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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT
OF 1934
For the fiscal year ended September 30, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE
ACT OF 1934
For the transition period from _____ to_____
Commission File No. 001-12171
CAPITOL COMMUNITIES CORPORATION
(Name of Small Business Issuer as specified in its charter)
Nevada 88-0361144
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
25550 Hawthorne Boulevard
Suite 207
Torrance, CA 90505
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (310) 375-2266
Securities to be registered under Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act:
Common Stock ($.01 Par Value)
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
[X] YES [ ] NO
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
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information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
State the issuer's revenues for its most recent fiscal year. $40,807.
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked price of such, as of a specified date within the past 60 days.
$1,313,108 based on the average of the bid and asked obtained from the National
Quotation Bureau, Inc. ("NQB") on November 28, 1997.
State the number of shares outstanding of each of the Issuer's classes of
common equity, as of the latest practicable date. 7,351,000 as of December 15,
1997.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
Transitional Small Business Disclosure Format YES [ ] NO [X]
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TABLE OF CONTENTS
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FORWARD-LOOKING STATEMENTS ................................ 4
- - --------------------------
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PART I
ITEM 1. DESCRIPTION OF BUSINESS...................... 4
ITEM 2. DESCRIPTION OF PROPERTY...................... 22
ITEM 3. LEGAL PROCEEDINGS............................ 36
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF
SECURITY HOLDERS............................. 37
PART II.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.......................... 37
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION............................ 39
ITEM 7. FINANCIAL STATEMENTS......................... 50
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE....... 50
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS; COMPLIANCE WITH
SECTION 16(a)OF THE EXCHANGE ACT............. 51
ITEM 10. EXECUTIVE COMPENSATION....................... 53
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT........................ 54
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS................................. 56
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K............. 57
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FORWARD-LOOKING STATEMENTS
In addition to historical information, this Report contains forward-looking
statements. Such forward-looking statements are generally accompanied by words
such as "intends," "projects," "strategies," "believes," "anticipates," "plans,"
and similar terms that convey the uncertainty of future events or outcomes. The
forward-looking statements contained herein are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
reflected in the forward-looking statements. Factors that might cause such a
difference include, but are not limited to, those discussed in ITEM 6 of this
Report, the section entitled "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION --Factors That May Affect Future Results and Market Price of Stock."
Readers are cautioned not to place undue reliance on these forward-looking
statements, which reflect management's analysis only as of the date hereof and
are in all cases subject to the Company's ability to, (1) meet its current
short-term debt obligations if the Company cannot extend, replace, convert into
long-term debt, or retire such debt as it matures, which may give rise to doubts
as to the Company's ability to meet its current obligations, and (2) to raise
sufficient capital to commence and continue meaningful operations. There can be
no assurance that the Company will be able to replace, extend, convert or retire
the current debt or raise sufficient capital. Capitol Communities Corporation
undertakes no obligation to publicly revise these forward-looking statements to
reflect events or circumstances that arise after the date hereof. Readers
should carefully review the risk factors described in other documents the
Company files from time to time with the Securities and Exchange Commission,
including without limitation those identified in the "Risk Factors" section of
the Company's Registration Statement filed with the Securities and Exchange
Commission (the "SEC") in September 1996 on Form 10-SB.
PART I.
ITEM 1. DESCRIPTION OF BUSINESS.
BUSINESS DEVELOPMENT
Capitol Communities Corporation, a Nevada corporation (the "Company"), was
formed on August 21, 1995. It is the successor-by-merger to AWEC Resources,
Inc., a New York corporation (the "Predecessor Corporation"). Unless the
context otherwise requires, all references to the "Company" in this Report
include the Predecessor Corporation, and all references to the Company's
business and properties include the business and properties of Capitol
Communities Corporation and its wholly-owned subsidiaries discussed in more
detail below.
The Predecessor Corporation was incorporated in the State of New York as
Century Cinema Corporation in November 1968. In 1969, the Predecessor
Corporation conducted its initial public offering of common stock, pursuant to a
Form S-2 registration statement filed with the SEC. From 1970 to 1971, the
Predecessor Corporation filed annual reports under the Securities Exchange Act
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of 1934, as amended (the "Exchange Act"). From 1972 until the Company's filing
of its Registration Statement on Form 10-SB on September 16, 1996, neither the
Predecessor Corporation nor its successor, Capitol Communities Corporation,
complied with the reporting requirements under the Exchange Act.
By 1983, current management of the Company believes that the Predecessor
Corporation had virtually no assets and was essentially dormant. In April 1984,
the Predecessor Corporation acquired the business of Diagnostic Medical
Equipment Corporation ("DMEC") (the "DMEC Acquisition"). In June 1983, the
Predecessor Corporation changed its name to Diagnostic Medical Equipment Corp.
After the DMEC Acquisition, the Predecessor Corporation was in the
pharmaceutical, medical equipment and surgical supplies business. In August
1987, the Predecessor Corporation filed a registration statement with the SEC on
Form S-18 for a proposed offering of securities. The registration statement
never became effective and was deemed abandoned by the SEC, as of August 1991.
The Company's management believes that, by December 1992, the Predecessor
Corporation had virtually no assets.
In February 1993, Charles L. Silengo Sr. and certain affiliates and related
persons (the "Silengo Group") sold all of the outstanding shares of Lion Coal
Co. ("Lion Coal") to the Predecessor Corporation in return for the issuance of
shares of common stock representing a majority interest in the Predecessor
Corporation. In August 1993, the Silengo Group sold most of its Predecessor
Corporation common stock to Joe Vick ("Vick"), thereby transferring control of
the Predecessor Corporation to Vick. The Predecessor Corporation transferred
its interest in Lion Coal to Charles L. Silengo, for nominal consideration, in
connection with the Silengo Group's sale of its Predecessor Corporation common
stock to Vick.
In October 1993, the Predecessor Corporation formed a wholly-owned
subsidiary, Resource Equity Corporation, a Texas corporation ("Resource
Equity"), to hold options on oil and gas properties purchased by the Predecessor
Corporation from PetroSource Energy Corporation ("PetroSource"), a company
controlled by Vick. The Predecessor Corporation issued shares of common stock
representing a controlling interest in the corporation to PetroSource as
consideration for the options. Although, at the time of the purchase, the board
of directors of the Predecessor Corporation valued the options at $1,395,356,
the amount of cash that PetroSource paid for the options, the options were later
discovered to be worthless. Resource Equity was subsequently dissolved on
February 13, 1996, by the State of Texas for failure to pay State franchise
taxes.
On November 29, 1993, the Predecessor Corporation filed a Form 10
registration statement with the SEC to register its common stock pursuant to
Section 12(g) of the Exchange Act. The Predecessor Corporation later withdrew
the registration statement, for reasons which are unknown to current management
of the Company.
On December 20, 1993, the Predecessor Corporation changed its name to AWEC
Resources, Inc. On February 11, 1994, the Predecessor Corporation formed a
wholly-owned subsidiary, AWEC Development Corporation, an Arkansas
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corporation, which later changed its name on January 29, 1996, to Capitol
Development of Arkansas Inc. (the "Operating Subsidiary").
In February 1994, PetroSource transferred the majority of its shares of
Predecessor Corporation common stock to Prescott Investments Limited
Partnership, a Nevada limited partnership ("Prescott LP"), and Charlie
Corporation, a Nevada corporation ("Charlie Corporation"), both of which were
then, and currently are, affiliates of Michael G. Todd, Herbert E. Russell and
John W. DeHaven. See ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT. The shares were transferred as payment for public relations
services provided by Prescott LP and Charlie Corporation to the Predecessor
Corporation.
On February 15, 1994, the Operating Subsidiary purchased approximately
2,041 acres of land in Maumelle, Arkansas (the "Maumelle Property") from Century
Realty, Inc. ("Century") for an aggregate purchase price of $8,430,000. The
purchase price was comprised of $1,693,000 paid in cash at the closing of the
sale and a promissory note payable to Century in the original principal amount
of $6,737,000, secured by a first priority security interest in a portion of the
Maumelle Property. The cash paid at the closing was obtained from the proceeds
of Maumelle Property lot sales to third parties that occurred concurrently with
the Operating Subsidiary's acquisition of the Maumelle Property. Since
purchasing the Maumelle Property, the Operating Subsidiary has sold, as of
September 30, 1997, approximately 305 acres of the Maumelle Property, for
aggregate gross sales proceeds of $6,279,786. This includes property deeded to
Century as part of a settlement agreement to retire debt and resolve a pending
legal action. See ITEM 2, "DESCRIPTION OF PROPERTY," and ITEM 3, "LEGAL
PROCEEDINGS."
The Maumelle Property was previously owned by Michael G. Todd and John W.
DeHaven, through a general partnership known as DeHaven, Todd & Company ("DTC"),
for approximately five years, from 1988 to 1993. In an uncontested foreclosure
action, DTC transferred the Maumelle Property to Century, successor to the
Resolution Trust Corporation (the "RTC"), which then was receiver for San
Jacinto Savings Association, the holder of a DTC promissory note secured by the
Maumelle Property. Century acquired rights to its claims on the Maumelle
Property from the RTC in February, 1993.
On February 17, 1994, the Predecessor Corporation filed another Form 10
registration statement with the SEC, but later withdrew it because of
significant comments from the SEC and the Predecessor Corporation's lack of
sufficient resources to satisfactorily respond to the SEC's comments. There has
been no reports or registration statements filed with the SEC since the
aforementioned Form 10 registration statement.
In May 1994, the Predecessor Corporation formed a wholly-owned subsidiary,
AWEC Homes, Inc., an Arkansas corporation (the "Home Construction Subsidiary"),
for the purpose of building single family homes on lots owned by the Predecessor
Corporation. The Home Construction Subsidiary, which later changed its name to
Capitol Homes, Inc. on January 29, 1996, has had no construction operations.
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In November 1994, Vick and PetroSource sold their remaining shares of the
Predecessor Corporation common stock to Charlie Corporation and Prescott LP in
consideration of strategic planning services.
The Operating Subsidiary refinanced its $6,737,000 Century promissory note
in September 1995 by (a) borrowing $3,500,000 from Resure, Inc., an Illinois
Insurance Exchange member syndicate ("Resure"), to make a cash payment of
$2,500,000 to Century (the "Resure Loan I"), (b) issuing two promissory notes to
Century, in the amount of $1,400,000 (the "Century Note I") and $350,000 (the
"Century Note II"), respectively, to replace the original Century promissory
note, and (c) issuing 700,000 shares of Common Stock to Century which
represented 9.57% of the Company's outstanding Common Stock, as of September 30,
1997. See ITEM 12, "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT." In consideration of the cash payment, promissory notes, and stock,
Century released all of the real property securing the original promissory note
and accepted approximately 36 acres of Maumelle Property commercial lots as
collateral to secure the $1,400,000 Century Note II. The Resure Loan I was
evidenced by a promissory note (the "Resure Note I") which is secured by
approximately 1,045 acres of the Maumelle Property residential acreage.
Effective September 30, 1997, the Company entered into a settlement agreement
with Century (the "Century Settlement Agreement) to cancel the Century Note I
and Century Note II in exchange for the delivery of a deed to 36 acres of the
commercial Maumelle Property and an additional 3.8 acres of commercial land in
Maumelle, Arkansas (the "Corner Tract") that the Company acquired on May 7,
1997. The Company retains an option to purchase the approximately 40 acres of
property from Century. See ITEM 2, "DESCRIPTION OF PROPERTY," ITEM 3, "LEGAL
PROCEEDINGS" and ITEM 6, "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION--LIQUIDITY AND CAPITAL RESOURCES--Indebtedness and Other Liquidity
Requirements."
Concurrently with the Resure Loan I, Resure issued to the Operating
Subsidiary a subordinated surplus debenture in the original principal amount of
$3,500,000 (the "Resure Debenture"). As consideration for the Resure Debenture,
the Operating Subsidiary issued a $3,500,000 promissory note to Resure (the
"Resure Note II"), which was secured by approximately 410 acres of the 1,044
acres of residential property securing the Resure Loan I. In February 1997, an
Illinois court found that Resure was insolvent, ordered that Resure be
liquidated, and appointed the Illinois Director of Insurance, Mark Boozell, (the
"Resure Liquidator") to oversee the liquidation. In May, 1997, Resure's
liquidator, agreed to release 67 acres held as collateral in exchange for
$675,100 to be placed in a cash collateral account. Effective September 30,
1997, the Company entered into a settlement agreement with the Liquidator of
Resure (the "Resure Settlement Agreement") whereby the Liquidator modified the
Resure Note I to bring all past due payments current in return for acceleration
of the maturity date from July 1, 2000 to September 1, 1999 and released the
approximately 344 acres that secured the Resure Note II. The Liquidator also
agreed to cancel the Resure Note II in exchange for the Company's termination of
its right to the Resure Debenture. The Resure Settlement Agreement was approved
by the Circuit Court of Cook County, Illinois, Chancery Division, on October 24,
1997. See ITEM 2, "DESCRIPTION OF PROPERTY - RESURE DEBENTURE," and ITEM 6
"MANAGEMENT'S DISCUSSION AND ANALYSIS
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OR PLAN OF OPERATION--LIQUIDITY AND CAPITAL RESOURCES--Indebtedness and Other
Liquidity Requirements."
In order to effectuate a change in domicile and name change approved by a
majority of the Predecessor Corporation shareholders, the Predecessor
Corporation merged, effective January 30, 1996, into Capitol Communities
Corporation, a Nevada corporation formed in August 1995 solely for the purpose
of the merger. Under the terms of the merger, each share of Predecessor
Corporation common stock was converted to a single share of Capitol Communities
Corporation common stock (the "Common Stock"), and Capitol Communities
Corporation succeeded to all of the assets, rights, obligations and liabilities
of the Predecessor Corporation.
On April 17, 1997, the Company formed Capitol Resorts, Inc., an Arkansas
corporation (the "Resort Subsidiary"), for the purpose of conducting the
Company's proposed vacation ownership interest operations. See "Business of the
Company," below.
On July 30, 1997, the Company acquired Capitol Resorts of Florida, Inc.
(the "Florida Resorts Subsidiary"), a newly formed Florida Corporation pursuant
to an Agreement and Plan of Reorganization between MLT Management Corp.("MLT"),
a corporation not affiliated with the Company. Under the agreement MLT
transferred its contract right to purchase approximately 36 acres of land and
improvements near Disney World in Osceola County, Florida (the "Florida Bible
College Property"). The Company acquired all of the outstanding stock in the
Florida Resorts Subsidiary in exchange for the issuance of 100,000 shares of
Company common stock to MLT. The Florida Resorts Subsidiary then closed the
purchase of the Florida Bible College Property July 30, 1997, at a purchase
price of $922,000 plus costs. See ITEM 2, "DESCRIPTION OF PROPERTY."
RECENT BUSINESS DEVELOPMENT
OCEAN PALMS RESORT PROPERTY. On December 9, 1997, the Florida Resorts
Subsidiary acquired the lease rights to 120 feet of beachfront land and
improvements located in Pompano Beach, Florida (the "Ocean Palms Resort
Property") from Ocean Palms Resort, Inc. ("OPRI"), and Ocean Palms Development
Corporation ("OPDC") unaffiliated third parties. The ground lease rights to the
Ocean Palms Resort Property is for a period of 99 years, of which 66 years and 3
months remain (the "Ground Lease"). The improvements include a 53 LTL unit
complex, and other common area facilities. The Company also acquired the
interest in several long term tenant leases, a $2,600,000 interest in promissory
notes arising out of the sale of long term leaseholds ("LTL")units of Ocean
Palms Resorts (the "Ocean Palms Resort Paper"), and the right to manage and
operate the on-going rental of the LTL units as hotel rooms on behalf of the LTL
owners.
The Company acquired the Ocean Palms Resort Property, the Ocean Palms
Resort Paper and the other rights for approximately $868,000 in cash, the
issuance of 33,500 shares of the Company's Common Stock and the assumption of
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a $1,158,000 mortgage encumbering the Ground Lease. See "ITEM 2, "DESCRIPTION OF
PROPERTY- -CERTAIN PROPERTY RECENTLY ACQUIRED OR TO BE ACQUIRED."
OCEAN VILLAS. On December 9, 1997, the Florida Resorts Subsidiary acquired
all of the issued and outstanding of OPV Development, Inc. ("OPV"), an
unaffiliated third party. With the stock acquisition, the Company acquired OPV's
primarily asset, two lease rights to a four lot parcel of land and improvements
(the "Ground Leases") located in Pompano Beach, Florida (the "Ocean Villas
Property"). The First Ground Lease is for a period of 99 years, of which 65
years and 5 months remain. The Second Ground Lease is for a period of 93 years
and 3 months, of which 65 years and 5 months remain. The Company acquired the 16
LTL unit Ocean Villas, and approximately $294,000 in promissory notes (the
"Ocean Villas Paper"), which arose from the prior sale of 4 LTL units, for
approximately $107,000 in cash, and the assumption of a first mortgage of
$375,000 and a second mortgage of $150,000 encumbering the Ground Leases. See
"ITEM 2, "DESCRIPTION OF PROPERTY- -CERTAIN PROPERTY RECENTLY ACQUIRED OR TO BE
ACQUIRED."
BUSINESS OF THE COMPANY
GENERAL. The Company is in the business of developing and selling real
estate, primarily in the City of Maumelle, Arkansas, a 5,000 acre planned
community located on the Arkansas River, across from the western Little Rock
area and fifteen miles from downtown Little Rock, Arkansas. The Company also
intends to engage in vacation ownership operations consisting of the following:
(1) the acquisition, renovation, development and operation of vacation ownership
resorts, hotels and other vacation properties, (2) marketing and selling
vacation ownership interests ("VOIs") and LTLs interest in such properties
(collectively, "Vacation Intervals"), and (3) providing financing for the
purchase of Vacation Intervals at its properties.
The Company's real estate as of September 30, 1997, consisted of the
remaining unsold portion of the Maumelle Property consisting of approximately
1,731 acres and the approximately 36 acres of the Florida Bible College land.
During fiscal year ended September 30, 1997, the Company sold approximately 109
acres of Maumelle real estate for an aggregate sales price of $3,855,313.
Included in the 109 acres was approximately 40 acres of commercial Maumelle
Property the Company deeded to Century to retire debt and resolve a pending
legal action. See ITEM 2, "DESCRIPTION OF PROPERTY," and ITEM 3, "LEGAL
PROCEEDINGS."
In the last three years, the Company's business has consisted primarily of
selling unimproved residential and commercial lots from its Maumelle Property
inventory to private individuals and other developers. Although management of
the Company in the 1997 fiscal year decided to shift the Company's primary focus
from selling land to the construction and sale of single-family homes, and the
development, sale and operation of vacation ownership intervals, the Company has
not yet commenced material development, building or other operational activities
and will require substantial funding before it can do so. Moreover, if the
Company cannot extend, replace, convert into long-term debt or retire its
current short-term debt, it may suffer
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liquidity problems that will prevent the Company from realizing or consummating
any of its business plans, objectives, strategies, or transactions. See ITEM 7,
"FINANCIAL STATEMENTS." There can be no assurance that the Company will be able
to raise sufficient capital to commence meaningful operations maintain adequate
liquidity and pursue the business plans, objectives, strategies, or transactions
discussed herein. See ITEM 6, "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION."
The Maumelle Property is managed by Maumelle Enterprises, Inc. ("Maumelle
Enterprises"), a real estate management firm that was affiliated with certain
officers, directors and controlling shareholders of the Company until March,
1997, and as of the date of this Report is still affiliated with certain
officers of the Company. The Company expects that Maumelle Enterprises will
continue in the foreseeable future to manage the Maumelle Property and any other
Maumelle-area real property the Company may acquire. In other geographic areas,
the Company expects to engage local unaffiliated brokers to manage its
properties. See ITEM 12, "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS--
SERVICES PROVIDED BY AFFILIATED COMPANIES."
The Company expects that, once developed, its vacation ownership resorts
will be managed, at least initially, by unaffiliated third parties.
PRINCIPAL PRODUCTS AND MARKETS.
RESIDENTIAL AND COMMERCIAL PROPERTIES. The Company plans to conduct its
single-family development and construction activities primarily in Arkansas,
through the Operating Subsidiary and/or the Home Construction Subsidiary. The
Company intends to construct single-family homes, apartments, and commercial
buildings on the land that it presently owns in Maumelle or may acquire in
Maumelle in the future. The developed properties will be sold to private home
purchasers and apartment or commercial building operators, as appropriate. See
ITEM 2, "DESCRIPTION OF PROPERTY--PROGRAM OF DEVELOPMENT."
The Company's initial focus in its home-building operations is to develop
single-family homes in the $125,000 to $200,000 price range on the approximately
3,800 unimproved single-family home lots it owns in Maumelle and on improved
lots it intends to acquire from third parties in Maumelle. The Company does not
expect to operate, manage or lease any of the single-family homes, apartment, or
commercial properties it may develop.
The Company intends to sell vacant property from its real estate inventory
only as needed to meet liquidity requirements or if Company management
determines that a particular property is not appropriate for development by the
Company. Since the end of the fiscal year, the Company has sold some of its
real property to fund operating and debt expense. See ITEM 6 "MANAGEMENT'S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION--LIQUIDITY AND CAPITAL RESOURCES--
Certain Recent Capital Raising Transactions." The Company expects that any such
land sold in the future likely will be land which has been zoned for commercial
or multi-family use, since the Company wishes to retain as many single-family
home lots, as it can for development and sale by the Company. Company
management expects that any such commercial or multi-
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family properties sold will be purchased by other real estate developers, who
may compete with the Company in any development activity undertaken by the
Company in Maumelle.
Based on current sales trends as evidenced by building permits issued,
recent improvement bond refinancing and renewed efforts of the Maumelle City
staff to attract industrial development, Management of the Company believes that
there is substantial unmet demand in the Maumelle area for single-family homes
in the $125,000 to $200,000 price range. There can be no assurance, however, as
to the existence of such demand or how long such demand will continue or that
the Company will be able to sell all of the homes it may build in Maumelle.
VACATION INTERVALS. The Company intends to sell Vacation Intervals in
vacation ownership properties owned or to be acquired by the Company. The
Company initially plans to complete the remodeling and sale of whole ownership
LTL interests in the 16 unit Ocean Palms Villas property in Pompano Beach, which
it recently acquired. The Company also plans in the third quarter of 1998 to
construct a new hotel on its Florida Bible College Property, which will be
utilized to sell Vacation Intervals in the price range of $10,000 to $12,000 per
week, assuming it can obtain construction financing. The Company intends to
manage and operate the vacation ownership properties it acquires in Pompano
Beach. The Company intends, initially, to contract with unaffiliated third
parties to operate the vacation ownership properties it acquires or develops in
other areas, including the Florida Bible College Property. The Company plans to
conduct its vacation ownership operations primarily through individual
subsidiaries to be owned by the Resort Subsidiary. See ITEM 2, "DESCRIPTION OF
PROPERTY--PROGRAM OF DEVELOPMENT," and "DESCRIPTION OF PROPERTY--POLICIES WITH
RESPECT TO CERTAIN ACTIVITIES."
VOIS AND LTLS. The purchase of a Vacation Interval typically entitles the
buyer to use a fully-furnished vacation residence, generally for a one-week
period each year, in perpetuity. Typically, the purchaser of a VOI acquires an
ownership interest in the vacation residence, which is often held as tenant in
common with other buyers of interests in the property generally a one-week
period each year in perpetuity. The purchaser of an LTL typically acquires a
long-term leasehold interest in the property, and therefore owns all 52 weeks of
a year for a specified number of years, typically 50 to 60 years.
The owners of VOI's typically manage the property through a non-profit
homeowners' association, which is governed by a Board consisting of
representatives of the developer and owners of Vacation Intervals at the resort.
The Board hires an agent, delegating many of the rights and responsibilities of
the homeowners' association to a management company, as described above,
including grounds landscaping, security, housekeeping and operating supplies,
garbage collection, utilities, insurance, laundry and repair and maintenance.
In the case of LTLs, the same functions are performed by the landlord or a
management company selected by the landlord.
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Each Vacation Interval owner typically is required to pay the homeowners'
association or management company, a share of all costs of maintaining the
property. These charges can consist of an annual maintenance fee plus applicable
real estate taxes and special assessments, assessed on an as-needed basis. If
the owner does not pay such charges, the owner's use rights may be suspended and
the homeowners' association or the holder of the note and assignment of the
leasehold interest may foreclose on the owner's Vacation Interval.
THE VACATION OWNERSHIP INDUSTRY AND MARKET. The vacation ownership
industry has existed in the United States since the late 1960s and has during
the past few years become one of the fastest growing real estate and vacation
industries in the country, as reported by the Wall Street Journal in October
1996. According to the American Resort Development Association (the "ARDA"), a
trade association for the vacation ownership industry, it is estimated that
approximately 1.7 million United States families own VOI units worldwide and
that sales volume for 1996 in the United States was in excess of $2.0 billion
and in excess of $5.0 billion worldwide. The average VOI unit in the United
States sells for $10,000 for a one week ownership interval, according to
industry sources. LTL interest typically sell in the range of $60,000 to
$125,000 per unit, depending upon the unit's location and size.
For many vacationers, particularly those with families, a lengthy stay at a
quality commercial lodging establishment can be very expensive, and the amount
of space required by a family (without renting multiple rooms) makes it
uneconomical for vacationers. Also, room rates and availability at such
establishments are subject to change periodically. In addition to providing
improved lifestyle benefits to owners, vacation ownership presents an economical
alternative to commercial lodging for vacationers.
The Company believes that, based on published industry data, the following
factors have contributed to the increased acceptance of the vacation ownership
concept among the general public and the substantial growth of the vacation
ownership industry over the past 15 years:
. Increased consumer confidence resulting from consumer protection regulation
of the vacation ownership industry and the entrance of brand name national
lodging companies to the industry;
. Increased flexibility of vacation ownership due to the growth of
international exchange organizations;
. Improvement in the quality of both the facilities themselves and the
management of available vacation ownership resorts;
. Increased consumer awareness of the value and benefits of vacation
ownership including the cost savings relative to other lodging alternatives; and
. Improved availability of financing for purchasers of Vacation Intervals.
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The vacation ownership industry traditionally has been highly fragmented
and dominated by a large number of local and regional resort developers and
operators, each with small resort portfolios generally of differing quality.
The Company believes that one of the most significant factors contributing to
the current success of the vacation ownership industry is the entry into the
market of some of the world's major lodging, hospitality and entertainment
companies. Such major companies which now operate or are developing Vacation
Interval resorts include Marriott Ownership Resorts, The Walt Disney Company,
Hilton Hotels Corporation, Hyatt Corporation, Four Seasons Hotels & Resorts, and
Inter-Continental Hotels and Resorts, as well as Primus Hotel Corporation and
Westin Hotels & Resorts.
The Company believes that national lodging and hospitality companies are
attracted to the vacation ownership concept because of the industry's rapid
historic growth rate and high profit margins. In addition, such companies
recognize that Vacation Intervals provide an attractive alternative to the
traditional hotel-based vacation and allow the hotel companies to leverage their
brands into additional resort markets where demand exists for accommodations
beyond traditional hotels.
According to information compiled by the ARDA for the year ended December
31, 1994 (the most recent year for which statistics are available), the prime
market for Vacation Intervals is customers in the 40-55 year age range who are
reaching the peak of their earning power and are rapidly gaining more leisure
time. The median age of a Vacation Interval buyer at the time of purchase is 46.
The median annual household income of current Vacation Interval owners in the
United States is approximately $63,000, with approximately 35% of all Vacation
Interval owners having annual household income greater than $75,000 and
approximately 17% of such owners having annual household income greater than
$100,000. Despite the growth in the vacation ownership industry as of December
31, 1994, Vacation Interval ownership has achieved only an approximate 3.0%
market penetration among United States households with income above $35,000 per
year and 3.9% market penetration among United States households with income
above $50,000 per year.
According to the ARDA study, the three primary reasons cited by consumers
for purchasing a Vacation Interval are (i) the ability to exchange the Vacation
Interval for accommodations at other resorts through exchange networks (cited by
82% of Vacation Interval purchasers), (ii) the money savings over traditional
resort vacations (cited by 61% of purchasers) and (iii) the quality and appeal
of the resort at which they purchased a Vacation Interval (cited by 54% of
purchasers). According to the ARDA study, buyers have a high rate of repeat
purchases: approximately 41% of all Vacation Interval owners own more than one
interval representing approximately 65% of the industry inventory and
approximately 51% of all owners who bought their first Vacation Interval before
1985 have since purchased a second Vacation Interval. In addition, customer
satisfaction increases with length of ownership, age, income, multiple location
ownership and accessibility to Vacation Interval exchange networks.
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The Company intends to take advantage of these demographic and other trends
if it is able to extend, replace, convert into long-term debt or retire its
current short-term debt obligations and obtain the necessary funds to commence
development. See "- - GROWTH STRATEGIES," below. Based on past industry
statistics, the Company expects the vacation ownership industry to continue to
grow as the baby-boom generation continues to enter the 40-55 year age bracket,
the age group which purchased the most Vacation Intervals in 1994.
MARKETING AND ADVERTISING.
The Company intends to develop a marketing and advertising plan, with
emphasis on the print media, to promote the sale of homes built by the Company
on the Maumelle Property. The Company also plans to build, decorate, furnish
and landscape model homes to facilitate sales on the Maumelle Property. The
Company intends to use community, regional and cooperative brokers to sell the
homes and other properties it develops.
The Company intends to employ a variety of marketing programs to generate
prospects for Vacation Interval sales efforts, which would include targeted
mailings, overnight mini-vacation packages at the vacation ownership resorts or
hotels the Company intends to develop, gift certificates, seminars and various
destination-specific local marketing efforts. Additionally, the Company intends
to offer incentive premiums to guests to encourage resort tours, in the form of
entertainment tickets, hotel stays, gift certificates or free meals. The
Company also intends to employ the traditional direct mail channels of
marketing, as well as telemarketing organizations and major travel agents to
promote the sale of Vacation Intervals. The Company expects to use an on-site
sales force at the vacation ownership resorts it intends to develop to market
its Vacation Interval product.
The Company intends to commence its Vacation Interval marketing activities
by selling whole ownership LTL units in its 16 units LTL complex, Ocean Villas
located in Pompano Beach, and selling discount vacation packages, which would
include stays at the hotel that the Company intends to develop on the Florida
Bible College Property near Disney World in Osceola, Florida. See ITEM 2,
"DESCRIPTION OF PROPERTY" and "PROGRAM OF DEVELOPMENT-Development of Vacation
Ownership Properties." The Company intends to employ sales representatives at
the hotel to sell Vacation Intervals to the hotel guests.
GROWTH STRATEGIES.
The Company's primary business objective is to increase long-term total
returns to shareholders through appreciation in value of the Common Stock. The
Company intends to achieve this objective by implementing the long-term growth
strategies summarized below. The Company will not be able to implement any of
these strategies if it cannot convert into long-term debt or extend, replace or
retire its current short-term debt and raise substantial additional capital to
commence development operations, of which there can be no assurance. See ITEM
6, "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION."
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DEVELOPMENT OF MAUMELLE PROPERTY AND VACATION OWNERSHIP OPERATIONS. The
------------------------------------------------------------------
Company initially intends to focus on the building and sale of single-family
homes in Maumelle, Arkansas, the construction and acquisition of vacation
ownership properties, and the sale and marketing of Vacation Interval interests
in such properties. The Company believes that such activities are the Company's
most significant growth opportunities.
Development of Maumelle Property. The Company's growth strategy with
--------------------------------
respect to the Maumelle Property is to focus on the building and sale of single-
family homes on improved lots it intends to acquire in Maumelle and on the
approximately 3,800 unimproved single-family home lots that are now part of the
Maumelle Property.
Of the approximately 5,300 single-family vacant sites in the City of
Maumelle, approximately 1,500 sites are not owned by the Company. The Company
plans to acquire some of these single-family sites, including some that are
owned by affiliates of the Company, if it can raise sufficient funds to do so.
Given the Company's ownership of a majority of available home sites in Maumelle,
and the fact that under Maumelle's current Master Land Use Plan little or no new
property can be added to the City of Maumelle without public hearings regarding
any proposed annexation of land by the City and the subsequent approval by the
City's Board of Directors, the Company believes it can achieve a dominant
position in the Maumelle market for single-family home sites. Management
expects that this dominance will enable the Company to implement an orderly
build-out program designed to maximize the selling prices of the homes it sells.
See ITEM 12, "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS--POSSIBLE
ACQUISITIONS OF LAND FROM AFFILIATES."
Vacation Interval Operations. The Company's growth strategy with respect
----------------------------
to its proposed vacation interval business is to capitalize on the increasing
popularity of Vacation Intervals by identifying and pursuing attractive
acquisition, conversion, development and marketing opportunities in the
industry.
The Company intends to acquire and/or develop vacation interval properties
in destinations where it discerns a strong demand. In evaluating whether to
acquire, convert or develop a vacation interval property in a particular
location, the Company expects to analyze relevant demographic, economic and
financial data. Specifically, the Company intends to consider the following
factors, among others, in determining the viability of a potential new vacation
interval resort or other property in a particular location: (i) supply/demand
ratio for the purchase of Vacation Intervals in the relevant market and for
Vacation Interval exchanges into the relevant market by other Vacation Interval
owners, (ii) the market's growth as a vacation destination, (iii) the ease of
converting a hotel or condominium property into a vacation interval resort from
a regulatory and construction point of view, (iv) the availability of additional
land at or nearby the property for potential future development and expansion,
(v) competitive accommodation alternatives in the market, (vi) uniqueness of
location, and (vii) barriers to entry that would tend to limit competition.
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If the Company can convert into long-term debt, or extend, replace or
retire its current short-term debt and raise sufficient development capital, the
Company intends to focus its initial vacation interval activities in Florida and
Missouri by (1) remodeling and selling LTL units on the Ocean Villas Property,
(2) constructing a hotel on the Florida Bible College Property near Disney World
in Osceola, Florida, and marketing Vacation Intervals to guests at the hotel,
(3) constructing vacation interval units on the Bible College Property, and (4)
acquiring or constructing additional vacation interval interest in other resort
properties in Florida. See ITEM 2, "DESCRIPTION OF PROPERTY--CERTAIN PROPERTY
RECENTLY ACQUIRED OR TO BE ACQUIRED" and "--PROGRAM OF DEVELOPMENT." The ARDA
estimates that Florida has a higher concentration of Vacation Intervals than any
other state in the United States. See "--COMPETITION," below.
The Company believes that an important part of its growth strategy will be
to obtain approval to have any vacation interval properties it develops
participate in broad-based Vacation Interval exchange networks. In a 1995 study
sponsored by the Alliance for Timeshare Excellence and the ARDA, the exchange
opportunity was cited by purchasers of Vacation Intervals as one of the most
significant factors in determining whether to purchase a Vacation Interval.
Participation in an exchange network would allow the Company's vacation interval
customers to exchange in a particular year their occupancy right in the unit in
which they own a Vacation Interval for an occupancy right at the same time or a
different time in another participating resort, based upon availability and the
payment of a variable exchange fee. A member may exchange his Vacation Interval
for an occupancy right in another participating resort by listing his Vacation
Interval as available with the exchange organization and by requesting occupancy
at another participating resort, indicating the particular resort or geographic
area to which the member desires to travel, the size of the unit desired and the
period during which occupancy is desired.
Once the Company's first vacation interval property has been developed, the
Company intends to apply to have its property included in a broad-based Vacation
Interval exchange network. There can be no assurance, however that any future
vacation interval properties developed by the Company will be accepted on a
Vacation Interval exchange. See ITEM 6, "MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION--RESULTS OF OPERATION--Factors That May Affect Future
Results and Market Price of Stock."
Another important component of the Company's growth strategy in the
vacation interval industry will be the financing of Vacation Interval purchases.
The Company intends to offer financing to purchasers of Vacation Intervals. The
Company anticipates that this financing would be secured by an assignment of
interest or a first mortgage on the underlying Vacation Interval. The Company
intends to raise capital for its operation and/or debt servicing requirements by
selling the promissory notes generated by this activity or using the notes as
collated for future commercial loans.
GEOGRAPHIC MARKETS DIVERSIFICATION. The Company believes that geographic
----------------------------------
diversity in its real property and vacation interval development
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activities will be a key factor in achieving long-term stability and growth.
