SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Fiscal Year
Ended December 31, 1993 Commission file no. 0-16976
ARVIDA/JMB PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
Delaware 36-3507015
(State of organization) (IRS Employer Identification No.)
900 N. Michigan Ave., Chicago, IL 60611
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 312/915-1987
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each Class which registered
- ------------------- ------------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
LIMITED PARTNERSHIP INTERESTS
AND ASSIGNEE INTERESTS THEREIN
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K X
State the aggregate market value of the voting stock held by non-affiliates of
the registrant. Not applicable.
Portions of the Prospectus of the registrant dated September 16, 1987 and
filed with the Commission pursuant to Rules 424(b) and 424(c) under the
Securities Act of 1933 are incorporated by reference in Parts II and III of
this Annual Report on Form 10-K.
TABLE OF CONTENTS
Page
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PART I
Item 1. Business. . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties. . . . . . . . . . . . . . . . . . . 4
Item 3. Legal Proceedings . . . . . . . . . . . . . . . 6
Item 4. Submission of Matters to a Vote of
Security Holders. . . . . . . . . . . . . . . . 9
PART II
Item 5. Market for the Partnership's Limited
Partnership Interests and Related
Security Holder Matters . . . . . . . . . . . . 9
Item 6. Selected Financial Data . . . . . . . . . . . . 10
Item 7. Management's Discussion and Analysis
of Financial Condition and Results
of Operations . . . . . . . . . . . . . . . . . 12
Item 8. Financial Statements and Supplementary
Data. . . . . . . . . . . . . . . . . . . . . . 23
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure. . . . . . . . . . . . . . 63
PART III
Item 10. Director and Executive Officers of
the Registrant. . . . . . . . . . . . . . . . . 63
Item 11. Executive Compensation. . . . . . . . . . . . . 67
Item 12. Security Ownership of Certain
Beneficial Owners and Management. . . . . . . . 68
Item 13. Certain Relationships and
Related Transactions. . . . . . . . . . . . . . 68
PART IV
Item 14. Exhibits, Financial Statement
Schedules, and Reports on Form 8-K. . . . . . . 69
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . 72
i
PART I
ITEM 1. BUSINESS
All references to "Notes" are to Notes to Consolidated Financial
Statements contained in this report.
The registrant, Arvida/JMB Partners, L.P. (the "Partnership"), is a
limited partnership formed in 1987 and currently governed under the Revised
Uniform Limited Partnership Act of the State of Delaware. The Partnership was
formed to own and develop substantially all of the assets of Arvida
Corporation (the "Seller"), a subsidiary of The Walt Disney Company, which
were acquired by the Partnership from the Seller on September 10, 1987. On
September 16, 1987, the Partnership commenced an offering to the public of up
to $400,000,000 in Limited Partnership Interests and assignee interests
therein ("Interests") pursuant to a Registration Statement on Form S-1 under
the Securities Act of 1933 (No. 33-14091). A total of 400,000 Interests were
sold to the public (at an offering price of $1,000 per Interest before
discounts) and the holders of 400,000 Interests were admitted to the
Partnership in October 1987. The offering terminated October 31, 1987. In
addition, a holder (an affiliate of the dealer-manager of the public offering)
of 4,000 Interests was admitted to the Partnership in October 1987.
Subsequent to admittance to the Partnership, no holder of Interests (a
"Limited Partner" or "Holder") has made any additional capital contribution.
The Limited Partners of the Partnership generally share in their portion of
the benefits of ownership of the Partnership's real property investments and
other assets according to the number of Interests held.
Pursuant to the Partnership Agreement, the Partnership may continue in
existence until December 31, 2087; however, the General Partner shall elect to
pursue one of the following courses of action: (i) to cause the Interests to
be listed on a national exchange or on the National Association of Securities
Dealers Automated Quotation System at any time on or prior to the date ten
years from the termination date of the offering of Interests; (ii) to
purchase, or cause one of its affiliates to purchase, ten years from the
termination of the offering of Interests, all of the Interests at their then
appraised fair market value (as determined by an independent nationally
recognized investment banking firm or real estate advisory company); or (iii)
to commence a liquidation phase ten years from the termination of the offering
of Interests in which all of the Partnership's remaining assets will be sold
prior to the end of the fifteenth year from the termination of the offering.
The assets of the Partnership consist principally of interests in land
which is in the process of being developed into master-planned residential
communities (the "Communities") and, to a lesser extent, commercial and
industrial properties; mortgage notes and accounts receivable; certain
management and other service contracts; construction, brokerage and other
support businesses; real estate assets held for investment; certain club and
recreational facilities; and certain cable television businesses serving
certain of its Communities. The Partnership is principally engaged in the
development of comprehensively planned resort and primary home Communities
containing a diversified product mix designed for the middle and upper income
segments of the various markets in which the Partnership operates.
The Partnership sells individual residential lots and parcels of
partially developed and undeveloped land. The third-party builders and
developers to whom the Partnership sells homesites and land parcels are
generally smaller local builders who require project specific financing for
their developments and whose operations are more susceptible to fluctuations
in the availability of financing. In addition, within the Communities, the
Partnership constructs, or causes to be constructed, a variety of products,
including single-family homes, townhouses and condominiums to be developed for
sale, as well as related commercial and recreational facilities. The
Communities are located primarily throughout the State of Florida, with
Communities also located near Atlanta, Georgia; Highlands, North Carolina and
in Orange County, California. Additional undeveloped properties owned by the
Partnership in or near its Communities are being considered for development as
commercial, office and industrial properties. The Partnership also owns or
manages certain club and recreational facilities within certain of its
Communities. Certain assets located in Florida were acquired by the
Partnership from the Seller by purchasing a 99.9% interest in a joint venture
partnership in which the General Partner acquired the remaining joint venture
partnership interest. In addition, other assets are owned by various
partnerships, the interests of which are held by certain indirect subsidiaries
of the Partnership and by the Partnership.
Arvida Company ("Arvida"), an affiliate of the General Partner, provides
certain development and management supervisory personnel to the Partnership
for the supervision of all of its projects and operations, subject, in each
case, to the overall control of the General Partner on behalf of the
Partnership. The Partnership, directly or through certain subsidiaries,
provides development and management services to the home ownership
associations within the Communities. Two of the Partnership's Communities
currently offer cable television systems to certain of their residents, which
systems are owned and operated by entities owned by the Partnership.
The business of the Partnership is cyclical in nature and certain aspects
of the development of Community projects are to some degree seasonal. The
Partnership does not expect that such seasonality will have a material impact
on its business. A presentation of information about industry segments,
geographic regions or raw materials is not applicable and would not be
material to an understanding of the Partnership's business taken as a whole.
The Communities are in various stages of development. The remaining
estimated build-out time for the Communities ranges from one year to 11 years.
The Partnership generally follows the practice with respect to Communities of
(i) developing an overall master plan for the Community, (ii) creating a
unifying architectural theme that is consistent with the Community's master
plan, (iii) offering a variety of recreational facilities, (iv) imposing
architectural standards and other property restrictions on residents and
third-party developers, in order to enhance the long-term value of the
Community, (v) establishing property owners' associations to maintain
compliance with architectural, landscaping and other requirements and to
provide for ownership and maintenance of certain facilities, and/or (vi)
operating and controlling access to golf, tennis and other recreational
facilities.
The Partnership's development approach, individually or by joint venture,
is intended to enhance the value of real estate in successive phases. The
first step in the development of a property is to design a Community master
plan that addresses the appropriate land uses and product mix, including
residential, recreational and, where appropriate, commercial and industrial
uses. The Partnership then seeks to obtain the necessary regulatory and
environmental approvals for the development of the Community in accordance
with the master plan. This approval process is a major factor in determining
the viability and prospects for profitability of the Partnership's development
projects.
The first phase in the regulatory approval process will usually consist
of obtaining the proper zoning approvals for the intended development. The
Partnership must also comply with state and local laws governing large planned
developments which may vary from state to state and community to community.
In Florida, for example, land development is subject to the Florida Local
Government Comprehensive Planning and Land Development Regulation Act, as
administered by the State and implemented by regional, county and municipal
authorities. In addition, prior to or contemporaneously with zoning approval,
the Partnership, if subject to the applicable filing requirements, must obtain
"Development of Regional Impact" ("DRI") approval from the applicable local
governmental agency after review and recommendations from the appropriate
regional planning agency, with oversight by the Florida State Department of
Community Affairs. With the exception of approximately 2,460 acres of Weston
(Weston's Increment III), the Partnership has received DRI approval on all of
its Florida Properties. Application with respect to Weston's Increment III
DRI approval has been filed and is being processed in the ordinary course of
business. Receipt of DRI approval is a prerequisite to obtaining zoning,
platting, building permits or other approvals required to begin development or
construction. Obtaining such approvals can involve substantial periods of
time and expense and may result in the loss of desired densities, and
approvals may need to be resubmitted if there is any subsequent deviation in
current approved plans. The process may also require committing land for
public use and payment of substantial impact fees. In addition, state laws
generally provide further that a parcel of land cannot be subdivided into
distinct segments without having a plat filed and finalized with the local or
municipal authority, which will, in general, require the approval of various
local agencies, such as environmental and public works departments. In
addition, the Partnership must secure the actual permits for development from
applicable Federal (e.g., the Army Corps of Engineers and/or the Environmental
Protection Agency with respect to coastal and wetlands developments, including
dredging of waterways) and state or local agencies, including construction,
dredging, grading, tree removal and water management and drainage district
permits. The Partnership may, in the process of obtaining such permits or
approvals for platting or construction activities, incur delays or additional
expenses; however, such permits and approvals are customarily obtained to
permit development. Failure to obtain or maintain necessary approvals, or
rejection of submitted plans, would result in an inability to develop the
Community as originally planned and would cause the Partnership to reformulate
development plans for resubmission, which might result in a failure to
increase, or a loss of, market value of the property. The foregoing
discussion and the discussion which follows are also generally applicable to
the Partnership's commercial and industrial developments.
Upon receipt of all approvals and permits required to be obtained by the
Partnership for a specific Community, other than actual approvals or permits
for final platting and/or construction activities, the Partnership applies for
the permits and other approvals necessary to undertake the construction of
infrastructure, including roads, water and sewer lines and amenities such as
lakes, clubhouses, golf courses, tennis courts and swimming pools. These
expenditures for infrastructure and amenities are generally significant and
are usually required early in the development of a Community project, although
the Partnership will attempt, to the extent feasible, to develop Communities
in a phased manner. See Note 12 for further discussion regarding Tax
Increment Financing Entities and their involvement with infrastructure
improvements.
Certain of the Florida Communities described below have applied for and
have been designated as a Planned Unit Development ("PUD") by the local zoning
authority (usually the governing body of the municipality or the county in
which the Community is or will be located). Designation as a PUD generally
establishes permitted densities (i.e., the number of residential units which
may be constructed) with respect to the land covered thereby and, upon
receipt, enables the developer to proceed in an orderly, planned fashion.
Generally, such PUD approvals permit flexibility between single-unit and
multi-unit products since the developer can plan Communities in either fashion
as long as permitted densities are not exceeded. As a consequence,
developments with PUD status are able to meet changing demand patterns in
housing through such flexibility. It should be noted that some of the
Communities, while not having received PUD approval, have obtained the
necessary zoning approvals to create a planned community development with many
of the benefits of PUD approval such as density shifting.
In developing the infrastructure and amenities of its Communities and
building its own housing products, the Partnership may function as a general
contractor although it may also from time to time hire firms for general
contracting work. The Partnership generally follows the practice of hiring
subcontractors, architects, engineers and other professionals on a project-by-
project basis rather than maintaining in-house capabilities, principally to be
able to select the subcontractors and consultants it believes are most
suitable for a particular development project and to control fixed overhead
costs. The Partnership maintains, through a wholly-owned affiliate, a staff
to perform certain construction work, to supervise construction and to perform
routine maintenance and minor repair work. Although the General Partner does
not expect the Partnership to be faced with any significant material or labor
shortages, the construction industry in general has from time to time
experienced serious difficulties in obtaining certain construction materials
and in having available a sufficiently large and adequately trained work
force.
The Partnership's strategy includes the ownership and development of
certain commercial and industrial property not located in a Partnership
Community. In addition, certain of the Partnership's Communities contain
acreage zoned for commercial use, although, except for the Weston Community,
such acreage is generally not substantial. On both of such types of
properties, the Partnership, individually or with a joint venture partner, may
build shopping centers, office buildings and other commercial buildings and
may sell land to be so developed.
Certain of the Communities and operations are owned by the Partnership
jointly with third parties. Such investments by the Partnership are generally
in partnerships or ventures which own and operate a particular property in
which the Partnership or an affiliate (either alone or with an affiliate of
the General Partner) has an interest.
The principal assets in which interests have been acquired by the
Partnership are described in more detail under Item 2 below to which reference
is hereby made for a description of such assets.
The Partnership's real properties are subject to competition from similar
types of properties in the vicinities in which they are located, including
properties owned, advised or managed by affiliates of the General Partner.
The Partnership has no real estate assets located outside of the United
States.
In the opinion of the General Partner of the Partnership, all of the
investment properties held at December 31, 1993 are adequately insured.
The Partnership currently owns no patents, trademarks, licenses or
franchises other than those trademarks and tradenames in respect of the names
of its Communities. The Arvida name and the service marks with respect to the
Arvida name are owned by Arvida, subject to the Partnership's non-exclusive
right to use the name and the service marks under its supervisory and
management agreement with Arvida and subject to the non-exclusive right of
certain third parties to the limited use of the name.
The Partnership has approximately 550 employees.
Reference is made to Item 8 - Schedule X filed with this annual report
for further information concerning real estate taxes and depreciation.
The terms of transactions between the Partnership and the General Partner
and its affiliates are set forth in Items 10, 11, 12 and 13 filed with this
annual report to which reference is hereby made for a description of such
terms and transactions.
ITEM 2. PROPERTIES
The principal assets being developed or managed by the Partnership are
described below. The acreage amounts set forth herein are approximations of
the gross acreage of the Communities or other properties referred to or
described and are not necessarily indicative of the net developable acreage
currently owned by the Partnership or its joint ventures. All of the
Partnership's properties are subject to mortgages to secure the repayment of
the Partnership's indebtedness as discussed in detail in Note 8.
(a) Palm Beach County, Florida
The Partnership owns property in Broken Sound, a 970-acre Community
located in Boca Raton. The Community offers a wide range of residential
products built by the Partnership or third-party builders and is in its final
stage of development.
(b) Broward County, Florida
The Partnership owns property in Weston, a 7,500-acre Community in its
mid stage of development. The Community offers a complete range of housing
products built by the Partnership or third-party builders, as well as tennis,
swim and fitness facilities, a golf course and an equestrian center. In
addition, the Partnership owns commercial properties, most of which are
currently undeveloped, located in the Weston Community. Reference is made to
Note 12 for a discussion of the Partnership's use of certain tax-exempt
financing in connection with the development of the Weston Community.
(c) Sarasota / Tampa, Florida
The Partnership owns property in the Longboat Key Club, a Community on
Longboat Key which is a barrier island on Florida's west coast, approximately
four miles from downtown Sarasota and seven miles from Sarasota/Bradenton
airport. The Community is in its late stage of development. The Partnership
also owns property in a Community in the Tampa area known as River Hills
Country Club which is a 1,200-acre Community in its mid stage of development.
The Partnership owned an interest in The Oaks Community in Sarasota, Florida.
The Partnership sold its interest in The Oaks during 1993. Reference is made
to Note 8 for a discussion of the sale of the Partnership's interest in The
Oaks property and the repayment of the mortgage loan secured by such property.
(d) Jacksonville, Florida
The Partnership owns property in two Communities in Ponte Vedra Beach,
Florida, twenty-five miles from downtown Jacksonville, known as Sawgrass
Country Club and The Players Club at Sawgrass. These Communities are in their
final stages of development. The Partnership also owns property in a 730-acre
Community known as the Jacksonville Golf and Country Club which is in its mid
stage of development.
(e) Atlanta, Georgia
The Partnership owns properties in the Atlanta, Georgia area known as
Water's Edge and Dockside, which are in their mid and final stages of
development, respectively.
(f) Highlands, North Carolina
The Partnership owns a 600-acre Community near Highlands, North Carolina
known as The Cullasaja Club. The Community is in its mid stage of
development. At December 31, 1991, the Partnership owned a 50% joint venture
interest in this Community; however, during 1992, the Partnership purchased
its joint venture partner's 50% interest in the Community. Reference is made
to Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations and Note 7 for further discussion of this joint venture.
(g) Other
The Partnership also owns a 20% joint venture interest in a 4,000-acre
Community, known as Coto de Caza, located in Southern Orange County,
California. The Community is in its mid stage of development. At December
31, 1991, the Partnership was the managing partner and owned a 50% joint
venture interest in the Community; however, during 1992 the Partnership's
joint venture partner was reallocated an additional 30% interest in the
venture and assumed the role of managing partner in exchange for funding the
venture's future cash requirements. Reference is made to Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations and Note 7 for further discussion of this joint venture. The
Partnership also has joint venture interests in Mizner Court and Mizner Tower,
located in Mizner Village, which consisted of 335 luxury condominium units in
Palm Beach County, Florida, all of which were sold as of December 31, 1991.
The Partnership also owns land zoned for commercial use in or near its
Communities in Jacksonville, Boca Raton, Atlanta, Georgia and in its Weston
Community. The Partnership also owns, either directly or through joint
venture interests, various commercial and industrial sites and buildings in
Sarasota, Tampa, Ocala, Pompano Beach and Palm Beach County, Florida which are
not located in its residential Communities. At December 31, 1993, the joint
venture with property in Pompano Beach was encumbered by mortgages in the
aggregate principal amount of approximately $4 million. Reference is made to
Note 11 for further discussion of this venture and its related indebtedness.
ITEM 3. LEGAL PROCEEDINGS
The Partnership is involved in an Environmental Protection Agency (EPA)
administrative enforcement proceeding with regard to the Partnership's Water's
Edge property. The EPA has asserted that a dam built to create a lake at the
Community during the time the property was owned by the Seller was in
violation of Section 404 of the Clean Water Act in that certain wetlands areas
had been filled. Pursuant to a Consent Agreement and Order entered into with
the EPA, the Partnership acquired certain land (at a cost of approximately
$400,000) for which it has developed and implemented a plan of mitigation for
the wetlands lost. In accordance with certain provisions of the Consent
Agreement and Order, the Partnership must provide the EPA with periodic
reports regarding the status of the mitigation plan. An agreement in principle
has been reached to settle the dispute between the parties pursuant to which
the EPA has agreed to assess a civil penalty of $125,000. The Partnership
cannot assure that the settlement agreement in fact will be consummated. The
Partnership is actively pursuing indemnification from the Seller for the total
costs that will ultimately be incurred to resolve this issue. There can be no
assurance that the Partnership will be reimbursed by the Seller.
The Partnership has been named as a defendant in a number of homeowner
lawsuits, each of which has been filed in the Circuit Court of the 11th
Judicial District for Dade County, Florida. Each of these suits allegedly in
part arises out of or relates to Hurricane Andrew, which resulted in damage
to, among other things, the Country Walk development in South Florida on
August 24, 1992. A number of the homeowner lawsuits were brought by various
plaintiffs in their individual capacity and other homeowner lawsuits were
brought as purported class actions.
In general, the complaints in the homeowner lawsuits allege that the
various plaintiffs and plaintiff classes purchased and owned homes and/or
condominiums located in the Country Walk development and that the damage or
destruction suffered by such homes and/or condominiums as a result of
Hurricane Andrew was beyond what should have been reasonably expected. The
allegations further suggest that the damage caused by Hurricane Andrew was a
result of the defendants' alleged defective design, construction, inspection
and/or other improper conduct in connection with development, construction and
sale of such homes and/or condominiums; that such misconduct on the part of
the defendants constituted, among other things, violations of various building
code provisions and breaches of express and implied warranties of merchant-
ability and habitability, or constituted intentional tort, negligence,
misrepresentation or fraudulent concealment, and caused personal injury. In
addition, there are allegations of latent defects that were uncovered by
Hurricane Andrew. The complaints allege that the Partnership is liable to the
named plaintiffs and plaintiff classes either as a result of the Partnership's
own acts of misconduct and/or as a result of the Partnership's purchase of the
assets of the Seller and the stock of three of the Seller's subsidiaries in
1987 and the Partnership's subsequent marketing, management and development of
the Country Walk development. The various named plaintiffs and purported
plaintiff classes seek compensatory damages in varying and, in some cases,
unspecified amounts, and other relief, including, in some of the actions,
injunctive relief and/or punitive damages. The Partnership intends to
vigorously defend itself in these lawsuits.
In connection with its purchase of assets, including certain assets
relating to the Country Walk development from the Seller, then a wholly-owned
subsidiary of The Walt Disney Company ("Disney"), in September 1987, the
Partnership obtained indemnification by Disney for certain liabilities
relating to facts or circumstances arising or occurring prior to the closing
of the Partnership's purchase of the assets. Over 80% of the Arvida-built
homes in Country Walk were built prior to the Partnership's ownership of the
Community. The Partnership has tendered each of the above-described lawsuits
to Disney for defense and indemnification in whole or in part pursuant to the
Partnership's indemnification rights. Where appropriate, the Partnership has
also tendered these lawsuits to its various insurance carriers for defense and
coverage. The Partnership is unable to determine at this time to what extent
damages in these lawsuits, if any, against the Partnership, as well as the
Partnership's cost of investigating and defending the lawsuits, will
ultimately be recoverable by the Partnership either pursuant to its rights of
indemnification by Disney or under contracts of insurance.
The Partnership has negotiated the terms of a class action settlement
with opposing counsel in one of the pending homeowners' lawsuits, which has
the potential for resolving substantial portions of the pending homeowners'
lawsuits which have been filed. On June 3, 1993, the Circuit Court of Dade
County entered an order preliminarily finding that the Partnership's proposed
class action settlement agreement, as revised, was within the range of what
appeared to be a fair and adequate settlement of the claims filed by single-
family homeowners and condominium owners at Country Walk. On August 10, 1993,
the court issued a final order approving the class action settlement. The
settlement, which is designed to resolve claims arising in connection with
estate and patio homes and condominiums sold by the Partnership after
September 10, 1987, is structured to compensate residents for losses not
covered by insurance. Settlement amounts payable are a function of the type
of unit involved and the claimant's proof regarding the adequacy of insurance
proceeds. Settlement class members representing 188 units in Country Walk
have accepted the settlement. Those who affirmatively rejected the offer may
continue to litigate against the Partnership. The Partnership currently
believes that the class action settlement may cost approximately $2.5 million.
The settlement is being funded by one of the Partnership's insurers, subject
to a reservation of rights. The amount of money, if any, which the insurance
company may recover from the Partnership pursuant to its reservation of rights
is uncertain.
On February 24, 1994, the Partnership was dismissed from the pending
class action homeowner lawsuits pursuant to the class action settlement. In
addition, the Partnership has been informed that Disney and an insurer have
reached agreements to settle five of the individual homeowner actions which
were tendered by the Partnership to Disney ("Disney Settlements"). These
Disney Settlements will be funded without any contribution from the
Partnership. The Partnership can give no assurance that the Disney
settlements will be finalized.
As noted above, those homeowners who affirmatively rejected the offer of
settlement may continue to litigate. The Partnership is currently a defendant
in eleven lawsuits brought by condominium and patio homeowners, all of whom
have declined to accept the terms of the class action settlement. These
lawsuits, involving nineteen named individuals, are pending in the Circuit
Court of Dade County. In these lawsuits, plaintiffs allege a variety of
claims involving, among other things, breach of warranty, negligence and
building code violations. The Partnership intends to vigorously defend itself
in these matters.
The Partnership has resolved a claim for construction related damages
brought by the Villages of Country Walk Homeowners' Association, Inc., among
others. Two of the Partnership's insurance carriers funded a settlement in
the amount of $2,740,000 to resolve claims related to the construction of the
common elements of the condominium units at Country Walk. One of the
insurance carriers has issued a reservation of rights in connection with these
claims and the extent to which that insurance company may ultimately recover
any of these proceeds from the Partnership is unknown.
On April 19, 1993, a subrogation claim entitled Village Homes At Country
Walk Master Maintenance Association, Inc. v. Arvida Corporation et al., was
filed in the 11th Judicial Circuit for Dade County. Plaintiffs filed this
suit for the use and benefit of American Reliance Insurance Company ("American
Reliance"). Plaintiffs seek to recover damages and pre- and post-judgment
interest in connection with $10,873,000 American Reliance has allegedly paid
to its insureds living in condominium units at Country Walk in the wake of
Hurricane Andrew. Disney is also a defendant in this suit. On July 1, 1993,
a subrogation lawsuit entitled Prudential Property and Casualty Company v.
Arvida/JMB Partners, et al., was filed in the 11th Judicial Circuit for Dade
County. Plaintiff seeks to recover damages, costs, and interest in connection
with $16,679,622 Prudential allegedly paid to its insureds living in Country
Walk at the time of Hurricane Andrew. Disney is also a defendant in this
suit. On July 15, 1993, a subrogation lawsuit entitled Allstate Insurance
Company v. Arvida/JMB Partners, et al., was filed in the 11th Judicial Circuit
for Dade County. Plaintiff seeks to recover damages, costs, and interest in
connection with $18,540,196 Allstate allegedly paid to its insureds living in
Country Walk at the time of Hurricane Andrew. Disney is also a defendant in
this suit. The Partnership settled a threatened subrogation action by State
Farm Insurance Company. The settlement was funded by one of the Partnership's
insurance carriers subject to a reservation of rights. The amount of money
the insurance carrier may seek to recover from the Partnership for this and
any other settlements it has funded is uncertain. The Partnership is a
defendant in and anticipates other subrogation claims by insurance companies
which have allegedly paid policy benefits to Country Walk residents. The
Partnership intends to defend itself vigorously in all such matters.
On October 13, 1993, a lawsuit captioned Berry v. Merril (sic) Lynch,
Pierce Fenner & Smith, J&B Arvida Limited Partnership (sic) and Does 1 through
100, was filed in the Superior Court of the State of California in and for the
County of San Diego, Case No. 669709. The lawsuit was purportedly filed as a
class action on behalf of the named plaintiffs and all other persons or
entities in the State of California who bought or acquired, directly or
indirectly, limited partnership interests ("Interests") in the Partnership
from September 1, 1987 through the present. The complaint in the action
alleges, among other things, that the defendants made misrepresentations and
concealed various facts, breached fiduciary duties, and violated the covenant
of good faith in connection with the sale of Interests in the Partnership.
The complaint further alleges that such conduct violated California state law
relating to fraud, breach of fiduciary duty, willful suppression of facts, and
breach of the covenant of good faith. Plaintiffs, on behalf of themselves and
the purported plaintiff class, seek unspecified compensatory damages,
consequential damages, punitive and exemplary damages, interest, costs of the
suit, and such other relief as the court may order. The Partnership believes
that the lawsuit is without merit and intends to vigorously defend itself.
Other than as described above, the Partnership is not subject to any
material pending legal proceedings, other than ordinary routine litigation
incidental to the business of the Partnership. Reference is made to Note 2
regarding certain other litigation involving the Partnership. Reference is
also made to Note 11 for a discussion of certain claims by Merrill Lynch for
indemnification by the Partnership and the General Partner against losses and
expenses that may be suffered by Merrill Lynch relating to claims for
arbitration asserted against it by certain investors in the Partnership.
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during 1992
and 1993.
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS
AND RELATED SECURITY HOLDER MATTERS
As of December 31, 1993, there were 27,001 record Holders of Interests of
the Partnership. There is no public market for Interests, and it is not
anticipated that a public market for Interests will develop. Upon request,
the General Partner may provide information relating to a prospective transfer
of Interests to an investor desiring to transfer his Interests. The price to
be paid for the Interests, as well as any other economic aspects of the
transaction, will be subject to negotiation by the investor. However, there
are restrictions governing the transferability of these Interests as described
in "Transferability of Partnership Interests" on pages A-31 to A-33 of the
Partnership Agreement and limitations on the rights of assignees of Holders of
Interests as described in Sections 3 and 4 of the Assignment Agreement which
are hereby incorporated by reference to Exhibits 3 and 4.0, respectively, of
the Partnership's Report on Form 10-K dated March 29, 1993 (File No. 0-16976).
Reference is made to Item 1. Business for a discussion of the election to be
made by the General Partner with respect to causing a listing of Interests on
a national exchange, purchasing or causing an affiliate to purchase all of the
Interests at their then appraised fair market value, or commencing a
liquidation of all of the Partnership's assets.
Reference is made to Item 6. Selected Financial Data for a discussion of
cash distributions made to the Limited Partners. For a description of the
provisions of the Partnership Agreement relating to cash distributions, see
Note 14. Reference is made to Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations and Note 8 for a discussion
of the factors impacting the Partnership's ability to reinstate distributions
to its partners.
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
DECEMBER 31, 1993, 1992, 1991, 1990 AND 1989
(NOT COVERED BY INDEPENDENT AUDITORS' REPORT)
<CAPTION>
1993 1992 1991 1990 1989
------------ ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Total revenues . . . . . . $247,651,192 174,710,779 155,699,871 275,705,089 301,641,819
============ ============ ============ ============ ============
Net operating income
(loss). . . . . . . . . . $ 30,689,914 (23,337,245) (11,777,093) 12,023,818 9,152,644
============ ============ ============ ============ ============
Equity in earnings
(losses) of uncon-
solidated ventures. . . . $ 1,134,947 (2,225,531) (769,300) (179,242) 4,349,064
============ ============ ============ ============ ============
Net income (loss). . . . . $ 29,293,058 (43,974,366) (30,667,969) 757,335 7,615,948
============ ============ ============ ============ ============
Net income (loss) per
Limited Partnership
Interest (a). . . . . . . $ 71.78 (160.42) (74.39) (13.51) 4.41
============ ============ ============ ============ ============
Total assets (b) . . . . . $346,435,065 350,807,538 420,289,287 437,541,360 523,807,900
============ ============ ============ ============ ============
Total liabilities (b). . . $194,344,888 228,010,419 253,517,802 240,101,906 268,391,481
============ ============ ============ ============ ============
Cash distributions
per Interest (c). . . . . $ -- -- -- 130 130
============ ============ ============ ============ ============
The above selected financial data should be read in conjunction with the financial statements and the related notes
appearing elsewhere in this annual report.
<FN>
(a) The net income (loss) per Limited Partnership Interest is based upon
the number of Interests outstanding at the end of each period (404,005).
(b) The Partnership does not present a classified balance sheet as a
matter of industry practice, and as such, does not distinguish between current
and non-current assets and liabilities.
(c) Cash distributions from the Partnership are generally not equivalent
to Partnership income as determined for Federal income tax purposes or as
determined under generally accepted accounting principles. Cash distributions
to the Limited Partners represent a return of capital for Federal income tax
purposes. There were no cash distributions in 1991, 1992 and 1993.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1993 and 1992, the Partnership had cash and cash
equivalents of approximately $18,907,000 and $7,634,000, respectively. Such
funds were available for debt service, working capital requirements and
distributions to partners. The favorable variance in cash and cash
equivalents at December 31, 1993 as compared to 1992 is due to an increase in
cash generated from operating activities due primarily to an overall increase
in sales activity, as well as an increase in net cash proceeds received from
the Partnership's joint ventures in 1993 as compared to 1992. The source of
both short-term and long-term future liquidity is expected to be derived
primarily from the sale of housing units, homesites and land parcels and
through the Partnership's credit facilities, which are discussed below.
In October 1992, the Partnership and its lenders executed a binding
agreement to restructure the Partnership's credit facility. The new facility
consists of a term loan in the amount of $126,805,195, a revolving line of
credit facility up to $45 million, an income property term loan of $20 million
and a $15 million letter of credit facility. The term loan, the revolving
line of credit and the letter of credit facility are secured by recorded
mortgages and security interests on all otherwise unencumbered tangible assets
of the Partnership as well as an assignment of all mortgages receivable,
equity memberships, certain joint venture interests or proceeds from joint
ventures, and cash balances (with the exception of deposits held in escrow).
The income property term loan is secured by the recorded first mortgages on a
mixed-use center and an office building in Boca Raton, Florida. All of the
notes under the new facility are cross-collateralized and cross-defaulted.
The Partnership made the required principal repayments under the new term loan
agreement of $8 million and $10 million in February 1993 and March 1994,
respectively. Principal repayments of $10 million are due in each of the
years 1995 and 1996, and the remaining balance outstanding is due in 1997. In
addition, the new term loan agreement provides for additional principal
repayments based upon a specified percentage of available cash flow and upon
the sale of certain assets. For the year ended December 31, 1993, the
Partnership made additional term loan payments totalling approximately $10.5
million. Under the new income property term loan, monthly principal and
interest payments are required to be paid on a 25-year amortization schedule
with the remaining balance outstanding due in July 1994. The revolving line
of credit and the letter of credit facility also mature in July 1994. The
Partnership is in the process of negotiating a renewal of its credit
facilities. Although the Partnership is hopeful these renewals will be
obtained, there can be no assurance that such will occur or that the terms,
amounts and restrictions of the renewed credit facilities will be similar to
those under the Partnership's existing facilities. As of December 31, 1993,
all available term loan proceeds had been borrowed, however, $45 million was
available under the revolving line of credit facility, subject to certain loan
covenant restrictions. Reference is made to Note 8 for further discussion of
the Partnership's credit facility.
The facility contains significant restrictions with respect to the
payment of distributions to partners, the maintenance of certain loan-to-value
ratios, the use of proceeds from the sale of the Partnership's assets, and
advances to the Partnership's joint ventures. Other than the uncertainty
surrounding the funding of any required joint venture advances, which require
the lenders' approval, and subject to the successful renewal of the
Partnership's credit facilities as discussed above, the Partnership believes
that the current and expected future liquidity and capital resources of the
Partnership, including its restructured bank credit facilities, generally
should be adequate to fund currently expected short and long-term capital
requirements for development and other costs of operations.
During November 1993, the Partnership received a commitment from a lender
for a $24 million revolving construction line of credit for the first building
and certain amenities within the Partnership's new condominium project on
Longboat Key, Florida known as Grand Bay. This line of credit was
subsequently executed on January 14, 1994. The line of credit bears interest
at the lender's prime rate plus 3/4% and matures January 14, 1996. See Note
15 for further discussion regarding this line of credit.
A statement of cash flows is required under generally accepted accounting
principles that classifies cash receipts and disbursements according to
whether they result from operating, investing or financing activities as those
terms are defined in Statement of Financial Accounting Standards No. 95. On a
cumulative basis, the Partnership has paid distributions from operating,
investing and financing activities.
At December 31, 1991, the Partnership owned a 50% joint venture interest
in the Cullasaja Community. The operations of the venture require periodic
cash advances from the partners. Since the fourth quarter of 1990, the
Partnership has funded the cash deficits of the venture in their entirety. As
a result, during July 1992, the Partnership purchased its joint venture
partner's 50% interest in the Community. The Partnership was not required to
make any cash payment to the joint venture partner for its interest. Instead,
the purchase price of such interest is in the form of subordinated non-
recourse promissory notes (the "Notes"), the payment of which is solely
contingent upon the ultimate net cash flow generated by the venture. The
Notes are subordinated to the repayment of the outstanding first mortgage loan
and certain advances, plus accrued interest thereon, made to the venture by
the partners. To the extent the Partnership has funded 100% of the venture's
cash deficits in the past or advances new funds, the repayment of such
advances, plus accrued interest thereon, is senior to the repayment of funds
previously advanced by both partners. A portion of the cash flow remaining
after payment of all senior indebtedness is to be applied annually against the
principal and interest (at 10% per annum) owed on the Notes. This agreement
was pursued as a more favorable alternative to the remedies included in the
previously existing joint venture agreement for situations in which the
partners advance unequal funds to the venture. As a result of this
transaction, the Partnership changed from the equity method of accounting to
the consolidated method of accounting for the joint venture effective January
1, 1992, resulting in a net increase in the Partnership's balance sheet of
approximately $12.1 million at that date. Certain of the Partnership's
property within the Cullasaja Community is encumbered by a mortgage note with
an outstanding balance of approximately $5.4 million at December 31, 1993.
The note has a maturity date of March 1, 1994 and bears interest at prime (6%
at December 31, 1993) plus 1.25% per annum, payable monthly. The Partnership
is currently seeking an extension of this loan. However, there can be no
assurance that the Partnership can obtain an extension. The Partnership is
required to make repayments on the note in accordance with a homesite lot
release provision of $72,750 per lot at closing. The note is collateralized
by a first mortgage on certain real estate inventories and 12.5% of the
outstanding balance is guaranteed by the Partnership.
The Coto de Caza joint venture had utilized the maximum amount available
under its operating line of credit and had been seeking alternative financing
sources to fund the significant additional cash necessary to continue
development of the project and to fund other joint venture operating costs.
In the interim, the Partnership and its joint venture partner had each
advanced approximately $3.1 million, net of reimbursements, to the joint
venture during 1991 and an additional $1.0 million during the first five
months of 1992. Given the weak market conditions in Orange County, California
and the continued lack of development financing available from traditional
lending sources, it was unlikely that the joint venture would be able to
secure additional financing in the near term. The Partnership's joint venture
partner was willing to continue to advance funds to meet the venture's
operating needs. The Partnership determined that it was in its best long-term
interest to utilize its capital for the development of its other properties
rather than commit additional funds for the development of the Coto de Caza
Community. As a result, the venture partner has funded the venture's cash
deficits in their entirety since June 1, 1992. As an alternative to advancing
funds for the venture's future capital requirements, the Partnership and its
joint venture partner amended the joint venture agreement, effective September
15, 1992, and reallocated ownership interests. In exchange for funding the
venture's future operating needs, the venture partner was reallocated an
additional 30% interest in the venture, and assumed the role of managing
general partner. As such, the venture partner has control over the future
operations of the Community, including the timing and extent of its
development. The Partnership retains a 20% limited partnership interest and
is entitled to receive distributions from net cash flow, after repayment of
third party loans and advances made by the venture partners, up to an amount
agreed upon by the Partnership and its joint venture partner. Certain
specified costs and liabilities incurred prior to the reallocation will
continue to be shared equally by the Partnership and its joint venture
partner. This agreement was pursued as a more favorable alternative to the
provisions included in the existing joint venture agreement for reallocation
of partnership interests should both partners not advance equal funds to the
venture. As a result of the Partnership's decrease in its ownership interest,
and its joint venture partner's control over the future operations of the
Community, commencing on September 15, 1992, the Partnership accounts for its
share of the operations of the Coto de Caza joint venture in accordance with
the cost method of accounting.
During 1992, the Partnership sold 60% of its interest in two land parcels
located in the Weston Community to unaffiliated third-party purchasers.
Subsequent to these transactions, the Partnership and the purchasers each
contributed their interests in these land parcels to two joint ventures which
were established for the purpose of constructing housing products within
Weston. The Partnership entered into development management agreements with
these joint ventures. Pursuant to the terms of these agreements, the
Partnership has agreed to fund all development and construction costs, as well
as certain overheads, incurred on behalf of the joint ventures' projects.
Amounts funded are to be reimbursed by the joint ventures from sales revenues
generated by each joint venture. Amounts advanced by the Partnership to each
respective joint venture earn interest at 8.5% for the first year and prime
(6.0% at December 31, 1993) plus 2% per annum thereafter. During the first
quarter of 1993, one of the joint ventures obtained project specific financing
in the amount of $4,950,000 to fund its development and construction
activities. In accordance with the provisions of this financing agreement, as
of December 31, 1993, the Partnership had been reimbursed the majority of
amounts previously advanced to the joint venture. As a result of this
financing arrangement, the Partnership does not anticipate the need for future
advances to this venture. Due to significant sales activity, amounts
previously advanced to the Partnership's other joint venture were reimbursed
in full as of December 31, 1993. These reimbursements are the primary reasons
for the decrease in investments in and advances to joint ventures on the
accompanying consolidated balance sheets from December 31, 1992 to December
31, 1993. Also contributing to the decrease in investments in and advances to
joint ventures on the accompanying consolidated balance sheets at December 31,
1993 as compared to December 31, 1992 is the receipt of distributions from
these joint ventures in the amount of $2.6 million, as well as $0.8 million
and $0.3 million of distributions from the Mizner Tower and Mizner Court joint
ventures, respectively.
In anticipation of its future development plans, the Partnership is
currently in the process of obtaining permits for development of Increment III
of its Weston Community, portions of which are environmentally sensitive areas
and are subject to protection as wetlands. The time involved to complete this
process, which involves the approvals of the Army Corps of Engineers, the
Environmental Protection Agency and comparable state and local regulatory
agencies, is expected to be lengthy. It is anticipated that certain costs of
mitigation will be incurred in conjunction with obtaining the necessary
permits, the amount and extent of which are unknown at this time. The
Partnership had previously gone through a similar process and was successful
in obtaining approvals for Increment II of the Weston Community. Although
there can be no assurance, given the Partnership's prior experience and
discussions to date with the appropriate agencies, the Partnership is hopeful
that a compromise will ultimately be reached that will adequately address the
concerns of the environmental agencies, while allowing the Partnership to
continue its development plans for Increment III of Weston.
In June 1993, the Partnership executed an agreement with Equitable South
Florida Venture ("Equitable"), the successor in interest to Tishman
Speyer/Equitable South Florida Venture, the original purchaser of
approximately 390 acres of land in Increment III of the Partnership's Weston
Community, whereby, in exchange for $5.0 million, the Partnership repurchased
approximately 330 acres of the land and Equitable agreed to relieve the
Partnership of the obligations under certain provisions of the Sale and
Purchase Agreement dated December 15, 1983, which were assumed by the
Partnership in connection with the purchase of the assets of Arvida
Corporation in September 1987. Of the agreed upon price of $5 million, $2.5
million was paid at the execution of the agreement and the balance of $2.5
million will be paid in equal annual installments of $500,000 together with
interest thereon at 8% per annum beginning May 1994. The unpaid principal
balance is secured by a mortgage on certain real estate located in the Weston
Community. As part of its efforts to obtain the appropriate development
permits discussed in the preceding paragraph, the Partnership has included
this land as part of its proposed mitigation plan for the development of
Increment III of its Weston Community.
The Partnership owned an 80% general partnership interest in The Oaks
Community located near Sarasota, Florida. During the fourth quarter of 1991,
the Partnership's joint venture partner failed to make capital contributions
required to fund ongoing operations and pursuant to the joint venture
agreement, was in default of the agreement. The Partnership executed an
agreement in August 1993 with its joint venture partner, CIS Oaks, Ltd.,
("CIS"), whereby CIS assigned its 20% interest in The Oaks to the Partnership,
thereby vesting 100% control of the assets of the joint venture in the
Partnership.
Certain of the assets of The Oaks joint venture were encumbered by two
mortgage loans. A $12,492,200 loan was scheduled to mature in January 1997
and a $3,260,000 loan was scheduled to mature in December 1993. The joint
venture had guaranteed $2.7 million of the loans, and the guaranteed amount
was with recourse to the Partnership. The joint venture was in default under
the terms of these loan agreements as a result of its failure to make
principal payments of approximately $1.3 million in January 1993 to release
the minimum number of homesite lots as required under these agreements and its
failure to pay interest commencing with a payment due in April 1993. The
Partnership was able to reach an agreement with its lenders to pay off the
existing mortgage loans at a substantial discount from face value. On
September 3, 1993, the Partnership paid the joint venture's lenders $6.7
million in full satisfaction of the outstanding mortgage loans, accrued
interest and guaranty. This transaction contributed to the decrease in notes
and mortgages payable at December 31, 1993 as compared to December 31, 1992
and is the cause of the approximate $9.5 million extraordinary gain on the
early extinguishment of debt for the year ended December 31, 1993.
The Partnership also sold its remaining land holdings in The Oaks
Community and its interest in The Oaks Club, an equity club, to an
unaffiliated third-party purchaser for $5.8 million. This sale transaction
occurred simultaneously with the repayment of the loans and satisfaction of
the mortgages, as discussed above. These transactions are the cause of
various changes in the Consolidated Balance Sheets at December 31, 1993 as
compared to December 31, 1992. In light of the Partnership's guarantee under
the loan agreement of $2.7 million of the outstanding mortgage loans, as well
as other factors, these transactions were pursued as the least costly
alternative available to the Partnership. These transactions resulted in a
minimal net gain for Federal income tax purposes.
During the first quarter of 1993, the Partnership reached a settlement
agreement with its joint venture partner in a property located in Ocala,
Florida, whereby in exchange for its partner's 50% interest in the venture,
the Partnership agreed to dismiss a lawsuit previously filed against its
venture partner for failure to perform in accordance with the terms of a
$1,600,000 note which had been issued to the Partnership by the joint venture.
This agreement was pursued as a more favorable remedy to other alternatives
available to the Partnership. As a result of this transaction, the
Partnership changed from the equity method of accounting to the consolidated
method of accounting for the joint venture effective March 1, 1993. This
consolidation contributes to the decrease in mortgages receivable at December
31, 1993 as compared to December 31, 1992.
During October 1993, the Partnership closed on the sale of its Oak Bridge
Club near Jacksonville, Florida to an unaffiliated third party for
approximately $3.2 million. This is the primary cause for the decrease in
property and equipment in the Consolidated Balance Sheets at December 31, 1993
as compared to December 31, 1992.
Reference is made to Note 11 regarding the Partnership's financial
guarantees pursuant to the terms of a loan agreement for a
commercial/industrial joint venture in Pompano Beach, Florida in which the
Partnership owns a 50% interest. The Partnership also has certain continuing
obligations relative to this joint venture as referred to in such Note.
Reference is made to Item 3. Legal Proceedings of this annual report for
a discussion of several lawsuits, in which the Partnership is a defendant,
allegedly arising out of or relating to Hurricane Andrew and certain property
damage allegedly suffered by the plaintiffs at a previously developed
community known as Country Walk.
During 1991, the Partnership obtained project specific financing in the
amount of $7 million on a retail shopping plaza located in the Partnership's
Weston Community. Subsequent to this transaction, the Partnership contributed
the assets and related indebtedness associated with the plaza to a joint
venture and sold a 21% interest in the venture to an unaffiliated third-party.
In July 1991, the Partnership converted the Weston Hills Country Club
(the "Club") from an equity to a non-equity membership plan in an effort to
increase membership and usage of the Club and stimulate sales momentum within
the Community.
In addition, during 1991 the Partnership closed on the sale of a land
parcel in its Broken Sound Community to an unaffiliated third-party builder in
conjunction with the repurchase of a land parcel in the Partnership's Weston
Community from the same builder. This transaction will alter the timing and
amount of expected future revenues.
The Partnership's obligations under bonds and standby letters of credit
have decreased approximately $13.9 million since December 31, 1992 primarily
due to decreased development and construction activity at the Partnership's
Broken Sound Community and the release of obligations related to the land
repurchased by the Partnership in its Weston Community, as discussed above.
The Partnership has been advised by Merrill Lynch that Merrill Lynch has
been named a defendant in actions pending in the Eleventh and Seventeenth
Judicial Circuit Courts in Dade and Broward Counties, Florida to compel
arbitration of claims brought by certain investors of the Partnership
representing approximately 4% of the total Interests outstanding. Merrill
Lynch has asked the Partnership and its General Partner to confirm an
obligation of the Partnership and its General Partner to indemnify Merrill
Lynch in these claims against all loss, liability, claim, damage and expense,
including without limitation attorney's fees and expenses, under the terms of
a certain Agency Agreement dated September 15, 1987 ("Agency Agreement") with
the Partnership relating to the sale of Interests in the Partnership through
Merrill Lynch on behalf of the Partnership. The Partnership is unable to
determine at this time the ultimate investment of investors who have filed
arbitration claims as to which Merrill Lynch might seek indemnification in the
future. At this time, and based upon the information presently available
about the arbitration statements of claims filed by some of these investors,
the Partnership and its General Partner believe that they have meritorious
defenses to demands for indemnification made by Merrill Lynch and intend to
vigorously pursue such defenses. In the event Merrill Lynch is entitled to
indemnification of its attorney's fees and expenses or other losses and
expenses, these amount may prove to be material.
RESULTS OF OPERATIONS
The results of operations for the years ended December 31, 1993, 1992 and
1991 are primarily attributable to the development and sale or operation of
the Partnership's assets. See Note 1 for a discussion regarding the
recognition of profit from sales of real estate.
Housing revenues are generated from the sale of homes within the
Partnership's Communities. Housing revenues increased significantly for the
year ended December 31, 1993 as compared to 1992 due primarily to increased
sales activity at the Partnership's Weston, Broken Sound and Jacksonville Golf
& Country Club Communities as well as the completion and close-out of the
Partnership's Marina Bay condominium project on Longboat Key, Florida. In an
effort to capture additional market share in Broward County, Florida, the
Partnership introduced several new value-oriented products in Weston in late
1992 and early 1993. The success of these products contributed to the
increased closings in Weston and the overall increase in revenues for the year
ended December 31, 1993 as compared to 1992. Revenues increased at Broken
Sound and Jacksonville Golf & Country Club due to new products introduced in
late 1992 which had their initial closings in 1993. Housing revenues
increased for the year ended December 31, 1992 as compared to 1991 due
primarily to an increase in sales activity at the Partnership's Broken Sound
and River Hills Communities. The increase in revenues at Broken Sound is due
to the sale of a new product line first offered in 1992, as well as an
increase during 1992, as compared to 1991, in sales volume of another housing
product offered at the Community. The increase in activity at the River Hills
Community was due primarily to the broader market appeal of the Partnership's
new lower-priced, value-oriented products.
Approximately 63% of 1993's housing revenues were generated during the
fourth quarter. This substantial increase in revenues was due primarily to an
increase in the demand for housing product in Weston combined with the
introduction of several new value oriented products in this Community earlier
in the year. Also contributing to the increase in revenues during the fourth
quarter of 1993 was the completion and close-out of all of the units in the
final phase of the Partnership's Marina Bay condominium project on Long Boat
Key, Florida in November and December 1993.
The gross operating profit from housing sales increased for the year
ended December 31, 1993 as compared to 1992 due primarily to the mix of
product sold at the Partnership's Weston and Broken Sound Communities. The
increase in gross operating profits is also attributable to higher profit
margins recognized from the final phase of Marina Bay on Longboat Key,
Florida. These closings generated increased revenues due to the desirable
location of the final building.
Revenues from the sale of homesites include amounts earned from the sale
of developed lots within the Partnership's Communities. Revenues from the
sale of homesites increased for the year ended December 31, 1993 as compared
to the same period in 1992 due to the initial closing of lots in several
homesite projects introduced early in 1993 in the Weston Hills Country Club
section of the Partnership's Weston Community. Also contributing to the
favorable variance was the closing of the remaining lots held for sale by the
Partnership on Longboat Key, Florida during September 1993. This favorable
variance was partially offset by decreased revenues at the Partnership's
Broken Sound Community due to the close-out of the final homesites in that
Community in 1992. Revenues from homesite sales activities were higher for
the year ended December 31, 1992 as compared to 1991 due primarily to an
increase in closings at the Partnership's Weston and River Hills Communities.
The increased activity was primarily attributable to the introduction of
several new products within these Communities in 1992. This favorable volume
variance was partially offset by decreased closing activity associated with
certain product lines which were substantially or completely sold out in 1991,
as well as decreased closing activity at one of the Partnership's Atlanta
Communities. In an effort to stimulate sales activity at one of the Atlanta
Communities, the Partnership is offering lower-priced homesites more
consistent with market demand.
Land and property revenues are generated from the sale of developed and
undeveloped residential or commercial land tracts, as well as the sale of
equity memberships in the clubs within the Partnership's Boca Raton, Florida
Community, as well as its Communities near Jacksonville, Florida and
Highlands, North Carolina. Revenues from land and property sales increased
for the year ended December 31, 1993 primarily as a result of the sale of the
remaining real estate and equity memberships at the Partnership's Oaks
Community. See further discussion regarding this transaction in Liquidity and
Capital Resources, above. In addition, the Partnership closed on the sale of
the Oak Bridge Club near Jacksonville, Florida to an unaffiliated third-party
purchaser in October 1993. The sale of this club also contributed to the
increase in land and property revenues for 1993 as compared to 1992. The
increase in the gross operating profit from land and property sales in 1993 as
compared to 1992 is due primarily to the recognition of deferred revenues in
1993 for sales, primarily at Broken Sound and Weston, which previously did not
meet the criteria for revenue recognition in accordance with generally
accepted accounting principles ("GAAP"). This increase was partially offset,
however, by the sale of the remaining real estate and equity memberships at
the Partnership's Oaks Community. Certain sales transactions which closed in
previous periods but did not meet the criteria for revenue recognition remain
deferred at December 31, 1993, and profit will be recognized in future periods
as these sales become eligible for revenue recognition in accordance with
GAAP. Land and property revenues decreased for the year ended December 31,
1992 as compared to 1991. Land and property revenues in 1992 resulted
primarily from the sale of a 17-acre single family residential parcel located
in the Partnership's Weston Community, the sale of 60% of the Partnership's
interest in two residential land parcels also located in the Weston Community,
and the sale of approximately 21 acres of undeveloped residential land located
in the Partnership's Broken Sound Community. Certain of these residential
sales transactions legally closed in 1992 but were not eligible for accounting
profit recognition during the year due to certain contract provisions.
However, certain amounts which had been deferred in previous years became
eligible for profit recognition in 1992 and are included in 1992 land and
property revenues. Sales of undeveloped commercial tracts in 1992 include
approximately four acres located in Palm Beach County, Florida, and
approximately nine acres located on Longboat Key, Florida. Land and property
revenues for the year ended December 31, 1991 resulted primarily from the sale
of a 28-acre multi-family residential parcel and a 16-acre single family
residential parcel in Palm Beach County, Florida, as well as an 18-acre multi-
family residential parcel located in one of the Partnership's Jacksonville
Communities.
Revenues from the sale of equity memberships decreased in 1992 as
compared to 1991 due primarily to the inclusion in 1991 of profits related to
the sales of Broken Sound equity memberships which had previously been
deferred for accounting purposes. The recognition of these deferred profits
in 1991 is the primary cause for the decrease in the net margin from land and
property sales in 1992 as compared to 1991.
Costs of revenues pertaining to the Partnership's housing sales reflect
the cost of the acquired assets as well as development and construction
expenditures, certain capitalized overhead costs, capitalized interest and
marketing and disposition costs. The costs related to the Partnership's
homesite sales reflect the cost of the acquired assets, related development
expenditures, certain capitalized overhead costs, capitalized interest and
disposition costs. Land and property costs reflect the cost of the acquired
assets, certain development costs and related disposition costs as well as the
costs associated with the sale of equity memberships.