The Company intends to work toward this diversity by considering real estate
development and vacation interval opportunities throughout the United States and
by forming joint ventures with local developers.
PRODUCT DIVERSIFICATION. Although, initially, the Company's primary focus
-----------------------
will be on the construction of single-family homes and vacation interval
properties, the Company intends to diversify its portfolio and income sources by
developing for sale the commercial and multi-family properties it currently owns
or may acquire in the future.
STRATEGIC ACQUISITIONS. The Company intends to make strategic acquisitions
----------------------
of businesses in geographic areas outside of Arkansas and Florida, particularly
in the vacation interval and home construction industries.
COMPETITION.
The real estate development and vacation interval industries are highly
competitive. In Arkansas--the geographic area in which the Company initially
intends to commence its single-family home and commercial development--there are
numerous large national and regional firms with significantly greater experience
and financial resources than the Company currently possesses. Such firms will
likely compete with the Company in the acquisition of land for development, the
hiring of sub-contractors, experienced management personnel, construction
workers and other employees, and the sale of product. The Company also will
compete for residential sales with the resale market for existing homes, multi-
family home sales, including townhouses and condominiums, and with available
rental properties.
In the vacation interval industry, the Company will be subject to
significant competition from other vacation interval resort owners and
operators, many with extensive experience in the lodging, hospitality and
entertainment areas. Many of the world's most recognized lodging, hospitality
and entertainment companies have begun to develop and sell Vacation Intervals in
resort properties, including, among others, Marriott Ownership Resorts, The Walt
Disney Company, Hilton Hotels Corporation, Hyatt Corporation, Four Seasons
Hotels & Resorts, and Inter-Continental Hotels and Resorts. These entities
possess significantly greater development experience, financial, marketing,
personnel and other resources than those of the Company and may be able to grow
at a more rapid rate or more profitably as a result.
The Company currently has no material presence or reputation in Arkansas,
Florida, Missouri or any other area in the real estate development or vacation
interval industries, and due to the substantial amount of short-term debt the
Company needs to extend, replace, convert into long-term debt or retire such
debt and also the lack of sufficient capital, it may not be able to commence
significant development activities. As a result, the Company may experience
difficulties in competing with established developers. Although the Company
intends to improve its ability to compete by entering into joint venture or
similar development agreements with established real estate and
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vacation interval developers and raising additional capital, there can be no
assurance of the success of any such agreements or attempts to raise capital.
RAW MATERIALS.
The main raw materials used in the construction of homes and vacation
interval units are concrete and lumber. In addition, the Company will use a
variety of other construction material, including glass and sheetrock. For
commercial construction the primary materials are steel, concrete and glass.
The Company intends to use materials that are commercially available on
competitive terms from a variety of sources, but there can be no assurance that
such materials will be available on terms that are acceptable to the Company.
Since the Company has not commenced significant construction activities, it does
not yet have any principal suppliers.
GOVERNMENTAL REGULATIONS AND STATE GOVERNMENT APPROVAL OF VACATION INTERVAL
SALES.
The building industry is subject to extensive and complex regulations. The
Company, its subcontractors and any joint venture partners must comply with
various federal, state and local laws, ordinances, rules and regulations
regarding zoning, architectural design, construction, population, density,
availability and installation of utility services, such as water, electricity,
gas, and waste disposal, the preservation of the natural terrain, and other
related matters, which requires resources and expertise which, for the most
part, the Company currently lacks. The Company intends to obtain such resources
and expertise by raising additional capital, hiring appropriate sub-contractors,
and entering into consulting agreements and/or joint venture agreements with
experienced real estate developers and other appropriate parties.
The vacation interval operations of the Company will be subject to
extensive regulation by the federal government and the zoning and other laws in
the state, county and city jurisdictions where the Company's vacation interval
properties will be located and where Vacation Intervals will be marketed and
sold. At the federal level, the Company may be subject to, among others, the
following legislation: the Federal Trade Commission Act, which prohibits unfair
or deceptive acts, the Truth-in-Lending Act, Regulation Z, the Equal Opportunity
Credit Act and Regulation B, the Interstate Land Sales Full Disclosure Act, the
Real Estate Standards Practices Act, the Telephone Consumer Protection Act, the
Telemarketing and Consumer Fraud and Abuse Prevention Act, the Fair Housing Act
and the Civil Rights Acts of 1964 and 1968. In addition, most states including
Florida have adopted laws and regulations regarding the sale of Vacation
Intervals, including laws that will require the Company to file with a state
authority for its approval a detailed offering statement describing the Company,
all material aspects of the project and the sale of the Vacation Intervals.
Most states grant the right to purchasers to cancel a contract of purchase at
any time within a period of time, usually ranging from three to fifteen days.
Other applicable state laws include licensing requirements for sellers of real
estate and travel sellers,
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and anti-fraud and telemarketing laws, price, gift, and sweepstake laws, and
labor laws.
The Company's Maumelle Property is subject to the City of Maumelle's Master
Land Use Plan. Under this Plan, approximately 1,241 acres of the approximately
1,285 acres of the Maumelle Property that was developable land as of September
30, 1997, was already zoned for single-family homes. The current zoning allows
the Company to apply for building permits for the approximately 3,800 single-
family home sites located on this acreage. Although much of the Company's
property is currently zoned for single-family homes, none of the developable
land acreage is subdivided and the Company will be required to incur a
significant additional cost to subdivide the property into individual lots. The
Company believes it can satisfy all anticipated governmental requirements
involved in the subdivision process, if it obtains adequate additional funding
and expertise.
The Company must seek building permits from the City of Maumelle Building
Inspector for each home it builds in Maumelle. The Company must apply for
building permits for each commercial property it develops in Maumelle from the
Maumelle City Planning Commission and the City's Board of Directors. Although
the Company believes it can satisfy all necessary requirements to obtain
building permits, at the present time, the Company is not seeking building
permits and does not intend to do so until it raises additional capital or
obtains construction funding.
The Company may be required to mitigate any environmental impact on its 446
acres of wetlands in Maumelle that may be caused by the Company's proposed
development activities in Maumelle. Although the Company is not currently aware
of any such mitigation requirements, the Company will be required to obtain
approval from the Army Corp of Engineers of any required mitigation efforts.
The Company may incur additional costs and delays in seeking such approvals and
performing such mitigation. See "--ENVIRONMENTAL LAWS," below.
Delays in obtaining governmental permits and approvals may increase
development costs to the Company. Zoning requirements and restrictions could
become more restrictive in the future, resulting in additional time and money
being spent to obtain approvals for development of the Company's properties.
The Company also may be subject to periodic delays or may be precluded from
developing projects due to building moratoriums or slow-growth or no-growth
initiatives that could be implemented in the future in the areas which it does
business. In addition, governmental authorities could change the zoning of all
or some of the Company's properties, or change vacation interval regulations,
which could result in a decrease in property values.
Under various state and federal laws governing housing and places of public
accommodation the Company is required to meet certain requirements related to
access and use by disabled persons. The Company is likely to incur substantial
costs complying with such laws, which may have a material adverse effect on the
Company. Additional legislation may impose further burdens or restrictions on
owners with respect to access by disabled persons. The
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ultimate amount of the cost of compliance with such legislation is not currently
ascertainable. Limitations or restriction arising from such laws may make it
difficult for the Company to develop its vacation interval resort properties and
may limit application of the Company's growth strategy in certain instances or
reduce profit margins on the Company's operations.
The Company believes that, with adequate funding, it can comply with all
applicable laws regarding its real estate development and vacation interval
operations. There can be no assurance, however, that the Company will be able to
comply with all such laws. The Company expects that the costs of complying with
governmental regulations will be very significant once it commences development
activities. There can be no assurance that the Company will be able to obtain
state approval to sell Vacation Intervals in all jurisdictions in which the
Company desires to sell such interests, or that the cost of complying will not
be so prohibitive as to make it unprofitable to commence vacation interval
operations. Any failure to comply with applicable laws or regulations could
have a material adverse effect on the Company.
ENVIRONMENTAL LAWS.
The Company is subject to various federal, state and local laws, ordinances
and regulations regarding environmental matters. Under these laws, a current or
previous owner or operator of real property may be required to investigate and
clean up hazardous or toxic substances or petroleum product releases at such
property, and may be held liable to a governmental entity or to third parties
for property damage and the costs of investigation, removal and decontamination
incurred by such parties in connection with contamination. The penalty is
imposed whether or not the owner or operator was aware of, or responsible for
the hazardous or toxic substances, and the liability under such laws has been
interpreted to be joint and several unless the harm is divisible and there is a
reasonable basis for allocation or responsibility.
The costs of investigation, removal or decontamination of such substances
could be substantial. If such substances are found on real property or there is
a failure to properly remove or decontaminate the area, the property could be
difficult to sell, rent, develop or use to secure debt financing. Persons who
arrange for the disposal or treatment of hazardous or toxic substances at a
disposal or treatment facility also may be liable for the costs of removal or
remediation of a release of hazardous or toxic substances at such disposal or
treatment facility, whether or not such facility is owned or operated by such
person. In addition, some environmental laws create a lien on the contaminated
site in favor of the government for damages and costs it incurs in connection
with the contamination. Finally, the owner of a site may be subject to common
law claims by third parties based on damages and costs resulting form
environmental contamination emanating from a site. In connection with its
ownership and operation of real property, the Company potentially may be liable
for the foregoing costs.
Certain Federal, state and local laws, regulations and ordinances govern
the removal, encapsulation or disturbance of asbestos-containing materials
("ACMs") when such materials are in poor condition or in the event of
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construction, remodeling, renovation or demolition of a building. Such laws may
impose liability for release of ACMs and may provide for third parties to seek
recovery from owners and operation of real properties for personal injury
associated with ACMs. In connection with its ownership and operation of its
properties, the Company may be potentially liable for such costs.
In addition, recent studies have linked radon, a naturally-occurring
substance, to increased risks of lung cancer. While there are currently no state
or federal requirements regarding the monitoring for, presence of, or exposure
to, radon in indoor air, the EPA and the Surgeon General recommend testing
residences for the presence of radon in indoor air, and the EPA further
recommends that concentrations of radon in indoor air be limited to less than 4
picocuries per liter of air (Pci/L) (the "Recommended Action Level"). The
presence of radon in concentrations equal to or greater than the Recommended
Action Level in one or more of the Company's properties may adversely affect the
Company's ability to develop its residential and commercial properties or sell
Vacation Intervals at such properties, as well as the market value of such
property.
Recently-enacted federal legislation will eventually require the Company to
disclose to potential purchasers of Vacation Intervals at any Company resorts
that were constructed prior to 1978 any known lead-paint hazards and will impose
treble damages for failure to so notify. If the Company decides to renovate and
of the existing buildings on the Florida Bible College Property, or any other
properties that it may acquire in the future, the Company will be subject to
this legislation if the buildings were constructed before 1978, as are the
existing buildings on the Florida Bible College Property.
Electric transmission lines are located in the vicinity of the Company's
properties. Electric transmission lines are one of many sources of electro-
magnetic fields ("EMFs") to which people may be exposed. Research into potential
health impacts associated with exposure to EMFs has produced inconclusive
results. Notwithstanding the lack of conclusive scientific evidence, some states
now regulate the strength of electric and magnetic fields emanating from
electric transmission lines, while others have required transmission facilities
to measure for levels of EMFs. In addition, the Company understands that
lawsuits have, on occasion, been filed (primarily against electric utilities)
alleging personal injuries resulting from exposure as well as fear of adverse
effects from transmission lines has been a factor considered in determining
property values in obtaining financing and in condemnation proceedings in
eminent domain brought by power companies seeking to construct transmission
lines. Therefore, there is a potential for the value of a property to be
adversely affected as a result of its proximity to a transmission line and for
the Company to be exposed to damage claims by person exposed to EMFs.
The Company had a Phase I investigation conducted on approximately 63% of
the Maumelle Property in July and August 1995 which found no evidence of soil or
ground water contamination on the studied property and recommended that a Phase
II study was not warranted. This Phase I assessment was carried out in
accordance with accepted industry practices and consisted of
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non-invasive investigations of environmental conditions at the properties,
including a preliminary investigation of the sites and identification of
publicly known conditions concerning properties in the vicinity of the sites,
physical site inspections, review of aerial photographs and relevant
governmental records where readily available, interviews of knowledgeable
parties, investigation for the presence of above ground and underground storage
tanks presently or formerly at the sites, a visual inspection of potential lead-
based paint and suspect friable ACMs where appropriate, a radon survey, and the
preparation and issuance of a written report. In 1986, an Environmental
Protection Agency ("EPA") representative stated in a letter to a previous owner
of the Maumelle Property, that although part of the Maumelle Property had been
used by the United States government during World War II as a munitions ordnance
facility until 1950, the entire site had been decontaminated by the U.S.
government prior to its sale in 1961. In the letter, the EPA characterized the
property as not having any further environmental concerns. No environmental
studies were conducted by the Company of the Florida Bible College Property.
The Company is not aware of any environmental liability with respect to any
of its real property that the Company believes would have a material adverse
effect on the Company's business, assets, or results of operations.
Nevertheless, there can be no assurance, that the Company's real property does
not contain hazardous or toxic substances, particularly on the property which
has not been subjected to a Phase I investigation, or that the Company will not
incur costs associated with the decontamination of any such substances or
liability arising from any such contamination. No assurance can be given that
the environmental studies conducted on the property reveal all environmental
liabilities or that no prior owner created any material environmental condition
not known to the Company.
The Company believes that compliance with applicable environmental laws and
regulations will have a material adverse effect on the Company, its financial
condition and its results of operations unless the Company can raise substantial
additional capital to fund its operations. The Company believes that its
properties are in compliance in all material respects with all federal, state
and local laws, ordinances and regulations regarding hazardous or toxic
substances. The Company has not been notified by any governmental authority or
any third party, and is not otherwise aware, of any material noncompliance,
liability or claim relating to hazardous or toxic substances or petroleum
products in connection with any of its present properties.
NUMBER OF EMPLOYEES. The Company and its subsidiaries have ten part-time
employees, and one full-time employee, its President, Michael G. Todd.
ITEM 2. DESCRIPTION OF PROPERTY.
GENERAL
The Company's principal asset is the Maumelle Property, located in
Maumelle, Arkansas, title to which is held by the Operating Subsidiary. At the
Company's fiscal year-end, the Maumelle Property consisted of
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approximately 1,241 acres of single-family sites (which included approximately
3,800 home sites), approximately 43 acres of multi-family sites, and
approximately 446 acres of miscellaneous undevelopable property. The Company
currently has no Commercial Lots. The Maumelle Property is currently zoned under
the City of Maumelle Master Land Use Plan for various development uses,
including single-family residences, multi-family units, and commercial
development. As of September 30, 1997, the Company's single-family home sites
in the City of Maumelle represented approximately 70% of all available vacant
land in Maumelle zoned for single-family homes.
The Maumelle Property can be divided into four categories: (1) the Large
Residential Tract, (2) the Pine Ridge Lots, (3) the Multi-Family Lots, (4) the
Miscellaneous Tract and Property. Each category of Maumelle Property will be
discussed separately below after the following overview of the City of Maumelle.
In July, 1997, the Company acquired additional real property, including
approximately 36 acres of land and improvements in Osceola, Florida, discussed
below, and in ITEM 1, "DESCRIPTION OF BUSINESS." See ITEM 6, "MANAGEMENT'S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION--LIQUIDITY AND CAPITAL RESOURCES."
Until September 30, 1997, the Operating Subsidiary owned the Resure
Debenture, when pursuant to the terms of the Resure Settlement Agreement, the
Company terminated its rights to the Resure Debenture in exchange for the
cancellation of the Resure Note II. See ITEM 2, "DESCRIPTION OF PROPERTY -
RESURE DEBENTURE," which is described below.
Except as otherwise noted, the Company believes that its real property
assets are in good condition and are suitable and adequate for the uses
indicated. Since there are no insurable improvements on the Company's properties
other than the Osceola, Florida property discussed below, the Company does not
maintain any insurance coverage on most of its real property assets. The
Florida Bible College Property is covered by an insurance policy covering bodily
injury and property damage combined, in the amount of $1,000,000 per occurrence
and in the aggregate, and a $2,000,000 policy covering the buildings on the
property. Management believes the property is adequately insured.
MAUMELLE PROPERTY
THE CITY OF MAUMELLE. The City of Maumelle is a 5,000 acre planned
community located off Interstate 40 on the Arkansas River. Fifteen miles from
downtown Little Rock, the capital of Arkansas, Maumelle is patterned after other
"new town" communities such as Reston, Virginia, Irvine Ranch in Orange County,
California and Columbia, Maryland.
Under the Master Plan, Maumelle cannot add new property to the city for
residential development without public hearings regarding any proposed
annexation of land by the City and the subsequent approval by the City Board of
Directors. From Maumelle's inception in 1966 to 1996, approximately $120
million has been spent on infrastructure, including sewer and water capacity for
a city of up to 25,000 residents and a system of designated common areas,
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including pathways, parks, lakes, a golf course and other recreational areas.
The City of Maumelle was incorporated as a city in 1985. It is governed by a
mayor and city council and has police, fire, and emergency services.
The population of Maumelle has grown at a faster rate than that of
neighboring Little Rock, Arkansas. From 1990 to 1996, Maumelle had a 13%
increase in its population; whereas Little Rock grew at only a 2% rate. The
community of Maumelle appears to be attracting more highly educated residents
than does Little Rock. The U.S. Department of Commerce and the Little Rock
Metropolitan Planning Commission ("Metroplan"), a government planning agency,
stated that in 1990, 92.6% of Maumelle residents had completed high school, with
38.8% having four or more years of college. During the same period, only 76.6%
of Little Rock residents had completed high school and 20.4% had four years or
more of college. Maumelle also exceeds the national average for high school and
college attendance. As of 1990, only 75.2% of U.S. citizens had completed high
school and 20.3% had four or more years of college.
Since 1979, Maumelle has attracted some major companies to its industrial
areas, including Target Distribution Center, Kinney Shoe Distribution Center,
Carrier (a manufacturing facility), Kimberly Clark (a manufacturing facility),
Ace Hardware Distribution Center, Family Dollar Distribution Center, and Lamb
Packaging and Iskco (both manufacturing facilities). The job growth rate in the
City of Maumelle has increased by 7.5% from 1990 to 1995; during the same period
Little Rock had a job growth rate increase of 14%.
As of June 30, 1996, the average new home price in Maumelle was $152,551
and in Little Rock was $162,339, according to a Metroplan report. The number of
building permits issued by Maumelle has increased 112% between 1990 and 1995,
according to Metroplan. During the same period, Little Rock experienced a
growth rate in building permit issuances of 58%. A total of 124 building
permits were issued in Maumelle in 1995, 220 in 1996, and 142 for the first six
months of 1997, with a projected total for the year of 350 permits.
LARGE RESIDENTIAL TRACT. As of the end of the 1997 fiscal year, the Large
Residential Tract was comprised of approximately 1,045 acres of undeveloped
residential land. In May, the Company sold 67 acres of this land to increase
its liquidity. See ITEM 6, "MANAGEMENT'S DISCUSSION AND ANALYSIS--LIQUIDITY AND
CAPITAL-- Certain Capital Raising Transactions." Under current zoning, the
Company believes this land can be subdivided into approximately 3,300 single-
family lots. The Large Residential Tract currently is zoned for residential
development.
The following summary of certain terms of the Resure Loans I and II is
qualified in its entirety by the fact that effective September 30, 1997, the
Company entered into the Resure Settlement Agreement which modified and brought
current the Resure Note I. Under the Resure Settlement Agreement, the Resure
Note II was canceled in exchange for the termination the Resure Debenture owned
by the Company. See discussion below and ITEM 6, "MANAGEMENT'S DISCUSSION AND
ANALYSIS OR PLAN OF OPERATION--LIQUIDITY AND CAPITAL RESOURCES--Indebtedness and
Other Liquidity Requirements."
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The Operating Subsidiary has fee title to the Large Residential Tract, all
of which is subject to a first-priority mortgage securing the $3,500,000 Resure
Loan I. Approximately 701 acres of the Large Residential Tract ("Residential
Parcel 1) is retained by the Liquidator as collateral on the modified Resure
Note I.
Under the original terms of the Resure Note I, quarterly payments of
principal and interest in the amount of $101,591.16 commenced January 1, 1997,
until its maturity date on July 1, 2000. Prior to that date interest only
payments were required on a quarterly basis. Under the Resure Settlement
Agreement the Company will continue to pay quarterly installments of principal
and interest in the amount of $101,591.16 until the Resure Note I's modified
maturity date on September 1, 1999. The amount of $525,460 that was held by the
Liquidator in a restricted cash collateral account was applied to the past due
interest payment of October 1, 1996, and for the principal and interest
installment payments that were due January 1, April 1 and October 1,1997. The
balance due at maturity, assuming payment of all scheduled principal and
interest payments and no pre-payments, will be $3,305,842. The Resure Note I
bears interest at a rate of 10% per annum. As of the date of this Report, the
Company is current on all payments to Resure and will not owe another quarterly
payment until January 1, 1998. The current principal amount of the Resure Note I
is $3,426,713 as of the date of this Report. The Resure Note I may be prepaid
at anytime by the Company without incurring premiums or penalties. As
additional consideration for the Liquidator to enter into the Resure Settlement
Agreement, the Company agreed to pay a developer's fee of $2,000 (the
"Developer's Fee") for each lot sold in Parcel 1, which is comprised of
approximately 701 acres of the Large Residential Property and Parcel 2, which is
comprised of approximately 344 acres of the Large Residential Property. In the
event that any portion of Parcel 1 is sold prior to being subdivided into
single-family lots, the Company will pay $2,853 per acre, and $5844.20 per acre
if Parcel 2 is sold prior to being subdivided; however, such Developer's Fees
shall not exceed $2,000,000. The Developer's Fee shall be secured by a written
amendment to the loan mortgage securing the Resure Note I, which shall be
recorded against the 701 acres of the Large Residential Property.
Under the Resure Settlement Agreement, the Liquidator released
approximately 344 acres of the Large Residential Tract that secured the
$3,500,000 Resure Note II. Prior to the settlement, payments of interest only at
a rate of 7% per annum were required semi-annually on each June 30 and December
31, which coincide with substantially concurrent and equal payments payable to
the Company by Resure pursuant to the Resure Debenture. See ITEM 2,
"DESCRIPTION OF PROPERTY--RESURE DEBENTURE." Under the Resure Settlement
Agreement, the Resure Note II was canceled by the Liquidator in exchange for the
termination of the Resure Debenture, which was issued to the Company in
consideration for the Resure Note II. As of the date of this Report, there are
no mortgages on the 344 acres of the Large Residential Property; however, the
property has been used to secure the $1,750,000 line of credit at the Bank of
Atkins.
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PINE RIDGE LOTS. The Pine Ridge Lots are comprised of approximately 197
acres, including 487 single-family lots which have a preliminary plat filed with
the City of Maumelle. The property is zoned for residential development. The
Operating Subsidiary has fee title to the Pine Ridge Lots. There are no
mortgages or liens for indebtedness or any other material encumbrances on the
property. There are, however, certain legal proceedings that may result in a
lien on the property. See ITEM 3, "LEGAL PROCEEDINGS." The Company, through its
Home Construction Subsidiary or joint ventures anticipate constructing single-
family homes on the Pine Ridge Lots in the calendar year of 1999, assuming it
can raise sufficient capital.
COMMERCIAL LOTS. The Company owned approximately 40 acres of Commercial
Lots, which were zoned for commercial use. Effective September 30, 1997, the
Company deeded the approximately 40 acres of Commercial Lots to Century as
consideration to retire debt comprised of the Century Note I for $1,400,000 and
the $350,000 Century Note II, and settle a pending legal action. The Company
retains the option to purchase the 40 acres of property from Century; provided
it makes certain option payments and pays a final payment in the amount of
$2,132,057.39 (the "Purchase Price) by April 17, 1998. If the Company is able to
purchase the Commercial Lots, the Company proposes to develop these Commercial
Lots for sale, either through joint ventures or through its Home Construction
subsidiary ITEM 3, "LEGAL PROCEEDINGS," and ITEM 6, "MANAGEMENT'S DISCUSSION AND
ANALYSIS OR PLAN OF OPERATION--LIQUIDITY AND CAPITAL RESOURCES."
Thirty-six acres of the Commercial Lots were encumbered by a lien securing
payment of special improvement taxes assessed against the property to service a
$380,000 bond issuance by the City of Maumelle, Arkansas Multi-Purpose
Improvement District No. 2. The annual tax on the property was $92,430, payable
each October 10. Century assumed the liability for the special improvement
taxes and the ad valorem taxes, including those due on October 10, 1997, upon
the delivery of the deed to said 36 acres.
MULTI-FAMILY LOTS. The Multi-Family lots are approximately 43 acres of
land that have been zoned for multi-family use. The Company proposes to develop
these Multi-Family Lots for sale, either through joint ventures or through its
Home Construction Subsidiary. The Company, however, may sell certain portions
of the Multi-Family Lots prior to development as required to meet liquidity
requirements or if the Company's Management determines that a particular
property is not appropriate for development by the Company. The Operating
Subsidiary has fee title to these lots, subject to the liens discussed below.
Approximately 30 acres of the Multi-Family Lots are subject to a lien in
favor of the Bank of Little Rock, as security for a $400,000 line of credit and
a $450,00 line of credit provided by that Bank, of which an aggregate of
$849,024 was outstanding as of the Company's fiscal year end, and $700,000 as of
December 1, 1997. See ITEM 6, "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION--LIQUIDITY AND CAPITAL RESOURCES--Indebtedness and Other Liquidity
Requirements. Each line of credit bears interest of a fixed rate of 10% per
annum. The $400,000 line of credit requires monthly interest payments
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commencing May 10, 1997, until April 10, 1998, when a balloon payment consisting
of the entire principal balance and accrued interest under the line is due and
payable. This line is secured by approximately 11 acres of the Commercial
Property. The $450,000 line of credit requires no monthly payments of interest
or principal, but was payable on demand or November 5, 1997, whichever was
sooner. This line of credit is secured by approximately 19 acres of the
Commercial Property. Subsequent to the Company's fiscal year, the $450,000 line
of credit from the Bank of Little Rock was modified to extend the maturity date
to February 5, 1998, or on demand, whichever is sooner.
As of September 30, 1997, all ad valorem taxes on the Multi-Family Lots are
current.
MISCELLANEOUS TRACT AND PROPERTY. The Miscellaneous Tract and Property
consists of approximately 446 acres of wetlands. The Operating Subsidiary has
fee title to the Miscellaneous Tract and Property, which are held free of any
encumbrances or liens. The Company has no current development plans for such
property. The wetlands property is located in the Arkansas River and,
therefore, is unsuitable for development.
FLORIDA BIBLE COLLEGE PROPERTY. As discussed above, the Company acquired
the Florida Bible College Property in Osceola, Florida on July 30, 1997. Fee
title to such property is held by the Florida Resorts Subsidiary. There are no
liens on the property, other than those for taxes not yet due. See ITEM 1,
"DESCRIPTION OF BUSINESS." As of the date of this Report, the Company has not
taken depreciation on the property. Taxes on the property and improvements were
$0 in 1997, as the previous owner was a tax exempt organization. The Florida
Bible College Property has not been reassessed, but the Company believes taxes
should be around $58,000 per year based upon prior assessments.
The Florida Bible College Property consists of buildings and other
improvements on approximately 36 acres of land near Disney World. The
improvements include two vacant two-story hotel buildings, totaling
approximately 49,450 square feet. The buildings contain 95 rooms, as well as a
lobby area, offices, a cafeteria, a kitchen, and meeting space. The
improvements also include a swimming pool, landscaping, irrigation, an asphalt
paved parking area and concrete walks and curbs. The structures are not
occupied and Management has determined that the facilities are not adequate for
or suitable for the Company's intended use of the property. See "--PROGRAM OF
DEVELOPMENT," below.
Approximately 22 acres are zoned for commercial and industrial use. This
property includes an office/education building, an auditorium, an administrative
building, and five single-family residences. These improvements are in fair to
good condition. The buildings are not occupied and as of the date of this
Report, the Company has listed this portion of the property for sale.
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CERTAIN PROPERTY RECENTLY ACQUIRED OR TO BE ACQUIRED
THE BRANSON, MISSOURI PROPERTY. In June 1997, the Company entered into
agreements to purchase approximately 21 acres of undeveloped land in Branson,
Missouri, for approximately $4,200,000. The purchase agreements relating to
this property required the sale to close by September 12, 1997. Although the
Company did not close on the Branson property in September, the Company
continues to negotiate to acquire the property. The Company does not currently
have the funds necessary to close the transaction. See "Prospective Sources of
Liquidity," below. If the property can be acquired and sufficient capital
raised, the Company intends to develop vacation ownership units on the property.
OCEAN PALMS RESORT. As discussed above, subsequent to the Company's fiscal
year-end, the Company purchased the rights to the Ground Lease and improvements
of Ocean Palms Resort located in Pompano Beach, Florida. The property consist
of a 53 LTL unit complex, pool, office areas, parking area and other amenities.
The assignment of the Ground Lease rights is held by the Florida Resorts
Subsidiary. The Ground Lease is for a period of 99 years, and will expire on
March 1, 2064. The Ground Lease is payable to Nancy H. Newell and Jane H.
Tubbs, or their successors or assigns, at a rate of $76,200, per year due on
March 1. The Ground Lease is encumbered by a mortgage in the amount of
$1,158,000 held by various trusts and individuals (the "Ocean Palms Mortgagee"),
which the Florida Resorts Subsidiary assumed. The Ocean Palms Mortgage is
evidenced by a promissory note ("Ocean Palms Note") in the amount of $1,158,000
and bears interest at a rate of 12.75% per annum. The Ocean Palms Note is
payable interest only in the amount of $12,303.75 each month from January 1,
1998 to May 1, 1998. The note is payable thereafter in the amount of
$17,119.85, commencing May 1, 1998, until its maturity on April 1, 1998, when
the note is due in full. The Company has the option of extending the Ocean
Palms Note for two additional years, by paying an option fee of 1% of the then
outstanding principal balance of the note on or before March 1 of each year. The
Ocean Palms Note is collaterized by an assignment of the Ocean Palms Resort
Paper held by the Company and the conditional assignment of the Ground Lease to
the Ocean Palms Mortgagee. Under the terms of the assignment of the paper, the
Company is obligated to pay the Ocean Palms Mortgagee the monthly proceeds from
the Ocean Palms Paper up to the amount of the monthly mortgage payment.
The 53 LTL units have been sold and are in good condition, as is the
common area improvements. The owners of the individual units are responsible for
the taxes, insurance and maintenance of their unit and a share of the common
area maintenance. These costs are assessed and collected monthly by the Company
as part of its management services. These management services also include the
management of the common area property and the rental of LTL units for owners
that choose to rent their units as hotel rooms. Management believes Ocean Palms
Resort is adequately insured.
OCEAN VILLAS. As discussed above, subsequent to the Company's fiscal
year-end, the Florida Resorts Subsidiary acquired all of the issued and
outstanding stock of OPV Development, Inc. ("OPV"), an unaffiliated third
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party. With the stock acquisition, the Company acquired OPV's primarily asset,
two lease rights to a four lot parcel of land and improvements (the "Ground
Leases") located in Pompano Beach, Florida (the "Ocean Villas Property"). The
Company acquired the 16 LTL unit Ocean Villas, and approximately $294,000 in
promissory notes (the "Ocean Villas Paper") created from the prior sale of 4 LTL
units, for approximately $107,000 in cash, and the assumption of a first
mortgage of $375,000 and a second mortgage of $150,000 which encumbers the
Ground Leases.
The First Ground Lease, dated July 1964, requires payment in the amount of
$2,614.18 every six months, with the next payment due January 20, 1998, and is
for a period of 99 years, of which 65 years and 5 months remain. The Second
Ground Lease, dated December 1969, requires payment in the amount of $2,848.55
every six months, with the next payment due January 21, 1998, and is for a
period of 99 years, of which 65 years and 5 months remain.
The First and Second Ground Leases are encumbered by two mortgages. The
first mortgage leasehold, and promissory note evidencing the mortgage (the
"First Ocean Villas Note",),dated September 17, 1997 in the amount of $375,000,
payable to Onofrio Biviano. The First Ocean Villas Note bears interest at a
rate of 10.5% per annum with payments of interest and principal of $3,743.92 due
on the 17/th/ of each month until the note matures on September 17, 2001, when
any remaining outstanding balance is due.
The second mortgage leasehold and promissory note evidencing the mortgage
(the "Second Ocean Villas Note"), dated December 9, 1997 in the amount of
$150,000, payable to Domenick Greco, Trustee and Leonard Gross. The First Ocean
Villas Note bears interest at a rate of 12% per annum payable interest only in
the amount of $1,500 per month, commencing January 9, 1998 until the note's
maturity on December 9, 1998, when the entire principal and accrued interest is
due.
The First and Second Ocean Villas Mortgage are secured by collateral
assignments to the mortgagees of any and all non-recourse installment notes
arising out of the sale of the Ocean Villas LTL units, until such mortgages are
paid in full.
Four of the 16 Ocean Villas units have been remodeled and sold to third
parties at an average price of $73,743 per unit, which resulted in the Ocean
Villas Paper, discussed above. The remaining 12 unsold units will require
approximately $50,000 in renovation. The Company is in the process of
renovating and marketing the LTL units for sale through an unaffiliated real
estate brokerage firm. Management believes the property is adequately insured.
Taxes on the Ocean Villas complex are approximately $12,432 and are due on
December 31, 1997. The Company intends to pay the taxes in a timely manner.
PROGRAM OF DEVELOPMENT.
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The Company will not be able to implement any of the following plans for
developing its properties if it cannot convert into long-term debt, or extend,
replace or retire its current short-term debt and raise substantial additional
capital, of which there can be no assurance. See ITEM 6, "MANAGEMENT'S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION."
DEVELOPMENT OF PROPERTY IN MAUMELLE. The Company intends to commence its
initial home development activities by the first quarter of 1998 by acquiring
approximately 30 improved single-family lots from third-party property owners
and building its first homes on such property. The Company intends to build
approximately 175 homes on acquired single-family lots within the next 2 years,
to be sold for sales prices in the range of $125,00 to $160,000.
The Company expects that some of the improved single-family lots referred
to above will be acquired from DeHaven Todd Limited Partnership ("DTLP"). The
Company expects to purchase any lots it acquires from DTLP at fair market value,
to be determined at the time of purchase. Such fair market value will be
established by an unaffiliated certified appraiser. See ITEM 12, "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS." The Company estimates that the
aggregate cost for acquiring the approximately 100 single-family lots it wishes
to purchase from DTLP will be approximately $19,000 per lot and that the
aggregate cost of development of the homes it wishes to build on the sites will
be approximately $60 to $65 per square foot.
The Company intends to commence development activity on portions of the
property it now owns in Maumelle as soon as it can obtain the necessary funds to
do so. Management anticipates that the Company will begin developing its
existing inventory in Maumelle with the Pine Ridge Lots. The Company intends to
start home site improvements on at least one Pine Ridge subdivision in the third
quarter of 1998, assuming it is able to obtain necessary capital for such
development. The Company plans to commence single-family home construction on
the first Pine Ridge subdivision lots in the 1999 calendar year.
The Pine Ridge Lots are fully entitled with a preliminary subdivision plat
recorded with the City of Maumelle. The Pine Ridge Lots are comprised of 487
lots in four subdivisions, averaging approximately 120 lots each. The
improvement district in which the Pine Ridge Lots are located is already
partially improved, with a roughly graded roadway.
Because the Pine Ridge Lots were partially improved prior to the Company's
acquisition, the Company expects its cost to develop an improved lot will be
less in Pine Ridge than the other Maumelle Property. Management estimates that
construction costs for single-family homes built on the acquired lots and on the
Pine Ridge Lots will average approximately $50 to $53 per square foot. The
Company estimates that the aggregate cost of building and selling 487 homes on
the Pine Ridge Lots, inclusive of general and administrative expenses, sales and
marketing expenses, will be in the range of $75 to $85 per square foot.
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The Company intends to build up to 3,300 moderately priced single-family
homes on the Large Residential Tract for sales prices in the range of $125,00 to
$200,000. The Company estimates that the cost for building and selling these
homes, inclusive of general and administrative expenses, sales and marketing
expenses, and closing costs, will be in the range of $100,000 to $160,000 per
home.
Because the Company lacks experience in the home construction industry and
has only limited experience in the vacation ownership industry, the Company
believes it may be difficult to obtain conventional credit sources sufficient to
finance the foregoing development activity. The Company, therefore, believes it
may be necessary to enter into joint ventures with well capitalized real estate
developers to pursue the Company's building program.
The Company's estimated costs of development, on a per square foot cost
basis, is higher than the national average and is reflective of the Company's
inexperience in the home construction industry. Given such inexperience and
likelihood of price fluctuations over time, no assurance can be given, however,
that construction costs will not exceed the Company's estimates.
There are no current plans for the improvement or development of the
Commercial Lots or the Miscellaneous Tracts and Properties. These properties
are being held for the purpose of future development or resale, depending upon
the Company's liquidity needs or if Management determines specific properties do
not meet its development strategies.
DEVELOPMENT OF VACATION INTERVAL PROPERTIES. The Company intends to
conduct vacation interval operations initially in Florida, Arkansas and
Missouri, either on its own or with joint venture partners. The Company intends
to immediately commence vacation ownership activities by renovating and selling
LTL units in the Pompano Beach, Florida Ocean Villa Property that was acquired
subsequent to the fiscal year end. The Ocean Villa Property consists of 16 LTL
units, of which 12 units remain unsold. The Company intends to initially manage
the Ocean Villas and the Ocean Palms Resort LTL units. Such management services
include the up-keep of the common areas and the rental of the LTL units as hotel
rooms for LTL owners that choose to rent their units.
The Company also intends to initially construct a hotel on its Florida
Bible College Property near Disney World, Florida. Although the property has
two vacant two-story hotel buildings on the property, totaling approximately
49,450 square feet, Management has determined that the buildings are not
suitable or adequate for their purposes and plan to demolish the buildings.
Assuming the Company is able to obtain the necessary capital through
construction and long-term debt financing for such development, of which there
can be no assurance, the Company intends to begin vacation ownership business
development activities by constructing a seven story 264 room hotel on the
Florida Bible College Property. The Company intends to use the hotel in the
Company's proposed Vacation Interval marketing operations. See "--DESCRIPTION
OF PROPERTY," above, and ITEM 1, "DESCRIPTION OF BUSINESS--RECENT BUSINESS
DEVELOPMENT." The Company intends to sell discount vacation tours to
prospective Vacation Interval purchasers, which would include a stay in the
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Company's hotel, and employ marketing representatives to sell VOI units to the
hotel guests. See ITEM 1, "DESCRIPTION OF BUSINESS--BUSINESS OF THE COMPANY--
MARKETING AND ADVERTISING." Management estimates that the construction of the
hotel, which will include a vacation interval sales offices, on the Florida
Bible College Property will cost approximately $14,000,000 and will commence
when the Company is able to obtain the necessary financing. The Company
initially intends to contract with an unaffiliated management firm to manage the
hotel.
After the construction of the hotel, the Company intends to develop a
health spa and approximately 150 Vacation Interval units on the property,
although such plans are in the preliminary stages. The timing and actual number
of rooms and Vacation Interval units built will depend on the demand for hotel
space and Vacation Intervals and the level of the Company's Vacation Interval
pre-sales.
The Company intends to finance the construction of the hotel building by
obtaining a construction and permanent loan secured by the property, which
currently is unencumbered by indebtedness for borrowed money. Although an
unaffiliated third party appraised the property in December 1997 at $4,570,000,
there can be no assurance that the Company will be able to obtain the necessary
financing, given the Company's need to extend, replace, convert into long-term
debt, or retire its short-term debt and raise sufficient capital to commence
meaningful operations. The Company intends to finance the construction of the
spa and the construction of the Vacation Interval units on the Florida Bible
College Property by construction and long-term debt financing, secured by the
property.
The Company intends to sell the approximately 22 acre commercial and
industrial portion of the property to a developer of commercial property.
The Company also intends to construct a vacation ownership resort on the
approximately 21 acres of undeveloped land in Branson, Missouri, if it is able
to negotiate a new agreement to purchase the property. The current agreement
expired September 12, 1997; although the Company currently does not have
sufficient funds to consummate this acquisition. See ITEM 6, "MANAGEMENT'S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION--LIQUIDITY AND CAPITAL RESOURCES--
Indebtedness and Other Liquidity Requirements."
RESURE DEBENTURE.
On September 1, 1995, the Operating Subsidiary acquired the Resure
Debenture in connection with the $3,500,000 Resure Loan II. See ITEM 1,
"DESCRIPTION OF BUSINESS--BUSINESS DEVELOPMENT," and ITEM 6, "MANAGEMENT'S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION--LIQUIDITY AND CAPITAL RESOURCES--
Indebtedness and Other Liquidity Requirements." The Resure Debenture was issued
by Resure to the Operating Subsidiary as consideration for the $3,500,000 Resure
Note II. The Operating Subsidiary was entitled to receive semi-annual payments
of principal and interest on the Resure Debenture, which generally matched the
amount and timing of the semi-annual principal and interest payments payable by
the Company to Resure under the Resure Note II.
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The principal and interest payments received by the Company under the Resure
Debenture were used to pay the semi-annual payments due to Resure under the
Resure Note II. The semi-annual principal and interest payments commenced
December 1995 and were to terminate in June 2000. Interest under the Resure
Debenture accrued at a rate of 7% per annum.
Under the Resure Settlement Agreement, effective September 30, 1997, the
Resure Liquidator canceled the Company's obligations under the Resure Note II,
in return for the cancellation of the Resure Debenture.
POLICIES WITH RESPECT TO CERTAIN ACTIVITIES
GENERAL. The following is a discussion of investment policies, financing
policies, conflict of interest policies, and policies with respect to certain
other activities of the Company. The policies with respect to these activities
have been determined by the Company's Board of Directors and may be amended or
revised from time to time at the discretion of the Board without a vote of the
shareholders of the Company, except that changes in certain policies with
respect to conflicts of interest must be approved by a majority of the
independent directors and otherwise be consistent with legal requirements.
INVESTMENT POLICIES.
Investments in Real Estate or Interests in Real Estate. The Company
------------------------------------------------------
generally conducts all of its investment activities through the Operating
Subsidiary and intends to do so for the foreseeable future, except that any
construction activity will likely be conducted through the Home Construction
Subsidiary and any vacation ownership development will be conducted through
individual subsidiaries to be owned by the Resort Subsidiary. During the 1997
fiscal year, the Company expanded its focus to include vacation ownership
operations, because Management believes that the vacation ownership industry has
substantial growth potential.
The Company's investment objective is to increase long-term total returns
to shareholders through appreciation in the value of the Common Stock. The
Company's policy is to acquire or develop assets where the Company believes that
favorable investment opportunities exist based on market conditions at the time
of the investment.
The Company expects to pursue its investment objectives primarily through
the direct ownership of properties by the Operating Subsidiary and/or
subsidiaries to be owned by the Resort Subsidiary, although, as discussed below,
the Company may also pursue indirect property ownership opportunities,
particularly if it is necessary or advisable to do so in order to acquire the
development resources, which the Company now lacks. The Company intends to
acquire or develop residential, commercial, and vacation ownership properties
primarily in the Maumelle area, Florida, and Missouri, but may pursue the
acquisition or development of residential, commercial and vacation ownership
properties in other areas of the United States.
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Future development or investment activities will not be limited by the
governing documents of the Company or its subsidiaries to any geographic area,
product type or specified percentage of the Company's assets. It is the
Company's policy to acquire assets primarily for possible capital gain.
Securities of or Interests in Persons Primarily Engaged in Real Estate
----------------------------------------------------------------------
Activities and Other Issuers. The Company also may invest in securities of
- - ----------------------------
other entities engaged in real estate activities or invest in securities of
other issuers, including investments by the Company for the purpose of
exercising control over such entities. No such investments will be made,
however, unless the Board of Directors determines the proposed investment would
not cause the Company to be an "investment company" within the meaning of the
Investment Company Act of 1940, as amended (the "Investment Company Act").
Should management recommend prospective acquisitions in the be the policy to
enumerate a correlation between the strategic objectives of the Company and the
prospective acquisition, or a plan to enhance shareholder value as measured by
future book value or earnings per share.
Investments in Mortgages. Subsequent to the Company's fiscal year, the
------------------------
Company acquired $2,600,000 in promissory notes, secured by conditional
assignments on leases on various LTL units in the Ocean Palms Resort Property.
The notes have been collaterally assigned by the Company to the holder of the
Ground Lease mortgage, as security. The Company has no immediate plans to
warehouse mortgages. The Company has determined that it is in its best interests
to engage in such activities as a means of providing enhanced service to its
Vacation Interval buyers. The Company may also offer such services to its home
buying customers, and hold mortgages generated from the sale of its Maumelle
Property inventory, as well as its Vacation Interval units.
FINANCING POLICIES. The organizational documents of the Company and its
subsidiaries impose no limits on the amount of indebtedness they may incur. The
Company will from time to time determine its borrowing policies in light of
then-current economic conditions, relative costs of debt and equity capital,
market value of the Company's real estate assets, growth and acquisition
opportunities, and other factors.
The Company intends to raise additional capital through equity offerings,
debt financing, or a combination thereof, although there can be no assurance
that the Company will be able to raise such capital on favorable terms or at
all.
The Company has not established any limit on the number or amount of
mortgages that may be placed on any single property or on the Company's
portfolio as a whole.
CONFLICTS OF INTEREST POLICIES. The Board of Directors is subject to
certain provisions of Nevada law that are designed to eliminate or minimize
certain potential conflicts of interest. There can be no assurances, however,
that these policies always will be successful in eliminating the influence of
such conflicts, and if they are not successful, decisions could be made that
34
<PAGE>
might fail to reflect fully the interest of all shareholders. See ITEM 12,
"CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."
Under Nevada law, each director is subject to restrictions on the
misappropriation of corporate opportunities to himself or his affiliates of
which he becomes aware solely as a result of his service as a director. The
Company may transact business with one or more of its directors or officers or a
corporation, firm or association in which one or more of its directors or
officers are directors, officers or are financially interested, provided any of
the following requirements are satisfied:
(a) The interested directors or officers must disclose the common
directorship, office or financial interest to the board of directors,
have it noted in the minutes, and a majority of the disinterested
directors must approve or ratify the contract or transaction; or
(b) The interested directors or officers must disclose the common
directorship, office or financial interest to the shareholders, and
the shareholders must approve by a majority vote the contract or
transaction. The votes of the interested director or officer must be
counted in any such vote of the shareholders; or
(c) The common directorship or office or financial interest is not known
to the director and officer at the time the transaction is brought
before the board of directors and therefore is not disclosed; or
(d) The contract or transaction is fair as to the Company at the time it
is authorized or approved.
CERTAIN POLICIES WITH RESPECT TO OTHER ACTIVITIES. The Company and its
subsidiaries have authority to offer their securities and to repurchase and
otherwise acquire their securities, and they are likely to engage in such
activities. In the future, the Company and its subsidiaries may make loans to
joint ventures in which they participate in order to meet working capital needs.
The Company and its subsidiaries have not engaged in trading, underwriting,
agency distribution, or sale of securities of other issuers and do not intend to
do so. The Company and its subsidiaries intend to make investments in a manner
such that they will not be treated as an investment company under the Investment
Company Act.
COMPETITIVE CONDITIONS. The Company's real property is subject to the
highly competitive conditions of the real estate development and vacation
ownership industries. In Arkansas--the geographic area in which the Company
initially intends to commence its single-family home and commercial development-
- - -there are numerous large national and regional firms with significantly greater
experience and financial resources than the Company currently possesses. Such
firms will likely compete with the Company in the acquisition of land for
development, the hiring of sub-contractors, experienced management personnel,
construction workers and other employees,
35
<PAGE>
and the sale of product. The Company also will compete for residential sales
with the resale market for existing homes, multi-family home sales, including
townhouses and condominiums, and with available rental properties.
In the vacation interval industry, the Company will be subject to
significant competition from other vacation ownership resort owners and
operators, many with extensive experience and market presence in the lodging,
hospitality and entertainment areas. Many of the world's most recognized
lodging, hospitality and entertainment companies have begun to develop and sell
Vacation Intervals in resort properties, including, among others, Marriott
Ownership Resorts, The Walt Disney Company, Hilton Hotels Corporation, Hyatt
Corporation, Four Seasons Hotels & Resorts, and Inter-Continental Hotels and
Resorts. These entities possess significantly greater development experience,
financial, marketing, personnel and other resources than those of the Company
and may be able to grow at a more rapid rate or more profitably as a result.
The Company currently has no material presence or reputation in Arkansas,
Florida, Missouri, or any other area in the real estate or vacation interval
development industry and does not have sufficient capital to commence
significant development activities. For this and other reasons discussed
herein, the Company may experience difficulties in competing with established
developers.
The Company believes that its ownership of a substantial majority of the
available undeveloped single-family home properties in Maumelle will give the
Company an advantage in entering the single-family home construction market in
Maumelle, assuming it is able to obtain sufficient capital to commence
construction activities. Although the Company does not currently have
substantial vacation interval industry expertise, Management believes that such
expertise can be acquired if the Company obtains the necessary capital to
attract experienced personnel.
ITEM 3. LEGAL PROCEEDINGS.
On August 12, 1996, a foreclosure action was instituted against the
Operating Subsidiary and the Predecessor Corporation, AWEC Resource, Inc., as
guarantor, by Century in the Chancery Court of Pulaski County, Arkansas (the
"Century lawsuit"). Century was seeking to foreclose on 36 acres of the
Commercial Lots of the Maumelle Property securing the $1,400,000 Century Note I,
which currently was in default. As a result of cross-default provisions of the
$350,000 Century Note II, Century alleged that the Century Note II was also in
default. On September 16, 1996, the Company filed an answer and counterclaim
against Century claiming that the Century Note I and the Century Note II were
usurious.
The Operating Subsidiary and the Company entered into the Century
Settlement Agreement, Effective September 30, 1997, to settle the foreclosure
action instituted by Century and the counterclaim filed by the Company. Under
the provisions of the Century Settlement Agreement, the Company delivered to an
escrow agent for the benefit of Century, a deed to 36 acres of the
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<PAGE>
Commercial Property, known as Tract D, and an approximate 3.8 acre tract of land
adjoining Tract D ("Corner Tract"). The Company also paid $17,500 to Century
simultaneous to the execution of the Century Settlement Agreement. The Company
retains the right to repurchase the approximate 40 acres of the Commercial
Property and the Corner Property; provided it makes five option payments of
$17,500 each on the 17/th/ of each month commencing November 17, 1997. In
addition, the Company must make a final payment in the amount of $2,132,057.39
(the "Purchase Price", due on April 17, 1998; provided that the Option Payments
are not in default. In return, Century canceled the Century Note I in the
amount of $1,400,000 and Century Note II in the amount of $350,000 owed by the
Company and delivered to the escrow agent certificates for 700,000 shares of the
Company's common stock it currently owns. The shares of Common Stock and the
deeds to the approximate 40 acres of Commercial Property and the Corner Tract
will be delivered to the Company upon the completion of the option Payments and
the Purchase Price. As of the date of this Report, the Company has paid the
November 17/th/ and December 17/th/ payments.
As of the Company's fiscal year-end, the approximately 197-acre Pine Ridge
Lots were subject to a possible tax assessment by the Pine Ridge Addition
Residential Property Owners Multi-Purpose Improvement District No. 9 (the "Pine
Ridge Improvement District"). The Pine Ridge Improvement District is faced with
a possible judgment in the amount of $237,811 in a lawsuit unrelated to the
Company and has claimed the authority to levy taxes against the Company's Pine
Ridge Lots to satisfy any judgment. The Company had accrued the full amount of
the possible liability in its 1995 fiscal year financial statements in case the
Residential Lots became subject to a tax to satisfy any judgment.
On March 13, 1997, the Company, as intervenor in the foregoing lawsuit, was
granted a summary judgment, that released the Pine Ridge Improvement District's
lien on the Pine Ridge Lots owned by the Company. An appeal of this judgment is
pending, and there can be no assurance that the lower court's decision will be
upheld.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders, through the solicitation
of proxies or otherwise.
PART II.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Common Stock is listed for trading in the over-the-counter market on
the NASDAQ electronic bulletin board under the symbol "CPCY"; however, the
market for shares of the Common Stock is extremely limited. There can be no
assurance that the present limited market for the Company's common stock will
become more active or even be sustained. In addition, any future sale of the
Company's stock by any of the controlling shareholders may have a substantial
adverse impact on any such public market.
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<PAGE>
The high and low bid prices for shares of common stock of the Company for
each quarter within the last two fiscal years are as follows:
BID
<TABLE>
<CAPTION>
Quarter Ending High Low
- - -------------- ---- ---
<S> <C> <C>
September 30, 1995 1 1/16 1/16
December 30, 1995 5/8 3/8
March 31, 1996 2 1/2 2 1/2
June 30, 1996 2 3/4 1 3/4
December 30, 1996 2 1.25
March 31, 1997 1.25 1.06
June 30, 1997 1.25 .81
September 30, 1997 .94 .75
</TABLE>
These bid prices were obtained from the National Quotation Bureau, Inc.
("NQB"), and reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not reflect actual transactions.
HOLDERS
The number of record holders of the Company's common stock was 508 as of
September 30, 1997, and 514 as of December 16, 1997.
DIVIDENDS
During the fiscal year ended September 30, 1997 and the fiscal year ended
September 30, 1996, the Company did not declare any cash dividends with respect
to its Common Stock. The Company does not expect to declare dividends in the
foreseeable future. The future dividend policy of the Company cannot be
ascertained with any certainty, particularly since the Company has decided to
shift the focus of its primary business to developing single-family homes and
vacation ownership properties and in marketing and selling Vacation Intervals,
and has had no operational history in these new areas of business. There are no
material restrictions limiting, or restrictions that are likely to limit, the
Company's ability to pay dividends on its Common Stock in the future, except
that the articles of incorporation of the Company permit the board of directors
to approve the issuance of preferred stock having such rights as may be
designated by the board without shareholder approval. Such rights may include
preferences with respect to dividends as well as prohibitions against the
declaration of dividends on Common Stock under certain circumstances.
38
<PAGE>
The following issuances of unregistered securities occurred during the
fiscal year ended September 30, 1997:
(1) In November 1995, the Predecessor Corporation issued 700,000 shares of
Common Stock to Century in connection with the refinancing of the original
$6,737,000 Maumelle Property acquisition promissory note. The shares were
issued as consideration for the payment of $3,321,794 of such debt. Such shares
were issued to Century in reliance on Section 4(2) of the Securities Act.
Effective September 30, 1997, Century delivered the shares to an escrow agent.
Upon the completion by the Company of the Option and Purchase Payments, the
escrow agent will deliver to the Company the 700,000 shares owned by Century for
cancellation.
(2) In July 1996, the Company entered into a financial consulting
agreement with Olsen & Associates Consulting, Inc. ("Olsen"), which was amended
in September 9, 1996. As consideration for the financial consulting services to
be rendered by Olsen, the Company agreed to issue 150,000 shares of Common Stock
to Olsen, as well as an option to purchase up to 350,000 shares of Common Stock.
On September 30, 1997, the agreement between the Company and Olsen was extended
to December 31, 1998. The Company relied on Section 4(2) of the Securities Act
in agreeing to issue such securities.
(3) On July 30, 1997, the Company issued 100,000 shares of Common Stock to
MLT in exchange for all of the outstanding stock in Capitol Resorts of Florida,
Inc. (the "Florida Resorts Subsidiary"). The shares were issued as consideration
for the Florida Resorts Subsidiary's contractual right to purchase approximately
36 acres of land and improvements in Osceola County, Florida, (the "Florida
Bible College"). The Company relied on Section 4(2) of the Securities Act in
agreeing to issue such securities.
(4) On July 29, 1997, the Company issued 50,000 shares of common stock to
David Paes in consideration of management services rendered to the Company. The
Company relied on Section 4(2) of the Securities Act in agreeing to issue such
securities.
(5) On July 29, 1997, the Company issued 50,000 shares of Common Stock to
Mary Peyton in consideration for management services rendered to the Company.
The Company relied on Section 4(2) of the Securities Act in agreeing to issue
such securities.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
OVERVIEW
The following discussion should be read in conjunction with the financial
statements and the notes thereto appearing in Item 7 of this Report (the
"Financial Statements"). As noted in below and elsewhere in this Report, the
Company needs to convert into long-term debt, or extend, replace or retire its
current short-term debt obligations in order to remain liquid and raise
additional capital to commence significant operations.
39
<PAGE>
During the period covered by the financial statements, the Company
significantly changed the nature of its business activities from land sales to
real estate development and vacation interval operations (all as discussed in
more detail herein), although no meaningful development operations have
commenced. As a result, the Company's management does not believe the
historical financial information presented in the Financial Statements is
indicative of likely future results of operations. The Company believes that
its ability to generate revenues in the future from real estate development and
interval activities will depend in large part on its ability to extend,
replace, convert into long-term debt or retire its current short-term debt and
raise sufficient capital to commence meaningful development operations, and the
Company's ability to develop or acquire greater construction, sales and other
real estate and interval development expertise than the Company now possesses.
RESULTS OF OPERATIONS
COMPARISON OF YEAR ENDED SEPTEMBER 30, 1997 TO YEAR ENDED SEPTEMBER 30,
1996. For the year ended September 30, 1997, the Company experienced a profit
of $40,807 compared with a loss of $1,109,053 for the year ended September 30,
1996. The difference in performance resulted primarily from revenues of
$4,139,299 in the year ended September 30, 1997. In comparison revenues for the
year ended September 30, 1996 were $31,676. The cost of sales for the year
ended September 30, 1997, amounted to $1,895,828, resulting in a gross profit of
$2,243,474 or an increase of $2,211,798 over 1996 results. This increase in
gross profits more than offset an increase of $836,509 in selling, general and
administrative expenses over the comparable expenses for 1996 of $610,820.
Sales increased by $4,107,623 for the year ended September 30, 1997, from
$31,676 for the year ended September 30, 1996, as a result of the sale of a 67
acre single family parcel of land at a price of $1,552,730, the sale of a two
acre commercial parcel for $110,000, the sale of a small tract of residential
property for $30,000, the sale of 40 acres of commercial property to Century
Realty for $2,192,583, and the sale of timber from the undeveloped single family
portion of the Maumelle Property for $235,864. The dissolution of the joint
venture with The Monterra Group also provided revenues of $18,122 from the net
proceeds of the sale of lots. gross profits for the year ended September 30,
1997 was $2,243,474. Gross profits for the year ended September 30, 1996 was
$31,676.
From the year ended September 30, 1996 to the year ended September 30,
1997, operating expenses increased from $610,820 to $1,447,329, an increase of
$836,509. The increase in operating expenses resulted primarily from increased
expenses for financial consulting, legal fees, amortization of loan costs on
short term borrowings and recognition of the uncollectible accrued interest due
from the Resure Debenture. A major portion of the increase resulted from an
increase in management and consulting fees from $49,944 for the year ended
September 30, 1996, to $564,074, an increase of $514,130. However, of this
increase, $163,983 was accrued for management fees to Maumelle Enterprises.
$226,000 was not paid in cash but credited against the
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<PAGE>
exercise price of certain stock options granted to two consultants.
Amortization expenses increased to $291,271 in the year ended September 30,
1997, from a total of $57,232 in the prior year, an increase of $234,039. This
resulted from expensing the remaining capitalized loan costs on the $3,500,000
Resure Note II and amortization of loan fees on various short term notes. The
Company also realized an expense of $123,893 as an allowance for accrued
interest due from Resure which was not collected under the Settlement Agreement
with Resure. There were no corresponding expenses in the year ended September
30, 1996. However, there was a decrease of $240,000 from September 30, 1996
expenses due to the forgiveness of $240,000 in salary for fiscal year 1997 by
the Company's President, Michael G. Todd in the fourth quarter of fiscal year
ended 1997. Mr. Todd forgave another $240,000 in accrued salary for fiscal year
1996 during fiscal year 1997, which increased additional paid in capital as of
September 30, 1997. The Company continues to accrue expenses to Maumelle
Enterprises, a related party, of management and consulting fees. Mr. Todd has
indicated it is his intention to commence accruing his salary of $20,000 per
month as of October 1, 1997. Maumelle Enterprises and Mr. Todd have represented
to the Company that it is their intention to allow the Company to accrue such
fees until the Company is financially in the position to pay the fees.
The Company believes that its results of operations can improve in the
future if it is able to raise sufficient additional capital to extend, replace
or retire its short-term debt, or convert such debt into long-term debt, and
commence significant development operations and to take advantage of an apparent
increase in building activity in the City of Maumelle in 1996, and the increase
in sales nationally of Vacation Intervals, which are summarized below. There
can be no assurance, however, that such trends will continue or that the Company
will be able to capitalize on these trends.
Two hundred and twenty permits were issued by the City of Maumelle for the
construction of new single-family homes during the 1996 calendar year. During
the first six months of 1997, 142 permits have been issued for the construction
of new homes and a total of 350 permits are projected for the 12 month period.
Although there can be no assurance that such increase in activity will continue
the Company believes that the level of home development activity in Maumelle
will continue to increase in the future, as compared to 1996, for the following
reasons:
(1) In June 1995, three of the outstanding improvement bond issues in the
City of Maumelle, to which 558 improved lots in the City of Maumelle were
subject, were refinanced with a new bond issue whose terms of indenture were
more favorable to homeowners. The Company believes that such bond issue will
result in an increase in the availability of building capital, because
management believes that home loan lenders are more likely to make loans if they
are secured by property that has no bond assessments.
(2) In June 1996, two additional improvement bond issues to which
approximately 655 Maumelle improved lots were subject were refinanced with a new
issue, again on more favorable terms.
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<PAGE>
(3) The Country Club of Arkansas, a golf-oriented development in Maumelle,
has completed improvements and opened its new golf course to the public in the
Fall of 1996. As of September 30, 1997, this development has approximately 450
home sites remaining to be developed. The owner/developer of the Country Club
of Arkansas has placed substantial amounts of advertising and promotion into
local print media which may produce a positive effect for future development
activity in Maumelle.
(4) Since May 1997, 750 new jobs have been created in the City of Maumelle
as a result of continuing industrial expansion. Since 1992, City of Maumelle has
added 4,000 new jobs and expects this growth to continue, although there can be
no assurance that the city will continue to see such job expansion.
The Company does not foresee any significant elements of income or loss
that would arise outside of the ordinary course of business, except for the
losses that would likely arise if the Company becomes unable to liquidate
property or obtain the necessary capital to retire its existing short-term debt
if the Company is unable to extend, replace or convert such debt into long-term
debt. See "LIQUIDITY AND CAPITAL RESOURCES," below.
Even if the Company can extend, replace, convert into long-term debt or
retire its existing short-term debt, obtain construction loans and/or raise
sufficient capital to commence its home-building and interval operations, there
may be some seasonal variance in the flow of income from these operations. Such
variances could arise, for example, from the impact of weather on any
construction in progress. Typically, substantial rainfall is experienced in
Central Arkansas from November through March, from April through September in
Florida, and snow or rain from November through March in Missouri.
FACTORS THAT MAY AFFECT FUTURE RESULTS AND MARKET PRICE OF STOCK. The
factors identified below are believed to be important factors (but not
necessarily all of the important factors) that could cause actual results to
differ materially from those expressed in any forward looking statement made by
or on behalf of the Company, whether in this section or elsewhere in this Report
or in any other written or verbal statement of the Company or its officers or
directors. Unpredictable or unknown factors not discussed herein could also
have material adverse effects on forward looking projections. The Company does
not intend to update these cautionary statements.
Liquidity Issues. The Company currently has $2,025,000 in short term debt
----------------
that will mature during fiscal year ended September 30, 1998 and which may
prevent the Company, unless extended, replaced retired or converted into long-
term debt, from realizing or consummating any of its business plans, objectives,
strategies, or transactions. Except for the short-term debt, the Company has
minimal operating income and its primary source of funds to meet operating
expenses for the last two years has been the liquidation of its real property
inventory. There can be no assurance that the Company will be able to extend,
replace, convert the short term debt into long-term debt, raise sufficient
capital to retire the debt, or generate sufficient revenues to
42
<PAGE>
pursue the business plans, objectives, strategies, or transactions discussed
herein.
The home building and construction and interval resort industries are
capital-intensive and generally involve a high degree of leveraging and up-front
expenses to acquire land, improve it, and begin development. The Company intends
to commence Vacation Interval activities by renovating and offering for sale LTL
units in the Ocean Villas Property located in Pompano Beach, Florida in the
first quarter of 1998. The Company further intends to commence building a hotel
on its Florida Bible College during the fiscal year 1998, assuming it can obtain
a construction loan collaterized by the property, which is currently
unencumbered. The Company also intends to commence single-family home
development in Maumelle in the first quarter of 1998. There can be no assurance,
however, that the Company will be able to obtain such loans. In addition, the
Company will need to raise substantial additional capital, or enter into joint
ventures or other development agreements with well-funded development partners
to implement its growth strategies in the vacation industry. There can be no
assurance that the Company will be able to raise sufficient additional capital
or enter into joint venture or other development agreements with developers
under terms that are favorable to the Company, or at all.
Competition. The real estate development and vacation interval industries
-----------
are highly competitive. In Arkansas--the geographic area in which the Company
initially intends to build homes--there are numerous large national and regional
firms with significantly greater experience and financial resources than the
Company currently possesses. Such firms will likely compete with the Company in
the acquisition of land for development, the hiring of sub-contractors,
experienced management personnel, construction workers and other employees, and
the sale of product.
In the vacation interval industry, the Company is subject to significant
competition from other interval developers and operators, many with extensive
experience and market presence in the lodging, hospitality and entertainment
areas and significantly greater development and operating experience and
financial, marketing, personnel and other resources than those of the Company.
The ARDA estimates that Florida--the state in which the Company intends to
commence its interval development--has a higher concentration of Vacation
Intervals than any other state in the United States. See ITEM 2, "DESCRIPTION
OF PROPERTY--POLICIES WITH RESPECT TO CERTAIN ACTIVITIES--Competitive
Conditions."
The Company currently has no material presence or reputation in Arkansas,
Florida, Missouri, or any other area in the real estate development or interval
industries and does not have sufficient capital to commence significant
development activities. For this and other reasons discussed herein, the
Company may experience difficulties in competing with established developers.
Lack of Experience. The Company has no operational experience in the real
------------------
estate development industry and has little experience in the vacation
43
<PAGE>
interval industry. Such inexperience may make it difficult for the Company to
achieve its business plans and objectives, particularly given the existence of
competition from more experienced and better capitalized companies.
Dependence on Vacation Interval Exchange Networks; Risk of Inability to
-----------------------------------------------------------------------
Qualify Resorts. The attractiveness of Vacation Interval ownership is enhanced
- - ---------------
significantly by the availability of exchange networks that allow Vacation
Interval owners to exchange in a particular year the occupancy right in their
Vacation Interval for an occupancy right in another participating network
resort. According to the ARDA, the ability to exchange Vacation Intervals was
cited by buyers as a primary reason for purchasing a Vacation Interval. Several
companies provide broad-based Vacation Interval exchange services. Since the
Company has not commenced interval operations, the Company is not currently
qualified for participation in any exchange network.
No assurance can be given that the Company will be able to qualify its
future resorts for participation in any exchange network. Exchange networks are
under no obligation to include any resorts the Company may develop. If the
major exchange networks cease to function effectively, or if the Company's
resorts are not accepted as exchanges for other desirable resorts in such
networks, the Company will have difficulty selling Vacation Intervals. See
"Business--Participation in Vacation Interval Exchange Networks."
Interest Rates; Mortgage Financing. Demand for homes, as well as for
----------------------------------
commercial construction, is adversely affected by increases in interest rates.
If interest rates increase, demand for homes and other projects the Company may
develop may be significantly reduced due to prospective buyers' inability to
obtain financing. Changes in interest rates may also affect the Company's
ability to sell Vacation Intervals to consumers on credit. Any adverse changes
in the availability of Federal Housing Administration or Veterans Administration
mortgage financing may also adversely impact the Company's housing sales.
Many Factors Beyond The Company's Control. The nature of the real estate
-----------------------------------------
development and interval industries is cyclical and is affected by various
factors beyond the Company's control, including changes in the general and local
economy, employment, availability of financing, interest rates, changes in
demographics, housing or Vacation Interval demands, as well as changes in
government regulations. Developers are subject to a number of other risks,
including availability and cost of land, materials, and labor, weather
conditions, construction delays, costs controls, and increases in real property
taxes and local government fees. Any economic downturn in the United States
could negatively affect the travel and tourism industry which could have a
material adverse effect on the Company's plans to develop interval properties.
LIQUIDITY AND CAPITAL RESOURCES
INDEBTEDNESS AND OTHER LIQUIDITY REQUIREMENTS. The principal amount of the
Company's total debt at September 30, 1997, included, without limitation,
44
<PAGE>
the following (see ITEM 2, "DESCRIPTION OF PROPERTY--MAUMELLE PROPERTY" for
descriptions of encumbered properties referenced below):
. $3,500,000 Resure Note I, the amended recourse note, payable to
Resure, matures September 1, 1999, secured by the approximately 701-
acre Large Residential Tract; 10% interest, paid quarterly until
October 1, 1996, then quarterly payments of principal and interest in
the amount of $101,591.15 are required.
. $200,000 recourse note payable to Davister Corp. (the "Davister
Note"), matured January 9, 1996, unsecured; 9% interest payable at
maturity.
. $977,706 in non-secured short-term debt financed by private sources.
The promissory notes generally bear interest at a rate of 10% per
annum and mature nine months from the date of issuance of each note.
. $400,000 in a commercial revolving line of credit from the Bank of
Little Rock (the "Little Rock Credit Line I"), secured by 11 acres of
the multi-family Maumelle Property. The Little Rock Credit Line I
bears interest at a fixed rate of 10% per annum. The Company is
required to pay interest only on a monthly basis until the credit line
matures on April 10, 1998, when the unpaid principal balance plus any
accrued interest is due and payable. As of December 10, 1997, the
balance of the Little Rock Credit Line I is $378,000.
$450,000 in a commercial revolving line of credit from the Bank of
Little Rock (the "Little Rock Credit Line II"), secured by 19 acres of
the multi-family Maumelle Property. The Little Rock Credit Line II
bears interest at a fixed rate of 10% per annum and matured November
5, 1997 or on demand. On November 5, 1997, the credit line's maturity
date was extended to until February 5, 1998, or on demand, whichever
is sooner, at which time the interest and principal is due and
payable. As of December 10, 1997, the balance of the Little Rock
Credit Line II is $450,000.
. $25,000 in ad valorem real property taxes, relating to all portions of
the Maumelle Property, due and payable as of December 31, 1997.
The Company is current on all of the foregoing debt, except the Davister
Note. Although the Davister Note has matured, the lender has not demanded
payment or instituted collection proceedings. The Company intends to retire this
debt in fiscal year 1998, from debt financing or generated revenues. The Company
intends to timely pay the ad valorem real property taxes for the fiscal year
1997.
CERTAIN RECENT EVENTS RELATING TO THE COMPANY'S INDEBTEDNESS AND LIQUIDITY
REQUIREMENTS.
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<PAGE>
Since the end of the 1997 fiscal year, the Company obtained a revolving
line of credit with the Bank of Atkins in the amount of $1,750,000 at a fixed
rate of interest of 10% per annum. The revolving line of credit matures May 27,
1998, at which time the principal and all accrued interest) is due. This line of
credit is secured by approximately 344 acres of the Large Residential Tract of
the Maumelle Property. As of December 19, 1998, the outstanding balance of the
revolving line of credit is $1,548,000. The funds were used to complete the
acquisition of the Ocean Palms Resorts Property, the Ocean Villas Property, to
pay off certain accounts payable and for working capital.
Under the Resure Settlement Agreement, the Company is required to pay a
Developer's Fee of $2,000 for each lot sold in the approximately 1,045 acres of
the Large Residential Tract of the Maumelle Property, with such Developer's Fees
not to exceed $2,000,000. The Developer's Fees shall be secured by written
amendment to the loan mortgage securing the Resure Note I, which shall be
recorded solely against 701 acres of the Large Residential Tract of the Maumelle
Property.