Operating properties represents activity from the Partnership's club and
hotel operations, commercial properties and certain other operating assets.
Revenues generated by the Partnership's operating properties increased for the
year ended December 31, 1993 as compared to 1992 primarily as a result of an
increase in membership activity at the Partnership's club facilities in Weston
resulting from the overall increase in home sales activity within that
Community. In addition, revenues from the Partnership's cable operations in
Broken Sound and Weston increased during the year ended December 31, 1993 as
compared to 1992 resulting from an increase in the number of cable subscribers
within those Communities as well as a change in the cable rate structure. The
decrease in the negative net margins for 1993 as compared to 1992 is due
primarily to cost reductions implemented at the Partnership's club and hotel
operations coupled with an overall increase in revenues from these operations.
The Partnership continues to evaluate the operations of its club and hotel
facilities and institute additional cost controls as deemed appropriate. The
decrease in the negative margins generated from operating properties for the
year ended December 31, 1992 as compared to 1991 was primarily the result of
increased operating revenues combined with reductions in certain overheads and
other operating costs at the Partnership's hotel operation and at several of
the Partnership's clubs and commercial and retail operating properties. These
favorable variances are partially offset, however, by the inclusion of the
funding of deficits for the Cullasaja Club during 1992 resulting from the
consolidation of the assets of the Cullasaja Joint Venture, as discussed above
in Liquidity and Capital Resources. Contributing to the improvement in the
1992 net margins as compared to 1991 was the inclusion in 1991 of certain
costs associated with the conversion of the Weston Hills Country Club from an
equity to a non-equity club.
Brokerage and other operations represents activity from the resale of
real estate inside and outside the Partnership's Communities, activity from
the sale of builders' homes within the Partnership's Communities, proceeds
from the Partnership's property management activities as well as fees earned
from various management agreements with joint ventures. The increase in
revenues and the corresponding increase in the gross operating profit from
brokerage and other operations for the year ended December 31, 1993 as
compared to 1992 was attributable to an increase in the volume of resale
activity, primarily in the Sarasota, Broward County and Palm Beach County,
Florida areas, as well as a decrease in the related cost of revenues resulting
from a reduction in commissions paid due to a modification of the
Partnership's brokerage commission structure. The increase in revenues and
gross operating profit from brokerage and other operations at December 31,
1992 as compared to 1991 is due primarily to an increase in commissions earned
by the Partnership from the sale of builder units, primarily at the
Partnership's Weston and Broken Sound Communities, as well as the reduction of
commissions associated with the sale of these units. Also contributing to the
improved margins is the increase in the volume of resale activity in the
Weston Community as well as the Jacksonville and Palm Beach County areas.
Selling, general and administrative expenses include all marketing costs,
with the exception of those costs capitalized in conjunction with the
construction of housing units, and project and general administrative costs.
These expenses are net of the marketing fees earned from third-party builders.
Selling, general and administrative expenses were significantly lower for the
year ended December 31, 1993 as compared to 1992. The significant reductions
in selling, general and administrative costs during the past three years are
attributable to the implementation of a series of overhead reductions
including the consolidation of certain administrative functions, a reduction
in the number of employees and other employee-related expenditures, the
implementation of more cost-effective marketing programs, as well as an
overall reduction of other administrative expenses. The favorable variance in
selling, general and administrative expenses for the year ended December 31,
1993 as compared to 1992 is also due in part to an increase in marketing fees
earned by the Partnership as a result of the increase in builder unit
closings. Management will continue to evaluate the operations of the
Partnership and institute additional cost controls as deemed necessary to
maximize the Partnership's profits in the future.
Charges to the carrying value of real estate inventories and other assets
represent adjustments to the book values of the Partnership's projects based
upon the analysis of each projects' estimated selling price in the ordinary
course of business less estimated costs of completion, holding and disposal as
compared to its recorded book value. At December 31, 1992, the Partnership
recorded charges to the inventory carrying values of certain residential and
commercial properties totalling approximately $12.2 million to reflect their
estimated net realizable values as determined by management's evaluation of
these properties. These charges include approximately $7.4 million to reduce
the carrying values of the Partnership's Water's Edge and Dockside Communities
located near Atlanta, Georgia and $1.8 million to reduce the carrying value of
its River Hills Community in Tampa, Florida. These Communities had been
experiencing slower sales absorptions than anticipated due to the pricing of
current products not being in line with current market demand. The charges to
the inventory carrying values result from the Partnership's plans to offer
lower-priced homesite and housing products in these Communities which are more
consistent with market demand. The Partnership did reduce the price of
homesites in the Water's Edge and Dockside Communities as planned; however,
during 1993, the Partnership experienced no significant increase in sales
absorptions in these Communities. Recent market studies indicate that the
housing product offered for sale by third-party builders in Water's Edge and
Dockside continues to be priced higher than market, and further reductions of
housing sales prices are warranted. Therefore, during the second quarter of
1993, the Partnership recorded an additional charge totalling approximately
$4.9 million to the inventory carrying value of the Water's Edge and Dockside
Communities to reflect the adverse impact of these additional reductions in
housing prices on future anticipated lot values.
In light of the circumstances surrounding The Oaks joint venture as
discussed in Liquidity and Capital Resources above, the Partnership, as a
matter of prudent accounting practice, recorded a charge to the carrying value
of real estate inventories and equity memberships of approximately $2.3
million and $1.0 million, respectively, in the fourth quarter of 1992 to
properly reflect the estimated market value of The Oaks property in its
current state of development assuming a bulk sale of the entire property under
present market conditions. The balance of the charges to reduce real estate
inventories at December 31, 1992, totalling approximately $0.7 million, were
recorded to reflect the then current market value of several parcels of
undeveloped commercial real estate.
In the fourth quarter of 1992, the Partnership recorded an approximate
$3.4 million charge to the net book value of property and equipment to reflect
the reduction in the values of a 29,000 square foot office building located in
Palm Beach County, Florida and the golf and country club facility at the
Partnership's River Hills Community. The value of the golf and country club
facility at River Hills had been adversely impacted by the introduction of new
lower-priced products within the Community, which are more in line with market
demand, as well as overall economic conditions and the competition from other
club facilities within the Tampa, Florida area.
The Partnership owns interests in a number of commercial joint ventures
located throughout Florida. Due to a significant decline in the demand for
undeveloped commercial real estate in the markets in which these properties
are located, in 1992 the respective joint ventures recorded charges to the
carrying values of their real estate inventories of approximately $7.4 million
to reflect their estimated net realizable values.
The amenities within the Partnership's Jacksonville Golf and Country Club
and Broken Sound Communities are conveyed to homeowners through the sale of
equity memberships. The sales of memberships in Jacksonville Golf and Country
Club have been adversely impacted during the past several years by the
introduction of lower-priced products within the Community in response to
market conditions as well as competition from other club facilities located in
the Jacksonville area. At Broken Sound, the higher-priced equity memberships
had experienced a slowdown in absorptions due primarily to the overall
slowdown in the economy and the low levels of consumer confidence. As a
result of the above, in 1992 the Partnership recorded charges to the carrying
value of its equity memberships at Jacksonville Golf and Country Club and
Broken Sound of approximately $2.2 million and $1.0 million, respectively. In
addition, equity memberships also included a $1.0 million reduction in the
value of The Oaks country club's equity memberships as discussed above.
Charges to the carrying value of real estate inventories and other assets
during 1991 consisted of a charge to income of approximately $1.4 million to
reduce the carrying value of the Partnership's interest in a commercial joint
venture located in Tampa, Florida. Also included in 1991, was an approximate
$0.7 million charge to the carrying value of housing product offered for sale
in the Partnership's River Hills Community due to the decision to replace a
higher-priced product line with a new lower-priced product more in line with
market demand. In addition, the Partnership reduced the carrying value of an
undeveloped land parcel held for sale in Jacksonville, Florida.
Interest income decreased for the year ended December 31, 1993 as
compared to 1992 primarily due to an overall decrease in the average amounts
invested in short-term instruments during 1993 as compared to 1992. Interest
income decreased in 1992 in comparison to 1991 primarily as a result of the
Partnership's purchase of its venture partner's interest in the Cullasaja
Joint Venture and the resulting consolidation of the venture's operations.
Interest income at December 31, 1991 includes interest earned on advances
previously made by the Partnership to the joint venture. Also contributing to
the decrease in interest income is the Partnership's decision to reserve
interest income accrued on advances to the Coto de Caza Joint Venture.
Reference is made to the Liquidity and Capital Resources section above for
further discussion concerning the Partnership's ownership interest in the Coto
de Caza joint venture.
Equity in earnings of unconsolidated joint ventures increased for the
year ended December 31, 1993 as compared to the same periods in 1992 due to
the change from the equity to the cost method of accounting for the
Partnership's investment in the Coto de Caza joint venture, which resulted in
the Partnership no longer recording its ownership share of the loss from the
Coto de Caza venture's operations. See Liquidity and Capital Resources above
for further discussion of the change in ownership of the Coto de Caza joint
venture. The increase was also attributable to the earnings generated from
the two joint ventures formed during the second half of 1992 for the purpose
of constructing homes within the Partnership's Weston Community. See
Liquidity and Capital Resources above and Notes 1 and 7 for further discussion
regarding these joint venture interests. The increase in equity in losses of
unconsolidated ventures in 1992 in comparison to 1991 is due primarily to the
Partnership's ownership interest in the Coto de Caza joint venture. Increased
operating losses were generated by the Coto de Caza joint venture primarily
due to the expensing of costs that previously qualified for capitalization.
In addition, interest income earned by the joint venture decreased in
comparison to 1991 due to the sale of the venture's mortgage portfolio in the
fourth quarter of 1991. The increase in losses during 1992 is also
attributable to the Partnership's ownership interest in a commercial joint
venture located in Ocala, Florida. This venture's 1991 results of operations
included profits from land sale activity, while no land sales occurred for
this venture in 1992. These unfavorable variances were partially offset by
the Partnership's interest in the Cullasaja joint venture's losses no longer
being included in equity in losses of unconsolidated ventures due to the
purchase in 1992 of the joint venture partner's interest in the venture. The
results of operations for Cullasaja since that purchase have been consolidated
in the accompanying Consolidated Statement of Operations.
Interest and real estate taxes decreased for the year ended December 31,
1993 as compared to 1992 due to an overall decrease in the Partnership's
average debt balance outstanding and an increase in the amount of real estate
inventories which meet the requirements for capitalization of these costs.
Nationwide housing starts and total nationwide single-family permits for
1993 increased 7.1 %* and 10.3%**, respectively from 1992. Trends in housing
permits for the major markets in which the Partnership's properties are
located are shown below.
% CHANGE FROM
------------------------------------------
HOUSING PERMITS
(SINGLE FAMILY)** 1992-1993 1991-1992 1990-1991 1989-1990
------------------ --------- --------- --------- ---------
Florida Markets:
West Palm Beach
(includes Boca Raton). +9.4% +22.6% -7.5% -47.7%
Miami - Ft. Lauderdale . +27.4% +34.8% -14.9% -30.4%
Jacksonville . . . . . . +4.2% +13.9% -1.3% -10.2%
Tampa Bay. . . . . . . . +6.4% +23.9% -0.2% -27.5%
Atlanta, Georgia . . . . . +14.1% +26.0% +4.9% -6.3%
Orange County, California. +24.0% -0.3% -16.8% -57.3%
* Source: "Housing Market Statistics" (February 1994) a publication
of the National Association of Home Builders
** Source: "U.S. Housing Markets" (February 2, 1994, February 5, 1993,
February 4, 1992, and February 1, 1992) a publication of Lomas Mortgage USA
For the year ended December 31, 1993, the Partnership (including its
consolidated ventures and its unconsolidated ventures accounted for under the
equity method) closed on the sale of 626 housing units, 752 homesite lots,
approximately 50 acres of developed and undeveloped residential or
commercial/industrial land tracts as well as the sales of The Oak Bridge Club
and the remaining real estate and equity memberships at The Oaks Community.
This compares to sales closings in 1992 of 320 housing units, 639 homesite
lots and approximately 91 acres of developed and undeveloped residential or
commercial/industrial land tracts. Sales closings in 1991 were for 273
housing units, 594 homesite lots and 107 acres of developed and undeveloped
land tracts. Outstanding contracts ("backlog") as of December 31, 1993 were
for 521 housing units, 127 homesites and approximately 47 acres of developed
and undeveloped land tracts. This compares to a backlog as of December 31,
1992 of 270 housing units, 86 homesites and 6 acres of developed and
undeveloped land tracts. The backlog as of December 31, 1991 was for 96
housing units, 28 homesites and approximately 34 acres of developed and
undeveloped land tracts. The increasing trend in backlog as compared to prior
years is indicative of the improvement in sales activity seen at many of the
Partnership's Communities.
As a result of management's efforts to broaden the appeal of the
Partnership's Communities through the introduction of new housing products,
the implementation of a series of cost reductions as well as the upward trends
in housing activity that the nation as well as the markets in which the
Partnership's properties are located have been experiencing, the Partnership
was able to generate significant cash flow before debt service during 1993.
The Partnership utilized this excess cash flow to make scheduled and
accelerated principal repayments on its outstanding debt, as required under
the terms of the credit facility agreement, and to increase its cash reserves.
Furthermore, in February 1994, the Partnership made a distribution of
$2,565,433 to its Limited Partners ($6.35 per Interest) and $142,523 to the
General Partner and Associate Limited Partners, collectively. As mentioned
above, the Partnership's income property term loan, revolving line of credit
and letter of credit facility are due for renewal in July 1994. Although the
Partnership is hopeful these renewals will be obtained, there can be no
assurance that such will occur or that the terms, amounts and restrictions of
the renewed credit facilities will be similar to those under the Partnership's
existing facilities. As a result, the Partnership will not be able to assess
whether or not cash distributions to partners can be made for 1994 until the
end of 1994 when the final operating results for the year as well as the terms
and conditions of a new credit facility are known.
INFLATION
Although the relatively low rates of inflation in recent years generally
have not had a material effect on the Community development business,
inflation in future periods can adversely affect the development of
Communities generally because of its impact on interest rates. High interest
rates not only increase the cost of borrowed funds to developers, but also
have a significant effect on the affordability of permanent mortgage financing
to prospective purchasers. In addition, any increased costs of materials and
labor resulting from high rates of inflation may, in certain circumstances, be
passed through to purchasers of real properties through increases in sales
prices, although such increases may reduce sales volume. If such cost
increases are not passed through to purchasers, there could be a negative
impact on the ultimate margins realized by the Partnership.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
INDEX
Reports of Independent Accountants
Consolidated Balance Sheets, December 31, 1993 and 1992
Consolidated Statements of Operations for the years ended
December 31, 1993, 1992 and 1991
Consolidated Statements of Changes in Partners' Capital Accounts
(Deficit) for the years ended December 31, 1993, 1992 and 1991
Consolidated Statements of Cash Flows for the years ended
December 31, 1993, 1992 and 1991
Notes to Consolidated Financial Statements
SCHEDULE
Supplementary Statements
of Operations Information . . . . . . . . X
SCHEDULES NOT FILED:
All schedules other than those indicated in the index have been omitted
as the required information is inapplicable or immaterial, or the information
is presented in the consolidated financial statements or related notes.
Report of Independent Accountants
To the Partners of
Arvida/JMB Partners, L.P.
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14 (a) (1) and (2) present fairly, in all material
respects, the financial position of Arivda/JMB Partners, L.P. (a limited
partnership) and its subsidiaries at December 31, 1992, and the results of
their operations and their cash flows for each of the two years in the period
ended December 31, 1992, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
Partnership's management; our responsibility is to express and opinion on
these financial statements based on our audits. We conducted our audits of
these statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above. We
have not audited the consolidated financial statements of Arvida/JMB Partners,
L.P. and its subsidiaries for any period subsequent to December 31, 1992.
PRICE WATERHOUSE
Miami, Florida
March 23, 1993
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
ARVIDA/JMB PARTNERS, L.P.
We have audited the accompanying consolidated balance sheet of Arvida/JMB
Partners, L.P. and Consolidated Ventures as of December 31, 1993, and the
related consolidated statements of operations, changes in partners' capital
accounts (deficit), and cash flows for the year then ended. Our audit also
included the 1993 financial statement schedule listed in the Index at Item 8.
These financial statements and schedule are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on
these financial statements and schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Arvida/JMB Partners, L.P. and Consolidated Ventures at December 31, 1993,
and the consolidated results of their operations and their cash flows for the
year then ended, in conformity with generally accepted accounting principles.
Also, in our opinion, the related 1993 financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
ERNST & YOUNG
Miami, Florida
March 15, 1994
<TABLE>
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1993 AND 1992
<CAPTION>
ASSETS
------
1993 1992
----------- -----------
<S> <C> <C>
Cash and cash equivalents (note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,906,679 7,634,320
Restricted cash (note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,645,678 7,955,251
Trade and other accounts receivable (net of allowance for doubtful accounts of
$381,151 and $695,504 at December 31, 1993 and 1992, respectively) . . . . . . . . . . . . . . . . . 7,298,714 7,192,420
Mortgages receivable, net (note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,940,961 5,737,331
Real estate inventories (notes 5 and 8). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188,679,152 189,649,253
Property and equipment, net (notes 6 and 8). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,989,577 70,072,466
Investments in and advances to joint ventures, net (note 7). . . . . . . . . . . . . . . . . . . . . . 24,731,852 31,298,724
Equity memberships (note 9). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,146,661 21,238,580
Amounts due from affiliates (note 10). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88,389 356,797
Prepaid expenses and other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,007,402 9,672,396
------------ -----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $346,435,065 350,807,538
============ ===========
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
1993 1992
----------- -----------
Liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,172,895 8,444,327
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,010,408 23,750,954
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,390,593 14,878,966
Notes and mortgages payable, net (note 8). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147,770,992 180,936,172
------------ -----------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194,344,888 228,010,419
------------ -----------
Partners' capital accounts (note 14)
General Partner and Associate Limited Partners:
Capital contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 20,000
Cumulative net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,739,753 33,446,823
Cumulative cash distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (33,466,823) (33,466,823)
------------ -----------
292,930 --
------------ -----------
Limited partners (404,005 interests including five Interests - Initial Limited Partner):
Capital contributions, net of offering costs. . . . . . . . . . . . . . . . . . . . . . . . . . . 364,841,815 364,841,815
Cumulative net losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (78,963,692) (107,963,820)
Cumulative cash distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (134,080,876) (134,080,876)
------------ -----------
151,797,247 122,797,119
------------ -----------
Total partners' capital accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152,090,177 122,797,119
------------ -----------
Commitments and contingencies (notes 7, 8, 10, 11 and 12)
Total liabilities and partners' capital. . . . . . . . . . . . . . . . . . . . . . . . . . . $346,435,065 350,807,538
=========== ===========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<TABLE>
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<CAPTION>
1993 1992 1991
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Housing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $105,135,532 53,579,787 45,972,101
Homesites. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,171,109 50,431,467 38,843,578
Land and property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,646,960 18,708,924 29,696,899
Operating properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,326,255 24,129,461 17,847,356
Brokerage and other operations . . . . . . . . . . . . . . . . . . . . . . . . 31,371,336 27,861,140 23,339,937
------------ ------------ ------------
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . 247,651,192 174,710,779 155,699,871
------------ ------------ ------------
Cost of revenues:
Housing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84,598,055 47,240,372 40,939,176
Homesites. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,025,954 32,445,059 26,028,401
Land and property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,431,543 15,501,055 19,447,313
Operating properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,552,287 26,868,457 23,045,011
Brokerage and other operations . . . . . . . . . . . . . . . . . . . . . . . . 25,113,709 23,462,659 21,736,687
------------ ------------ ------------
Total cost of revenues . . . . . . . . . . . . . . . . . . . . . . . . 192,721,548 145,517,602 131,196,588
------------ ------------ ------------
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED
1993 1992 1991
------------ ------------ ------------
Gross operating profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,929,644 29,193,177 24,503,283
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . 19,343,730 25,283,422 33,526,558
Charges to the carrying value of real estate inventories
and other assets (notes 1, 5, 6, 7 and 9). . . . . . . . . . . . . . . . . . . 4,896,000 27,247,000 2,753,818
------------ ------------ ------------
Net operating income (loss). . . . . . . . . . . . . . . . . . . . . . 30,689,914 (23,337,245) (11,777,093)
Interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 672,000 1,616,309 2,111,587
Equity in earnings (losses) of unconsolidated ventures (notes 1 and 7) . . . . . 1,134,947 (2,225,531) (769,300)
Interest and real estate taxes, net (note 1) . . . . . . . . . . . . . . . . . . (12,739,584) (20,027,899) (20,233,163)
------------ ------------ ------------
Net income (loss) before extraordinary item. . . . . . . . . . . . . . 19,757,277 (43,974,366) (30,667,969)
Extraordinary item:
Gain on early extinguishment of debt (note 8). . . . . . . . . . . . 9,535,781 -- --
------------ ------------ ------------
Net income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,293,058 (43,974,366) (30,667,969)
============ ============ ============
Net income (loss) per Limited Partnership Interest . . . . . . . . . . $ 71.78 (160.42) (74.39)
============ ============ ============
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<TABLE>
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL ACCOUNTS (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<CAPTION>
GENERAL PARTNER AND ASSOCIATE LIMITED PARTNERS LIMITED PARTNERS (404,005 INTERESTS)
----------------------------------------------------------------------------------------------------------------------
NET NET
CONTRIBU- INCOME CASH INCOME
TIONS (LOSS) DISTRIBUTIONS TOTAL CONTRIBUTIONS (LOSS) DISTRIBUTIONS TOTAL
--------- --------- ------------- ----------- ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance (deficit)
December 31,
1990. . . . . . . $20,000 13,224,612 (33,466,823) (20,222,211) 364,841,815 (13,099,274) (134,080,876) 217,661,665
Net loss
(note 14) . . . . -- (613,359) -- (613,359) -- (30,054,610) -- (30,054,610)
------- ---------- ----------- ----------- ----------- ----------- ------------ -----------
Balance (deficit)
December 31,
1991. . . . . . . 20,000 12,611,253 (33,466,823) (20,835,570) 364,841,815 (43,153,884) (134,080,876) 187,607,055
Net income (loss)
(note 14) . . . . -- 20,835,570 -- 20,835,570 -- (64,809,936) -- (64,809,936)
------- ---------- ----------- ----------- ----------- ----------- ------------ -----------
Balance (deficit)
December 31,
1992. . . . . . . 20,000 33,446,823 (33,466,823) -- 364,841,815 (107,963,820) (134,080,876) 122,797,119
Net income
(note 14) . . . . -- 292,930 -- 292,930 -- 29,000,128 -- 29,000,128
------- ---------- ----------- ----------- ----------- ----------- ------------ -----------
Balance
December 31,
1993. . . . . . . $20,000 33,739,753 (33,466,823) 292,930 364,841,815 (78,963,692) (134,080,876) 151,797,247
======= ========== =========== =========== =========== =========== ============ ===========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<TABLE>
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<CAPTION>
1993 1992 1991
------------ ------------ ------------
<S> <C> <C> <C>
Net income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,293,058 (43,974,366) (30,667,969)
Charges (credits) to net income (loss) not requiring (providing) cash:
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . . . . 6,232,092 7,550,386 7,072,673
Equity in earnings (losses) of unconsolidated ventures . . . . . . . . . . . . (1,134,947) 2,225,531 769,300
Provision for doubtful accounts. . . . . . . . . . . . . . . . . . . . . . . . 269,400 42,423 735,921
(Gain) loss on sale of property and equipment. . . . . . . . . . . . . . . . . 34,827 (13,133) 401,016
Gain on sale of joint venture interest . . . . . . . . . . . . . . . . . . . . -- -- (1,185,130)
Charge to carrying value of real estate inventories and other
assets (notes 1, 5, 6, 7 and 9). . . . . . . . . . . . . . . . . . . . . . . 4,896,000 27,247,000 2,753,818
Extraordinary gain on early extinguishment of debt (note 8). . . . . . . . . . (9,535,781) -- --
Changes in:
Restricted cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,690,427) (784,260) (793,627)
Trade and other accounts receivable. . . . . . . . . . . . . . . . . . . . . . (499,618) 2,161,155 314,725
Real estate inventories:
Additions to real estate inventories . . . . . . . . . . . . . . . . . . . . (131,513,189) (65,702,042) (54,614,385)
Cost of revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140,055,552 95,186,486 86,414,890
Capitalized interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,738,179) (4,470,150) (2,939,326)
Capitalized real estate taxes. . . . . . . . . . . . . . . . . . . . . . . . (3,179,099) (2,026,309) (1,072,410)
Equity memberships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,091,919 5,723,093 460,444
Amounts due from affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . 268,408 (4,464,883) (275,529)
Prepaid expenses and other assets. . . . . . . . . . . . . . . . . . . . . . . (134,749) (2,539,319) 1,918,138
Accounts payable, accrued expenses and other liabilities . . . . . . . . . . . 1,484,062 1,840,679 (3,654,630)
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,740,546) 5,345,420 (4,601,063)
------------ ------------ ------------
Total adjustments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (834,275) 67,322,077 31,704,825
------------ ------------ ------------
Net cash provided by operations. . . . . . . . . . . . . . . . . . . . 28,458,783 23,347,711 1,036,856
------------ ------------ ------------
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1993 1992 1991
------------ ------------ ------------
Investing activities:
Mortgages receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,196,370 1,825,359 (2,749,485)
Acquisitions of property and equipment . . . . . . . . . . . . . . . . . . . . (3,470,360) (4,000,910) (1,932,818)
Proceeds from disposals of property and equipment. . . . . . . . . . . . . . . 1,121,253 83,071 983,218
Joint venture distributions (contributions), net . . . . . . . . . . . . . . . 3,916,119 (3,676,826) 8,039,040
Payments from (advances to) joint ventures . . . . . . . . . . . . . . . . . . 3,956,980 916,114 (5,135,352)
Proceeds from sale of joint venture interest . . . . . . . . . . . . . . . . . -- -- 775,000
Proceeds from acquisition of joint venture interest. . . . . . . . . . . . . . 6,614 81,741 --
------------ ------------ ------------
Net cash provided by (used in) investing activities. . . . . . . . . . 6,726,976 (4,771,451) (20,397)
------------ ------------ ------------
Financing activities:
Proceeds from notes and long-term borrowings . . . . . . . . . . . . . . . . . 28,095,548 22,102,094 69,466,723
Payments of notes and long-term borrowings . . . . . . . . . . . . . . . . . . (52,008,948) (62,618,870) (43,136,757)
Payments of short-term bank borrowings . . . . . . . . . . . . . . . . . . . . -- (2,246,174) (6,323,328)
------------ ------------ ------------
Net cash provided by (used in) financing activities. . . . . . . . . . (23,913,400) (42,762,950) 20,006,638
------------ ------------ ------------
Increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . 11,272,359 (24,186,690) 21,023,097
Cash and cash equivalents, beginning of year . . . . . . . . . . . . . . . . . . 7,634,320 31,821,010 10,797,913
------------ ------------ ------------
Cash and cash equivalents, end of year . . . . . . . . . . . . . . . . . . . . . $ 18,906,679 7,634,320 31,821,010
============ ============ ============
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest, net of amounts capitalized. . . . . $ 7,387,204 10,945,116 14,598,590
============ ============ ============
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1993 1992 1991
------------ ------------ ------------
Non-cash investing and financing activities:
Conversion of equity country club. . . . . . . . . . . . . . . . . . . . . . $ -- -- 20,270,336
Land contributed in exchanges for joint venture interests (note 7) . . . . . -- 3,681,600 --
Acquisition of joint venture interests (note 7). . . . . . . . . . . . . . . 324,169 12,090,912 --
------------ ------------ ------------
$ 324,169 15,772,512 20,270,336
============ ============ ============
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF ACCOUNTING
Principles of Consolidation
The consolidated financial statements include the accounts of Arvida/JMB
Partners, L.P. (the "Partnership") and its consolidated ventures (Note 7).
All material intercompany balances and transactions have been eliminated in
consolidation. The equity method of accounting has been applied in the
accompanying consolidated financial statements with respect to those
investments where the Partnership's ownership interest is 50% or less, with
the exception of the Partnership's investment in the Coto de Caza Joint
Venture which is accounted for in accordance with the cost method of
accounting, effective September 15, 1992 (Note 7).
Recognition of Profit from Sales of Real Estate
For sales of real estate, profit is recognized in full when the collecta-
bility of the sales price is reasonably assured and the earnings process is
virtually complete. When the sale does not meet the requirements for
recognition of income, profit is deferred until such requirements are met.
For sales of residential units, profit is recognized at the time of closing or
if certain criteria are met, on the percentage-of-completion method.
Real Estate Inventories and Cost of Real Estate Revenues
Real estate inventories are carried at cost, including capitalized
interest and property taxes, but not in excess of the net realizable value
determined by the evaluation of individual projects. Management's evaluation
of net realizable value is based on each projects' estimated selling price in
the ordinary course of business less estimated costs of completion, holding
and disposal. These estimates are reviewed periodically and compared to each
project's recorded book value. Adjustments to book value, as they become
necessary, are reported in the period in which they become known. The total
cost of land, land development and common costs are apportioned among the
projects on the relative sales value method. Costs pertaining to the
Partnership's housing, homesite, and land and property revenues reflect the
cost of the acquired assets as well as development costs, construction costs,
capitalized interest, capitalized real estate taxes and capitalized overheads.
Certain marketing costs relating to housing projects, including exhibits and
displays, and certain planning and other predevelopment activities, excluding
normal period expenses, are capitalized and charged to housing cost of
revenues as related units are closed. A warranty reserve is provided as
residential units are closed. This reserve is reduced by the cost of
subsequent work performed.
Capitalized Interest and Real Estate Taxes
Interest and real estate taxes incurred are capitalized to qualifying
assets, principally real estate inventories. Such capitalized interest and
real estate taxes are charged to cost of revenues as sales of real estate
inventories are recognized. Interest, including the amortization of loan
fees, of $14,786,169, $17,424,850 and $16,621,042 was incurred for the years
ended December 31, 1993, 1992 and 1991, respectively, of which $7,738,179,
$4,470,150 and $2,939,326 was capitalized for the years ended December 31,
1993, 1992 and 1991, respectively. Interest payments, including amounts
capitalized, of $15,125,383, $15,415,266 and $17,537,916 were made for the
years ended December 31, 1993, 1992 and 1991, respectively.
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Real estate taxes of $8,870,693, $9,099,508 and $7,623,857 were incurred
for the years ended December 31, 1993, 1992 and 1991, respectively, of which
$3,179,099, $2,026,309 and $1,072,410 were capitalized for the years ended
December 31, 1993, 1992 and 1991, respectively. Real estate tax payments of
$8,733,910, $10,301,400 and $7,217,145 were made for the years ended December
31, 1993, 1992 and 1991, respectively. The preceding analysis of real estate
taxes does not include real estate taxes incurred or paid with respect to the
Partnership's club facilities and operating properties as these taxes are
included in cost of revenues for operating properties.
Property and Equipment and Other Assets
Property and equipment are carried at cost less accumulated depreciation
and are depreciated on the straight-line method over the estimated useful
lives of the assets which range from two to forty years. Expenditures for
maintenance and repairs are charged to expense as incurred. Costs of major
renewals and improvements which extend useful lives are capitalized. Other
assets are amortized on the straight-line method, which approximates the
interest method, over the useful lives of the assets which range from one to
five years. Amortization of debt discounts (1992 and 1991 only) and other
assets, excluding loan fees, of approximately $247,400, $1,074,000 and
$1,289,100 was incurred for the years ended December 31, 1993, 1992 and 1991,
respectively. Amortization of loan fees, which is included in interest
expense, of approximately $587,500, $343,800 and $0 was incurred for the years
ended December 31, 1993, 1992 and 1991, respectively.
Investments in and Advances to Joint Ventures, Net
In general, the equity method of accounting has been applied in the
accompanying consolidated financial statements with respect to those
investments for which the Partnership does not have majority control and where
the Partnership's ownership interest is 50% or less. The cost method of
accounting has been applied in the accompanying consolidated financial
statements with respect to the Coto de Caza joint venture, effective September
15, 1992, as a result of the Partnership's decrease in its ownership interest
and its joint venture partner's control over the future operations of the
Community. The cost method of accounting is used when a limited partner has
virtually no influence over venture operations and financial policies. Under
the cost method, income is generally recorded only to the extent of
distributions received. Reference is made to Note 7 for further discussion of
this joint venture.
Investments in joint ventures are carried at the Partnership's
proportionate share of the ventures' assets (not in excess of their net
realizable value determined by evaluation of individual projects), net of
their related liabilities and adjusted for any basis differences. Basis
differences result from the purchase of interests at values which differ from
the recorded cost of the Partnership's proportionate share of the joint
ventures' net assets.
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The Partnership periodically advances funds to certain of its joint
ventures in which it holds ownership interests when deemed necessary and
economically justifiable. Such advances are generally interest bearing and
are payable to the Partnership from amounts earned through joint venture
operations.
Equity Memberships
The amenities within certain of the Partnership's Boca Raton and
Jacksonville, Florida Communities, as well as its Community near Highlands,
North Carolina are sold to the respective homeowners through the sale of
equity memberships. The amounts recorded as equity memberships in the
accompanying Consolidated Balance Sheets represent the accumulation of costs
incurred in constructing clubhouses, golf courses, tennis courts and various
other related assets, less amounts allocated to memberships sold not in excess
of their net realizable value determined by evaluations of individual
amenities. Equity membership revenues and related cost of revenues are
included in land and property in the Consolidated Statements of Operations.
Partnership Records
The Partnership's records are maintained on the accrual basis of
accounting as adjusted for Federal income tax reporting purposes. The
accompanying consolidated financial statements have been prepared from such
records after making appropriate adjustments where applicable to reflect the
Partnership's accounts in accordance with generally accepted accounting
principles ("GAAP") and to consolidate the accounts of the ventures as
described above. The net effect of these items is summarized as follows:
<TABLE>
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
<CAPTION>
1993 1992
--------------------------- ---------------------------
GAAP BASIS TAX BASIS GAAP BASIS TAX BASIS
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Total assets . . . . . . . . . . . . . . . . . . . . . . . $346,435,065 416,391,142 350,807,538 366,368,152
Partners' capital accounts (deficit):
General Partner and Associate Limited Partners. . . . . 292,930 19,280 -- --
Limited Partners. . . . . . . . . . . . . . . . . . . . 151,797,247 263,965,551 122,797,119 236,342,695
Net income (loss):
General Partner and Associate Limited Partners. . . . . 292,930 19,280 20,835,570 9,229,820
Limited Partners. . . . . . . . . . . . . . . . . . . . 29,000,128 27,622,856 (64,809,936) (13,688,552)
Net income (loss) per Limited Partnership Interest. . . . 71.78 68.37 (160.42) (33.88)
============ ============ ============= =============
</TABLE>
Reference is made to Note 14 for further discussion of the allocation of
profits and losses to the General Partner, Associated Limited Partners and
Limited Partners.
The net income (loss) per Limited Partnership Interest is based upon the
number of Limited Partnership Interests outstanding at the end of each period
(404,005).
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Reclassifications
During 1992, the Partnership evaluated the presentation and
classification of information in its consolidated financial statements, the
usefulness of such information and its conformity with the financial
statements of other real estate developers and builders. As a result of this
evaluation, the Partnership restructured the presentation of financial
information in its Consolidated Statements of Operations. Such
reclassifications are reflected in the accompanying Consolidated Statements of
Operations and the Consolidated Statements of Cash Flows for the years ended
December 31, 1993, 1992 and 1991. Certain reclassifications have also been
made to the 1991 Consolidated Statement of Cash Flows to conform with the 1992
presentation. Management believes that these reclassifications have resulted
in a more informative presentation of the Partnership's financial information.
Certain reclassifications have also been made to the 1992 and 1991 financial
statements to conform to the 1993 presentation.
Income Taxes
No provision for state or Federal income taxes has been made as the
liability for such taxes is that of the partners rather than the Partnership.
However, in certain instances, the Partnership has been required under
applicable state law to remit directly to the state tax authorities amounts
representing withholding on applicable taxable income allocated to partners.
(2) INVESTMENT PROPERTIES
The Partnership's assets consist principally of interests in land which
is in the process of being developed into master-planned residential
Communities (the "Communities") and, to a lesser extent, commercial
properties; mortgage notes and accounts receivable; management and other
service contracts; construction, brokerage and other support activities; real
estate assets held for investment; club and recreational facilities; and cable
television businesses serving certain of its Communities.
On August 27, 1991, the General Partner, on behalf of the Partnership,
initiated a lawsuit in the Circuit Court of Cook County (County Department,
Chancery Division), Illinois against The Walt Disney Company ("Disney"). The
litigation arises out of the Partnership's acquisition of substantially all of
the real estate and other assets of Arvida Corporation, a subsidiary of
Disney, in September 1987. In the complaint filed on its behalf, the
Partnership alleges that under the terms of the contract with Disney for the
acquisition, the purchase price of the assets was to be reduced by the amount
of certain payments made prior to the closing (the "Closing") of the
transaction out of funds of Arvida Corporation in order to satisfy certain
obligations that were not assumed by the Partnership. The complaint also
alleges that the contract entitles the Partnership to (i) reimbursement by
Disney for amounts advanced by the Partnership to pay certain other claimed
obligations of Arvida Corporation, including certain post-Closing adjustments,
in connection with the acquisition and (ii) indemnification by Disney for
additional costs and expenses incurred by the Partnership subsequent to the
Closing in order to remedy certain environmental conditions that existed prior
to the Closing. The complaint further alleges that the Partnership has made
various demands on Disney for payment of these amounts and that Disney has
refused to make such payments. The Partnership seeks declaratory judgments
that the Partnership is entitled to a purchase price reduction from Disney and
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
reimbursement or indemnification by Disney for amounts advanced or costs and
expenses incurred by the Partnership for certain obligations of Arvida
Corporation, together with interest on all such amounts and costs. During the
second quarter of 1992, the Partnership received approximately $0.8 million in
settlement of portions of this claim. There is no assurance as to what
amounts, if any, the Partnership will recover as a result of the litigation
with regard to the remaining open issues under the initially filed complaint.
During July 1993, Disney filed an answer denying the substantive allegations
of the Partnership's complaint and raising various affirmative defenses. The
Partnership believes Disney's defenses are without merit and will continue to
pursue its claims. In addition, Disney has filed a three count counterclaim
in which it seeks among other things: a complete accounting of liabilities
allegedly assumed but not discharged by the Partnership to ascertain whether
certain funds, not to exceed $2.9 million, are due Disney in accordance with
the purchase agreement; an unspecified amount of damages exceeding $500,000
allegedly representing workers compensation and warranty payments made by
Disney, which Disney alleges are obligations of the Partnership; an accounting
for funds disbursed from a claims pool in the amount of $3,000,000 established
by the parties; and attorney fees and costs. The Partnership believes it has
meritorious defenses to these counterclaims and will defend itself vigorously
against them.
(3) CASH, CASH EQUIVALENTS AND RESTRICTED CASH
At December 31, 1993 and 1992, cash and cash equivalents primarily
consisted of U.S. Government obligations with original maturities of three
months or less, money market demand accounts and repurchase agreements, the
cost of which approximated market value. Cash and cash equivalents include
treasury bills with original maturities of three months or less of
approximately $3,900,000 and $0 at December 31, 1993 or 1992. Included in
restricted cash are amounts restricted under various escrow agreements.
Credit risk associated with cash, cash equivalents and restricted cash is
considered low due to the high quality of the financial institutions in which
these assets are held.
(4) MORTGAGES RECEIVABLE
Mortgages receivable generally range in maturity from 1 to 3 years,
certain of which are collateralized by liens on the property sold and bear
interest with stated rates up to 10% per annum. All mortgages receivable with
below market rates are discounted at the market rate prevailing at the date of
issue or purchase. The resulting effective interest rates on mortgages
receivable range from approximately 11% to 14% per annum. The outstanding
principal balances of mortgages receivable at December 31, 1993 and 1992 are
summarized as follows:
1993 1992
----------- ------------
Total gross mortgages receivable . . . . $3,958,649 6,838,848
Unamortized discount and
valuation allowances . . . . . . . . . (1,017,688) (1,101,517)
---------- ----------
Mortgages receivable, net . . . . . $2,940,961 5,737,331
========== ==========
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(5) REAL ESTATE INVENTORIES
Real estate inventories at December 31, 1993 and 1992 are summarized as
follows:
1993 1992
------------ ------------
Land held for future development or
sale . . . . . . . . . . . . . . . . . $ 24,259,509 30,459,094
Community development inventory:
Work in progress and
land improvements. . . . . . . . . . 137,048,514 133,507,511
Completed inventory. . . . . . . . . . 27,371,129 25,682,648
------------ -----------
Real estate inventories . . . . . . $188,679,152 189,649,253
============ ===========
Real estate inventories at December 31, 1992 include charges to the
inventory carrying values of certain residential and commercial properties
totalling approximately $12.2 million to reflect their estimated net
realizable values as determined by management's evaluation of these
properties. These charges include approximately $9.2 million to reduce the
carrying values of the Partnership's Water's Edge and Dockside Communities
located near Atlanta, Georgia and its River Hills Community in Tampa, Florida.
These Communities had been experiencing slower sales absorptions than
anticipated due to the pricing of products not being in line with market
demand. The charges to the inventory carrying values resulted from the
Partnership's plans to offer lower-priced homesite and housing products in
these Communities which are more consistent with market demand. The
Partnership did reduce the price of homesites in the Water's Edge and Dockside
Communities as planned; however, during 1993, the Partnership experienced no
significant increase in sales absorptions in these Communities. Recent market
studies indicate further reductions of housing sales prices in these
communities are warranted. Therefore, real estate inventories at December 31,
1993 include an additional charge totalling approximately $4.9 million to the
inventory carrying value of the Water's Edge and Dockside Communities to
reflect the adverse impact of these additional reductions in housing prices on
future anticipated lot values.
Also included in real estate inventories at December 31, 1992, is a
charge of approximately $2.3 million to reduce the carrying value of real
estate inventories at The Oaks to properly reflect the estimated market value
of the property assuming a bulk sale of the entire property. The balance of
the charges to reduce real estate inventories, of approximately $0.7 million,
was recorded to reflect the then current market value of several parcels of
undeveloped commercial real estate. See Note 8 for discussion regarding the
Partnership's sale of its remaining land holdings in The Oaks Community during
1993.
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(6) PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1993 and 1992 are summarized as
follows:
1993 1992
------------ ------------
Land . . . . . . . . . . . . . . . . . $ 6,566,045 6,560,828
Land improvements. . . . . . . . . . . 18,214,258 19,388,725
Buildings. . . . . . . . . . . . . . . 51,166,841 50,098,289
Equipment and furniture. . . . . . . . 19,024,112 18,225,992
Construction in progress . . . . . . . 1,281,936 873,411
------------ ------------
Total . . . . . . . . . . . . . . 96,253,192 95,147,245
Accumulated depreciation. . . . . (29,263,615) (25,074,779)
------------ ------------
Property and equipment, net . . . $ 66,989,577 70,072,466
============ ============
In the fourth quarter of 1992, the Partnership recorded an approximate
$3.4 million charge to the net book value of property and equipment to reflect
reductions in the values of a 29,000 square foot office building located in
Palm Beach County, Florida and a golf and country club facility at the
Partnership's River Hills Community. The value of the golf and country club
facility at River Hills had been adversely impacted by the introduction of new
lower-priced products within the Community as well as overall economic
conditions and the competition from other club facilities within the Tampa,
Florida area.
Depreciation expense of approximately $5,397,200, $6,132,700 and
$5,783,600 was incurred for the years ended December 31, 1993, 1992 and 1991,
respectively.
(7) INVESTMENTS IN AND ADVANCES TO JOINT VENTURES, NET
The Partnership has numerous investments in real estate joint ventures
with ownership interests ranging from 20% to 50%. The Partnership's joint
venture interests accounted for under the equity method are as follows:
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
LOCATION OF
NAME OF VENTURE % OF OWNERSHIP PROPERTY
- --------------- -------------- ------------
Arvida Boose
Joint Venture 50 Florida
Arvida Corporate
Park Associates 50 Florida
Arvida Pompano Associates
Joint Venture 50 Florida
H.A.E. Joint Venture 33-1/3 Florida
Mizner Court Associates
Joint Venture 50 Florida
Mizner Tower Associates
Joint Venture 50 Florida
Ocala 202 Joint Ventures 50 Florida
Tampa 301 Associates
Joint Venture 50 Florida
Windmill Lake Estates
Associates
Joint Venture 50 Florida
Arvida/RBG I Joint Venture 40 Florida
Arvida/RBG II Joint Venture 40 Florida
The following is combined summary information of joint ventures accounted
for under the equity method. The 1993 and 1992 summary information presented
below is not comparable to the 1991 information due to the consolidation of
the Cullasaja Joint Venture effective January 1, 1992 and the application of
the cost method of accounting, effective September 15, 1992, for the
Partnership's ownership interest in the Coto de Caza joint venture. The 1993
summary information presented is not comparable to the 1992 and 1991
information due to the consolidation of AOK Group effective March 1, 1993.
See further discussion below regarding the Partnership's accounting for these
joint venture interests.
<TABLE>
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
<CAPTION>
DECEMBER 31, DECEMBER 31,
1993 1992
------------ ------------
ASSETS
------
<S> <C> <C>
Real estate inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11,170,628 21,701,201
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,209,918 11,453,177
----------- ------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $17,380,546 33,154,378
=========== ============
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
Accounts payable, deposits and other liabilities . . . . . . . . . . . . . . . . . . . . . . $ 752,274 3,862,725
Notes and mortgages payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,109,656 10,963,677
----------- ------------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,861,930 14,826,402
Venture partners' capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,753,884 9,057,262
Partnership's capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,764,732 9,270,714
----------- ------------
Total liabilities and partners' capital. . . . . . . . . . . . . . . . . . . . . . $17,380,546 33,154,378
=========== ============
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
COMBINED RESULTS OF OPERATIONS
------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1993 1992 1991
------------ ------------ ------------
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $32,846,925 10,667,527 38,568,785
=========== ============ ============
Net income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,409,483 (24,284,665) (2,864,164)
=========== ============ ============
Partnership's proportionate share of net income (loss) . . . . . . . . . . $ 953,165 (12,205,635) (1,421,006)
=========== ============ ============
Partnership's equity in earnings (losses) of unconsolidated ventures . . . $ 1,134,947 (2,225,531) (769,300)
=========== ============ ============
The following is a reconciliation of the Partnership's Capital accounts within the joint ventures
to its investments in and advances to joint ventures as reflected on the accompanying Consolidated Balance
Sheets:
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1993 1992 1991
------------ ------------ ------------
Partnership's Capital, equity method . . . . . . . . . . . . . . . . . . . $ 6,764,732 9,270,714 27,753,620
Partnership's Capital, cost method . . . . . . . . . . . . . . . . . . . . 5,836,000 8,763,000 --
Basis difference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,888,487 5,065,397 3,534,512
----------- ------------ ------------
Investments in joint ventures. . . . . . . . . . . . . . . . . . . . . . . 20,489,219 23,099,111 31,288,132
Advances to joint ventures, net. . . . . . . . . . . . . . . . . . . . . . 4,242,633 8,199,613 9,115,727
----------- ------------ ------------
Investments in and advances to joint ventures, net. . . . . . . . . . $24,731,852 31,298,724 40,403,859
=========== ============ ============
</TABLE>
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The Partnership's share of net income (loss) is based upon its ownership
interest in numerous investments in joint ventures which are accounted for in
accordance with the equity method of accounting. Equity in earnings (losses)
of unconsolidated ventures represents the Partnership's share of net income
(loss) and reflects a component of purchase price adjustments included in the
Partnership's basis, which are generally being amortized in relation to the
cost of revenues of the underlying real estate assets. Equity in earnings
(losses) of unconsolidated ventures may also include adjustments to carrying
values of the investments as deemed necessary to reflect such investments at
their appropriate net realizable values. These factors contribute to the
differential in the Partnership's proportionate share of the net income (loss)
of the joint ventures and its equity in earnings (losses) of unconsolidated
ventures as well as to the basis differential between the Partnership's
investments in joint ventures and its equity in underlying net assets, as
shown above.
Due to a significant decline in the demand for undeveloped commercial
real estate in the markets in which the Partnership's joint venture properties
are located, the respective joint ventures recorded charges to the carrying
values of their real estate inventories of approximately $7.4 million in 1992
to reflect their estimated net realizable values. Equity in earnings (losses)
of unconsolidated joint ventures for the year ended December 31, 1991 includes
a charge to income of approximately $1.4 million to reduce the carrying value
of the Partnership's interest in a commercial joint venture located in Tampa,
Florida.
There are certain risks associated with the Partnership's investments
made through joint ventures including the possibility that the Partnership's
joint venture partners in an investment might become unable or unwilling to
fulfill their financial or other obligations, or that such joint venture
partners may have economic or business interests or goals that are
inconsistent with those of the Partnership. In addition, under certain
circumstances, either pursuant to the joint venture agreements or due to the
Partnership's obligations as a general partner, the Partnership may be
required to make additional cash advances or contributions to certain of the
ventures.
At December 31, 1991, the Partnership owned a 50% joint venture interest
in the Cullasaja Community. Certain of the venture's property is encumbered
by a mortgage. The principal balance outstanding on this note at December 31,
1993 and 1992 was approximately $5,412,000 and $6,649,000, respectively. The
note matures on March 1, 1994 and bears interest at a rate of prime (6% at
December 31, 1993) plus 1.25% per annum which is payable monthly. The
Partnership is required to make repayments on the note in accordance with a
homesite lot release provision of $72,750 per lot at closing. The Partnership
is currently seeking an extension of this loan. However, there can be no
assurance that the Partnership can obtain an extension. The operations of the
venture required periodic cash advances from the partners. Since the fourth
quarter of 1990, the Partnership has funded the venture's cash deficits in
their entirety. As a result, during July 1992, the Partnership reached an
agreement to purchase its joint venture partner's 50% interest in the
Community. The Partnership was not required to make any cash payment to the
joint venture partner for its interest. Instead, the purchase price of such
interest is in the form of subordinated non-recourse promissory notes (the
"Notes"), the payment of which is solely contingent upon the ultimate net
cash flow generated by the joint venture. The Notes are subordinated to the
repayment of the outstanding first mortgage loan and certain advances, plus
accrued interest thereon, made to the venture by the partners. To the extent
the Partnership has funded 100% of the venture's cash deficits in the
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
past or advances new funds, the repayment of such advances, plus accrued
interest thereon, is senior to the repayment of funds previously advanced by
both partners. A portion of the cash flow remaining after payment of all
senior indebtedness is to be applied annually against the principal and
interest (at 10% per annum) owed on the Notes. This agreement was pursued as
a more favorable alternative to the remedies included in the previously
existing joint venture agreement for situations in which the partners advance
unequal funds to the venture. As a result of this transaction, the
Partnership has changed from the equity method of accounting to the
consolidated method of accounting for the joint venture effective January 1,
1992. The consolidation and the issuance of the Notes described above yielded
an increase in the Partnership's total assets of approximately $12.1 million.
The Coto de Caza joint venture had utilized the maximum amount available
under its operating line of credit and had been seeking alternative financing
sources to fund the significant additional cash necessary to continue
development of the project and to fund the venture's other operating costs.
In the interim, the Partnership and its joint venture partner had each
advanced, net of reimbursements, approximately $3.1 million to the venture
during 1991 and an additional $1.0 million during the first five months of
1992. Interest earned, at 10% per annum, during 1991 had been paid in full as
of December 31, 1991. Interest earned during 1993 and 1992 totalling
approximately $803,000 was unpaid as of December 31, 1993. Due to the
reallocation of the Partnership's interest in the Coto de Caza joint venture
effective September 15, 1992, the Partnership has provided an allowance for
doubtful accounts with regard to the interest earned and unpaid at December
31, 1993 on advances previously made by the Partnership. Given the weak
market conditions in Orange County, California and the continued lack of
development financing available from traditional lending sources, it was
unlikely that the joint venture would be able to secure additional financing
in the near term. The joint venture partner was willing to continue to
advance funds to meet the venture's operating needs. Given the finite amount
of available capital, the Partnership determined that it was in its best long-
term interest to utilize that capital for the development of its other
properties rather than commit additional funds for the development of the Coto
de Caza Community. As a result, the venture partner has funded the venture's
cash deficits in their entirety since June 1, 1992. As an alternative to
funding future capital requirements, the Partnership and its joint venture
partner agreed to amend the joint venture agreement and reallocate ownership
interests. In exchange for funding the venture's future operating needs, the
venture partner was reallocated an additional 30% interest in the venture, and
assumed the role of managing general partner. As such, the venture partner
has control over the future operations of the Community, including the timing
and extent of its development. The Partnership retains a 20% limited
partnership interest and is entitled to receive distributions from net cash
flow, after repayment of third party loans and advances made by the venture
partners, up to an amount agreed upon by the Partnership and its joint venture
partner. Certain specified costs and liabilities incurred prior to the
reallocation will continue to be shared equally by the Partnership and its
joint venture partner. This agreement was pursued as a more favorable
alternative to the provisions included in the previously existing joint
venture agreement for reallocation of partnership interests should both
partners not advance equal funds to the venture. As a result of the
Partnership's decrease in its ownership interest, and its joint venture
partner's control over the future operations of the Community, commencing on
September 15, 1992, the Partnership accounts for its share of the operations
of the Coto de Caza joint venture in accordance with the cost method of
accounting.
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
During 1992 the Partnership sold 60% of its interest in two land parcels
located in its Weston Community to unaffiliated third-party purchasers.
Subsequent to these transactions, the Partnership and the purchasers each
contributed their interests in these land parcels to joint ventures
established for the purpose of developing housing products within Weston. The
Partnership entered into development management agreements with these joint
ventures. Pursuant to the terms of these agreements, the Partnership agreed
to fund all development and construction costs, as well as certain overheads,
incurred on behalf of the joint venture projects. Amounts funded are
reimbursed by the joint ventures from sales revenues generated by each joint
venture. Amounts advanced by the Partnership to each respective joint venture
earn interest at 8.5% for the first year and prime plus 2% per annum
thereafter. During the first quarter of 1993, one of the joint ventures
obtained third-party, project specific financing in the amount of $4,950,000
to fund its development and construction activities. In accordance with the
provisions of this financing agreement, as of December 31, 1993, the
Partnership had been reimbursed the majority of amounts previously advanced to
the joint venture. As a result of this financing arrangement, the Partnership
does not anticipate the need for future advances to this venture. Due to
significant sales activity, amounts previously advanced to the Partnership's
other joint venture were reimbursed in full during 1993.