In November, the Company retired $155,000 in non-secured short-term debt
from private investors.
Due to recent acquisitions, the Company's debt now includes the following:
. $1,158,000 note ("Ocean Palms Resort Note"), payable to various trusts
and individuals (the "Ocean Palms Mortgagee"), secured by an
assignment of the Ocean Palms Paper and the conditional assignment of
the Ocean Palms Ground Lease; 12.75% interest per annum, with interest
only payments made monthly until May 1, 1998, at which time it is the
note is payable interest and principal each month until it matures on
April 1, 1998. The note can be extended by two additional years upon
the payment of a 1% extension fee of the then outstanding principal
balance of the note on or before March 1.
. $375,000 note ("First Ocean Villas Note"), payable to Onofrio Biviano
and secured by collateral assignments of the non-recourse installment
notes (the "Ocean Villas Paper"); 10.5% interest, payable interest and
principal monthly until the note matures on September 17, 2001.
. $150,000 note ("Second Ocean Villas Note"), payable to Domenick Greco,
Trustee and Leonard Gross, and secured by collateral assignments of
the Ocean Villas Paper; 12% interest, payable interest only per month,
commencing January 9, 1998, until the note matures on December 9,
1998.
. Ocean Palms Resort Ground Lease is payable yearly in the amount of
$76,200 until March 1, 2064.
46
<PAGE>
. Ocean Villas First Ground Lease is payable every six months in the
amount of $2,614.18 until July 20, 2063.
. Ocean Villas Second Ground Lease is payable every six months in the
amount of $2,848.55 until July 20, 2063.
In addition to the foregoing debt and other liquidity requirements, the
Company will, within six months after the date of this Report, require general
working capital to cover overhead and administrative expenses in the amount of
at least $500,000.
CERTAIN CAPITAL RAISING TRANSACTIONS. During the fiscal year ended 1997,
the Company obtained capital through the following transactions:
. On December 31, 1996, the Company raised $110,000 from the sale of a
2-acre parcel of the Commercial Lots.
. In May 1997, the Company sold a 67 acre single-family parcel of the
Maumelle Property to an unaffiliated home developer for a gross sales
price of $1,552,730. $675,100 of the sale proceeds were placed in a
restricted cash collateral account as security for the Resure Note II.
As part of the Resure Settlement, the funds were released from the
restricted cash collateral account and used to bring current the
payments due under the Resure Note I. $200,000 of the proceeds were
used to purchase approximately 3.8 acres of commercial property (the
"Corner Tract") in Maumelle from Maumelle Enterprises an affiliated
real estate management firm. The deed to the Corner Tract has been
delivered to an escrow agent as part of the Century Settlement. See
ITEM 2, "DESCRIPTION OF PROPERTY," and ITEM 12, "CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS."
. As discussed above, the Company obtained two secured lines of credit
from the Bank of Little Rock.
Subsequent to the Company's fiscal year end, the Company raised additional
capital for the purpose of acquisitions and working capital through the
following transactions:
. As discussed above, the Company obtained a revolving line of credit in
the amount of $1,750,000, which matures on May 27, 1998.
. The Company borrowed an additional $280,755 in non-secured short-term
debt from private investors. The promissory notes generally bear
interest at a rate of 10% per annum and mature nine months from the
date of issuance of each note.
PROSPECTIVE SOURCES OF LIQUIDITY. Current operating cash flows will be
sufficient to service the Company's existing debt. However, the Company
currently has insufficient funds to retire its short-term debt if agreements
47
<PAGE>
to extend the present bank credit lines cannot be obtained or if the Company is
unable to raise additional equity and/or debt capital.
The Company's negotiations with a mortgage banking firm to arrange debt and
construction financing have not been successful.
However, the Company is currently negotiating with two mortgage banking
firms to arrange debt financing in the amount of $15,000,000 (the "Debt
Financing Loan"). If the Debt Financing Loan is obtained, the Company will use
the proceeds to retire its short-term debt and for working capital.
The Company is currently negotiating with two mortgage banking firms to
arrange debt and construction financing in the amount of $15,000,000(the
"Construction Financing Loan"). If the Construction Financing Loan is obtained,
the Company intends to use the net proceeds to begin operations as a home
builder and to service existing debt. The Company intends to use part of the
unsecured potions of the Maumelle Property to secure $10,000,000 of the loan,
with the remaining $5,000,000 to be secured by home construction. Such
negotiations remain in the initial stage and there is no assurance that the
Company will able to obtain the Construction Financing Loan on favorable terms
or at all.
In addition, the Company is negotiating with a commercial bank and other
institutional investors to obtain a construction loan in the amount of
$14,000,000, to be secured by the Florida Bible College Property (the "Florida
Bible College Construction Loan"). The Florida Bible College Construction Loan
proceeds will be used to construct a 264 room hotel.
There can be no assurance, however, that the Company will be able to
negotiate terms acceptable to the Company on any or all of these loans, or at
all.
The Company's sale of an 11 acre parcel of Maumelle Property commercial
lots which, as of the fiscal year end, was expected to close on or before March
31, 1997, was canceled due to the buyer's inability to obtain the financing it
required. The Company has no current plans to sell these lots.
With respect to prospective long-term liquidity, the Company intends to
generate the bulk of its cash from operations by building and selling homes
initially in the City of Maumelle, as well as its proposed interval operations.
At present, management of the Company believes that the most likely sources of
substantial cash flow during the next two years are (1) the development and sale
of single-family home product in the $125,000 to $200,000 price range on the
approximately 3,500 single-family home sites it owns in Maumelle and on the
improved lots it intends to acquire in Maumelle from the third parties, (2) the
sale of Vacation Intervals and the installment contracts generated from such
sales, and (3) the liquidation of property which Management considers unsuitable
for the Company's purposes or as required. See ITEM 1, "DESCRIPTION OF
BUSINESS--BUSINESS OF THE COMPANY--GROWTH STRATEGIES."
48
<PAGE>
The Company intends to raise operating capital by selling debt and/or
equity securities to the public or in private transactions. There can be no
assurance, however, that such public or private offerings will be successful.
The Company intends to meet home building and interval operating capital
requirements by obtaining development financing in the form of secured credit
line facilities from lenders, although there can be no assurance that such
financing can be obtained on attractive terms, or at all. See ITEM 2,
"DESCRIPTION OF PROPERTY."
COMPARISON OF YEAR ENDED SEPTEMBER 30, 1997 TO YEAR ENDED SEPTEMBER 30,
1996. At September 30, 1997, the Company had total assets of $10,164,867, a
decrease of $2,773,310 or 21.44% from the Company's total assets as of the
fiscal year ended September 30, 1996.The Company had cash of $227,162 at
September 30, 1997, compared to a negative cash position on September 30, 1996,
an increase of $413,073. This improvement resulted from sales of land, timber
royalties and the secured short term debt financing. See "LIQUIDITY AND CAPITAL
RESOURCES" above.
Prepaid assets increased from $6,893 on September 30, 1996 to $202,674 on
September 30, 1997, an increase of $195,781. This increase was primarily due to
the prepayment of amounts owed under a financial consulting contract. The
contract extends through September 30, 1998, and the prepaid portion of the
contracted amounted to $150,000. The prepayment of these amounts did not result
in a decrease in cash. The consultant was given credit against the exercise
price of certain stock options granted to them pursuant to the consulting
contract.
Investments decreased from $3,500,000 as of September 30, 1996 to $0 as of
September 30, 1997. This represented the cancellation of the Resure Debenture.
The carrying value of the Company's real estate holdings increased by
$312,280 during the year, from $9,156,357 to $9,468,637. The net increase was a
result of various transactions. One component was the decrease resulting from
the elimination of $208,172 of Special Taxes of certain Maumelle Property
commercial tracts. This cost had previously been capitalized, thus reducing the
carrying value of the property. A second component was the decrease resulting
from the dismissal of the Holloway Lawsuit against the Pine Ridge District. The
Company had accrued a liability of $200,000 which was capitalized as a part of
the cost of the tract. Upon dismissal of the suit, this liability was eliminated
and the carrying value of the land was reduced. The sale of one of the
commercial sites in December, 1996 resulted in a net reduction of $28,361. The
sale of a 67 acre single-family parcel resulted in a reduction of real estate
holdings of $322,256. The sale of 40 acres of commercial property to Century
resulted in a reduction of real estate holdings of $1,435,309, representing the
allocated cost of the property. The major addition to real estate holdings
resulted from the acquisition of the property in Orlando, Florida. The
acquisition cost and additional capitalized expenditures through September 30,
1997 amounted to a total of $2,062,888. Other additions to real estate holdings
resulted from expenditures of $63,070
49
<PAGE>
in connection with the renewal of a purchase contract for the acquisition of the
West Little Rock, Capitol Lakes Estates project. The contract was renewed after
an appeal and subsequent reversal of the Little Rock City Council's prior denial
of zoning changes and annexation into the City. On April 15, 1997, the Company
paid a fee of $10,000 for a six month extension on the agreement to October 14,
1997, and subsequently to April 14, 1998. Additional capitalized costs totaling
$95,706 were added to real estate holdings, primarily for pre-development costs
on four different properties in Maumelle. Other additions to real estate
holdings resulted from pre-acquisition costs on properties in Branson, Missouri
and in North Carolina of $31,800.
Total liabilities of the Company as of September 30, 1997, decreased by a
total of $4,431,217 from the September 30, 1996 total of $10,485,042. The
liability for accrued interest decreased to $59,810 at September 30, 1997 from
$252,712. This decrease of $192,861 resulted from the settlements with Century
and Resure, which resulted in the payoff of the Century notes and the Resure
Note II, and the payment of all interest due on the Resure Note II. The current
liability for notes payable increased by $135,567 during the year from
$1,964,406 to $2,099,973. This increase included the $977,706 of secured short
term loans obtained during the year and a $49,665 reclassification of notes
payable to current liabilities for principal payments due within one year of
September 30, 1997. New short term lines with an aggregate balance owing of
$849,024 were also obtained during the year. The Century notes totaling
$1,750,000 in short term notes payable were retired.
Accounts payable and accrued expenses decreased by $591,932, from
$1,108,926 as of September 30, 1996 to $516,994 as of September 30, 1997.
Accrued Special Taxes decreased by $208,172 in the year. The decrease was a
result of the bond refinancing by the Improvement District encompassing the bulk
of the Company's commercial land. A decrease in the Pine Ridge District
liability of $200,000 resulted from the dismissal of the lawsuit filed against
the District. As sole property owner in the Pine Ridge District, any liability
of the District would impact on the Company. Accrued real estate taxes payable
also decreased by $55,890, which represents the difference between new accruals
of $59,990 and payment of taxes totaling $115,880. Accrued Officers salaries of
$240,000 at September 30, 1996 were forgiven at September 30, 1997 and
reclassified as Additional Paid in Capital. Shareholders' Equity increased by
$1,657,907 or 67.57% in the year. The increase is a result of the net income of
$40,807 for the year ended September 30, 1997, the issuance of 188,000 new
shares of the Company's common stock at $2.00 per share, pursuant to the
Consultants stock options discussed above, and the issuance of 100,000 of the
Company's common stock in relation to the Company's acquisition of the Orlando,
Florida property.
ITEM 7. FINANCIAL STATEMENTS.
The audited financial statements of the Company are included
in this Annual Report on Form 10-KSB at pages F1 to F16.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSURE.
50
<PAGE>
The Company has not changed accountants during the last two fiscal years;
nor has the Company had any disagreements with the accountants on any matter of
accounting principles or practices, financial statement disclosures, or auditing
scope or procedures.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
Date of Expiration of
Name Age Position Election Director Term
- - ---- --- -------- -------- -------------
<S> <C> <C> <C> <C>
Michael G. Todd 48 Chairman, 7/95 1996 or until
President, successor
and Secretary elected
Ronald J. Campbell(1) 53 Director 3/94 Removed March
29, 1997
Herbert E. Russell 70 Director 3/94 1996 or until
successor
elected
Robert R. Neyland 42 Director 4/94 1996 or until
successor
elected
Thomas Blake(1) 62 Director 3/97 until successor
(Date elected
of
appoint-
ment)
David R. Paes 42 Vice President, 7/95 N/A
Treasurer and
Assistant Secretary
Raymond Baptista 55 Vice President 10/97 N/A
of Finance
</TABLE>
1) On March 28, 1997, Ronald J. Campbell resigned as Secretary. The Board of
Directors appointed Michael G. Todd secretary of the Company, effective March
29, 1997. Effective March 28, 1997, shareholders of the Company holding more
than two-thirds of the Company's common stock removed Mr. Campbell from the
board of directors without cause by written consent. Effective March 31, 1997,
a majority of the remaining directors voted to appoint Thomas Blake as a
director of the Company to fill the vacancy created by Mr. Campbell's removal.
The following is a biographical summary of the experience of the directors
and executive officers of the Company:
51
<PAGE>
MICHAEL G. TODD. Chairman of the Board, President and Chief Executive Officer,
and Secretary of the Company. Todd also is the sole Director and President of
the Operating Subsidiary and the Florida Resorts Subsidiary. Todd is a general
partner of DeHaven Todd & Co., a merchant banking partnership he co-founded in
1985 with John W. DeHaven. Todd has extensive experience in the banking
industry, having been the President and Chief Executive Officer of two Southern
California banks, Orange City Bank and Bay Cities National Bank. Upon the
resignation of Ronald J. Campbell as secretary of the Company, the Board of
Directors appointed Todd Secretary, effective March 29, 1997.
HERBERT E. RUSSELL. Director. Russell is the President of Charlie Corporation,
a Nevada corporation, which is a controlling shareholder of the Company.
Russell is also President of Hermico Corporation, a company founded by Russell
and engaged in the business of prospecting and producing precious metal
concentrates. Prior to forming Hermico, Russell owned and operated an oil field
trucking company and a cotton farm.
ROBERT R. NEYLAND. Director. Neyland also serves on the Board of Directors of
Home Capital Investment Corporation, a public company. Since 1993, Neyland has
been the Chief Financial Officer for Select Switch Systems, Inc., a privately-
held Texas company. He was also a partner in Living Suite, a weekly and monthly
residential rental company, from 1990 to 1996.
DAVID R. PAES. Vice President, Treasurer, and Assistant Secretary. Paes is
Executive Vice President and a controlling shareholder of Maumelle Enterprises,
a real estate management company that currently provides management and
administrative service to the Company. See ITEM 12, "CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS--SERVICES PROVIDED BY AFFILIATED COMPANIES." He has been
involved in real estate development as a chief financial officer of two real
estate land companies since 1977, and is a certified public accountant.
THOMAS BLAKE. Director. Blake is the Director, Business/ Finance, of Glenwood
L. Garvey Associates, an urban planning and consulting firm. As Special Advisor
to Self-Cleaning Environments USA, Inc., a manufacturer of environmentally
friendly waste disposal units, Blake provides consulting services regarding
business planning, financing, and marketing. His the founder and former
principal of Thomas C. Blake Consulting, an advisory service firm, and was Chief
Executive Officer of Interstate Group Administrators, Inc., a benefit services
company. He is a director of West Coast Savings & Loan and formerly was a
director of various other financial institutions.
RAYMOND C. BAPTISTA. Vice President - Finance. Baptista has 25 years experience
in banking and finance, both nationally and internationally. He has also been
actively involved in real estate acquisitions and development and was president
and CEO of a national Real Estate Management company.
SIGNIFICANT EMPLOYEES
The Company's sole full-time employee is Michael G. Todd, its Chairman,
President, Chief Executive Officer, and Secretary.
FAMILY RELATIONSHIPS
52
<PAGE>
There are no family relationships between any directors or executive
officers of the Company, either by blood or by marriage.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
During the past five years, no director, person nominated to become a
director, executive officer, promoter or control person of the Company:
(1) was a general partner or executive officer of any business against
which any bankruptcy petition was filed, either at the time of the bankruptcy or
two years prior to that time;
(2) was convicted in a criminal proceeding or named subject to a pending
criminal proceeding (excluding traffic violations and other minor offenses);
(3) was subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise limiting
his involvement in any type of business, securities or banking activities; or
(4) was found by a court of competent jurisdiction (in a civil action),
the SEC or the Commodity Futures Trading Commission to have violated a federal
or state securities or commodities law, and the judgment has not been reversed,
suspended or vacated.
ITEM 10. EXECUTIVE COMPENSATION.
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to the
compensation that was paid in 1997 fiscal year to the Company's executive
officers.
The following table sets forth the aggregate compensation paid by the
Company for services rendered during the periods indicated:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS PAYOUTS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Name & Year Salary Bonus Other Res- Securi- LTIP All
Prin- or ($) ($) Annual tric- ties Pay- Other
cipal Period Compen- ted Under- outs Compen-
</TABLE>
53
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Position Ended sation Stock Lying sation
Options
Michael 9/30/97 0/(1)/ 0 0 0 0 0 0
Todd,
Chairman/
President
David 9/30/97 0 0 0 50,000 0 0 0
Paes/(2)/
</TABLE>
_____________
(1) Michael G. Todd has been employed as President of the Company since
November 1994. Todd received no salary from the Company for the period November
1994 through September 30, 1997, and has deferred his salary for the period
October 1, 1996 through September 1, 1997. Effective September 30, 1997, Todd
canceled the deferred salary in the amount of $480,000 owed to him by the
Company for the above mentioned period. Todd has received no other compensation.
(2) David Paes has been Vice-President of the Company since July 1995 but has
not devoted any significant amount of time to its operations. Paes has
received no salary or other compensation from the Company from July 1995 through
September 30, 1996. On July 29, 1997, Mr. Paes received 50,000 shares of
restricted shares of the Company's common stock in compensation for management
services rendered to the Company.
The Company does not have any qualified or non-qualified stock or option
plans for its employees.
The Company has a five-year written agreement with Todd to perform the
duties of President. Under the agreement, which became effective on October 1,
1995, Todd is to be compensated at a rate of $20,000 per month. The agreement
expires on September 30, 2000. The Company is not party to any other employment
agreements.
DIRECTOR COMPENSATION
Outside directors are compensated for their services in the amount of $500
per month. Outside directors Neyland, Russell, and Blake have agreed to defer
such compensation until the Treasurer of the Company determines that sufficient
funds are available to make such payments. Such compensation has been deferred
since April 1994, and continues to be deferred. For the fiscal year ended
September 30, 1997, the Company had a deferred liability in the amount of
$18,000 for outside directors' compensation.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth the beneficial ownership of shares of Common
Stock as of September 30, 1997, for (i) each person who is known by the Company
to be the beneficial owner of more than a 5% interest in the Company,
54
<PAGE>
(ii) directors of the Company, (iii) the sole "named executive officer" of the
Company, as defined in Item 402(a)(2) of SEC Regulation S-B, and (iv) the
directors and named executive officer of the Company as a group. Unless
otherwise indicated in the footnotes, all such interests are owned directly, and
the indicated person or entity has sole voting and investment power. Addresses
are provided only for 5% or greater owners.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
<TABLE>
<CAPTION>
Name and
Title of Class address of Amount and Percent of
beneficial nature of bene- class
owner(1) ficial owner
<S> <C> <C> <C>
Common Stock Michael G. Todd(2) 2,851,589 shares 39%
Common Stock John W. DeHaven(3)(4) 2,844,189 shares 38.90%
Common Stock Herbert E. Russell(3) 2,844,189 shares 38.90%
Common Stock Century Realty 700,000 shares 9.57%
Inc. (5)
Common Stock Jens Olsen(6) 500,000 shares 6.84%
Common Stock Robert R. Neyland 0 shares 0%
Common Stock Thomas Blake 0 shares 0%
Common Stock Directors and Executive
Officers as a Group 5,695,778 shares 77.90%
</TABLE>
(1) Unless otherwise indicated, the address of the beneficial owner is 25550
Hawthorne Boulevard, Suite 207, Torrance, California 90505.
(2) All of these shares are owned by Prescott Investments, L.P. Michael G. Todd
is the sole managing member of Granite Industries LLC, which is the
managing general partner of Prescott LP. Todd is the sole "named executive
officer" of the Company, as defined in Item 402(a)(2) of SEC Regulation S-
B. See ITEM 9, "DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS."
(3) All of these shares are owned by Charlie Corporation, of which Herbert E.
Russell, as grantor and trustee of an irrevocable trust, owns 100% of the
outstanding stock. John W. DeHaven is the sole income beneficiary of the
trust, but Russell has sole investment and voting power over the trust.
The trust terminates on the death of John W. DeHaven. See ITEM 9,
"DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS."
(4) John W. DeHaven disclaims beneficial ownership of these shares.
55
<PAGE>
(5) Century Realty, Inc. The Company believes that Century Realty is a wholly-
owned subsidiary of Transcontinental Realty Investors, Inc., which is the
beneficial owner of these shares. Transcontinental Realty's address is
10670 North Central Expressway, Suite 300, Dallas, Texas 75231. Effective
September 30, 1997, the Company entered into a Settlement Agreement with
Century, which included the delivery to an escrow agent of the Century's
shares. Such shares shall be delivered to the Company for cancellation;
provided the Company makes certain payments by April 17, 1998.
(6) Jens Olsen was granted the right to purchase up to 500,000 shares of the
Company's Common Stock at a price ranging from $2.00 to $4.00 per share in
a financial consultant agreement dated October 7, 1996. As of the date
hereof, Olsen has exercised his right to purchase 150,000 shares, and has
the right to exercise his option to purchase up to 350,000 shares of Common
Stock at anytime until December 31, 1998, when any unexercised shares
expire. Olsen's address of record is 230 Park Avenue, Suite 1000, New York
City, New York 10169.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SERVICES PROVIDED BY AFFILIATED COMPANIES
The Company has paid fees or expects to pay fees to certain affiliated
companies for various types of services, and will continue to do so in the
future. These arrangements are summarized below.
MAUMELLE ENTERPRISES, INC. AGREEMENT. The Company has an oral agreement
with Maumelle Enterprises, Inc. to provide management and administrative
services for the Maumelle Property. Currently, Maumelle Enterprises manages the
Company's inventory of property, oversees any sale of property, and manages
administrative matters such as ensuring payment of taxes, mortgages and other
expenditures incurred in management of the property. Maumelle Enterprises also
represents the Company at local and state hearings that may affect the Company's
property. Until March 1997, Maumelle Enterprises was owned primarily by officers
and directors of the Company. It has no clients other than the Company and
DeHaven Todd Limited Partnership, an Arkansas limited partnership ("DTLP"),
which is owned almost entirely by Michael G. Todd and John W. DeHaven. In March
1997, Michael G. Todd and John W. DeHaven agreed to cancel all of their shares
of Maumelle Enterprises common stock, which aggregately represented twenty
percent (20%) of the shares in Maumelle Enterprises, as partial consideration
for Maumelle Enterprises' agreement to sell approximately 3.8 acres of
commercial property, known as the Corner Tract, in the City of Maumelle to the
Company, See "--ACQUISITION OF LAD FROM AFFILIATES," discussed below. After
giving effect to the cancellation of the shares owned by Mr. Todd and Mr.
DeHaven, David Paes and Mary Peyton each owns 50% of the outstanding shares of
Maumelle Enterprises, as of the date of this Report. Mary Peyton, the President
of the Resort Subsidiary, receives a salary of $39,600 per annum as an officer
of Maumelle Enterprises.
56
<PAGE>
Under the oral management and administrative services agreement, payment to
Maumelle Enterprises for management services depends upon the actual services
rendered in a given month and the current liquidity of the Company. If funds are
not available, Maumelle Enterprises has agreed to defer payment of its fees. For
the fiscal year ended September 30, 1996, the Company paid Maumelle Enterprises
$33,367 and accrued unpaid fees of $198,230. In the fiscal year ended September
30, 1997, the Company paid Maumelle Enterprises $231,448 and accrued unpaid fees
of $130,616.
The Company intends to formalize its management agreement with Maumelle
Enterprises in writing. The duration, terms and conditions of the contract have
not yet been determined and will be subject to approval by the independent
directors of the Company.
SUBLEASING OF OFFICE SPACE. The Company is currently subleasing its
principal office space in Torrance, California from DTC, a California
partnership. The partnership, owned equally by Michael G. Todd and John W.
DeHaven charges the Company $1,900 per month. The Company paid DTC the total of
$21,600 in rental payments for the fiscal year ended September 30, 1997.
The majority of the disinterested board of directors on October 1, 1995,
voted to approve the oral agreement between the Company and DTC for the
subleasing of office space from DTC to the Company.
The Company plans to continue to sublease its office space from DTC until
at least September 30, 1998.
ACQUISITIONS OF LAND FROM AFFILIATES
LAND ACQUISITION. The Company intends to purchase 121 improved single-
family lots from DTLP. John W. DeHaven, who is the sole general partner of
DTLP, owns 75% of DTLP, while Michael G. Todd owns 20% as a limited partner. In
addition to the 121 single-family lots, DTLP owns approximately 6 acres of
commercial property and approximately 135 single-family lots in the City of
Maumelle.
The Company expects to purchase any lots it acquires from DTLP at fair
market value, to be determined at the time of purchase. Such fair market value
will be established by an unaffiliated certified appraiser. Any future
transactions between the Company and its officers, directors and affiliates will
be approved by a majority of the Company's outside directors or will be
consistent with policies approved by such outside directors.
On May 7, 1997, the Company purchased approximately 3.8 acres of commercial
property, known as the Corner Tract, in the City of Maumelle from Maumelle
Enterprises for $200,000, and as partial consideration for the cancellation of
Michael G. Todd and John W. DeHaven's shares of common stock in Maumelle
Enterprises. The property was appraised at $265,000 by an unaffiliated third-
party appraiser in 1994. The Corner Tract was deeded to Century as part of the
Century Settlement Agreement to retire the Century Note
57
<PAGE>
1 and Century Note II. The Company retains the option to repurchase the
property.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) FINANCIAL STATEMENTS AND EXHIBITS
FINANCIAL STATEMENTS
CAPITOL COMMUNITIES CORPORATION, INCLUDING PREDECESSOR CORPORATION AND
SUBSIDIARIES.
<TABLE>
<S> <C>
Report of Independent Auditors.......................................... F-3
Balance Sheet as of September 30, 1997.................................. F-4
Statements of Operations for the Years Ended
September 30, 1997 and 1996............................................. F-6
Statements of Changes in Shareholders' Equity
September 30, 1997...................................................... F-7
Statements of Cash Flows for the Years Ended
September 30, 1997 and 1996............................................. F-8
Notes to Financial Statements........................................... F-10
</TABLE>
58
<PAGE>
EXHIBITS
The following Exhibits are filed as part of this Report. (Exhibits numbers
correspond to the exhibits required by Item 601 of Regulation S-B for an annual
report on Form 10-KSB,
2.1.1 Articles of Merger, filed with State of Nevada, dated November 29, 1995,
merging AWEC Resources into Capitol Communities Corporation.*
2.1.2 Agreement of Merger, filed with State of Nevada, dated November 15, 1995,
between AWEC Resources, Inc., and Capitol Communities Corporation.*
2.2 Certificate of Merger, filed with State of New York, dated January 5,
1996, merging AWEC Resources, Inc., into Capitol Communities
Corporation.*
3.1.1 Articles of Incorporation of Capitol Communities Corporation, dated
August 18, 1995.*
3.1.2 Certificate of Amendment of Articles of Incorporation of Capitol
Communities Corporation, dated February 6, 1996.*
3.2 Bylaws of Capitol Communities Corporation, dated August 22, 1995.*
10.1 Contribution Agreement, dated September 11, 1995, between AWEC
Development Corporation and Resure, Inc.*
10.2 Subordinated Surplus Debenture, dated September 11, 1995, between AWEC
Development Corporation and Resure, Inc.*
10.3 Non-Recourse Promissory Note, dated September 11, 1995, between AWEC
Development Corporation and Resure, Inc.*
10.4 Non-Recourse Mortgage, dated September 11, 1995 between AWEC Development
Corporation and Resure, Inc.*
10.5 Security Agreement, dated September 11, 1995 between AWEC Development
Corporation and Resure, Inc.*
10.6 Environmental Indemnity Agreement, dated September 11, 1995, between AWEC
Development Corporation and Resure, Inc.*
10.7 Loan Agreement, dated September 11, 1995 between AWEC Development
Corporation and Resure, Inc.*
10.8 Promissory Note, dated September 11, 1995 between AWEC Development
Corporation and Resure, Inc.*
10.9 Mortgage, dated September 11, 1995 between AWEC Development Corporation
and Resure, Inc.*
59
<PAGE>
10.10 Environmental Indemnity Agreement, dated September 11, 1995, between
AWEC Development Corporation and Resure, Inc.*
10.11 Agreement for Refinance of Secured Note, dated September 11, 1995 between
Century Realty, Inc., AWEC Resources, Inc., and AWEC Development
Corporation.*
10.12 Promissory Note, dated September 11, 1995, between AWEC Development
Corporation and Century Realty, Inc. in the amount of $1,400,000.*
10.13 Mortgage, dated September 11, 1995, between AWEC Development Corporation
and Century Realty, Inc. in the amount of $350,000.*
10.14 Promissory Note, dated September 11, 1995, between AWEC Development
Corporation and Century Realty, Inc.*
10.15 Guaranty, dated September 11, 1995, between AWEC Development Corporation
and Century Realty, Inc.*
10.16 Stock Option Agreement, dated September 11, 1995, between Century Realty,
Inc., and AWEC Development Corporation.*
10.17 Release Deed, dated September 9, 1995, between Century Realty, Inc., and
AWEC Development Corporation.*
10.18 Employment Agreement, dated July 14, 1995 between the Company and Michael
G. Todd.*
10.19 Olsen Consultant Agreement, dated October 7, 1996 between the Company and
Jens Olsen.**
10.20 Purchase Agreement, dated October 24, 1995, between John L. Burnett,
Trustee for Wood Health Joint Venture and the Company.***
10.21 Asset Purchase Agreement, effective February 21, 1997, between Capitol
Communities Corporation and SunBay Inc. for the purchase of the SunBay
Resort.****
10.22 RealEstate Contract, effective February 28, 1997, between Capitol
Communities Corporation and Steve Hockersmith as agent for an
unidentified buyer for the sale of 67.51 acres of land in Maumelle,
Arkansas.****
10.23 Asset Purchase Agreement, effective June 16, 1997, between Capitol
Communities Corporation and PVP Development Company, L.L.C. an Arkansas
limited liability company, for the purchase of approximately 20.71 acres
of land in Branson, Missouri.*****
10.24 Asset Purchase Agreement, effective June 16, 1997, between Capitol
Communities Corporation and Palace View Ventures, L.L.C., a Missouri
limited liability company, and Palace View, Inc.,a Missouri corporation
60
<PAGE>
for the purchase of approximately 1 acres of land with 2 finished
pads.*****
10.25 Agreement and plan of reorganization dated July 30, 1997 to acquire
shares of Capital Resorts of Florida, Inc. and Florida Bible
College.*****
10.26 Century Realty, Inc. Settlement and Release Agreement signed October 20,
1997, effective September 30, 1997.******
10.27 Debt Settlement and Release dated effective September 30, 1997.******
10.28 Agreement, dated December 9, 1997, between Capitol Resorts of Florida,
Inc. and Ocean Palms Development Corporation and Ocean Palms Resort, Inc.
10.29 Ground Lease, dated February 10, 1996, between Lighthouse Point
Construction Corp. and Nancy H. Newell and Jane H. Tubbs.
10.30 Assignment of Ground Lease and Tenant Leases, dated December 9, 1997,
between Capitol Resorts of Florida Inc., and Ocean Palms Development
Corporation.
10.31 Assignment of Leashold Improvements, dated December 9, 1997, between
Capitol Resorts of Florida Inc., and Ocean Palms Development Corporation.
10.32 Mortgage and Note Modification and Assumption Agreement, dated December
9, 1997, between Capitol Resorts of Florida Inc., and the Trustee of the
M.B. Co., Inc. Pension Plan, the Trustee of the Domenick Greco Revocable
Trust, Stanley Elkman, the Trustee of the Arthur A. Kober Co., Inc.,
Employees Profit Sharing Fund, and Morton J. Berman ("Ocean Palms Resort
Mortgagee").
10.33 Collateral Assignment and Pledge of Agreements and Conditional
Assignments of Lease and Purchase Money Promissory Note, dated December
9, 1997, between Capitol Resorts of Florida Inc., and jointed by Ocean
Palms Development Corporation and assigned to the Ocean Palms Resort
Mortgagee.
10.34 Assignment of Agreements and Conditional Assignments of Lease and
Purchase Money Promissory Notes, dated December 9, 1997, between Capitol
Resorts of Florida Inc., and Ocean Palms Development Corporation and
Ocean Palms Resort, Inc.
10.35 Purchase Money Leasehold Mortgage and Security Agreement, dated February
2, 1992, between Lucaya Beach Hotel Corporation and Del-Aire Management
Co., Inc.
61
<PAGE>
10.36 Mortgage and Note Modification Agreement, dated January 22, 1997, between
the Ocean Palms Resort Mortgagee and Ocean Palms Cooperative Association,
Inc.
11. Statement of Computation of Per Share Earnings.
21. List of Subsidiaries.*
23. Consent of Joel S. Baum P.A.
See Financial Statements at F-1 To F-16.
* Exhibit(s) incorporated by reference from the Registration on Form 10-
SB of the Company, Registration No.915636 filed on September 16, 1996.
** Exhibit incorporated by reference from Form 8-K, Commission File No.
915636 filed on October 18, 1996.
*** Exhibit(s) incorporated by reference from the December 31, 1996
Quarterly Report on Form 10-QSB filed on February 19, 1997.
****Exhibit(s) incorporated by reference from the March 31, 1997
Quarterly Report on Form 10-QSB filed on May 19, 1997.
*****Exhibit(s) incorporated by reference from the June 30, 1997
Quarterly Report on Form 10-QSB filed on August 13, 1997.
******Exhibit(s) incorporated by reference from the Form 8-K, Commission
File No. 915636 filed on November 5, 1997.
(b) REPORTS ON FORM 8-K
The following reports on Form 8-K were filed by the Company during the
fiscal quarter ended September 30, 1997.
None
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
there unto duly authorized.
CAPITOL COMMUNITIES CORPORATION
By: /s/ Michael G. Todd
Michael G. Todd, Chairman,
President and Chief
Executive Officer
62
<PAGE>
CAPITOL COMMUNITIES CORPORATION, INC.
AND SUBSIDIARIES
AUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
1
<PAGE>
CAPITOL COMMUNITIES CORPORATION, INC. AND SUBSIDIARIES
------------------------------------------------------
TABLE OF CONTENTS
-----------------
Page
-----
Independent Auditor's Report 3
Financial Statements
Balance Sheet 4
Statements of Operations and Retained Deficit 5
Statements of Changes in Shareholders' Equity 6
Statements of Cash Flows 7
Notes to Financial Statements 8-16
2
<PAGE>
INDEPENDENT AUDITOR'S REPORT
----------------------------
To the Board of Directors and Stockholders
of Capitol Communities Corporation, Inc. and Subsidiaries
We have audited the accompanying balance sheets of Capitol Communities
Corporation, Inc. and Subsidiaries as of September 30, 1997 and the related
statements of income and accumulated deficit, stockholders equity and cash flows
for the years ended September 30, 1997, and 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements 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 financial statements referred to above present fairly, in
all material respects, the financial position of Capitol Communities
Corporation, Inc. and Subsidiaries as of September 30, 1997 and the results of
its operations and its cash flows for the years ended September 30, 1997 and
1996 in conformity with generally accepted accounting principles.
December 23, 1997
/s/ Joel S. Baum, P.A., CPA
Coral Springs, Florida
3
<PAGE>
CAPITAL COMMUNITIES CORPORATION, INC AND SUBSIDIARIES
-----------------------------------------------------
BALANCE SHEET
-------------
SEPTEMBER 30, 1997
------------------
ASSETS
------
1997
-----------
Current Assets:
Cash and Cash Equivalents $ 227,162
Accounts Receivable 12,096
Prepaid Assets 202,674
-----------
Total Current Assets 441,932
-----------
Fixed Assets:
Furniture and Fixtures
(Net of accumulated depreciation of $2,412) 36,260
-----------
Non-Current Assets:
Deposits 62,679
Real Estate Holdings 9,468,637
Loan Origination Fees
(Net of accumulated amortization of $295,597) 155,359
-----------
Total Non-current Assets 9,686,675
-----------
Total Assets $10,164,867
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Accounts Payable & Accrued Expenses $ 516,994
Accrued Interest 59,810
Notes Payable 2,099,973
-----------
Total Current Liabilities 2,676,777
Non-Current Liabilities:
Notes Payable 3,377,048
-----------
Total Liabilities 6,053,825
----------
Shareholders' Equity:
Preferred Stock, $.01 par value, none
issued and outstanding - 0 -
Common Stock, $.001 par value; 40,000,000
shares authorized; 7,312,000 shares
issued and outstanding 7,312
Additional Paid in Capital 6,380,896
Retained Deficit (2,277,166)
-----------
Total Shareholders' Equity 4,111,042
-----------
Total Liabilities and Shareholders' Equity $10,164,867
===========
See Accompanying Notes to the Financial Statements
4
<PAGE>
CAPITOL COMMUNITIES CORPORATION, INC. AND SUBSIDIARIES
------------------------------------------------------
STATEMENTS OF OPERATIONS AND RETAINED DEFICIT
---------------------------------------------
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
---------------------------------------
1997 1996
----------- ----------
Revenues:
Sales (Note 11) $ 4,139,299 $ 31,676
Cost of Sales 1,895,825 - 0 -
----------- ----------
Gross Profit 2,243,474 31,676
Operating Costs and Expenses:
Selling, General &
Administrative 1,447,329 610,820
----------- ----------
Income (Loss) Before
Interest Income (Expense) 796,145 (579,144)
Interest Income 71,543 245,905
Interest Expense (826,881) (775,814)
------------ ----------
Net Income (Loss) 40,807 (1,109,053)
Retained Deficit - Beginning of
Year (2,317,973) (1,208,920)
------------ -----------
Retained Deficit - End of Year $(2,277,166) $(2,317,973)
============ ===========
Income (Loss) Per Common Share 0.006 (0.158)
=========== ===========
Weighted Average
Common Shares Outstanding 7,171,014 7,000,000
=========== ===========
See Accompanying Notes to the Financial Statements
5
<PAGE>
CAPITOL COMMUNITIES CORPORATION, INC. AND SUBSIDIARIES
------------------------------------------------------
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
---------------------------------------------
SEPTEMBER 30, 1997
------------------
ADDITIONAL
COMMON STOCK PAID-IN ACCUMULATED
# SHARES AMOUNT CAPITAL DEFICIT
---------- ------ ---------- ------------
September 30, 1994 11,135,018 $11,135 $1,438,191 $ (323,002)
Reverse Stock
Split (July, 1995) (8,908,014) (8,908) 8,908 - 0 -
Additional Stock
Issued 4,772,996 4,773 3,317,009 - 0 -
Net Loss - 0 - - 0 - - 0 - (885,918)
---------- ------- ---------- -----------
September 30, 1995 7,000,000 7,000 4,764,108 (1,208,920)
Net Loss - 0 - - 0 - - 0 - (1,109,053)
---------- ------- ---------- -----------
September 30, 1996 7,000,000 7,000 4,764,108 (2,317,973)
Additional Stock
Issued 312,000 312 1,616,788 - 0 -
Net Income - 0 - - 0 - - 0 - 40,807
---------- ------- ---------- -----------
September 30, 1997 7,312,000 $ 7,312 $6,380,896 $(2,277,166)
========== ======= ========== ===========
See Accompanying Notes to the Financial Statements
6
<PAGE>
CAPITOL COMMUNITIES CORPORATION, INC. AND SUBSIDIARIES
------------------------------------------------------
STATEMENTS OF CASH FLOWS
------------------------
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
---------------------------------------
1997 1996
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 40,807 $(1,109,053)
Adjustments to Reconcile Net
Income (Loss) to Cash Used in
Operating Activities:
Depreciation 2,412 - 0 -
Amortization 155,344 57,232
(Increase) Decrease in Accounts
Receivable (11,039) (38,191)
(Increase) Decrease in Prepaid
Assets (195,781) 535
(Increase) Decrease in Accrued
Interest Receivable 62,140 - 0 -
(Increase) Decrease in Deposits (62,550) - 0 -
(Increase) Decrease in Real
Estate Holdings (312,280) (254,936)
(Increase) Decrease in Loan
Obligation Fees (99,102) - 0 -
(Increase) Decrease in
Investments 3,500,000 - 0 -
Increase (Decrease) in Accounts
Payable and Accrued Expenses (784,793) 906,631
Increase (Decrease) in Short
Term Notes Payable 135,567 - 0 -
----------- -----------
Net Cash Provided (Used) in
Operating Activities 2,430,725 (437,782)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Furniture and
Fixtures (38,672) - 0 -
----------- -----------
Net Cash Provided (Used) in
Investing Activities (38,672) - 0 -
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (Decrease) in Long Term
Debt (3,596,080) (13,832)
Issuance of Common Stock 312 - 0 -
Issuance of Additional Paid in
Capital 1,616,788 - 0 -
----------- -----------
Net Cash Provided (Used) by
Financing Activities (1,978,980) (13,832)
----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 413,073 (451,614)
CASH AND CASH EQUIVALENTS -
BEGINNING OF YEAR (185,911) 265,703
----------- -----------
CASH AND CASH EQUIVALENTS -
END OF YEAR $ 227,162 $ (185,911)
=========== ===========
See Accompanying Notes to the Financial Statements
7
<PAGE>
CAPITOL COMMUNITIES CORPORATION, INC. AND SUBSIDIARIES
------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
SEPTEMBER 30, 1997
------------------
NOTE 1 SIGNIFICANT ACCOUNTING POLICIES
-------------------------------
A. BACKGROUND
----------
The Company was originally incorporated in the State of New York on
November 8, 1968 under the name of Century Cinema Corporation. In 1983,
the Company merged with a privately owned company, Diagnostic Medical
Equipment Corp. and as a result changed its name to that of the acquired
company. By 1990, the Company was an inactive publicly held corporation.
In 1993, the Company changed its name to AWEC Resources, Inc. and
commenced operations. On February 11, 1994 the Company formed a wholly
owned subsidiary AWEC Development Corp, an Arkansas Corporation, which
later changed its name to Capitol Development of Arkansas. The Company
is currently in the business of developing and selling real estate
properties.
In February, 1994 Petro Source Energy Corporation transferred the
majority of its holdings in the common shares of the predecessor
corporation, AWEC Resources, Inc., to Prescott Investments Limited
Partnership and Charlie Corporation, both of which were then and
currently are affiliates of Michael Todd, Herbert Russell and John
DeHaven, the beneficial owners of the Company. These shares were
transferred in consideration for public relations services provided by
Prescott Limited Partnership and Charlie Corporation to Petro Source.
Such services were deemed by Petro Source to be integral and
indispensable to the concurrent acquisition of approximately 2,041 acres
of land in Maumelle, Arkansas by the Company's Operating Subsidiary. The
Company was not a party to the transfer of shares. The Company did not
issue any new shares pursuant to the acquisition of the land.
Accordingly, the transfer of shares did not affect the capitalization of
the Company, and was non-dilutive to all other shareholders.
In order to effectuate a change in domicile and name change approved by
a majority of the Predecessor Corporation shareholders, the Predecessor
Corporation merged, effective January 30, 1996, into Capitol Communities
Corporation, a Nevada corporation formed in August 1995 solely for the
purpose of the merger.
B. PRINCIPLES OF CONSOLIDATION
---------------------------
The Consolidated financial statements include accounts of its
8
<PAGE>
wholly-owned subsidiaries. All material intercompany transactions have been
eliminated.
C. REAL ESTATE HOLDINGS
--------------------
Real estate investments are stated at the lower of cost or market.
Acquisition costs are allocated to respective properties based on
appraisals of the various properties acquired in the acquisition.
D. INCOME TAXES
------------
In February 1992, the Financial Accounting Standards Board issued
Statement on Financial Accounting standards 109 of "Accounting for
Income Taxes." Under Statement 109, deferred tax assets and liabilities
are recognized for the estimated future tax consequences attributable to
differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases.
E. REVENUE RECOGNITION
-------------------
Revenue is recognized under the full accrual method of accounting upon
the completed sale of real property held for development and sale. All
costs incurred directly or indirectly in acquiring and developing the
real property are capitalized.
F. USE OF ESTIMATES
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the period. Actual results could differ from those estimates.
G. CASH AND CASH EQUIVALENTS
-------------------------
Cash and cash equivalents include cash on hand, cash in banks, and any
highly liquid investments with a maturity of three months or less at the
time of purchase.
The Company and its Subsidiaries maintain cash and cash equivalent
balances at several financial institutions which are insured by the
Federal Deposit Insurance Corporation up to $100,000. At September 30,
1997 there is no concentration of credit risk from uninsured bank
balances.
9
<PAGE>
H. EARNINGS/LOSS PER SHARE
-----------------------
Primary earnings per common share are computed by dividing the net
income (loss) by the weighted average number of shares of common stock
and common stock equivalents outstanding during the year. The number of
shares used for the fiscal years ended September 30, 1997 and 1996 were
7,171,014 and 7,000,000, respectively.
NOTE 2 CAPITAL TRANSACTIONS
--------------------
In July, 1997, the Company issued 100,000 shares of common stock in a
stock for stock acquisition (See Note).
NOTE 3 AGREEMENTS
----------
Currently the Company has an oral agreement with Maumelle Enterprise,
Inc. (Maumelle), an affiliated company, to provide management, sales and
administrative services for the Company's inventory of property. Under
this oral agreement, payment to Maumelle for management services depends
upon the actual services rendered in a given month and the current
liquidity of the Company. If funds are not available, Maumelle has
agreed to defer payment of its fees.
During the fiscal year ended September 30, 1997, the Company paid
Maumelle a total of $198,081 for fees accrued from prior years and
$33,367 for fees due for 1997. As of September 30, 1997, a balance of
$130,616 remained accrued and unpaid for fiscal 1997.
NOTE 4 CONTINGENCIES
-------------
A. There was a lawsuit pending in the amount of $200,000 with interest at
5% per annum dated February 9, 1994 against Pine Ridge Improvement
District, filed by Robert D. Holloway, Inc. for engineering services,
planning, and surveying. Capitol Communities Corporation, Inc. and its
subsidiaries were not a party to the action; however, as owner of the
property, any judgement against the property could be a liability to the
Company.On March 12, 1997 the Chancery Court of Pulaski County,
Arkansas, Second Division granted a summary judgement in favor of the
Company, relieving it of any liability arising from assessment or tax
levy in the matter of Robert Holloway, Inc. vs Pine Ridge Residential
Property Owners Improvement District. Robert Holloway, Inc. subsequently
appealed the summary judgment. The Company has not accrued a liability
for this contingency.
10
<PAGE>
NOTE 5 MORTGAGES
---------
On September 11, 1995, the Company entered into a promissory note with
Resure, Inc. for $3,500,000, bearing interest at 10% per annum, payable
in full on July 1, 2000 and secured by a 701.3 acre tract of land in
Maumelle, Arkansas. Effective September 30, 1997, the Company entered
into a modification of the promissory note with Resure, Inc. The
principal becomes due and payable in full, on September 1, 1999.
NOTE 5 MORTGAGES (CONTINUED)
- - ------ --------------------
Payments are due in the amount of $101,591.16 including principal and
interest at 10% per annum, payable quarterly. The next payment is due
January 1, 1998.
NOTE 6 LEASE AGREEMENT
---------------
The Company is subleasing office space from Dehaven & Todd Co., in which
Michael G. Todd, is a partner. The monthly lease payment began on
October 1, 1995 and is $1,900 per month. The lease expires September 30,
1998.
The lease commitment is as follows:
Year ended September 30
1998 22,800
Total Minimum
Rental Payments $22,800
=======
As of September 30, 1997, all amounts due under this agreement have been
paid.
NOTE 7 EXECUTIVE EMPLOYMENT AGREEMENT
------------------------------
The Company has a five-year written agreement with Michael Todd to
perform the duties of President. Under the agreement, which became
effective on October 1, 1995, Michael Todd is to be compensated at a
rate of $20,000. per month. The agreement expires on September 30, 2000.
The Company is not a party to any other employment agreements.
Michael Todd has forgiven all liability of the Company, under the
agreement for the periods ending September 30, 1996 and 1997.
NOTE 8 NOTES PAYABLE
-------------
Notes payable consist of the following:
11
<PAGE>
9/30/1997
---------
Note Payable - Bank of Little Rock
----------------------------------
Secured 10% Line of Credit 10% per annum;
maturing May 10, 1998
$ 399,024
Note Payable - Bank of Little Rock
----------------------------------
Secured 10% Line of Credit 10% per annum;
maturing November 5, 1997 450,000
NOTE 8 NOTES PAYABLE
-------------
Note Payable - Davister
-----------------------
Unsecured 9% per annum due
January 9, 1996 200,000
Notes Payable
-------------
Miscellaneous Short-Term 1,001,284
Note Payable - Resure Mortgage 49,665
------------------------------ -----------
Total Current Maturities $2,099,973
-----------
Note Payable - Resure Mortgage
------------------------------
Secured 10% per annum due
September 1, 1999 - Quarterly
payments beginning 1/1/98
for $101,591 3,377,048
Total Non-Current 3,377,048
-----------
Total Notes Payable $5,477,021
===========
NOTE 9 LOAN ORIGINATION FEES
---------------------
Loan origination fees were incurred in connection with the Resure, Inc.
debt refinancing September 11, 1995. aid costs included attorney,
consult, title, appraisal and survey fees and are being amortized over 57
months on a straight-line basis. Upon the modification of the obligation,
50% of the balance was written off.
NOTE 10 SUPPLEMENTAL CASH FLOW INFORMATION
----------------------------------
Year End 1997 1996
12
<PAGE>
Interest Paid $826,881 $775,814
NOTE 11 SETTLEMENT
----------
On October 20, 1997, Capitol Communities Corporation, Capital
Development of Arkansas, Inc., a wholly-owned subsidiary of the Company
and Century Realty, Inc. entered into a Settlement and Release
Agreement effective September 30, 1997. The Settlement Agreement was
entered to settle the foreclosure action instituted by Century, on
August 12, 1996 against Operating Subsidiary and the Company in the
Chancery Court of Pulaski County and to settle the counterclaim filed
by the Company. In the foreclosure action, Century was seeking to
foreclose on 36 acres of the commercial lots, known as Tract D, located
in Maumelle, Arkansas, which secured a $1,400,000 Century promissory
note. As a result of cross-default provisions, an unsecured (Century
Note 1) $350,000 Century promissory note (Century Note 2) was also in
default.
Under the provisions of the Settlement Agreement, the Company paid
$17,500 to Century simultaneous to the execution of the Settlement
Agreement and delivered to an escrow agent a Warranty Deed conveying to
Century Tract D and an approximately 3.5 acre track of land adjoining
Tract D. In return, Century acknowledged that all obligations due
Century pursuant to the Century Note 1 and the Century Note 2 were
satisfied. Under the Settlement Agreement the Company has the option to
repurchase Tract D and the Corner Tract. In return, Century delivered
to the escrow agent certificates of 700,000 shares of the Company's
common stock, and a Quitclaim Deed to Tract D and the Corner Lot in
favor of the Company.
NOTE 12 REFINANCING DEBT
----------------
Effective September 30, 1997, Capitol Communities Corporation, Capital
Development of Arkansas, Inc., a wholly-owned subsidiary of the Company
and Mark Boozell, Director of Insurance of the State of Illinois
liquidator for Resure, Inc entered into a Debt Settlement and Release
Agreement. On October 24, 1997, Judge Ellis E. Reid of the Circuit
Court of Cook County, Illinois County Department, Chancery Division,
approved the Settlement Agreement.
Under the provisions of the Settlement Agreement, the Liquidator
modified and amended the $3,500,000 recourse note payable to Resure to
become due and payable in full on September 1, 1999. Resure applied the
amount of $525,460, to the Company's four quarterly payments that were
due October 1, 1996, January 1, 1997, April 1, 1997, and October 1,
1997. The approximately
13
<PAGE>
$150,000 remaining in the Resure cash collateral account was retained
by the Liquidator. As part of the Settlement Agreement, the Liquidator
released 342.22 acres of the Company's single-family residential
property of the original 1,044 acres of residential property that
secured the Resure Note I. The remaining 701.03 acres of single-family
residential property was retained by the Liquidator as collateral on
the modified Resure Note I.
The Settlement Agreement further provided that the Company's $3,500,000
non-recourse note payable to Resure and return the Resure Note II and
the contribution agreement, signed in connection with the Resure Note
II to the Company. The Company terminated the Resure Debenture, which
was issued by Resure as consideration for the Resure Note II, and
delivered it to the Liquidator.
NOTE 12 REFINANCING DEBT (CONTINUED)
----------------------------
As additional consideration for the Liquidator to enter into the Resure
settlement Agreement, the Company agreed to pay a developer's fee of
$2,000 for each lot sold in Parcel 1, which is comprised of
approximately 701 acres of the Large Residential Property and Parcel 2,
which is comprised of approximately 344 acres of the Large Residential
Property. In the event that any portion of Parcel 1 is sold prior to
being subdivided into single-family lots, the Company will pay $2,853
per acre and $5,844.20 per acre if Parcel 2 is sold prior to being
subdivided, however, such Developer's Fees shall not exceed $2,000,000.
The Developer's Fee shall be secured by a written amendment to the loan
mortgage securing the Resure Note I, which shall be recorded against
the 701 acres of the Large Residential Property.
NOTE 13 ACQUISITIONS
------------
On July 30, 1997, the Company acquired Capitol Resorts of Florida, Inc,
a Florida Corporation formed on July 22, 1997, whole sole asset was the
right to purchase a 36.301 acre parcel of land in Osceola County,
Florida formerly known as the Florida Bible College property. On July
30, 1997, the Company entered into a reorganization agreement with MLT
Management Corp., the parent of CRF. Under the terms of the agreement
the Company acquired all of the issued and outstanding capital shares
of CRF in exchange for 100,000 shares of the Company's voting common
stock. Upon acquisition of the CRF stock, its sole director resigned
and Michael G. Todd, president and director of the Company, was
appointed the sole director of CRF. On the same day, CRF closed on the
contract to acquire Florida Bible College
14
<PAGE>
property for $922,000 plus costs. The property was appraised by a third
party on May 12, 1997 at a value of $3,385,000. A subsequent appraisal
by another qualified third party appraiser, dated December 5, 1997,
valued the property at $4,570,000. A portion of the property (14.24
acres in two parcels) is developed with a 95 room hotel and various
structures.
NOTE 14 OPTION
------
Under the Settlement Agreement the Company has the option to repurchase
Tract D and the Corner Tract. In return, Century delivered to the
escrow agent certificates for 700,000 share of the Company's common
stock, and a Quitclaim Deed to Tract D and the Corner Lot in favor of
the Company.
NOTE 15 SUBSEQUENT EVENTS
-----------------
On December 9, 1997, the Florida Resorts Subsidiary acquired the lease
rights to 120 feet of beachfront land and improvements located in
Pompano Beach, Florida from Ocean Palms Resort, Inc. and Ocean Palms
Development Corporation, unaffiliated third parties. The ground lease
rights to the Ocean Palms Resort Property is for a period of 99 years,
of which 66 years and 3 months remain. The improvements include a 53 LTL
unit complex, and other common area facilities. The Company also
acquired the interest in several long term tenant leases, a $2,600,000
interest in promissory notes, arising out of the sale of long term
leasehold units of Ocean Palms Resorts and the right to manage and
operate the on-going rental of the units as hotel rooms on behalf of the
owners.
The Company acquired the Ocean Palms Resort Property, the Ocean Palms
Resort Paper and the other rights for approximately $868,000 in cash,
the issuance of 33,500 shares of the Company's Common Stock and the
assumption of a $1,158,000 mortgage encumbering the Ground Lease.
On December 9, 1997, the Florida Resorts Subsidiary acquired all of the
issued and outstanding common stock of OPV Development, Inc. an
unaffiliated third party. With the stock acquisition, the Company
acquired OPV's primary asset, two lease rights to a four lot parcel of
land and improvements located in Pompano Beach, Florida. The First
Ground Lease is for a period of 99 years of which 65 years and 5 months
remain. The Second Ground Lease is for a period of 93 years and 3
months, of which 65 years and 5 months remain. The Company acquired the
16 LTL unit Ocean Villas, and approximately $294,000 in promissory
notes, which
15
<PAGE>
arose from the prior sale of 4 LTL units, for approximately $107,000 in
cash, and the assumption of a first mortgage of $375,000 and a second
mortgage of $150,000 encumbering the Ground Leases.
16
<PAGE>
EXHIBIT 10.28
AGREEMENT
THIS AGREEMENT made and entered into this 9th day of December, 1997, by and
between CAPITOL RESORTS OF FLORIDA, INC., a Florida corporation, with offices
located at 10605 Maumelle Blvd., #C, Maumelle, AR 72113, (hereinafter referred
to as "Purchaser") and OCEAN PALMS DEVELOPMENT CORPORATION, a Florida
Corporation and OCEAN PALMS RESORT, INC., A Florida corporation, with offices
located as 1200 North Ocean Blvd., Pompano Beach, FL 33062, (hereinafter
referred to as "Seller").
WITNESSETH:
WHEREAS, the Seller owns certain assets described as follows:
A. Ocean Palms Resort, consisting o_ the tenant's interest in that certain
long term ground lease recorded in Official Records Book 2973, Page 677, of the
Public Records of Broward County, Florida (the "Ground Lease") (said Ground
Lease having been assigned to Seller by Assignment of Lease recorded in Official
Records Book 25980, Page 744, of the Public Records of Broward County, Florida),
a copy of which Ground Lease is attached hereto as Exhibit "A"; together with
the improvements contained upon the real property which is the subject matter of
the Ground Lease consisting of a 53 unit apartment complex, pool, office areas,
parking areas and other amenities (the "Improvements"), said Ground Lease and
Improvements being located upon land lying, and situate at 1200 North Ocean
Blvd., Pompano Beach, FL 33062, being more specifically described as follows:
See Exhibit "B" attached hereto and by reference made a part hereof.
B. All of the personal property owned by Seller and used in connection with
the operation of Ocean Palms Resort, including, but not limited to, all of the
furniture, furnishings, fixtures, machinery and equipment of Seller located in
the several apartment units at Ocean Palms Resort or used in the maintenance and
operation of Ocean Palms Resort, all warranties pertaining to such personal
property, all permits, approvals, advertising materials, trade names, phone
numbers, equipment and maintenance leases and agreements, hardware and software
(the "Personal Property"). The Personal Property does not include 2 computers
and one copy machine owned personally by Diane Bloom and Howard Bloom.
C. The landlord's interest in the several long term tenant leases of the
individual apartments at Ocean Palms Resort (the "Tenant Leases"), which Tenant
Leases are more fully described in Exhibit "C" attached hereto and by reference
made a part hereof.
<PAGE>
D. The exclusive right to manage and operate the hotel operation ongoing at
Ocean Palms Resort (the "Desk").
E. The owner and holder's interest in all of those certain promissory notes and
accompanying conditional lease assignments arising out of sales of long term
leases upon the several apartments of Ocean Palms Resorts (the "Paper"), which
Paper aggregates approximately $2,600,000.00 in outstanding principal balances,
and which paper is more specifically described and identified in Exhibit "D"
attached hereto and by reference made a part hereof.
The Ground Lease, Improvements, Personal Property, and Tenant Leases are
hereinafter, from time to time, collectively referred to as the "Resort
Property"; and the Resort Property, the Paper and the Desk are hereinafter, from
time to time, collectively referred to as the "Assets".
WHEREAS, Purchaser desires to purchase the Assets; and
WHEREAS, Seller is desirous of selling the said Assets upon the following
terms and conditions; and
NOW, THEREFORE, in consideration of the mutual benefits accruing to the
respective parties under the provisions of this Agreement, it is hereby agreed
as follows:
1. Sale and Purchase. The Seller agrees to sell and convey and the Purchaser
agrees to purchase, free from all encumbrances except as hereinafter
specifically set forth, the Ground Lease, the Improvements, the Personal
Property, the Tenant Leases, the Desk, and the Paper; and together with all
plans, specifications and surveys located in or used in connection with the
Resort Property, (hereinafter referred to as the "Plans"); together with all
termite inspection reports and guarantees and warranties, environmental reports
and engineering reports (hereinafter referred to as the "Reports").
2. Purchase Price The purchase price for the Desk shall be TEN THOUSAND
DOLLARS ($10,000.00). The purchase price for the Resort Property, the Paper and
for
any remaining tangible and intangible assets included in the sale shall be ONE
MILLION NINE HUNDRED FIFTY-SIX THOUSAND DOLLARS ($1,956,000.00) plus
THIRTY-THREE THOUSAND FIVE-HUNDRED (33,500) shares of the capital stock of
Purchaser's parent, Capitol Communities Corporation (the "Stock").
3. Payment of Purchase Price Said purchase price of TEN THOUSAND DOLLARS
($10,000.00) for the Desk and said purchase price of ONE MILLION NINE-HUNDRED
FIFTY-SIX THOUSAND DOLLARS ($1,956,000.00) plus THIRTY-THREE THOUSAND FIVE-
HUNDRED (33,500) shares of the Stock for the Resort Property, the Paper and for
any remaining tangible and intangible assets included in the sale shall be paid
<PAGE>
at closing as follows:
(a) TEN THOUSAND DOLLARS ($10,000.00) for the Desk shall be paid in cash or by
cashier's or certified check or wire transfer.
(b) ONE MILLION ONE-HUNDRED FIFTY-EIGHT THOUSAND DOLLARS ($1,158,000.00)
of the purchase price for the Resort Property and the Paper shall be paid by the
assumption by Purchaser of that certain first leasehold mortgage presently
encumbering the Ground Lease (the "Leasehold Mortgage"), a copy of which
Leasehold Mortgage and all modifications thereof are attached hereto as Exhibit
"E" and by reference made a part hereof. Purchaser acknowledges that the Paper
is and/or shall be collaterally assigned to the owner and holder of the
Leasehold Mortgage as and for additional security for the promissory note
referred to therein. Purchaser also agrees that at the closing, and in order to
induce the owner and holder of the Leasehold Mortgage to allow the assumption
thereof by Purchaser, the Leasehold Mortgage and the promissory note secured
thereby will be modified and amended so that the monthly payments due
thereunder, commencing with the payment due on the 1st day of May, 1998, will be
calculated based upon a ten (10) year amortization, and the terms of the
collateral assignment of the Paper will be modified so that each month out of
the collections received from the Paper an amount equal to the monthly payment
due under the Leasehold Mortgage will be paid to the owner and holder thereof
and thereafter any remaining collections for such month shall be paid over to
Purchaser. Additionally the insurance escrow requirement set forth in the
--------------------------------------------------------------
Mortgage will be removed. Except as hereinabove set forth the terms of the
- - ------------------------
Leasehold Mortgage as they exist as of the date of this agreement (including the
maturity date), and the terms governing the collateral assignment of the Paper
will remain the same.
(c) The Stock, being 33,500 shares of the common stock of Capitol Communities
Corporation, shall be delivered free and clear of all liens and encumbrances.
Seller may take title to the Stock in its own name or in the name of a designee.
(d) The balance of the purchase price for the Resort Property and the Paper,
in the amount of approximately SEVEN-HUNDRED NINETY-EIGHT THOUSAND DOLLARS
($798,000.00) (or such greater or lesser amount as may be necessary to complete
the payment of the purchase price after adjustments or credits, prorations and
the like) shall be paid in cash or by cashier's or certified check or wire
transfer. An estimated closing statement is attached hereto as Exhibit "G".
----------------------------------------------------------------
4. Title. The Seller shall, within five (5) days prior to the closing of the
------
within transaction, at Seller's expense, obtain a title insurance commitment
--------
issued by a qualified title insurer agreeing to issue to the Purchaser, upon the
recording of the assignment of lease hereinafter mentioned, a leasehold owner's
title insurance policy in the amount of the purchase price for the Resort
<PAGE>
Property insuring title of the Purchaser to the Ground Lease to be good and
marketable subject only to: the following: (a) taxes for the year 1998 and
subsequent years; (b) conditions, restrictions, limitations, easements and
reservations of record (but Purchaser shall not be obligated to close hereunder
if the same render title to the Property not good and marketable and insurable;
(c) zoning ordinances of record provided same are not violated by existing
structures; (d) the Leasehold Mortgage; and (e) those additional matters which
shall be discharged by Seller at or before closing. Purchaser shall have three
(3) days from the date of receiving said title insurance commitment to examine
same. If the title is found to be defective, Purchaser shall, within said period
notify the Seller in writing specifying the defects. Upon receiving such notice,
Seller shall use diligence to correct the defects and the closing shall be
extended, if necessary, to no later than ten (10) days after such defects have
been corrected. If Seller cannot correct the defects within ten twenty (10) days
from receiving the notice, Purchaser shall have the option of:
(a) Accepting title as it then is together with such cash, adjustment to the
purchase price or other consideration as the parties may agree upon, or
(b) Demanding a refund of all moneys paid hereunder which shall forthwith be
returned to the Purchaser, and thereupon the Purchaser and Seller shall be
released of all further obligations to each other under this Agreement.
The cost of the title insurance shall be paid for by Seller. Seller, immediately
subsequent to the date of the complete execution of the within agreement will
provide Purchaser with a copy of the most recent leasehold owners title
insurance policy covering the Ground Lease.
5. 'Title Status Search. Prior to the closing of the within transaction and
within five (5) days thereof, Purchaser shall be entitled to cause search to be
made in the Public Records of Broward County, Florida, and in the Uniform
Commercial Code Records of the State of Florida, to determine the existence of
any liens, encumbrances, judgments, or outstanding adverse interests against the
equipment, furniture, furnishings, and machinery proposed to be sold pursuant to
this Agreement. In the event that Purchaser shall determine the existence of any
liens, encumbrances (other than the encumbrance of the Leasehold Mortgage) or
adverse claims against the property, other than the claims which can be
satisfied by payment of money at the time of closing by Seller, then Purchaser
shall have the option to rescind this Agreement and receive full refund of all
moneys paid and deposited hereunder.
6. Risk of Loss. All risk of loss up to the time of closing shall be borne by
the Seller. If any loss or damage, whether it be due to fire, storm, flood,
riot, or other casualty exceeds $250,000.00, the Purchaser shall have the option
of either taking the Property as is, together with any insurance proceeds
payable by virtue of such loss or damage, or of canceling this Agreement by
giving written notice to the Seller. Upon such or deposited pursuant to this
Agreement and all obligations under this Agreement shall thereupon terminate.
<PAGE>
7. Closing.
(a) It is agreed that the closing of the title shall take place at the office
of Purchaser's attorney, on or before the ____ day of December, 1997,
unless otherwise extended by the provisions of this Agreement, or at such
earlier date upon which the parties may agree.
(b) At the time of the closing the Assignment of the Ground Lease shall be
recorded and evidence of title continued at Purchaser's expense to show title in
Purchaser without any encumbrances or changes which would render Purchaser's
title unmarketable, from the date of the last evidence and the cash proceeds of
sale shall be held in escrow by Seller's attorney for a period of not longer
than three (3) days. If Seller's title is rendered unmarketable, Purchaser's
attorney shall, within said three (3) day period, notify Seller or Seller's
attorney in writing of the defect, and Seller shall have five (5) days from the
date of receipt of such notice to cure said defect. In the event Seller fails to
timely cure said defect, all moneys paid hereunder by Purchaser shall, upon
written demand therefor, and within five (5) days thereafter, be returned to
Purchaser and simultaneously with such repayment, Purchaser shall vacate the
premises and reconvey the Resort Property and the remaining Assets to the
Seller. In the event that Purchaser fails to make timely demand for refund he
shall take title as is, waiving all rights against Seller as to such intervening
defect, except such rights as may be available to Purchaser by virtue of
warranties contained in Assignment of the Ground Lease. In the event the
transaction is not consummated because of an uncorrected or unwaived defect in
title, the Seller will be deemed to have defaulted under this Agreement.
(c) Except as otherwise set forth in this Agreement possession of the Resort
Property shall be delivered at the closing, subject to the existing Tenant
Leases.
(d) Each of the parties shall execute and deliver at the closing all
instruments reasonably required to effectuate the terms and conditions of this
Agreement and the intent thereof.
8. Assessments Certified, confirmed or ratified special assessment liens as of
the date of the closing (and not as of the date of Agreement) are to be paid by
the Seller. If, on the closing date, the Resort Property or any part thereof
shall be or have been affected by an assessment or assessments which are or may
become payable in annual installments, of which the first installment is then a
charge or lien, or has been paid, then for the purposes of this Agreement all
the unpaid installments of any such assessment, including those which are to
become due and payable after the closing date, shall be deemed to be due and
payable and to be liens on the premises affected thereby, and shall be paid and
discharged by the Seller on the closing date. Pending liens as of the date of
closing shall be assumed by the Purchaser, provided, however, that where the
improvement has
<PAGE>
been substantially completed as of the date of the Agreement, such pending liens
shall be considered as certified, confirmed or ratified, and the Seller shall,
at closing, be charged an amount equal to the last estimate of the public body
of the assessment for the improvement.
9. Proration of Taxes (Real and Personal). Taxes both of real property and
personal property shall be prorated as of the closing date. Tax prorations shall
be based upon gross taxes for the year of the closing, with adjustment for
maximum discount. If the taxes for the year of the closing are unknown, they
shall be estimated for the purpose of closing and a re-proration thereof shall
be effected when tax notices are received.
10. Adjustments, Prorations and Expenses of Sale. The purchase price shall be
adjusted for prorations or insurance (if policies of insurance are being assumed
by Purchaser), utilities, license fees, rents, escrows with mortgagees, prepaid
hotel revenues, and similar items being transferred to Purchaser.
Transferable deposits shall be credited to the Seller. Seller shall have the
right to the refund of any nontransferable deposits and Purchaser shall be
responsible for making its own deposits therefor. The cost of recording any
corrective instrument, shall be paid for by the Seller. State documentary stamps
which are required to be affixed to the instrument or instruments of conveyance,
the cost of recording the Assignment of Ground Lease and other assignments shall
be paid for by the Purchaser. Attorney's fees of Michael M. Wallack, Esq. in
connection with the transaction contemplated by this agreement, in the amount of
----------------
$25,000.00, shall be paid for by Purchaser.
- - ----------
11. Survey. The Purchaser, within the time provided for examination and
objection to title, may have the Resort Property surveyed as its expense. If the
survey shows an encroachment on said Resort Property or that the improvements
located on the Resort Property in fact encroach on the lands of others, or
violate any of the covenants herein, the same shall be treated as a title
defect.
12. Representations of Seller. The Seller represents and warrants in connection
with the transaction herein contemplated that:
(a) Except as otherwise expressly set forth herein, between the date hereof
and the closing date Seller will continue its usual program of maintenance and
repair of the Resort Property and it will continue its existing operation of the
Desk, and will continue its existing management of the Paper.
(b) The Seller shall, prior to closing, furnish Purchaser with an estoppel
letter from the landlord under the Ground Lease and from the owner and holder of
the Leasehold Mortgage. In addition Seller will furnish Purchaser with Seller's
affidavit setting forth, as to each Tenant Lease, the rental rate, the term
thereof, and whether same is in good standing; and Seller will furnish
<PAGE>
Purchaser with Seller's affidavit setting forth, as to each item of Paper, the
interest rate, monthly payment amount, remaining term, outstanding principal
balance, paid through date, and whether same is in good standing.
(c) The Improvements contain: 53 apartments, a swimming pool, hot tub, and
other facilities and amenities.
(d) There are no contracts or leases (other than the Ground Lease and the
Tenant Leases) binding Seller in connection with the ownership or operation of
the Resort Property which are not cancelable within thirty (30) days except as
listed on Schedule "F" attached hereto and made a part hereof and except for the
contractual right of Diane Bloom to own, operate, manage and commercialize the
Desk, which contractual right Seller agrees to extinguish by the payment of a
settlement fee at the time of the closing of the within transaction.
(e) Seller has the legal power and right to enter into and perform this
Agreement and the consummation of the transaction contemplated by this Agreement
will not result in breach or termination of any term or provision of or
constitute a default under any contract, mortgage or other instrument to which
Seller is a party or by which Seller is bound.