During the first quarter of 1993, the Partnership reached a settlement
agreement with AOK Group, its joint venture partner in a property located in
Ocala, Florida, whereby in exchange for its joint venture partner's 50%
interest in the venture, the Partnership agreed to dismiss a lawsuit
previously filed against its joint venture partner for failure to perform in
accordance with the terms of a $1,600,000 note which had been issued to the
Partnership by the joint venture. This agreement was pursued as a more
favorable remedy to other alternatives available to the Partnership. As a
result of this transaction, the Partnership has changed from the equity method
of accounting to the consolidated method of accounting for the joint venture
effective March 1, 1993. This transaction resulted in an increase in the
Partnership's total assets of approximately $324,000.
The Partnership incurs certain general and administrative expenses,
including insurance premiums, which are paid by the Partnership on behalf of
the joint ventures in which it holds interests. The Partnership receives
reimbursements from the joint ventures for such costs. For the year ended
December 31, 1993, the Partnership was entitled to receive approximately
$343,000 from certain of the joint ventures in which it holds interests. At
December 31, 1993, approximately $64,000 was owed to the Partnership, of which
approximately $27,000 was received as of March 15, 1994.
(8) NOTES AND MORTGAGES PAYABLE
Notes and mortgages payable at December 31, 1993 and 1992 are summarized
as follows:
1993 1992
------------ ------------
Term loan credit facility of $126,805,195
bearing interest at approximately 5.6%
and 6.5% per annum at December 31, 1993
and 1992, respectively (A). . . . . . . $108,262,248 126,805,195
Income property term loan of $20,000,000,
bearing interest at approximately 5.6%
and 6.0% per annum at December 31, 1993
and 1992, respectively (A). . . . . . . 18,933,328 19,733,332
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
1993 1992
------------ ------------
Revolving line of credit of $45,000,000
(A) . . . . . . . . . . . . . . . . . . -- --
Other notes and mortgages payable (B). . 20,575,416 34,397,645
------------ ------------
Total. . . . . . . . . . . . . $147,770,992 180,936,172
============ ============
(A) At December 31, 1991, the Partnership had an agreement with two
commercial banks permitting the Partnership to borrow up to $225 million under
various credit facilities consisting of a term loan originally totalling $150
million and a revolving credit line of up to $75 million. In addition, the
Partnership had a letter of credit agreement up to $20 million. Although the
Partnership's term loan was not scheduled to mature until February 1998, the
lenders required the Partnership to restructure its entire credit facility as
part of the extension of the revolving line of credit facility which
originally matured on January 15, 1992. The Partnership and its lenders
finalized an agreement in October of 1992 for a new facility. The new
facility consists of a term loan in the amount of $126,805,195, a revolving
line of credit facility up to $45 million, an income property term loan of $20
million, and a $15 million letter of credit facility. The term loan, the
revolving line of credit and the letter of credit facility are secured by
recorded mortgages on all otherwise unencumbered real property assets of the
Partnership as well as an assignment of all mortgages receivables, equity
memberships, certain joint venture interests or joint venture proceeds and
cash balances (with the exception of deposits held in escrow). The income
property term loan is secured by the recorded first mortgages on a mixed-use
center and an office building in Boca Raton, Florida. All of the notes under
the new facility are cross-collateralized and cross-defaulted. The term loan,
the revolving line of credit and the income property term loan bear interest
based, at the Partnership's option, on one of the lender's prime rate plus 1%
or on the relevant London Inter-Bank Offering Rate (LIBOR) plus 2.25% per
annum. At December 31, 1993, $75 million of the Partnership's outstanding
credit facility was under two interest rate swap arrangements. For the year
ended December 31, 1993, the effective interest rate for the combined term
loan, income property term loan and revolving line of credit facility was
approximately 9.3% per annum. This rate includes the effect of the interest
rate swap agreements, one of which matured in February 1994 and the other of
which will mature in October 1994. In addition, the Partnership was required
to pay the lenders certain commitment and administration fees as well as all
closing costs relating to these borrowings.
Under the term loan agreement, the Partnership made the first scheduled
principal repayments of $8 million in February 1993 and $10 million in March
1994. Principal repayments of $10 million are due in each of the years 1995
and 1996, and the remaining balance outstanding is due in July 1997. In
addition, the term loan agreement provides for additional principal repayments
based upon a specified percentage of available cash flow and upon the sale of
certain assets. For the year ended December 31, 1993, the Partnership made
additional term loan payments totalling approximately $10.5 million. Under
the income property term loan, monthly principal and interest payments are
required to be paid on a 25-year amortization schedule with the remaining
balance outstanding due in July 1994. The revolving line of credit and letter
of credit facility also mature in July 1994.
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The Partnership is in the process of negotiating a renewal of its credit
facilities. Although the Partnership is hopeful these renewals will be
obtained, there can be no assurance that such will occur or that the terms,
amounts and restrictions of the renewed credit facilities will be similar to
those under the Partnership's existing facilities. The credit agreement
contains significant restrictions with respect to the payment of distributions
to partners, the maintenance of certain loan-to-value ratios, the use of
proceeds from the sale of the Partnership's assets and advances to the
Partnership's joint ventures. As of March 15, 1994, all of the term loan
proceeds had been borrowed with a remaining balance of $92,360,145, and $0,
$18,733,327 and $11,868,393 were outstanding on the revolving line of credit
facility, the income property term loan and the letter of credit facility,
respectively.
Loan fees incurred in connection with the restructuring of the
Partnership's credit facility have been capitalized and are being amortized
over the lives of the loans included in the credit facility using the
straight-line method, which approximates the interest method.
(B) Other notes and mortgages payable are collateralized by certain real
estate inventories, property and equipment and certain investments with a net
book value of approximately $22 million at December 31, 1993. These notes and
mortgage notes have a weighted average annual effective interest rate of
approximately 7.2% and 7.5% at December 31, 1993 and 1992, respectively, and
mature in varying amounts through 2017.
The Partnership owned an 80% general partnership interest in The Oaks
Community located near Sarasota, Florida. The Partnership's joint venture
partner was in default under the terms of the joint venture agreement due to
its failure to make capital contributions to fund ongoing operations. In
August 1993, the Partnership's joint venture partner assigned its 20% interest
in The Oaks to the Partnership thereby vesting 100% control of the joint
venture assets in the Partnership.
Certain of the assets of The Oaks joint venture were encumbered by two
mortgage loans. A $12,492,200 loan was scheduled to mature in January 1997
and a $3,260,000 loan was scheduled to mature in December 1993. The joint
venture had guaranteed $2.7 million of the loans, and the guaranteed amount
was with recourse to the Partnership. The joint venture was in default under
the terms of these loan agreements as a result of its failure to make
principal payments of approximately $1.3 million in January 1993 to release
the minimum number of homesite lots as required under these agreements and its
failure to pay interest commencing with a payment due in April 1993. The
Partnership was able to reach an agreement with the lenders to pay off the
existing mortgage loans at a substantial discount from face value. On
September 3, 1993, the Partnership paid the joint venture's lenders $6.7
million in full satisfaction of the outstanding mortgage loans, accrued
interest and guaranty. This transaction contributes to the decrease in notes
and mortgages payable at December 31, 1993 as compared to December 31, 1992
and is the cause of the approximate $9.5 million extraordinary gain on the
early extinguishment of debt as of December 31, 1993.
The joint venture also sold its remaining land holdings in The Oaks
Community and its interest in The Oaks Club to an unaffiliated third party
purchaser for $5.8 million simultaneously with the repayment of the loans and
satisfaction of the mortgages. These transactions are the cause of various
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
changes in the consolidated balance sheets at December 31, 1993 as compared to
December 31, 1992. In light of the Partnership's guarantee under the loan
agreement of $2.7 million of the outstanding mortgage loans, as well as other
factors, the above transactions were pursued as the least costly alternative
available to the Partnership. These transactions resulted in a minimal net
gain for Federal income tax purposes.
In anticipation of the above circumstances, the Partnership, as a matter
of prudent accounting practice, recorded a charge to the carrying value of
real estate inventories and equity memberships of approximately $2.3 million
and $1.0 million, respectively, in the fourth quarter of 1992 to properly
reflect the estimated market value of the property in its then current state
of development assuming a bulk sale of the entire property.
Following is a schedule of the maturities of the notes and mortgages
payable at December 31, 1993.
1994 . . . . . . . . . . . . . . . $ 37,184,325
1995 . . . . . . . . . . . . . . . 10,665,714
1996 . . . . . . . . . . . . . . . 17,374,705
1997 . . . . . . . . . . . . . . . 78,762,248
1998 . . . . . . . . . . . . . . . 500,000
Thereafter . . . . . . . . . . . . 3,284,000
------------
Total notes and
mortgages payable. . . . . . $147,770,992
============
(9) EQUITY MEMBERSHIPS
Equity memberships represent the accumulation of costs incurred in
constructing club houses, golf courses, tennis courts and various other
related assets, less amounts allocated to memberships sold, not in excess of
their net realizable values determined by evaluation of individual amenities.
These amenities are conveyed to homeowners through the sale of equity
memberships. The sale of memberships in Jacksonville Golf and Country Club
has been adversely impacted during the past several years by the introduction
of lower-priced products within the Community as well as the competition from
other club facilities located in the Jacksonville area. At Broken Sound, the
higher-priced equity memberships have experienced a slowdown in absorptions
due primarily to the overall slowdown in the economy and the low levels of
consumer confidence. As a result of the above, in 1992, the Partnership
recorded charges to the carrying value of its equity memberships at
Jacksonville Golf and Country Club and Broken Sound of approximately $2.2
million and $1.0 million, respectively. In addition, equity memberships for
the year ended December 31, 1992 also include a $1.0 million reduction in the
value of The Oaks Country Club's equity memberships as discussed further in
Note 8.
<TABLE>
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(10) TRANSACTIONS WITH AFFILIATES
Fees, commissions and other expenses required to be paid by the Partnership to affiliates of the General Partner as
of December 31, 1993 and for the years ended December 31, 1993, 1992 and 1991 are as follows:
<CAPTION>
UNPAID AT
DECEMBER 31,
1993 1992 1991 1993
-------- -------- -------- --------------
<S> <C> <C> <C> <C>
Property management fees . . . . . . . . . . . . . . . . . . . . $153,088 108,243 -- 8,460
Insurance commissions. . . . . . . . . . . . . . . . . . . . . . 287,639 267,673 346,193 --
Reimbursement (at cost) for accounting services. . . . . . . . . 61,881 61,101 70,130 61,881
Reimbursement (at cost) for legal services . . . . . . . . . . . 31,821 38,344 35,543 31,821
Reimbursement (at cost) for data processing services . . . . . . -- -- 3,545 --
Reimbursement (at cost) for out-of-pocket expenses . . . . . . . 20,534 24,562 17,369 --
-------- -------- -------- ----------
$554,963 499,923 472,780 102,162
======== ======== ======== ==========
</TABLE>
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The Partnership receives reimbursements from or reimburses affiliates of
the General Partner for certain general and administrative costs including,
and without limitation, salary and salary-related costs relating to work
performed by employees of the Partnership and certain out-of-pocket
expenditures incurred on behalf of such affiliates. For the year ended
December 31, 1993, the total of such costs incurred by the Partnership on
behalf of these affiliates totalled approximately $171,000. Approximately
$24,700 was outstanding at December 31, 1993, of which approximately $4,400
was received as of March 15, 1994. This amount does not bear interest and is
expected to be paid in future periods. For the year ended December 31, 1992,
the Partnership was entitled to receive reimbursements of approximately
$129,000.
In accordance with the Partnership Agreement, the General Partner and
Associate Limited Partners have deferred a portion of their distributions of
net cash flow from the Partnership totaling approximately $810,000 as of
December 31, 1993. This amount does not bear interest and is expected to be
paid in future periods subject to certain restrictions contained in the
Partnership's credit facility.
Arvida Company ("Arvida"), pursuant to an agreement with the Partnership,
provides development, construction, management and other personnel and
services to the Partnership for all of its projects and operations. Pursuant
to such agreement, the Partnership shall reimburse Arvida for all of its
out-of-pocket expenditures (including salary and salary-related costs),
subject to certain limitations. The total of such costs for the years ended
December 31, 1993 and 1992 was approximately $6,686,100 and $6,622,800,
respectively, of which approximately $80,000 was unpaid as of December 31,
1993 and all of which was paid as of March 15, 1994.
The Partnership and Arvida/JMB Partners, L.P.-II (a publicly-held limited
partnership affiliated with the General Partner) each employ project related
and administrative personnel who perform services on behalf of both
partnerships. In addition, certain out-of-pocket expenditures related to such
services and other general and administrative costs, including certain
insurance premiums, are incurred and allocated to each partnership as
appropriate. The Partnership receives reimbursements from or reimburses
Arvida/JMB Partners, L.P.-II for such costs (including salary and salary-
related costs). For the year ended December 31, 1993, the Partnership was
entitled to receive approximately $2,497,400 from Arvida/JMB Partners, L.P.-
II. At December 31, 1993, approximately $26,100 was outstanding, all of which
was received as of March 15, 1994. In addition, for the year ended December
31, 1993, the Partnership was obligated to reimburse Arvida/JMB Partners,
L.P.-II approximately $1,234,300, all of which was paid as of December 31,
1993. The net reimbursements paid to the Partnership for the year ended
December 31, 1992 was approximately $236,000.
The Partnership pays for certain general and administrative costs,
including insurance premiums, on behalf of its affiliated clubs, homeowners
associations and maintenance associations. The Partnership receives
reimbursements from the affiliates for such costs. For the year ended
December 31, 1993, the Partnership was entitled to receive approximately
$366,400 from its affiliates. At December 31, 1993, approximately $116,700
was owed to the Partnership, of which approximately $23,000 was received as of
March 15, 1994. The amount reimbursed to the Partnership for the year ended
December 31, 1992 was approximately $2,327,200.
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(11) COMMITMENTS AND CONTINGENCIES
As security for performance of certain development obligations, the
Partnership is contingently liable under standby letters of credit and bonds
for approximately $11,651,000 and $11,146,000, respectively, at December 31,
1993. As of December 31, 1992, the Partnership was contingently liable under
standby letters of credit and bonds for approximately $18,438,000 and
$18,293,000, respectively. In addition, certain joint ventures in which the
Partnership holds an interest are also contingently liable under bonds for
approximately $1,089,000 and $1,180,000 at December 31, 1993 and 1992,
respectively.
The Partnership leases certain building space for its management offices,
sales offices and other facilities, as well as certain equipment. The
building and equipment leases expire over the next 2 to 11 years. Minimum
future rental commitments under non-cancelable operating leases having a
remaining term in excess of one year as of December 31, 1993 are as follows:
1994 . . . . . . . . . . . $1,287,841
1995 . . . . . . . . . . . 1,130,218
1996 . . . . . . . . . . . 855,780
1997 . . . . . . . . . . . 228,167
1998 . . . . . . . . . . . 150,437
Thereafter . . . . . . . . 283,835
----------
$3,936,278
==========
Rental expense of $2,786,710, $2,320,028 and $2,865,680 was incurred for
the years ended December 31, 1993, 1992 and 1991, respectively.
The Partnership is named a defendant in a number of homeowner lawsuits,
certain of which purported to be class actions, that allegedly in part arose
out of or related to Hurricane Andrew, which on August 24, 1992 resulted in
damage to a former community development known as Country Walk. The homeowner
lawsuits allege, among other things, that the damage suffered by the
plaintiffs' homes and/or condominiums within Country Walk was beyond what
could reasonably be expected from the hurricane and/or was a result of the
defendants' alleged defective design, construction, inspection and/or other
improper conduct in connection with the development, construction and sales of
such homes and condominiums, including alleged building code violations. The
various plaintiffs seek varying and, in some cases, unspecified amounts of
compensatory damages and other relief. In certain of the lawsuits injunctive
relief and/or punitive damages are sought. The Partnership intends to
vigorously defend itself in these lawsuits.
The various lawsuits arising out of or relating to Hurricane Andrew
allege that the Partnership is liable, among other reasons, as a result of its
own alleged acts of misconduct or as a result of the Partnership's assumption
of Arvida Corporation's liabilities in connection with the Partnership's
purchase of Arvida Corporation's assets from the Walt Disney Company
("Disney") in 1987, which included certain assets related to the Country Walk
development. Pursuant to the agreement to purchase such assets, the
Partnership obtained indemnification by Disney for certain liabilities
relating to facts or circumstances arising or occurring prior to the closing
of the Partnership's purchase of the assets. Over 80% of the Arvida-built
homes in Country Walk were built prior to the Partnership's ownership of the
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Community. Where appropriate, the Partnership has tendered or will tender
each of the above-described lawsuits to Disney for defense and indemnification
in whole or in part pursuant to the Partnership's indemnification rights.
Where appropriate, the Partnership is also tendering these lawsuits to its
various insurance carriers for defense and coverage. The Partnership is
unable to determine at this time to what extent damages in these lawsuits, if
any, against the Partnership, as well as the Partnership's cost of
investigating and defending the lawsuits, will ultimately be recoverable by
the Partnership either pursuant to its rights of indemnification by Disney or
under contracts of insurance.
The Partnership has negotiated the terms of a class action settlement
with opposing counsel in one of the pending homeowners' lawsuits which has the
potential for resolving substantial portions of the pending homeowners'
lawsuits which have been filed. On June 3, 1993, the Circuit Court of Dade
County entered an order preliminarily finding that the Partnership's proposed
class action settlement agreement, as revised, was within the range of what
appeared to be a fair and adequate settlement of the claims filed by single-
family homeowners and condominium owners at Country Walk. On August 10, 1993,
the court issued a final order approving the class action settlement. The
settlement, which is designed to resolve claims arising in connection with
estate and patio homes and condominiums sold by the Partnership after
September 10, 1987, is structured to compensate residents for losses not
covered by insurance. Settlement amounts payable are a function of the type
of unit involved and the claimant's proof regarding the adequacy of insurance
proceeds. Homeowners of 188 units of Country Walk have accepted the
settlement. Those who affirmatively rejected the offer may continue to
litigate against the Partnership. The Partnership currently believes that the
class action settlement may cost approximately $2.5 million. The settlement
is being funded by one of the Partnership's insurers, subject to a reservation
of rights. The amount of money, if any, which the insurance company may
recover from the Partnership pursuant to its reservation of rights is
uncertain. Due to this uncertainty, the accompanying consolidated balance
sheets do not reflect an accrual for such costs.
On February 24, 1994, the Partnership was dismissed from the pending
class action lawsuits pursuant to the class action settlement. In addition,
the Partnership has been informed that Disney and an insurer have reached
agreements to settle five of the individual homeowners actions which were
tendered by the Partnership to Disney. These Disney Settlements will be
funded without any contribution from the Partnership. The Partnership can
give no assurance that the Disney settlements will be finalized.
As noted above, those homeowners who affirmatively rejected the offer of
settlement may continue to litigate. The Partnership is currently a defendant
in eleven lawsuits brought by condominium and patio home owners, all of whom
have declined to accept the terms of the class action settlement. These
lawsuits, involving nineteen named individuals, are pending in the Circuit
Court of Dade County. In these lawsuits, plaintiffs allege a variety of
claims involving, among other things, breach of warranty, negligence and
building code violations. The Partnership intends to vigorously defend itself
in these matters.
On April 19, 1993, a subrogation claim entitled Village Homes at Country
Walk Master Maintenance Association, Inc. v. Arvida Corporation et al., was
filed in the 11th Judicial Circuit for Dade County. Plaintiffs filed this
suit for the use and benefit of American Reliance Insurance Company ("American
Reliance"). Plaintiffs seek to recover damages and pre- and post-judgment
interest in connection with $10,873,000 American Reliance has allegedly paid
to its insureds living in condominium units at Country Walk in the wake of
Hurricane Andrew. Disney is also a defendant in this suit. On July 1, 1993,
a subrogation lawsuit entitled Prudential Property and Casualty Company v.
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Arvida/JMB Partners, et al., was filed in the 11th Judicial Circuit for Dade
County. Plaintiff seeks to recover damages, costs, and interest in connection
with $16,679,622 Prudential allegedly paid to its insureds living in Country
Walk at the time of Hurricane Andrew. Disney is also a defendant in this
suit. On July 15, 1993, a subrogation lawsuit entitled Allstate Insurance
Company v. Arvida/JMB Partners, et al., was filed in the 11th Judicial Circuit
for Dade County. Plaintiff seeks to recover damages, costs, and interest in
connection with $18,540,196 Allstate allegedly paid to its insureds living in
Country Walk at the time of Hurricane Andrew. Disney is also a defendant in
this suit. The Partnership settled a threatened subrogation action by State
Farm Insurance Company. The settlement was funded by one of the Partnerships
insurance carriers subject to a reservation of rights. The amount of money
the insurance carrier may seek to recover from the Partnership for this and
any other settlements it has funded is uncertain. The Partnership is a
defendant in and anticipates other subrogation claims by insurance companies
which have allegedly paid policy benefits to Country Walk residents. The
Partnership intends to defend itself vigorously in all such matters.
The Partnership has resolved a claim for construction related damages
brought by the Villages of Country Walk Homeowners' Association, Inc., among
others. Two of the Partnership's insurance carriers funded a settlement in
the amount of $2,740,000 to resolve claims related to the construction of the
common elements of the condominium units at Country Walk. One of the
insurance carriers has issued a reservation of rights in connection with these
claims and the extent to which that insurance company may ultimately recover
any of these proceeds from the Partnership is unknown. Therefore, the
accompanying consolidated balance sheets do not reflect an accrual for such
costs.
The Partnership is involved in an Environmental Protection Agency (EPA)
administrative enforcement proceeding with regard to the Partnership's Water's
Edge property. The EPA has asserted that a dam built to create a lake at the
Community during the time the property was owned by Arvida Corporation was in
violation of Section 404 of the Clean Water Act in that certain wetland areas
had been filled. Pursuant to a Consent Agreement and Order entered into with
the EPA, the Partnership acquired certain land (at a cost of approximately
$400,000) for which it has developed and implemented a plan of mitigation for
the wetlands lost. In accordance with certain provisions of the Consent
Agreement and Order, the Partnership must provide the EPA with periodic
reports regarding the status of the mitigation plan. An agreement in
principle has been reached to settle the dispute between the parties pursuant
to which the EPA has agreed to assess a civil penalty of $125,000. The
Partnership is actively pursuing indemnification from Disney for the total
costs that will ultimately be incurred to resolve this issue. There can be no
assurance that the Partnership will be reimbursed by Disney.
On October 13, 1993, a lawsuit captioned Berry v. Merril (sic) Lynch,
Pierce Fenner & Smith, J&B Arvida Limited Partnership (sic) and Does 1 through
100, was filed in the Superior Court of the State of California in and for the
County of San Diego, Case No. 669709. The lawsuit was purportedly filed as a
class action on behalf of the named plaintiffs and all other persons or
entities in the State of California who bought or acquired, directly or
indirectly, limited partnership interests ("Interests") in the Partnership
from September 1, 1987 through the present. The complaint in the action
alleges, among other things, that the defendants made misrepresentations and
concealed various facts, breached fiduciary duties, and violated the covenant
of good faith in connection with the sale of Interests in the Partnership.
The complaint further alleges that such conduct violated California state law
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
relating to fraud, breach of fiduciary duty, willful suppression of facts, and
breach of the covenant of good faith. Plaintiffs, on behalf of themselves and
the purported plaintiff class, seek unspecified compensatory damages,
consequential damages, punitive and exemplary damages, interest, costs of the
suit, and such other relief as the court may order. The Partnership believes
that the lawsuit is without merit and intends to vigorously defend itself.
In addition, the Partnership has been advised by Merrill Lynch that
Merrill Lynch has been named a defendant in actions pending in the Eleventh
and Seventeenth Judicial Circuit Courts in Dade and Broward Counties, Florida
to compel arbitration of claims brought by certain investors of the
Partnership representing approximately 4% of the total Interests outstanding.
Merrill Lynch has asked the Partnership and its General Partner to confirm an
obligation of the Partnership and its General Partner to indemnify Merrill
Lynch in these claims against all loss, liability, claim, damage and expense,
including without limitation attorneys' fees and expenses, under the terms of
a certain Agency Agreement dated September 15, 1987 ("Agency Agreement") with
the Partnership relating to the sale of Interests in the Partnership through
Merrill Lynch on behalf of the Partnership. In the actions to compel
arbitration, the claimants have advised Merrill Lynch that they will seek to
file demands for arbitration and claims for unspecified damages against
Merrill Lynch based on Merrill Lynch's alleged violation of applicable state
and/or federal securities laws and alleged violations of the rules of the
National Association of Securities Dealers, Inc., together with pendent state
law claims. The Agency Agreement generally provides that the Partnership and
its General Partner shall indemnify Merrill Lynch against losses occasioned by
an actual or alleged misstatements or omission of material facts in the
Partnership's offering materials used in connection with the sale of Interests
and suffered by Merrill Lynch in performing its duties under the Agency
Agreement, under certain specified conditions. The Agency Agreement also
generally provides, under certain conditions, that Merrill Lynch shall
indemnify the Partnership and its General Partner for losses suffered by the
Partnership and occasioned by certain specified conduct by Merrill Lynch in
the course of Merrill Lynch's solicitation of subscriptions for Interests.
The Partnership is unable to determine at this time the ultimate investment of
investors who have filed arbitration claims as to which Merrill Lynch might
seek indemnification in the future. At this time, and based upon the
information presently available about the arbitration statements of claims
filed by some of these investors, the Partnership and its General Partner
believe that they have meritorious defenses to demands for indemnification
made by Merrill Lynch and intend to vigorously pursue such defenses. In the
event Merrill Lynch is entitled to indemnification of its attorney's fees and
expenses or other losses and expenses, these amounts may prove to be material.
The Partnership is also a defendant in several actions brought against it
arising in the normal course of business. It is the belief of the General
Partner, based on knowledge of facts and advice of counsel, that the claims
made against the Partnership in such actions will not result in any material
adverse effect on the Partnership's consolidated financial position or results
of operations.
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The Partnership owns a 50% joint venture interest in 31 acres located
within a 209-acre commercial/industrial park in Pompano Beach, Florida. The
joint venture's property is encumbered by a mortgage loan in the principal
amount of approximately $4 million as of December 31, 1993. As the
Partnership believes the economics of the project do not warrant making
additional cash investments or providing further financial guarantees, it was
determined in 1991 that the least costly alternative for the venture would be
to convey the land to the lender and to make certain cash payments to the
lender in connection with the existing guarantees under the venture loan
agreement. During April 1992, the Partnership and its joint venture partner
each tendered payment in the amount of approximately $3.1 million for their
respective shares of the guarantee payment and certain other holding costs to
the lender, the majority of which reduced the outstanding mortgage loan to the
current balance. Title to the property was not conveyed at that time pending
resolution of certain general development obligations of the venture and
certain environmental issues. The Partnership has been negotiating with the
lender regarding the scope of the development work required to be done and
does not anticipate the associated costs to be significant. With respect to
the environmental issues, the previous owner remains obligated to undertake
the clean up pursuant to, among other things, a surviving obligation under the
purchase and sale agreement. During January 1994, the Florida Department of
Environmental Protection approved the first phase of a three phase
environmental clean-up program. However, no substantial clean-up has occurred
to date. If the previous owner is unable to fulfill its obligations as they
relate to this environmental issue, the resolution of the environmental issue
and its related costs may become an obligation of the venture and ultimately
the Partnership. Should this occur, the Partnership does not anticipate the
cost of this clean-up to be material to its operations. The lender has
recently asserted the mortgage loan is with recourse to the joint venture
partners as a result of the partners' failure to perform in accordance with
the terms of the loan agreement. The Partnership believes this claim is
without merit and will vigorously defend itself against this allegation. The
transfer of title, when fully consummated, will not have a significant impact
on the Partnership's operations for financial reporting purposes due to the
prior payment of the financial guarantees and certain holding costs. However,
the Partnership will recognize a loss for Federal income tax purposes.
In anticipation of its future development plans, the Partnership is
currently in the process of obtaining permits for development of Increment III
of its Weston Community, portions of which are environmentally sensitive areas
that may be subject to protection as wetlands. The time involved to complete
this process, which involves the approvals of the Army Corps of Engineers, the
Environmental Protection Agency and other regulatory agencies, is expected to
be lengthy. It is anticipated that certain costs of mitigation will be
incurred in conjunction with obtaining the necessary permits, the amount and
extent of which are unknown at this time. The Partnership had previously gone
through a similar process and was successful in obtaining the approvals for
Increment II of the Weston Community. Although there can be no assurance,
given the Partnership's prior experience and discussions to date with the
appropriate agencies, the Partnership is hopeful that a compromise will
ultimately be reached that will adequately address the concerns of the
environmental agencies, while allowing the Partnership to continue its
development plans for Weston's Increment III.
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
In June 1993, the Partnership reached an agreement with Equitable South
Florida Venture ("Equitable"), the successor in interest to Tishman
Speyer/Equitable South Florida Venture, the original purchaser of
approximately 390 acres of land in Increment III in the Partnership's Weston
Community, whereby, in exchange for $5.0 million, the Partnership repurchased
approximately 330 acres of the land and Equitable agreed to relieve the
Partnership of the obligations under certain provisions of the Sale and
Purchase Agreement dated December 15, 1983 which were assumed by the
Partnership in connection with the purchase of the assets of Arvida
Corporation in September 1987. Of the agreed upon price of $5 million, $2.5
million was paid at closing and the balance of $2.5 million will be paid in
equal annual installments of $500,000 together with interest thereon of 8% per
annum beginning May 1994. The unpaid principal balance will be secured by a
mortgage on certain real estate located in the Partnership's Weston Community.
As part of its efforts to obtain the appropriate development permits discussed
in the preceding paragraph, the Partnership has included this land as part of
its proposed mitigation plan for the development of Increment III of its
Weston Community.
The Partnership may be responsible for funding certain other ancillary
activities for related entities in the ordinary course of business which the
Partnership does not currently believe will have any material effect on its
consolidated financial position or results of operations.
(12) TAX INCREMENT FINANCING ENTITIES
In connection with the development of the Partnership's Weston Community,
which is in the mid stage of development, bond financing is utilized to
construct certain on-site and off-site infrastructure improvements, including
major roadways, lakes, other waterways and pump stations, which the
Partnership would otherwise be obligated to finance and construct as a
condition to obtain certain approvals for the project. This bond financing is
obtained by The Indian Trace Community Development District ("District"), a
local government district operating in accordance with Chapter 190 of the
Florida Statutes. Under this program, the Partnership is not obligated
directly to repay the bonds. Rather, the bonds are expected to be fully
serviced by special assessment taxes levied on the property, which effectively
collateralizes the obligation to pay such assessments. While the owner of the
property, the Partnership is responsible to pay the special assessment taxes
until land parcels are sold. At such point, the liability for the assessments
related to parcels sold will be borne by the purchasers through a tax
assessment on their property. These special assessment taxes are designed to
cover debt service on the bonds, including principal and interest payments, as
well as the operating and maintenance budgets of the District. The use of
this type of bond financing is a common practice for major land developers in
South Florida.
The District issued $64,660,000 of variable rate bonds in November 1989
and $31,305,000 of variable rate bonds in July 1991. These bonds mature in
various years commencing in May 1991 through May 2011. At December 31, 1993,
the amount of bonds issued and outstanding totalled $89,950,000. For the
twelve months ended December 31, 1993, the Partnership paid special
assessments related to these bonds of approximately $5.2 million.
In order to take advantage of historically low interest rates and reduce
the exposure of variable rate debt, the District is pursuing a new bond
issuance. If successful, the proceeds from this offering will be used to
refund 1989 and 1991 bonds currently outstanding.
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(13) STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 107
("SFAS 107") - DISCLOSURES ABOUT FAIR VALUE OF
FINANCIAL INSTRUMENTS
SFAS 107 requires entities with total assets exceeding $150 million for
fiscal years ending after December 15, 1992 to disclose the SFAS 107 values of
all financial assets and liabilities for which it is practicable to estimate.
Value is defined in SFAS 107 as the amount at which the instrument could be
exchanged in a current transaction between willing parties, other than in a
forced or liquidation sale. The Partnership believes the carrying amount of
its financial instruments (excluding its interest rate swap agreements)
approximates SFAS 107 value. The SFAS 107 value of the Partnership's interest
rate swap agreements were obtained from dealer quotes. These values represent
the estimated amounts the Partnership would be obligated to pay to terminate
the agreements, taking into account current interest rates. The notional
amounts, the carrying amounts, and SFAS 107 values for the Partnership's
interest rate swap agreements are as follows:
At December 31, 1993
---------------------------------
Notional Carrying SFAS 107
Amount Amount (1) Value
---------- ---------- ----------
Interest Rate Swap Agreements:
In a net payable position. . . $50,000,000 $1,018,902 $1,306,410
In a net payable position. . . 25,000,000 240,838 1,229,232
(1) The amounts shown under "carrying amount" represent interest
expense accruals arising from these unrecognized financial instruments.
(14) PARTNERSHIP AGREEMENT
Pursuant to the terms of the Partnership Agreement (and subject to
Section 4.2 which allocates Profits, as defined, to the General Partner and
Associate Limited Partners), profits or losses of the Partnership will be
allocated as follows: (i) profits will be allocated such that the General
Partner and the Associate Limited Partners will be allocated profits equal to
the amount of cash flow distributed to them for such fiscal period with the
remainder allocated to the Limited Partners, except that in all events, the
General Partner shall be allocated at least 1% of profits and (ii) losses will
be allocated 1% to the General Partner, 1% to the Associate Limited Partners
and 98% to the Limited Partners.
In the event profits to be allocated in any given year do not equal or
exceed cash distributed to the General Partner and the Associate Limited
Partners for such year, the allocation of profits will be as follows: The
General Partner and the Associate Limited Partners will be allocated profits
equal to the amount of cash flow distributed to them for such year. The
Limited Partners will be allocated losses such that the sum of amounts
allocated to the General Partner, Associate Limited Partners, and Limited
Partners equals the profit for the given year.
Section 4.2F of the Partnership Agreement requires the allocation of
Profits (as defined) to the General Partner and Associate Limited Partners in
order to take account of a current or anticipated reduction in the
Partnership's indebtedness and certain other circumstances. In accordance
with Section 4.2F of the Partnership Agreement, for financial reporting and
Federal income tax purposes for the year ended December 31, 1992, the General
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Partner and Associate Limited Partners received allocations of Profits in
addition to their respective allocations, pursuant to the other allocation
provisions of the Partnership Agreement, of the Partnership's loss, as
adjusted for such allocation of Profits. The amount of Profits, net of such
loss, allocated to the General Partner and Associate Limited Partner,
collectively, for tax and financial reporting purposes for 1992 was
approximately $9,230,000 and $20,836,000, respectively. In future periods in
which the Partnership incurs a loss, the General Partner and Associate Limited
Partners may be allocated Profits pursuant to Section 4.2F equivalent to the
amount of loss (as adjusted for such allocation of Profits), if any, allocable
to them for financial reporting and Federal income tax purposes. For the year
ended December 31, 1993, the Partnership had net income for financial
reporting and Federal income tax purposes, however, no cash distributions were
made during 1993. In accordance with Section 4.2A of the Partnership
Agreement, the amount of net income allocated, collectively, to the General
and Associate Limited Partners for tax and financial reporting purposes was
approximately $19,000 and $293,000, respectively.
In general, and subject to certain limitations, the distribution of Cash
Flow (as defined) after the initial admission date is allocated 90% to the
Holders of Interests and 10% to the General Partner and the Associate Limited
Partners (collectively) until the Holders of Interests have received
cumulative distributions of Cash Flow equal to a 10% per annum return (non-
compounded) on their Adjusted Capital Investments (as defined) plus the return
of their Capital Investments; provided, however, that 4.7369% of the 10%
amount otherwise distributable to the General Partner and Associate Limited
Partners (collectively) will be deferred, and such amount will be paid to the
Holders of Interests, until the Holders of Interests receive Cash Flow
distributions equal to a cumulative, non-compounded amount of 12% per annum of
their Capital Investments (as defined). This deferral provision is in place
until the Holders of Interests receive total cash distributions equal to their
Capital Investments. Any deferred amounts owed to the General Partner and
Associate Limited Partners (collectively) will be distributable to them out of
Cash Flow otherwise distributable to the Holders of Interests at such time as
such Holders have received a 12% per annum cumulative, non-compounded return
on their Capital Investments (as defined) or in any event, to the extent of
one-half of Cash Flow otherwise distributable to the Holders of Interests at
such time as they have received total distributions of Cash Flow equal to
their Capital Investments (as defined). Thereafter, all distributions of Cash
Flow will be made 85% to the Holders of Interests and 15% to the General
Partner and the Associate Limited Partners (collectively); provided, however,
that the General Partner and the Associate Limited Partners (collectively)
shall be entitled to receive an additional share of Cash Flow otherwise
distributable to the Holders of Interests equal to the lesser of an amount
equal to 2% of the cumulative gross selling prices of any interests in real
property of the Partnership (subject to certain limitations) or 13% of the
aggregate distributions of Cash Flow to all parties pursuant to this sentence.
(15) Subsequent Events
(a) During February 1994, the Partnership paid a distribution of
$2,565,433 to the Limited Partners ($6.35 per Interest) and $142,523 to the
General Partner and Associate Limited Partners, collectively.
(b) During November 1993, the Partnership received a commitment from a
lender for a $24 million revolving construction line of credit for the first
building and certain amenities within the Partnership's new condominium
project on Longboat Key, Florida known as Grand Bay. This note was
subsequently executed on January 14, 1994 and bears interest at the lender's
prime rate plus 3/4%, payable monthly. In addition, the Partnership is
required to make repayments on the note in accordance with release provisions
as set forth in the credit agreement, with any remaining outstanding principal
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED
balance payable at maturity on January 14, 1996. The note is secured by a
recorded first mortgage on certain real and personal property in Sarasota
County, Florida. As of March 15, 1994, approximately $2.6 million was
outstanding under this note. The Grand Bay project is planned to consist of
six condominium buildings on 24 acres and will offer certain amenities
including a recreation facility with a community pool and two tennis courts.
The Partnership intends to obtain additional lines of credit prior to the
construction of each of the remaining five buildings at Grand Bay. These
buildings are planned to be constructed over the next five years with the
final building expected to be completed in 1998.
SCHEDULE X
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
SUPPLEMENTARY STATEMENTS OF OPERATIONS INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
CHARGED TO COSTS AND EXPENSES
----------------------------------------
1993 1992 1991
------------ ------------ ------------
Depreciation and
amortization . . . . . $6,232,092 7,550,386 7,072,673
Repairs and
maintenance. . . . . . 2,623,072 2,328,918 1,673,475
Property taxes, net of amounts
capitalized. . . . . . 6,925,925 8,220,342 7,353,574
Advertising costs. . . . 5,051,175 5,240,007 7,561,712
----------- ----------- -----------
$20,832,264 23,339,653 23,661,434
=========== =========== ===========
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
On November 30, 1993, the General Partner of the Partnership approved the
engagement of Ernst & Young as the Partnership's independent auditors for the
fiscal year ending December 31, 1993 to replace the firm of Price Waterhouse
who were dismissed as auditors of the Partnership effective November 30, 1993.
The reports of Price Waterhouse on the Partnership's consolidated financial
statements for the year ended December 31, 1992 and 1991 did not contain an
adverse opinion or a disclaimer of opinion and were not qualified or modified
as to uncertainty, audit scope, or accounting principles. In connection with
the audits of the Partnership's financial statements for the above-mentioned
years and in the subsequent interim period, there were no disagreements with
Price Waterhouse on any matters of accounting principles or practices,
financial statement disclosure, or auditing scope and procedures which, if not
resolved to the satisfaction of Price Waterhouse would have caused Price
Waterhouse to make reference to the matter in their report. The change in
accountants was previously reported in the Partnership's Report on Form 8-K
dated December 8, 1993, a copy of which is filed as Exhibit 99.2 to this
report, describing the change in the Partnership's independent auditors.
There were no changes or disagreements with auditors during 1992.
PART III
ITEM 10. DIRECTOR AND EXECUTIVE OFFICERS OF THE REGISTRANT
The General Partner of the Partnership is Arvida/JMB Managers, Inc., a
Delaware corporation, all of whose outstanding shares of stock are owned by
JMB Holdings Corporation, an Illinois corporation, 75% of the outstanding
shares of which are owned by JMB Realty Corporation ("JMB"), a Delaware
corporation, and the remaining 25% of which are owned by 900 Partner
Investments, an Illinois general partnership whose partners include certain
officers and directors of JMB and its affiliates. Arvida/JMB Managers, Inc.
was substituted as general partner of the Partnership as a result of a merger
on March 30, 1990 of an affiliated corporation that was the then general
partner of the Partnership into Arvida/JMB Managers, Inc., which, as the
surviving corporation of such merger, continues as General Partner. All
references herein to "General Partner" include Arvida/JMB Managers, Inc. and
its predecessor, as appropriate. The General Partner has responsibility for
all aspects of the Partnership's operations. Arvida/JMB Associates, an
Illinois general partnership, of which certain officers and affiliates of JMB
are partners and Arvida/JMB Limited Partnership, an Illinois limited
partnership, of which Arvida/JMB Associates is the general partner, are the
Associate Limited Partners of the Partnership. Various relationships of the
Partnership to the General Partner and its affiliates are described under the
caption "Conflicts of Interest" at pages 21-24 of the Prospectus, which
description is hereby incorporated herein by reference to Exhibit 28.1 of the
Partnership's Report on Form 10-K dated March 29, 1993 (File No. 0-16976).
The director, executive officers and certain other officers of the
General Partner of the Partnership are as follows:
SERVED IN
NAME OFFICE OFFICE SINCE
---- ------ ------------
Judd D. Malkin Chairman 04/08/87
Neil G. Bluhm President 04/08/87
Roger E. Hall Vice President 04/09/87
Ernest M. Miller, Jr. Vice President 04/09/87
H. Rigel Barber Vice President 04/08/87
Ira J. Schulman Vice President 04/09/87
Gailen J. Hull Vice President 04/09/87
Howard Kogen Vice President
and Treasurer 04/08/87
Gary Nickele Vice President,
General Counsel 04/08/87
and Director 12/18/90
Vincent P. Donahue, Jr. Vice President 04/09/87
James D. Motta Vice President 04/09/87
John Garrity Vice President 02/01/91
John Grab Vice President 04/09/87
There is no family relationship among any of the foregoing director or
officers. The foregoing director has been elected to serve a one-year term
until the annual meeting of the General Partner to be held on June 7, 1994.
All of the foregoing officers have been elected to serve one-year terms until
the first meeting of the Board of Directors held after the annual meeting of
the General Partner to be held on June 7, 1994. There are no arrangements or
understandings between or among any of said director or officers and any other
person pursuant to which any director or officer was selected as such.
The foregoing director and certain of the officers are also officers
and/or directors of various affiliated companies, including JMB, which is the
corporate general partner of Carlyle Real Estate Limited Partnership-VII
("Carlyle-VII"), Carlyle Real Estate Limited Partnership-IX ("Carlyle-IX"),
Carlyle Real Estate Limited Partnership-X ("Carlyle-X"), Carlyle Real Estate
Limited Partnership-XI ("Carlyle-XI"), Carlyle Real Estate Limited Partner-
ship-XII ("Carlyle-XII"), Carlyle Real Estate Limited Partnership-XIII
("Carlyle-XIII"), Carlyle Real Estate Limited Partnership-XIV ("Carlyle-XIV"),
Carlyle Real Estate Limited Partnership-XV ("Carlyle-XV"), Carlyle Real Estate
Limited Partnership-XVI ("Carlyle-XVI"), Carlyle Real Estate Limited
Partnership-XVII ("Carlyle-XVII"), JMB Mortgage Partners, Ltd. ("Mortgage
Partners"), JMB Mortgage Partners, Ltd.-II ("Mortgage Partners-II"), JMB
Mortgage Partners, Ltd.-III ("Mortgage Partners-III"), JMB Mortgage Partners,
Ltd.-IV ("Mortgage Partners-IV"), Carlyle Income Plus, Ltd. ("Carlyle Income
Plus") and Carlyle Income Plus, Ltd.-II ("Carlyle Income Plus-II") and the
managing general partner of JMB Income Properties, Ltd.-IV ("JMB Income-IV"),
JMB Income Properties, Ltd.-V ("JMB Income-V"), JMB Income Properties, Ltd.-VI
("JMB Income-VI"), JMB Income Properties, Ltd.-VII ("JMB Income-VII"), JMB
Income Properties, Ltd.-VIII ("JMB Income-VIII"), JMB Income Properties,
Ltd.-IX ("JMB Income-IX"), JMB Income Properties, Ltd.-X ("JMB Income-X"), JMB
Income Properties, Ltd.-XI ("JMB Income-XI"), JMB Income Properties, Ltd.-XII
("JMB Income-XII") and JMB Income Properties, Ltd.-XIII ("JMB-XIII"). Most of
the foregoing director and officers are also officers and/or directors of
various affiliated companies of JMB including Arvida/JMB Managers-II, Inc.
(the general partner of Arvida/JMB Partners, L.P.-II ("Arvida-II") and Income
Growth Managers, Inc. (the corporate general partner of IDS/JMB Balanced
Income Growth, Ltd. ("IDS/BIG")). The director and most of such officers are
also partners, directly or indirectly, of certain partnerships (the "Associate
Partnerships") which are associate general partners in the following real
estate limited partnerships: Carlyle-VII, Carlyle-IX, Carlyle-X, Carlyle-XI,
Carlyle-XII, Carlyle-XIII, Carlyle-XIV, Carlyle-XV, Carlyle-XVI, Carlyle-XVII,
JMB Income-VI, JMB-VII, JMB Income-VIII, JMB Income-IX, JMB Income-X, JMB
Income-XI, JMB Income-XII, JMB Income-XIII, Mortgage Partners, Mortgage
Partners-II, Mortgage Partners-III, Mortgage Partners-IV, Carlyle Income Plus,
Carlyle Income Plus-II and IDS/BIG. The following director and officers are
partners, indirectly through other partnerships, of one of the Associate
Limited Partners of the Partnership and of the Associate Limited Partner of
Arvida-II.
The business experience during the past five years of the director and
such officers of the Corporate General Partner of the Partnership in addition
to that described above is as follows:
Judd D. Malkin (age 56) is Chairman of the Board of JMB, an officer
and/or director of various JMB affiliates and a partner, directly or
indirectly, of the Associate Partnerships. He is also an individual general
partner of JMB Income Properties-IV and JMB Income Properties-V. Mr. Malkin
has been associated with JMB since October, 1969. He is a Certified Public
Accountant.
Neil G. Bluhm (age 56) is President and a director of JMB and an officer
and/or director of various JMB affiliates and a partner, directly or
indirectly, of the Associate Partnerships. He is also an individual general
partner of JMB Income Properties-IV and JMB Income Properties-V. Mr. Bluhm
has been associated with JMB since August, 1970. He is a member of the Bar of
the State of Illinois and a Certified Public Accountant.
Roger E. Hall (age 62) is Chairman of Arvida. Prior thereto, he was
President-Arvida (September, 1987 to January, 1989).
Ernest M. Miller, Jr. (age 51) is President and Chief Executive Officer
of Arvida. Prior thereto, he was Executive Vice President and Chief Financial
Officer of Arvida (September, 1987 to February, 1989). From February, 1984,
Mr. Miller has been Chairman of Wilson Miller Capital Corp., a real estate
investment and consulting business.
H. Rigel Barber (age 45) is Chief Executive Officer and Executive Vice
President of JMB, an officer of various JMB affiliates and a partner of
various Associate Partnerships. Mr. Barber has been associated with JMB since
March, 1982. He received a J.D. Degree from the Northwestern Law School and
is a member of the Bar of the State of Illinois.
Ira J. Schulman (age 42) is Executive Vice President of JMB, an officer
of various JMB affiliates and a partner, directly or indirectly, of various
Associate Partnerships. He holds a Masters Degree in Business Administration
from the University of Pittsburgh.
Gailen J. Hull (age 46) is a Senior Vice President of JMB, an officer of
various JMB affiliates and a partner, directly or indirectly, of various
Associate Partnerships. Mr. Hull has been associated with JMB since March,
1982. He holds a Masters degree in Business Administration from Northern
Illinois University and is a Certified Public Accountant.
Howard Kogen (age 58) is Senior Vice President and Treasurer of JMB, an
officer of various JMB affiliates and a partner, directly or indirectly, of
various Associate Partnerships. Mr. Kogen has been associated with JMB since
March, 1973. He is a Certified Public Accountant.
Gary Nickele (age 41) is Executive Vice President, Secretary and General
Counsel of JMB, an officer of various JMB affiliates and a partner, directly
or indirectly, of various Associate Partnerships. Mr. Nickele has been
associated with JMB since February, 1984. He holds a J.D. degree from the
University of Michigan Law School and is a member of the Bar of the State of
Illinois.
Vincent P. Donahue Jr. (age 40) is Vice President of Finance and Chief
Financial Officer of Arvida. Prior thereto, he was Vice President-
Acquisitions of Arvida from October, 1987 to October, 1990.
James D. Motta (age 37) is President-Community Development Division of
Arvida. Prior thereto, he was President-Southeast Division of Arvida (July,
1992 to July, 1993), President-South Florida Division of Arvida (January, 1989
to July, 1992) and Vice President and General Manager--Boca Raton of Arvida
(September, 1987 to January, 1989).
John R. Grab (age 37) is Vice President and General Manager - Club/Hotel
Operations. Prior thereto, he was Vice President and Project General Manager
- - Weston Hills (October 1990 to October 1993), Vice President and Project
General Manager - Jacksonville Golf & Country Club (June 1988 to October
1990), and Vice President of Finance - North Florida Division (September 1987
to June 1988). Previously, he was employed by Arvida Corporation, which he
joined in December 1981, and was Vice President - Finance and Accounting with
Arvida Hospitality Management, Inc. (October 1986 to September 1987). He is a
Certified Public Accountant. He received his B.S. in Accounting from St. Leo
College.
John M. Garrity (age 47) is Vice President and General Manager - Arvida
Homes, with Arvida Company. Prior thereto, he was Vice President of
Construction - Arvida Homes (December 1992 to March 1993) and Vice President
and Project General Manager - Weston (February 1991 to December 1992).
Previously, he was President of The Key Company (September 1988 to February
1991), and Vice President and Market Manager - Tampa (March 1981 to August
1988). He holds a Masters degree in Business Administration from the
University of North Carolina.
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The officers and the director of the General Partner receive no current
or proposed direct remuneration in such capacities from the Partnership. The
General Partner and the Associate Limited Partners are entitled to receive a
share of cash distributions, when and as cash distributions are made to the
Limited Partners, and a share of profits or losses as described under the
caption "Cash Distributions and Allocations of Profit and Losses" at pages 61
to 64 of the Prospectus and at pages A-9 to A-16 of the Partnership Agreement,
which description incorporated herein by reference to Exhibits 28.1 and 3.,
respectively, to the Partnership's Report for December 31, 1992 on Form 10-K
dated March 29, 193 (File No. 0-16976). Reference is also made to Notes 1 and
14 for a description of such distributions and allocations. The General
Partner and the Associate Limited Partners did not receive any cash
distributions in 1993. Under certain circumstances they will be entitled to
approximately $810,000 which was deferred in 1990. Such payment is subject to
certain restrictions contained in the Partnership Agreement and the
Partnership's credit facility. Pursuant to the Partnership Agreement, the
General Partner and Associate Limited Partners were allocated profits for tax
purposes for 1993 of approximately $19,280. Reference is made to Note 14 for
further discussion of this allocation.
The Partnership is permitted to engage in various transactions involving
the General Partner and its affiliates, as described under the captions
"Management of the Partnership" at pages 56 to 59, "Conflicts of Interest" at
pages 21-24 of the Prospectus and "Rights, Powers and Duties of the General
Partner" at pages A-16 to A-28 of the Partnership Agreement, which
descriptions are hereby incorporated herein by reference to Exhibits 28.1 and
3., respectively, to the Partnership's Report for December 31, 1992 on Form
10-K dated March 29, 1993 (File No. 0-16976). The relationships of the
General Partner (and its director and executive officers and certain other
officers) and its affiliates to the Partnership are set forth above in Item
10.
Arvida may be reimbursed fully for all of its out-of-pocket expenditures
(including salary and salary-related expenses) incurred while supervising the
development and management of the Partnership's properties and other
operations, subject to the limitation that such reimbursement may not exceed
5% of the aggregate gross revenues from the business of the Partnership. In
1993, such expenses were approximately $6,686,100, of which approximately
$80,000 was unpaid as of December 31, 1993.
The Partnership and Arvida/JMB Partners, L.P.-II (a publicly-held limited
partnership affiliated with the General Partner) each employ project related
and administrative personnel who perform services on behalf of both
partnerships. In addition, certain out-of-pocket expenditures related to such
services and other general and administrative expenses, including certain
insurance premiums, are incurred and allocated to each partnership as
appropriate. The Partnership receives reimbursements from or reimburses
Arvida/JMB Partners, L.P.-II for such costs (including salary and salary-
related expenses). The Partnership was entitled to receive approximately
$2,497,400 from Arvida/JMB Partners, L.P.-II for such costs and services
incurred in 1993, approximately $26,100 of which was outstanding as of
December 31, 1993. In addition, the Partnership was obligated to reimburse
Arvida/JMB Partners, L.P.-II approximately $1,234,300 for the year ended
December 31, 1993, all of which was paid at December 31, 1993.
JMB Insurance Agency, Inc., an affiliate of the General Partner, earned
and received insurance brokerage commissions in 1993 of approximately $288,000
in connection with providing insurance coverage for certain of the properties
of the Partnership, all of which were paid as of December 31, 1993. Such
commissions are at rates set by insurance companies for the classes of
coverage provided.
The General Partner of the Partnership or its affiliates are entitled to
property management fees and may be reimbursed for their direct expenses or
out-of-pocket expenses relating to the administration of the Partnership and
the acquisition, development, ownership, supervision, and operation of the
Partnership assets. In 1993, the General Partner of the Partnership or its
affiliates were due reimbursement for such direct or out-of-pocket expenses
and property management fees in the amount of approximately $173,600,
approximately $165,200 of which was paid as of December 31, 1993.
Additionally, the General Partner and its affiliates are entitled to
reimbursements for legal and accounting services. Such costs for 1993 were
approximately $93,700, none of which was paid as of December 31, 1993.
The Partnership was also entitled to receive reimbursements from
affiliates of the General Partner for certain general and administrative
expenses including, and without limitation, salary and salary-related expenses
relating to work performed by employees of the Partnership and certain out-of-
pocket expenditures incurred on behalf of such affiliates. The Partnership
was owed approximately $171,000 for such costs and services incurred in 1993,
approximately $146,300 of which was received as of December 31, 1993.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
(a) No person or group is known by the Partnership to own beneficially
more than 5% of the outstanding Interests of the Partnership.
(b) The General Partner and its officers and directors own the following
Interests of the Partnership:
NAME OF AMOUNT AND NATURE
BENEFICIAL OF BENEFICIAL PERCENT
TITLE OF CLASS OWNER OWNERSHIP OF CLASS
- -------------- ---------- ----------------- --------
Limited Partnership General Partner 125 Interests Less
Interests and its officers than 1%
and director as
a group
- ---------------
No officer or director of the General Partner of the Partnership
possesses a right to acquire beneficial ownership of Interests of the
Partnership.
All of the outstanding shares of the General Partner of the Partnership
are owned by affiliates of its officers and director as set forth above in
Item 10.
(c) There exists no arrangement, known to the Partnership, the operation
of which may at a subsequent date result in a change in control of the
Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no significant transactions or business relationships with the
General Partner, affiliates or their management other than those described in
Items 10, 11 and 12 above.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements. (See Index to Financial Statements
filed with this annual report on Form 10-K).
2. Exhibits.
3. Amended and Restated Agreement of Limited
Partnership.**
4.0 Assignment Agreement by and among the General
Partner, the Initial Limited Partner and the Partnership.**
4.1 Amended and Restated Credit Agreement dated
October 7, 1992, among Arvida/JMB Partners, L.P., Arvida/JMB Partners,
Southeast Florida Holdings, Inc., Center Office Partners, Center Retail
Partners, Center Hotel Limited Partnership, Weston Hills Country Club Limited
Partnership and Chemical Bank and Nationsbank of Florida, N.A. is herein
incorporated by reference to Exhibit No. 4.4 to the Partnership's Report on
Form 10Q (File number 0-16976) dated November 11, 1992.
4.2 Security Agreement dated as of October 7, 1992
made by Arvida/JMB Partners, L.P., Arvida/JMB Partners, Southeast Florida
Holdings, Inc., Center Office Partners, Center Retail Partners, Center Hotel
Limited Partnership and Weston Hills Country Club Limited Partnership (as
"grantors") in favor of Chemical Bank and Nationsbank of Florida, N.A. (as
"lenders") is herein incorporated by reference to Exhibit No. 4.5 the
Partnership's Report on Form 10Q (File number 0-16976) dated November 11,
1992.
4.3 Pledge Agreement dated as of October 7, 1992
among Arvida/JMB Partners, L.P., Arvida/JMB Partners, Southeast Florida
Holdings, Inc., Center Office Partners, Center Retail Partners, Center Hotel
Limited Partnership and Weston Hills Country Club Limited Partnership (as
"pledgors") and Chemical Bank and Nationsbank of Florida, N.A. (as "lenders")
is herein incorporated by reference to Exhibit No. 4.6 the Partnership's
Report on Form 10Q (File number 0-16976) dated November 11, 1992.
4.4 Various mortgages and other security interests
dated October 7, 1992 related to the assets of Arvida/JMB Partners, Center
Office Partners, Center Retail Partners, Center Hotel Limited Partnership,
Weston Hills Country Club Limited Partnership which secure loans under the
Amended and Restated Credit Agreement referred to in Exhibit 4.1 are herein
incorporated by reference to Exhibit No. 4.7 the Partnership's Report on Form
10Q (File number 0-16976) dated November 11, 1992.
4.7. $24,000,000 Consolidated Revolving Promissory
Note dated January 14, 1994 by and between Arvida Grand Bay Limited
Partnership-I, Arvida Grand Bay Limited Partnership-II, Arvida Grand Bay
Limited Partnership-III, Arvida Grand Bay Limited Partnership-IV, Arvida Grand
Bay Limited Partnership-V and Arvida Grand Bay Limited Partnership-VI and
Barnett Bank of Broward County, N.A. is filed herewith.
4.8. Amended and Restated Mortgage and Security
Agreement dated January 14, 1994 by and between Arvida Grand Bay Limited
Partnership-I, Arvida Grand Bay Limited Partnership-II, Arvida Grand Bay
Limited Partnership-III, Arvida Grand Bay Limited Partnership-IV, Arvida Grand
Bay Limited Partnership-V, Arvida Grand Bay Limited Partnership-VI and Arvida
Grand Bay Properties, Inc. and Barnett Bank of Broward County, N.A. is filed
herewith.
4.9. Construction Loan Agreement dated January 14,
1994 by and between Arvida Grand Bay Limited Partnership-I and Arvida Grand
Bay Properties, Inc. and Barnett Bank of Broward County, N.A. is filed
herewith.
10.1. Agreement between the Partnership and The Walt
Disney Company dated January 29, 1987 is hereby incorporated by reference to
Exhibit 10.2 to the Partnership's Registration Statement on Form S-1 (File No.
33-14091) under the Securities Act of 1933 filed on May 7, 1987.
10.2. Management, Advisory and Supervisory Agreement is
hereby incorporated by reference to Exhibit 10.2 to the Partnership's Form 10-
K (File No. 0-16976) dated March 27, 1991.
10.3. Letter Agreement, dated as of September 10, 1987,
between the Partnership and The Walt Disney Company, together with exhibits
and related documents.*
10.4. Joint Venture Agreement dated as of September 10,
1987, of Arvida/JMB Partners, a Florida general partnership. *
21. Subsidiaries of the Registrant.
99.1. Pages 21-24, 56-59, 61-64, A-9 to A-28, A-31 to
A-33, and B-2 of the Partnership dated September 16, 1987 (relating to SEC
Registration Statement File No. 33-14091).*
99.2. The Registrant's Form 8-K Report (File
No. 0-16976) dated December 6, 1993 is incorporated by reference.
* Previously filed with the Securities and Exchange
Commission as Exhibits 10.4 and 10.5, respectively, to the Partnership's
Registration Statement (as amended) on Form S-1 (File No. 33-14091) under the
Securities Act of 1933 filed on September 11, 1987 and incorporated herein by
reference.
** Previously filed with the Securities and Exchange
Commission as Exhibits 3 and 4, respectively, to the Partnership's Form 10-K
Report (File No. 0-16976) filed on March 27, 1990 and hereby incorporated
herein by reference.
The Partnership agrees to furnish to the Securities and Exchange
Commission upon request a copy of each instrument with respect to long-term
indebtedness of the Partnership and its consolidated subsidiaries, the
authorized principal amount of which is 10% or less than the total assets of
the Partnership and its subsidiaries on a consolidated basis.
(b) Reports on Form 8-K
The Partnership's report dated December 6, 1993 describing the
change in the Partnership's independent auditors for the year ended
December 31, 1993. No financial statements were required to be filed
therewith.
No annual report or proxy material for the fiscal year 1993 has been sent to
the Partners of the Partnership. An annual report will be sent to the
Partners subsequent to this filing.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Partnership has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
ARVIDA/JMB PARTNERS, L.P.
BY: Arvida/JMB Managers, Inc.
(The General Partner)
GAILEN J. HULL
By: Gailen J. Hull
Senior Vice President
Date: March 25, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
BY: Arvida/JMB Managers, Inc.
(The General Partner)
NEIL G. BLUHM
By: Neil G. Bluhm, President
(Principal Executive Officer)
Date: March 25, 1994
JUDD D. MALKIN
By: Judd D. Malkin, Chairman
(Principal Financial Officer)
Date: March 25, 1994
GARY NICKELE
By: Gary Nickele, Vice President
and Director
Date: March 25, 1994
GAILEN J. HULL
By: Gailen J. Hull, Vice President
(Principal Accounting Officer)
Date: March 25, 1994
<TABLE>
ARVIDA/JMB PARTNERS, L.P.
EXHIBIT INDEX
<CAPTION>
DOCUMENT
INCORPORATED SEQUENTIALLY
EXHIBIT NO. EXHIBIT BY REFERENCE NUMBERED PAGE
- ----------- ------- ------------ -------------
<S> <C> <C> <C>
3.** Amended and Restated Agree-
ment of Limited Partnership
of the Partnership. No
4.0.** Assignment Agreement by and
among the General Partner, the
Initial Limited Partner and the
Partnership
4.1. Amended and Restated Credit
Agreement dated October 7, 1992,
among Arvida/JMB Partners, L.P.,
Arvida/JMB Partners, Southeast Florida
Holdings, Inc., Center Office Partners,
Center Retail Partners, Center Hotel
Limited Partnership, Weston Hills Country
Club Limited Partnership and Chemical
Bank and Nationsbank of Florida, N.A.
is herein incorporated by reference to
Exhibit No. 4.4 to the Partnership's
Report on Form 10Q (File No. 0-16976)
dated November 11, 1992. Yes
4.2. Security Agreement dated as of October 7,
1992 made by Arvida/JMB Partners, L.P.,
Arvida/JMB Partners, Southeast Florida Holdings,
Inc., Center Office Partners, Center Retail
Partners, Center Hotel Limited Partnership and
Weston Hills Country Club Limited Partnership
(as "grantors") in favor of Chemical Bank and
DOCUMENT
INCORPORATED SEQUENTIALLY
EXHIBIT NO. EXHIBIT BY REFERENCE NUMBERED PAGE
- ----------- ------- ------------ -------------
Nationsbank of Florida, N.A. (as "lenders")
is herein incorporated by reference to
Exhibit No. 4.5 to the Partnership's Report
on Form 10Q (File No. 0-16976) dated
November 11, 1992. Yes
4.3. Pledge Agreement dated as of October 7, 1992
among Arvida/JMB Partners, L.P., Arvida/JMB Partners,
Southeast Florida Holdings, Inc., Center Office
Partners, Center Retail Partners, Center Hotel
Limited Partnership and Weston Hills Country
Club Limited Partnership (as "pledgors") and
Chemical Bank and Nationsbank of Florida, N.A.
(as "lenders") is herein incorporated by
reference to Exhibit No. 4.6 to the
Partnership's Report on Form 10Q (File
No. 0-16976) dated November 11, 1992. Yes
4.4. Various mortgages and other security interests
dated October 7, 1992 related to the assets of
Arvida/JMB Partners, Center Office Partners,
Center Retail Partners, Center Hotel Limited
Partnership, Weston Hills Country Club Limited
Partnership which secure loans under the Amended
and Restated Credit Agreement referred to in
Exhibit 4.1 are herein incorporated by reference
to Exhibit No. 4.7 the Partnership's Report on
Form 10Q (File No. 0-16976) dated November 11, 1992. Yes
4.7. $24,000,000 Consolidated Revolving Promissory Note
dated January 14, 1994 by and between Arvida Grand
Bay Limited Partnership-I, Arvida Grand Bay Limited
Partnership-II, Arvida Grand Bay Limited Partner-
ship-III, Arvida Grand Bay Limited Partnership-IV,
Arvida Grand Bay Limited Partnership-V and Arvida
Grand Bay Limited Partnership-VI and Barnett
Bank of Broward County, N.A. is filed herewith. No
DOCUMENT
INCORPORATED SEQUENTIALLY
EXHIBIT NO. EXHIBIT BY REFERENCE NUMBERED PAGE
- ----------- ------- ------------ -------------
4.8. Amended and Restated Mortgage and Security Agreement
dated January 14, 1994 by and between Arvida Grand Bay
Limited Partnership-I, Arvida Grand Bay Limited Partner-
ship-II, Arvida Grand Bay Limited Partnership-III,
Arvida Grand Bay Limited Partnership-IV, Arvida Grand
Bay Limited Partnership-V, Arvida Grand Bay Limited
Partnership-VI and Arvida Grand Bay Properties, Inc.
and Barnett Bank of Broward County, N.A. is filed herewith. No
4.9. Construction Loan Agreement dated January 14, 1994 by
and between Arvida Grand Bay Limited Partnership-I and
Arvida Grand Bay Properties, Inc. and Barnett Bank of
Broward County, N.A. is filed herewith. No
10.1. Agreement between the Partnership and
The Walt Disney Company dated January 29, 1987,
is hereby incorporated by reference to
Exhibit 10.2 to the Partnership's Registration
Statement on Form S-1 (File No. 33-14091) under
the Securities Act of 1933 filed on May 7, 1987 Yes
10.2. Management, Advisory and
Supervisory Agreement. Yes
10.3. *Letter Agreement, dated as of
September 10, 1987, between the
Partnership and The Walt Disney
Company, together with exhibits
and related documents. Yes
10.4. *Joint Venture Agreement
dated as of September 10, 1987,
of Arvida/JMB Partners, a
Florida general partnership. Yes
21. Subsidiaries of the Registrant No
99.1. Pages 21-24, 56-59, 61-64 and Yes
A-9 to A-28, A-31 to A-33, and B-2 of
the Partnership's Prospectus
dated September 16, 1987 filed
pursuant to Rules 424(b) and
424(c) (relating to SEC
Registration Statement File
No. 33-14091).
99.2 The Registrant's report on Form 8K Yes
(File No.0-16976) is incorporated
by reference.
- ---------------
<FN>
* Previously filed as Exhibits 10.3 and 10.4, respectively, to the
Partnership's Registration Statement (as amended) on Form S-1 (File No. 33-
14091) to the Securities Exchange Act of 1933 and incorporated herein by
reference.
** Previously filed as Exhibits 3.0 and 4.1, respectively, to the
Partnership's Form 10-K Report (File No. 0-16976) filed on March 27, 1990 and
hereby incorporated herein by reference.
</TABLE>
EXHIBIT 21
List of Subsidiaries
The Partnership is a general partner in Arvida/JMB Partners, Center Office
Partners and Center Retail Partners, all of which are Florida general
partnerships. The Partnership is the owner of Southeast Florida Holdings,
Inc., an Illinois Corporation. The Partnership is a limited partner in Arvida
Management Limited Partnership, Arvida Contractors Limited Partnership, Gulf
and Pacific Communications Limited Partnership, Boca Raton Communications
Limited Partnership and Jax Cable Limited Partnership, Center Hotel Limited
Partnership, Weston Athletic Club Limited Partnership, Arvida Realty Sales
Limited Partnership, Arvida/Weston Retail Sales Limited Partnership and Arvida
Grand Bay Limited Partnership-I, each of which is a Delaware limited
partnership. The Partnership is also a partner in the following partnerships
with third party developers: Addison Joint Venture, Arvida Boose Joint
Venture, Arvida Corporate Park Associates, Arvida Oaks II, Ltd., Arvida
Pompano Associates Joint Venture, Coto De Caza, Ltd., Cullasaja Joint Venture,
H.A.E. Joint Venture, Mizner Court Associates Joint Venture, Mizner Tower
Associates Joint Venture, Ocala 202 Joint Venture, Tampa 301 Associates Joint
Venture, Windmill Lake Estate Associates Joint Venture and the AOK Group.
THE TAX HAS BEEN PAID AND THE PROPER DOCUMENTARY STAMPS HAVE BEEN AFFIXED TO
THE AMENDED AND RESTATED MORTGAGE AND SECURITY AGREEMENT DATED OF EVEN DATE
HEREWITH SECURING THIS PROMISSORY NOTE.
THIS CONSOLIDATED REVOLVING PROMISSORY NOTE CONSOLIDATES THE FOLLOWING
PROMISSORY NOTES: (A) PROMISSORY NOTE BY ARVIDA/JMB PARTNERS, A FLORIDA
GENERAL PARTNERSHIP ("ORIGINAL BORROWER") IN THE ORIGINAL PRINCIPAL AMOUNT OF
ONE THOUSAND AND 00/100 DOLLARS, IN FAVOR OF SOUTHEAST FLORIDA HOLDINGS, INC.,
AN ILLINOIS CORPORATION ("ORIGINAL LENDER") AS ASSIGNED BY ORIGINAL LENDER TO
LENDER AND AS ASSUMED BY MAKER FROM ORIGINAL BORROWER PURSUANT TO THAT CERTAIN
ASSIGNMENT AND ASSUMPTION OF NOTE AND MORTGAGE DATED OF EVEN DATE HEREWITH;
AND (B) FUTURE ADVANCE REVOLVING PROMISSORY NOTE IN THE AMOUNT OF TWENTY-THREE
MILLION NINE HUNDRED NINETY-NINE THOUSAND AND 00/100 DOLLARS ($23,999,000.00)
BY MAKER IN FAVOR OF LENDER DATED OF EVEN DATE HEREWITH
CONSOLIDATED REVOLVING PROMISSORY NOTE
$24,000,000.00 Fort Lauderdale, Florida
Date: January 14, 1994
FOR VALUE RECEIVED, the undersigned, Arvida Grand Bay Limited
Partnership - I, a Delaware limited partnership, Arvida Grand Bay Limited
Partnership - II, a Delaware limited partnership, Arvida Grand Bay Limited
Partnership - III, a Delaware limited partnership, Arvida Grand Bay Limited
Partnership - IV, a Delaware limited partnership, Arvida Grand Bay Limited
Partnership - V, a Delaware limited partnership, Arvida Grand Bay Limited
Partnership - VI, a Delaware limited partnership, and Arvida Grand Bay
Properties, Inc., a Delaware corporation located at 900 North Michigan Avenue,
Chicago, Illinois 60611 (hereinafter collectively referred to as "Maker"),
promises to pay to the order of Barnett Bank of Broward County, N.A., a
national banking association, its successors and/or assigns ("Lender"), at One
East Broward Boulevard, Fort Lauderdale, Florida 33301, Attention: Commercial
Real Estate Lending Department, or at such other place as may be designated in
writing by Lender, the principal sum of Twenty-Four Million and 00/100 Dollars
($24,000,000.00), or so much thereof as may be advanced, together with
interest thereon from the date of advances on the outstanding principal
balance at the annual variable rate of three-quarters percent (3/4%) above the
prime interest rate established by Barnett Banks, Inc. as calculated on a
daily basis upon the principal balance from time to time outstanding, but not
to exceed the maximum rate permitted by law. For the purposes of this Note,
the prime interest rate shall be the annual rate of interest as announced as
its prime rate from time to time by Barnett Banks, Inc. The prime rate is a
reference rate for the information and use of the Lender in establishing the
actual rates to be charged to its borrowers. If at any time, or from time to
time, such prime interest rate increases or decreases, then the rate of
interest hereunder shall be correspondingly increased or decreased effective
the date on which any such change is made.
Provided there exists no Event of Default, as defined in the
Construction Loan Agreement by Maker in favor of Lender dated of even date
herewith, Maker may borrow from Lender not to exceed Twenty-Four Million and
00/100 Dollars ($24,000,000.00) as evidenced by this Note. All advances shall
bear interest initially at the rate in effect on the date on which each
advance is made and shall change thereafter as the interest rate set forth
herein changes. The outstanding principal balance due hereunder may fluctuate
up and down, from time to time, at Maker's option, but shall not exceed
Twenty-Four Million and 00/100 Dollars ($24,000,000.00) in aggregate principal
amount outstanding at any one time.
Interest only, calculated on the daily outstanding balance of all
advances pursuant to the Note, shall be due and payable on the first day of
the first month immediately following the first disbursement or advance of
loan proceeds pursuant to this Note, and continuing on the first day of each
month thereafter until maturity.
The outstanding principal balance and all accrued but unpaid interest
shall be fully due and payable on January 14, 1996 ("Maturity Date"), unless
extended as set forth herein.
Interest hereunder shall be computed on the basis of a 360-day year for
the actual number of days in the interest period.
This Note may be prepaid in whole or in part without penalty or premium.
All payments of principal and interest shall be made in lawful money of
the United States which shall be legal tender in payment of all debts, public
and private, at the time of payment.
This Note is secured by a first Mortgage and Security Agreement by
Arvida/JMB Partners, a Florida general partnership in favor of Southeast
Florida Holdings, Inc., an Illinois corporation dated September 1, 1993 and
recorded in Official Records Book 2546 at Page 2460 of the Public Records of
Sarasota County, Florida, as assigned to Lender and assumed by Maker pursuant
to that certain Assignment and Assumption of Note and Mortgage dated of even
date herewith and as restated and amended in that certain Amended and Restated
Mortgage and Security Agreement also dated of even date herewith (collectively
the "Mortgage") executed by Maker, which Mortgage constitutes a first lien on
certain real and personal property in Sarasota County, Florida of which Arvida
Grand Bay Limited Partnership - I and Arvida Grand Bay Properties, Inc. are
the fee simple owners. Reference is hereby made to the Mortgage and to the
Construction Loan Agreement of even date herewith for a description of events
of default and rights of acceleration of the Maturity Date in the event of
default. It is expressly agreed that all of the covenants, conditions and
agreements contained in the Mortgage and the Construction Loan Agreement are
made a part of this Note. Upon default in the payment of principal or
interest or both due on any note secured by said Mortgage, including, but not
limited to this Note, all notes so secured and remaining unpaid shall become
due and payable, notwithstanding the terms and provisions of these notes.
In the event any scheduled payment of the principal sum, or any
installment thereof, or any interest thereon, as above provided, is not made
within fifteen days of when payment is due, this Note may be declared in
default and the entire amount of this Note, including the principal balance
then outstanding, together with all interest accrued thereon, shall become
immediately due and payable, at the option of Lender and without notice (the
Maker hereby expressly waives notice of such default), time being of the
essence of this agreement. Notwithstanding anything to the contrary set forth
herein, Lender shall provide Borrower with written notice prior to the first
of each month of the interest installment to be paid for each month. If
Borrower does not receive written notice of any monthly interest installment
from Lender, Borrower shall provide written notice to Lender no later than the
first day of the month for which the interest installment is due of Lender's
failure to provide Borrower with a written notice of the interest installment,
and said interest installment shall be due and payable the later of (a)
fifteen (15) days from receipt by Borrower of a written notice of the monthly
interest installment and (b) the fifteenth day of each month during the term
of the Loan, as hereinafter defined. Further, any payment required to be paid
by this Note, the Mortgage or the Construction Loan Agreement, with the
exception of interest and principal, shall be due and payable no later than
fifteen (15) days from receipt by Borrower from Lender of written notice of
the required payment.
Payment of this obligation is further secured by various assignments and
other instruments of even date herewith, executed by Maker in favor of Lender.
All such assignments and instruments from time to time securing payment of all
or any portion of this obligation are jointly and severally called the "Other
Loan Documents." In the event there is an Event of Default as defined in the
Construction Loan Agreement, Mortgage and Other Loan Documents, beyond any
applicable grace or cure period, this Note shall after the expiration of any
applicable grace or cure period, be declared in default and the entire amount
of this Note, including the principal balance then outstanding, together with
all interest accrued thereon, shall be accelerated and declared to be
immediately due and payable at the option of Lender.
Provided that no Event of Default (as said term is defined in the
Mortgage, Construction Loan Agreement or other Loan Documents, as defined
herein) has occurred, and provided there is no default under the Loan which
Borrower has received notice of, and Borrower has not cured (unless the
applicable cure period has not then expired), Lender will extend the Maturity
Date of this Note for up to one (1) additional year ("Option Term") upon
Borrower's request, so long as the following additional conditions are
satisfied:
(a) Maker shall pay to Lender a pro-rata extension fee equal to
the sum of one-half percent (1/2%) per annum of (i) the outstanding principal
balance of the loan evidenced by this Note ("Loan") on the date of the
extension, plus (ii) the amount of the Loan funds committed by Lender to be
funded during the Option Term, but remaining unfunded as such committed amount
may have been reduced by Borrower;
(b) Maker shall execute a renewal note and other appropriate
documentation required by Lender, and Guarantor shall execute any appropriate
documentation required by Lender, in form and substance satisfactory to the
Lender;
(c) Maker shall pay all reasonable third-party out-of-pocket
expenses, including reasonable attorneys' fees and costs of Lender's counsel;
(d) Maker shall deliver notice to Lender of the requested
extension at least thirty (30) days prior to the Maturity Date of this Note;
(e) Maker shall have received certificates of occupancy
evidencing completion of the common areas and elevators of the Phase I
Building, as defined in the Construction Loan Agreement, and certificates of
occupancy evidencing completion of thirty-seven (37) Units, as also defined in
the Construction Loan Agreement located in the Phase I Building; and
(f) The Units in the Phase I Building for which certificates of
occupancy have not been obtained, shall be substantially completed, which
shall be defined to mean that ninety percent (90%) of the budgeted amount for
each of said Units, as set forth in the Loan Budget, as defined in of the
Construction Loan Agreement, shall have been expended.
The Maker agrees if Lender is the prevailing party in any legal
proceeding enforcing this Note, Lender shall be entitled to recover its third-
party reasonable out-of-pocket costs of suit, including reasonable attorneys'
fees and costs, at both trial and appellate levels and in any bankruptcy
action.
Each maker, endorser and guarantor or any person, firm or corporation
becoming liable under this Note hereby consents to any extension or renewal of
this Note or any part hereof, without notice, and agrees that they will remain
liable under this Note during any extension or renewal hereof, until the debts
represented hereby are paid in full.
The Maker and any endorsers, and all others who are, or who may become
liable for the payment hereof with the exception of the Guarantor, severally
expressly grant to the Lender a continuing first lien security interest in any
and all money, general or specific deposits, or property of any such parties
now or hereafter in the possession of the Lender. The Maker and such other
parties authorize and empower the Lender, in its sole discretion, at any time
after the occurrence of an Event of Default hereunder to appropriate and, in
such order as Lender may elect, apply any such money, deposits or property to
the payment hereof or to the payment of any and all indebtedness, liabilities
and obligations of such parties to the Lender or any of the Lender's
affiliates, whether now existing or hereafter created or arising or now owned
or howsoever after acquired by the Lender or any of the Lender's affiliates
(whether such indebtedness, liabilities and obligations are or will be joint
or several, direct or indirect, absolute or contingent, liquidated or un-
liquidated, matured or unmatured, including, but not limited to, any letter of
credit issued by the Lender for the account of any such parties).
Provided Lender has not exercised its right to accelerate this Note as
herein provided, in the event any scheduled payment of principal required
under this Note is not received by Lender by the fifteenth (15) day of the
month, Maker shall pay Lender a late charge of five percent (5%) of the
payment not so received calculated from the first day of the month, the
parties agreeing that said charge is a fair and reasonable charge for the late
payment and shall not be deemed a penalty or as compounding interest.
Notwithstanding anything to the contrary set forth herein, Lender shall
provide Borrower with written notice prior to the first of each month of the
interest installment to be paid for each month. If Borrower does not receive
written notice of any monthly interest installment from Lender, Borrower shall
provide written notice to Lender no later than the first day of the month for
which the interest installment is due of Lender's failure to provide Borrower
with a written notice of the interest installment, and in the event the
payment is not received by Lender by the later of (a) fifteen (15) days from
receipt by Borrower of a written notice of the monthly interest installment
and (b) the fifteenth day of each month during the term of the Loan, as
hereinafter defined, Maker shall pay Lender a late charge of five percent (5%)
of the payment not so received, the parties agreeing that said charge is a
fair and reasonable charge for the late payment and shall not be deemed a
penalty or as compounding interest. Further, if any payment required to be
paid by this Note, the Mortgage or the Construction Loan Agreement, with the
exception of interest and principal, is not paid within fifteen (15) days from
receipt by Borrower from Lender of written notice of the required payment
Maker shall pay Lender a late charge of five percent (5%) of the payment not
so received, the parties agreeing that said charge is a fair and reasonable
charge for the late payment and shall not be deemed a penalty or as
compounding interest.
In the event Lender accelerates this Note as herein provided or the full
amount of outstanding principal and interest are not fully repaid to Lender on
or before the Maturity Date, then the entire unpaid principal balance of this
obligation, together with all interest accrued, shall bear interest from the
date of default or from the Maturity Date, respectively, at the lesser of (i)
five percent above the prime interest rate and (ii) the maximum rate permitted
under applicable law, provided the maximum interest rate shall never be more
than twenty-five percent (25%) ("Default Interest Rate"). Any late charge
paid by Maker shall be applied to the Default Interest Rate charged by Lender
after acceleration of the Note.
Nothing herein contained, nor in any instrument or transaction related
hereto, shall be construed or so operate as to require Maker, or any person
liable for the payment of the Loan made pursuant to this Note, to pay interest
in an amount or at a rate greater than the highest rate permissible under
applicable law as amended from time to time. Should any interest or other
charges paid by Maker, or any party liable for the payment of the Loan made
pursuant to this Note, result in the computation or earning of interest in
excess of the highest rate permissible under applicable law, then any and all
such excess shall be and the same is hereby waived by Lender, and all such
excess shall be paid by Lender to Maker or to any party liable for the payment
of the Loan made pursuant to this Note, it being the intent of the parties
hereto that under no circumstances shall Maker or any party liable for the
payment of the Loan hereunder, be required to pay interest in excess of the
highest rate permissible under applicable law as amended from time to time.
By operation of Section 687.12, Florida Statutes (1991), the interest rate
charged under this Note is authorized by Chapters 658, 665 and 687, Florida
Statutes (1991) and applicable federal law.
All persons now or at any time liable for payment of this Note hereby
waive presentment, protest, notice of protest and dishonor. The Maker
expressly consents to any extension or renewal, in whole or in part, and all
delays in time of payment or other performance which Lender may grant at any
time and from time to time without limitation and without any notice or
further consent of the undersigned.
The remedies of Lender as provided herein, or in the Mortgage, the
Construction Loan Agreement or the Other Loan Documents shall be cumulative
and concurrent and may be pursued singularly, successively or together, at the
sole discretion of Lender, and may be exercised as often as the occasion
therefor shall arise.
This Note is to be construed according to the applicable laws of the
State of Florida and the United States of America. Any action brought upon
the enforcement of this Note is hereby authorized to be instituted and
prosecuted in Broward County, Florida, or at the United States District Court
for the Southern District of Florida, at the election of Lender.
This Note may not be changed orally, but only by an agreement in
writing, signed by the party against whom enforcement of any
waiver, change, modification or discharge is sought.
Except as expressly set forth in that certain Continuing and
Unconditional Guaranty of Arvida/JMB Partners, L.P., a Delaware limited
partnership (the "Guarantor") in favor of Lender dated of even date herewith
(the "Guaranty"), but notwithstanding anything to the contrary in this Note,
the Mortgage, the Construction Loan Agreement or any other Loan Documents,
neither any present nor future constituent partner in, or agent of Maker, nor
any person or entity that, directly or indirectly (i.e., through one or more
additional partnerships), is a partner in any partner in Maker, nor any
shareholder, member, officer, manager, director, employee or agent of any
corporation or limited liability company that, directly or indirectly, (i.e.,
through one or more additional partnerships) is a constituent partner in
Maker, shall be personally liable, directly or indirectly, under or in
connection with this Note, the Mortgage, the Construction Loan Agreement, or
any other Loan Documents, or any instrument securing or otherwise executed in
connection with this Note, the Mortgage, the Construction Loan Agreement, or
any other Loan Documents, or any certificate delivered in connection with this
Note, the Mortgage, the Construction Loan Agreement, or any other Loan
Documents, or any amendments or modifications to any of the foregoing made at
any time or times, heretofore or hereafter; except as expressly set forth in
the Guaranty, the recourse of Lender and each of its successors and assignees
under or in connection with this Note, the Mortgage, the Construction Loan
Agreement, any other Loan Documents and such instruments and certificates, and
any such amendments or modifications, shall be limited to the assets of Maker
only, and Lender and each of its successors and assignees waives and does
hereby waive any such personal liability. For the purposes of this Note, the
Mortgage, the Construction Loan Agreement, each other Loan Document and any
such instruments and certificates, and any such amendments or modifications,
neither the negative capital account of a partner, nor any obligation of any
partner to restore a negative capital account or to contribute capital to
Maker or any other partnership shall be deemed to be the property or an asset
of Maker or any other partnership (and neither Lender nor any of its
successors or assigns shall have any right to collect, enforce or proceed
against or with respect to any such negative capital account or partner's
obligation to restore or contribute).
At such time that any entity which comprises Maker shall have paid
principal payments in an amount equal to the total amount funded under the
Loan for the construction of improvements as described in the Construction
Loan Agreement on property owned by that entity, and provided there exists no
Event of Default as defined in the Construction Loan Agreement, then Lender
shall release the entity which has made the above-described principal payments
from any and all liability pursuant to this Note.
MAKER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT
IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE AND ANY DOCUMENT
CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER
PARTY.
IN WITNESS WHEREOF, the undersigned has executed this Note on the date
specified below.
MAKER:
ARVIDA GRAND BAY LIMITED
PARTNERSHIP - I, a Delaware
limited partnership
By: ARVIDA GRAND BAY MANAGERS, INC.,
a Delaware corporation,
general partner (SEAL)
By:_____________________________
Vincent P. Donahue,
Vice President
Dated: January ___, 1994
ARVIDA GRAND BAY LIMITED
PARTNERSHIP - II, a Delaware
limited partnership
By: ARVIDA GRAND BAY MANAGERS, INC.,
a Delaware corporation,
general partner (SEAL)
By:_____________________________
Vincent P. Donahue,
Vice President
Dated: January ___, 1994
ARVIDA GRAND BAY LIMITED
PARTNERSHIP - III, a Delaware
limited partnership
By: ARVIDA GRAND BAY MANAGERS, INC.,
a Delaware corporation,
general partner (SEAL)
By:_____________________________
Vincent P. Donahue,
Vice President
Dated: January ___, 1994
ARVIDA GRAND BAY LIMITED
PARTNERSHIP - IV, a Delaware
limited partnership
By: ARVIDA GRAND BAY MANAGERS, INC.,
a Delaware corporation,
general partner (SEAL)
By:_____________________________
Vincent P. Donahue,
Vice President
Dated: January ___, 1994
ARVIDA GRAND BAY LIMITED
PARTNERSHIP - V, a Delaware
limited partnership
By: ARVIDA GRAND BAY MANAGERS, INC.,
a Delaware corporation,
general partner (SEAL)
By:_____________________________
Vincent P. Donahue,
Vice President
Dated: January ___, 1994
ARVIDA GRAND BAY LIMITED
PARTNERSHIP - VI, a Delaware
limited partnership
By: ARVIDA GRAND BAY MANAGERS, INC.,
a Delaware corporation,
general partner (SEAL)
By:_____________________________
Vincent P. Donahue,
Vice President
Dated: January ___, 1994
ARVIDA GRAND BAY PROPERTIES,
INC., a Delaware corporation (SEAL)
By:_____________________________
Vincent P. Donahue,
Vice President
Dated: January ___, 1994
STATE OF FLORIDA )
: ss.
COUNTY OF ____________)
The foregoing instrument was acknowledged before me this ____ day of
January, 1994, by Vincent P. Donahue, Vice President of Arvida Grand Bay
Managers, Inc., a Delaware corporation, general partner of Arvida Grand Bay
Limited Partnership - I, a Delaware limited partnership, Arvida Grand Bay
Limited Partnership - II, a Delaware limited partnership, Arvida Grand Bay
Limited Partnership - III, a Delaware limited partnership, Arvida Grand Bay
Limited Partnership - IV, a Delaware limited partnership, Arvida Grand Bay
Limited Partnership - V, a Delaware limited partnership, and Arvida Grand Bay
Limited Partnership - VI, a Delaware limited partnership, on behalf of the
limited partnerships. He is personally known to me or has produced
___________________________ as identification.
______________________________
Notary Public
Name of Notary Printed:
______________________________
My commission expires: (NOTARY SEAL)
My commission number is:
STATE OF FLORIDA )
: ss.
COUNTY OF ____________)
The foregoing instrument was acknowledged before me this
____ day of January, 1994, by P. Vincent Donahue, Vice President
of Arvida Grand Bay Properties, Inc., a Delaware corporation, on
behalf of the corporation. He is personally known to me or has
produced ___________________________ as identification.
______________________________
Notary Public
Name of Notary Printed:
______________________________
My commission expires: (NOTARY SEAL)
My commission number is:
FTL-90106.4
1/10/94
CONSTRUCTION LOAN AGREEMENT
THIS CONSTRUCTION LOAN AGREEMENT (the "Loan Agreement" or "Agreement")
is made and executed by and between ARVIDA GRAND BAY LIMITED PARTNERSHIP - I
, a Delaware limited partnership and ARVIDA GRAND BAY PROPERTIES, NC., a
Delaware corporation, located at 900 North Michigan Avenue, Chicago, Illinois
60611, Attention: Stephen A. Lovelette (hereinafter referred to as "Borrower")
and BARNETT BANK OF BROWARD COUNTY, N.A., a national banking association,
located at One East Broward Boulevard, Fourth Floor, Fort Lauderdale, Florida
33301, attention: Commercial Real Estate Lending Department (hereafter
referred to as "Lender").
W I T N E S S E T H:
WHEREAS, Borrower and Arvida Grand Bay Limited Partnership - II, a
Delaware limited partnership, Arvida Grand Bay Limited Partnership - III, a
Delaware limited partnership, Arvida Grand Bay Limited Partnership - IV, a
Delaware limited partnership, Arvida Grand Bay Limited Partnership - V, a
Delaware limited partnership, and Arvida Grand Bay Limited Partnership - VI, a
Delaware limited partnership has negotiated with Lender for a loan in the
principal amount of Twenty-Four Million and 00/100 Dollars ($24,000,000.00)
(the "Loan") to be secured by an amended and restated mortgage and security
agreement encumbering land to be used by Borrower to construct a ten story
mid-rise residential condominium building containing a total of fifty-six (56)
condominiums ("Phase I Building"), a recreational clubhouse, a guardhouse, a
covered parking garage, amenities, and related improvements, to be known as
Phase I of Bishop's Point on Longboat Key, Sarasota County, Florida
(collectively "Phase I" or "Project" or "Improvements") which Project is more
specifically defined in that certain loan commitment letter by Lender to
Borrower, dated November 3, 1993, (the "Commitment");
WHEREAS, the Project is located upon certain real property as described
in EXHIBIT "A" (the "Land") located in Longboat Key, Sarasota County, Florida
(Phase I and the Land hereafter being referred to collectively as the
"Property"); and
WHEREAS, Borrower and Lender wish to enter into this Loan Agreement in
order to set forth the terms and conditions of the disbursement of the Loan.
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants,
representations, warranties and agreements contained herein, the sum of TEN
AND 00/100 DOLLARS ($10.00) and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Borrower and Lender
agree as follows:
ARTICLE I
LOAN DOCUMENTS
Subject to the conditions contained in the Commitment and prior to the
initial disbursement, Borrower shall execute and deliver, or cause to be
executed and delivered to Lender the following documents (hereinafter
collectively and together with this Loan Agreement referred to as the "Loan
Documents"), all in a form satisfactory to Lender:
1. NOTE. A consolidated revolving promissory note of even date
herewith by Borrower, Arvida Grand Bay Limited Partnership - II, a Delaware
limited partnership, Arvida Grand Bay Limited Partnership - III, a Delaware
limited partnership, Arvida Grand Bay Limited Partnership - IV, a Delaware
limited partnership, Arvida Grand Bay Limited Partnership - V, a Delaware
limited partnership, and Arvida Grand Bay Limited Partnership - VI, a Delaware
limited partnership payable to the order of Lender in the principal amount of
Twenty-Four Million and 00/100 Dollars ($24,000,000.00) (the "Note"), which
shall include such terms and conditions as have heretofore been mutually
agreed upon between Borrower and Lender and which Note consolidates that
certain Promissory Note in the amount of One Thousand and 00/100 Dollars and
that certain Future Advance Revolving Promissory Note in the amount of Twenty-
Three Million Nine Hundred Ninety-Nine Thousand and 00/100 Dollars.
2. AMENDED AND RESTATED MORTGAGE AND SECURITY AGREEMENT. An
amended and restated mortgage and security agreement encumbering the Property
which amends and restates that certain Mortgage dated September 1, 1993 and
recorded in Official Records Book 2546, Page 2460 of the Public Records of
Sarasota County, Florida and which was assigned to Lender and assumed by
Borrower, Arvida Grand Bay Limited Partnership - II, a Delaware limited
partnership, Arvida Grand Bay Limited Partnership - III, a Delaware limited
partnership, Arvida Grand Bay Limited Partnership - IV, a Delaware limited
partnership, Arvida Grand Bay Limited Partnership - V, a Delaware limited
partnership, and Arvida Grand Bay Limited Partnership - VI, a Delaware limited
partnership pursuant to that certain Assignment and Assumption of Note and
Mortgage dated of even date herewith (collectively the "Mortgage") and which
Mortgage is a first lien on the Property shall be in a form satisfactory to
Lender and shall be subject only to those exceptions and matters satisfactory
to Lender.
3. UCC-1 FINANCING STATEMENTS (LOCAL AND STATE). UCC-1
Financing Statements (local and state) covering all personal property,
fixtures and equipment owned by Borrower, placed or to be placed on or under
the Property, and used by Borrower exclusively in connection with the Project
and such other documents as will insure Lender a first perfected security
interest in and to said personal property, fixtures and equipment.
4. ASSIGNMENT OF RENTS AND LEASES. An assignment of rents
and leases from Borrower to Lender assigning any and all leases and rents now
in existence or which may come into existence during the life of the Loan from
Borrower to Lender.
5. MORTGAGEE TITLE INSURANCE COMMITMENT AND POLICY. A
mortgagee title insurance commitment ("Commitment") and policy in the face
amount of Twenty-Four Million and 00/100 Dollars ($24,000,000.00), insuring
the Mortgage as a valid first lien on the Property subject only to exceptions
as shall be approved in writing by Lender, issued by a title company
satisfactory to Lender ("Title Insurer"), and in a form satisfactory to and
approved by Lender and satisfying the requirements set forth in the
Commitment, including such reinsurance and/or coinsurance agreements, if any,
and any affirmative coverage required by Lender. Borrower, at Borrower's
expense, shall deliver to Lender copies of any documents which may affect the
Property in any manner (as determined by Lender's counsel) at any time prior
to or during the term of the Loan.
6. OPINION OF COUNSEL. An opinion of counsel licensed in the
State of Florida and satisfactory to Lender which covers such matters as may
be required by Lender and, as to organization and existence of entities formed
in states outside of Florida an opinion letter as to those issues by local
counsel of said jurisdiction.
7. MORTGAGOR'S AFFIDAVIT. Mortgagor's Affidavit, in form and
content sufficient to permit the Title Insurer to delete any exception for
parties in possession, matters of survey, mechanic's or materialmen's liens,
the gap exception, and taxes and assessments which are due and payable.
8. BORROWING AUTHORITY INSTRUMENTS. Documents evidencing the
necessary authorization for all actions taken by Borrower and Guarantor in
connection with this Loan as may be required by Lender. Appropriate documents
may include corporate and partnership resolutions, certificates of active
status, certificates of authority, certified copies of articles of
incorporation and all amendments thereto, certified copies of by-laws and all
amendments thereto and limited partnership agreements, including all
amendments thereto.
9. GENERAL CONSTRUCTION CONTRACT. A General Construction
Contract (the "Construction Contract") in form and content acceptable to
Lender, executed by and between Borrower and a licensed Florida contractor
acceptable to Lender in its sole and absolute discretion (the "Contractor") to
construct Phase I in accordance with the plans and specifications dated
__________, 1993 (the "Plans and Specifications") prepared by The Lawrence
Group Architects, Inc. (the "Architect"). Said Construction Contract shall
include the provision that, upon the happening of an Event of Default, as
defined in the Mortgage or this Loan Agreement, Contractor will, at the
request of Lender, continue performance pursuant to the Construction Contract
with Borrower until completion of construction of the Phase I Building,
provided that Contractor shall be compensated by Lender from the date Lender
assumes the rights and obligations pursuant to the Construction Contract.
Borrower shall also deliver to Lender a copy of the Architect's Contract by
and between the Borrower and the Architect, which shall be in form and content
acceptable to Lender and which shall provide that the Architect shall submit
to Lender any certificates, as-built plans or specifications or other
information which shall be a prerequisite to disbursements of Loan proceeds,
including the final disbursement, as provided herein.
10. MAJOR SUBCONTRACTS. Contracts in form and content
acceptable to Lender, which have been executed by and between Contractor and
all major subcontractors, materialmen and suppliers ("Subcontractors") to
construct the Project in accordance with the Plans and Specifications. For
the purposes hereof, a major subcontract shall be any contract which is a
contract for Twenty-Five Thousand and 00/100 Dollars ($25,000.00) or more and
which is designated by Lender to be a Major Subcontract. If Major
Subcontracts have not been executed, Borrower shall furnish to Lender firm
bids or internal estimates of the work to be covered by the Major Subcontract,
and such supporting documentation therefor as Lender may require. Borrower
shall submit to Lender a list of all other Subcontractors working on the
Project and shall keep the list current until the Project is completed. All
subcontracts for work, labor and materials entered into by Contractor or
directly by Borrower, either with Major Subcontractors, other subcontractors
or with Borrower's own employees or agents, shall cover completion of the
Project shown on the Plans and Specifications. The aggregate contract price
for constructing and equipping the Project in accordance with the Plans and
Specifications and representations made to Lender and all other costs of the
project being financed with the Loan proceeds and pursuant to the terms and
conditions hereof (the "Project") shall not exceed the amount allocated and
described in the budget for the Loan (the "Loan Budget") approved in writing
by Lender and attached hereto and made a part hereof as EXHIBIT "B." Borrower
shall furnish such additional supporting documentation for the cost of the
items described in the Loan Budget as may be required by Lender.
11. BORROWER'S ARCHITECT'S/ENGINEER'S OPINIONS AND AGREEMENTS.
Written certificates from Borrower's Architect/ Engineer ("Engineer" or
Architect") covering such matters as may be required by Lender and stating
that the proposed Project, when completed in accordance with the Plans and
Specifications, will comply with all governmental restrictions, ordinances and
regulations. Further, Borrower will provide Lender with an agreement by
Borrower's Architect in form and content acceptable to Lender, regarding
Lender's right to use the Plans and Specifications at no cost to Lender upon
an Event of Default, as defined in the Mortgage and this Loan Agreement by
Borrower.
12. LENDER'S CONSTRUCTION INSPECTOR'S PLAN AND COST REVIEW.
Written plan and cost review from Lender's construction inspector
("Inspector") covering such matters as may be required by Lender and stating
that the proposed Project can feasibly be constructed within the Loan Budget
and that the proposed Project, when completed in accordance with the Plans and
Specifications, will comply with all governmental restrictions, ordinances and
regulations.
13. ASSIGNMENT OF CONTRACT RIGHTS. An assignment to Lender of
all of Borrower's contract rights under the Contractor's Contract, the
Architect's Contract and all other contracts.
14. COMMITMENT FEE. The non-refundable commitment fee of One
Hundred Twenty Thousand and 00/100 Dollars ($120,000.00), plus any out-of-
pocket expenses. The amount of One Hundred Twenty Thousand 00/100 Dollars
($120,000.00) of the commitment fee was paid upon the acceptance of the
Commitment. It is understood and agreed that no part of such fee will be
returned to the Borrower in any event, including, but not limited to as a
credit against closing costs or expenses. Further, a non-refundable
commitment fee of One Hundred Twenty Thousand and 00/100 Dollars
($120,000,000.00) shall be paid by Borrower to Lender annually commencing on
the date which is one year from the date of this Agreement and continuing
annually throughout the term of the Loan. If the Option term is exercised by
Borrower and Lender, a non-refundable commitment fee during the term of the
Option Term, as defined in the Note shall be due annually in the sum of one-
half percent (1/2%) per annum of (i) the outstanding principal balance of the
Loan on the effective date of the extension, plus (ii) the amount of loan
funds committed by Lender to be funded during the Option Term but remaining
unfunded as such committed amount may have been reduced by Borrower.
15. GUARANTY. The guaranty of payment of the Note ("Guaranty")
by Arvida/JMB Partners, L.P., a Delaware limited partnership (the
"Guarantor"). Further, a Guaranty of Completion shall be given by Guarantor.
16. TAXES. Proof of payment of real property and personal
property taxes for 1992 and all prior years, and information as to tax
identification numbers, tax rates, estimated tax values and the identities of
the taxing authorities and evidence of payment of any outstanding liens or
other outstanding obligations or encumbrances against the Property or Phase I
Building.
17. UTILITIES. Commitment letters addressed to Lender
evidencing the availability and sufficiency of water, sewer, electric,
telephone and natural gas utility services to satisfactorily service the
proposed Phase I Building on the Property and that such facilities are
available and will be furnished.
18. PERMITS. Building permit(s) and satisfactory evidence that
the Land and the Project and the intended uses of the Property are in
compliance with all applicable laws, regulations and ordinances. Such
evidence may include letters, licenses, permits, certificates and other
correspondence from the appropriate governmental authorities, opinions of
Borrower's attorney or other attorneys and opinions or certifications from
Borrower's Architect, as Lender may determine. Those laws, regulations and
ordinances with which compliance should be evidenced include, by way of
illustration but not limitation, the following: (a) environmental protection
laws; (b) erosion control ordinances; (c) doing-business and/or licensing
laws; (d) laws protecting disabled or handicapped persons; and (e) zoning laws
(in this regard, the evidence submitted should include (i) the zoning
designation made for the Land; (ii) the permitted uses of the Land under such
zoning designation, (iii) zoning requirements as to parking, lot size, ingress
and egress and building setbacks, (iv) the absence of moratoriums that would
prohibit construction of the Phase I Building, (v) site plan approval, and
(vi) the length of time of the validity of all such approvals, variances and
permits).
19. COST BREAKDOWN. A detailed construction and non-
construction cost breakdown on Lender approved forms of all construction and
non-construction costs including specification of which items are to be funded
from sources other than the Loan. Lender reserves the right to require, at
Borrower's expense, a construction cost take-off by Lender's Inspector or by
an expert in the construction cost field to be designated by Lender. If, in
the judgment of such Inspector or such cost expert, the total estimated costs
of constructing the Project exceeds the Total Cost of the Project as set forth
on Exhibit "B" attached hereto and made a part hereof, and if Borrower does
not have or have access to, which access can be affirmatively demonstrated to
Lender in Lender's discretion, sufficient capital in an amount satisfactory to
the Lender to pay all costs which exceed the amount allocated for the Project,
which determination by Lender shall not be arbitrary, same shall be a default,
unless said default shall be cured to the satisfaction of Lender within thirty
(30) days after written notice of the default to Borrower by Lender.
20. SOIL TESTS. A report as to soil borings and compaction
reports and analysis made at the Land by a soil testing firm satisfactory to
Lender and Lender's Inspector. The number and location of such borings shall
be in accordance with the recommendations of the soil testing firm and must
also be satisfactory to Lender. The report shall include the recommendations
of the soil testing firm as to the preparation of the soil needed in order to
adequately support the Phase I Building and the other Improvements. (During
the course of construction, Borrower shall also provide such reports as to
concrete tests and additional soil tests as are requested or required by
Lender.)
21. FINANCIAL STATEMENTS. Current financial statements, and
such other credit information as Lender may require for Borrower, in form and
content satisfactory to Lender, and including evidence of the availability of
Borrower's funds necessary or access by Borrower to funds, which access can be
affirmatively demonstrated to Lender, in Lender's opinion, which shall not be
arbitrary, to pay the total costs (hard construction and indirect costs) of
the Project in excess of the amount of the Loan. Current financial statements
and such other credit information as Lender may require for Guarantor, in form
and content satisfactory to Lender. The Commitment and the Mortgage contain
further requirements with respect to the foregoing financial statements and
credit information.
22. PLANS AND SPECIFICATIONS. Two (2) sets of Plans and
Specifications, which Borrower shall have approved in writing and which shall
be satisfactory to Lender in Lender's sole discretion, including any changes
or modifications thereto to the date of receipt by Lender, and any and all
construction contracts or other documents in the possession or control of
Borrower or any general contractor relating to the construction of the Phase I
Building which have been requested by Lender. The two (2) sets must include
plans and specifications for architectural, structural, mechanical, plumbing,
electrical and site development (including storm drainage, utility lines,
erosion control and landscaping) work, and must be stamped with all required
approvals from all applicable governmental authorities; certified under seal
by Architect and signed by Borrower and Contractor to be true copies of the
Plans and Specifications architecturally and structurally approved by all
authorities and agencies having jurisdiction thereon. They must also
incorporate the recommendations made in the soil testing report. No changes
shall be made thereafter in the Plans and Specifications with the exception of
any Approved Change Orders without the prior written consent of the Lender,
except alterations which constitute Approved Change Orders, as hereinafter
defined.
23. CERTIFICATE OF ARCHITECT. Certificate of Architect
preparing the Plans and Specifications addressed to Lender and stating that
any necessary soil testing has been performed and soil conditions are
satisfactory for the structural support of the Project; that there is adequate
ingress and egress to the Property and the Phase I Building; that the Plans
and Specifications have been approved by all governmental authorities, meet
all State construction, energy conservation, and environmental codes and meet
all Federal laws and regulations adopted pursuant to the Fair Housing Act of
1968 (as amended) and the Americans with Disabilities Act of 1990; that
provisions have been made for the handicapped in accordance with all state and
local ordinances, rules and regulations; that the zoning is proper; that the
permit has been properly issued; that all utilities necessary to service the
Phase I Building and the Property are available with adequate capacity; that
all required governmental permits and approvals have been obtained; and such
additional items as may be required by Lender. The Certificate of Architect
shall include submission of reports and certifications regarding fill,
foundation, design, settlement, H.V.A.C. and such other reports and
certifications as required by Lender.
24. LIEN WAIVERS. Waivers of lien from each and every
contractor, subcontractor, laborer or material supplier performing services or
supplying material to the Property within the past ninety (90) days and an
affidavit listing all of said entities and certifying that no work has been
performed and no materials have been supplied for which the costs remain
unpaid prior to closing.