(f) The Resort Property is free and clear of pollution, debris, and/or
hazardous and/or toxic substances, whether visible or not, other than as
expressly disclosed to Purchaser in this agreement. Attached hereto as Exhibit
"H" is a phase I environmental report covering the Resort Property and
confirming the foregoing representation.
(g) Seller is the owner of the tenant's interest in the Ground Lease and is
able to convey full and complete title and possession (subject to the Tenant
Leases) at Closing except as to those matters specifically accepted by Purchaser
(including, but not limited to the Leasehold Mortgage).
(h) The Leasehold Mortgage is in good standing and not in default.
(i) There has been no litigation for the preceding twelve (12) months, nor
does there exist now any litigation, nor is Seller aware of any potential
litigation, all with respect to any aspect of the Resort Property or any portion
thereof, including but not limited to eminent domain and/or condemnation
proceedings of any nature; except landlord tenant litigation with tenants in
default under Tenant Leases, none of which litigation is presently ongoing, and
except as to Seller's and Seller's stockholders dispute with one of Seller's
stockholders, Karen Abdallah, which dispute will be settled at the time of the
closing of the within transaction by payment to Karen Abdallah, in redemption of
her stock in Seller and in repayment of all indebtedness owned her by Seller, of
the sum of $550,000.00.
<PAGE>
(j) There are no pending, certified, confirmed, or ratified improvement
or other assessments or liens to be made by any governmental or quasi-
governmental authority for which the Seller shall not be liable and satisfied at
Closing.
(k) That there is no impending bankruptcy or insolvency of Seller, nor
has there been over the past twelve (12) months.
(1) That all documents heretofore provided and to be provided to
Purchaser under and in connection with this agreement are true and correct,
complete copies of originals and/or true and correct, complete originals.
(m) The Ground Lease is in good standing and not in default. Rental
under the Ground Lease is paid to and through the 28th day of February, 1998;
and the next rental payment under the Ground Lease (for the period March 1, 1998
through February 28, 1999) is due on the 1st day of March, 1998 in the amount of
approximately $76,320.00 (the quoted figure is the amount of the last period's
ground rent and may be increased for the forthcoming period based upon the
escalator clause set forth in the Ground Lease).
(n) The documents and instruments constituting the Paper (and the
related closing files) are authentic and represent bona fide transactions for
value, and the information contained therein is, to the best of Seller's
knowledge and belief, true, correct and complete.
(o) The Stock which is being acquired by Seller and/or its designee
pursuant to the provisions of this Agreement is being acquired solely for the
account of the Seller or its designee, for investment purposes only and not with
a view to, or in connection with, any distribution or sale of securities. Seller
has no contract, understanding or arrangement with any person to sell, transfer
or pledge to such person, or anyone else, any of the Stock which is being
acquired by Seller, and the Seller has no present plans or intentions to enter
into any such contract, understanding or arrangement. Seller is an "Accredited
Investor" as defined in Regulation D. Seller, either alone or in conjunction
with its counsel and its other representatives, has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of acquiring the Stock. Seller understand that there is a
risk that it may lose all of its investment in the Stock, but Seller feels that
it could afford such a loss. Seller understands that the shares of Stock have
not been registered under the Securities Act of 1933 and that no federal or
state agency has passed upon the Stock or made any finding or determination as
to the fairness of an investment in the Stock and Seller further understands
that the shares of Stock cannot be resold in the absence of such registration or
an exemption therefrom. Seller is not dependent upon a current cash return with
respect to its investment in the shares of Stock. Seller understands that
Capitol Communities Corporation is not a "tax shelter," and any information to
be provided to it concerning the income tax consequences arising from an
investment in the Stock is necessarily
<PAGE>
general in nature and the specific tax consequences to it relative to an
investment in Capitol Communities Corporation will depend upon its individual
circumstances. Seller is relying upon its own advisors with regard to the
federal, state and local tax consequences to Seller arising from this
transaction. Seller understands that the transferability of the shares of Stock
are restricted and that an investment in the Stock involves limited liquidity.
Seller hereby acknowledges and represents that it and its advisors, counsel and
representatives have had the opportunity to review the Capitol Communities
Corporation's records and documents, including, but not limited to all of
Capitol Communities Corporation's 1934 Act filings, and ask questions of Capitol
Communities Corporation's President and discuss this investment and this
transaction and its risks with Seller's attorney and accountant.
13. Representations of Purchaser. The purchaser represents and warrants in
connection with the transaction herein contemplated that:
(a) Purchaser has the legal power and right to enter into and perform
this Agreement and the consummation of the transaction contemplated by this
Agreement will not result in breach or termination of any term or provision of
or constitute a default under any contract, mortgage or other instrument to
which Purchaser is a party or by which Purchaser is bound.
14. Seller's Responsibilities. At the closing Seller will deliver the following
instruments and documents to the Purchaser:
(a) Assignment of Ground Lease. The Assignment of Ground Lease shall be
properly executed and in recordable form and satisfactory to Purchaser's
attorney.
(b) Assignment of Improvements. The Assignment of Improvements shall be
properly executed and in recordable form and satisfactory to Purchaser's
attorney.
(c) Assignment of Tenant Leases. The Assignment of Tenant Leases shall
be properly executed and in recordable form and satisfactory to Purchaser's
attorney, and shall convey all of the Tenant Leases
(d) Bill of sale. Bill of Sale conveying all of the Personal Property
being conveyed in connection with the transaction contemplated by this
Agreement.
(e) Assignment of Paper. The Assignment of Paper shall be properly
executed and in recordable form and satisfactory to Purchaser's attorney, and
shall convey all of the Paper.
(f) Assignment of Rights to the Desk. The Assignment of Rights to the
Desk shall be properly executed and in recordable form and satisfactory to
Purchaser's
<PAGE>
attorney, and shall convey all of the Seller's interest in and to the Desk.
(g) No Lien Affidavit. Seller shall furnish to Purchaser an affidavit that
there have been no improvements to the Real Property undertaken by Seller or at
Seller's direction for 90 days immediately preceding the closing date. If the
said Real Property has been improved by Seller or at his direction within 90
days immediately preceding the closing date, the Seller shall deliver as to the
work done by Seller or at his direction, releases or waivers of Construction
Liens executed by general contractors, subcontractors, suppliers, or materialmen
and Seller's Construction Lien Affidavit.
(h) Creditor's Affidavit. Seller's Affidavit of Creditor's of the Resort
Property. Additionally at the closing Seller will provide proof of payment for
the debts of Seller as listed on the Seller's Affidavit of Creditors and/or will
-----------
pay same as they fall due (except to the extent same are being assumed by
- - -------------------------- ----------------------------------------------
Purchaser).
- - ----------
(i) Seller's Affidavit that all federal withholding and employment taxes and
all state of Florida sales and use taxes have been paid through the date of the
closing of the within transaction.
(j) Certificate of Non-Foreign Status.
(k) Original documents and files as to (a) the Tenant Leases, and (b) the
Paper (provided, that Purchaser acknowledges that the original promissory notes
which constitute part of the Paper have been and/or will be deposited with the
owner and holder of the Leasehold Mortgage pursuant to the terms thereof and of
the related collateral assignment of the Paper).
(1) Mortgage Modification and Assumption Agreement pursuant to which
Purchaser will assume and agree to pay the Leasehold Mortgage and agree to the
modification thereof hereinabove described.
(m) Keys, specifications, advertising materials and the like.
(n) The Plans and Reports.
15. Assignment. The Purchaser shall have the right at any time prior to closing
to assign all Purchaser's right, title and interest under this Agreement
whereupon Purchaser shall have no further liability or responsibility under this
Agreement. In addition, Purchaser shall have the right to designate entities to
take title to the various Assets which entities may be other than Purchaser,
provided that the Resort Property (which includes the Ground Lease, the
Improvements, the Personal Property and the Tenant Leases) shall be conveyed to
one and the same entity.
<PAGE>
16. No Broker. The parties shall and do hereby represent one unto the other
that they have dealt with no real estate broker in connection with the real
estate transaction contemplated by the within Agreement. In the event a real
estate broker or agent claims to have dealt with one of the parties contrary to
the foregoing representation, the party with whom the broker or agent claims to
have dealt with or consulted with agrees to indemnify and hold the other party
harmless against such claim or demand.
17. Purchaser's Representatives. From the date of this Agreement Purchaser may
have its representatives upon the Real Property.
18. Default by Purchaser. If Purchaser fails to perform any of the covenants of
this Agreement to be performed by Purchaser, all moneys paid pursuant to this
Agreement by the Purchaser as aforesaid shall be retained by or for the account
of the Seller as consideration for the execution of this Agreement and as agreed
and liquidated damages in full settlement of any and all claims for damages or
Seller shall have the right to specific performance.
19. Default by Seller. If Seller fails to perform any of the covenants of this
Agreement to be performed by Seller, then the Purchaser may elect to terminate
this Agreement, in which event all moneys paid by Purchaser shall be returned to
the Purchaser on demand or Purchaser shall have the right to specific
performance.
20. Survival or Representations and Covenants. All representations and
covenants made by each party shall survive the delivery of possession and the
closing for the benefit of the other party.
21. Attorney's Fees and Costs. In connection with any litigation arising out of
this Agreement, the prevailing party shall be entitled to recover all costs
incurred, including reasonable attorney's fees at both the trial and appellate
level.
22. Entire Agreement. This Agreement sets forth the entire understanding of the
parties and it shall not be changed or terminated except by a document in
writing signed by the party or parties charged therewith. No representations not
contained in this instrument shall be valid or binding upon either of the
parties unless contained in some document in writing referred to or incorporated
in this instrument or duly executed in writing.
23. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the heirs, administrators, executors, successors, and assigns of each
of the parties hereto.
24. Invalidity. If any term or provision of this Agreement or the application
thereof to any person or circumstance shall, to any extent, be invalid or
<PAGE>
unenforceable, the remainder of this Agreement, or the application of such term
or provision to the persons or circumstances other than those as to which it is
held invalid or unenforceable, shall not be affected thereby and each term and
provision of this Agreement shall be valid and enforced to the fullest extent
permitted by law.
25. Hold Harmless. Seller shall save and hold harmless the Purchaser from any
liability, expense, damage or claim arising out of or incurred by Seller's
business conducted on the Ground Lease property or arising out of or in
connection with the Resort Property, the Desk, or the Paper and not on account
of the acts or omissions of Purchaser, Purchaser's agents or employees prior to
the date of the closing of the within transaction (including, but not limited to
-----------------------------
payables of Seller not expressly assumed by Purchaser) and Seller shall
- - -----------------------------------------------------
reimburse for all costs and expenses, including, but not limited to, a
reasonable attorney's fee on both the trial or appellate level, incurred by
Purchaser in defending any such liability, expense, damage or claim. In
connection therewith, Seller and Purchaser agree that Five-thousand (5000)
shares of the Stock shall remain in escrow with Michael M. Wallack, Esq.
("Escrow Agent") subsequent to the closing for a period not to exceed ninety
(90) days for the purpose of providing a fund and source from which any claims
of Purchaser covered by the foregoing indemnification can be charged and/or
offset. If no claim is made in writing by Purchaser within said ninety (90) day
-----------------------------------------------------------------------
period, then Escrow Agent shall deliver the Stock to Seller or its designee. If
- - -------------------------------------------------------------------------------
Purchaser makes a written claim or claims within the said ninety (90) day
- - -------------------------------------------------------------------------
period, then Escrow Agent shall so notify Seller and unless Seller pays or
- - ------------------------------------------------------------------------------
settles the claim within ten (10) days thereafter, Escrow Agent shall return
- - -----------------------------------------------------------------------------
the Stock to Purchaser and Purchaser shall retain the number of shares
- - ----------------------------------------------------------------------
necessary to satisfy the claim(s) based upon $_ per share and shall issue a
- - ---------------------------------------------------------------------------
certificate for the remaining shares of Stock, if any, and shall deliver such
- - -----------------------------------------------------------------------------
certificate to Escrow Agent, or if the said ninety (90) day period has expired,
- - -------------------------------------------------------------------------------
to Seller or its designee. In the event that a dispute arises between the part-
- - -------------------------------------------------------------------------------
ies as to the provisions of this section 25 or the application thereof, Escrow
- - ------------------------------------------------------------------------------
Agent shall be entitled to file an action in interpleader against the parties
- - ------------------------------------------------------------------------------
and deposit the Stock with the registry of the court having jurisdiction
- - ------------------------------------------------------------------------
thereof, and the parties shall hold harmless the Escrow agent of and from any
- - ----------------------------------------------- -----------------------------
liability, expense, damage or claim in connection therewith and shall reimburse
- - -------------------------------------------------------------------------------
Escrow Agent on demand for all costs incurred, including court costs and
- - ------------------------------------------------------------------------
attorney's fees at both the trial and appellate levels.
- - ------------------------------------------------------
Additionally, Purchaser shall save and hold harmless the Seller from any
liability, expense, damage or claim arising out of any negligent or intentional
act or omission of Purchaser's agents or employees on the Ground Lease property
or arising out of the Resort Property or the Desk during the period commencing
with the date of the closing of the within transaction and Purchaser shall
reimbursed for all costs and expenses, including, but not limited to, a
reasonable attorney's fee on both the trail or appellate level incurred by
Seller in defending any such liability, expense, damage or claim.
<PAGE>
26. Governing Law; Venue. The terms and provisions of this Agreement shall be
governed by the laws of the State of Florida. Venue in any proceeding shall be
in Broward County, Florida.
27. Notices. Any notice or communication required or permitted under this
Agreement shall be given by certified mail, postage prepaid, to the following
addresses:
FOR THE SELLER: OCEAN PALMS DEVELOPMENT CORPORATION
OCEAN PALMS RESORT, INC.
1200 North Ocean Blvd.
Pompano Beach, FL 33062
FOR THE PURCHASER: CAPITOL RESORTS OF FLORIDA, INC.
10605 Maumelle Blvd., #C,
Maumelle, AR 72113
Any such notice or communication may also be personally delivered to either
party at the above addresses or sent via recognized overnight courier, or any
such notice or communication, whether by certified mail or personal delivery or
overnight courier, may be delivered to such other address or in care of such
other person as shall be designated hereafter in writing by any party to the
others, and shall be deemed to have been given as of the date so delivered or as
of the date of receipt whichever event first occurs.
28. Captions. Captions and headings to the various paragraphs of this Agreement
are for convenience only, and carry no legal effect and shall in no way affect
the interpretation or construction of the paragraphs of this Agreement.
29. Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall constitute an original.
30. Time for Acceptance. If this Agreement is not accepted by Seller on or
before the expiration of _____ ( ) days subsequent to the date that this
Agreement is received by Seller at 1200 North Ocean Blvd., Pompano Beach, FL
33062 this Agreement shall thereafter be null and void.
31. RADON GAS: Radon is a naturally occurring radioactive gas that, when it has
accumulated in a building in sufficient quantities, may present health risks to
persons who are exposed to it over time. Levels of radon that exceed Federal and
State guidelines have been found in buildings in Florida. Additional information
regarding radon and radon testing may be obtained from your County Public Health
Unit.
<PAGE>
IN WITNESS WHEREOF, the undersigned have set their hands and seals the day and
year first above written.
Signed, sealed and delivered
in the presence of:
SELLER:
OCEAN PALMS DEVELOPMENT Signed, sealed and delivered
CORPORATION In the presence of
/s/ Michael M. Wallack.
By: /s/ Diane Bloom
Its: President
OCEAN PALMS RESORT, INC.
By: /s/ Diane Bloom /s/ Michael M. Wallack
Its: President
PURCHASER:
CAPITOL RESORTS OF FLORIDA, /s/ Michael M. Wallack
INC., a Florida corporation
By: /s/ David R. Paes
---------------------
Its: Vice President
<PAGE>
INDEX TO SCHEDULES
Exhibit "A" Ground Lease
Exhibit "B" Legal Description of Fee
Exhibit "C" Tenant Leases
Exhibit "D" Paper
Exhibit "E" Leasehold Mortgage
Exhibit "F" Contracts and Equipment
Leases
Exhibit "G" Estimated Settlement Statement
Exhibit "H" Environmental Report
14
<PAGE>
EXHIBIT 10.29
EXHIBIT "A"
L E A S E
---------
THIS LEASE, made and entered into at Fort Lauderdale, Florida, this 10th
day of February, 1965, by and between NANCY H. NEWELL and JANE H. TUBBS joined
by their respective spouses, hereinafter referred to as "LESSORS", and
LIGHTHOUSE POINT CONSTRUCTION CORP., hereinafter referred to as "LESSEE".
W I T N E S S E T H:
That in consideration of the covenants and agreements hereinafter mentioned
and to be performed by the respective parties hereto, and the payment of the
rental hereinafter designated to be paid by the Lessee in accordance with the
provisions of this lease, the Lessors have leased, rented, let and demised, and
by these presents do lease, rent, let and demise unto said Lessee, its
successors and assigns, the following described property situated in Broward
County, Florida:
Lots Fourteen (14), Fifteen (15), and Sixteen (16) in Block Thirteen
(13), of POMPANO BY THE SEA, according to the plat thereof, recording in
Plat Book 1, page 22, of the public records of Broward County, Florida.
ALSO, begin at the intersection of the center line of Alta Avenue
with a Westerly extension of the North boundary of Lot 16, Block 13, as
shown on the plat of POMPANO BY THE SEA, as recorded in Plat Book 1, page
22, of the public records of Broward County, Florida; thence Westerly along
said Westerly extension of the North boundary line of said Lot 16 a
distance of 15.91 feet; thence Southerly making an included angle of
104(degrees) 14' 30" a distance of 123.76 feet; thence Easterly with an
included angle of 75(degrees) 45' 30" a distance of 45.64 feet to the
center line of Alta Avenue; thence North along said center line to the
point of beginning.
TO HAVE AND TO HOLD the above described premises together with all and
singular the tenements, hereditaments
<PAGE>
and appurtenances thereunto belonging, or in anywise incident or appertaining,
together with rents, issues and profits thereof (save and except the rents and
other amounts due to Lessors by Lessee herein) unto said Lessee for the term of
Ninety-Nine (99) years, as hereinafter defined.
THE TERMS, CONDITIONS AND COVENANTS OF THIS LEASE
ARE AS FOLLOWS:
1. Term. This lease shall begin at 12:00 o'clock noon on the 1st day
----
of March, A.D., 1965, and continue for Ninety-Nine (99) years thereafter, up to
12:00 o'clock noon on March 1, 2064, unless sooner terminated as herein
provided.
2. Possession. Possession of the leased premises will be
----------
delivered to Lessee on the date above mentioned for this lease to begin.
3. Title, Survey. The Lessors covenant that they have lawful title to
-------------
said premises, free and clear of all liens, mortgages, and encumbrances and have
full authority to make this lease on the terms herein set forth. Lessors have
furnished to the Lessee an abstract of title covering the leased premises
continued to Lessee has made such examination of said abstract as it desires and
will accept the title to the premises in its present condition. Lessee will, at
its own expense, procure a survey of the leased premises, if it desires such
survey.
4. Rental. Lessee hereby covenants with Lessors to pay to Lessors at
------
such place as they from time to time designate in writing the following sums of
money as rent for the use of the leased premises:
Sixteen Thousand Dollars ($16,000.00) per year, payable on March
1st of each year of the term hereof.
-2-
<PAGE>
Upon the execution hereof, Lessee has paid to Lessors the entire rent for the
period of March 1, 1965 to February 28, 1966. The rent provided hereby shall be
subject to adjustment in accordance with paragraph 28 hereof.
5. Improvements. Lessee agrees that if it constructs
------------
improvements on the demised premises they shall be completed free from all
mechanic's or other liens and claims of all persons furnishing materials,
equipment, services or labor in connection with the construction of said
improvements.
Lessee agrees that if it shall
construct a building upon the demised lands, same will be of good quality
construction and of design and appearance in keeping with the locality and
location of the demised premises, and in conformance with all laws, ordinances,
building codes, and regulations applicable thereto but not to give to Lessors
the right otherwise to restrict the Lessee.
6. Insurance. Nothing herein shall limit or restrict
---------
the rights of a mortgagee under paragraph 17 hereof, to insurance coverage
and/or the proceeds thereof. Lessee agrees to maintain, at its cost, at all
times during the term of this lease, including the period of construction of
said building and improvements, with insurance companies qualified to do
business in Florida, fire and extended coverage insurance upon the leased
premises, in an amount equal to the full insurable value. Such policies shall be
so drawn and shall contain such provisions as will protect both Lessors and
Lessee, as their respective interests appear in addition to protecting any
mortgage under paragraph 17 hereof. Subject to requirements of said mortgagee,
all policies of insurance or certificates thereof, as provided for in this
paragraph, shall be delivered to Lessors herein and will be renewed from time to
time by
-3-
<PAGE>
Lessee so that at all times the insurance protection herein provided shall
continuously exist; and evidence of each renewal shall be submitted to Lessors
at least twenty (20) days prior to the expiration of each policy.
In the event of loss, and subject to the right of the mortgagee pursuant to
the standard policies of insurance approved for Florida, the proceeds collected
from such insurance and available to Lessors and/or Lessee shall be paid over to
the FIRST NATIONAL BANK IN FORT LAUDERDALE, Fort Lauderdale, Florida, as
Trustee, or to such other trustee as Lessors and Lessee may from time to time
designate, in writing, it being understood, however, that all such amounts shall
be available to Lessee, providing there shall be no default by it in any of the
terms, covenants or provisions of this lease, for the reconstruction or repair,
as the case may be, of any such buildings, or building or improvements, damaged
or destroyed by fire or other casualty, and shall be paid out by said Trustee
from time to time as the work of reconstruction or repairs shall progress, on
bona fide architect's or contractor's certificates, showing application of the
amount paid for such repair or reconstruction; provided, however, that it first
be made to appear to the satisfaction of the Trustee that any amount necessary
for the reconstruction or repair of any of the buildings or improvements, so
damaged or destroyed, which may be in excess of the amount received upon such
policies, has been provided by Lessee for such purpose and its application to
such purpose assured. In the event there shall be at any time any excess
remaining with the Trustee from the proceeds of such insurance policies, after
the repair or reconstruction of any such buildings, or improvements, to a
condition equal to the former condition thereof, then, if there be at that time
no default on the part of the Lessee in the performance of the covenants and
conditions hereof, any such amount
-4-
<PAGE>
so held by the Trustee shall be paid by it to the Lessee. Lessee will also
maintain in the same manner, at its cost, during the term of this lease,
Owners', Landlords' and Tenants' Public Liability and Elevator Insurance, if
there is an elevator, in an amount not less than One Hundred Thousand
($100,000.00) Dollars coverage for one person, and not less than Three Hundred
Thousand ($300,000.00) Dollars coverage for more than one person.
7. Maintenance and Repair of Property. The Lessee agrees that it will, at
----------------------------------
its own expense, keep and maintain the buildings and improvements which may at
any time be situated on said demised premises during the term of this lease and
all appurtenances thereunto belonging to or appertaining, including, but not
limited to, all fire escapes, elevators, sidewalks, steps, including both the
interior and exterior of the buildings, in good and substantial condition and
repair and in a clean and sanitary condition, and will use, keep and maintain
such premises and improvements thereon as well as the sidewalks and streets in
front of and around such building, in conformity to and in compliance with all
existing and future statutes, laws, orders, ordinances, ruling, and regulations
applicable thereto, of the City of Pompano Beach, County of Broward, State of
Florida, of the United States, and of any other lawful authority having
jurisdiction thereof, and will protect and indemnify forever, save and keep
harmless the Lessors from and against any loss, costs, damages and expenses
occasioned by or arising out of any breach or default in the performance and
observance of any provisions, conditions, covenants and stipulations in this
lease contained, or occasioned or arising by or out of any accident or injury or
damage to any person whomsoever or whatsoever happening, or done in or about or
upon the said premises or due directly or indirectly to the construction,
tenancy, use or occupation of said premises, or upon the sidewalks or streets
adjoining the same by the Lessee or any person or persons
-5-
<PAGE>
occupying, holding or claiming, by, through or under it.
8. Taxes. As part consideration for this lease
-----
and in addition to the rent hereinbefore provided, the Lessee shall, after
January 1, 1965 and during the entire term of this lease, pay to the Public
Officers charged with the collection thereof, promptly as the same become due,
and not later than thirty (30) days before any penalty is added thereto or
imposed thereon because of nonpayment, all taxes, assessments, levies, licenses,
excises, franchises, imposts, penalties and charges, general and special,
ordinary and extraordinary of whatever name, nature and kind, which are now, or
may hereafter be, levied, assessed, charged or imposed which are or may become a
lien; (whether by Federal, State, City, County, or other Public Authority) upon
this lease, the above described premises, the use or occupation thereof, the
buildings and improvements now or hereafter situated thereon, or upon the Owners
or occupants in respect thereof.
As to the taxes and assessments, the
Lessee shall, fifteen (15) days before any penalty is added thereto or imposed
thereon, furnish to the Lessors, for inspection and such use as may be proper in
protecting the estate and interest of the Lessors in said premises, receipts
from the pertinent Governmental bodies, showing that said taxes have been paid.
All property taxes and assessments
levied against the leased premises for the year 1965 shall be pro-rated as of
March 1, 1965. The Lessee will pay any assessment against said lands resulting
from the installation of sewers by the City of Pompano Beach, and will reimburse
Lessors for the groin assessment against the lands ($5,653.78) heretofore paid
by Lessors. Such reimbursement shall be made immediately upon the completion of
any future improvement on
-6-
<PAGE>
the demised lands. An and all other pending or certified liens or assessments on
said lands at time of execution hereof shall be paid by Lessors.
If the Lessee shall in good faith
desire to contest the validity of such taxes, assessments or other charges
covered by this paragraph or section of this lease, it shall have the right to
do so, provided it shall, if taxes become delinquent thereby, give to the
Lessors a bond in twice the amount involved, conditioned upon the payment of
such taxes, assessments or charges in case the Lessee is defeated in such
contest, or if it shall deposit with the Lessors a sum of money equal to One
Hundred Twenty (120%) per cent of such charge. However, in the event of such
contest, no sales of the property shall ever be permitted to take place.
9. Utility Charges. The Lessee agrees and covenants to pay
---------------
all utility charges, including but not limited thereto, water, gas and
electricity used on or about the said premises, and to pay the same monthly or
as they shall become due.
10. Compliance with Regulations of Public Bodies.
--------------------------------------------
The Lessee covenants and agrees that it will, at its own cost, make such
improvements on the premises and perform such acts and do such things as shall
be lawfully required by any public body having jurisdiction over said property,
in order to comply with sanitary requirements, fire hazard requirements, zoning
requirements, setback requirements, and other similar requirements designed
to protect the public.
11. Lawful Use of Premises. Lessee further covenants and agrees
----------------------
that said premises and all buildings and improvements thereon, during the term
of this lease, shall
-7-
<PAGE>
be used only and exclusively for lawful purposes, and that said Lessee will not
use or suffer anyone to use said premises or buildings for any purpose in
violation of the laws of the United States, the State of Florida, Broward
County, Florida, or the ordinances and regulations of the City of Pompano Beach,
Florida. Said Lessee covenants and agrees to save said Lessors harmless from
every such violation.
12. Inspection of Premises. The Lessee agrees and covenants that the
----------------------
Lessors, or their agents, at all reasonable times and during all reasonable
hours, shall have free access to said demised premises and to any buildings or
structures that may at any time be thereon, or any part thereof, for the purpose
of examining or inspecting the condition of the same or of exercising any right
or power reserved to the Lessors under the terms and provisions of this
indenture, providing, however, that Lessors shall not abuse this privilege and
shall not harass the Lessee.
13. Liens Created by Lessee. The Lessee covenants and agrees that it
-----------------------
has no power to incur any indebtedness giving a right to a lien of any kind or
character upon the right, title and interest of Lessors in and to the land
covered by this lease, and that no person shall ever be entitled to any lien
directly or indirectly derived through or under it, or its agents or servants,
or on account of any act or remission of said Lessee, which lien shall be
superior to the lien in this lease reserved to the Lessors upon the leased
premises. All persons contracting with said Lessee, or furnishing materials or
labor to said Lessee, or to his agents or servants, as well as all persons
whomsoever, shall be bound by this provision of this lease. Should any such
lien be filed, Lessee shall, within fifteen (15) days, discharge the same by
paying the same or by filing of a bond or otherwise, as permitted by law.
-8-
<PAGE>
14. Indemnification Against Claims. Lessee shall indemnify
------------------------------
and save harmless the said Lessors from and against any and all claims, suits,
actions, damages, and/or causes of actions arising during the term of this
lease, for any personal injury, loss of life and/or damage to property sustained
in, or about, the demised premises, or the buildings and improvements thereof,
or the appurtenances thereto, or upon the adjacent sidewalks, or streets, and
from and against all costs, counsel fees, expenses, and liabilities incurred in
and about any such claim, the investigation thereof, or the defense of any
action, or proceedings, brought thereon, and from and against any orders,
judgments and/or decrees, which may be entered therein.
15. Indemnification Against Costs and Charges. In the event the
-----------------------------------------
Lessors are compelled to incur any expense in collecting any sum of money due
under this lease for rent, or otherwise, or, in the event suit shall be brought
by the Lessors for the purpose of evicting or ejecting the Lessee from the
leased premises, or if suit be brought by the Lessors for the purpose of
compelling the payment of any other sum which should be paid by the Lessee under
the terms hereof, or for the purpose of enforcing performance by the Lessee of
any of the several agreements, and conditions and covenants herein contained,
the Lessee covenants and agrees to pay to Lessors all expenses and costs of
litigation, including a reasonable attorney's fee for the Lessors' attorney,
provided such suit terminates in favor of the Lessors. Any sum due under the
terms and provisions of this paragraph shall constitute a lien against the
interest of the Lessee in the premises and their property thereon to the same
extent and on the same conditions as delinquent rent would constitute a lien
upon said premises and property.
16. Acceptance of Premises. It is further
----------------------
-9-
<PAGE>
covenanted and agreed that the Lessee, in acquiring this lease, has done so as
the result of a personal inspection of the premises by its duly authorized
representatives, and that no oral representations of any kind or nature
whatsoever have been made by the Lessors, and that only the terms of this lease
are to be binding upon the Lessors and the Lessee.
17. Subordination. If, during the term of this lease, the Lessee desires
-------------
to finance the improvements to be constructed upon the leased premises, the
Lessors agree to subordinate their entire interest in the above described land
to a recognized lending institution which is commonly used in Dade or Broward
County, Florida (defined for purposes hereof as a state or national bank,
savings and loan association or major insurance company) to allow the Lessee to
place a construction mortgage and/or a permanent mortgage to construct the
improvements thereon. Lessors shall not be required to sign the promissory nor
mortgage note or notes secured by said mortgage or mortgages; or in any way to
become personally liable for payment of said mortgage or mortgages or for said
note or notes; and the said mortgages shall contain a provision reciting that
the Lessors join in the execution thereof only for the purpose of making said
premises subject to the lien of said mortgages, providing, however, that:
(a) The proceeds of said mortgage loan or loans shall be disbursed in
accordance with the procedure customarily followed by the lending
institution.
(b) Each of said mortgage indebtednesses shall be liquidated within a
period not to exceed twenty-one (21) years and may be amortized over such
period.
Lessors agree that they will execute any such mortgage
or mortgages, and any and all other documents and instruments necessary to be
executed
-10-
<PAGE>
by them by the institutional lender, subject to the provisions of this lease,
and agree that inasmuch as the procurement of said mortgage and its proceeds are
material, that they will execute said mortgage or mortgages and such other
documents as may be presented to them, without undue delay. If Lessee desires a
second subordination of title by Lessors, the provisions of Paragraph 29 shall
govern.
18. Assignment of Lessee's Interest. Lessee's interest in this lease
-------------------------------
shall be freely transferable and assignable, provided that at the time of such
transfer and assignment and as often as the same may be made, there has been no
default by the Lessee hereunder and this lease is in good standing and provided
further that said assignment is evidenced by an instrument in writing, which,
among other things, shall provide that the assignee shall expressly accept and
assume all the terms and covenants in this lease agreement contained, to be kept
and performed by the Lessee, duly executed and acknowledged by both assignors
and assignee and duly recorded in the office of the Clerk of the Circuit Court
of Broward County, Florida, and a duplicate original of said instrument of
assignment is immediately forwarded to the Lessors by Registered Mail; provided,
however, in no event shall any such assignment release the Lessee from any of
its obligations hereunder without the written consent of the Lessors. No
assignment shall be made of this lease as to less than all of the property, but
this provision shall not prevent sub-letting of portions of the improvements
herein authorized on said premises.
19. Transfer of Lessors' Interest. Lessors shall have the right to
-----------------------------
sell, mortgage, or otherwise dispose of, the underlying fee in this property,
subject to the terms and conditions of this lease and shall have the right to
mortgage or
-11-
<PAGE>
assign to others their right to receive money and other things of value accruing
to them by reason of this lease.
20. Bankruptcy of Lessee. Should the Lessee, at any time during the term
--------------------
of this lease, suffer or permit an involuntary or voluntary, petition in
bankruptcy to be filed against it, or to make any assignment for the benefit of
its creditors, or should a receiver or trustee be appointed for the Lessee's
property and said appointment not vacated within sixty (60) days thereafter, or
should the Lessee's leasehold interest be levied on and the lien thereof not
discharged within sixty (60) days after said levy has been made, then, in such
event, and upon the happening of either or any of said events, the Lessors shall
have the right, at their election, to consider the same a default on the part of
the Lessee of the terms and provisions hereof, and the Lessors may then declare
a forfeiture of this lease. This paragraph is in furtherance, and not a
limitation, of the powers herein conferred upon the Lessors.
21. Forfeiture. If the Lessee shall fail to keep and perform
----------
any of the covenants, conditions and agreements herein provided to be performed
by said Lessee, and such default shall continue for a period of sixty (60) days
from the date of Lessors' giving to Lessee, written notice, as hereinafter
provided, of the existence of such breach, the Lessors shall have the right to
treat such default as intentional, inexcusable, and thereupon at the expiration
of the sixty day period after notice to Lessee as above provided, the Lessors,
by notice in writing transmitted to the Lessee as herein provided for, may at
their option declare this lease ended and without further force and effect.
Thereupon, the Lessors are authorized to re-enter and re-possess the leased
premises and the buildings and improvements thereon, either with or without
legal process,
-12-
<PAGE>
and the Lessee does in such event hereby waive any demand for possession of said
property and agrees to surrender and deliver up said leased premises and
property peaceably to said Lessors. In the event of such forfeiture the Lessee
shall have no claim whatsoever against the Lessors.
22. Lessee Not Agent. Nothing herein contained shall authorize the
----------------
Lessee to do any act or make any contract which in any manner shall affect the
estate or interest of the Lessors in said premises, or in the buildings or
improvements now or hereafter situated thereon.
23. Non-Waiver. The waiver of any breach of any covenant,
----------
condition, or stipulation herein contained, shall not be taken to be a waiver of
any subsequent breach of the same, or any other covenant, condition or
stipulation, and the acceptance of rent during any period in which the Lessee
may be in default shall not be deemed to be a waiver of such default.
24. Applicable Statutes. The Lessee recognizes the validity and
-------------------
applicability of the summary remedies provided by the statutes of the State of
Florida for the protection of Landlords and the enforcement of Landlords' right,
and nothing herein contained shall be construed as limiting in any way such
rights accruing by virtue of such statutes.
(a) The remedies herein provided for the Lessors
are cumulative and shall be in addition to all other remedies now or hereinafter
existing, whether by statute, at law, or in equity.
25. Notice. That notices, demand and communications
------
hereunder to the Lessee or to the Lessors shall be served, or given, by United
States Registered
-13-
<PAGE>
Mail, return receipt requested, and if intended for the Lessee, the same shall
be addressed to the Lessee, at the leased premises, and if intended for the
Lessors, the same to be addressed to Lessors at:
2450 Southeast 7th Drive
Pompano Beach, Florida,
in writing, or to such other addresses as are hereafter designated by either
party, or their successors in interest, sent by United States Registered Mail,
as aforesaid, to such designated addresses.
26. Time is of the Essence. Time of performance by the Lessee of each
----------------------
and every provision and covenant herein contained is and shall be forever
construed as of the very essence of this lease.