25. FORM OF CONTRACT. Copy of form of contract for the sale of
the individual condominium units located in the Phase I Building ("Unit(s)")
("Unit Contract"), which Unit Contract shall be acceptable to Lender and its
counsel and shall be subordinate to the first lien of the Mortgage. Each Unit
Contract must provide for: (i) an initial minimum payment of no less than ten
percent (10%) of the gross sales price of a Unit to Borrower as an escrow
deposit; (ii) an additional minimum payment of no less than ten percent (10%)
of the gross sales price of a Unit to Borrower as an escrow deposit upon
commencement of construction of the Building in which the Unit is located;
(iii) a final minimum payment of five percent (5%) of the gross sales price of
a Unit to Borrower as an escrow deposit upon construction of the Building in
which the Unit is located reaching the "top-off" stage, which is defined to
mean that the shell of the Building is completed, the roof of the Building is
dried in and the windows are completed ("Top-Off"). Notwithstanding the
matters set forth above, if the total twenty-five percent (25%) escrow deposit
as set forth in subparagraphs (i), (ii), and (iii) above shall exceed
$100,000.00 for any Unit then the above-described escrow deposit requirement
shall be reduced to a total escrow deposit of $100,000.00; (iv) an escrow
agent acceptable to Lender, in Lender's sole discretion; and (v) that all
escrow deposits relating to the Project, shall be deposited in Barnett Bank of
Southwest, Florida, N.A., its successors and assigns. Borrower acknowledges
that all amounts required hereunder to be deposited in escrow may not be used
for construction purposes.
26. INSURANCE. Evidence of insurance in form and content
satisfactory to Lender, as set forth herein.
27. COLLATERAL ASSIGNMENT OF SALES CONTRACTS AND DEPOSITS. A
collateral assignment from Borrower to Lender of all of Borrower's rights and
interest in and to any and all sales contracts and deposits held thereunder,
and providing that all Unit purchasers' deposits shall be held in an escrow
account at Barnett Bank of Southwest, Florida, N.A., its successors and
assigns. The Borrower's rights to all monies in said escrow account shall
also be assigned to Lender.
28. COLLATERAL ASSIGNMENT OF LICENSES AND PERMITS. A
Collateral Assignment of all licenses, permits, approvals and certifications
relating to the use and construction of the Phase I Building on the Property,
to the extent permitted by law, including but not limited to trade and
fictitious names with the exception of JMB, Arvida, and their derivatives, all
of which must be transferable during the entire term of the Loan, in form and
content acceptable to Lender.
29. APPRAISAL. Appraisal in accordance with the requirements as
set forth in the Commitment.
30. CONSTRUCTION LOAN DISBURSEMENT AGREEMENT. The Construction
Loan Disbursement Agreement shall be executed by Borrower, Contractor, Lender
and the title underwriter, as Disbursing Agent.
31. SURVEY Three (3) original boundary and as-built
surveys of the Property encumbered by the lien of the Mortgage, current within
ninety (90) days of closing, satisfactory to Lender, in Lender's sole
discretion. Lender's survey requirements are more specifically set forth in
the Commitment.
32. AMENDED NOTICE OF COMMENCEMENT. An Amended Notice of
Commencement signed by Borrower at closing amending that certain Notice of
Commencement recorded in Official Records Book 2558 at Page 2960 of the Public
Records of Sarasota County, Florida with a certified copy thereof being posted
at the job site in accordance with the Florida Construction Lien Law, Chapter
713, Florida Statutes (the "Florida Construction Lien Law") and a copy thereof
furnished to Lender. Proof acceptable to Lender, in its sole discretion, that
the Amended Notice of Commencement has been properly posted at the job site in
accordance with the requirements of the Florida Construction Lien Law, shall
be delivered to Lender and to the Title Insurer. The Amended Notice of
Commencement shall name the Lender, and Title Insurer as additional parties to
whom all notices shall be given. The Amended Notice of Commencement shall
state that it is in effect throughout the duration of the construction period
as set forth in the Construction Contract.
33. CONDOMINIUM DOCUMENTS. Copies of all condominium and
related documents in form and content acceptable to Lender, and in compliance
with Florida law. The condominium documents shall have been approved by the
State of Florida and/or shall have been recorded in the Public Records of
Sarasota County, Florida.
34. PAYMENT AND PERFORMANCE BONDS. Full payment and performance
bonds in the total amount of the Loan, with dual obligee riders designating
Lender as a dual obligee, in form and content satisfactory to Lender. The
Payment Bond shall be issued in full compliance with the requirements of
Florida Statutes Section 713.23.
35. ENVIRONMENTAL AUDIT. A Phase I environmental audit or
assessment report of the Property, at Borrower's expense, performed to the
Lender's satisfaction by an acceptable and qualified environmental consultant
or independent engineer verifying that no unremediated environmental
contamination, except as disclosed in said Environmental Audit on the Property
has occurred or is imminent and containing adequately supported and documented
conclusions (which conclusions must be satisfactory to the Lender, in its sole
discretion) which evaluate (i) whether any hazardous or toxic substances,
hazardous wastes, pollutants, contaminants or any other environmental hazards
are present in the soil, surface water or groundwater at or adjacent to the
Property; (ii) whether operations at the Property are in compliance with all
federal, state and local air quality and water quality regulations and other
applicable environmental laws and (iii) whether there are any other potential
or actual environmental concerns from current or prior ownership and uses of
the Property. The contract between the Borrower and consultant for the
conduct of an environmental audit or assessment shall contain a provision
which expressly states that the Lender is an intended beneficiary of the
contract and is entitled to rely on any report of findings or conclusions or
the results of the environmental audit. In order to evaluate the
environmental risks associated with this transaction, the Borrower will, upon
request, give permission to the Lender and its agents and contractors to enter
the Property for the purpose of conducting its own environmental assessment or
hydrogeologic study of the Property including soil borings, installation of
piezometers, the collection of soil and surface water samples, geophysical or
geotechnical testing, soil vapor surveys and the installation and sampling of
groundwater monitoring wells. All such assessments, studies, inspections and
investigations deemed necessary by the Lender shall be conducted at Borrower's
expense.
36. MISCELLANEOUS. Such other matters, insurance or documents as
Lender shall require, which requirements shall not be arbitrary.
All of the Loan Documents shall be in form and content satisfactory to
the Lender, and shall comply with all of the requirements set forth in the
Loan Agreement and the Commitment.
ARTICLE II
INITIAL FUNDING OF PHASE I
1. The initial funding of Loan proceeds for the Phase I Building
shall be funded by Lender subsequent to the following:
A. Execution of all such documents as Lender and Lender's
counsel may reasonably require to insure that the Lender has a valid first
lien on the Property and the Phase I Building.
B. Recording of all documents as required by Lender's Counsel.
C. Receipt by Lender of the marked-up Title Insurance
Commitment, insuring Lender's Mortgage, which marked-up Title Insurance
Commitment must be approved by Lender's counsel.
D. Receipt by Lender of a copy of the Building Permit or
Permits, as the case may be, for the Phase I Building.
E. Receipt by Lender and Lender's counsel of certification that
Borrower has pre-sold in the Phase I Building pursuant to Sold Unit Contracts,
as hereinafter defined, the greater of in total dollars: (i) the aggregate
dollar value in gross sales proceeds of 34 Sold Units or (ii) Seventeen
Million Six Hundred Thousand and 00/100 Dollars ($17,600,000.00) in
anticipated Net Sales Proceeds pursuant to Sold Unit Contracts, as hereinafter
defined ("Phase I Pre-Sale Requirement"). Net Sales Proceeds shall mean the
gross sales price paid by a third-party-end-purchaser for any Unit, less any
Lender approved closing expenses; said closing expenses shall not exceed Three
and one half percent (3.5%) of the gross sales price. If Borrower does not
fulfill the Phase I Pre-Sale Requirement, Borrower may obtain disbursements of
Loan funds provided: (i) Borrower has a total of Sold Unit Contracts at least
equal to fifty percent (50%) of the Units in the Phase I Building, and (ii)
Borrower funds from its own monies, prior to the receipt of any Loan Proceeds
for the Phase I Building, the difference between the total dollar amount of
the Phase I Pre-Sale Requirement and the actual total dollar amount which will
be received by Borrower as Net Sales Proceeds pursuant to Sold Unit Contracts
for the Phase I Building at the time Borrower desires to obtain a disbursement
of Loan funds for the Phase I Building ("Phase I Building Funding Gap"). If a
Phase I Building Funding Gap exists, then as additional Units are sold in the
Phase I Building pursuant to Sold Unit Contracts, Lender will refund to
Borrower, on a dollar for dollar basis, an amount equal to Phase I Building
Funding Gap, provided that Lender shall not be required to fund Loan Funds in
excess of the Loan Budget and in excess of the amounts set forth in Article
III hereof. A Sold Unit Contract is defined as a fully executed contract for
the sale of a Unit, on a form of contract pre-approved by Lender that provides
for: (i) an initial minimum payment of not less than ten percent (10%) of the
gross sales price of a Sold Unit to Borrower as an earnest money deposit; (ii)
an additional minimum payment of not less than ten percent (10%) of the gross
sales price of a Sold Unit to Borrower as an earnest money deposit upon
commencement of construction of the Building in which the Sold Unit is
located; (iii) a final minimum payment of five percent (5%) of the gross sales
price of a Sold Unit to Borrower as earnest money upon construction of the
Building in which the Sold Unit is located reaching Top-off (notwithstanding
the matters set forth above, if the total twenty-five percent (25%) escrow
deposit as set forth in subparagraph (i), (ii), (iii) above shall exceed One
Hundred Thousand and 00/100 Dollars ($100,000.00) for any Unit then the above-
described escrow deposit requirement shall be reduced to a total escrow
deposit of $100,000.00); (iv) where the fifteen (15) day statutory rescission
period pursuant to Florida Statutes Section 718.503 ("Rescission Period") has
expired; (v) where the purchase price of the Sold Unit is equal to or greater
than ninety percent (90%) of the proposed sales price for that Unit as set
forth on the Schedule of Costs attached hereto as Exhibit "C"; (vi) where the
Sold Unit has not been purchased by Guarantor, Borrower or an employee of
Borrower, Guarantor or any affiliate or subsidiary of Borrower or Guarantor or
any affiliate or subsidiary of Borrower or Guarantor; and (vii) where to the
best of Borrower's knowledge and belief after inquiry, the third-party-end
purchaser of the Sold Unit has not purchased any other Unit in the Phase I
Building or any other Building, either individually or in a corporate or
partnership name or capacity, which corporation or partnership is controlled
by the third-party-end purchaser. (A "Sold Unit" is defined as a Unit which
has been sold to a third-party-end-purchaser pursuant to a Sold Unit
Contract). Notwithstanding anything contained herein to the contrary, Lender
shall have the right in its sole discretion to accept a contract as a Sold
Unit Contract where a contract does not comply with each of the conditions a
set forth above.
F. Receipt by Lender of proof satisfactory to Lender in its
sole discretion that Borrower has already invested Six Million One Hundred
Seventy-Nine Thousand and 00/100 Dollars ($6,179,000.00) relating to the
Project consisting of (a) $3,300,000.00 paid to Chemical Bank, N.A. for which
payment Borrower received a partial release from the lien of Chemical's
mortgage relating to the Property and (b) $2,879,000.00 toward the hard and
soft costs of design and construction of one, two or all of the following: (i)
The Phase I Building; (ii) the guardhouse located on the Project; and (iii)
the recreational clubhouse facilities located on the Project.
G. Evidence reasonably satisfactory to Lender and Lender's
counsel of the fulfillment of any other condition to funding.
H. Delivery to Lender of the documents required above as a
condition to funding.
I. Receipt and approval by Lender and Lender's counsel of all
proposed condominium and homeowners' association documents relating to the
Property.
2. The initial funding of Loan proceeds for the recreational
clubhouse and guardhouse shall be funded by Lender subsequent to the
following:
A. Fulfillment by Borrower of all matters set forth in Article
II, Paragraph 1 above.
B. Receipt by Lender of a copy of the Building Permit or
Permits, as the case may be for the guardhouse and recreational clubhouse.
C. Receipt and approval by Lender of two sets of plans and
specifications for the guardhouse and the recreational clubhouse. The plans
and specifications must comply with the requirements of Article I, Paragraph
22 of the Agreement.
D. Receipt and approval by Lender of a written plan and cost
review by the Inspector of the guardhouse and the recreational clubhouse.
E. Receipt and approval by Lender of a loan budget for the
construction of the guardhouse and recreational clubhouse.
F. Execution and recordation of a Notice of Commencement or an
Amended Notice of Commencement relating to the construction of the
recreational clubhouse and guardhouse, which must include payment and
performance bonds in accordance with the requirements of Article I, Paragraph
34 hereof.
G. Receipt and approval by Lender of fully executed
assents/certificates and licenses by the Contractor, Architect and Engineer
relating to the construction of the guardhouse and the recreational clubhouse.
H. Receipt and approval by Lender of insurance information
relating to the construction of the guardhouse and the recreational clubhouse
in accordance with Article I, Paragraph 26 of this Agreement.
ARTICLE III
METHOD AND CONDITIONS OF DISBURSEMENT OF LOAN PROCEEDS
1. DISBURSEMENTS AND RETAINAGE. Lender shall disburse from the
Note the Lesser of the following: (a) eighty-five percent (85%) of the total
cost of hard and soft design and construction based upon costs submitted by
Borrower to Lender and approved by Lender and Lender's Construction Inspector
in accordance with the Loan Budget or (b) seventy-five percent (75%) of the
appraised value of the Phase I Building upon completion of the Phase I
Building (based on an appraisal satisfactory to Lender in Lender's sole
discretion). Requisitions for disbursements for hard construction costs shall
be in an amount not to exceed the percentage of work completed and
incorporated in the project, times the total amount of the Construction
Contract, less ten percent (10%) retainage, and less the amount previously
paid to the Contractor by Borrower or Lender. Requisitions for disbursements
of soft costs will be funded upon submission by Borrower of approved invoices
to Lender.
2. PAYMENT REQUISITION AND APPLICATION FOR PAYMENT FORMS. At
such time as Borrower shall desire to obtain a disbursement of any portion of
the Loan proceeds, subject to the other requirements hereof, Borrower shall
complete, execute and deliver to Lender a construction loan requisition form
("Construction Loan Requisition Form") on the forms approved by Lender, and
each contractor in privity with Borrower shall complete, execute and Borrower
shall deliver to Lender a completed Application and Certificate for Payment
and Continuation Sheet (A1A Documents G602 and G603) ("Application and
Certification"). Each Application and Certification shall be provided to
Lender's Inspector setting forth a detailed breakdown of the requested
disbursement, supporting requisition and invoices of subcontractors and
suppliers, the original cost breakdown approved by Lender together with the
percentage of completion of each item and the balance remaining to complete
each item and certification and notarization of all certificates by Borrower's
construction supervisor. Each Application and Certification shall be
certified by Borrower and Contractor.
3. EVIDENCE OF PROGRESS OF CONSTRUCTION. The above-said
Construction Loan Disbursement Form shall be accompanied by such evidence, at
Borrower's expense, in form and content satisfactory to Lender, which shall
include but not be limited to properly executed certificates, affidavits,
waivers and releases of lien from Borrower, Architect, Contractor and/or such
other persons as Lender may require, showing:
(a) The value of the portion of the Improvements completed
at that time;
(i) That all outstanding claims for labor, materials
and fixtures for which Lender has funded pursuant to a Construction Loan
Requisition Form and an Application and Certification submitted by Borrower,
have been properly paid;
(b) That there are no liens outstanding against the Property
except for Lender's lien and other than inchoate liens for property taxes not
yet due;
(i) That Borrower has complied with all of
Borrower's obligations, as of the date thereof, under the Loan Documents;
(c) That all construction prior to the date of the request
for an advance has been completed in a good and workmanlike manner in
accordance with the Plans and Specifications and as required by all inspecting
governmental authorities having jurisdiction thereof;
(i) That all funds previously disbursed by Lender
have been applied in accordance with the Loan Budget;
(ii) That copies of all bills or statements for
indirect expenses for which the advance is requested are attached to said
Construction Loan Requisition Form and Application and Certification; and
(iii) Except as otherwise may be provided, that all
change orders shall have been approved in writing by Lender.
Where the draw request relates to items other than payments for work
performed or materials furnished under the Construction Contract, there shall
be included a statement of the purposes for which the advance is desired and
invoices for the same, as Lender shall reasonably require and approve.
4. PROJECT EVALUATION REPORT. At such time as Borrower shall
desire to obtain a disbursement of any portion of the Loan proceeds and after
an Application and Certification shall be delivered to Lender and Lender's
Inspector, Lender's Inspector shall prepare a Project Evaluation Report within
five (5) business days of Borrower's request for a Project Evaluation Report
which certifies, to Lender's satisfaction, that the work completed has been
completed substantially in accordance with the Plans and Specifications and
that the value of the work completed is equal to or greater than the amount
already funded pursuant to the Loan plus the amount of the draw request
submitted by Borrower. Borrower shall pay the cost of Lender's Inspectors'
services, plus any reasonable and customary out-of-pocket expenses immediately
upon receipt of a statement from Lender's Inspector.
5. SOLVENCY. At such time as Borrower shall desire to obtain a
disbursement of any portion of the Loan proceeds, Lender may require, in its
sole discretion, that Lender be provided with satisfactory evidence that there
is not pending against Borrower, a petition in bankruptcy, whether voluntary
or otherwise, any assignment for the benefit of creditors, any petition
seeking reorganization or arrangements under the Federal bankruptcy laws of
the United States or of any other action brought under the aforesaid
bankruptcy laws.
6. PARTIAL RELEASES OF LIEN. At such time as Borrower shall
desire to obtain a disbursement of any portion of the Loan proceeds, Borrower
shall provide Lender or such other persons as Lender may designate with an
original partial release of lien from each party or entity which Title Company
shall require.
7. REPORT OF ESCROW ACCOUNT. At such time as Borrower shall
desire to obtain a disbursement of any portion of the Loan proceeds, Borrower
shall provide Lender with a Status Report setting forth, on a per Unit basis,
all activities, including deposits and withdrawals relating to the Escrow
Account, as hereinafter defined.
8. EQUITY REQUIREMENTS. At such time as Borrower shall desire
to obtain a disbursement of any portion of the Loan proceeds, Borrower shall
provide Lender with proof satisfactory to Lender, in Lender's sole discretion,
that Borrower has contributed a minimum of fifteen percent (15%) of the total
cost of the Project as set forth in Exhibit "C."
9. FOUNDATION SURVEY. Within fifteen (15) days of the
completion of the construction of the foundations of the Phase I Building, a
foundation survey shall be submitted to Lender or such other persons as Lender
may designate which shall show and which shall certify to Lender and Title
Insurer, the locations of such foundations. The surveyor shall also submit a
certification as to the absence of encroachments from or onto the Land and
compliance of the Improvements, as then constructed, setback requirements and
other relevant restrictions.
10. ACCESS TO STREETS. Lender shall not make any disbursement
for construction of any of the Project on the Property if any such Improvement
shall not have satisfactory access to streets unencumbered by liens.
11. FINAL DISBURSEMENT DATE. Subject to the provisions of this
Article, Lender shall not be required to make any disbursement from the
proceeds of this Loan later than the maturity date of the Note.
12. LIEN PRIORITY AS PREREQUISITE FOR CONSTRUCTION. As of the
date hereof, the Mortgage shall be of first lien priority as to the Property.
Lender shall in no event disburse funds from the Loan proceeds for the
construction of any of the Improvements unless (a) the Mortgage then shall
constitute a first lien on such Improvement, and (b) there shall exist no
other lien of any sort, whether prior or inferior, except any lien which shall
be paid off with the disbursement of Loan funds or from funds which Borrower
has access to, provided Borrower's access to said funds can be affirmatively
demonstrated to Lender than the lien of the Mortgage with respect to the
Property.
13. MATERIALS STORED ON-SITE. Lender is willing to make loan
disbursements based on the invoice value of insured materials properly stored
on the construction site. All invoices for materials stored on-site and the
reasonableness of the quantity of such materials are subject to Lender's
review and approval. Lender must have a first lien on the materials stored
on-site, and a disbursement therefor must not be in conflict with the terms of
the Construction Contract. A list must be submitted to Lender of the
materials to be stored on-site for which loan disbursements will be requested.
Such list must include a breakdown by type, number of units and cost per unit.
14. MATERIALS STORED OFF-SITE. Lender will not make any loan
disbursements based on the value of materials stored off-site, unless Lender
has given its approval to a disbursement based thereon because of the
difficulty or danger of storing such materials on-site, but Lender shall have
absolute discretion in determining whether to approve such disbursement and
upon what terms and conditions such disbursement will be made. In the event
Lender elects to make a loan disbursement for materials stored off-site, the
conditions of Paragraph 13 above shall apply to such disbursement.
15. CONTINUATION OF TITLE INSURANCE COVERAGE. The above-said
Construction Loan Requisition Form and Application and Certification shall be
accompanied by a date down endorsement to the Title Policy, which endorsement
shall (a) indicate that since the effective date of the Title Policy (or the
effective date of the last such endorsement, if any), there has been no change
in the status of title to the Land as set out in the Title Policy, and (b)
have the effect of increasing the coverage of the Title Policy by an amount
equal to the advance then being made, unless the Title Policy expressly
provides automatically and unconditionally for such increase in coverage upon
each such disbursement. Lender reserves the right to require a Certificate of
Architect certifying that the building location is not in violation of any
setback restrictions.
16. EVIDENCE OF SOFT COST ALLOCATIONS. Borrower shall furnish
written documentation which satisfactorily accounts to Lender for the
expenditure of funds allocated to the payment of the soft costs set forth on
the Loan Budget.
17. CONDITIONS PRECEDENT TO EACH DISBURSEMENT. At no time and
in no event shall Lender be obligated to disburse funds:
(a) if any Event of Default as described herein or in the
Mortgage shall have occurred and shall not have been cured, except that Lender
may, at Lender's option, pay itself accrued interest to the extent that Loan
proceeds allocated to an interest reserve in the Loan Budget remain
undisbursed, if applicable; or
(b) if Lender determines in its discretion, which shall
not be arbitrary that construction cannot be completed within the time
required by this Loan Agreement; or
(c) if, prior to the Loan closing and at all times during
the term of the Loan, Lender is not satisfied, in its discretion, that the
proceeds of the Loan remaining undisbursed together with additional funds to
be disbursed by Borrower or additional funds which Borrower can affirmatively
demonstrate to Lender are available to Borrower to disburse will be sufficient
to complete all of the Phase I Building according to the Plans and
Specifications and to pay for all labor, materials and costs and all other
costs and disbursements required to complete the Phase I Building, including
interest and other non-construction costs. Lender's determination shall not
be arbitrary. If required by Lender, Borrower shall pay with its own funds
and furnish written documentation which satisfactorily accounts to Lender for
all acquisition, development, or other construction costs in excess of the
proceeds of this Loan necessary to fully complete the construction of the
Phase I Building. Each such payment shall be expended before any or any other
Loan disbursement will be made, and it shall be advanced as construction
progresses; or
(d) if the Property shall have been damaged by fire or
other casualty and the Property has not been repaired to the satisfaction of
Lender or arrangements satisfactory to Lender have not been made to repair the
Property.
18. RETAINAGE; CONDITIONS PRECEDENT TO FINAL DISBURSEMENT.
All Loan disbursements shall be subject to the following condition:
The final Loan disbursement and retainages shall be withheld
by Lender, and shall be disbursed along with all other retainages under this
paragraph only upon compliance with the following requirements (in addition to
the requirements for all other disbursements):
(a) Evidence of Completion. Receipt by Lender of
satisfactory evidence of the completion of the improvements substantially in
accordance with the Plans and Specifications and approval of such completion
by local governmental authorities which satisfactory evidence shall include a
final certificate of occupancy and use by the proper governmental authority
and the delivery by the Borrower's Architect of a certificate of completion of
the Improvements in accordance with the Plans and Specifications.
(i) As-Built Survey. Receipt by Lender of two (2)
copies of a satisfactory "as-built" survey prepared by a registered surveyor,
in accordance with the Plans and Specifications and showing all of the
Improvements in place, including striping of parking areas, and a statement as
to the number of parking spaces. The survey shall be certified to Lender and
Title Insurer and shall also include a narrative metes and bounds or platted
description of the boundary of the Land, the area of the Land and of the
Improvements, the location and dimensions of any easement and the dimensions
of the Phase I Building. The surveyor must include on the survey a signed
narrative statement certifying the existence or nonexistence of any
encroachment from or onto the Land and must include the date of the survey and
the surveyor's registration number and seal and such other matters as required
by Title Insurer, in form and substance satisfactory to Lender and Title
Insurer.
(b) Final Releases of Lien; Contractor's Affidavit.
Receipt by Lender or such other parties as Lender may designate of all final
releases of lien by Contractor and any Subcontractors and of the requisite
affidavit of Contractor sufficient in the opinion of Lender's counsel to
comply with the Florida Construction Lien Law, and the removal of any
mechanics' and materialmen's liens (inchoate or otherwise) affecting title to
the Property.
(c) Borrower's Supervising Architect's and Engineer's
Certification. Certification from the supervising architect and engineer that
all on-site and off-site Improvements required to be constructed have been
completed substantially in accordance with the approved Plans and
Specifications and are free of deficiency.
(d) Contractor's Certification. Certification from
Contractor that all on-site and off-site Phase I Improvements required to be
constructed have been completed strictly in accordance with the approved Plans
and Specifications and are free of structural deficiency.
(i) Borrower's Affidavit. Certification by Borrower
that all on-site and off-site Phase I Improvements required to be constructed
have been completed substantially in accordance with the approved Plans and
Specifications and are free of deficiency.
(e) As-Built Plans and Specifications. One (1) set of
detailed as-built plans and specifications must be submitted to Lender as soon
as they are completed but in no event no later than ninety days from the
issuance of Certificate(s) of Occupancy for Phase I. They must be approved
and identified as such in writing by Borrower, Borrower's architect and
engineer and Contractor. The one (1) set must include plans and specifications
for architectural, structural, mechanical, plumbing, electrical and all site
development (including storm drainage, utility lines and landscaping) work.
(f) OTHER EVIDENCE. Such other evidence as Lender may
require in its discretion, which shall not be arbitrary, to establish that the
Improvements and their intended use comply with all applicable zoning and
other requirements of the public authorities having jurisdiction including but
not limited to compliance with the National Environmental Policy Act and any
other applicable Federal, State, local or municipal environmental impact or
energy laws or regulations.
(g) NOTICE, FREQUENCY AND PLACE OF DISBURSEMENTS. At
Lender's option (a) the above-said draw request shall be submitted to Lender
at least ten (10) business days prior to the date of the requested advance,
(b) disbursements shall be made no more frequently than monthly and (c) all
disbursements shall be made by transfer to the Disbursing Agent's account at
Lender or at such other place as Lender may designate from time to time.
19. DEPOSIT OF FUNDS ADVANCED. The above notwithstanding,
following any Event of Default, at Lender's option, Borrower shall deposit all
loan proceeds advanced by Lender in a separate and exclusive account to be
withdrawn and used solely for the payment of bills for labor, materials and
fixtures used or to be used in construction of the Improvements and other
costs contemplated by the approved budget, and Borrower will promptly furnish
Lender with evidence thereof.
20. ADVANCES DO NOT CONSTITUTE A WAIVER. No advance of Loan
proceeds hereunder shall constitute a waiver of any of the conditions of
Lender's obligation to make further advances, nor in the event Borrower is
unable to satisfy any such condition, shall any such waiver have the effect of
precluding Lender from thereafter declaring such inability to be an event of
default described herein or in the Mortgage.
21. LENDER'S DETERMINATION TO TERMINATE ADVANCES UNDER THE LOAN.
Borrower and Lender stipulate and agree that for purposes of Florida Statutes
Section 713.3471(1)(a), Lender shall not be deemed to have made a "final
determination that the lender will cease further advances pursuant to the
loan," unless Lender notifies Borrower, in writing, that any cessation or
delay or withholding of any loan advance is, and constitutes a "final
determination" under the statute. The parties specifically acknowledge and
agree that a denial or delay of a request for a loan advance which is denied
or delayed pursuant to the terms of this Loan Agreement or any of the Loan
Documents shall not constitute a "final determination" under the statute,
unless Lender provides the written notice described herein.
ARTICLE IV
WARRANTIES OF BORROWER
As material inducements to Lender to enter into this Loan Agreement and
to make the Loan, Borrower hereby warrants to Lender as follows:
1. VALIDITY OF LOAN DOCUMENTS. That the Loan Documents are in
all respects legal, valid and binding according to their terms and grant to
Lender a valid and enforceable first lien security interest in the Property
and the personalty located thereon subject only to bankruptcy, insolvency and
other similar laws affecting the rights of creditors.
2. PRIORITY OF LIEN ON PERSONALTY. That no bill of sale,
security agreement, financing statement or other title retention agreement
(except those executed in favor of Lender) has or will be executed with
respect to any personal property, equipment or fixtures used in conjunction
with the construction, operation or maintenance of the Phase I Building.
3. CONFLICTING TRANSACTIONS OF BORROWER. That the
consummation of the transactions hereby contemplated and the performance of
Borrower's obligations under and by virtue of the Loan Documents will not
result in any breach of, or constitute a default under any mortgage, security
deed, deed of trust, lease, bank loan or credit agreement, corporate charter
or bylaws or other instrument to which Borrower is a party or by which it may
be bound or affected.
4. PENDING LITIGATION. That there are no actions, suits or
proceedings pending or, to the knowledge of Borrower, threatened against or
affecting Borrower or any of Borrower's general partners which affects any of
the Property securing the Loan, or involving the validity or enforceability of
any of the Loan Documents or the priority of the lien thereof, at law or in
equity, or before or by any governmental authority, except actions, suits and
proceedings which are fully covered by insurance or which, if adversely
determined, would not substantially impair Borrower's ability to perform each
and every one of its obligations under and by virtue of the Loan Documents;
and that to Borrower's knowledge, it is not in default with respect to any
order, writ, injunction, decree or demand of any court or any governmental
authority.
5. VIOLATIONS OF GOVERNMENTAL LAW, ORDINANCES OR REGULATIONS.
That Borrower has no knowledge of any violation or notice of violations of any
federal or state law or municipal ordinance or order or requirement of the
county or city in which the Property is located or any municipal department or
other governmental authority having jurisdiction affecting the Property, which
violations in any way relate to or affect the Property.
6. COMPLIANCE WITH ZONING ORDINANCES AND SIMILAR LAWS. That
the Plans and Specifications and construction pursuant thereto and the use of
the Property contemplated thereby have been approved by all appropriate
governmental and quasi-governmental authorities and accordingly comply and
will continue to comply with all applicable governmental and quasi-
governmental laws, regulations, and standard requirements, including but not
limited to the Fair Housing Act of 1968, as amended, and the Americans with
Disabilities Act of 1990.
7. AVAILABILITY OF UTILITIES. That all utility services
necessary for the construction of the Phase I Building and the operation
thereof for their intended purpose are available at the boundaries of the
Land, including water supply, storm and sanitary sewer facilities, electric
and telephone facilities.
8. BUILDING PERMITS. That all building permits required for
the construction of the Phase I Building have been obtained or to the best of
Borrower's knowledge, after diligent inquiry may be obtained without undue
delay, unusual expense or material alteration of the Plans and Specifications.
9. CERTIFICATE OF OCCUPANCY. That all certificates of
occupancy required for the occupancy of the Phase I Building have been
obtained or to the best of Borrower's knowledge, after diligent inquiry may be
obtained without undue delay or unusual expense.
10. CONDITION OF PROPERTY. That the Property is not now damaged
or injured as a result of any fire, explosion, accident, flood or other
casualty.
11. BROKERAGE COMMISSIONS. That any brokerage commission
claimed by, through or under Borrower, Guarantor or any Arvida related entity
which is due in connection with the transaction contemplated hereby has been
paid in full and that any such commission coming due in the future will be
paid promptly by Borrower. Borrower agrees to and shall indemnify Lender from
any liability, claim or loss arising by reason of any such brokerage
commission, with the exception of any brokerage commission which may be due
and owing by Lender relating to this Loan due to Lender's relationship with
any broker. This provision shall survive the repayment of the Loan and shall
continue in full force and effect so long as the possibility of such
liability, claim or loss exists.
12. USURY. To the best of Borrower's knowledge, after due and
diligent inquiry, the amounts to be received by Lender which are or which may
be deemed to be interest hereunder or under any of the Loan Documents or
otherwise in connection with the transactions herein contemplated constitute
lawful interest and are not usurious or illegal under the laws of the State of
Florida, and no aspect of the transactions contemplated by this Loan Agreement
is or will be usurious under current Florida law.
13. ACCURACY OF INFORMATION. Lender's commitment to make the
Loan, as expressed in the Commitment and accepted by Borrower is based on the
accuracy of Borrower's and Guarantor's representations and statements.
Neither this Loan Agreement nor any document, financial statement, credit
information, certificate or statement required herein to be furnished or
furnished by Borrower and/or Guarantor or both to Lender contains any untrue
statement of a fact or omits to state a fact material to this Loan Agreement
or to Lender's decision to enter into this Loan Agreement or the transaction
contemplated hereunder. Lender shall have the option to declare the
Commitment to be breached if there shall have been any material
misrepresentation or misstatement or any material error in any statement,
document or other submission delivered to Lender, or if prior to the initial
Loan disbursement, there shall have been a material adverse change in the
state of facts submitted to Lender, or if Borrower or Guarantor or any general
partner of Borrower has become insolvent, bankrupt or has otherwise been
subject to any material adverse change in financial condition. The Commitment
is hereby incorporated herein by reference, but to the extent it conflicts
with the Loan Documents, the Loan Documents shall govern.
14. SET-OFFS. Borrower does not have any defense or set-off
with respect to any money disbursed or otherwise advanced or to be advanced
hereunder.
15. INVESTMENT COMPANY. Borrower represents and warrants that
Borrower is not an investment company as defined by the Investment Company Act
of 1940, as amended, and that Borrower is not required to register under said
Act.
16. CONTINUATION AND INVESTIGATION. The warranties and
representations contained herein shall be and remain true and correct so long
as any of Borrower's obligations hereunder have not been satisfied, or so long
as part of the Loan shall remain outstanding, and each request by Borrower for
a disbursement or extension of the Loan shall constitute an affirmation that
the foregoing representations and warranties remain true and correct as of the
date thereof. All representations, warranties, covenants and agreements made
herein or in any certificate or other document delivered to Lender by or on
behalf of Borrower pursuant to or in connection with this Loan Agreement shall
be deemed to have been relied upon by Lender notwithstanding any investigation
heretofore or hereafter made by Lender or on its behalf, and shall survive the
making of any or all of the disbursements contemplated hereby.
17. HAZARDOUS SUBSTANCES.
Borrower warrants and represents to Lender to the best of its knowledge
after due and diligent investigation and except as disclosed in that certain
Environmental Site Assessment for "Grand Bay Condominium site, Longboat Key,
Sarasota County, Florida" by Ardaman & Associates, Inc. dated October 29, 1993
("Phase I Audit")":
a. That neither Borrower nor any other person to the best
of Borrower's knowledge, after due and diligent inquiry, has ever used the
Property as a facility for the treatment or disposal of any "Hazardous
Substances," as that term is hereinafter defined, or for the storage of any
Hazardous Substances, except the storage of hazardous Substances in the
Ordinary Course of Business, as defined below, and all past uses of the
Property were in full compliance with any and all applicable federal, state
and local Environmental Laws, as defined below;
b. The Property is now in full compliance with any and
all applicable Federal, state and local Environmental Laws, which
Environmental Laws include but are not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), 42
U.S.C. 9601, et seq., the Superfund Amendments and Reauthorization Act of
1986 ("SARA"), Public Law 99-499, 100 Stat. 1613, the Resource Conservation
and Recovery Act ("RCRA"), 42 U.S.C. 6901, et seq., the Florida Resource
Recovery and Management Act, Section 403.701, et seq., Florida Statutes, the
Pollutant Spill Prevention and Control Act, Section 376.011-376.17 and 376.19-
376.21 Florida Statutes, and all Federal, state or local environmental
statutes, ordinances, rules and regulations whether now existing or in the
future enacted, promulgated, adopted, entered or issued, both within and
outside present contemplation of Borrower and Lender.
c. Borrower covenants and agrees that at all times during
the term of the Loan (which term shall include any all extensions of the Loan)
the Property will be in full compliance with any and all applicable Federal,
state and local Environmental Laws, which Environmental Laws include but are
not limited to CERCLA, SARA, RCRA, the Florida Resource Recovery and
Management Act, the Pollutant Spill Prevention and Control Act, and all
Federal, state or local environmental statutes, ordinances, rules and
regulations whether now existing or in the future enacted, promulgated,
adopted, entered or issued, both within and outside present contemplation of
Borrower and Lender.
d. That as of the date hereof Borrower has no knowledge
of any soil or groundwater contamination and no knowledge that there are
hazardous or toxic materials, substances, wastes or other environmentally
regulated substances (including solids or gaseous products and any materials
containing asbestos), the presence of which is limited, regulated or
prohibited by any state, federal or local governmental authority or agency
having jurisdiction over the Property, or which are otherwise known to pose a
hazard to health or safety of occupants of the Property, located on, in or
under the Property or used in connection therewith, except as permitted by law
or as may occur in the ordinary course of Borrower's business, which shall be
defined as the development of property and the construction and the sale of
any and all Units located on the Property ("Ordinary Course of Business").
e. That Borrower shall notify Lender of any change in the
nature or extent of any hazardous or toxic materials, substances or wastes
maintained on, in or under the Property or used in connection therewith of
which Borrower is aware, except any changes in the Ordinary Course of Business
as defined above and any changes that comply with any and all applicable,
federal, state and local Environmental Laws, and will transmit to Lender
copies of any citations, orders, notices or other material governmental or
other communication received with respect to any other hazardous materials,
substances, wastes or other environmentally regulated substances affecting the
Property;
f. That with respect to the Property and/or any property
in the development known as Bishop's Point on Longboat Key, Borrower is not
aware of, nor has the Borrower nor any of its currently affiliated entities
which own land anywhere in the development known as Bishop's Point on Longboat
Key received notice of, any past or present events, conditions, circumstances,
activities, practices, incidents, actions or plans which may interfere with or
prevent compliance or continued compliance with Environmental Laws or any
ordinance, regulation, code, plan, order, decree, judgment, injunction, notice
or demand letter issued, entered, promulgated or approved thereunder, or which
may give rise to any common law or legal liability, or otherwise form the
basis of any claim, action, demand, suit, proceeding, hearing, study or
investigation, based on or related to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling, or the
emission, discharge, release or threatened release into the environment, of
any Hazardous Substance onto the Property and/or any Property in the
development known as Bishop's Point on Longboat Key;
g. That there is no civil, criminal or administrative
action, suit, demand, claim, hearing, notice or demand letter, notice of
violation, investigation, or proceeding pending or threatened against Borrower
or the Property, relating in any way to any Environmental Laws or any
regulation, code, plan, order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved thereunder;
h. (i) Except as limited in Subparagraph (h)(vi) below,
and Article X, Paragraph 13, Borrower hereby agrees to indemnify, reimburse,
defend and hold harmless Lender, its officers, directors, employees,
successors and assigns from and against all demands, claims, civil or criminal
actions or causes of action, liens, assessments, civil or criminal penalties
or fines, losses, damages, liabilities, obligations, costs, disbursements,
expenses or fees of any kind or of any nature (including, without limitation,
cleanup costs, attorneys', consultants' or experts' fees and disbursements and
costs of litigation at trial and appellate levels) which may at any time be
imposed upon, incurred by or asserted or awarded against, Lender directly or
indirectly, related to or resulting from: (a) any acts or omissions of
Borrower at, on or about the Property which contaminate air, soils, surface
waters or groundwaters over, on or under the Property; (b) Borrower's breach
of any representation or warranty under this Agreement; (c) pursuant to or in
connection with the application of any Environmental Law, to the acts or
omissions of Borrower or any other person at the Property and any
environmental damage alleged to have been caused there or in the project known
as Bishop's Point at Longboat Key, in whole or in part, by the manufacture,
processing, distribution, use, handling, transportation, treatment, storage,
or disposal on the Property of any Hazardous Substance; or (d) the presence,
whether past, present or future, of any Hazardous Substances on, in or about
the Property except in the Ordinary Course of Business in the development
known as Bishop's Point on Longboat Key.
(ii) Without limiting the foregoing, this
indemnification provision specifically protects the Lender against any claim
or action from activities described in (a), (b), (c) or (d) above, based in
whole or in part upon any Environmental Law, based in whole or in part upon
any environmental statute, rule, regulation or policy, including but not
limited to Chapters 403 and 376, Florida Statutes, the Florida Administrative
Code, the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, ("CERCLA") 42 USC 9601, et seq., as amended, the Resource
Conservation and Recovery Act, 42 USC 6901, et seq., and other laws, whether
now in existence or enacted in the future. whether now in existence or enacted
in the future.
(iii) Except as limited in sub-paragraph (h)(vi)
below and Article X, Paragraph 13 hereof, Borrower's indemnification
obligation under this section shall not be limited to any extent by the term
of the Loan and shall continue, survive and remain in full force and effect
notwithstanding payment in full and satisfaction of the Note and the Mortgage
or foreclosure under the Mortgage, or delivery of a deed in lieu of
foreclosure. The provisions of this section shall be deemed to survive
satisfaction of the Note or issuance of a certificate of title and shall
continue in full force and effect after any foreclosure or other proceeding by
which the Lender, its successors and assigns, succeed to ownership of the
Property.
(iv) Those liabilities, losses, claims, expenses and
damages for which Lender is indemnified under this section shall be paid to
Lender, without any requirement of waiting for the ultimate outcome of any
litigation, claim or other proceeding, and Borrower shall pay such liability,
losses or claims or expenses to Lender as so incurred within thirty (30) days
after notice from Lender itemizing said amounts as of the date of such notice.
In addition to any remedy available for failure to periodically pay such
amounts, such amounts shall thereafter bear interest at the "Default Rate" as
defined in the Loan Documents.
(v) Borrower waives any acceptance of this indemnity
by Lender. The failure of Lender to enforce any right or remedy hereunder, or
to promptly enforce any such right or remedy, shall not constitute a waiver
thereof nor give rise to any estoppel against Lender, nor excuse Borrower from
its obligations hereunder. Any waiver of such right or remedy must be in
writing and signed by Lender. This indemnity is subject to enforcement at law
and/or equity, including actions for damages and/or specific performance.
(vi) Notwithstanding anything to the contrary
contained in this Agreement, Borrower's indemnity, agreements and undertakings
hereunder shall not apply to the extent that Borrower can affirmatively
demonstrate that the claims, civil or criminal actions or causes of action,
liens, assessments, civil or criminal penalties or fines, losses, damages,
liabilities, or obligations that apply to any presence, release or discharge
of toxic or Hazardous Substances, petroleum or petroleum products, chemicals
or other pollutants on the Property arise from actionable conduct of Lender,
an affiliated entity of Lender or some other third party and such conduct has
first occurred on the Property after the earliest of the following dates: (a)
transfer of title to the Property to Lender or an affiliated entity of the
Lender pursuant to a foreclosure sale or (b) acceptance by Lender of a deed or
other assignment of title to the Property or (c) exclusive possession or
control of the Property by Lender. In consideration of this indemnity Lender
covenants that it will avail itself of the protection afforded secured lenders
under CERCLA and any implementing regulations, if applicable. Further, Lender
agrees and acknowledges that Borrower's maximum liability under this indemnity
shall not exceed the sum of (i) the cost of remediation in compliance with all
federal, state or local environmental statutes, regulations, rules or
ordinances, including any penalties, fines or assessments in connection
therewith and (ii) any other actual out-of-pocket damages incurred by Lender
relating to the presence, release or discharge of toxic or Hazardous
Substances, petroleum or petroleum products, chemicals, pollutants, or other
contaminants on the Property and within the scope of this indemnity and
Agreement in an amount not to exceed the outstanding loan balance, including
principal, interest, Lender's reasonable third-party out-of-pocket expenses,
including reasonable attorney's fees and costs and any penalties.
Notwithstanding anything to the contrary herein in the Commitment or the Loan
Documents (or any instruments or certificates executed or delivered in
connection with the Loan), or any amendments or modifications made to the
foregoing at any time or times, no present or future constituent partner in or
agent of Borrower, nor any shareholder, officer, director, employee, trustee,
beneficiary or agent of any corporation or trust that is or becomes a
constituent partner in Borrower, shall be personally liable, directly or
indirectly, for the matters set forth above, and the Lender and each of its
successors and assignees waives and does hereby waive any such personal
liability. For purposes of this Agreement, the Commitment, each of the Loan
Documents and any such instruments and certificates, and any such amendments
or modifications, neither the negative capital account of any constituent
partner in Borrower, nor any obligation of any constituent partner in Borrower
to restore a negative capital account or to contribute capital to Borrower or
to any other constituent partner in Borrower, shall at any time be deemed to
be the property or an asset of Borrower or any such other constituent partner
(and neither Lender nor any of its successors or assignees shall have any
right to collect, enforce or proceed against or with respect to any such
negative capital account or partner's obligation to restore or contribute).
As used in this paragraph, a "constituent partner" in Borrower shall mean any
direct partner in Borrower and any person or entity that is a partner in any
partnership that, directly or indirectly through one or more other
partnerships, is a partner in Borrower. Finally, notwithstanding anything to
the contrary contained herein, this indemnity shall not be assignable to any
future buyer of the Property, it being the intent of the Borrower and the
Lender that the indemnity is given for the benefit of the Lender, its
officers, directors and affiliates and any successor financial institution,
its officers, directors and affiliates by merger or sale of Lender of the sale
of the Loan.
(viii) As used herein, "Environmental Law" means any
federal, state, or local statutory or common law relating to pollution or
protection of the environment, including without limitation, any common law of
nuisance or trespass, and any law or regulation relating to emissions,
discharges, releases or threatened releases of Hazardous Substances into the
environment (including without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances.
(ix) As used herein, "Hazardous Substance" means any
substance or material (i) identified in Section 101(14) of CERCLA, 42 USC
9601(14), as the same may be amended from time to time, or
be toxic, a pollutant or contaminant, under federal, state or local statute,
law, ordinance, rule or regulation or judicial or administrative order or
decision, as same may be amended from time to time;
h. Lender shall have the right, in its sole discretion,
which shall not be arbitrarily withheld, to require Borrower to periodically
(but not more frequently than annually unless an environmental complaint from
a governmental entity is then outstanding) perform (at Borrower's expense) an
environmental audit, which must be satisfactory to Lender, in its sole
discretion, which shall not be arbitrary, of the Property, hazardous waste
management practices and/or hazardous waste disposal sites used by Borrower.
Such audit must be by an environmental consultant satisfactory to Lender.
Should Borrower fail to commence such environmental audit within 30 days of
the Lender's written request, Lender shall have the right but not the
obligation to retain an environmental consultant to perform such environmental
audit. All costs and expenses incurred by Lender in the exercise of such
rights shall bear interest at the default rate set forth in the Note and shall
be secured by this Mortgage and shall be payable by Borrower upon demand or
charged to Borrower's Loan balance at the discretion of the Lender;
i. Any intentional breach of any warranty, representation
or agreement contained in Paragraph 17 hereof shall be a default hereunder and
shall entitle Lender to exercise any and all remedies provided in the Loan
Documents, or otherwise permitted by law, upon thirty (30) days' notice from
Lender to Borrower of the default with the exception that any intentional
breach of any warranty, representation or agreement contained in Paragraph (4)
hereof shall be a default hereunder and shall entitle Lender to exercise any
and all remedies provided in the Loan Documents, or otherwise permitted by
law; and
j. Any unintentional breach of any warranty,
representation or agreement contained in Paragraph 17 hereof shall be a
default hereunder and shall entitle Lender to exercise any and all remedies
provided in the Loan Documents, or otherwise permitted by law, unless Borrower
shall provide Lender, within thirty (30) days of Borrower determining that
there has been an unintentional breach of any warranty, representation or
agreement, a formal written plan of assessment or remediation (the "Plan")
relating to the cure of any environmental problems on the Property which
resulted from said breach of warranty, representation or agreement contained
in Paragraph 17 hereof. The Plan shall include a detailed analysis of any
environmental problems on the Property, a plan of action of remediation and a
time frame for each phase of remediation. If Lender shall determine that the
Plan is satisfactory, in Lender's discretion, which shall not be arbitrary,
and Borrower shall implement the Plan, provided Borrower implements the Plan
and follows the time frame for remediation as set forth in the Plan, there
shall not be a default under the Loan. If Lender determines at any time that
Borrower is not complying or implementing the Plan, or both, said non-
implementation or non-compliance or both shall constitute a default hereunder
and shall entitle Lender to exercise any and all remedies provided in the Loan
Documents or otherwise permitted by law.
18. FLORIDA CONSTRUCTION CONTRACT PROMPT PAYMENT LAW. In
consideration of the making of the Loan by the Lender, Borrower does hereby
agree to indemnify and hold the Lender harmless from any and all losses,
claims, and damages, including interest, and attorneys fees, which the Lender
may suffer by virtue of the Lender having failed to comply with any of the
provisions of the Florida Construction Contract Prompt Payment Law or Florida
Statutes section 713.347. Notwithstanding the matters set forth herein, this
indemnification provision shall not be binding if Lender shall not comply with
the terms and conditions of Article III.
ARTICLE VI
COVENANTS OF BORROWER
Borrower hereby covenants and agrees with Lender as follows:
1. LOAN AGREEMENT. To duly and punctually perform, observe and
comply with all of the terms, provisions, conditions, covenants and agreements
on its part to be performed, observed and complied with hereunder and under
the Loan Documents and any other documents and instruments delivered to Lender
in connection herewith. Borrower will not suffer or permit any default or
Event of Default, as hereinafter defined to exist hereunder or thereunder.
Borrower will promptly give notice in writing to Lender (a) of the occurrence
of any material litigation or proceeding affecting Borrower and whether or not
Borrower's liability, if any, is covered by insurance, and (b) of any dispute
between Borrower and any governmental or regulatory body or any other party,
which dispute may materially interfere with Borrower's normal operations or
with construction of the Phase I Building.
2. AGREEMENT OF ARCHITECT. To promptly furnish Lender with an
agreement by Architect, in form and content acceptable to Lender, that, in the
Event of Default by Borrower, as hereinafter defined or under the terms of any
of the Loan Documents, Architect will, at Lender's request: (a) continue
performance pursuant to its agreement with Borrower until completion of
construction of the Phase I Building, provided that Lender shall compensate
Architect from the date of Lender's assuming such agreement in accordance with
said agreement for all such services rendered, and (b) permit Lender to use
the Plans and Specifications at no cost to Lender.
3. CONSTRUCTION SUBCONTRACTS.
(a) To permit no material default under the terms of the
Major Subcontracts;
(b) To waive none of Subcontractors' material obligations
thereunder;
(c) To do no act which would relieve Subcontractors of
their respective obligations to construct the Phase I Building according to
the Plans and Specifications; and
(d) To make no amendments, other than Approved Change
Orders as Lender may approve in writing to any of the Major Subcontracts,
without Lender's prior written consent.
4. INSURANCE. Borrower will procure for, deliver copies of and
original certificates of and maintain for the benefit of Lender during the
life of the Mortgage, insurance policies in such amounts as Lender shall
require, including a minimum of $24,000,000.00/$24,000,000.00 liability
insurance, and insurance insuring the Property against fire, builder's risk in
the amount of $17,200,000.00 relating to the construction of the Phase I
Building, hazard, extended coverage and such other insurable hazards,
casualties and contingencies as Lender may require. The form of such policies
and the companies issuing them shall be acceptable to Lender. All policies
shall contain a standard, non-contributory mortgagee endorsement making losses
payable to Lender, its successors and/or assigns, as mortgagee and loss payee.
All policies shall include a provision for a minimum thirty (30) day advance
notice to Lender of any intended policy cancellation or modification, with the
exception of nonpayment of premium, which each insurance company shall be
unconditionally obligated to notify the Lender in writing of at least ten (10)
days before cancellation or modification. Borrower shall not take out
separate insurance concurrent in form or contributing in the event of loss
with that required to be maintained hereunder, unless Lender is included
thereon under a standard, non-contributory mortgagee endorsement making losses
payable to Lender. Borrower shall immediately notify Lender whenever any such
separate insurance is taken out and shall promptly deliver to Lender the
policy or policies of such insurance. The said property insurance so obtained
shall include "all risks", builder's risk, on a nonreporting 100% completed
value form, on the Phase I Building, buildings, machinery, equipment,
materials, supplies and temporary structures and all other property of any
nature used for the construction of the buildings, with an endorsement which
includes as a loss payable any additional interest expense caused by a peril
insured against under the policy. This coverage for interest expense is
limited to the period of time from the date of physical damage until such time
as will reasonably elapse, in the exercise of due diligence, to the repair of
the damage to its prior state. The amount of coverage of the policy of
insurance shall be the full replacement cost, including underground work, but
not less than Seventeen Million Two Hundred Thousand and 00/100 Dollars
($17,200,000.00) for the Phase I Building. Applicable notice to be given to
Lender at the following address: Barnett Bank of Broward County, N.A. -
Document Services, Post Office Box 40329, Jacksonville, Florida 32203-0329.
The Borrower shall submit to Lender evidence satisfactory to
Lender as to whether or not the Property or any part thereof is located within
an area identified pursuant to the Flood Disaster Protection Act of 1973 as
being in a flood hazard area. If the Property is located in a flood hazard
area, flood insurance shall be obtained for the maximum amount of coverage
available through the federal flood insurance program for the improvements
located on the Property from time to time or 100% of the highest insurance
value of the improvements on a replacement cost basis, whichever is less. The
National Flood Insurance Program flood policy shall cover the same parties
covered under the builder's risk policy, other insurance policies with
coverage for flood, collapse, rain damage and such other usual coverage as may
be obtained thereunder, and such policy will be written with an insurance
company and with cancellation provisions as hereinabove provided. The
insurance coverage, without limiting the same by this description, shall
extend to any loss occasioned by fire, windstorm, other perils of extended
coverage, vandalism, malicious mischief, theft, mysterious disappearance and
such other coverage as is a normal incidence of such insurance. The foregoing
insurance shall specifically cover necessary architect and engineering fees
necessary to repair or replace any insured property and shall also cover
debris removal. Further, the insurance shall at least permit waiver of
subrogation so any release of liability entered into prior to any loss will
not affect the validity of the coverage otherwise provided.
At least thirty (30) days prior to the expiration date of all such
policies, Borrower shall deliver to Lender proof of renewals of all required
policies in a form satisfactory to Lender. Borrower shall deliver to Lender
receipts evidencing the payment of all such insurance policies and renewals on
an annual basis. As further security for the indebtedness secured hereby, the
delivery of the insurance policies to Lender shall constitute an assignment of
all unearned premiums. In the event of the foreclosure of the Mortgage or any
other transfer of title to the Property in extinguishment of the indebtedness
secured hereby, all right, title and interest of Borrower in and to all
insurance policies then in force shall pass to the purchaser or grantee.
Provided, there is no Event of Default which has occurred and is
continuing, Borrower shall be entitled to negotiate for the adjustment or
compromise of any loss under any insurance policy, provided however, Borrower
shall not conclude said negotiations in a final settlement without Lender's
prior written consent, which consent shall be not be arbitrarily withheld by
Lender. Further, Lender shall permit Borrower to utilize the insurance
proceeds to rebuild and/or repair the Phase I Building, or both provided that
(i) there is no Event of Default which has occurred and is continuing; (ii)
Borrower's Inspecting Engineer has determined that the rebuilding and/or
repair of the Phase I Building or both shall be completed prior to the
Maturity Date of the Loan, as set forth in the Note or any extended Maturity
Date of the Note as also set forth in the Note; (iii) the insurance proceeds
received by Borrower are sufficient in Lender's opinion, which shall not be
arbitrary to rebuild and/or repair the Phase I Building, or both and if not
sufficient Borrower has deposited with Lender additional funds to build and/or
repair the Phase I Building, or both; and (iv) Lender shall hold and disburse
the insurance proceeds, pursuant to the terms of this Agreement, as the Phase
I Building are rebuilt and/or repaired.
Upon the occurrence and during the continuance of an Event of
Default, Lender is hereby authorized and empowered at its option to adjust or
compromise any loss under any insurance policy. Each insurance company is
hereby authorized and directed to make payment for all such losses directly to
Lender instead of to Borrower and Lender jointly. After deducting from the
insurance proceeds any reasonable third-party out-of-pocket expense incurred
by it in the collection or handling of said funds, Lender shall apply the net
proceeds, at its sole option, to the reduction of the sums secured hereby or
toward the repair and restoration of the Phase I Building, or for any other
purpose or object satisfactory to Lender without affecting the lien of the
Mortgage for the full amount secured hereby before such payment took place.
Lender shall not be held responsible for any failure to collect any insurance
proceeds due under the terms of any policy, regardless of the cause of such
failure.
If required by Lender upon an Event of Default, Borrower will pay
to Lender on the first (1st) day of each month, together with and in addition
to the regular installment of interest and principal and until the Note is
fully paid, an amount equal to one-twelfth (1/12) of the yearly premiums for
insurance, to enable Lender to pay such insurance premiums when due. The
Borrower shall promptly furnish Lender with the insurance premium statements.
Such added payments shall not be nor be deemed to be trust funds, but may be
commingled with the general funds of Lender and Lender shall not pay interest
on them. At the option of Lender, such added payments may be carried as a
debit item on Lender's books and accounts. Upon demand of Lender, Borrower
agrees to deliver to Lender such additional sums as are necessary to make up
any deficiencies in the amounts necessary to enable Lender to pay such
insurance premiums. Lender shall have no responsibility for payment of any
premium for insurance hereunder, except to the extent that funds are deposited
by Borrower with Lender hereunder. Upon an Event of Default by Borrower in
the performance of any of the terms, covenants and conditions in the Mortgage,
this Loan Agreement or the Note, Lender may, at Lender's option, apply any
amount then held by Lender under this paragraph to the reduction of the
indebtedness secured in the Mortgage.
5. COLLECTION OF INSURANCE PROCEEDS. To cooperate with Lender
in obtaining for Lender the benefits of any insurance or other proceeds
lawfully or equitably payable to Borrower or Lender in connection with the
transactions contemplated hereby and in paying any indebtedness or obligation
of Borrower to Lender incurred hereunder (including the payment by Borrower of
the expense of an independent appraisal on behalf of Lender in case of a fire
or other casualty affecting the Property).
6. AD VALOREM TAX AND COMMON AREA EXPENSES. Subject to the
provisions in the Mortgage, Borrower shall submit proof, on an annual basis,
that all ad valorem real property taxes have been timely paid and that common
area expenses required to be paid by the Borrower have been timely paid.
7. APPLICATION OF LOAN PROCEEDS. To use the proceeds of the
Loan solely for the purpose set forth herein and in no event to use any of the
Loan proceeds for any other purpose whatsoever. Borrower shall make only such
payments to the Contractor on account of other contracts or for other work
which may entitle the person performing such work to lien rights in the
Property as are proper payments under the Florida Construction Lien Law.
8. EXPENSES. To pay any and all third-party reasonable out-of-
pocket costs of closing the Loan, and any and all third-party reasonable out-
of-pocket expenses costs incurred during the term of the Loan any and all
third-party reasonable out-of-pocket expenses of Lender with respect thereto,
including but not limited to fees of Lender's Inspector, the disbursing agent,
attorneys' fees and costs (including attorneys' fees and costs incurred by
Lender subsequent to the closing of the Loan in connection with the
disbursement, collection, restructure, amendment or transfer of the Loan),
advances, recording expenses, surveys, title insurance premiums, intangible
taxes, documentary stamps, sales taxes, surtax and other revenue fees, escrow
fees, Architect's and Engineer's costs and inspection fees, expenses of
foreclosure (including reasonable attorneys' fees and third-party reasonable
out-of-pocket costs including reasonable attorneys' fees relating to any
bankruptcy proceedings) and similar items, and to allow all closing papers,
Loan Documents and other legal matters to be subject to the approval of
Lender's counsel. Under no circumstances will Lender pay to any third party
any mortgage brokerage or other fees incurred in connection with this Loan and
Borrower covenants and agrees to indemnify Lender and hold Lender harmless
from any and all such claims for fees or commissions by third parties.
Further, Borrower agrees to pay all of Lender's third-party reasonable out-of-
pocket costs and reasonable attorneys' fees, including all appellate
litigation, involving any of such claims.
9. BORROWER'S EQUITY REQUIREMENT. Borrower acknowledges that
the costs for the items described in the Loan Budget may exceed the portion of
the Loan proceeds allocated for the items also described in the Loan Budget.
Borrower acknowledges and agrees that Borrower has sufficient liquid capital
to pay all costs which exceed the amount of the Loan proceeds allocated for
the payment of the items set forth in the Loan Budget or has access to
sufficient liquid capital, which access can be affirmatively demonstrated to
Lender by Borrower. If Borrower does not have sufficient capital in an amount
satisfactory to Lender or does not have access to sufficient liquid capital
(at any time during the terms of the Loan) to pay all costs which exceed the
amount of the Loan proceeds allocated for the payment of any items set forth
in the Loan Budget, same will be a default.
10. COMMENCEMENT Borrower shall commence construction of Phase
I prior to or within thirty (30) days after the date of closing of the Loan.
Good workmanship and quality materials shall be utilized. Quality of
construction is of the essence and each construction draw shall be subject to
satisfactory quality and completion of work in place. Borrower shall supply
such sums of money above the Loan Budget and perform such duties as may be
necessary to complete the construction of the Phase I Building for which
funding is requested pursuant to the Plans and Specifications and in full
compliance with all terms and conditions of the Loan Documents, all of which
shall be accomplished within the Term of the Construction Period as defined
herein, and without liens, claims or assessments (actual or contingent)
asserted against the Property for any material, labor or other items furnished
in connection therewith, and all in full compliance with the Florida
Construction Lien Law, and further in compliance with all construction, use,
building, zoning and other similar requirements of any pertinent governmental
authority. Borrower will provide to Lender evidence of satisfactory
compliance with all of such requirements upon request therefor by Lender. The
construction and development of the improvements shall be inspected by Lender.
"Substantially Completed" shall mean that Phase I has been completed in a
sufficient manner to obtain all requisite Certificates of Occupancy and the
following work as to Phase I shall be completed: grading, landscaping,
adequate sewer, water, electrical, gas, telephone and other utility
facilities, completed streets, sidewalks, drainage and curbs, both on-site and
off-site, public and private.
11. ACCESS. Except for driveways and roads to be constructed on
or adjacent to the Property, the rights-of-way for all roads necessary for the
full utilization of the Project for its intended purposes, have either been
acquired by the appropriate governmental authority or have been dedicated to
public use and accepted by such governmental authority, and all such roads
shall have been completed, or all necessary steps shall have been taken by
Borrower and such governmental authority to assure the complete construction
and installation thereof prior to the date upon which access to the Property
via such roads will be necessary. All curb cuts and traffic signals shown on
the Plans and Specifications are existing or have been fully approved by all
necessary governmental authorities.
12. RIGHT OF LENDER TO INSPECT PROPERTY AND REVIEW PLANS. To
permit Lender and its representatives and agents and Lender's Inspector upon
prior notification to Borrower to enter upon the Property and to inspect the
Project and all materials to be used in the construction thereof, provided
said inspection shall not interfere with construction or marketing, and to
cooperate and cause Contractor to cooperate with Lender and its
representatives and agents and Lender's Inspector during such inspections
(including making available to Lender working copies of the Plans and
Specifications together with all related supplementary materials); provided,
however, that this provision shall not be deemed to impose upon Lender any
obligation to undertake such inspections. Lender shall designate a
Construction Inspector to perform various services on behalf of Lender. The
costs of these services shall be charged to and shall be paid by Borrower.
The services performed by Lender's Inspector include but are not limited to
review of the Plans and Specifications, review of any and all construction
contracts, review of any and all other documents in the possession or control
of Borrower or any general contractor relating to the construction of the
Project and all proposed changes to them, inspection of construction work for
conformity with the approved Plans and Specifications and approval of requests
for Loan disbursements. Borrower's Architect shall perform those services, if
any, as described in the Architect's contract.
13. CORRECTION OF DEFECTS. To promptly correct any defect in
the Project or any departure from the Plans and Specifications not permitted
herein as Approved Change Orders and which has not been approved previously by
Lender. The advance of any Loan proceeds shall not constitute a waiver of
Lender's right to require compliance with this covenant.
14. APPROVAL OF CHANGE ORDERS. To permit, during the
construction of the Project: (i) no individual deviation from the Plans and
Specifications which exceeds One Hundred Thousand and 00/100 Dollars
($100,000.00); (ii) no multiple deviations which in the aggregate, exceed
Three Hundred Fifty Thousand and 00/100 Dollars ($350,000.00); and (iii) no
deviation from the Plans and Specifications which constitute a structural
change, notwithstanding the cost of the structural change (collectively
"Approved Change Order"), without Lender's prior written approval. Regardless
of amount, Borrower shall submit all change orders to Lender within five (5)
days of the submission thereof to the Contractor. All change orders must be
fully executed prior to submission. Lender agrees to approve or disapprove
all fully executed and complete change orders no later than ten (10) business
days after submission of same to Lender, provided said change orders are
provided to Lender and Lender's inspector at the following addresses: Barnett
Bank of Broward County, N.A., One East Broward Boulevard, Fourth Floor, Fort
Lauderdale, Florida 33301, Attention: Commercial Real Estate Lending
Department and Construction Loan Disbursement Department and to Lender's
Inspector at 652 South Military Trail, Deerfield Beach, Florida 33442.
15. BOOKS AND RECORDS. To keep and maintain proper and accurate
books, records and accounts reflecting all items of income and expense of
Borrower in connection with the Property and the construction thereon; and
upon the request of Lender, to make such books, records and accounts available
to Lender three business days after Lender's request for inspection or
independent audit. Such inspection shall take place in Borrower's offices
during normal business hours.
16. NOTIFICATION OF CLAIMS BY SUBCONTRACTORS AND MATERIALMEN.
To advise Lender promptly and in writing if Borrower receives any Notice to
Owner from any laborer, subcontractor or materialman in connection with any
labor or materials furnished in the construction of the Project.
17. MONTHLY REPORTS. To submit to Lender monthly reports
indicating the sales status of the Phase I Building along with a copy of all
Sold Unit Contracts within fifteen (15) days of the expiration of the
Rescission Period for each Sold Unit Contract. To notify Lender of all Sold
Unit Contracts which are in default or which have been cancelled by the third-
party end purchaser no later than five (5) business days after any Sold Unit
Contract is in default or has been cancelled by a third-party end purchaser.
18. FINANCIAL STATEMENTS. The Borrower shall annually submit to
Lender annual financial statements certified to Lender or on a Lender approved
form, at Borrower's option, in accordance with generally-accepted accounting
principles, with respect to the Borrower and with respect to Guarantor
financial statements as set forth above, and such financial statements shall
be satisfactory to Lender. Borrower shall also submit for Guarantor (i) a
quarterly 10-Q Report within ninety-five (95) days from the end of each
quarter; and (ii) an annual 10-K Report within ninety-five (95) days from the
end of each calendar year. These conditions shall remain in effect throughout
the term of this Loan. The financial statements included in the 10-K Reports
shall be audited by a certified public accountant.
19. UPDATED OPINION OF COUNSEL. To submit to Lender an opinion
of counsel licensed in the State of Florida and the state of incorporation or
formation of any Borrower or Guarantor entity organized in a state other than
Florida satisfactory to Lender covering such further matters regarding Phase I
as Lender may reasonably require from time to time.
20. ADDITIONAL DOCUMENTS. To perform hereunder as follows:
(a) CONSTRUCTION. To furnish to Lender all instruments,
documents, initial surveys, footing or foundation surveys (following the
pouring of the final slab), certificates, plans and specifications,
appraisals, title insurance and other insurance, reports and agreements and
upon request (i) financial statements of Borrower, and Guarantor; (ii) other
or further information as to the financial condition of Borrower and
Guarantor; (iii) the names of all persons with whom Borrower has contracted
for major contracts for the construction of the Phase I Building or the
furnishing of labor or materials therefor (for the purposes hereof, a major
subcontract shall be any contract in excess of $25,000.00 designated by Lender
to be a Major Subcontract); (iv) copies and/or lists of all paid and/or unpaid
bills for labor and materials with respect to the construction of the Unit or
Units under construction and funded by Lender at the time of Lender's request;
and (v) budgets of Borrower and revisions thereof showing the estimated cost
of construction of the Phase I Building and funds required at any given time
to complete and pay for such construction, and each and every other document
and instrument required to be furnished by the terms of the Commitment.
(b) PRESERVATION OF SECURITY. To sign and deliver to
Lender such documents, instruments, assignments and other writings, and to do
such other acts necessary or desirable to preserve and protect the collateral
at any time securing or intended to secure the Note, as Lender may require.
(c) THIS LOAN AGREEMENT. To do and execute all and such
further lawful and reasonable acts, conveyances and assurances in the law for
the better and more effective carrying out of the intents and purposes of this
Loan Agreement, as Lender shall reasonably require from time to time.
21. FURTHER ENCUMBRANCES. There shall be no secondary or
further financing of the personal or real property now or hereafter located on
the Property with the exception of leveraged leasing of personal property
related to the Project, without Lender's prior written consent, which consent
Lender may arbitrarily withhold.
22. LEASES OR SALES CONTRACTS. Borrower shall not enter into
any lease regarding any portion of the Property with the exception of leases
as set forth in paragraph 21 above, without Lender's prior written consent
which consent shall not be arbitrary. Further, Borrower shall not enter into
any sales contract regarding any portion of the Property, which materially
amends or modifies the form of sales contract approved by Lender without
Lender's prior written consent.
23. MORTGAGEE TITLE INSURANCE. Borrower warrants that there are
no matters pending against Borrower or the project which could result in a
change in the status of the title to the Property in the period of time
between the effective date of the Commitment and the recording of the Mortgage
(the "gap"). Borrower covenants that it shall not commit any act or permit
any act to be committed which might result in a change in the status of the
title to the Property during the gap, and Borrower shall indemnify Lender and
the title insurance agent and the title insurance underwriter from any and all
losses, costs and expenses (including reasonable attorneys' fees and costs)
suffered as a result of a change in the status of the title to the Property
during the gap.
24. WARRANTIES AND REPRESENTATIONS TRUE. Borrower's warranties,
representations and covenants in the Loan Documents shall be true and correct
on and as of the date of each advance with the same effect as if made on such
date.
25. FLORIDA CONSTRUCTION CONTRACT PROMPT PAYMENT LAW.
(a) Borrower shall fully and timely comply with all of the
provisions of the Florida Construction Contract Prompt Payment Law, Chapter
92-286, Laws of Florida, as amended from time to time. Prior to the
commencement of construction, and throughout the term of the construction
period of the Loan, the Borrower shall provide to the Lender, a true, complete
and correct list of all Subcontractors, Major Contract Materialmen, and
suppliers of custom fabricated items which are to be incorporated into the
Phase I Building. The Borrower shall, at all times during the term of the
construction period of the Loan, provide to the Lender, within 10 days of the
Borrower's receipt thereof, copies of all Notices to Owner, Claims of Lien,
and Demands for Sworn Statement of Account, issued by any party, whether
pursuant to the Notice of Commencement or otherwise, in connection with the
Project.
(b) The Borrower and Lender stipulate and agree that for
purposes of section 713.3471(2), none of the construction loan proceeds (as
referred to in the statute) have been designated as "Designated Construction
Loan Proceeds", as defined in and by such statute. In the event that the
stipulation contained in this paragraph is deemed invalid, or unenforceable,
in whole or in part, then, in such event, to the extent of such invalidity or
unenforceability, the Borrower shall be deemed to have not consented to the
disbursement of any reallocated loan proceeds, except where the Lender, prior
to any disbursement not in accordance with the original allocation of loan
proceeds, affirmatively notifies the Borrower in writing that it will avail
itself of a provision in the Mortgage, or this Loan Agreement, permitting such
reallocated disbursement ("Lender's Reallocated Disbursement"). In the event
that the Lender is going to make a Lender's Reallocated Disbursement, the
Borrower agrees that it shall, within 3 business days of a written request by
the Lender, provide to the Lender a written list, certified by an officer or
official of the Borrower having knowledge of the circumstances, and authority
to provide certificates on behalf of the Borrower, containing the name and
address of all contractor(s) (including all parties who may be deemed a
Contractor as a multiple prime contractor, or by virtue of the relationship
between the Borrower and any other party or entity furnishing labor, material
or services to the Project), and all other actual and potential lienors,
including, but not limited to, those who have served a statutory notice to
owner upon the Borrower in order to insure that the Lender will be able to
comply with the requirements of Section 713.3471(2)(b) of the Florida
Statutes.
(c) In the event that the Borrower requests a reallocation
of any portion of the construction loan proceeds in accordance with the
provisions of section 713.3471 of the Florida Statutes, such reallocation
request will be considered in accordance with the terms and conditions of this
Loan Agreement, and the Borrower shall fully and timely comply with all of the
Borrower's obligations under section 713.3471(2)(a) of the Florida Statutes,
including, but not limited to, the providing of all notices required thereby,
and Borrower shall provide to Lender written sworn statements executed by
contractor(s) (as defined above) and all other actual or potential lienors (as
defined above), confirming that the contractor(s) or other lienor or third
party has received the written notice required by section 713.3471(2)(a) of
the Florida Statutes. The Lender shall not be obligated to approve a
reallocation requested by the Borrower, or to disburse funds pursuant to an
approved reallocation request made by the Borrower, until and unless the
Borrower has complied with all of its obligations relating to such
disbursement under the terms and provisions of this Loan Agreement and section
713.3471 of the Florida Statutes. Nothing contained herein shall be deemed to
constitute a waiver by the Lender of any of its rights relating to the
approval of disbursement requests or construction budget or allocations
provided elsewhere in this Loan Agreement.
ARTICLE VII
PHASE II REQUIREMENTS
Borrower and Lender acknowledge and agree that Lender, subject to
the following conditions, and provided there exists no Event of Default or
Defaults, may modify the terms of the Loan and fund the construction of either
(a) a ten story mid-rise building containing 56 luxury condominium units and
related improvements ("Mid-Rise Building") or (b) a 4 story low-rise building
containing 24 luxury condominium units and related improvements ("Low-Rise
Building") ((a) or (b) is also known as "Phase II" or the "Phase II
Building"). The following are the conditions that Borrower or the Arvida
related entity which owns the Property on which the Phase II Building will be
constructed must satisfy prior to Lender agreeing to fund the construction of
Phase II:
1. Borrower shall execute any and all loan documents required by
Lender to modify the Loan and spread the lien of the Mortgage to the property
consisting of the Phase II Building and related improvements ("Phase II
Property"), including but not limited to a Spreader Agreement, spreading the
lien of the Mortgage to the Phase II Property, and Guarantor shall execute any
appropriate documentation required by Lender, in form and substance
satisfactory to the Lender;
2. Borrower shall provide Lender with a copy of the Building Permit
or Permits, as the case may be, for the Phase II improvements.
3. If the Phase II Building shall be a Low-Rise Building, receipt by
Lender and Lender's counsel of proof satisfactory to Lender that Borrower has
pre-sold in the Phase II Building pursuant to Sold Unit Contracts fifteen
(15) Units ("Low-Rise Building Pre-Sale Requirement").
4. If the Phase II Building shall be a Mid-Rise Building, receipt by
Lender and Lender's counsel of proof satisfactory to Lender that Borrower has
pre-sold in the Phase II Building pursuant to Sold Unit Contracts, the greater
of in total dollars: (i) the aggregate dollar value in Gross Sales Proceeds of
34 Sold Units or (ii) $17,600,000.00 in anticipated Net Sales Proceeds
pursuant to Sold Unit Contracts ("Mid-Rise Building Pre-Sale Requirement")
(the Low-Rise Building Pre-Sale Requirement and the Mid-Rise Building Pre-Sale
Requirement are hereinafter collectively referred to as the "Phase II Pre-Sale
Requirement"). In the event Borrower has not fulfilled the Phase II Pre-Sale
Requirement, and Borrower desires to obtain disbursements of Loan funds for
Phase II, and provided Borrower has a total of Sold Unit Contracts at least
equal to 50% of the Units in the Phase II Building, Borrower shall be
permitted to receive fundings pursuant to the Loan for the construction of
Phase II, provided Borrower funds from its own monies prior to the receipt of
any Loan proceeds for Phase II the difference between the total dollar amount
of the Phase II Pre-Sale Requirement and the actual total dollar amount which
will be received by Borrower as Net Sales Proceeds pursuant to Sold Unit
Contracts for the Phase II Building at the time Borrower desires to obtain a
disbursement of Loan funds for Phase II ("Phase II Funding Gap"). As
additional Units are sold in the Phase II Building pursuant to Sold Unit
Contracts, Lender will refund to Borrower from the Loan on a dollar for dollar
basis an amount equal to the Phase II Funding Gap provided that Lender shall
not be required to fund Loan funds in excess of the amounts set forth in the
Loan Budget.
5. Appraisal of the Phase II land establishing a value of the Phase
II land at least equal to the value in the Phase II Budget.
6. Receipt by Lender of proof that eighty-five percent (85%) of the
Units in the Phase I Building are Sold Units or have been sold and closed to
third-party end purchasers.
7. Subcontractor's contracts of major subcontractors ($25,000.00 or
more) for Phase II and the name and address of each subcontractor who will
perform work and supply materials to Phase II.
8. Receipt by Lender and Lender's counsel of a marked-up title
insurance commitment issued pursuant to a title insurance commitment, insuring
Lender's Mortgage as spread to lien the Phase II Property, which marked-up
title insurance commitment must be approved by Lender and Lender's Counsel.
9. Receipt and approval by Lender of all borings and soil compaction
reports and analysis relating to Phase II.
10. Receipt and approval by Lender of reports and certificates by
Borrower's Architect and/or Engineer, or both regarding fill, foundation,
design, settlement, RODE and such other reports and certifications as required
by Lender or Lender's Construction Inspector, or both relating to Phase II.
11. Receipt and approval by Lender of construction and non-
construction cost breakdowns and use of proceeds relating to Phase
II on Lender-approved forms.
12. Receipt and approval by Lender of a construction schedule relating
to Phase II.
13. Receipt and approval by Lender of two (2) copies of the final
revised site plans and Plans and Specifications for Phase II.
14. Receipt and approval by Lender of proof of insurance including,
liability insurance, and insurance against fire, builder's risk, extended
coverage, flood and such other insurable hazards, casualties and contingencies
as Lender may require for Phase I and Phase II.
15. Receipt and approval by Lender of three (3) original boundary
surveys of the property to be encumbered by the lien of the Mortgage, current
within 90 days of the closing, in form and content satisfactory to Lender, in
Lender's sole discretion.
16. Receipt and approval by Lender of written verification addressed
to Lender from all appropriate governmental authorities, together with other
evidence satisfactory to the Lender in Lender's sole discretion, that Phase II
is zoned to permit the Phase II Building and related improvements; that there
are in full force and effect, without conditions, valid approvals, variances
and building permits, including approval of plat, density and site plan
approval, issued by all governmental authorities having jurisdiction thereof;
and designating the length of time of the validity of all such approvals,
variances and permits.
17. Receipt and approval by Lender of letters from providers of
utilities addressed to Lender confirming the sufficient capacity of sewer,
water, electric, telephone and other pertinent utilities to satisfactorily
service Phase II and that such utilities are available and will be furnished
to Phase II.
18. Receipt and approval by Lender of letters from the city and county
where Phase II is located addressed to Lender confirming that there are no
moratoria currently in effect or proposed which would prohibit construction or
use of any portion of the Phase II.
19. Receipt and approval by Lender of certificate of the Borrower and
Guarantor in form and content satisfactory to Lender regarding authority of
the Borrower and Guarantor to enter into the modification of the Loan and/or
execute the loan modification documents, together with fully executed copy of
the limited partnership agreement and all amendments thereto, a certificate of
limited partnership and certificates of good standing from the Secretary of
State of Florida and the state of incorporation of the Borrower and Guarantor
of the limited partnership. Borrower shall also provide as to any corporate
general partner, certified copies of the articles of incorporation and all
amendments thereto and certificates of good standing issued by both the
Secretary of State, State of Florida and the state of incorporation of the
corporation and certified copies of the bylaws and all amendments thereto.
20. Receipt and approval by Lender of evidence of payment of any
outstanding liens, taxes, or other obligations or encumbrances against Phase
II and any portion of the Property or the Phase I Building, which is still
encumbered by the Mortgage and confirming that there are no outstanding
special assessment relating to Phase II or any portion of the Property or the
Phase I Building still encumbered by the Mortgage remaining unpaid.
21. Borrower shall deliver to the Lender an Opinion Letter
satisfactory to Lender and executed by Florida counsel for the Borrower and as
necessary counsel in the state of incorporation or formation of any Borrower
or Guarantor entity organized in a state other than Florida.
22. Estoppel letters in form satisfactory to the Lender from any
existing mortgagees or lienors regarding the amount necessary to pay off and
satisfy any existing mortgages or liens, including the per diem amount and the
amount of any required prepayment penalty.
23. Receipt and approval by Lender of insured Closing Letter from
title insurance underwriter.
24. Receipt and approval by Lender of a UCC-11 Search.
25. Receipt and approval by Lender of certification of costs of
construction of Phase II by Lender's Construction Inspector, at Borrower's
expense.
26. Receipt and approval by Lender of Certificate of Architect or
Engineer preparing the Plans and Specifications, satisfactory to Lender. The
form of the certificate shall be furnished by Lender.
27. Receipt and approval by Lender of Evidence that the Architect,
Engineer and General Contractor for Phase II are licensed to do business in
the State of Florida and in the county where the Property is located.
28. Receipt and approval by Lender of Architect's contract, as to
Phase II, in form satisfactory to Lender.
29. Receipt and approval by Lender of Engineer's contract, as to Phase
II, in form satisfactory to Lender.
30. Receipt and approval by Lender of fixed cost general contractor's
contract as to Phase II, in form satisfactory to Lender.
31. Collateral assignment by Borrower of all of its rights, title, and
interest in and to all plans, specifications and drawings for Phase II and all
shop drawings incident thereto.
32. Receipt and approval by Lender of assents by the Architect,
Engineer and General Contractor which assents include upon default by
Borrower, an assignment to Lender of all of Borrower's rights, title and
interest in and to all plans, specifications and drawings for Phase II and all
shop drawings incident thereto.
33. Receipt and approval by Lender of evidence satisfactory to Lender
in its sole discretion, that the intended construction of the Phase II and
their use comply fully with (and no notices of violation have been received in
connection with) governmental or regulatory rules, laws, ordinances, statutes,
codes and requirements applicable to the Property, including, without
limitation, the Fair Housing Act of 1968 (as amended) and the Americans with
Disabilities Act of 1990, and any amendments thereto.
34. Borrower shall pay all reasonable third-party out-of-pocket
expenses, including reasonable attorneys' fees and costs of Lender's Counsel
relating to the Phase II Loan.
35. Recording as soon as practicable after closing of the Phase II
Loan of all documents as required by Lender's Counsel relating to Phase II.
36. Evidence satisfactory to Lender and Lender's Counsel of the
fulfillment of any other condition or requirement relating to Phase II.
ARTICLE VIII
DEFAULTS
Upon the occurrence of any one or more of the following circumstances
and to the extent applicable after the passing of time as set forth herein and
pursuant to Paragraph 18 hereof ("Event(s) of Default"), Lender shall, at its
option, be entitled, in addition to and not in lieu of the remedies provided
for in the Note, Mortgage, or other Loan Documents, to proceed to exercise any
remedy described herein:
1. DEFAULT UNDER PROMISSORY NOTE. Failure by Borrower to pay,
as and when due and payable but no later than fifteen days from the due date,
any scheduled installment of interest, principal or any other payment required
to be paid by this Loan Agreement, the Mortgage, the Note or any other Loan
Documents. Notwithstanding anything to the contrary set forth herein, Lender
shall provide Borrower with written notice prior to the first of each month of
the interest installment to be paid for each month. If Borrower does not
receive written notice of any monthly interest installment from Lender,
Borrower shall provide written notice to Lender no later than the first day of
the month for which the interest installment is due, of Lender's failure to
provide Borrower with a written notice of the interest installment, and said
interest installment shall be due and payable no later than fifteen (15) days
from receipt by Borrower of a written notice of the monthly interest
installment. Further, any payment required to be paid by this Loan Agreement,
the Mortgage, the Note or any Loan Documents, with the exception of interest
and principal, shall be due and payable the later of: (a) fifteen (15) days
from receipt by Borrower from Lender of written notice of the required payment
and (b) the fifteenth day of each month during the term of the Loan.
2. DEFAULT UNDER LOAN DOCUMENTS. Failure by Borrower or the
Guarantor to duly observe any other covenant, condition or agreement of this
Loan Agreement, the Mortgage, the Note, the Commitment, or any Loan Document
or any other security instrument given hereunder after the expiration of any
applicable grace period; or
3. DEFAULT OF OTHER OBLIGATIONS. Failure by Borrower or
Guarantor to pay, as and when due and payable, all the indebtedness due to
Lender, or to duly observe all of the covenants, conditions and agreements now
or hereafter existing between Borrower, Guarantor, and Lender pursuant to the
terms and conditions of any other obligation or indebtedness; or
4. BREACH OF WARRANTY. Any warranty made or agreed to be made
herein or in any related Loan Document heretofore, concurrently or hereafter
executed shall be breached by Borrower or Guarantor or shall prove to be false
or misleading; or
5. FILING OF LIENS AGAINST THE PROPERTY. Any lien for labor,
material, taxes or otherwise shall be filed against the Property or otherwise
incurred and not be removed within fifteen (15) days from the date of filing
any such lien; or
6. LEVY UPON THE PROPERTY. A levy be made under any process
on, or a receiver be appointed for the Property or any other property of
Borrower; or
7. BANKRUPTCY OR INSOLVENCY OF BORROWER.
(a) The filing by Borrower, Guarantor or any of Borrower's
or Guarantor's general partners of a voluntary petition in bankruptcy for
adjudication as a bankrupt or insolvent, or the filing by Borrower, Guarantor
or any of Borrower's or Guarantor's general partners of any petition or answer
seeking or acquiescing in any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief for itself under any
present or future federal, state or other statute, law or regulation relating
to bankruptcy, insolvency or other relief for debtors, or Borrower, Guarantor
or any of Borrower's or Guarantor's general partners seeking or consenting to
or acquiescing in the appointment of any trustee, receiver or liquidator of
Borrower, Guarantor or any of Borrower's or Guarantor's general partners or of
all or any substantial part of the Property or of any or all of the rents,
revenues, issues, earnings, profits or income thereof, or the making of any
general assignment for the benefit of creditors, or specific written admission
by Borrower, Guarantor or any of Borrower's or Guarantor's general partners of
its inability to pay its debts generally as they become due; or
(b) The filing of an involuntary petition against
Borrower, Guarantor or any of Borrower's or Guarantor's general partners
seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future
federal, state or other statute, law or regulation relating to bankruptcy,
insolvency or other relief for debtors, or the appointment of any trustee,
receiver or liquidator of Borrower or Guarantor or any of Borrower's or
Guarantor's general partners or of all or any substantial part of the Property
or of any or all of the rents, revenues, issues, earnings, profits or income
thereof without Borrower's consent or acquiescence, which shall not be
discharged by the appropriate court of law within sixty (60) days of the
above-described filing; or
8. ASSIGNMENT FOR THE BENEFIT OF CREDITORS. Borrower,
Guarantor or any of Borrower's or Guarantor's general partners shall make a
general assignment for the benefit of creditors; or
9. TRANSFER OF PROPERTY. Borrower shall sell, transfer,
assign, convey, lease, enter into any management contract, which form of
management contract has not been pre-approved by Lender, or further encumber
all or any part of its interest in any property constituting security for this
Loan without the express written consent of Lender, except in the Ordinary
Course of Business.
Notwithstanding anything set forth herein to the contrary,
Borrower may assign and transfer its rights and obligations, upon which
assignment, Borrower will have no further liability or responsibility, related
to or arising out of this Agreement to any corporation, partnership or other
entity owned or controlled by, or under common control with, Borrower or JMB
Realty Corporation ("JMB"), a Delaware corporation (any of the foregoing, a
"JMB Affiliate"). For purposes of this paragraph, control of a specified
person or entity (including the correlative terms "controlled by" and "under
common control with") means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of the
person or entity, whether through ownership of voting securities, by contract
or otherwise. For purposes of applying this definition, (i) the managing
partner of a general or limited partnership will be deemed to be in control
thereof, provided such managing partner possesses the power to direct or cause
the direction of the management and policies of the partnership, and (ii) an
entity will be deemed controlled by JMB if a majority of the trustees,
directors or persons in similar capacities which direct or cause the direction
of the management and policies of such entity are at all times officers,
directors, shareholders, employees or individuals acting in similar capacities
of JMB or an entity controlled by or under the common control with JMB;or
10. ABANDONMENT OR CESSATION OF CONSTRUCTION. Construction of
Phase I Building shall be abandoned or shall cease for any reason and not be
resumed within fifteen (15) business days thereafter unless such cessation is
due to any reason beyond Borrower's control, including but not limited to
strike or unavailability of materials unless such events of force majeure
shall delay construction so long that the Phase I Building reasonably cannot
be completed within the time allocated for completion herein; or
11. LIEN AGAINST PROPERTY. Borrower grants any mortgage, lien
or encumbrance upon the Property; or
12. ENCROACHMENTS AND PERMITS. All or any portion of the Phase
I Building which encroach upon any street or road setback or easement or upon
any adjoining property, or violate any ordinance, regulation, rule or
direction of any federal or state agency, or of any governmental or quasi-
governmental authority, or any zoning setback line, or the building permit(s)
shall be revoked or suspended or shall lapse, or if any building or other
permit or license shall be conditional in nature and Borrower shall fail to
punctually satisfy the conditions so as to prevent its invalidity; or
13. UNAUTHORIZED WORK. Borrower shall, without Lender's prior
written consent, undertake or contract for work on the Property outside of or
beyond the scope of the Plans and Specifications which shall not constitute an
Approved Change Order; or
14. BREACH. A violation or breach shall occur in any agreement,
covenant or restriction affecting title to the Property, including but not
limited to matters appearing as permitted exceptions in the Title Policy; or
15. FILING OF NOTICE. The filing for record by Borrower or
Guarantor or any of Borrower's general partners of a notice limiting the
maximum amount which may be secured by the Mortgage pursuant to Section
697.04(1)(b) of the Florida Statutes (1991); or
16. BORROWER'S GENERAL PARTNERS. The substitution or removal of
any of Borrower's general partners or the general partners of any of
Borrower's general partners which are partnerships without Lender's prior
written consent or the amendment of Borrower's Limited Partnership Agreement
without Lender's prior written consent. Notwithstanding anything set forth
above, Borrower and/or Borrower's general partner may assign and transfer its
rights and obligations (upon which assignment Borrower will have no further
liability or responsibility) related to or arising out of this Agreement to
any corporation, partnership or other entity owned or controlled by, or under
common control with, Borrower or JMB; or
17. TRANSFER BY GUARANTOR. Guarantor shall transfer any assets
to Arvida/JMB Partners, L.P.-II without the prior written consent of Lender in
Lender's sole and absolute discretion or Arvida/JMB Partners, L.P.-II shall
transfer any assets to Guarantor without the prior written, consent of Lender
in Lender's sole and absolute discretion. Allocation of operational and
managerial expenses between Guarantor and Arvida/JMB Partners, L.P.-II shall
not be deemed a transfer of assets.
18. NON-MONETARY DEFAULT PERIOD. Notwithstanding any provision
to the contrary contained herein no non-monetary Event of Default shall be
deemed to have occurred until Lender has given Borrower notice of such non-
monetary Event of Default, and Borrower has not cured said non-monetary Event
of Default within thirty (30) days thereafter. Notwithstanding the matters
set forth above if during the above-described grace period, Borrower shall be
diligently pursuing curing any non-monetary Event of Default including but not
limited to taking all actions necessary to cure said non-monetary Event of
Default in a timely manner and notifying Lender of said actions, then Lender
shall extend the non-monetary grace period for an additional fifteen (15)
days, provided if Lender shall determine in its sole discretion at any time
during the extended grace period that Borrower is no longer acting diligently
to cure the non-monetary Event of Default, the extended grace period shall be
terminated upon Lender's providing Borrower with notice of same. Further, if
Lender shall determine that Borrower shall be diligently pursuing curing the
non-monetary default, Lender shall, in Lender's sole discretion, allow
Borrower additional time to cure the non-monetary Event of Default, which
additional time shall be determined in Lender's sole discretion and which
additional time shall be terminated upon Lender providing Borrower of notice
of same.
ARTICLE IX
REMEDIES OF LENDER
Upon the occurrence of any one or more of the circumstances set out as
an Event of Default herein, Lender shall, at its option, be entitled, in
addition to and not in lieu of the remedies provided for in the Note, Mortgage
or other related Loan Documents, to proceed to exercise any of the following
remedies:
1. DEFAULT CONSTITUTES DEFAULT UNDER LOAN DOCUMENTS. Borrower
agrees that the occurrence of such Event of Default shall constitute a default
under each of the Loan Documents, thereby entitling Lender (a) to exercise any
of the various remedies therein provided, including the acceleration of the
indebtedness evidenced by the Note and the foreclosure of the Mortgage, and
(b) cumulatively to exercise all other rights, options and privileges provided
by law or in equity.
2. ACCELERATION OF MATURITY.
(a) In the event any payment of the principal sum, or any
installment thereof, or any interest thereon, is not made when payment is due,
after expiration of any applicable grace period the Loan may be declared in
default and the entire amount of the Note or so much as may have been
advanced, including the principal balance then outstanding, together with all
interest accrued thereon, shall be accelerated and shall become immediately
due and payable, at the option of Lender and without notice (the Borrower
hereby expressly waives notice of such default), time being of the essence of
this agreement.
(b) In the event Borrower fails to perform any covenant,
condition or agreement required in this Loan Agreement, the Note, Mortgage, or
any other related Loan Documents, after the expiration of any applicable grace
period, Lender may declare the Loan in default and the entire amount of the
Note, including the principal balance then outstanding, together with all
interest accrued thereon, shall be accelerated and declared to be immediately
due and payable at the option of Lender.
3. LENDER'S RIGHT TO ENTER AND TAKE POSSESSION, OPERATE AND
APPLY INCOME.
(a) If an Event of Default shall have occurred and be
continuing, Borrower agrees that upon Lender's demand, Borrower shall
forthwith surrender to Lender the actual possession and, to the extent
permitted by law, Lender itself or by such officers or agents as it may
appoint, may enter and take possession of all the Property and may exclude
Borrower and its agents and employees wholly therefrom and may have joint
access with Borrower to the books, papers and accounts of Borrower.
(b) If Borrower shall for any reason fail to surrender or
deliver all or any portion of the Property to Lender upon demand, Lender may
obtain a judgment or decree conferring on Lender the right to immediate
possession or requiring Borrower to deliver immediate possession of all or
part of the Property to Lender, and Borrower hereby specifically consents to
the entry of such a judgment or decree.
(c) Borrower will pay to Lender upon demand, all
reasonable third-party out-of-pocket expenses of obtaining such judgment or
decree (including all reasonable third-party out-of-pocket expenses incurred
by Lender as a result of any appeal), its attorneys; and all such expenses
shall be secured by the lien of the Mortgage.
(d) Upon every such entering upon or taking of possession,
Lender may hold, store, use, operate, manage and control the Property and
conduct Borrower's business on the Property and, from time to time:
(i) make all maintenance, repairs, renewals,
replacements, additions, betterments and improvements necessary and proper to
the Property and purchase or otherwise acquire additional fixtures, personalty
and other property;
(ii) insure the Property;
(iii) manage and operate the Property and exercise all
of the rights and powers of Borrower (in Lender's name or otherwise) with
respect to the management and operation of the Property;
(iv) enter into any and all agreements with respect
to the exercise by others of any of the powers herein granted to Lender;
(v) to perform or cause to be performed any and all
work and labor necessary to complete the Phase I Building in accordance with
the Plans and Specifications; and
(vi) to disburse that portion of the Loan proceeds
not previously disbursed (including any retainage) to the extent necessary to
complete construction of the Phase I Building in accordance with the Plans and
Specifications, and if such completion requires a larger sum than the
remaining undisbursed portion of the Loan, to disburse such additional funds,
all of which funds so disbursed by Lender shall be deemed to have been
disbursed to Borrower and shall be secured by the Mortgage. For this purpose,
Borrower hereby constitutes and appoints Lender its true and lawful attorney-
in-fact with full power of substitution to complete the construction of Phase
I in Borrower's name and hereby empowers Lender as said attorney-in-fact to
take all actions necessary in connection therewith, including but not limited
to the following: (i) to use any funds of Borrower, including any balance
which may be held in escrow and any funds which may remain unadvanced
hereunder, for the purpose of completing Phase I in the manner called for by
the Plans and Specifications; (ii) to make such additions and changes and
corrections in the Plans and Specifications which shall be necessary or
desirable to complete the Phase I Building in substantially the manner
contemplated by the Plans and Specifications; (iii) to employ such
contractors, subcontractors, agents, architects and engineers and inspectors
as shall be required for said purposes; (iv) to pay, settle or compromise all
existing or future bills and claims which are or may be liens against the
Property or which may be necessary or desirable for the completion of Phase I
or the clearance of title to the Property; (v) to execute all applications and
certificates in Borrower's name which may be required by any construction
contract; and (vi) to do any and every act with respect to the construction of
Phase I which Borrower may do in its own behalf. It is understood and agreed
that this power of attorney shall be deemed to be a power coupled with an
interest which cannot be revoked by death or otherwise. Said attorney-in-fact
shall also have power to prosecute and defend all actions or proceedings in
connection with the construction of Phase I and to take such action and
require such performance as it deems necessary. In accordance therewith,
Borrower hereby assigns and quitclaims to Lender all sums to be advanced
hereunder, including retainage and any sums in escrow, conditioned upon the
use of said sums, if any, for the completion of Phase I.
all as Lender may, from time to time, determine to be to its best advantage;
and Lender may collect and receive all the income, revenues, rents, issues and
profits of the same, including those past due as well as those accruing
thereafter, and after deducting:
(aa) All expenses of taking, holding, managing
and operating the Property;
(bb) The cost of all such maintenance, repairs,
renewals, replacements, additions, betterments, improvements, purchases and
acquisitions;
(cc) The cost of such insurance;
(dd) Such taxes, assessments and other charges
prior to the lien of the Mortgage as Lender may determine to pay;
(ee) Other proper charges upon the Property or
any part thereof; and
(ff) The reasonable compensation, expenses and
disbursements of the attorneys and agents of Lender, including attorneys' fees
and costs for any appeal.
Lender shall apply the remainder of the sums received by Lender, first to the
payment of accrued interest and then to the payment of principal and all other
sums or indebtedness that may be due hereunder.
(e) Whenever all interest, principal installments and
other amounts due under the terms of the Note and Mortgage shall have been
paid and all defaults made good, Lender shall surrender possession of the
Property to Borrower, its successors or assigns. Lender's right to take
possession, however, shall exist if any subsequent Event of Default shall
occur and be continuing.
4. RECEIVER. If any Event of Default shall have occurred and
be continuing, Lender shall be entitled, as a matter of strict right and
without regard to the value or occupancy of the Property, to the appointment
of a receiver who will enter upon and take possession of the Property, collect
the rents and profits therefrom and apply the same as the court may direct.
The receiver shall have all the rights and powers permitted under the laws of
Florida. All costs and expenses (including receiver's fees, attorneys' fees
and costs, including attorneys' fees and costs incurred as a result of any
appeal, and agents' compensation) incurred in connection with the appointment
of a receiver shall be secured by the Mortgage. The right to enter and take
possession of the Property, to manage and operate the same and to collect the
rents, issues and profits thereof (whether by a receiver or otherwise) shall
be cumulative to any other right or remedy hereunder or afforded by law and
may be exercised by Lender concurrently therewith or independently thereof.
Lender shall be liable to account only for such rents, issues and profits
actually received by Lender whether received pursuant to this paragraph 4 or
the preceding paragraph 3 above. Notwithstanding the appointment of any
receiver, trustee or other custodian, Lender shall be entitled, as pledgee, to
the possession and control of any cash or other instruments, at the time held
by or payable or deliverable under the terms of this Loan Agreement or the
Mortgage to Lender.
5. LENDER'S POWER OF ENFORCEMENT. If any Event of Default
shall have occurred and be continuing, whether Lender takes possession or not,
Lender may proceed by suit at law or in equity (or by any other appropriate
proceeding or remedy) to enforce payment of the Note or the performance of any
term of the Mortgage, this Loan Agreement, the Loan Documents or any other
right, to foreclose the Mortgage and to sell the Property in its entirety or
in separate parcels, under the judgment or decree of a court or courts of
competent jurisdiction and to pursue any other remedy available to it, all as
Lender shall deem most effectual. Lender may take action either by judicial
proceedings or by the exercise of its powers to take possession, as Lender may
determine.
6. PRINCIPAL AND INTEREST BECOME DUE ON FORECLOSURE. Upon
commencement of suit or foreclosure of the Mortgage, the unpaid principal
balance of the Note, if not previously accelerated and declared due for
Borrower's default, and the interest accrued thereon, together with all other
sums owed by Borrower to Lender that remain unpaid at the time of the
commencement of such suit or foreclosure, together with accrued interest
thereon, shall be immediately due and payable.
7. PURCHASE BY LENDER. Upon any foreclosure sale pursuant to
judicial proceedings, Lender may bid for and purchase all or any portion of
the Property and, upon compliance with the terms of sale, may hold, retain and
possess and dispose of the Property without further accountability to
Borrower.
8. WAIVER OF APPRAISEMENT, VALUATION, STAY AND EXTENSION.
Borrower agrees (to the full extent permitted by law) that in case of a
default on its part hereunder, neither Borrower nor anyone claiming by,
through or under it, shall or will set up, claim or seek to take advantage of
any appraisement, valuation, stay or extension laws now or hereafter in force,
in order to prevent or hinder the enforcement or foreclosure of the Mortgage
or the final and absolute sale of the Property or the final and absolute
possession of the Property by the purchasers in foreclosure and Borrower, for
itself and for all who may at any time claim by, through, or under it, hereby
waives (to the full extent that it may lawfully do so) the benefit of all such
laws and any and all right to have the assets comprising the Property
marshalled upon any foreclosure and Borrower agrees that the Property may be
sold in its entirety.
9. SUITS TO PROTECT THE PROPERTY. Lender shall have power:
(a) to institute and maintain such suits and proceedings as it may deem
expedient to prevent any impairment of the Property by any acts which may be
unlawful or which violate the Mortgage or this Loan Agreement; (b) to preserve
or protect Lender's interest in the Property and in the income, revenues,
rents and profits arising therefrom; and (c) to restrain the enforcement of or
compliance with any legislation or other government enactment, rule or order
that may be unconstitutional or otherwise invalid, if the enforcement of or
compliance with such enactment, rule or order would impair Lender's security.
All payments made or costs or expenses incurred by Lender in connection with
this paragraph, including reasonable attorneys' fees and costs, whether or not
suit is filed and, if filed, for all appeals, shall be secured by the Mortgage
and shall be immediately repaid by Borrower to Lender on demand, with interest
thereon from the date incurred until the date repaid by Borrower at the same
rate as provided by the Note.
10. BORROWER TO PAY THE NOTE ON ANY DEFAULT IN PAYMENT;
APPLICATION OF MONIES BY LENDER. If default shall be made in the payment of
any amount due under the Note, Mortgage, this Loan Agreement or any Loan
Documents, then after the expiration of any applicable grace period, upon
Lender's demand, Borrower will pay to Lender the whole amount due and payable
under the Note; and in case Borrower shall fail to pay the same upon demand,
Lender shall be entitled to sue for and to recover judgment for the whole
amount so due and unpaid together with all costs and expenses, including
third-party reasonable out-of-pocket costs, expenses and disbursements of
Lender's agents and attorneys, whether or not suit is filed, and if filed, for
all appeals.
Lender shall be entitled to sue and recover judgment as aforesaid
either before, after or during the pendency of any proceeding for the
enforcement of the Mortgage, and the right of Lender to recover such judgment
shall not be affected by any taking, possession or foreclosure sale hereunder
or by the exercise of any other right, power or remedy for the enforcement of
the terms of the Mortgage or the foreclosure of the lien hereof.
In case of a foreclosure sale of all or any part of the Property
and of the application of the proceeds of sale to the payment of the debt
secured by the Mortgage, Lender shall be entitled to enforce payment of and to
receive all amounts then remaining due and unpaid upon the Note, and Lender
shall be entitled to recover judgment for any portion of the debt remaining
unpaid, with interest. Notwithstanding the matters set forth above, Lender
and Borrower acknowledge and agree that Arvida Grand Bay Managers, Inc., an
Illinois corporation as general partner of Borrower, will not have any
personal liability or responsibility for obligations with respect to this
Loan.
Borrower agrees, to the full extent that it may lawfully so agree,
that no recovery of any such judgment by Lender and no attachment or levy of
any execution upon any such judgment upon any of the Property or upon any
other property shall in any manner or to any extent affect the lien of the
Mortgage upon the Property or any part thereof or any lien, rights, powers or
remedies of Lender hereunder, but such lien, rights, powers and remedies shall
continue unimpaired.
Any money collected by Lender or received by Lender under this
paragraph 10 shall be applied as follows:
(a) to the payment of fees, reasonable third-party out-of-
pocket expenses, costs and disbursements of the agents and attorneys of
Lender;
(b) to the payment of the amounts of accrued interest and
principal and any other amount due and unpaid under the Note; and
(c) to the payment of all other indebtedness due Lender
under any other loans secured by the Mortgage.
11. DELAY OR OMISSION - NO WAIVER. No delay or omission of
Lender to exercise any right, power or remedy accruing upon any default shall
impair any such right, power or remedy or shall be a waiver of any such
default or acquiescence therein; and every right, power and remedy given by
this Loan Agreement, any Loan Document or by law to Lender may be exercised
from time to time and as often as may be deemed expedient by Lender.
12. NO WAIVER OF ONE DEFAULT TO AFFECT ANOTHER, ETC. No waiver
of any default hereunder shall extend to or shall affect any subsequent or any
other then existing default or shall impair Lender's rights, powers or
remedies for the defaults not waived by Lender.
If Lender: (a) grants forbearance or an extension of time for the
payment of any sums secured by the Mortgage; (b) takes other or additional
security for the payment of the Note; (c) waives or does not exercise any
right granted in this Loan Agreement, the Mortgage or in the Note or any Loan
Documents; (d) releases any part of the Property from the lien of the Mortgage
or otherwise changes any of the terms of this Loan Agreement, the Note or
Mortgage or any Loan Documents; (e) consents to the filing of any map, plat or
replat of the Land; (f) consents to the granting of any easement on the Land;
or (g) makes or consents to any agreement subordinating the lien of the
Mortgage, any such act or omission by Lender shall not release, discharge,
modify, change or affect Borrower's original liability under the Note, the
Mortgage, this Loan Agreement or otherwise, or the original liability of any
maker, co-signer, endorser, surety or guarantor of the Note, nor shall any
such act or omission preclude Lender from exercising any right, power or
privilege granted in this Loan Agreement or the Mortgage in the event of any
other concurrent or subsequent default, nor (except as otherwise expressly
provided in an instrument or instruments executed by Lender) shall the lien of
the Mortgage be altered thereby. In the event of the sale or transfer by
operation of law or otherwise of all or any part of the Property, Lender,
without further notice, is authorized and empowered to deal with any such
transferee as fully and to the same extent as it might deal with Borrower,
without in any way releasing or discharging any of Borrower's liabilities or
obligations hereunder.
13. DISCONTINUANCE OF PROCEEDINGS - POSITION OF PARTIES
RESTORED. In case Lender shall have proceeded to enforce any right or remedy
under the Mortgage by foreclosure, entry or otherwise and such proceedings
shall have been discontinued or abandoned for any reason or shall have been
determined adversely to Lender, then and in every such case, Borrower and
Lender shall be restored to their former positions and rights hereunder and
all rights, powers and remedies of Lender shall continue as if no such
proceeding occurred.
14. REMEDIES CUMULATIVE. No right, power or remedy conferred
upon or reserved to Lender by this Loan Agreement is intended to be exclusive
of any other right, power or remedy, but each and every such right, power and
remedy shall be cumulative and concurrent and shall be in addition to any
other right, power and remedy given hereunder or now or hereafter existing at
law or in equity or by statute.
ARTICLE X
MISCELLANEOUS
In the event of a conflict with other provisions of this Loan Agreement,
the provisions of this Article shall control.
1. BINDING TERMS. All of the obligations, covenants, terms and
conditions hereof shall be binding obligations, covenants, terms and
conditions throughout the term of this loan.