27. Eminent Domain. In event of taking of any portion or all of
--------------
said lands, the Lessors shall receive all sums awarded for the taking of the fee
title to the lands and the Lessee shall receive all sums paid for damage to all
improvements and to the leasehold interest of the Lessee in said premises and
improvements thereon.
28. Rental Adjustment. Lessors and Lessee hereby covenant and
-----------------
agree that the rental payments provided for in Paragraph 4 above shall be
adjusted higher or lower at five year intervals commencing March 1, 1970 and
continuing each five years throughout the lease term. The adjustment to the
rent to be made, and, therefore, the annual rent for each five year period
commencing March 1, 1970 shall be determined by multiplying the basic annual
rental provided for in Paragraph 4 above by a fraction, the numerator of which
shall be the Index Figure indicated for the month of December preceding each
such March 1st, commencing with December, 1969, as shall be
-14-
<PAGE>
shown by the Consumers' Price Index - the United States City Average All Items
and Commodity Groups, issued by the Bureau of Labor Statistics for the United
States Department of Labor, and the denominator of which shall be the Basic
Standard Index Figure of such Price Index for the month of December, 1964. The
product of such multiplication shall be the amount of the annual rental payments
to be made hereafter for the succeeding five year period until the next
computation provided for hereunder shall be made.
Lessors may provide for substitute Index
having the same intent in the event basic Index is discontinued or converted.
29. In the event Lessee requests Lessors to subordinate their fee title a
second time, Lessors need only agree to such subordination (1) if the lease is
in good standing; (2) the handling of the mortgage funds are the same as
provided in Paragraph 17 hereof, (3) the mortgage does not exceed 75% of the
value of the land and improvements thereon or to be constructed thereon, and (4)
the normal and equal amortization of such mortgage shall require that same be
satisfied prior to the expiration of the term of this lease. In the event the
parties cannot agree upon the value of the land and improvements same shall be
arrived at by arbitration in accordance with the Florida Arbitration Code.
30. Right of First Refusal. In the event Lessors desire to sell the
----------------------
demised premises during the term of this lease Lessee shall have the right of
first refusal provided notice of intention to exercise this right is served in
writing upon Lessors within fifteen (15) days from date Lessors present to
Lessee a bona fide contract of sale. Provided timely notice is given as
aforesaid Lessee may purchase the property upon the same terms and conditions as
set forth in said bona fide offer.
31. Final Repository. This instrument
----------------
-15-
<PAGE>
constitutes the final repository of the agreement between the parties relating
thereto.
Reference herein to Lessors shall include their successors
in interest and assigns, and bind them, and likewise, reference herein to Lessee
shall include and bind its successors in interest and assigns.
IN WITNESS WHEREOF, the Lessors have hereunto set their hands and seals and
Lessee has caused this instrument to be signed, the day and year above written.
Signed in the presence of:
/s/ A. Earl Staub /s/ Nancy H. Newell
- - ----------------------------------- -----------------------------------
NANCY H. NEWELL
/s/ Grace T. Staub
- - -----------------------------------
/s/ A. Earl Staub /s/ [Signature Illegible]
- - ----------------------------------- -----------------------------------
SPOUSE
/s/ Grace T. Staub
- - -----------------------------------
/s/ A. Earl Staub /s/ Jane H. Tubbs
- - ----------------------------------- -----------------------------------
JANE H. TUBBS
/s/ Grace T. Staub
- - -----------------------------------
/s/ A. Earl Staub /s/ [Signature Illegible]
- - ----------------------------------- -----------------------------------
SPOUSE
/s/ Grace T. Staub
- - ----------------------------------- [SEAL]
LIGHTHOUSE POINT CONSTRUCTION CO.
/s/ [Signature Illegible] By /s/ [Signature Illegible]
- - ----------------------------------- -----------------------------------
/s/ Dee J. Erickson
- - -----------------------------------
/s/ [Signature Illegible]
- - ----------------------------------- Attest:
/s/ Dee J. Erickson /s/ [Signature Illegible]
- - ----------------------------------- -----------------------------------
-16-
<PAGE>
FIRST AMENDMENT TO LEASE
------------------------
THIS FIRST AMENDMENT TO LEASE is made and entered into this _____ day of
__________, 1992, NANCY H. NEWELL, ELAINE NEWELL FISCHER, DORIS JANE TUBBS, as
Personal Representatives of the Estate of Jane H. Tubbs, DORIS JANE TUBBS and
JOSEPH D. TUBBS (hereinafter collectively referred to as "Lessors") and Del-Aire
Management Co., Inc., a Florida corporation (hereinafter referred to as
"Lessee").
RECITALS
--------
A. On or about February 10, 1965, Nancy H. Newell and Jane H. Tubbs, as
Lessors, entered into a lease agreement with Lighthouse Point Construction
Corp., as Lessee, of certain property described therein (the "Lease").
B. This lease was recorded in the Public Records of Broward County,
Florida in Official Records Book 2973 at Page 677 and was re-recorded in the
Public Records of Broward County, Florida in Official Records Book 3069 at Page
186.
C. By a series of mesne assignments, title to the leasehold interest was
transferred to Lucaya Palm-Aire, Inc., a Florida corporation.
D. Lessee herein acquired title to the leasehold interest from Lucaya
Palm-Aire, Inc. by virtue of foreclosure proceedings and foreclosure sale
evidenced by a Certificate of Title issued by the Clerk of the Circuit Court of
the 17th Judicial Circuit in and for Broward County, Florida said Certificate of
Title bearing the date of December 3, 1991 and recorded in OR Book 19975, Page
616 of the Public Records of Broward County Florida.
E. Lessor and Lessee have discovered that an error may have been made in
the legal description set forth in the lease in
<PAGE>
that the lease may not fully describe all of the property leased to the Lessee.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by both parties, Lessor and Lessee
agree as follows:
1. In order to correct a scivener's or surveyor's error in the legal
description set forth in the Lease, the parties hereto acknowledge and agree
that the property which is and has been subject to the lease since its inception
is properly described as follows:
Lots 14, 15 and 16, Block 13, of POMPANO BY THE SEA, according to the plat
thereof, as recorded in Plat Book 1, Page 22, of the public records of Broward
County, Florida,
TOGETHER WITH that portion of the East one half of Alta Avenue, lying West
of and adjacent to Lots 14, 15 and 16 in said Block 13,
TOGETHER WITH the following described property:
Begin at the Intersection of the Center Line of Alta Avenue with a Westerly
Extension of the North Boundary of Lot 16, Block 13, as shown on the plat of
POMPANO BY THE SEA, as recorded in Plat Book 1, Page 22, of the public records
of Broward County, Florida; thence Westerly along said westerly extension of the
North boundary line of said Lot 16, a distance of 15.91 feet, to the East right
of way line of State Road A-1-A, (North Ocean Blvd.), thence Southerly, making
an included angle of 104 degrees 14' 30", a distance of 123.76 feet, along the
East right of way line of State Road A-1-A (North Ocean Blvd.) thence Easterly
with an included angle of 75 degrees 45' 30", a distance of 45.64 feet, to the
Center Line of Alta Avenue, a distance of 120.0 feet, more or less, to the POINT
OF BEGINNING.
Said Property lying and being in the City of Pompano Beach, Broward County,
Florida.
2. The Lessors hereby certify that none of them reside on the property
described herein and that the property described herein does not constitute the
homestead property of any of the Lessors.
-2-
<PAGE>
IN WITNESS WHEREOF the parties have executed this Amendment the day and
first above written.
/s/ Christine A. Sackett /s/ Nancy H. Newell
- - ----------------------------------- -----------------------------------
Witness Nancy H. Newell
Printed Name: Christine A. Sackett Date of Execution: 2-19-92
--------------------- ----------------
Address: 1818 Edgemere Dr.
--------------------------
/s/ Karen S. Baumgartner Rochester, NY 14612
- - ----------------------------------- -----------------------------------
Witness
Printed Name: Karen S. Baumgartner
/s/ Christine A. Sackett /s/ Elaine Newell Fischer
- - ----------------------------------- -----------------------------------
Witness Elaine Newell Fischer
Printed Name: Christine A. Sackett Date of Execution: 2-14-92
--------------------- ----------------
Address: 628 [ILLEGIBLE]
--------------------------
/s/ Karen S. Baumgartner Rochester, NY 14612
- - ----------------------------------- -----------------------------------
Witness
Printed Name: Karen S. Baumgartner
ESTATE OF JANE H. TUBBS
/s/ Christine A. Sackett /s/ Doris J. Tubbs
- - ----------------------------------- -----------------------------------
Witness By: Doris J. Tubbs, Personal
Printed Name: Christine A. Sackett Representative
--------------------- Date of Execution: [ILLEGIBLE]
----------------
Address: [ILLEGIBLE]
/s/ Karen S. Baumgartner --------------------------
- - ----------------------------------- [ILLEGIBLE]
Witness -----------------------------------
Printed Name: Karen S. Baumgartner
/s/ Christine A. Sackett /s/ Doris Jane Tubbs
- - ----------------------------------- -----------------------------------
Witness Doris Jane Tubbs
Printed Name: Christine A. Sackett Date of Execution: [ILLEGIBLE]
--------------------- ----------------
Address: 2422 EXECUTIVE DR.
--------------------------
/s/ Karen S. Baumgartner [ILLEGIBLE]
- - ----------------------------------- -----------------------------------
Witness
Printed Name: Karen S. Baumgartner
/s/ Nancy H. Newell AS ATTORNEY IN FACT
/s/ Christine A. Sackett FOR JOSEPH D. TUBBS
- - ----------------------------------- -----------------------------------
Witness Nancy H. Newell as attorney-
Printed Name: Christine A. Sackett in-fact for Joseph D. Tubbs
--------------------- Date of Execution: 2-14-92
----------------
Address: 1818 EDGEMERE DR.
/s/ Karen S. Baumgartner --------------------------
- - ----------------------------------- Rochester, NY 14612
Witness -----------------------------------
Printed Name: Karen S. Baumgartner
DEL-AIRE MANAGEMENT CO., INC.
/s/ Lee C. Summers /s/ Domenick Greco
- - ----------------------------------- -----------------------------------
Witness Domenick Greco, President
Printed Name: Lee C. Summers Date of Execution: 2-27-92
--------------------- ----------------
Address: 4541 White Cedar
--------------------------
/s/ Morton J. Berman Delray Beach, FL
- - ----------------------------------- -----------------------------------
Witness
Printed Name: Morton J. Berman
-3-
<PAGE>
STATE OF NEW YORK
COUNTY OF MONROE
------
I HEREBY CERTIFY that on this day, before me, an officer duly authorized in
the State aforesaid and in the County aforesaid to take acknowledgments,
personally appeared NANCY H. NEWELL to me known to be the person described in
and who executed the foregoing instrument and she acknowledged before me that
she executed the same.
WITNESS my hand and official seal in the County and State last aforesaid
this 14th day of February, 1992.
---- --------
/s/ Charlene C. Sherwood
------------------------
Notary Public
Printed Name: Charlene C. Sherwood
--------------------
My Commission Expires: Feb. 3, 1994
STATE OF NEW YORK
COUNTY OF MONROE
------
I HEREBY CERTIFY that on this day, before me, an officer duly authorized in
the State aforesaid and in the County aforesaid to take acknowledgments,
personally appeared ELAINE NEWELL FISCHER to me known to be the person described
in and who executed the foregoing instrument and she acknowledged before me that
she executed the same.
WITNESS my hand and official seal in the County and State last aforesaid
this 14th day of February, 1992.
---- --------
/s/ Charlene C. Sherwood
------------------------
Notary Public
Printed Name: Charlene C. Sherwood
--------------------
My Commission Expires: Feb. 3, 1994
STATE OF NEW YORK
COUNTY OF MONROE
------
I HEREBY CERTIFY that on this day, before me, an officer duly authorized in
the State aforesaid and in the County aforesaid to take acknowledgments,
personally appeared DORIS JANE TUBBS as Personal Representative of the ESTATE OF
JANE H. TUBBS, to me known to be the person described in and who executed the
foregoing instrument and she acknowledged before me that she executed the same.
WITNESS my hand and official seal in the County and State last aforesaid
this 14th day of February, 1992.
---- --------
/s/ Charlene C. Sherwood
------------------------
Notary Public
Printed Name: Charlene C. Sherwood
--------------------
My Commission Expires: Feb. 3, 1994
- 4 -
<PAGE>
STATE OF NEW YORK
COUNTY OF MONROE
------
I HEREBY CERTIFY that on this day, before me, an officer duly authorized in
the State aforesaid and in the County aforesaid to take acknowledgments,
personally appeared DORIS JANE TUBBS, to me known to be the person described in
and who executed the foregoing instrument and she acknowledged before me that
she executed the same.
WITNESS my hand and official seal in the County and State last aforesaid
this 14th day of February, 1992.
/s/ Charlene C. Sherwood
-----------------------------
Notary Public
Printed Name: Charlene C. Sherwood
--------------------
My Commission Expires: Feb. 3, 1994
STATE OF NEW YORK
COUNTY OF MONROE
------
I HEREBY CERTIFY that on this day, before me, an officer duly authorized in
the State aforesaid and in the County aforesaid to take acknowledgments,
personally appeared NANCY H. NEWELL, as attorney-in-fact for JOSEPH D. TUBBS, to
me known to be the person described in and who executed the foregoing instrument
and she acknowledged before me that she executed the same.
WITNESS my hand and official seal in the County and State last aforesaid
this 14th day of February, 1992.
/s/ Charlene C. Sherwood
-----------------------------
Notary Public
Printed Name: Charlene C. Sherwood
--------------------
My Commission Expires: Feb. 3, 1994
STATE OF FLORIDA
COUNTY OF PALM BEACH
----------
I HEREBY CERTIFY that on this day, before me, an officer duly authorized in
the State aforesaid and in the County aforesaid to take acknowledgments,
personally appeared DOMENICK GRECO, as President of Del-Aire Management Co.,
Inc. to me known to be the person described in and who executed the foregoing
instrument and he acknowledged before me that he executed the same.
WITNESS my hand and official seal in the County and State last aforesaid
this ____ day of February, 1992.
/s/ Susan M. Margolies
----------------------
Notary Public
Printed Name: Susan M. Margolies
------------------
My Commission Expires: July 15, 1995
-5-
<PAGE>
ASSIGNMENT OF LEASE
-------------------
DEL-AIRE MANAGEMENT CO., INC., a Florida corporation, hereinafter referred
to as "Assignor", does hereby assign, transfer and set over to LUCAYA BEACH
HOTEL CORPORATION, a Florida corporation, hereinafter referred to as "Assignee",
whose address is 1200 N. Ocean Blvd., Pompano Beach, Florida 33062, all of the
right, title and interest of the Assignor in and to that certain Lease in the
real property described therein, which Lease is dated February 10, 1965 and
recorded March 4, 1965, in Official Records Book 2973, at Pages 677 through 693
of the Public Records of Broward County, Florida, wherein Nancy H. Newell, and
Jane H. Tubbs, joined by their respective spouses, are Lessors, and Lighthouse
Point Construction Corp., is Lessee which Lease by Mesne Assignment and
Certificate of Title was assigned to Assignor. The real property which is the
subject of such Lease is situate in Broward County, Florida and is described as
follows: 8330011400
Lots Fourteen (14), Fifteen (15) and Sixteen (16) in Block Thirteen (13)
of POMPANO BY THE SEA, as recorded in Plat Book 1, Page 22 of the Public
Records of Broward County, Florida;
TOGETHER WITH that portion of the East one-half of Alta Avenue, lying West
of and adjacent to Lots 14, 15 and 16, in said Block 13.
TOGETHER WITH the following described property:
Begin at the intersection of the Center Line of Alta Avenue with a
Westerly extension of the North boundary of Lot 16, Block 13 as shown on
the Plat of POMPANO BY THE SEA, as recorded in Plat Book 1, Page 22 of the
Public Records of Broward County, Florida; thence Westerly along said
Westerly extension of the North boundary line of said Lot 16 a distance of
15.91 feet; thence Southerly, making an included angle of 104 degrees,
14', 30" a distance of 123.76 feet; thence Easterly with an included angle
of 75 degrees, 45', 30" a distance of 45.64 feet to the Center Line of
Alta Avenue; thence North along said Center Line a distance of 120.0 feet
more or less to the point of beginning.
Except as otherwise set forth in the letter from Lessors dated February
12, 1992 the Assignee does expressly accept and assume all of the terms,
covenants and conditions in such Lease Agreement to be kept and performed by the
Lessee and the Assignee has executed this instrument and caused it to be
acknowledged as
<PAGE>
evidence of its acceptance and assumption.
This Assignment shall become effective on the 26 day of February, 1992.
-- -------- -
IN WITNESS WHEREOF, the Assignor and Assignee have executed and
acknowledged this Assignment this 26th day of February, 1992.
---- -------- -
/s/ Lee C. Summers DEL-AIRE MANAGEMENT CO., INC.
- - -----------------------------------
Witness
Printed Name: Lee C. Summers
/s/ John Barba By: /s/ Domenick Greco, Pres
- - ----------------------------------- -------------------------------------
Witness Printed Name: Domenick Greco, Pres.
Printed Name: John Barba
/s/ William Miller LUCAYA BEACH HOTEL CORPORATION
- - -----------------------------------
Witness
Printed Name: William Miller
/s/ [ILLEGIBLE] By: /s/ Romulo Bandeira De Souza G. Neto
- - ----------------------------------- -------------------------------------
Witness Printed Name:
Printed Name: [ILLEGIBLE] Romulo Bandeira De Souza G. Neto
STATE OF FLORIDA
COUNTY OF [ILLEGIBLE]
-----------
I HEREBY CERTIFY that on this day, before me, an officer duly authorized in
the State aforesaid and the County aforesaid to take acknowledgments, personally
appeared ROMULO BANDEIRA DE SOUZA G. NETO, as President of Lucaya Beach Hotel
Corporation, to me known to be the person described in and who executed the
foregoing instrument and he acknowledged before me that he executed the same on
behalf of said corporation.
WITNESS my hand and official seal in the County and State last aforesaid
this [ILLEGIBLE] day of February, 1992.
----------- -------- -
/s/ Douglas M. Bates
-------------------------------------
Notary Public
Printed Name:
My Commission Expires:
[SEAL OF DOUGLAS M. BATES]
STATE OF FLORIDA
COUNTY OF [ILLEGIBLE]
-----------
I HEREBY CERTIFY that on this day, before me, an officer duly authorized in
the State aforesaid and the County aforesaid to take acknowledgments, personally
appeared as Domenick Greco, Pres. of Del-Aire Management Co., Inc., to me known
to be the person described in and who executed the foregoing instrument and he
acknowledged before me that he executed the same.
WITNESS my hand and official seal in the County and State last aforesaid
this [ILLEGIBLE] day of February, 1992.
----------- -------- -
/s/ Douglas M. Bates
-------------------------------------
Notary Public
Printed Name:
My Commission Expires:
[SEAL OF DOUGLAS M. BATES]
-2-
<PAGE>
ACCEPTANCE BY ASSIGNEE
----------------------
LUCAYA BEACH HOTEL CORPORATION, does hereby accept the following Assignment
of the Lease and agrees to perform, conform with and abide by each condition and
covenant contained and set forth in the Lease herein assigned, and does hereby
agree to accept the foregoing Assignment of Lease and further agrees that all
notices to and under and pursuant to the Lease herein assigned should be sent to
him at 1200 N. Ocean Blvd., Pompano Beach, Florida 33062, Attn: Mr. Romulo De
Souza.
IN WITNESS WHEREOF, the Assignees executed and acknowledged the acceptance
of Assignee this 26 day of [ILLEGIBLE], 1992
-- ----------- -
LUCAYA BEACH HOTEL CORPORATION
By: /s/ Romulo Bandeira De Souza G. Neto
------------------------------------
Romulo Bandeira De Souza G. Neto
President
STATE OF FLORIDA
COUNTY OF [ILLEGIBLE]
-----------
I HEREBY CERTIFY that on this day, before me, an officer duly authorized in
the State aforesaid and in the County aforesaid to take acknowledgements,
personally appeared ROMULO BANDEIRA DE SOUZA G. NETO, President of Lucaya Beach
Hotel Corporation, to me known to be the person described in and who executed
the foregoing instrument and he acknowledged before me that he executed the same
on behalf of the corporation.
WITNESS my hand and official seal in the County and State last aforesaid
this [ILLEGIBLE] day of February, 1992.
----------- -------- -
/s/ Douglas M. Bates
------------------------------------
Notary Public
Printed Name:
My Commission Expires:
[SEAL OF DOUGLAS M. BATES]
Assignor's Identification No. 65-0262526
Parcel No. [ILLEGIBLE]
-3-
<PAGE>
LEGAL DESCRIPTION
-----------------
Lots 14, 15 and 16 in Block 13 of POMPANO BY THE SEA RESUBDIVISION,
according to the Plat thereof, recorded in Plat Book 1, Page 22 of the
Public Records of Broward County, Florida.
TOGETHER WITH that portion of the East one-half of Alta Avenue, lying West
of and adjacent to Lots 14, 15 and 16, in said Block 13.
TOGETHER WITH the following described property:
Begin at the intersection of the Center Line of Alta Avenue with a Westerly
extension of the North boundary of Lot 16, Block 13 as shown on the Plat of
POMPANO BY THE SEA, as recorded in Plat Book 1, Page 22 of the Public
Records of Broward County, Florida; thence Westerly along said Westerly
extension of the North boundary line of said Lot 16 a distance of 15.91
feet; thence Southerly, making an included angle of 104 degrees, 14', 30" a
distance of 123.76 feet; thence Easterly with an included angle of 75
degrees, 45', 30" a distance of 45.64 feet to the Center Line of Alta
Avenue; thence North along said Center Line a distance of 120.0 feet more
or less to the point of beginning.
- 20 -
<PAGE>
Exhibit 10.30
ASSIGNMENT OF GROUND LEASE AND TENANT LEASES
---------- -- ------ ----- --- ------ ------
THIS ASSIGNMENT made and entered into this _9th__ day of December, 1997, by
and between Ocean Palms Development Corporation, a corporation organized and
existing under the laws of the State of Florida, with offices located at 1200
North Ocean Blvd., Pompano Beach, FL 33062 hereinafter referred to as
"Assignor"), and Capitol Resorts of Florida, Inc., a corporation organized and
existing under the laws of the State of Florida, with offices located at 10605
Maumelle Blvd., #C, Maumelle, AR 72133 (hereinafter referred to as "Assignee");
WITNESSETH:
WHEREAS, Nancy H. Newell and Jane H. Tubbs, joined by their respective
spouses, and/or their respective successors and/or assigns, are Lessor, and
Assignor, through mesne assignments, is Lessee of that certain Ninety-Nine Year
Ground executed the 10th day of February, 1965, and recorded in Official Record
Book 2973, at page 677, and re-recorded in Official Records Book 3069, at page
186, of the Public Records of Broward County, Florida Lease (hereinafter
referred to as the "Lease"), which Lease covers the real property described in
Exhibit "A" attached hereto and by reference made a part hereof; and
WHEREAS, Assignor is the Lessor of those certain subleases of apartments
(hereinafter referred to as the "Subleases") located and contained within the
improvements on the leasehold covered by the Lease, which Subleases are more
specifically set forth and described in Exhibit "B" attached hereto and by
reference made a part hereof; and
WHEREAS, Assignor is desirous of assigning all of its right, title and
interest in and to the Lease and the Subleases to Assignee, and Assignee is
desirous of accepting said assignment and of assuming all of Assignor's duties
and obligations under said Lease and Subleases;
NOW, THEREFORE, in consideration of the mutual covenants and agreements as
hereafter set forth and the sum of TEN ($10.00) DOLLARS in hand paid by the
Assignee to the Assignor, receipt whereof is hereby acknowledged by the
Assignor, the parties agree as follows:
1. The Assignor does hereby assign, transfer and set over unto the Assignee,
all of its right, title and interest in and to the Lease, the same being
that certain Ninety-Nine Year Ground Lease executed the 10th day of
February, 1965, and recorded in Official Record Book 2973, at page
<PAGE>
677, and re-recorded in Official Records Book 3069, at page I 86 of the
Public Records of Broward County, Florida.
2. The Assignee shall and does hereby accept the assignment of the Lease and in
so doing and as part of the consideration for this assignment, Assignee
shall and does hereby accept and assume and agree to carry out and perform
all of the terms, covenants and conditions of the Lease which on the part of
the Lessee, are to be carried out and performed.
3. The Assignor does hereby assign, transfer and set over unto the Assignee,
all of its right, title and interest in and to the Subleases, the same being
those certain Subleases more specifically set forth and described in Exhibit
"B" attached hereto and by reference made a part hereof.
4. The Assignee shall and does hereby accept the assignment of the Subleases
and in so doing and as part of the consideration for this assignment,
Assignee shall and does hereby accept and assume and agree to carry out and
perform all of the terms, covenants and conditions of the Subleases which on
the part of the Lessor, are to be carried out and performed.
IN WITNESS WHEREOF, the parties hereto have set their hands and seals the
day and year first above written.
In the presence of:
(C
Print Name
ASSIGNOR:
Witness OCEAN PALMS DEVELOPMENT
CORPORATION, a Florida
/s/ Michael M. Wallack corporation;
By:/s/ Diane Bloom
Diane Bloom, President
{Corporate Seal}
ASSIGNEE:
CAPITOL RESORTS OF FLORIDA, INC.,
a Florida corporation
By: /s/ David Paes
David Paes, Vice President
/s/ Michael M. Wallack (Corporate Seal)
STATE OF FLORIDA
<PAGE>
COUNTY OF BROWARD
SS:
The foregoing instrument was acknowledged before me this 9/th/ day December
--------
1997 Diane Bloom, as President of Ocean Palms Development Corporation, a Florida
corporation, who is personally known to me, or who has identification.
------------------------------
/s/ Michael M. Wallack
(Signature of Person taking Acknowledgment)
(Name of Acknowledger
.MICHAEL M. WALLACK
MY COMMISSION #CC 544401
EXPIRES: April 8, 2000
STATE OF Florida
COUNTY OF Broward
SS:
The foregoing instrument was acknowledged before me this 9th December, 1997,
--------- ----
by David Paes, as Vice President of Capitol Resorts of Florida, Inc., a Florida
corporation who is personally known to me, or has produced AR Drivers License as
identification.
(Signature of Person Taking Acknowledgment)
/s/ Michael M. Wallack
(Name of Acknowledger Typed, Printed or
Stamped)
.MICHAEL M. WALLACK
MY COMMISSION #CC 544401
EXPIRES: April 8, 2000
I,
<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION
----- -----------
Lots 14, 15 and 16 in Block 13 of POMPANO BY THE SEA
RESUBDIVISION, according to the Plat thereof recorded in Plat Book 1, Page
22 of the Public Records of Broward County, Florida.
TOGETHER WITH that portion of the East one-half of Alta Avenue lying West of and
adjacent to Lots 14, 15 and 16, in said Block 13.
TOGETHER WITH the following described property:
Begin at the intersection of the Center Line of Alta Avenue with a westerly
extension of the North Boundary of Lot 16, Block 13 as shown on the Plat of
POMPANO BY THE SEA, as recorded in Plat book I, Page 22 of the Public Records of
Broward County, Florida; thence Westerly along said Westerly extension of the
North boundary line of said Lot 16 a distance of 15.91 feet; thence Southerly,
making an included angle of 104 degrees, 14', 30" a distance of 123.76 feet;
thence Easterly with an included angle of 75 degrees, 45', 30" a distance of
45.64 feet to the Center Line of Alta Avenue; thence North along said Center
Line a distance of 120.0 feet more or less to the point of beginning.
<PAGE>
Exhibit 10.31
ASSIGNMENT OF LEASEHOLD IMPROVEMENTS
THIS ASSIGNMENT made and entered into this _9th_ day of December, 1997, by
and between Ocean Palms Development Corporation, a corporation organized and
existing under the laws of the State of Florida, with offices located at 1200
North Ocean Blvd., Pompano Beach, FL 33062 (hereinafter referred to as
"Assignor"), and Capitol Resorts of Florida, Inc., a corporation organized and
existing under the laws of the State of Florida, with offices located at 10605
Maumelle Blvd., #C, Maumelle, AR 72133 (hereinafter referred to as "Assignee");
WITNESSETH:
WHEREAS, Assignor is the title holder to all those certain leasehold
improvements (hereinafter referred to as the "Leasehold Improvements") presently
located on the real estate (which real estate is more specifically described in
Exhibit "A" attached hereto and by reference made a part hereof) subject to that
certain Ninety-Nine Year Ground Lease wherein Nancy H. Newell and Jane H. Tubbs,
joined by their respective spouses, and/or their respective successors and/or
assigns, are Lessor, and Assignor, through mesne assignments, is Lessee,
executed the 10th day of February, 1965, and recorded in Official Record Book
2973, at page 677, and re-recorded in Official Records Book 3069, at page 186,
of the Public Records of Broward County, Florida (hereinafter referred to as the
'tease"); and
WHEREAS, Assignor is desirous of assigning all of its right, title and
interest in and to the Leasehold Improvements to Assignee, and Assignee is
desirous of accepting said assignment and of assuming all of Assignor's duties
and obligations for said Leasehold improvements;
NOW, THEREFORE, in consideration of the mutual covenants and agreements as
hereafter set forth and the sum of TEN ($10.00) DOLLARS in hand paid by the
Assignee to the Assignor, receipt whereof is hereby acknowledged by the
Assignor, the parties agree as follows:
1. The Assignor does hereby assign, transfer and set over unto the Assignee,
all of its right, title and interest in and to the Leasehold Improvements
presently located on the real estate which is subject to the Lease, being that
certain Ninety-Nine Year Ground Lease executed the lOth day of February, 1965,
and recorded in Official Record Book 2973, at page 677, and re-recorded in
Official Records Book 3069, at page 186, of the Public Records of Broward
County, Florida
<PAGE>
2. The Assignee shall and does hereby accept the assignment of the Leasehold
Improvements and in so doing and as part of the consideration for this
Assignment, Assignee shall and does hereby accept and assume and agree to carry
out and perform all of the terms, covenants and conditions of the Lease which on
the part of the Lessee, are to be carried out and performed.
IN WITNESS WHEREOF, the parties hereto have set their hands and seals the day
and year first above written.
Witnessed
ASSIGNOR:
OCEAN PALMS DEVELOPMENT
/s/ Michael M. Wallack CORPORATION, a Florida
corporation
By:/s/ Diane Bloom
Diane Bloom, President
{Corporate Seal}
ASSIGNEE:
CAPITOL RESORTS OF
FLORIDA, INC., a Florida
corporation
/s/ Michael M. Wallack By:/s/ David Paes
David Paes, Vice President
{Corporate Seal}
:STATE OF FLORIDA COUNTY OF BROWARD
The foregoing instrument was acknowledged before me this 9/th/ day of
----------
December, 1997, by Diane Bloom, as President of Ocean Palms Development
- - --------------
corporation, a Florida corporation, who is personally known to me, or who has
----------------------
produced as identification.
Signature Person Taking Acknowledgment
/s/ Michael M. Wallack
<PAGE>
STATE OF Florida
COUNTY OF Broward
SS:
The foregoing instrument was acknowledged before me this 9th day of December,
1997, by David Paes, as Vice President of Capitol Resorts of Florida, a Florida
- - ----
corporation, who is personally known to me, or who has produced AR Drivers
License as identification.
(Signature of Person Taking Acknowledgment)
/s/ Michael M. Wallack
MICHAEL M. WALLACK
MY COMMISSION # CC 544401
EXPIRES: April 8, 2000
<PAGE>
Page 3
EXHIBIT "A"
LEGAL DESCRIPTION
----- -----------
Lots 14, 15 and 16 in Block 13 of POMPANO BY THE SEA
RESUBDIVISION, according to the Plat thereof recorded in Plat Book 1, Page
22 of the Public Records of Broward County, Florida.
TOGETHER WITH that Portion of the East one-half of Alta Avenue, lying West of
and adjacent to Lots 14, 15 and 16, in said Block 13.
TOGETHER WITH the following described property:
Begin at the intersection of the Center Line of Alta Avenue with a westerly
extension of the North boundary of Lot 16, Block 13 as shown on the Plat of
POMPANO BY THE SEA, as recorded in Plat book 1, Page 22 of the Public Records of
Broward County, Florida; thence Westerly along said Westerly extension of the
North boundary line of said Lot 16 a distance of 15.91 feet; thence Southerly,
making an included angle of 104 degrees, 14', 30" a distance of 123.76 feet;
thence Easterly with an included angle of 75 degrees, 45', 30" a distance of
45.64 feet to the Center Line of Alta Avenue; thence North along said Center
Line a distance of 120.0 feet more or less to the point of beginning.
<PAGE>
Exhibit 10.32
MORTGAGE AND NOTE MODIFICATION AND ASSUMPTION
AGREEMENT
THIS AGREEMENT made and entered into this 9th_ day of December, 1997 by
and between the TRUSTEE OF THE M.B. CO., INC. PENSION PLAN, the TRUSTEE OF
THE MENSWEAR-BOYSWEAR CO., INC. PENSION PLAN, the TRUSTEE OF THE
DOMENICK GRECO REVOCABLE TRUST, STANLEY ELKMAN, the TRUSTEE OF THE
ARTHUR A. KOBER CO., INC. EMPLOYEES PROFIT SHARING FUND, and MORTON J.
BERMAN, with offices located at 4541 White Cedar Lane, Delray Beach, FL 33044
(hereinafter referred to as 'Mortgagee and CAPITOL RESORTS OF FLORIDA, INC., a
Florida corporation, with offices located at 10605 Maumelle Blvd., #C, Maumelle,
AR 72113 (hereinafter collectively referred to as "Mortgagor");
WITNESSETH:
WHEREAS, Lucaya Beach Hotel Corporation heretofore executed and delivered to
Del-Aire Management Co., Inc. a certain promissory note dated the 26th day of
February 1992 in the original principal amount of ONE MILLION TWO-HUNDRED
THOUSAND DOLLARS ($1,200,000.00) (the "Note"); and
WHEREAS, THE Note is secured by that certain Purchase Money Leasehold
Mortgage and Security Agreement made by Lucaya Beach Hotel Corporation in favor
of Del-Aire Management Co., Inc. dated the 26th day of February 1992, and
recorded the 28th day of February, 1992 in Official Records Book 19218, Page
815, of the Public Records of Broward County, Florida (the "Mortgage"), as
modified by Mortgage and Note Modification Agreement dated the 22nd day of
January, 1997 and recorded 3rd day of February, 1997 in Official Records Book
25980, Page 735, of the Public Records of Broward County, Florida {the
"Modification") (the Mortgage as Modified by the Modification being hereinafter
referred to as the "Modified Mortgage"), which Modified Mortgage encumbers lands
more particularly described in Exhibit "A" attached hereto and by reference made
a part hereof, lying, being and situate in Broward County, Florida
(the "Property"); and
WHEREAS, Mortgagee is the owner and holder of the Note and the Modified
Mortgage, having obtained same by Assignment of Mortgage dated the 28th day of
May, 1993 and recorded in Official Records book 21050, Page 330, of the Public
records of Broward County, Florida; and
WHEREAS, Mortgagor, by virtue of that certain Assignment of Lease dated the
date hereof and recorded concurrently herewith in the Public Records of Broward
County, Florida, has become the owner of the Property; and
WHEREAS, Mortgagor desires to obtain the approval of the Mortgagee for the
conveyance to Mortgagor of title to the Property so that such conveyance will
not constitute a default under tile Modified Mortgage; and
Page 1
<PAGE>
WHEREAS, Mortgagee is willing to provide its approval to the aforesaid
conveyance provided that Mortgagor assumes the Modified Mortgage and agrees to
the modifications of the Modified Mortgage and the Note hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual benefits accruing to the
respective parties under the provisions of this Agreement it is hereby agreed as
follows:
1. Recitals. The foregoing recitals are true and correct and are incorporated
herein by reference as though set out in full.
2. Outstanding Principal Balance. As of the date hereof the outstanding
principal balance of the Note (including the $100,000.00 readvancement made on
or about December 20, 1996) is $1,158,000.00, the December, 1997 payment having
been received by Mortgagee and credited. The next payment under the Note and
Mortgage is due on January 1, 1998. The Modified Mortgage and Note are in good
standing and not in default.