2. BANK ACCOUNTS. Borrower shall open and maintain, with
Lender, during the entire term of this Loan, its operating account for the
Property and a construction account into which the Loan funds shall be
disbursed with respect to this project.
3. PAYMENT OF CONSTRUCTION COSTS. Lender shall be under no
duty or obligation to anyone to ascertain whether Borrower has used or will
use the Loan proceeds for the payment of bills incurred by Borrower in
connection with the construction of the Phase I Building. Payment of all
bills for labor and materials in connection with the construction of the Phase
I Building shall be Borrower's responsibility, and Lender's sole obligation
shall be to advance the proceeds of the Loan subject to, and in accordance
with this Loan Agreement.
4. RECOMMENDATION BY LENDER'S INSPECTOR. At no time shall
Lender be obligated to disburse funds in excess of that recommended by
Lender's Inspector. If Lender's Inspector does not recommend the disbursement
of any funds requested by Borrower, Lender's Inspector shall set forth in
writing the reasons for such non-recommendation.
5. NOTICES TO ALL PARTIES. All notices, statements, requests
and demands given to or made upon any party hereto in accordance with the
provisions of this Loan Agreement shall be deemed to have been given or made
when hand delivered or when deposited in the Certified Mails of the United
States, Return Receipt Requested, postage prepaid or sent overnight mail,
addressed to such party at the address or addresses hereinabove stated
following the names of the respective parties, or to a different address in
accordance with any unrevoked written direction from such party to the other
parties hereto, except in cases where it is expressly provided herein that
such notice, request or demand shall not be effective until received by the
party to whom it is intended.
6. NO PARTNERSHIP OR JOINT VENTURE. Nothing herein contained
nor the acts of the parties hereto shall be construed to create a partnership
or joint venture between Borrower and Lender, and the parties hereby
acknowledge that no such relationship exists between them.
7. NO ASSIGNMENT BY BORROWER. This Agreement may not be
assigned by Borrower without the prior written consent of Lender. If Lender
approves an assignment hereof by Borrower, Lender shall be entitled to make
advances to such assignee and such advances shall be evidenced by the Note and
secured by the Mortgage and related Loan Documents. Notwithstanding anything
set forth above, Borrower may assign and transfer its rights and obligations
(upon which assignment Borrower will have no further liability or
responsibility) related to or arising out of this Agreement to any
corporation, partnership or other entity owned or controlled by Borrower or
JMB.
8. USURY. It is the intention of the parties to comply with
all applicable usury laws. Accordingly, it is agreed that notwithstanding any
provision to the contrary in the Loan Documents, in no event shall the Loan
Documents require the payment or permit the collection of interest in excess
of the maximum amount permitted by such laws. If any such excess of interest
is contracted for, charged or received under the Loan Documents, or in the
event the maturity of the indebtedness evidenced by such Loan Documents is
accelerated in whole or in part, so that under any such circumstance, the
amount of interest contracted for, charged or received shall exceed the
maximum amount of interest permitted by the applicable usury laws, then in any
such event (a) the provisions of this paragraph shall govern or control, (b)
neither Borrower nor any other person or entity now or hereafter liable for
repayment of the Loan shall be obligated to pay the amount of such interest
not permitted by the applicable usury laws, (c) any such excess which may have
been collected shall be refunded to Borrower and (d) the effective rate of
interest for the Note shall be automatically reduced to the maximum lawful
rate allowed under applicable usury laws.
9. TIME. Time is of the essence of this Loan Agreement.
10. WAIVER. No waiver of any term, provision, condition,
covenant or agreement herein contained shall be effective unless set forth in
a writing signed by Lender, and any such waiver shall be effective only to the
extent set forth in such writing. No failure by Lender to exercise, or no
delay by Lender in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or further exercise
thereof, or the exercise of any right or remedy provided by law. No notice to
or demand on Borrower in any case shall, in itself, entitle Borrower to any
other or further action in any circumstance without notice or demand.
11. CONFLICT. The provisions of this Loan Agreement shall
control in the event of any conflict among it, the Commitment, the Note, the
Mortgage and any other Loan Document.
12. ADDITIONAL FINANCING. The Lender's obligation to fund this
Loan is limited to the principal amount set forth in the Note herein and the
Lender is not obligated to fund any additional amounts other than as set forth
in the Note herein. It is expressly understood that Borrower has sought and
agreed to the terms for repayment set forth in the Note and it is the burden
of the Borrower to provide any permanent financing, bridge financing, or other
financing which may be necessary to repay this Loan on or prior to the
Maturity date. It is expressly understood that it is not the responsibility
of the Lender to provide to Borrower further financing of the Project or the
repayment of this Loan.
13. ARVIDA GRAND BAY MANAGERS, INC.. Borrower and Lender
acknowledge and agree that Arvida Grand Bay Managers, Inc., an Delaware
corporation, as general partner of Arvida Grand Bay Limited Partnership - I,
Arvida Grand Bay Limited Partnership - II, a Delaware limited partnership,
Arvida Grand Bay Limited Partnership - III, a Delaware limited partnership,
Arvida Grand Bay Limited Partnership - IV, a Delaware limited partnership,
Arvida Grand Bay Limited Partnership - V, a Delaware limited partnership, and
Arvida Grand Bay Limited Partnership - VI, a Delaware limited partnership,
will not have any personal responsibility for obligations with respect to this
Loan. Borrower and Lender acknowledge and agree that, except as expressly set
forth in the Guaranty, but notwithstanding anything to the contrary in the
Commitment, in this Loan Agreement or in any other Loan Document, neither any
present or future partner in or agent of Borrower, nor any person or entity
that, directly or indirectly (i.e., through one or more additional
partnerships) is a partner in any partner in Borrower, nor any shareholder,
member, officer, manager, director, employee or agent of any corporation or
limited liability company that, directly or indirectly (i.e., through one or
more additional partnerships) is a partner in Borrower, shall be personally
liable, directly or indirectly, under or in connection with the Commitments
this Loan Agreement or any other Loan Document, or any instrument securing or
otherwise executed in connection with the Commitment, this Loan Agreement or
any other Loan Document, or any certificate delivered in connection with the
Commitment, this Loan Agreement or any other Loan Document, or any amendments
or modifications to any of the foregoing made at any time or times, heretofore
or hereafter; except as expressly set forth in the Guaranty, the recourse of
Lender and each of its successors and assignees under or in connection with
the Commitment, this Loan Agreement, any other Loan Document and such
instruments and certificates, and any such amendments or modifications, shall
be limited to the assets of Borrower only and Lender and each of its
successors and assignees waives and does hereby waive any such personal
liability. For the purposes of the Commitment, this Loan Agreement, each
other Loan Document and such instruments and certificates, and any such
amendment or modifications, neither the negative capital account of a partner,
nor any obligation of any partner to restore a negative capital account or to
contribute capital to Borrower or any other partnership shall be deemed to be
the property or an asset of Borrower or any other partnership (and neither
Lender nor any of its successors or assignees shall have any right to collect,
enforce or proceed against or with respect to any such negative capital
account or partner's obligation to restore or contribute).
14. SIGN REGARDING FINANCING. Borrower shall erect on the site
one (1) sign of the Lender indicating the Lender is providing financing for
the Project.
15. EXECUTION OF ADDITIONAL DOCUMENTS BY LENDER. Lender agrees
that it will cooperate and execute any and all reasonable forms and consents
required: (i) for the filing of any and all subdivision maps or plats
affecting the Property or any part thereof, as well as executing any and all
documents required by any appropriate governmental authority to effect the
filing of said subdivision maps or plats, provided same is in the form and
content satisfactory to lender; (ii) for the recording of any condominium
documents and/or declaration of protective covenants and restrictions
affecting the Property or any part thereof, provided same is in form and
content satisfactory to lender; (iii) for the dedication of and/or granting of
easements for streets, roads, rights of way and utility easements affecting
the Property, provided same is in form and content satisfactory to Lender;
(iv) in connection with the conveyance and/or dedication of entrance features,
parks, recreational facility property, streets, roads, wetlands, lakes and/or
any other similar types of areas to the public or a homeowners' or property
owners' association created as contemplated by a declaration of protective
covenants and restrictions, provided same is in form and content satisfactory
to Lender; and/or (v) in connection with the granting of easements and other
forms of conveyance for flowage, storage and drainage, provided same is in
form and content satisfactory to Lender.
ARTICLE XI
GENERAL CONDITIONS
The following conditions shall apply throughout the term of this Loan
Agreement:
1. PARTIAL RELEASES OF MORTGAGE. Provided there exists no
Event of Default under the Note, the Mortgage, the Loan Agreement or any
related Loan Document, upon completion of the recreational clubhouse and
guardhouse and transfer of same to the appropriate homeowners or condominium
association, as described in the Loan Agreement, Lender will execute, in
recordable form, and deliver to Borrower a partial release from the lien of
the Mortgage for such recreational clubhouse and guardhouse. Further,
provided there exists no Event of Default under the Note, this Mortgage, the
Loan Agreement or any related Loan Document, at the closing of each
condominium Unit located in Phase I, or in Phase II of the Property if Lender
agrees to fund the construction of Phase II ("Unit"), to a third-party end-
purchaser, Borrower shall pay to Lender an amount equal to one hundred percent
(100%) of the Net Sales Proceeds, as defined below, received by Borrower for
the Unit for which Borrower is requesting a partial release of this Mortgage
("Release Price") and Lender shall apply these monies to reduce the
outstanding principal balance of the Note. Upon receipt of the Release Price
by Lender, Lender will execute, in recordable form, and deliver to Borrower, a
partial release from the lien of the Mortgage for such Unit which is being
sold to a third party end purchaser. For purposes of this Mortgage, Net Sales
Proceeds is defined as the gross sales price paid by a third-party end-
purchaser per Unit ("Gross Sales Price"), less any lender approved closing
expenses ("Lender Approved Expenses") which closing expenses shall be defined
as closing expenses in the amount of up to 3.5% of the Gross Sales Price of
each Unit. Borrower shall bear all costs associated with the preparation,
execution, and recording of all partial releases, including Lender's
reasonable attorneys' fees and third-party reasonable out-of-pocket costs. The
payment of any such Release Price shall not relieve Borrower of its obligation
to make each and every payment required by the Note, Mortgage or any Loan
Document.
2. RESTRICTION ON SALE OF ADDITIONAL CONDOMINIUMS Borrower
shall not be permitted to sell condominium units or other improvements or
commence construction of condominium units or other improvements on any
Portion of the Bishop's Point Project except for the Property during the term
of the Loan unless (i) Borrower has satisfied the Phase I Pre-Sale Requirement
for that type of building (i.e., low-rise or mid-rise) for Phase I or (ii)
Borrower is constructing or selling condominium units in a type of building
which is different in type than the Phase I Building. (By way of example, if
the Phase I Building is mid-rise Building, Borrower shall be permitted to sell
condominium units in a low-rise building or commence construction of
condominium units in a low-rise building on any portion of the Bishop's Point
Project.)
3. CONSTRUCTION OF THE PHASE I BUILDING GUARDHOUSE,
RECREATIONAL CLUBHOUSE, AND COVERED PARKING GARAGE. Borrower shall complete
construction of the Phase I guardhouse, recreational clubhouse, and covered
parking garage no later than the completion of construction of the Phase I
Building.
4. REPAYMENT OF LOAN. Borrower shall make the following
additional payments to Lender to reduce the outstanding principal balance of
the Loan:
a. PHASE I PRE-SALE REQUIREMENT Sixty days after
Borrower receives certificates of occupancy for the number of Units required
to be pre-sold by Borrower pursuant to the Phase I Pre-Sale Requirement,
Borrower shall have paid or shall pay at that time to Lender an amount equal
to the Phase I Pre-Sale Requirement, which sum shall reduce the outstanding
principal balance of the Note. Upon receipt by Lender of the monies equal to
the Phase I Pre-Sale Requirement and provided there exists no Event of Default
under the Note, the Mortgage, this Loan Agreement or any related Loan
Document, Lender will execute, in recordable form, and deliver to Borrower, a
partial release from the lien of the Mortgage for the Unit or Units for which
the Phase I Pre-Sale Requirement has been allocated by Borrower.
b. PHASE I ADDITIONAL BUILDING PAYMENT Commencing on the
first day of the first full month immediately after the sixty day period
described in subparagraph 4a above, and on the first day of each and every
month thereafter, until the principal amount of the Note attributable to the
Phase I Building is paid in full, Borrower shall pay an amount equal to
ninety-six and one-half percent (96.5%) of the cost of one Unit, as set forth
in Exhibit "C" hereof ("Building I Additional Payment"), which Unit shall be
selected by Borrower from Exhibit "C." Upon receipt by Lender of the Building
I Additional Payment and provided there exists no Event of Default under the
Loan Documents, Lender will execute, in recordable form, and deliver to
Borrower, a partial release from the lien of the Mortgage for the Unit or
Units which shall be selected by Borrower from Exhibit "C". However, if
Borrower closes and receives the sales proceeds from the sale of a Unit or
Units in the Phase I Building, which is not a Unit or Units which is included
in the Phase I Pre-Sale Requirement, and repays a portion of the Loan as set
forth in Article XI, paragraph 1 hereof, then Borrower shall not be required
to pay Lender the Building I Additional Payment for the month or months
following the sale of such Unit or Units. Borrower and Lender acknowledge and
agree that Borrower shall not be required to pay the Building I Additional
Payment for one month for each Unit, which is not included in the Phase I Pre-
Sale Requirement, which is closed and for which Borrower receives the sales
proceeds from the sale of a Unit and repays a portion of the Loan as set forth
in Article XI , paragraph 1 hereof. (By way of example, if Lender is
repaid by Borrower, as set forth in Article XI section 1. hereof, from the
sale of three Units, which are not included in the Phase I Pre-Sale
Requirement, in the month of October, no Phase I Additional Payment will be
due in the months of November, December and January. Further, if Lender is
then repaid by Borrower, as set forth in Article XI, paragraph 1 hereof, from
the sale of two Units, which are not included in the Phase I Pre-Sale
Requirement, in November, no Phase I Additional Payment will be due in the
months of February and March.)
c. PHASE II PRE-SALE REQUIREMENT Further, if Lender
agrees to fund the construction of the Phase II Building, as defined in
Article VII hereof, sixty days after receipt by Borrower of certificates of
occupancy for the number of Units required to be pre-sold by Borrower pursuant
to the Phase II Pre-Sale Requirement, Borrower shall have paid or shall pay at
that time to Lender an amount equal to the Phase II Pre-Sale Requirement,
which sum shall reduce the outstanding principal balance of the Note. Upon
receipt by Lender of the monies equal to the Phase II Pre-Sale Requirement and
provided there exists no Event of Default under the Note, the Mortgage, this
Loan Agreement or any related loan document, Lender will execute, in
recordable form, and deliver to Borrower, a partial release from the lien of
the Mortgage for the Unit or Units for which the Phase II Pre-Sale Requirement
has been allocated.
d. PHASE II ADDITIONAL BUILDING PAYMENT Commencing on
the first day of the first full month immediately after the above-described
sixty day period in subparagraph 4c above, and on the first day of each and
every month thereafter until the principal amount of the Note attributable to
Phase II is paid in full, ("Building II Additional Payment") (the Building I
Additional Payment and the Building II Additional Payment are hereinafter
collectively referred to as the "Additional Payments") Borrower shall pay an
amount equal to ninety-six and one-half percent (96.5%) of the cost of one
Unit, which Unit shall be a Unit located in the Phase II Building and selected
by Borrower, pursuant to a Schedule of Costs which shall be acceptable to
Lender, in Lender's sole discretion. Upon receipt by Lender of the Building
II Additional Payment and provided there exists no Event of Default under the
Loan Documents, Lender will execute, in recordable form, and deliver to
Borrower, a partial release from the lien of the Mortgage for the Unit or
Units which have been selected by Borrower. However, if Borrower closes and
receives the sales proceeds from the sale of a Unit or Units in the Phase II
Building, which is not a Unit or Units which is included in the Phase II Pre-
Sale Requirement, and repays a portion of the Loan as set forth in Article
XI, paragraph 1 hereof, then Borrower shall not be required to pay Lender the
Building II Additional Payment for the month or months following the sale of
such Unit or Units. Borrower and Lender acknowledge and agree that Borrower
shall not be required to pay the Building II Additional Payment for one month
for each Unit, which is not included in the Phase II Pre-Sale Requirement,
which is closed and for which Borrower receives the sales proceeds from the
sale of a Unit and repays a portion of the Loan as set forth in Article XI,
paragraph 1 hereof. (By way of example, if Lender is repaid by Borrower, as
set forth in Article X, paragraph 1 hereof, from the sale of three Units,
which are not included in the Phase II Pre-Sale Requirement, in the month of
October, no Phase II Additional Payment will be due in the months of November,
December and January. Further, if Lender is then repaid by Borrower, as set
forth in Article XI, paragraph 1 hereof, from the sale of two Units, which are
not included in the Phase II Pre-Sale Requirement, in November, no Phase II
Additional Payment will be due in the months of February and March.)
2. RIGHTS OF THIRD PARTIES. All conditions of Lender's
obligations hereunder, including the obligation to make advances, are imposed
solely and exclusively for the benefit of Lender, its successors and assigns,
and no other person other than the Borrower, its successors and/or permitted
assigns, shall have standing to require satisfaction of such conditions in
accordance with their terms or be entitled to assume that Lender will refuse
to make advances in the absence of strict compliance with any or all thereof,
and no other person, other than the Borrower, under any circumstance, shall be
deemed to be a beneficiary of such conditions, any and all of which Lender
freely may waive in whole or in part at any time if, in its sole discretion,
it deems it desirable to do so. In particular, Lender makes no representation
and assumes no obligation as to third parties concerning the quality of the
construction of the Phase I Building by Borrower or the absence therefrom of
defects. In this connection, Borrower agrees to and shall indemnify Lender
from any liability, claim or loss and attorneys' fees and costs resulting from
the disbursement of the Loan proceeds or from the condition of the Property,
whether related to the quality of construction or otherwise and whether
arising during or after the term of the Loan, provided Borrower's indemnity
shall not relate to matters which occurred after (i) transfer of title to the
Property, pursuant to a foreclosure sale; or (ii) acceptance by Lender of a
deed or other assignment of title to the Property. This provision shall
survive the repayment of the Loan and shall continue in full force and effect
so long as the possibility of such liability, claim or loss exists.
3. EVIDENCE OF SATISFACTION OF CONDITIONS. Any condition of
this Loan Agreement which requires the submission of evidence of the existence
or nonexistence of a specified fact or facts, implies as a condition the
existence or nonexistence, as the case may be, of such fact or facts, and
Lender shall, at all times, be free to establish independently and to its
reasonable satisfaction and in its absolute discretion such existence or non-
existence.
4. ASSIGNMENT. Lender shall have the unconditional right to
assign all or any part of its interest hereunder to any third party after
completion of construction of the Phase I Building and Lender shall have the
right to assign all or any part of its interest hereunder to an affiliate bank
of Lender or to another lender which has taken control of at least fifty
percent (50%) of Lender's real estate portfolio during construction of Phase
I. Borrower may not assign this Loan Agreement or any of its rights or
obligations hereunder without Lender's prior written consent. Notwithstanding
anything set forth above, Borrower may assign and transfer its rights and
obligations (upon which assignment Borrower will have no further liability or
responsibility) related to or arising out of this Agreement to any
corporation, partnership or other entity owned or controlled by Borrower or
JMB.
5. SUCCESSORS AND ASSIGNS INCLUDED IN PARTIES. Whenever in
this Loan Agreement one of the parties hereto is named or referred to, the
successors and permitted assigns of such party shall be included, and all
covenants and agreements contained in this Loan Agreement by or on behalf of
Borrower or by or on behalf of Lender shall bind and inure to the benefit of
their respective successors and permitted assigns, whether so expressed or
not.
6. HEADINGS. The headings of the sections, paragraphs and
subdivisions of this Loan Agreement are for the convenience of reference only,
are not to be considered a part hereof and shall not limit or otherwise affect
any of the terms hereof.
7. INVALID PROVISIONS TO AFFECT NO OTHERS. If fulfillment of
any provision hereof or any transaction related hereto at the time performance
of such provision shall be due, shall involve transcending the limit of
validity prescribed by law, then ipso facto, the obligation to be fulfilled
shall be reduced to the limit of such validity; and if any clause or provision
herein contained operates or would prospectively operate to invalidate this
Loan Agreement in whole or in part, then only such clause or provision shall
be held for naught as though not herein contained, and the remainder of this
Loan Agreement shall remain operative and in full force and effect.
8. NUMBER AND GENDER. Whenever the singular or plural number,
masculine or feminine, or neuter gender is used herein, it shall equally
include the other.
9. AMENDMENTS. Neither this Loan Agreement nor any provision
hereof may be changed, waived, discharged or terminated orally, but only by
written instrument signed by the party against whom enforcement of the change,
waiver, discharge or termination is sought.
10. GOVERNING LAW. This Loan Agreement shall be governed in its
enforcement, construction and interpretation by the laws of the State of
Florida.
11. LITIGATION. In the event any legal proceedings are
instituted between the parties concerning this Loan Agreement, the Note, the
Mortgage, or any other Loan Documents, the Lender shall be entitled to recover
its costs of suit, including attorneys' fees, at both trial and appellate
levels and any bankruptcy proceeding.
12. WAIVER OF TRIAL BY JURY. BORROWER HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS LOAN AGREEMENT AND ANY DOCUMENT CONTEMPLATED TO BE
EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER PARTY. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER TO ENTER INTO THIS LOAN.
IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement on
the dates specified below.
WITNESSES: BORROWER:
ARVIDA GRAND BAY LIMITED
PARTNERSHIP- I, a Delaware limited
partnership
By: ARVIDA GRAND BAY MANAGERS, INC.,
a Delaware corporation
general partner (SEAL)
__________________________
__________________________ By:___________________________
Vincent P. Donahue,
Vice President
Dated: January __, 1994
ARVIDA GRAND BAY PROPERTIES, INC.,
a Delaware corporation
By: ARVIDA GRAND BAY MANAGERS, INC.,
a Delaware corporation
general partner (SEAL)
__________________________
__________________________ By:_____________________________
Vincent P. Donahue,
Vice President
LENDER:
BARNETT BANK OF BROWARD COUNTY, N.A.,
a national banking association
__________________________
__________________________ By:__________________________________
Jeffrey H. Cannon,
Vice President
STATE OF FLORIDA )
: ss.
COUNTY OF BROWARD )
The foregoing instrument was acknowledged before me this ____ day of
January, 1994, by Vincent P. Donahue, Vice President of Arvida Grand Bay
Managers, Inc., a Delaware corporation, general partner of Arvida Grand Bay
Limited Partnership - I, a Delaware limited partnership, on behalf of the
limited partnership. He is personally known to me or has produced
___________________________ as identification.
______________________________
Notary Public
Name of Notary Printed:
______________________________
My commission expires: (NOTARY SEAL)
My commission number is:
STATE OF FLORIDA )
: ss.
COUNTY OF BROWARD )
The foregoing instrument was acknowledged before me this ____ day of
January, 1994, by Vincent P. Donahue, Vice President of Arvida Grand Bay
Properties, Inc., a Delaware corporation, on behalf of the corporation. He is
personally known to me or has produced _______________________ as
identification.
______________________________
Notary Public
Name of Notary Printed:
______________________________
My commission expires: (NOTARY SEAL)
My commission number is:
STATE OF FLORIDA )
: ss.
COUNTY OF BROWARD )
The foregoing instrument was acknowledged before me this ____ day of
January, 1994, by Jeffrey H. Cannon, Vice President of Barnett Bank of Broward
County, N.A., a national banking association, on behalf of the association.
He is personally known to me or has produced ________________________ as
identification.
______________________________
Notary Public
Name of Notary Printed:
______________________________
My commission expires: (NOTARY SEAL)
My commission number is: FTL-90384.5
AMENDED AND RESTATED MORTGAGE AND SECURITY AGREEMENT
Mortgagor: ARVIDA GRAND BAY LIMITED PARTNERSHIP - I,
(Borrower) a Delaware limited partnership,
ARVIDA GRAND BAY LIMITED PARTNERSHIP - II,
a Delaware limited partnership,
ARVIDA GRAND BAY LIMITED PARTNERSHIP - III,
a Delaware limited partnership,
ARVIDA GRAND BAY LIMITED PARTNERSHIP - IV,
a Delaware limited partnership,
ARVIDA GRAND BAY LIMITED PARTNERSHIP - V,
a Delaware limited partnership,
ARVIDA GRAND BAY LIMITED PARTNERSHIP - VI,
a Delaware limited partnership,
and ARVIDA GRAND BAY PROPERTIES, INC.,
a Delaware corporation
900 North Michigan Avenue
Chicago, Illinois 60611
Attention: Stephen Lovelette
Mortgagee: BARNETT BANK OF BROWARD COUNTY, N.A.
(Lender) One East Broward Boulevard
Fort Lauderdale, Florida 33301
Attention: Commercial Real Estate Lending
Department
Amount of initial indebtedness secured hereby:
$24,000,000.00
Date final payment due:
January 14, 1996
THIS AMENDED AND RESTATED MORTGAGE AND SECURITY AGREEMENT (the
"Mortgage") is given to secure the performance and observance by Borrower of
all the covenants and conditions contained in this Mortgage, in the
consolidated revolving promissory note from Borrower to Lender of even date
herewith in the original principal amount of Twenty-Four Million and 00/100
Dollars ($24,000,000.00) (the "Note") and in that certain construction loan
agreement of even date herewith between Borrower and Lender (the "Loan
Agreement") and any other loan documents as described in the Loan Agreement or
executed of even date herewith (collectively, "Loan Documents") in connection
with the loan ("Loan"), and in order to charge the properties, interests and
rights hereinafter described with such payment, performance and observance,
and for and in consideration of the sum of Ten Dollars ($10.00) to Borrower
duly paid by Lender on or before the delivery of this Mortgage and for other
valuable consideration, the receipt of which is hereby acknowledged, Borrower
has executed and delivered this Mortgage and has mortgaged to Lender and its
successors and assigns all of Borrower's interest in the following-described
real property, buildings, improvements, appurtenances, tangible property,
rents, contract rights, other intangibles and proceeds (which, together with
any additional such property hereafter acquired by Borrower and subjected to
the lien of this Mortgage, is collectively referred to as the "Property"), to-
wit:
(A) THE LAND. Land described in Exhibit "A," to be used by
Borrower to construct a ten story mid-rise residential condominium building
containing a total of fifty-six (56) luxury condominiums, a recreational
clubhouse, a guardhouse, a covered parking garage, amenities and related
improvements to be known as Phase I of Bishop's Point on Longboat Key (Phase I
of Bishop's Point on Longboat Key is hereinafter referred to as the
"Project").
(B) IMPROVEMENTS. All buildings, structures, betterments and
other improvements of any nature now or hereafter constructed, or intended to
be constructed, in whole or in part upon the Land, regardless of whether
physically affixed or now or hereafter severed or capable of severance from
the Land (the "Improvements").
(C) APPURTENANCES. All easements, rights of way, gores of land,
streets, ways, alleys, passages, sewer rights, waters, water courses, water
rights and powers and all tenements, hereditaments and appurtenances
whatsoever, in any way belonging, relating or appertaining to the Land, or
which hereafter shall in any way belong, relate to or be appurtenant to the
Land, whether now owned or hereafter acquired by Borrower, and the reversion
and reversions, remainder and remainders, rents, issues, profits thereof, and
all the estate, right, title, interest, property, possession, claim and demand
whatsoever at law, as well as in equity, of Borrower of, in and to the same
(the "Appurtenances").
(D) TANGIBLE PERSONAL PROPERTY AND FIXTURES. All of Borrower's
right, title and interest in and to all fixtures, equipment and tangible
personal property of any nature whatsoever including any construction
materials that are now or hereafter (i) attached or affixed to the Land or the
Improvements, or both, or (ii) situated upon or about the Land or the
Improvements, or both, regardless of whether physically affixed or severed or
capable of severance from the Land or Improvements, or (iii) regardless of
where situated, used, usable or intended to be used in connection with the
Land and with any present or future use or operation of or upon the Land, or
(iv) severed from the Land or Improvements, or both.
(E) RENTS. All rents, issues, incomes and profits in any manner
arising from the Land, Improvements or tangible property, or any combination
thereof, leases, licenses, franchises and concessions of, or relating to the
possession, use or occupancy of all or any portion of the Land, Improvements
or tangible property, whether now existing or hereafter made, including any
and all amendments, modifications, replacements, substitutions, extensions,
renewals or consolidations now or hereafter made (collectively the "Rents"),
but reserving to Borrower the right to collect, retain and otherwise have the
use and benefit of all such rents, issues, incomes and profits unless and
until a default occurs herein which is not cured within the applicable cure
period provided herein.
(F) CONTRACT RIGHTS. All of Borrower's right, title and interest
in and to any and all contracts, written or oral, express or implied, now
existing or hereafter entered into or arising, in any manner related to the
improvement, use, operation, sale, conversion or other disposition (voluntary
or involuntary) of the Land, Improvements, tangible property, the Rents or any
interest therein, or any combination, including any and all deposits, prepaid
items and payments due and to become due thereunder, and further including
construction contracts, service contracts, purchase contracts, repurchase
agreements, management agreements, marketing agreements, labor agreements,
advertising contracts, purchase orders and equipment leases; but reserving to
Borrower the use and benefit of all such contracts, deposits, prepaid items,
payments and proceeds until a default occurs herein which is not cured with
the applicable cure period provided herein.
(G) OTHER INTANGIBLES. All of Borrower's right, title and
interest in and to any and all other contract rights, accounts, instruments
and general intangibles, as such terms from time to time are defined in the
Florida Uniform Commercial Code, in any manner related to the use, operation,
sale, conversion or other disposition (voluntary or involuntary) of the Land,
Improvements, tangible property or Rents or any interest therein, including
all permits, licenses, insurance policies and choses in action; but reserving
to Borrower the use and benefit of all such items until a default occurs
herein which is not cured within the applicable cure period provided herein.
Lender will not be bound by any obligation of Borrower under or with respect
to any intangible listed herein unless, and only to the extent Lender elects
to assume such liability in writing.
(H) PROCEEDS. All proceeds of the voluntary or involuntary
conversion of any of the property from time to time encumbered by this
Mortgage into cash or other liquidated claims, or that are otherwise payable
for injury or loss to, or the taking, conversion, requisitioning or
destruction of any and all such property, including all insurance and
condemnation proceeds as provided in this Mortgage.
TO HAVE AND TO HOLD the Property and all parts thereof unto
Lender, its successors and assigns, to its proper use and benefit forever,
subject however to the terms and conditions herein.
PROVIDED, HOWEVER, that if Borrower shall pay or cause to be paid
to Lender the principal, interest and other sums payable in respect to the
Note, at the times and in the manner stipulated therein and herein, all
without any deduction or credit, and shall fully and promptly keep, perform
and observe Borrower's covenants and promises in the Note (including any
renewal, extension or modification thereof) and in this Mortgage, then this
Mortgage and all of Lender's interest and rights hereunder shall be void.
AND Borrower represents to, warrants to, covenants with and agrees
with Lender that:
ARTICLE ONE
PARTICULAR COVENANTS OF THE BORROWER
1.01 PERFORMANCE OF NOTE AND MORTGAGE. Borrower will perform,
observe and comply with all the provisions of this Mortgage, the Note secured
hereby and all of the Loan Documents and will duly and punctually pay to
Lender the sum of money expressed in the Note, with interest and all other
sums required to be paid by Borrower, pursuant to the provisions of this
Mortgage, without any deduction or credit for taxes or other similar charges
paid by Borrower.
1.02 WARRANTY OF TITLE. At the time of the execution and
delivery of this Mortgage, Borrower is well seized of an indefeasible estate
in fee simple in the Land and Improvements hereby mortgaged and has good and
absolute title to all existing personal property hereby mortgaged and has good
right, full power and lawful authority to convey and mortgage the same; that
the same is free and clear of all liens, charges and encumbrances whatsoever
except only those exceptions specified in the loan title insurance policy
issued to Lender as of the date hereof; and that Borrower shall and will
warrant and forever defend the title thereto. Borrower shall maintain its
title to the Property (including any addition or replacement thereto) free and
clear of all mortgages, security interests, liens and encumbrances, other than
as provided and permitted by this Mortgage.
1.03 AD VALOREM TAX PAYMENTS.
a. At Lender's option, and only upon an Event of Default
pursuant to the terms of the Loan, Borrower will pay to Lender on the first
(1st) day of each month, together with and in addition to any regular
installment of interest and principal, until the Note is fully paid, an amount
equal to one-twelfth (1/12th) of the yearly taxes and assessments as estimated
by Lender to enable Lender to pay (at least thirty (30) days before they
become delinquent) all taxes, assessments and other similar charges against
the Property or any part thereof. Such added payments shall not be, nor be
deemed to be trust funds but may be commingled with the general funds of
Lender and Lender shall not pay interest on them. At the option of Lender,
such added payments may be carried as a debit item on Lender's books and
accounts. Upon Lender's demand, Borrower agrees to deliver to Lender such
additional amounts as are necessary to make up any deficiencies in the amounts
necessary to enable Lender to pay such taxes, assessments and similar charges.
Borrower shall submit to Lender promptly the ad valorem tax notice-receipt,
and Lender's obligation to pay the taxes is incumbent upon prompt submission
of the tax notice. Lender shall have no responsibility for payment of any
taxes and assessments hereunder, except to the extent that funds are deposited
by Borrower with Lender hereunder. In the event of a default by Borrower in
the performance of any of the terms, covenants or conditions in this Mortgage,
the Note or the Loan Documents, Lender, at Lender's option, may apply any
amount then held by Lender under this paragraph to the reduction of the
indebtedness secured by this Mortgage.
b. If Lender does not require Borrower to make payments
under paragraph 1.03(a), Borrower shall be responsible for and shall make
prompt and timely payment of all yearly taxes and assessments prior to the
same becoming delinquent and a copy(s) of all receipts relating to such
payments shall be submitted to Lender within thirty (30) days of payment.
Notwithstanding the matters set forth above, Borrower shall be permitted to
contest all yearly tax assessments provided Borrower shall at all times comply
with any and all requirements relating thereto including but not limited to
contesting the yearly tax assessment in a timely manner.
1.04 OTHER TAXES, LIENS AND UTILITY CHARGES.
a. Borrower will pay promptly, when due and as due, all
charges for utilities, whether public or private, and will promptly exhibit to
Lender, upon Lender's request, receipts for the payment of all taxes,
assessments, water rates, dues, charges, common area expenses, fines and
impositions of every nature whatsoever imposed, levied or assessed or to be
imposed, levied or assessed upon or against the Property or any part thereof
or upon the interest of Lender in the Property as well as all income taxes,
assessments and other governmental charges lawfully levied and imposed by the
United States of America or any state, county, municipality or other taxing
authority upon Borrower or in respect to the Property or any part thereof or
any charge which, if unpaid, would become a lien or charge upon the Property.
Borrower will provide Lender receipts for the payment of ad valorem real
property taxes on the Property no later than March 31 of each calendar year.
b. Borrower will not suffer any security liens,
mechanic's, laborer's, statutory or other liens, including security interests,
to be created and to remain outstanding upon any of the Property for more than
fifteen (15) days from the date of the filing or incurring of such lien,
except as may be extended pursuant to Article Two hereof.
1.05 INSURANCE. Borrower will procure for, deliver copies of and
original certificates of and maintain for the benefit of Lender during the
life of this Mortgage, insurance policies in such amounts as Lender shall
require, including a minimum of $24,000,000.00/$24,000,000.00 of liability
insurance, and insuring the Property against fire, builder's risk, hazard,
extended coverage and such other insurable hazards, casualties and
contingencies as Lender may require. The form of such policies and the
companies issuing them shall be acceptable to Lender, in Lender's sole
discretion. All policies shall contain a standard, non-contributory mortgagee
endorsement making losses payable to Lender, its successors or assigns, as
mortgagee and loss payee. All policies shall include a provision for a
minimum thirty (30) day advance notice to Lender of any intended policy
cancellation or modification, with the exception of non-payment of premium,
which each insurance company shall be unconditionally obligated to notify the
Lender in writing of at least ten (10) days before cancellation or
modification. Borrower shall not take out separate insurance concurrent in
form or contributing in the event of loss with that required to be maintained
hereunder, unless Lender is included thereon under a standard, non-
contributory mortgagee endorsement making losses payable to Lender. Borrower
shall immediately notify Lender whenever any such separate insurance is taken
out and shall promptly deliver to Lender the policy or policies of such
insurance. The said property insurance so obtained shall include "all risks,"
builder's risk, on a nonreporting 100% completed value form, on the
Improvements, buildings, machinery, equipment, materials, supplies and
temporary structures and all other property of any nature used for the
construction of the buildings, with an endorsement which includes as a loss
payable any additional interest expense caused by a peril insured against
under the policy. This coverage for interest expense is limited to the period
of time from the date of physical damage until such time as will reasonably
elapse, in the exercise of due diligence, to the repair of the damage to its
prior state. The amount of coverage of the policy of insurance shall be the
full replacement cost, including underground work, but not less than Seventeen
Million Two Hundred Thousand and 00/100 Dollars ($17,200,000.00) for the Phase
I Building, as defined in the Construction Loan Agreement dated of even date
herewith. Applicable notices hereunder shall be given to Lender at the
following address: Barnett Bank of Broward County, N.A.- Document Services,
Post Office Box 40329, Jacksonville, Florida 32203-0329. Borrower shall
submit, upon request of Lender, a business interruption or rent loss insurance
policy upon terms satisfactory to Lender.
Borrower shall submit to Lender evidence satisfactory to Lender as
to whether or not the Property or any part thereof is located within an area
identified pursuant to the Flood Disaster Protection Act of 1973 as being in a
flood hazard area. If the Property is located in a flood hazard area, flood
insurance shall be obtained for the maximum amount of coverage available
through the federal flood insurance program for the improvements located on
the Property from time to time or 100% of the highest insurance value of the
improvements on a replacement cost basis, whichever is more. The National
Flood Insurance Program flood policy shall cover the same parties covered
under the other insurance policies with coverage for flood, collapse, rain
damage and such other usual coverage as may be obtained thereunder, and such
policy will be written with an insurance company and with cancellation
provisions as hereinabove provided. The insurance coverage, without limiting
the same by this description, shall extend to any loss occasioned by fire,
windstorm, other perils of extended coverage, vandalism, malicious mischief,
theft, mysterious disappearance and such other coverage as is a normal
incidence of such insurance. The foregoing insurance shall specifically cover
necessary architect and engineering fees necessary to repair or replace any
insured property and shall also cover debris removal. Further, the insurance
shall at least permit waiver of subrogation so any release of liability
entered into prior to any loss will not affect the validity of the coverage
otherwise provided.
At least thirty (30) days prior to the expiration date of all such
policies, Borrower shall deliver to Lender proof of renewals of all required
policies in a form satisfactory to Lender. Borrower shall deliver to Lender
receipts evidencing the payment of all such insurance policies and renewals on
an annual basis. As further security for the indebtedness secured hereby, the
delivery of the insurance policies to Lender shall constitute an assignment of
all unearned premiums. In the event of the foreclosure of this Mortgage or
any other transfer of title to the Property in extinguishment of the
indebtedness secured hereby, all right, title and interest of Borrower in and
to all insurance policies then in force shall pass to the purchaser or
grantee.
Provided, there is no Event of Default which has occurred and is
continuing, Borrower shall be entitled to negotiate for the adjustment or
compromise of any loss under any insurance policy, provided however, Borrower
shall not conclude said negotiations in a final settlement without Lender's
prior written consent, which consent shall not be arbitrarily withheld by
Lender. Further, Lender shall permit Borrower to utilize the insurance
proceeds to rebuild and/or repair the Improvements, or both provided that (i)
there is no Event of Default which has occurred and is continuing; (ii)
Borrower's Inspecting Engineer has determined that the rebuilding and/or
repair of the Improvements or both shall be completed prior to the Maturity
Date of the Loan, as set forth in the Note or any extended Maturity Date of
the Loan, if applicable as also set forth in the Note; (iii) the insurance
proceeds received by Borrower are sufficient in Lender's opinion to rebuild
and/or repair the Improvements, or both and if not sufficient Borrower has
deposited with Lender additional funds to build and/or repair the
Improvements, or both; and (iv) Lender shall hold and disburse the insurance
proceeds pursuant to the terms of the Loan Agreement as the Improvements are
rebuilt and/or repaired, or both.
Upon the occurrence of an Event of Default and during the
continuance of any Event of Default, Lender is hereby authorized and empowered
at its option to adjust or compromise any loss under any insurance policy.
Each insurance company is hereby authorized and directed to make payment for
all such losses directly to Lender instead of to Borrower and Lender jointly.
After deducting from the insurance proceeds any third party reasonable out-of-
pocket expense incurred by it in the collection or handling of said funds,
Lender shall apply the net proceeds, at its sole option, to the reduction of
the sums secured hereby or toward the repair and restoration of the
Improvements, or for any other purpose or object satisfactory to Lender
without affecting the lien of the Mortgage for the full amount secured hereby
before such payment took place. Lender shall not be held responsible for any
failure to collect any insurance proceeds due under the terms of any policy,
regardless of the cause of such failure.
At Lender's option, and only upon an Event of Default pursuant to
the terms of this Loan, Borrower will pay to Lender on the first (1st) day of
each month, together with and in addition to the regular installment of
interest and principal and until the Note is fully paid, an amount equal to
one-twelfth (1/12th) of the yearly premiums for insurance, to enable Lender to
pay such insurance premiums when due. Borrower shall promptly furnish Lender
with the insurance premium statements. Such added payments shall not be trust
funds nor shall they be deemed to be trust funds, but may be commingled with
the general funds of Lender and Lender shall not pay interest on them. At the
option of Lender, such added payments may be carried as a debit item on
Lender's books and accounts. Upon demand of Lender, Borrower agrees to deliver
to Lender such additional sums as are necessary to make up any deficiencies in
the amounts necessary to enable Lender to pay such insurance premiums. Lender
shall have no responsibility for payment of any premium for insurance
hereunder, except to the extent that funds are deposited by Borrower with
Lender hereunder. In the event of a default by Borrower in the performance of
any of the terms, covenants and conditions in this Mortgage, the Note or the
Loan Documents, Lender may, at Lender's option, apply any amount then held by
Lender under this paragraph to the reduction of the indebtedness secured
hereby.
1.06 TITLE INSURANCE. Borrower will procure and maintain for the
benefit of Lender during the life of this Mortgage a standard ALTA Mortgagee
Policy insuring the Mortgage to be a valid first lien interest in all of the
Property. The title insuring underwriter and title agent shall be approved by
Lender and its counsel. Such policy shall provide coverage for the full
principal amount of the loan evidenced by the Note and secured hereby,
together with such endorsements as Lender or its counsel shall reasonably
require, and shall not contain any title exceptions not approved by Lender and
its counsel. The Lender reserves the right to require Borrower to deliver to
Lender copies of any documents which may affect the Property in any manner (as
determined by Lender's counsel) at any time during the term of the Loan, at
Borrower's expense.
1.07 CONDEMNATION. If all or any part of the Property shall be
damaged or taken through condemnation (which term when used in this Mortgage
shall include any damage or taking by any governmental authority and any
transfer by private sale in lieu thereof), either temporarily or permanently,
Lender shall be entitled to all compensation, awards and other payments or
relief therefor and is hereby authorized, at its option, to commence, appear
in and prosecute (in its own or Borrower's name) any action or proceeding
relating to any condemnation and to settle or compromise any claim in
connection therewith. All such compensation, awards, damages, claims, rights
of action and proceeds and the right thereto are hereby assigned by Borrower
to Lender who, after deducting all of its third party reasonable out-of-pocket
expenses, including reasonable attorneys' fees and costs (and attorneys' fees
and costs upon appeal), may release any monies so received by it without
affecting the lien of this Mortgage or may apply the same in such manner as
Lender shall determine, to the reduction of the sums secured hereby and to any
prepayment charge herein provided, and any balance of such monies then
remaining shall be paid to Borrower. Lender shall provide Borrower with funds
from the proceeds of any compensation, awards, damages, claims, rights of
action and proceeds to clear any property encumbered by this Mortgage and
affected by the condemnation or taking. Borrower agrees to execute such
further assignments of any compensation, awards, damages, claims, rights of
action and proceeds as Lender may require. Notwithstanding anything set forth
herein to the contrary, provided there is no Event of Default under any of the
Loan Documents and provided that notwithstanding the condemnation action, the
Improvements can be constructed or rebuilt, Borrower can submit plans and
specifications and any other information required by Lender, in its
discretion, relating to rebuilding the Improvements, which information shall
be reviewed by Lender. If after Lender reviews the above-described
information Lender determines, in its sole and absolute discretion, that the
Improvements can be constructed or rebuilt with the condemnation proceeds plus
any additional Loan monies and/or monies available for contribution by
Borrower and provided Borrower complies with any and all additional conditions
and requirements determined by Lender in Lender's sole discretion, then any
condemnation proceeds will be available for construction or rebuilding of the
Improvements .
1.08 CARE OF THE PROPERTY.
a. Borrower will preserve and maintain the Property in
good condition and repair and will not commit or suffer any waste thereof.
b. Borrower shall permit Lender and its representatives
and agents to enter upon and inspect the Property at any time during normal
business hours, upon notice by Lender to Borrower, during the life of this
Mortgage.
c. Borrower will promptly comply with all present and
future laws, ordinances, rules and regulations of any governmental authority
affecting the Property or any part thereof, including all easements,
restrictive covenants and conditions that may be applicable to the Property.
d. If a part of the Property shall be physically damaged
through condemnation, Borrower will promptly restore, repair or alter the
remaining property in a manner satisfactory to Lender. No such work required
to be performed hereunder shall be undertaken until plans and specifications
therefor, prepared by an architect or engineer satisfactory to Lender, have
been submitted to and approved by Lender.
1.09 FURTHER ASSURANCES; AFTER ACQUIRED PROPERTY. At any time
and from time to time, upon request by Lender, Borrower will make, execute and
deliver or cause to be made, executed and delivered to Lender and, where
appropriate, cause to be recorded and/or filed and from time to time
thereafter to be re-recorded and/or refiled at such time and in such offices
and places as shall be deemed desirable by Lender and any and all such other
and further mortgages, instruments of further assurance, certificates, surveys
and other documents including, without limitation, any further security
agreements and financing statements as, in the opinion of Lender, may be
reasonably necessary or desirable in order to effectuate, complete or perfect
or to continue and preserve: (a) the obligation of Borrower under the Note,
this Mortgage or the Loan Documents; and (b) the lien of this Mortgage as a
first and prior lien upon all of the Property whether now owned or hereafter
acquired by Borrower for use in connection with the Land. The lien hereof
will automatically attach, without further act, to all after-acquired property
attached to and/or used in the operation of the Property or any part thereof.
Borrower shall comply with all terms and conditions of any other instruments
executed in connection with this paragraph.
1.10 EXPENSES. Borrower will be responsible and liable for, and
shall hold Lender harmless from, and will pay or reimburse Lender on demand
for all third-party reasonable out-of-pocket costs and expenses incurred in
connection with the Loan whether paid from the Loan proceeds or otherwise,
including but not limited to Loan fees, title and other insurance premiums,
surveys, appraisals, brokerage commissions and claims of brokerage
commissions, ad valorem taxes, tangible and intangible taxes, sales taxes,
inspecting architect's or engineer's fees, reasonable attorneys' fees and
costs, including attorneys' fees and costs upon appeal and in bankruptcy,
recording charges and all costs and expenses incurred by Lender in any action,
proceeding or dispute of any kind in which Lender is made a party or appears
as a party plaintiff or defendant, affecting the Note, Mortgage, or any other
Loan Documents, Borrower or Property, including, but not limited to the
foreclosure of this Mortgage, any condemnation action involving the Property
or any action to protect the security hereof and all appeals. Any such amount
paid by Lender shall be added to the indebtedness and secured by this
Mortgage. Any such amount paid by Lender shall be payable upon demand and
shall earn interest from the date paid by Lender until the date refunded by
Borrower at the same rate as provided in the Note and shall be secured by this
Mortgage. Further, in the event of a dispute or an Event of Default by
Borrower hereunder, and if Lender is the prevailing party, Lender shall be
entitled to recover its attorneys' fees and costs through and including all
appellate litigation.
1.11 LENDER'S PERFORMANCE UPON DEFAULTS. If Borrower shall
default and fail to cure said default in the payment of any tax or other
imposition, in its obligation to furnish insurance hereunder or in the
performance or observance of any other covenant, condition or term in this
Mortgage, Lender may perform or observe the same and all payments made or
costs or expenses incurred by Lender in connection therewith shall be
reimbursed by Borrower on demand, shall earn interest from the date paid by
Lender until the date refunded by Borrower at the same rate provided in the
Note and shall be secured by this Mortgage. After any Event of Default,
Lender is hereby empowered to enter and to authorize others to enter upon the
Property or any part thereof for the purpose of performing or observing any
such defaulted covenant, condition or terms, without thereby becoming liable
to Borrower or any person in possession holding under Borrower.
1.12 ESTOPPEL AFFIDAVITS. Within ten (10) days after written
request from Lender or Borrower, the other shall furnish a written statement,
duly acknowledged, setting forth the unpaid principal of and interest on the
Note and whether or not any offset or defense exists against such principal
and interest.
1.13 FINANCIAL STATEMENTS. The Borrower shall annually submit to
Lender annual financial statements certified to Lender or on a Lender approved
form, at Borrower's option, in accordance with generally-accepted accounting
principles, with respect to the Borrower and Guarantor, and such financial
statements shall be satisfactory to Lender. Borrower shall also submit for
Guarantor (i) a quarterly 10-Q Report within ninety-five (95) days from the
end of each quarter; and (ii) an annual 10-K Report within ninety-five (95)
days from the end of each calendar year. These conditions shall remain in
effect throughout the term of this Loan. The financial statements included in
the 10-K Reports shall be audited by a certified public accountant.
1.14 LEASES AND SALES CONTRACTS AFFECTING PROPERTY. Borrower
shall not enter into any lease(s) affecting any portion of the Property
without Lender's prior written consent which consent shall not be arbitrary.
Further, Borrower shall not enter into any sales contract(s) affecting any
portion of the Property upon terms which are materially different from the
form of sales contract previously approved by Lender without Lender's prior
written consent. Such leases or contracts shall be subordinate to the
Mortgage.
1.15 DEFENSE BY BORROWER. Upon an Event of Default and at
Lender's option, Borrower shall appear in and defend any suit, action or
proceeding which might in any way and in the sole judgment of Lender affect
the value of the Property, the priority of this Mortgage or the rights and
powers of Lender.
1.16 TIME. Borrower agrees that time is of the essence hereof in
connection with all obligations of Borrower in this Mortgage, in the Loan
Documents or in the Note or any other instrument constituting additional
security for the Note.
ARTICLE TWO
DEFAULTS AND REMEDIES
2.01 Upon the occurrence of any one or more of the following
circumstances and to the extent applicable after the passing of time as set
forth herein and pursuant to Paragraph q hereof ("Event(s) of Default"),
Lender shall, at its option, be entitled, in addition to and not in lieu of
the remedies provided for in the Note, Mortgage, or other Loan Documents, to
proceed to exercise any remedy described herein:
a. DEFAULT UNDER PROMISSORY NOTE. Failure by Borrower to
pay, as and when due and payable but no later than fifteen days from the due
date, any installment of interest, principal or any other payment required to
be paid by the Mortgage, the Note hereby secured or any other Loan Documents,
within any applicable grace period. Notwithstanding anything to the contrary
set forth herein, Lender shall provide Borrower with written notice prior to
the first of each month of the interest installment to be paid for each month.
If Borrower does not receive written notice of any monthly interest
installment from Lender, Borrower shall provide written notice to Lender no
later than the first day of the month for which the interest installment is
due, of Lender's failure to provide Borrower with a written notice of the
interest installment, and said interest installment shall be due and payable
the later of: (a) fifteen (15) days from receipt by Borrower of a written
notice of the monthly interest installment and (b) the fifteenth day of each
month during the term of the Loan. Further, any payment required to be paid
by this Loan Agreement, the Mortgage, the Note or any Loan Documents, with the
exception of interest and principal, shall be due and payable no later than
fifteen (15) days from receipt by Borrower from Lender of written; notice of
the required payment.
b. DEFAULT UNDER LOAN DOCUMENTS. Failure by Borrower to
duly observe any covenant, condition or agreement of the Mortgage, the Note,
the Commitment, or any Loan Document or any other security instrument given
hereunder within any applicable grace period; or
c. DEFAULT OF OTHER OBLIGATIONS. Failure by Borrower or
Guarantor to pay, as and when due and payable, all the indebtedness due to
lender, or to duly observe all of the covenants, conditions and agreements now
or hereafter existing between Borrower or Guarantor and Lender pursuant to the
terms and conditions of any other obligation or indebtedness; or
d. BREACH OF WARRANTY. Any warranty made or agreed to be
made herein or in any related Loan Document heretofore, concurrently or
hereafter executed shall be breached by Borrower or shall prove to be false or
misleading; or
e. FILING OF LIENS AGAINST THE PROPERTY. Any lien for
labor, material, taxes or otherwise shall be filed against the Property or
otherwise incurred and not be removed within fifteen (15) days from the date
of filing any such lien; or
f. LEVY UPON THE PROPERTY. A levy be made under any
process on, or a receiver be appointed for the Property or any other property
of Borrower; or
g. BANKRUPTCY OR INSOLVENCY OF BORROWER.
(i) The filing by Borrower or Guarantor or any of
Borrower's or Guarantor's general partners of a voluntary petition in
bankruptcy for adjudication as a bankrupt or insolvent, or the filing by
Borrower or Guarantor or any of Borrower's or Guarantor's general partners of
any petition or answer seeking or acquiescing in any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief for itself under any present or future federal, state or other statute,
law or regulation relating to bankruptcy, insolvency or other relief for
debtors, or Borrower or Guarantor or any of Borrower's or Guarantor's general
partners seeking or consenting to or acquiescing in the appointment of any
trustee, receiver or liquidator of Borrower or Guarantor or any of Borrower's
or Guarantor's general partners or of all or any substantial part of the
Property or of any or all of the rents, revenues, issues, earnings, profits or
income thereof, or the making of any general assignment for the benefit of
creditors, or specific written admission by Borrower or Guarantor or any of
Borrower's or Guarantor's general partners of its inability to pay its debts
generally as they become due; or
(ii) The filing of an involuntary petition against
Borrower or Guarantor or any of Borrower's or Guarantor's general partners
seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future
federal, state or other statute, law or regulation relating to bankruptcy,
insolvency or other relief for debtors, or the appointment of any trustee,
receiver or liquidator of Borrower or Guarantor or any of Borrower's general
partners or of all or any substantial part of the Property or of any or all of
the rents, revenues, issues, earnings, profits or income thereof without
Borrower's consent or acquiescence, which shall not be discharged by the
appropriate court of law within sixty days of the above-described filing; or
h. ASSIGNMENT FOR THE BENEFIT OF CREDITORS. Borrower or
Guarantor or any of Borrower's general partners shall make a general
assignment for the benefit of creditors; or
i. TRANSFER OF PROPERTY. Borrower shall not, sell,
transfer, assign, convey, lease, enter into any management contract, which
form of management contract has not been pre-approved by Lender, or further
encumbers all or any part of its interest in any property constituting
security for this Loan without the express written consent of the Lender,
except in the ordinary course of Borrower's business, which shall be defined
as the development of property and the construction and sale of any and all
Units, as hereinafter defined, located on the Property ("Ordinary Course of
Business"). Notwithstanding anything set forth herein to the contrary,
Borrower may assign and transfer its rights and obligations (upon which
assignment, Borrower will have no further liability or responsibility) related
to or arising out of this Loan to any corporation, partnership, or other
entity owned or controlled by, or under common control with, Borrower or JMB
Realty Corporation ("JMB"), a Delaware corporation (any of the foregoing, a
"JMB Affiliate"). For purposes of this paragraph, control of a specified
person or entity (including the correlative term "controlled by" and "under
common control with") means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of the
specified person or entity, whether through ownership of voting securities by
contract or otherwise. For purposes of applying this definition (i) the
managing partner of a general or limited partnership will be deemed to be in
control thereof, provided such managing partner possesses the power to direct
or cause the direction of the management and policies of the partnership, and
(ii) an entity will deemed controlled by JMB if a majority of the trustees,
directors or persons in similar capacities which direct or cause the direction
of the management and policies of such entity are at all times officers,
directors, shareholders, employees or individuals acting in similar capacities
of JMB or an entity controlled by or under common control with JMB; or
j. ABANDONMENT OR CESSATION OF CONSTRUCTION.
Construction of the Improvements shall be abandoned or shall cease for any
reason and not be resumed within fifteen (15) business days thereafter or
shall have ceased, unless such cessation is due to any reason beyond
Borrower's control,including but not limited to strike or unavailability of
materials unless such events of force majeure shall delay construction so long
that the Improvements reasonably cannot be completed within the time allocated
for completion in the Loan Agreement; or
k. LIEN AGAINST PROPERTY. Borrower grants any mortgage,
lien or encumbrance upon the Property; or
l. ENCROACHMENTS AND PERMITS. All or a portion of the
Improvements encroach upon any street or road setback or easement or upon any
adjoining property, or violate any ordinance, regulation, rule or direction of
any federal or state agency, or of any governmental or quasi-governmental
authority, or any zoning setback line, or the building permit(s) shall be
revoked or suspended or shall lapse, or if any building or other permit or
license shall be conditional in nature and Borrower shall fail to punctually
satisfy the conditions so as to prevent its invalidity; or
m. UNAUTHORIZED WORK. Borrower shall, without Lender's
prior written consent, undertake or contract for work on the Property outside
of or beyond the scope of the Plans and Specifications which shall not
constitute an Approved Change Order; or
n. BREACH. A violation or breach shall occur in any
agreement, covenant or restriction affecting title to the Property, including
but not limited to matters appearing as permitted exceptions in the Title
Policy; or
o. FILING OF NOTICE. The filing for record by Borrower
or any Guarantor or any of Borrower's general partners of a notice limiting
the maximum amount which may be secured by the Mortgage pursuant to Section
697.04(1)(b) of the Florida Statutes (1991); or
p. BORROWER'S GENERAL PARTNERS. The substitution or
removal of any of Borrower's general partners or the general partners of any
of Borrower's general partners which are partnerships without Lender's prior
written consent; the amendment of Borrower's Limited Partnership Agreement
without Lender's prior written consent. Notwithstanding anything set forth
above, Borrower and/or Borrower's general partner may assign and transfer its
rights and obligations (upon which assignment Borrower will have no further
liability or responsibility) related to or arising out of this Agreement to
any corporation, partnership or other entity owned or controlled by, or under
common control with, Borrower or JMB or any JMB Affiliate; or
q. TRANSFER BY GUARANTOR. Guarantor shall transfer any
assets to Arvida/JMB Partners, L.P.-II without the prior written consent of
Lender in Lender's sole and absolute discretion or Arvida/JMB Partners, L.P.-
II shall transfer any assets to Guarantor without the prior written, consent
of Lender in Lender's sole and absolute discretion. Allocation of operational
and managerial expenses between Guarantor and Arvida/JMB Partners, L.P.-II
shall not be deemed a transfer of assets.
r. NON-MONETARY DEFAULT PERIOD. Notwithstanding any
provision to the contrary contained herein, no non-monetary Event of Default
shall be deemed to have occurred until Lender has given Borrower notice of
such non-monetary Event of Default, and Borrower has not cured said non-
monetary Event of Default within thirty (30) days thereafter. Notwithstanding
the matters set forth above, if during the above-described grace period,
Borrower shall be diligently pursuing curing any non-monetary Event of Default
including but not limited to taking all actions necessary to cure said non-
monetary Event of Default in a timely manner and notifying Lender of said
actions, then Lender shall extend the non-monetary grace period for an
additional fifteen (15) days, provided if Lender shall determine in its sole
discretion at any time during the extended grace period that Borrower is no
longer acting diligently to cure the non-monetary Event of Default, the
extended grace period shall be terminated upon Lender's providing Borrower
with notice of same. Further, if Lender shall determine that Borrower shall
be diligently pursuing curing the non-monetary default, Lender shall, in
Lender's sole discretion, allow Borrower additional time to cure the non-
monetary Event of Default, which additional time shall be determined in
Lender's sole discretion and which additional time shall be terminated upon
Lender providing Borrower of notice of same; or
s. FAILURE TO DISPROVE DEFAULT. Lender shall reasonably
suspect the occurrence of one or more of the above said Events of Default and
Borrower, upon Lender's written request specifying such Event of Default,
shall fail to provide evidence reasonably satisfactory to Lender that such
Event or Events of Default have not in fact occurred.
2.02 REMEDIES OF LENDER.
Upon the occurrence of any one or more of the circumstances
set out as an Event of Default herein, Lender shall, at its option, be
entitled, in addition to and not in lieu of the remedies provided for in the
Note, Loan Agreement or other related Loan Documents, to proceed to exercise
any of the following remedies:
a. DEFAULT CONSTITUTES DEFAULT UNDER LOAN DOCUMENTS.
Borrower agrees that the occurrence of such Event of Default shall constitute
a default under each of the Loan Documents, thereby entitling Lender (a) to
exercise any of the various remedies therein provided, including the
acceleration of the indebtedness evidenced by the Note and the foreclosure of
the Mortgage, and (b) cumulatively to exercise all other rights, options and
privileges provided by law or in equity.
b. ACCELERATION OF MATURITY.
Upon the occurrence of any one or more of the Events
of Default described herein or in the Note, Loan Agreement or any other Loan
Document, the Loan may be declared in default and the entire amount of the
Note or so much as may have been advanced, including the principal balance
then outstanding, together with all interest accrued thereon, shall be
accelerated and shall become immediately due and payable, at the option of
Lender and without notice (the Borrower hereby expressly waives notice of such
default), time being of the essence of this Mortgage.
c. LENDER'S RIGHT TO ENTER AND TAKE POSSESSION, OPERATE
AND APPLY INCOME.
(i) If any Event of Default shall have occurred and
be continuing, Borrower agrees that upon Lender's demand, Borrower shall
forthwith surrender to Lender the actual possession and, to the extent
permitted by law, Lender itself or by such officers or agents as it may
appoint, may enter and take possession of all the Property and may exclude
Borrower and its agents and employees wholly therefrom and may have joint
access with Borrower to the books, papers and accounts of Borrower.
(ii) If Borrower shall for any reason fail to
surrender or deliver all or any portion of the Property to Lender upon
demand, Lender may obtain a judgment or decree conferring on Lender the right
to immediate possession or requiring Borrower to deliver immediate possession
of all or part of the Property to Lender, and Borrower hereby specifically
consents to the entry of such a judgment or decree.
(iii) Borrower will pay to Lender upon demand, all
reasonable third-party out-of-pocket expenses of obtaining such judgment or
decree (including all reasonable third-party out-of-pocket expenses incurred
by Lender as a result of any appeal), and all such expenses shall be secured
by the lien of this Mortgage.
(iv) Upon every such entering upon or taking of
possession, Lender may hold, store, use, operate, manage and control the
Property and conduct Borrower's business on the Property and, from time to
time:
(a) make all maintenance, repairs, renewals,
replacements, additions, betterments and improvements necessary and proper to
the Property and purchase or otherwise acquire additional fixtures, personalty
and other property;
(b) insure the Property;
(c) manage and operate the Property and exercise
all of the rights and powers of Borrower (in Lender's name or otherwise) with
respect to the management and operation of the Property;
(d) enter into any and all agreements with
respect to the exercise by others of any of the powers herein granted to
Lender,
(e) to perform or cause to be performed any
and all work and labor necessary to complete the Improvements in accordance
with the Plans and Specifications; and
(f) to disburse that portion of the Loan
proceeds not previously disbursed (including any retainage) to the extent
necessary to complete construction of the Improvements in accordance with the
Plans and Specifications, and if such completion requires a larger sum than
the remaining undisbursed portion of the Loan, to disburse such additional
funds, all of which funds so disbursed by Lender shall be deemed to have been
disbursed to Borrower and shall be secured by this Mortgage. For this
purpose, Borrower hereby constitutes and appoints Lender its true and lawful
attorney-in-fact with full power of substitution to complete the construction
of the Improvements in Borrower's name and hereby empowers Lender as said
attorney-in-fact to take all actions necessary in connection therewith,
including but not limited to the following: (i) to use any funds of Borrower,
including any balance which may be held in escrow and any funds which may
remain unadvanced under the Loan Agreement, for the purpose of completing the
Improvements in the manner called for by the Plans and Specifications; (ii) to
make such additions and changes and corrections in the Plans and
Specifications which shall be necessary or desirable to complete the
Improvements in substantially the manner contemplated by the Plans and
Specifications; (iii) to employ such contractors, subcontractors, agents,
architects and engineers and inspectors as shall be required for said
purposes; (iv) to pay, settle or compromise all existing or future bills and
claims which are or may be liens against the Property or which may be
necessary or desirable for the completion of the Improvements or the clearance
of title to the Property; (v) to execute all applications and certificates in
Borrower's name which may be required by any construction contract; and (vi)
to do any and every act with respect to the construction of the Improvements
which Borrower may do in its own behalf. It is understood and agreed that
this power of attorney shall be deemed to be a power coupled with an interest
which cannot be revoked by death or otherwise. Said attorney-in-fact shall
also have power to prosecute and defend all actions or proceedings in
connection with the construction of the Improvements and to take such action
and require such performance as it deems necessary. In accordance therewith,
Borrower hereby assigns and quitclaims to Lender all sums to be advanced
hereunder, including retainage and any sums in escrow, conditioned upon the
use of said sums, if any, for the completion of the Improvements, all as
Lender may, from time to time, determine to be to its best advantage; and
Lender may collect and receive all the income, revenues, rents, issues and
profits of the same, including those past due as well as those accruing
thereafter, and after deducting:
(aa) All expenses of taking, holding, managing
and operating the Property;
(bb) The cost of all such maintenance, repairs,
renewals, replacements, additions, betterments, improvements, purchases and
acquisitions;
(cc) The cost of such insurance;
(dd) Such taxes, assessments and other charges
prior to the lien of this Mortgage as Lender may determine to pay;
(ee) Other proper charges upon the Property or
any part thereof; and
(ff) The reasonable compensation, expenses and
disbursements of the attorneys and agents of Lender, including attorneys' fees
and costs for any appeal.
Lender shall apply the remainder of the sums received by Lender, first to the
payment of accrued interest and then to the payment of principal and all other
sums or indebtedness that may be due hereunder.
(v) Whenever all interest, principal installments
and other amounts due under the terms of this Mortgage shall have been paid
and all defaults made good, Lender shall surrender possession of the Property
to Borrower, its successors or assigns. Lender's right to take possession,
however, shall exist if any subsequent Event of Default shall occur and be
continuing.
d. RECEIVER. If any Event of Default shall have occurred
and be continuing, Lender shall be entitled, as a matter of strict right and
without regard to the value or occupancy of the Property, to the appointment
of a receiver who will enter upon and take possession of the Property, collect
the rents and profits therefrom and apply the same as the court may direct.
The receiver shall have all the rights and powers permitted under the laws of
Florida. All costs and expenses (including receiver's fees, attorneys' fees
and costs, including attorneys' fees and costs incurred as a result of any
appeal, and agents' compensation) incurred in connection with the appointment
of a receiver shall be secured by this Mortgage. The right to enter and take
possession of the Property, to manage and operate the same and to collect the
rents, issues and profits thereof (whether by a receiver or otherwise) shall
be cumulative to any other right or remedy hereunder or afforded by law and
may be exercised by Lender concurrently therewith or independently thereof.
Lender shall be liable to account only for such rents, issues and profits
actually received by Lender whether received pursuant to this paragraph
2.02(d) or the preceding paragraph 2.02(c). Notwithstanding the appointment of
any receiver, trustee or other custodian, Lender shall be entitled, as
pledgee, to the possession and control of any cash or other instruments, at
the time held by or payable or deliverable under the terms of this Mortgage to
Lender.
e. LENDER'S POWER OF ENFORCEMENT. If any Event of
Default shall have occurred and be continuing, whether Lender takes possession
or not, Lender may proceed by suit at law or in equity (or by any other
appropriate proceeding or remedy) to enforce payment of the Note or the
performance of any term of this Mortgage, the Loan Documents or any other
right, to foreclose this Mortgage and to sell the Property in its entirety or
in separate parcels, under the judgment or decree of a court or courts of
competent jurisdiction and to pursue any other remedy available to it, all as
Lender shall deem most effectual. Lender may take action either by judicial
proceedings or by the exercise of its powers to take possession, as Lender may
determine.
f. PRINCIPAL AND INTEREST BECOME DUE ON FORECLOSURE.
Upon commencement of suit or foreclosure of this Mortgage, the unpaid
principal balance of the Note, if not previously accelerated and declared due
for Borrower's default, and the interest accrued thereon, together with all
other sums owed by Borrower to Lender that remain unpaid at the time of the
commencement of such suit or foreclosure, together with accrued interest
thereon, shall be immediately due and payable.
g. PURCHASE BY LENDER. Upon any foreclosure sale
pursuant to judicial proceedings, Lender may bid for and purchase all or any
portion of the Property and, upon compliance with the terms of sale, may hold,
retain and possess and dispose of the Property without further accountability
to Borrower.
h. WAIVER OF APPRAISEMENT, VALUATION, STAY, EXTENSION
AND REDEMPTION LAWS. Borrower agrees (to the full extent permitted by law)
that in case of a default on its part hereunder, neither Borrower nor anyone
claiming by, through or under it, shall or will set up, claim or seek to take
advantage of any appraisement, valuation, stay or extension laws now or
hereafter in force, in order to prevent or hinder the enforcement or
foreclosure of this Mortgage or the final and absolute sale of the Property or
the final and absolute possession of the Property by the purchasers in
foreclosure, and Borrower, for itself and for all who may at any time claim
through or under it, hereby waives (to the full extent that it may lawfully do
so) the benefit of all such laws and any and all right to have the assets
comprising the Property marshalled upon any foreclosure and Borrower agrees
that the Property may be sold in its entirety.
i. SUITS TO PROTECT THE PROPERTY. Lender shall have
power: (i) to institute and maintain such suits and proceedings as it may
deem expedient to prevent any impairment of the Property by any acts which may
be unlawful or which violate this Mortgage; (ii) to preserve or protect
Lender's interest in the Property and in the income, revenues, rents and
profits arising therefrom; and (iii) to restrain the enforcement of or
compliance with any legislation or other government enactment, rule or order
that may be unconstitutional or otherwise invalid, if the enforcement of or
compliance with such enactment, rule or order would impair Lender's security.
All payments made or costs or expenses incurred by Lender in connection with
this paragraph, including reasonable attorneys' fees and costs, whether or not
suit is filed and, if filed, for all appeals, shall be secured by this
Mortgage and shall be immediately repaid by Borrower to Lender on demand, with
interest thereon from the date incurred until the date repaid by Borrower at
the same rate as provided by the Note.
j. BORROWER TO PAY THE NOTE ON ANY DEFAULT IN PAYMENT;
APPLICATION OF MONIES BY LENDER. If default shall be made in the payment of
any amount due under the Note, Mortgage, or any Loan Documents, then after the
expiration of any applicable grace period, upon Lender's demand, Borrower will
pay to Lender the whole amount due and payable under the Note; and in case
Borrower shall fail to pay the same upon demand, Lender shall be entitled to
sue for and to recover judgment for the whole amount so due and unpaid
together with all costs and expenses, including third-party reasonable out-of-
pocket costs, expenses and disbursements of Lender's agents and attorneys,
whether or not suit is filed, and if filed, for all appeals.
Lender shall be entitled to sue and recover judgment as aforesaid
either before, after or during the pendency of any proceeding for the
enforcement of this Mortgage, and the right of Lender to recover such judgment
shall not be affected by any taking, possession or foreclosure sale hereunder
or by the exercise of any other right, power or remedy for the enforcement of
the terms of this Mortgage or the foreclosure of the lien hereof.
In case of a foreclosure sale of all or any part of the Property
and of the application of the proceeds of sale to the payment of the debt
hereby secured, Lender shall be entitled to enforce payment of and to receive
all amounts then remaining due and unpaid upon the Note, and Lender shall be
entitled to recover judgment for any portion of the debt remaining unpaid,
with interest. Notwithstanding the matters set forth above, Lender and
Borrower acknowledge and agree that Arvida Grand Bay Managers, Inc., a
Delaware corporation as general partner of Borrower, will not have any
personal liability or responsibility for obligations with respect to this
Loan.
Borrower agrees, to the full extent that it may lawfully so agree,
that no recovery of any such judgment by Lender and no attachment or levy of
any execution upon any such judgment upon any of the Property or upon any
other property shall in any manner or to any extent affect the lien of this
Mortgage upon the Property or any part thereof or any lien, rights, powers or
remedies of Lender hereunder, but such lien, rights, powers and remedies shall
continue unimpaired.
Any money collected by Lender or received by Lender under this
paragraph shall be applied as follows:
(i) to the payment of the compensation, reasonable third-
party out-of-pocket expenses, costs and disbursements of the agents and
attorneys of Lender;
(ii) to the payment of the amounts of accrued interest and
principal and any other amount due and unpaid under the Note or the Loan
Agreement; and
(iii) to the payment of all other indebtedness due Lender
under any other loans secured by this Mortgage.
k. DELAY OR OMISSION - NO WAIVER. No delay or omission
of Lender to exercise any right, power or remedy accruing upon the occurrence
of any Event of Default shall impair any such right, power or remedy or shall
be a waiver of any such Event of Default or acquiescence therein; and every
right, power and remedy given by this Mortgage, any Loan Document or by law to
Lender may be exercised from time to time and as often as may be deemed
expedient by Lender.
l. NO WAIVER OF ONE EVENT OF DEFAULT TO AFFECT ANOTHER,
ETC. No waiver of any Event of Default hereunder shall extend to or shall
affect any subsequent or any other then existing Default or shall impair
Lender's rights, powers or remedies for the Events of Default not waived by
Lender.
If Lender: (i) grants forbearance or an extension of time for the
payment of any sums secured hereby; (ii) takes other or additional security
for the payment of the Note; (iii) waives or does not exercise any right
granted in this Mortgage or in the Note or any Loan Documents; (iv) releases
any part of the Property from the lien of the Mortgage or otherwise changes
any of the terms of the Note or Mortgage or any Loan Documents; (v) consents
to the filing of any map, plat or replat of the Land; (vi) consents to the
granting of any easement on the Land; or (vii) makes or consents to any
agreement subordinating the lien of this Mortgage, any such act or omission by
Lender shall not release, discharge, modify, change or affect Borrower's
original liability under the Note, this Mortgage or otherwise, or the original
liability of any maker, general partner, co-signer, endorser, surety or
guarantor of the Note, nor shall any such act or omission preclude Lender from
exercising any right, power or privilege granted in this Mortgage in the event
of any other concurrent or subsequent Event of Default, nor (except as
otherwise expressly provided in an instrument or instruments executed by
Lender) shall the lien of this Mortgage be altered thereby. In the event of
the sale or transfer by operation of law or otherwise of all or any part of
the Property, Lender, without further notice, is authorized and empowered to
deal with any such transferee as fully and to the same extent as it might deal
with Borrower, without in any way releasing or discharging any of Borrower's
liabilities or obligations hereunder.
m. DISCONTINUANCE OF PROCEEDINGS - POSITION OF PARTIES
RESTORED. In case Lender shall have proceeded to enforce any right or remedy
under this Mortgage by foreclosure, entry or otherwise and such proceedings
shall have been discontinued or abandoned for any reason or shall have been
determined adversely to Lender, then and in every such case, Borrower and
Lender shall be restored to their former positions and rights hereunder and
all rights, powers and remedies of Lender shall continue as if no such
proceeding occurred.
n. REMEDIES CUMULATIVE. No right, power or remedy
conferred upon or reserved to Lender by this Mortgage is intended to be
exclusive of any other right, power or remedy, but each and every such right,
power and remedy shall be cumulative and concurrent and shall be in addition
to any other right, power and remedy given hereunder or now or hereafter
existing at law or in equity or by statute.
ARTICLE THREE
ADDITIONAL COVENANTS AND DEFAULTS
3.01 STATUTORY LIENS. Borrower will pay from time to time when
the same shall become due, all claims and demands of mechanics, materialmen,
laborers and others which, if unpaid, might result in a lien on the Property,
whether paramount or subordinate to this Mortgage, or any part of the Property
or on the revenues, rents, issues, income and profits arising therefrom and
Borrower will do or cause to be done everything necessary so that the first
lien of this Mortgage shall be fully preserved, at Borrower's sole expense and
without expense to Lender.
3.02 SECURITY INTEREST. This instrument also serves as a
Security Agreement and creates a security interest in favor of Lender under
the Florida Uniform Commercial Code and Lender shall have all rights,
privileges and remedies (including notice of a secured party) under the
Florida Uniform Commercial Code and without limitation upon or in derogation
of the rights and remedies created under and accorded Lender by this Mortgage
pursuant to the common law or any other law of the State of Florida or any
other jurisdiction. The rights and remedies of Lender under the Florida
Uniform Commercial Code shall be cumulative and in addition to all other
rights and remedies of Lender arising under the common law or any other law of
the State of Florida or of any other jurisdiction. On demand, Borrower shall
promptly execute, and pay all costs and expenses of filing, all financing
statements, continuation statements, partial releases and termination
statements deemed necessary or appropriate by Lender to establish and maintain
the validity and priority of the security interest of Lender. Borrower
agrees, in accordance with the provisions of the Florida Uniform Commercial
Code, that ten (10) days notice by Lender to Borrower shall be deemed to be
reasonable notice under any provision of the Florida Uniform Commercial Code
requiring notice; provided that Lender may, at its option, dispose of the
Property in accordance with Lender's rights and remedies under this Mortgage,
in lieu of proceeding under the Florida Uniform Commercial Code.
3.03. FURTHER LIENS. Borrower covenants that the Property or any
part thereof shall not be further encumbered by the lien of any other
mortgage, lien, encumbrance, burden or claim without Lender's prior written
consent. Any such further encumbrance made without Lender's express prior
written consent shall be an Event of Default, and all rights and remedies of
Lender provided in this Mortgage may be utilized by Lender herein.
3.04 FUTURE ADVANCES. In addition to all other indebtednesses
secured by this Mortgage, this Mortgage shall secure also and constitute a
first lien on the Property for all future advances made by Lender to Borrower
for any purpose within twenty (20) years from the date of this Mortgage to the
same extent as if such advances were made on the date of the execution of this
Mortgage. Any such advances may be made at the option of Lender. The total
amount of the indebtedness, including future advances, that is secured by this
Mortgage, may increase or decrease from time to time, but shall not exceed a
maximum principal amount of Forty-Eight Million and 00/100 Dollars
($48,000,000.00) at any one time, plus interest thereon and any disbursement
made by Lender for the payment of taxes, levies or insurance on the Property
encumbered by this Mortgage, with interest on such disbursement.
3.05 MARSHALLING OF ASSETS. To the extent permitted by law,
Borrower, on its own behalf and on behalf of its successors and assigns,
hereby expressly waives all right to require a marshalling of assets by Lender
or to require Lender to petition the court in a foreclosure suit to first
foreclose and sell any portion of the Property retained by Borrower, before
foreclosing upon and selling any other portion of the Property previously
conveyed by Borrower subject to this Mortgage.
3.06 TAX ON MORTGAGE OR INDEBTEDNESS. In the event of the
passage, after the date of this Mortgage, of any law: (a) making it illegal
for Borrower to pay the whole or any part of the taxes, assessments, charges
or liens herein required to be paid by Borrower; or (b) rendering the payment
by Borrower of all taxes levied or assessed upon the security documents or the
interest in the Property represented thereby unlawful; or (c) rendering the
covenants for the payment of the sums set forth in subparagraphs (a) and (b)
of this section by Borrower legally inoperative, the entire unpaid balance of
the indebtedness shall, upon thirty (30) days written notice to Borrower,
become immediately due and payable, anything in the Note or the Loan Documents
to the contrary notwithstanding.
3.07 HAZARDOUS SUBSTANCES.
Borrower warrants and represents to Lender to the best of its knowledge
after due and diligent investigation and except as disclosed in that certain
Environmental Site Assessment for "Grand Bay Condominium Site, Longboat Key,
Sarasota County, Florida" by Ardaman & Associates, Inc. dated October 29,
1993":
a. That neither Borrower nor any other person to the best
of Borrower's knowledge, after due and diligent inquiry, has ever used the
Property as a facility for the treatment or disposal of any "Hazardous
Substances," as that term is hereinafter defined, or for the storage of any
Hazardous Substances, except the storage of hazardous Substances in the
Ordinary Course of Business, and all past uses of the Property were in full
compliance with any and all applicable federal, state and local Environmental
Laws, as defined below;
b. The Property is now in full compliance with any and
all applicable Federal, state and local Environmental Laws, which
Environmental Laws include but are not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), 42
U.S.C. 9601, et seq., the Superfund Amendments and Reauthorization Act of
1986 ("SARA"), Public Law 99-499, 100 Stat. 1613, the Resource Conservation
and Recovery Act ("RCRA"), 42 U.S.C. 6901, et seq., the Florida Resource
Recovery and Management Act, Section 403.701, et seq., Florida Statutes, the
Pollutant Spill Prevention and Control Act, Section 376.011-376.17 and 376.19-
376.21 Florida Statutes, and all Federal, state or local environmental
statutes, ordinances, rules and regulations whether now existing or in the
future enacted, promulgated, adopted, entered or issued, both within and
outside present contemplation of Borrower and Lender.
c. Borrower covenants and agrees that at all times during
the term of the Loan (which term shall include any all extensions of the Loan)
the Property will be in full compliance with any and all applicable Federal,
state and local Environmental Laws, which Environmental Laws include but are
not limited to CERCLA, SARA, RCRA, the Florida Resource Recovery and
Management Act, the Pollutant Spill Prevention and Control Act, and all
Federal, state or local environmental statutes, ordinances, rules and
regulations whether now existing or in the future enacted, promulgated,
adopted, entered or issued, both within and outside present contemplation of
Borrower and Lender.
d. That as of the date hereof Borrower has no knowledge
of any soil or groundwater contamination and no knowledge that there are
hazardous or toxic materials, substances, wastes or other environmentally
regulated substances (including solids or gaseous products and any materials
containing asbestos), the presence of which is limited, regulated or
prohibited by any state, federal or local governmental authority or agency
having jurisdiction over the Property, or which are otherwise known to pose a
hazard to health or safety of occupants of the Property, located on, in or
under the Property or used in connection therewith, except as permitted by law
or as may occur in the ordinary course of Borrower's business, which shall be
defined as the development of property and the construction and the sale of
any and all Units located on the Property ("Ordinary Course of Business").
e. That Borrower shall notify Lender of any change in the
nature or extent of any hazardous or toxic materials, substances or wastes
maintained on, in or under the Property or used in connection therewith of
which Borrower is aware, except any changes in the Ordinary Course of Business
as defined above and any changes that comply with any and all applicable,
federal, state and local Environmental Laws, and will transmit to Lender
copies of any citations, orders, notices or other material governmental or
other communication received with respect to any other hazardous materials,
substances, wastes or other environmentally regulated substances affecting the
Property;
f. That with respect to the Property and/or any property
in the development known as Bishop's Point on Longboat Key, Borrower is not
aware of, nor has the Borrower nor any of its currently affiliated entities
which own land anywhere in the development known as Bishop's Point on Longboat
Key received notice of, any past or present events, conditions, circumstances,
activities, practices, incidents, actions or plans which may interfere with or
prevent compliance or continued compliance with Environmental Laws or any
ordinance, regulation, code, plan, order, decree, judgment, injunction, notice
or demand letter issued, entered, promulgated or approved thereunder, or which
may give rise to any common law or legal liability, or otherwise form the
basis of any claim, action, demand, suit, proceeding, hearing, study or
investigation, based on or related to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling, or the
emission, discharge, release or threatened release into the environment, of
any Hazardous Substance onto the Property and/or any Property in the
development known as Bishop's Point on Longboat Key;
g. That there is no civil, criminal or administrative
action, suit, demand, claim, hearing, notice or demand letter, notice of
violation, investigation, or proceeding pending or threatened against Borrower
or the Property, relating in any way to any Environmental Laws or any
regulation, code, plan, order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved thereunder;
h. (i) Except as limited in Subparagraph (h)(vi) below,
and Article Four, Paragraph 4.09 below, Borrower hereby agrees to indemnify,
reimburse, defend and hold harmless Lender, its officers, directors,
employees, successors and assigns from and against all demands, claims, civil
or criminal actions or causes of action, liens, assessments, civil or criminal
penalties or fines, losses, damages, liabilities, obligations, costs,
disbursements, expenses or fees of any kind or of any nature (including,
without limitation, cleanup costs, attorneys', consultants' or experts' fees
and disbursements and costs of litigation at trial and appellate levels) which
may at any time be imposed upon, incurred by or asserted or awarded against,
Lender directly or indirectly, related to or resulting from: (a) any acts or
omissions of Borrower at, on or about the Property which contaminate air,
soils, surface waters or groundwaters over, on or under the Property; (b)
Borrower's breach of any representation or warranty under this Agreement; (c)
pursuant to or in connection with the application of any Environmental Law, to
the acts or omissions of Borrower or any other person at the Property and any
environmental damage alleged to have been caused there or in the project known
as Bishop's Point at Longboat Key, in whole or in part, by the manufacture,
processing, distribution, use, handling, transportation, treatment, storage,
or disposal on the Property of any Hazardous Substance; or (d) the presence,
whether past, present or future, of any Hazardous Substances on, in or about
the Property except in the Ordinary Course of Business in the development
known as Bishop's Point on Longboat Key.
(ii) Without limiting the foregoing, this
indemnification provision specifically protects the Lender against any claim
or action from activities described in (a), (b), (c) or (d) above, based in
whole or in part upon any Environmental Law, based in whole or in part upon
any environmental statute, rule, regulation or policy, including but not
limited to Chapters 403 and 376, Florida Statutes, the Florida Administrative
Code, the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, ("CERCLA") 42 USC 9601, et seq., as amended, the Resource
Conservation and Recovery Act, 42 USC 6901, et seq., and other laws, whether
now in existence or enacted in the future. whether now in existence or enacted
in the future.
(iii) Except as limited in sub-paragraph (h)(vi)
below and Article Four, Paragraph 4.09 below, Borrower's indemnification
obligation under this section shall not be limited to any extent by the term
of the Loan and shall continue, survive and remain in full force and effect
notwithstanding payment in full and satisfaction of the Note and the Mortgage
or foreclosure under the Mortgage, or delivery of a deed in lieu of
foreclosure. The provisions of this section shall be deemed to survive
satisfaction of the Note or issuance of a certificate of title and shall
continue in full force and effect after any foreclosure or other proceeding by
which the Lender, its successors and assigns, succeed to ownership of the
Property.
(iv) Those liabilities, losses, claims, expenses,
and damages for which Lender is indemnified under this section shall be paid
to Lender, without any requirement of waiting for the ultimate outcome of any
litigation, claim or other proceeding, and Borrower shall pay such liability,
losses, claims or expenses to Lender as so incurred within thirty (30) days
after notice from Lender itemizing said amounts as of the date of such notice.
In addition to any remedy available for failure to periodically pay such
amounts, such amounts shall thereafter bear interest at the "Default Rate" as
defined in the Loan Documents.
(v) Borrower waives any acceptance of this indemnity
by Lender. The failure of Lender to enforce any right or remedy hereunder, or
to promptly enforce any such right or remedy, shall not constitute a waiver
thereof nor give rise to any estoppel against Lender, nor excuse Borrower from
its obligations hereunder. Any waiver of such right or remedy must be in
writing and signed by Lender. This indemnity is subject to enforcement at law
and/or equity, including actions for damages and/or specific performance.
(vi) Notwithstanding anything to the contrary
contained in this Agreement, Borrower's indemnity, agreements and undertakings
hereunder shall not apply to the extent that Borrower can affirmatively
demonstrate that the claims, civil or criminal actions or causes of action,
liens, assessments, civil or criminal penalties or fines, losses, damages,
liabilities, or obligations that apply to any presence, release or discharge
of toxic or Hazardous Substances, petroleum or petroleum products, chemicals
or other pollutants on the Property arise from actionable conduct of Lender,
an affiliated entity of Lender or some other third party and such conduct has
first occurred on the Property after the earliest of the following dates: (a)
transfer of title to the Property to Lender or an affiliated entity of the
Lender pursuant to a foreclosure sale; (b) acceptance by Lender of a deed or
other assignment of title to the Property; or (c) a change in possession or
control over the Property as described in Article IX Paragraph 3 of the Loan
Agreement whereby Lender has exclusive possession or control of the Property.
In consideration of this indemnity Lender covenants that it will avail itself
of the protection afforded secured lenders under CERCLA and any implementing
regulations, if applicable. Further, Lender agrees and acknowledges that
Borrower's maximum liability under this indemnity shall not exceed the sum of
(i) the cost of remediation in compliance with all federal, state or local
environmental statutes, regulations, rules or ordinances, including any
penalties, fines or assessments in connection therewith and (ii) any other
actual out-of-pocket damages incurred by Lender relating to the presence,
release or discharge of toxic or Hazardous Substances, petroleum or petroleum
products, chemicals, pollutants, or other contaminants on the Property and
within the scope of this indemnity and Agreement in an amount not to exceed
the outstanding loan balance, including principal, interest, Lender's
reasonable third-party out-of-pocket expenses, including reasonable attorney's
fees and costs and any penalties. Notwithstanding anything to the contrary in
the loan commitment, this Mortgage or the other Loan Documents (or any
instruments or certificates delivered in connection therewith at any time or
times), no present or future constituent partner in or agent of Borrower, nor
any shareholder, officer, director, employee, trustee, beneficiary or agent of
any corporation or trust that is or becomes a constituent partner in Borrower,
shall be personally liable, directly or indirectly, for the matters set forth
above; and the Lender and each of its successors and assignees waives and does
hereby waive any such personal liability. For purposes of the loan commitment,
this Mortgage, each of the other Loan Documents (and any such instruments and
certificates), and any amendments or modifications to the foregoing made at
any time or times, neither the negative capital account of any constituent
partner in Borrower, nor any obligation of any constituent partner in Borrower
to restore a negative capital account or to contribute capital to Borrower or
to any other constituent partner in Borrower, shall at any time be deemed to
be the property or an asset of Borrower or any such other constituent partner
(and neither Lender nor any of its successors or assignees shall have any
right to collect, enforce or proceed against or with respect to any such
negative capital account or partner's obligation to restore or contribute).
As used in this paragraph, a "constituent partner" in Borrower shall mean any
direct partner in Borrower and any person or entity that is a partner in any
partnership that, directly or indirectly through one or more other
partnerships, is a partner in Borrower. Finally, notwithstanding anything to
the contrary contained herein, this indemnity shall not be assignable to any
future buyer of the Property, it being the intent of the Borrower and the
Lender that the indemnity be given for the benefit of the Lender, its
officers, directors and affiliates, and any successor financial institution,
its officers, directors and affiliates by merger or sale of Lender or the sale
of the Loan.
(vii) As used herein, "Environmental Law" means any
federal, state, or local statutory or common law relating to pollution or
protection of the environment, including without limitation, any common law of
nuisance or trespass, and any law or regulation relating to emissions,
discharges, releases or threatened releases of Hazardous Substances into the
environment (including without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances.
(viii) As used herein, "Hazardous Substance"
means any substance or material (i) identified in Section 101(14) of CERCLA,
42 USC 9601(14), as the same may be amended from time to time, or (ii)
determined to be toxic, a pollutant or contaminant, under federal, state or
local statute, law, ordinance, rule or regulation or judicial or
administrative order or decision, as same may be amended from time to time;
h. Lender shall have the right, in its sole discretion,
which shall not be arbitrarily withheld, to require Borrower to periodically
(but not more frequently than annually unless an environmental complaint from
a governmental entity is then outstanding) perform (at Borrower's expense) an
environmental audit, which must be satisfactory to Lender, in its sole
discretion, which shall not be arbitrary, of the Property, hazardous waste
management practices and/or hazardous waste disposal sites used by Borrower.
Such audit must be by an environmental consultant satisfactory to Lender.
Should Borrower fail to commence such environmental audit within 30 days of
the Lender's written request, Lender shall have the right but not the
obligation to retain an environmental consultant to perform such environmental
audit. All costs and expenses incurred by Lender in the exercise of such
rights shall bear interest at the default rate set forth in the Note and shall
be secured by this Mortgage and shall be payable by Borrower upon demand or
charged to Borrower's Loan balance at the discretion of the Lender;
i. Any intentional breach of any warranty, representation
or agreement contained in Paragraph 3.07 hereof shall be a default hereunder
and shall entitle Lender to exercise any and all remedies provided in the Loan
Documents, or otherwise permitted by law, upon thirty (30) days' notice from
Lender to Borrower of the default with the exception that any intentional
breach of any warranty, representation or agreement contained in Paragraph (4)
hereof shall be a default hereunder and shall entitle Lender to exercise any
and all remedies provided in the Loan Documents, or otherwise permitted by
law; and
j. Any unintentional breach of any warranty,
representation or agreement contained in Paragraph 3.07 hereof shall be a
default hereunder and shall entitle Lender to exercise any and all remedies
provided in the Loan Documents, or otherwise permitted by law, unless Borrower
shall provide Lender, within thirty (30) days of Borrower determining that
there has been an unintentional breach of any warranty, representation or
agreement, a formal written plan of assessment or remediation (the "Plan")
relating to the cure of any environmental problems on the Property which
resulted from said breach of warranty, representation or agreement contained
in Paragraph 3.07 hereof. The Plan shall include a detailed analysis of any
environmental problems on the Property, a plan of action of remediation and a
time frame for each phase of remediation. If Lender shall determine that the
Plan is satisfactory, in Lender's discretion, which shall not be arbitrary,
and Borrower shall implement the Plan, provided Borrower implements the Plan
and follows the time frame for remediation as set forth in the Plan, there
shall not be a default under the Loan. If Lender determines at any time that
Borrower is not complying or implementing the Plan, or both, said non-
implementation or non-compliance or both shall constitute a default hereunder
and shall entitle Lender to exercise any and all remedies provided in the Loan
Documents or otherwise permitted by law.
ARTICLE FOUR
MISCELLANEOUS PROVISIONS
4.01 PARTIAL RELEASES. Provided there exists no Event of Default
under the Note, the Mortgage, the Loan Agreement or any related Loan Document,
upon completion of the recreational clubhouse and guardhouse and transfer of
same to the appropriate homeowners or condominium association, as described in
the Loan Agreement, Lender will execute, in recordable form, and deliver to
Borrower a partial release from the lien of the Mortgage for such recreational
clubhouse and guardhouse. Further, provided there exists no Event of Default
under the Note, this Mortgage, the Loan Agreement or any related Loan
Document, at the closing of each condominium Unit located in either Phase I or
Phase II of the Property, if Lender agrees to fund the construction of Phase
II ("Unit") to a third-party end-purchaser, Borrower shall pay to Lender an
amount equal to one hundred percent (100%) of the Net Sales Proceeds, as
defined below, received by Borrower for the Unit for which Borrower is
requesting a partial release of this Mortgage ("Release Price") and Lender
shall apply these monies to reduce the outstanding principal balance of the
Note. Upon receipt of the Release Price by Lender, Lender will execute, in
recordable form, and deliver to Borrower, a partial release from the lien of
the Mortgage for such Unit which is being sold to a third party end purchaser.
For purposes of this Mortgage, Net Sales Proceeds is defined as the gross
sales price paid by a third-party end-purchaser per Unit ("Gross Sales
Price"), less any lender approved closing expenses ("Lender Approved
Expenses") which closing expenses shall be defined as closing expenses in the
amount of up to 3.5% of the Gross Sales Price of each Unit. Borrower shall
bear all reasonable third party out-of-pocket costs associated with the
preparation, execution, and recording of all partial releases, including
Lender's reasonable attorneys' fees and third-party reasonable out-of-pocket
costs. The payment of any such Release Price shall not relieve Borrower of its
obligation to make each and every payment required by the Note, Mortgage or
any Loan Document.
4.02 BORROWER ENTITY STATUS. Borrower warrants to Lender that:
(i) Borrower and its general partners are and shall remain until all of the
indebtedness has been repaid duly organized, existing and in good standing
under the laws of the state of their incorporation or formation, and are and
shall remain until all of the indebtedness has been repaid duly qualified to
do business in and in good standing under the laws of the State of Florida;
(ii) Borrower and its general partners have the power, authority and legal
right to carry on the business now being conducted by them and to engage in
the transactions contemplated by this Mortgage, the Loan Commitment and the
Note; and (iii) the execution and delivery of and the carrying out of the
transaction contemplated by this Mortgage, the Loan Commitment and the Note,
and the performance and observance of the provisions of all of the foregoing,
have been duly authorized by all necessary actions of Borrower and its general
partners and will not conflict with or result in a breach of the terms or
provisions of any existing law or any existing rule, regulation or order of
any court or governmental body or enabling documents of the Borrower or its
general partners.
4.03 LEASING COMMISSION/MANAGEMENT FEES. Borrower covenants that
every agreement to pay leasing commissions or management fees with respect to
the leasing of space in or management of the Property, or any part thereof, is
and shall be subject, subordinate and inferior to the rights of Lender, except
as to those Units which have been released from the lien of the Mortgage, so
that in the event Lender acquires title to the Property either at a
foreclosure sale or by other means, Lender will be exonerated and discharged
from all liabilities for the payment of any such commissions or compensations.
4.04 SUCCESSORS AND ASSIGNS INCLUDED IN PARTIES. Whenever in
this Mortgage one of the parties hereto is named or referred to, the
successors and permitted assigns of such party shall be included and all
covenants and agreements contained in this Mortgage by or on behalf of
Borrower, or by or on behalf of Lender shall bind and inure to the benefit of
their respective successors and permitted assigns, whether so expressed or
not. The term "Borrower" shall be deemed to include any permitted future
owner of the Property.
4.05 OFFSETS. No indebtedness secured by this Mortgage shall be
deemed to have been offset or compensated by all or any part of any claim,
cause of action, counterclaim or part of any claim, cause of action,
counterclaim or cross claim, whether liquidated or unliquidated, which
Borrower now or hereafter may have or may claim to have against Lender; and,
in respect of the indebtedness now or hereafter secured hereby, Borrower
waives to the full extent permitted by law the benefits of any applicable law,
regulation or procedure which substantially provides that where cross-demands
for money have existed between persons at any point in time when neither
demand was barred by the applicable statute of limitations, and an action is
thereafter commenced by one such person, the other person may assert in his
answer the defense of payment in that the two demands are compensated so far
as they equal each other, notwithstanding that an independent action asserting
his claim would at the time of filing his answer be barred by the applicable
statute of limitations.
4.06 NOTICES. Any notice, demand or other instrument authorized
by this Mortgage to be served on or given to either party shall be deemed to
have been duly given or made if delivered personally, if mailed by certified
or registered mail, postage prepaid, or if forwarded via overnight mail,
addressed to the addresses set forth at the beginning of this Mortgage (unless
either party notifies the other in writing of an address change), except that
mailed written notice, with the exception of overnight mail notice, shall not
be deemed given or made until five (5) days after the date of mailing thereof.
4.07 HEADINGS, ETC. The Headings of the Articles, Sections,
Paragraphs and Subdivisions of this Mortgage are for convenience of reference
only, are not to be considered a part hereof and shall not limit or otherwise
affect any of the terms hereof.
4.08 INVALID PROVISIONS TO AFFECT NO OTHERS. In case any one or
more of the covenants, agreements, terms or provisions contained in this
Mortgage, the Note, or any other Loan Documents shall be invalid, illegal or
unenforceable in any respect, the validity of the remaining covenants,
agreements, terms or provisions contained herein, in the Note, and in any
other related Loan Document in no way shall be affected, prejudiced or
disturbed thereby.
4.09 ARVIDA GRAND BAY MANAGERS, INC. Borrower and Lender
acknowledge and agree that Arvida Grand Bay Managers, Inc., a Delaware
corporation, as general partner of Arvida Grand Bay Limited Partnership - I,
Arvida Grand Bay Limited Partnership - II, a Delaware limited partnership,
Arvida Grand Bay Limited Partnership - III, a Delaware limited partnership,
Arvida Grand Bay Limited Partnership - IV, a Delaware limited partnership,
Arvida Grand Bay Limited Partnership - V, a Delaware limited partnership, and
Arvida Grand Bay Limited Partnership - VI, a Delaware limited partnership,
will not have any personal responsibility for obligations with respect to this
Loan. Borrower and Lender acknowledge and agree that, except as expressly set
forth in the Guaranty, but notwithstanding anything to the contrary in the
loan commitment, this Amended and Restated Mortgage and Security Agreement or
in any other Loan Document, neither any present or future partner in or agent
of Borrower, nor any person or entity that, directly or indirectly (i.e.,
through one or more additional partnerships) is a partner in any partner in
Borrower, nor any shareholder, member, officer, manager, director, employee or
agent of any corporation or limited liability company that, directly or
indirectly (i.e., through one or more additional partnerships) is a partner in
Borrower, shall be personally liable, directly or indirectly, under or in
connection with the loan commitment, this Amended and Restated Mortgage and
Security Agreement or any other Loan Document, or any instrument securing or
otherwise executed in connection with the loan commitment, this Amended and
Restated Mortgage and Security Agreement, this or any other Loan Document, or
any certificate delivered in connection with the loan commitment, this Amended
and Restated Mortgage and Security Agreement or any other Loan Document, or
any amendments or modifications to any of the foregoing made at any time or
times, heretofore or hereafter; except as expressly set forth in the Guaranty,
the recourse of Lender and each of its successors and assignees under or in
connection with the loan commitment, this Mortgage, each of the other Loan
Documents and such instruments and certificates, and any such amendments or
modifications, shall be limited to the assets of Borrower only and, Lender and
each of its successors and assigns waives and does hereby waive any such
personal liability. For the purposes of this the loan commitment, this
Amended and Restated Mortgage and Security Agreement, each other Loan Document
and such instruments and certificates, and any such amendments or
modifications, neither the negative capital account of a partner, nor any
obligation of any partner to restore a negative capital account or to
contribute capital to Borrower or any other constituent partner shall be
deemed to be the property or an asset of Borrower or any such other
constituent partner (and neither Lender nor any of its successors or assignees
shall have any right to collect, enforce or proceed against or with respect to
any such negative capital account or partner's obligation to restore or
contribute). As used in this paragraph, a "constituent partner" in Borrower
shall mean any direct partner in Borrower and any person or entity that is a
partner in any partnership that, directly or indirectly through one or more
other partnerships, is a partner in Borrower.
4.10 CHANGES, ETC. Neither this Mortgage nor any term hereof may
be changed, waived, discharged or terminated orally, but only by an instrument
in writing signed by the party against which enforcement of the change,
waiver, discharge or termination is sought. Any agreement hereafter made by
Borrower and Lender relating to this Mortgage shall be superior to the rights
of the holder of any intervening lien or encumbrance. Any failure by Lender
to insist upon the strict performance by Borrower of any of the terms and
provisions hereof shall not be deemed to be a waiver of any of the terms and
provisions hereof, and Lender, notwithstanding any such failure, shall have
the right thereafter to insist upon the strict performance by Borrower of any
and all of the terms and provisions of this Mortgage to be performed by
Borrower.
4.11 GOVERNING LAW. This Mortgage, the Note, the other Loan
Documents and any other obligation which this Mortgage secures is made
pursuant to, and shall be construed, enforced and interpreted by the laws of
the State of Florida.
4.12 ADDITIONAL FINANCING. The Lender's obligation to fund this
Loan is limited to the principal amount set forth herein and the Lender is not
obligated to fund any additional amounts other than as set forth herein. It
is expressly understood that Borrower has sought and agreed to the terms for
repayment set forth herein and it is the burden of the Borrower to provide any
permanent financing, bridge financing, or other financing which may be
necessary to repay this Loan on or prior to the maturity date set forth in the
Note. It is expressly understood that it is not the responsibility of the
Lender to provide to Borrower further financing of the Property or the
repayment of this Loan.
4.13 WAIVER OF TRIAL BY JURY. BORROWER HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT IT MAY HAVE TO A TRIAL BY JURY
WITH RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS MORTGAGE AND ANY DOCUMENT CONTEMPLATED TO BE EXECUTED IN
CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER PARTY.
IN WITNESS WHEREOF, Borrower has executed and delivered this
Mortgage and Security Agreement on the date specified below.
WITNESSES: ARVIDA GRAND BAY LIMITED
PARTNERSHIP - I, a Delaware
limited partnership
____________________ By: ARVIDA GRAND BAY MANAGERS, INC.,
a Delaware corporation,
____________________ general partner
Print Witness Name:
(SEAL)
____________________
____________________ By:________________________
Print Witness Name: Vincent P. Donahue,
Vice President
Dated: January ___, 1994
ARVIDA GRAND BAY LIMITED
PARTNERSHIP - II, a Delaware
limited partnership
____________________ By: ARVIDA GRAND BAY MANAGERS, INC.,
a Delaware corporation,
____________________ general partner
Print Witness Name:
(SEAL)
____________________
____________________ By:________________________
Print Witness Name: Vincent P. Donahue,
Vice President
Dated: January ___, 1994
ARVIDA GRAND BAY LIMITED
PARTNERSHIP - III, a Delaware
limited partnership
____________________ By: ARVIDA GRAND BAY MANAGERS, INC.,
a Delaware corporation,
____________________ general partner
Print Witness Name:
(SEAL)
____________________
____________________ By:________________________
Print Witness Name: Vincent P. Donahue,
Vice President
Dated: January ___, 1994
ARVIDA GRAND BAY LIMITED
PARTNERSHIP - IV, a Delaware
limited partnership
____________________ By: ARVIDA GRAND BAY MANAGERS, INC.,
a Delaware corporation,
____________________ general partner
Print Witness Name:
(SEAL)
____________________
____________________ By:________________________
Print Witness Name: Vincent P. Donahue,
Vice President
Dated: January ___, 1994
ARVIDA GRAND BAY LIMITED
PARTNERSHIP - V, a Delaware
limited partnership
____________________ By: ARVIDA GRAND BAY MANAGERS, INC.,
a Delaware corporation,
____________________ general partner
Print Witness Name:
(SEAL)
____________________
____________________ By:________________________
Print Witness Name: Vincent P. Donahue,
Vice President
Dated: January ___, 1994
ARVIDA GRAND BAY LIMITED
PARTNERSHIP - VI, a Delaware
limited partnership
____________________ By: ARVIDA GRAND BAY MANAGERS, INC.,
a Delaware corporation,
____________________ general partner
Print Witness Name:
(SEAL)
____________________
____________________ By:________________________
Print Witness Name: Vincent P. Donahue,
Vice President
Dated: January ___, 1994
ARVIDA GRAND BAY PROPERTIES, INC.,
a Delaware corporation
By:_______________________________
Vincent P. Donahue,
Vice President
Dated: January ___, 1994
STATE OF FLORIDA )
: ss.
COUNTY OF ____________)
The foregoing instrument was acknowledged before me this ____ day of
January, 1994, by Vincent P. Donahue, Vice President of Arvida Grand Bay
Managers, Inc., a Delaware corporation, general partner of Arvida Grand Bay
Limited Partnership - I, a Delaware limited partnership, Arvida Grand Bay
Limited Partnership - II, a Delaware limited partnership, Arvida Grand Bay
Limited Partnership - III, a Delaware limited partnership, Arvida Grand Bay
Limited Partnership - IV, a Delaware limited partnership, Arvida Grand Bay
Limited Partnership - V, a Delaware limited partnership, and Arvida Grand Bay
Limited Partnership - VI, a Delaware limited partnership, on behalf of the
limited partnerships. He is personally known to me or has produced
___________________________ as identification.
______________________________
Notary Public
Name of Notary Printed:
______________________________
My commission expires: (NOTARY SEAL)
My commission number is:
STATE OF FLORIDA )
: ss.
COUNTY OF ____________)
The foregoing instrument was acknowledged before me this ____ day of
January, 1994, by Vincent P. Donahue, Vice President of Arvida Grand Bay
Properties, Inc., a Delaware corporation, on behalf of the corporation. He is
personally known to me or has produced ___________________________ as
identification.
______________________________
Notary Public
Name of Notary Printed:
______________________________
My commission expires: (NOTARY SEAL)
My commission number is:
FTL-90298.5
1/14/94