3. Option To Extend; Modification of Monthly Payment Mortgagor has exercised
the first option to extend the Note and Mortgage as provided pursuant to the
Modification. Notwithstanding anything to the contrary contained in the
Modification, Mortgagor shall have the right and option to extend the Note and
Mortgage for two (2) consecutive extension periods of one (1) year each (subject
to payment of an annual extension fee in an amount equal to one percent (1%) of
the then outstanding principal balance of the Note (but not including that
portion of the then outstanding principal balance of the Note which represents
the aforesaid $100,000.00 re-advancement made on or about December 20, 1996),
said extension fee to be due and payable on or before March 1 each year prior to
the commencement of each extension period); so that said Note and Mortgage will
become all due and payable on the 1st day of April, 1999 (if the first
extension is exercised), and on the 1st day of April, 2000 (if the second
extension is also exercised). In order to exercise the aforesaid right and
option Mortgagor shall, on or before March 1 of each year prior to the
commencement of each extension period, notify the Mortgagee in writing of
Mortgagee's election to exercise the right and option and, in each such case,
such written notice must be accompanied by the aforesaid appropriate extension
fee. Mortgagor agrees that, if Mortgagor exercises the first option to extend,
the payment due under the Note for each month, beginning with the payment due on
the 1st day of May, 1998, and continuing thereafter from month to month until
maturity, shall be the sum of Seventeen Thousand One-Hundred Nineteen and 85/100
ths Dollars ($17,119.85), and each such payment shall be applied first to
interest accruing under the Note and then to principal.
4. Application of Proceeds of Purchase Monty Obligations. Notwithstanding
anything to the contrary contained in section 5 of the Modification, the monthly
proceeds of the purchase money obligations held by Mortgagee as additional
collateral for the Mortgage shall be applied and distributed as follows: an
amount of such proceeds equal to the payment due each calendar month under the
Note (as modified by the Modification and as modified by this instrument) shall
be applied as and when received upon the indebtedness represented by the Note,
first to accrued interest and then to principal, and the remaining proceeds for
<PAGE>
such calendar month shall be paid over by Mortgagee to Mortgagor.
5. Escrows for Taxes, Insurance and Ground Lease Payments. Notwithstanding
the requirements of section 6 of the Modification, from and after the date
hereof Mortgagor shall not be required to escrow funds for payment of premiums
for flood, hazard or liability insurance on the Property; but nothing herein
shall be construed as a waiver or modification of Mortgagor's right to keep such
insurance in force or to make payments for real estate tax and ground lease
payments as otherwise required by the Modified Mortgage.
6. Assumption. Mortgagor shall and does hereby assume and agree to pay the
Note and Modified Mortgage as further modified by this instrument; and in
consideration thereof and of the agreements and undertakings set forth herein,
Mortgagee shall and does hereby approve the conveyance of the Property to
Mortgagor and Mortgagee shall and does hereby consent to the assumption by
Mortgagor of the Modified Mortgage as further modified by this instrument.
7. First Leasehold Mortgage. Notwithstanding the changes, amendments and
modifications provided herein, and notwithstanding any transfer or conveyance of
the Property to Mortgagor, and notwithstanding any sub-leasing of individual
apartments and/or commercial spaces upon the Property, the Modified Mortgage as
further modified by this instrument is and will remain a first leasehold
mortgage.
8. Modification of Financing Statement. This Mortgage and Note
Modification and
Assumption Agreement shall also constitute a modification of that certain UCC 1
financing
Statement recorded February 28, 1992 in Official Records Book 19218, Page 842,
of the Public Records of Broward County, Florida.
9. Full Force and Effect; Conflicts. This modification is made upon the
express agreement and understanding that, except as herein specifically set
forth, the Modified Mortgage and the Note shall remain unmodified and in full
force and effect. In the event of any conflict between the terms and provisions
of the Mortgage, Modification or Note and the terms and provisions of this
Mortgage and Note Modification and Assumption Agreement, the terms and
provisions of this Mortgage and Note Modification and Assumption Agreement shall
take precedence.
10. Binding Effect. This agreement shall be binding upon and inure to the
benefit of the successors and assigns of the respective parties hereto.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals the
day and year first above written.
<PAGE>
Witnesses
MORTGAGEE:
TRUSTEE OF THE M.B. CO, INC
PENSION PLAN
By: /s/ Domenic Greco
---------------------
/s/ Howard Bloom DOMENICK GRECO as Trustee of the MB
Co., Inc. Pension Plan
/s/ Lucianne Oppenheim
Print Name
TRUSTEE OF THE MENSWEAR-BOYSWEAR
CO., INC. PENSION PLAN
/s/ Howard Bloom
/s/ Lucianne Oppenheim /s/ Domenic Greco
DOMENIC GRECO, as Trustee of the
Menswear-Boyswear Co., Inc. Pension
Plan
TRUSTEE OF THE DOMENIC GRECO
REVOCABLE TRUST
/s/ Howard Bloom /s/ Domenic Greco
DOMENICK GRECO, as Trustee Of The
/s/ Lucianne Oppenheim Domenick Greco Revocable Trust
/s/ Howard Bloom /s/ Stanley Elkman
/s/ Lucianne Oppenheim STANLEY ELKMAN
CELIA WACHS BERMAN TRUST "B"
/s/ Howard Bloom
By: /s/ Morton J. Berman
/s/ Lucianne Oppenheim
MORTON J. BERMAN, TRUSTEE
/s/ Howard Bloom /s/ Morton J. Berman
MORTON J BERMAN
/s/ Lucianne Oppenheim
Page 4
<PAGE>
MORTGAGOR:
CAPITOL RESORTS OF FLORIDA, INC., a
Florida corporation
/s/ Domenic Greco
/s/ Raymond C. Baptista
/s/ David Paes
David Paes, Vice President
Print Name
State of Florida County of Broward
The foregoing instrument was acknowledged before me this 22nd of January
1997, by DOMENICK GRECO as TRUSTEE OF THE M.B. CO., INC. PENSION PLAN who is
personally known to me, or who has produced ________________ as identification,
and who did / did not take an oath.
LINDA L. MEANS Signature of Person Taking
Acknowledgment
MY COMMISSION # CC 421559
EXPIRES: NOV 17, 1998 /s/ Linda L. Means
------------------
LINDA L. MEANS
State of Florida
County of Broward
The foregoing instrument was acknowledged before me this 22 of December.
---------
1997, by DOMENICK GRECO as TRUSTEE OF THE MENSWEAR.BOYSWEAR CO., INC. PENSION
- - ----
PLAN who. is personally known to me. or who has produced _______________ as
------------------------------
identification, and who did / did not take an oath
Signature of Person Taking Acknowledgment
/s/ Colleen Krysmalski
(Title or Rank) (Serial Number, if any)
COLLEEN KRYSMALSKI
MY COMMISSION # CC 617843
EXPIRES: March 19, 2001
<PAGE>
State of Florida
County of Broward
The foregoing instrument was acknowledged before me this 9 day of
December, 1997, by DOMENICK GRECO as TRUSTEE OF THE DOMENICK GRECO REVOCABLE
- - --------------
TRUST who is personally known to me, or who has produced ___________________ as
---------------------------------
identification, and who did / did not take oath.
Signature of Person Taking Acknowledgment
/s/ Colleen Krysmalski
(Title or Rank) (Serial Number, if any)
COLLEEN KRYSMALSKI
MY COMMISSION # CC 617843
EXPIRES: March 19, 2001
State of Florida
County of Broward
The foregoing instrument was acknowledged before me this 9 day of
December, 1997, by STANLEY ELKMAN who is personally known to me, or who has
- - -------------- ---------------------------------
produced ___________________ as identification, and who did / did not take oath.
Signature of Person Taking Acknowledgment
/s/ Colleen Krysmalski
(Title or Rank) (Serial Number, if any)
COLLEEN KRYSMALSKI
MY COMMISSION # CC 617843
EXPIRES: March 19, 2001
State of Florida
County of Broward
The foregoing instrument was acknowledged before me this 9 day of
December, 1997, by MORTON J. BERMAN as TRUSTEE OF THE CELIA WACHS BERMAN TRUST
- - --------------
"B" who is personally known to me, or who has produced ___________________ as
---------------------------------
identification, and who did / did not take oath.
Signature of Person Taking Acknowledgement
/s/ Colleen Krysmalski
(Title or Rank) (Serial Number, if any)
<PAGE>
COLLEEN KRYSMALSKI
MY COMMISSION # CC 617843
EXPIRES: March 19, 2001 State of Florida
State of Florida
County of Broward
The foregoing instrument was acknowledged before me this 9 day of
December, 1997, by MORTON J. BERMAN who is personally known to me, or who has
- - -------------- ---------------------------------
produced ___________________ as identification, and who did / did not take oath.
Signature of Person Taking Acknowledgment
/s/ Colleen Krysmalski
Title or Rank) (Serial Number, if any)
COLLEEN KRYSMALSKI
MY COMMISSION # CC 617843
EXPIRES: March 19, 2001 State of Florida
State of Florida
County of Broward
The foregoing instrument was acknowledged before me this 9 day of
December, 1997, by DAVID PAES as VICE PRESIDENT of CAPITOL RESORTS OF FLORIDA,
- - --------------
INC., who is personally known to me, or who has produced ___________________ as
- - ---------------------------------
identification, and who did / did not take oath.
Signature of Person Taking Acknowledgment
/s/ Colleen Krysmalski
Title or Rank) (Serial Number, if any)
COLLEEN KRYSMALSKI
MY COMMISSION # CC 617843
EXPIRES: March 19, 2001 State of Florida
<PAGE>
Exhibit "A"
Legal Description
That certain real property lying, being and situated in Broward County, Florida,
and more particularly described as follows:
The lessee's interest in a 99 year leasehold created pursuant to lease
dated February 10, 1965 made and entered into by and between Nancy H.
Newell and Jane H. Tubbs, as lessors, and Lighthouse Point Construction
Corp., as lessee, recorded in Official Records Book 2973, Page 677, of the
Public Records of Broward County, Florida, and re-recorded in Official
Records Book 3069, Page 186, of the Public Records of Broward County,
Florida; which leasehold covers the following described real property; to
wit:
Lots 14, 15 and 16 in Block 13 of POMPANO BY THE SEA RESUBDIVISION,
according to the Plat thereof, recorded in Plat Book 1,
Page 22 of the Public Records of Broward County, Florida.
TOGETHER WITH that portion of the East one-half of Alta Avenue, lying West
of and adjacent to Lots 14, 15 and 16 in said Block 13.
TOGETHER WITH the following described property:
Begin at the intersection of the Center Line of Alta Avenue with a westerly
extension of the North boundary of Lot 16, Block 13 as shown on the Plat of
POMPANO BY THE SEA, as recorded in Plat book 1, Page 22 of the Public
Records of Broward County, Florida; thence Westerly along said Westerly
extension of the North boundary line of said Lot 16 a distance of 15.91
feet; thence Southerly, making an included angle of 104 degrees, 14', 30" a
distance of 123.76 feet; thence Easterly with an included angle of 75
degrees, 45', 30" a distance of 45.64 feet to the Center Line of Alta
Avenue; thence North along said Center Line a distance of 120.0 feet more
or less to the point of beginning.
<PAGE>
Exhibit 10.33
COLLATERAL ASSIGNMENT AND PLEDGE OF
AGREEMENTS AND CONDITIONAL ASSIGNMENTS OF LEASE
AND
PURCHASE MONEY PROMISSORY NOTES
THIS ASSIGNMENT, made this 9th day of December, 1997 by OCEAN PALMS
RESORT, INC., a Florida corporation, with offices located at 1200 North Ocean
Blvd.,Pompano Beach, FL 33062, joined by OCEAN PALMS DEVELOPMENT CORPORATION, a
Florida corporation, with offices located at 1200 North Ocean Blvd., Pompano
Beach, FL 33062 (hereinafter collectively referred to as "ASSIGNOR") to the
TRUSTEE OF THE M.B. CO., INC. PENSION PLAN, the TRUSTEE OF THE MENSWEAR-BOYSWEAR
CO., INC. PENSION PLAN, the TRUSTEE OF THE DOMENICK GRECO REVOCABLE TRUST,
STANLEY ELKMAN, the TRUSTEE OF THE ARTHUR A. KOBER CO., INC. EMPLOYEES PROFIT
SHARING FUND, and MORTON J. BERMAN, with offices located at 4541 White Cedar
Lane. Delray Beach, FL 33044 (hereinafter referred to as "ASSIGNEE");
WITNESSETH:
THAT WHEREAS, ASSIGNEE is the owner and holder of that certain promissory
note dated the 26th day of February 1992 made by Lucaya Beach Hotel Corporation
in favor of to Del-Aire Management Co., Inc. in the original principal amount of
ONE MILLION TWO-HUNDRED THOUSAND DOLLARS ($1,200,000.00)(the "Note"), which Note
is secured by that certain Purchase Money Leasehold Mortgage and Security
Agreement made by Lucaya Beach Hotel Corporation in favor of Del-Aire Management
Co., Inc. dated the 26th day of February 1992, and recorded the 28th day of
February, 1992 in Official Records Book 19218, Page 815, of the Public Records
of Broward County, Florida, as modified by Mortgage and Note Modification
Agreement dated the 22nd day of January, 1997 and recorded 3rd day of February,
1997 in Official Records Book 25980, Page 735, of the Public Records of Broward
County, Florida (the "Mortgage"); and
WHEREAS, ASSIGNOR is the owner and holder of certain Promissory Notes and
Agreements And Conditional Assignments Of Lease which Promissory Notes and
Agreements And Conditional Assignments Of Lease ASSIGNOR has agreed to assign to
ASSIGNEE to further secure the Note; and
WHEREAS, ASSIGNOR by these presents, desires to assign to ASSIGNEE the said
Promissory Notes and Agreements And Conditional Assignments Of Lease, the same
being more specifically listed and described in Schedule "A" attached hereto and
by reference made a part hereof, to ASSIGNEE to further secure the Note;
NOW THEREFORE, in consideration of the premises, the sum of Ten and no! 100
Dollars ($10.00) in hand paid by ASSIGNEE TO ASSIGNOR, and other good and
valuable consideration, the receipt of which is hereby acknowledged by ASSIGNOR,
the ASSIGNOR does hereby transfer, set over, assign and convey unto ASSIGNEE,
its successors and assigns, (i) all right, title and interest of ASSIGNOR in and
to the hereinafter described Promissory Notes and Agreements And Conditional
<PAGE>
Assignments Of Lease, (ii) all right, title and interest of ASSIGNOR as Grantee
under the Agreements And Conditional Assignments Of Lease, (iii) the
indebtedness secured by the Agreements And Conditional Assignments Of Lease and
evidenced by the Promissory Notes, and (iv) all rights, powers and privileges
conferred by the Promissory Notes and Agreements And Conditional Assignments Of
Lease; provided, however, that this Assignment is a collateral assignment
subject to the terms hereof and subject to the terms regarding same set forth in
paragraph 5 of that certain Mortgage and Note Modification Agreement dated the
22nd day of January, 1997 and recorded 3rd day of February, 1997 in Official
Records Book 25980, Page 735, of the Public Records of Broward County, Florida.
The Promissory Notes and Agreements And Conditional Assignments Of Lease
assigned hereby are the following:
SEE SCHEDULE "A" ATTACHED HERETO AND BY REFERENCE MADE A PART HEREOF.
1. Term and Conditions of Assignment. This Assignment is irrevocable until
---------------------- ----------
the entire indebtedness secured by the Mortgage, including future advances made
thereunder, together with any renewals thereof, shall be paid in full. So long
as no default has occurred and is continuing under the terms and conditions of
the Note, Mortgage or any modifications, renewals or extensions thereof,
ASSIGNOR shall have the right to collect all payments and other charges arising
from the Promissory Notes and Agreements And Conditional Assignments Of Lease
and shall disburse same as provided for the Mortgage (or in any modification
thereof). In the event of default and so long as such default shall continue,
ASSIGNEE shall have the right and privilege of directly receiving the payments
and other charges arising from the Promissory Notes and Agreements And
Conditional Assignments Of Lease pledged hereby and may designate an agent,
which agent may be ASSIGNOR, to collect and disburse said moneys and apply same
on the Mortgage. ASSIGNOR warrants and represents that it is the owner and
holder of the Promissory Notes and Agreements And Conditional Assignments Of
Lease.
2. Power of Attorney. ASSIGNOR does hereby appoint ASSIGNEE as ASSIGNOR's
----- -- --------
true and lawful, irrevocable attorney in fact to demand, receive, and enforce
payment, to give receipts, releases, and satisfactions and to sue either in the
name of ASSIGNOR or in the name of ASSIGNEE for all payments and other charges
arising from the Promissory Notes and Agreements And Conditional Assignments Of
Lease. All sums so collected may be applied by ASSIGNEE to the payment of any
sums then due upon the Note, Mortgage or other obligations relating to same. The
exercise by ASSIGNEE of the rights under this paragraph shall neither impair nor
constitute a waiver of any other rights or remedies which ASSIGNEE may have
under the Note, Mortgage or any other document or instrument related to the loan
represented by the Note, or otherwise, but the remedy hereby given shall be in
addition to all others which ASSIGNEE may have. ASSIGNOR does hereby authorize
and direct the payors under the Promissory Notes and Agreements And Conditional
Assignments Of Lease to pay over to ASSIGNEE all payments and other charges
arising from the Promissory Notes and Agreements And Conditional Assignments Of
Lease upon written notice and request from ASSIGNEE and any such payment by any
payor to ASSIGNEE shall constitute a full release and discharge to the extent of
such payments as fully as though they had been made to ASSIGNOR.
3. ASSIGNOR's Obligation. ASSIGNOR shall observe and perform all the
---------------------
obligations imposed upon the payee/assignee under the Promissory Notes and
<PAGE>
Agreements And Condition~1 Assignments Of Lease: not collect any of the payments
under the Promissory Notes and Agreements And Conditional Assignments Of Lease
in advance of the time when the same shall become due (unless an appropriate
portion thereof is paid to ASSIGNEE in accordance with the provisions of the
Mortgage, including all modifications thereof]); not execute any other
assignment of ASSIGNOR's interest unless such assignment is expressly made
subject to this Assignment; and not alter, modify or change the terms of the
Promissory Notes and Agreements And Conditional Assignments Of Lease or cancel
same or accept a surrender thereof without the prior written consent of
ASSIGNEE.
4. Satisfaction. Upon the recordation in the public records of Broward
------------
County, Florida of a proper satisfaction of the Note and Mortgage, this
Assignment shall become void and of no further force or effect, even without the
recordation of any instrument specifically making reference to same; provided,
however, that upon the request of the ASSIGNOR, ASSIGNEE shall execute and
deliver to ASSIGNOR a reassignment of the Promissory Notes and Agreements And
Conditional Assignments Of Lease.
5. Miscellaneous. This Assignment shall inure to the benefit of ASSIGNEE, its
-------------
successors and assigns, and any subsequent holder of the Note and Mortgage and
shall be binding upon ASSIGNOR and upon any obligor upon the Note or Mortgage.
6. WAIVER OF JURY TRIAL. BY THE EXECUTION HEREOF, THE ASSIGNOR
--------------------
HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY AGREES THAT: (A)
NEITHER THE ASSIGNOR NOR ANY ASSIGNEE, SUCCESSOR, HEIR, OR LEGAL
REPRESENTATIVE OF THE SAME SHALL SEEK A JURY TRIAL IN ANY LAWSUIT,
PROCEEDING, COUNTERCLAIM, OR ANY OTHER LITIGATION PROCEDURE ARISING
FROM OR BASED UPON THIS AGREEMENT, ANY OTHER LOAN AGREEMENT OR ANY
LOAN DOCUMENT EVIDENCING, SECURING OR RELATING TO THE OBLIGATIONS OR
TO THE DEALINGS OR RELATIONSHIP BETWEEN OR AMONG THE PARTIES THERETO;
(B) NEITHER THE ASSIGNOR NOR ASSIGNEE WILL SEEK TO CONSOLIDATE ANY SUCH
ACTION, IN WHICH A JURY TRIAL HAS BEEN WAIVED, WITH ANY OTHER ACTION IN
WHICH A JURY TRIAL HAS NOT BEEN OR CANNOT BE WAIVED; (C) THE PROVISIONS OF
THIS PARAGRAPH HAVE BEEN FULLY NEGOTIATED BY THE PARTIES HERETO, AND
THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS; (D) NEITHER THE
ASSIGNOR NOR ASSIGNEE HAS IN ANY WAY AGREED WITH OR REPRESENTED TO ANY
OTHER PARTY THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY
ENFORCED IN ALL INSTANCES; AND (E) THIS PROVISION IS A MATERIAL INDUCEMENT
FOR ASSIGNEE TO ENTER INTO THIS TRANSACTION.
IN WITNESS WHEREOF, the undersigned ASSIGNOR has hereunto set its hand and
affixed its seal the day and year first above written.
In the Presence of: OCEAN PALMS RESORT, INC., a
Florida Corporation
/s/ Michael M. Wallack /s/ Diane Bloom
By:
Diane Bloom, President
(CORPORATE SEAL)
<PAGE>
/s/ Michael M. Wallack OCEAN PALMS DEVELOPMENT
CORPORATION, a Florida corporation
By: /s/ Diane Bloom
Diane Bloom, President
State of Florida
County of Broward
The foregoing instrument was acknowledged before me this 9th day of
December, 1997, by DIANE BLOOM as President of OCEAN PALMS RESORT, INC., a
Florida corporation, who is personally known to me,
--------------------------
Signature of Person Taking Acknowledgment
/s/ Michael M. Wallack
MICHAEL M WALLACK
MY COMMISSION #CC 544401
EXPIRES: April 8, 2000
State of Florida
County of Broward
The foregoing instrument was acknowledged before me this 9th day of
December, 1997, by DIANE BLOOM as President of OCEAN PALMS DEVELOPMENT, a
Florida corporation, who is personally known to me,
--------------------------
Signature of Person Taking Acknowledgment
/s/ Michael M. Wallack
MICHAEL M WALLACK
MY COMMISSION # CC 544401
EXPIRES: April 8, 2000
<PAGE>
Exhibit 10.34
ASSIGNMENT OF
AGREEMENTS AND CONDITIONAL ASSIGNMENTS OF LEASE
AND
PURCHASE MONEY PROMISSORY NOTES
THIS ASSIGNMENT, made this 9th day of December, 1997 by OCEAN PALMS RESORT,
INC., a Florida corporation, with offices located at 1200 North Ocean Blvd.,
Pompano Beach, FL 33062, joined by OCEAN PALMS DEVELOPMENT CORPORATION, a
Florida corporation, with offices located at 1200 North Ocean Blvd., Pompano
Beach, FL 33062 (hereinafter collectively referred to as "ASSIGNOR") to CAPITOL
RESORTS OF FLORIDA, INC., a Florida corporation, with offices located at 10605
Maumelle Blvd., #C, Maumelle, AR 72133 (hereinafter referred to as "ASSIGNEE");
FOR AND IN CONSIDERATION of the premises, the sum of Ten and no/ 100
Dollars ($10.00) in hand paid by ASSIGNEE TO ASSIGNOR, and other good and
valuable consideration, the receipt of which is hereby acknowledged by ASSIGNOR,
the ASSIGNOR does hereby transfer, set over, assign and convey unto ASSIGNEE,
its successors and assigns, (i) all right, title and interest of ASSIGNORS in
and to the hereinafter described Promissory Notes and Agreement And Conditional
Assignments Of Lease, (ii) all right, title and interest of ASSIGNOR as Grantee
under the Agreement And Conditional Assignments Of Lease, (iii) the indebtedness
secured by the Agreement And Conditional Assignments Of Lease and evidenced by
the Promissory Notes, and (iv) all rights, powers and privileges conferred by
the Promissory Notes and Agreement And Conditional Assignments Of Lease;
provided, however, that this Assignment is subject and subordinate to that
certain Collateral Assignment and Pledge Of Agreements And Conditional
Assignments Of Lease And Purchase Money Promissory Notes in favor of the
TRUSTEE OF THE M.B. CO., INC. PENSION PLAN, the TRUSTEE OF THE MENSWEAR-BOYSWEAR
CO., INC. PENSION PLAN, the TRUSTEE OF THE DOMENICK GRECO REVOCABLE TRUST,
STANLEY ELKMAN, the TRUSTEE OF THE ARTHUR A. KOBER CO., INC. EMPLOYEES PROFIT
SHARING FUND, and MORTON J. BERMAN, with offices located at 4541 White Cedar
Lane, Delray Beach, FL 33044 (the "Greco Collateral Assignment") and the terms
thereof including the terms regarding same set forth in paragraph S of that
certain Mortgage and Note
<PAGE>
Modification Agreement dated the 22nd day of January, 1997 and recorded 3rd day
of February, 1997 in Official Records Book 25980, Page 735, of the Public
Records of Broward County, Florida. The Greco Collateral Assignment is a
collateral assignment to secure certain indebtedness as more fully set forth
therein.
ASSIGNOR warrants and represents that it is the owner and holder of the
said Promissory Notes and Agreements And Conditional Assignments Of Lease,
- - ----
subject to the Greco Collateral Assignment as aforesaid, and that the Promissory
Notes and Agreements And Conditional Assignments Of Lease assigned hereby are
the following:
SEE SCHEDULE "A" ATTACHED HERETO AND BY REFERENCE MADE A PART
HEREOF.
IN WITNESS WHEREOF, the undersigned ASSIGNOR has hereunto set its hand and
affixed its seal the day and year first above written.
In the presence OCEAN PALMS RESORT, INC., a
Florida corporation
-------------------
/s/ Michael M. Wallack
By: /s/ Diane Bloom
Diane Bloom, President
Print Name
OCEAN PALMS DEVELOPMENT
/s/ Michael M. Wallack CORPORATION, a Florida corporation
By: /s/ Diane Bloom
Diane Bloom, President
(CORPORATE SEAL)
State of Florida
County of Broward
<PAGE>
The foregoing instrument was acknowledged before me this 9th day of
December, 1997, by DIANE BLOOM as President OCEAN PALMS RESORT, INC., a Florida
corporation, who is personally known to me
(Signature of Person Taking
Acknowledgment)
/s/ Michael M. Wallack
MICHAEL M. WALLACK
MY COMMISSION # CC 544401
EXPIRES: April 8, 2000
State of Florida
County of Broward
The foregoing instrument was acknowledged before me this 9th day of
December, 1997, by DIANE BLOOM as President OCEAN PALMS DEVELOPMENT CORPORATION,
INC., a Florida corporation, who is personally known to me
(Signature of Person Taking
Acknowledgment)
/s/ Michael M. Wallack
MICHAEL M. WALLACK
MY COMMISSION # CC 544401
EXPIRES: April 8, 2000
<PAGE>
Exhibit 10.35
PURCHASE MONEY LEASEHOLD MORTGAGE AND SECURITY AGREEMENT
--------------------------------------------------------
THIS LEASEHOLD MORTGAGE AND SECURITY AGREEMENT ("Mortgage") made this
20 day of February 1992, between LUCAYA BEACH HOTEL CORPORATION, a Florida
corporation, ("Mortgagor"), and DEL-AIRE MANAGEMENT CO., INC., a Florida
corporation, having an office at 4541 White Cedar Lane, Delray Beach, Florida
("Mortgagee")
1. Mortgagor has purchased the leasehold interest described herein
from the Mortgagee and executed the promissory note in the face amount of One
Million Two Hundred Thousand and 00/100 Dollars ($1,200,000.00) ("the Note")
secured by this Mortgage as part of the purchase price for said leasehold
interest.
2. Mortgagor desires to execute the within Mortgage and Security
Agreement and grant the security interests provided herein for the purpose of
securing the payment and performance obligations of the Mortgagor under the
Note.
NOW THIS LEASEHOLD MORTGAGE AND SECURITY AGREEMENT WITNESSETH, that in
consideration of the aforesaid principal sum of the Note and as further security
for the payment under the Note with interest and aforesaid together with all
other sums recoverable by Mortgagee under the terms of the Note, this Mortgage
and Security Agreement, together with all existing and future liabilities of
Mortgagor to Mortgagee (said indebtedness and interest and such other sums and
liabilities are hereinafter collectively referred to as the "Aggregate Debt U),
and as security for the due and timely performance by Mortgagor of all of the
other provisions of the Note, and intending to be legally bound hereby,
Mortgagor hereby GRANTS, BARGAINS, SELLS, CONVEYS, ASSIGNS, TRANSFERS, RELEASES,
PLEDGES and MORTGAGES to Mortgagee its leasehold interest in that certain parcel
of real property known as The Lucaya Beach Hotel located in Broward County,
Florida, as more fully described in Exhibit "A" attached hereto and made a part
hereof (the "Real Property"), held pursuant to that certain lease agreement
dated February 10, 1965 (the "LEASE") between Lighthouse Point Construction
Corp. (Mortgagor', predecessor-in-interest), as lessee, and Nancy H. Newell and
Jane H. Tubbs, as lessor ("Leasehold Estate");
TOGETHER WITH all right, title and interest of Mortgagor in and to the
following property located at the Real Property (the "Location") now owned or
hereafter acquired by Mortgagor, or its successors or assigns, or in which
Mortgagor, or its successors or assigns, now or hereafter has an interest
(provided, however, that building plans and specifications, survey,
appliances, fixtures, equipment, furniture and furnishings appurtenant to
that certain hotel currently operated as the "Oceanside Hotel" which hotel is
located on land adjacent to the land described On Exhibit "A" hereto shall not
be encumbered hereby) which Mortgagor hereby assigns to Mortgagee until the
Aggregate Debt is paid:
(a) All buildings and other improvements now or hereafter located on the Real
Property ("Improvements");
(b) All streets, lanes, alleys, passages, ways, water courses, easements,
rights, liberties, privileges, tenements, hereditaments and appurtenances
whatsoever belonging to the Real Property or in any way made appurtenant to the
Real Property hereafter, and the reversions and remainder, with respect thereto
("Appurtenances");
(c) All machinery, equipment, furniture and fixtures, office materials and
supplies, spare parts, and other tangible personal property of every kind and
description, now owned or
<PAGE>
hereafter acquired, including, without limitation, every item which is or may
be necessary or convenient in relation to the operation of the hotel located at
the Location (the "Hotel") and with respect to all of the foregoing, all parts,
substitutions, improvements, accessories, attachments and additions thereto and
therefor ("Equipment")
(d) All agreements of governmental authorities relating to such Hotel and
other licenses, permit agreements and rights under governmental ordinances
agreements granting access rights 55 to leases, notes receivable purchased by
Mortgagor with the proceeds of loans advanced by the Mortgagee, and contract
rights to the extent they relate to the Hotel, in connection with the conduct of
the business and/or operation of the Hotel ("Intangibles").
(e) All building materials, building machinery and building equipment
delivered on site to the Location during the course of, or in connection with,
the construction of, or reconstruction of or remodeling of any building and
improvements from time to time ("Building Equipment");
(f) All goods and inventory, located at the Locations now owned or hereafter
acquired and all additions and accessions thereto, and all books, records,
computer software and logs relating to and/or appropriate to the conduct of the
business at the Hotel and/or the operations of the Hotel, provided that
Mortgagor shall be entitled at its expense to make and keep copies of same
("Goods");
(g) All awards or payments, including interest thereon, which may be made with
respect to the Location and any improvements, whether from the exercise of the
right of eminent domain (including any transfer made in lieu of the exercise of
said right), or for any other injury to or decrease in the value of the real
estate upon which the Hotel is located or any improvements located thereon
including, without limitation, all awards or payments of estimated compensation,
all damages to the Location or any improvements resulting from any taking, all
machinery and equipment dislocation expenses, all settlement amounts, all
apportionments of taxes, reimbursement of attorneys' and en engineers' fees, all
moving expenses and all business dislocation expenses ("Awards");
(h) All of Mortgagor's rights in and to the trademarks, tradenames service-
marks, franchises, copyrights in literary property of any kind, jingles,
licenses, permits and privileges owned or held by it and used in the conduct of
the business of the Hotel and/or operations of the Hotel provided that the fore-
going shall not be construed to include the name Lucaya Beach Hotel or any
variation thereof and provided further that to the extent that Mortgagor uses
such trademarks, trade names, service marks, franchise, copyrights, jingle,
licenses, permits and privileges in hotels other than the Hotel, Mortgagor shall
be entitled to continue such use after exercise of the Mortgagee' rights against
such collateral ("Intangibles");
(i) Claims arising from insurance coverage or against third parties for loss
or damage to or destruction of any of the foregoing ("Insurance Policies"); and
(j) All proceeds of any of the foregoing ("Proceeds").
All of the Leasehold Estate, Real Property, Improvements, Appurtenances,
Equipment, Building Equipment, Intangibles, Awards, Insurance Policies, Proceeds
and Goods and other property interests referred to above are
<PAGE>
sometimes collectively referred to as the "Mortgaged Property".
T0 HAVE AND T0 HOLD the Mortgaged Property unto Mortgagee, its successors and
assigns forever free from all rights and benefits under the homestead exemption
and valuation laws of any State which said rights and benefits said Mortgagor
does hereby release and waive. All right, title and interest of Mortgagor in and
to all extensions, improvements, and betterments, renewals, substitutes and
replacements of, and all additions and all additions and appurtenances to the
Mortgaged Property hereafter acquired by, or released to, Mortgagor or
constructed, assembled or placed by Mortgagor on the Real Property, and all
conversions of the security constituted thereby, immediately upon such
acquisition, release, construction, assembling, placement or conversion, as the
same may be, and in each such case, without any further mortgage, pledge,
conveyance, assignment or other act by Mortgagor, shall become subject to the
lien of this Mortgage as fully and completely, and with the same effect, as
though now owned by Mortgagor end specifically described herein.
Notwithstanding the foregoing, Mortgagor shall, at its own cost, make, execute,
acknowledge, deliver and record any and all such further acts, deeds,
conveyances, mortgages, notices of assignment transfers, assurances and other
documents as Mortgagee shall from time to time require for better assuring,
conveying, assigning, transferring and confirming unto Mortgagee the Mortgaged
Property and the other rights hereby conveyed or assigned or intended now or
hereafter so to be, or which Mortgagor may be or may hereafter become bound to
convey or assign for carrying out the intention of facilitating the performances
of the terms of this Mortgage. In addition, Mortgagor hereby agrees that this
Mortgage is a security agreement under the Florida Uniform Commercial Code and
hereby grants to and creates in Mortgagee a security interest thereunder in,
among other things, all Equipment, Building Equipment, Intangibles, Awards,
Insurance Policies, Proceeds and Goods. Mortgagor shall, at its own cost and
expense, execute, deliver and file any financing statements, continuation
certificates and other documents Mortgagee may require from time to time to
perfect and maintain in favor of the Mortgagee a security interest under the
Uniform Commercial Code in such Equipment, Building Equipment, Intangibles,
Awards, Insurance Policies, Proceeds and Goods. Without limiting the generality
of any of the foregoing, Mortgagor hereby irrevocably appoints Mortgagee
attorney-in-fact for Mortgagor to execute, deliver and file any of the documents
referred to hereinabove for and on behalf of Mortgagor.
PROVIDED ALWAYS, and these Presents are upon this express condition, that if
Mortgagor or its successors or assigns shall well and truly pay or cause to be
paid unto Mortgagee, its Successors or assigns, the Aggregate Debt secured by
this mortgage, and otherwise perform Mortgagor's Obligations then this Mortgage,
and the estate hereby granted, shall cease, determine and be void, and Mortgagee
shall furnish to Mortgagor a satisfaction of this Mortgage in proper form for
recording, but Mortgagee shall not be required to bear any expense or cost in
connection with such satisfaction or the recording thereof.
THIS MORTGAGE secures not only existing indebtedness (including the sums
advanced and to be advanced pursuant to the Note) but also such additional sum
or sums as may be advanced by the then holder of the Note at any time after the
date hereof, together with interest thereon at the applicable rate provided for
elsewhere herein or if otherwise provided at the time of any such future
advance, then at the rate so provided, to the ease extent as if such future
advance were made on the date of execution of this Mortgage and although there
may be no indebtedness outstanding at the time any such future advances are
made. To the extent permitted by law, all future advances shall be equally
secured with and have the same priority as the original indebtedness secured
hereby and shall be subject to all the terms and provisions of this Mortgage.
The total amount of indebted-
<PAGE>
ness that may be so secured may decrease or increase from time to time, but
the total unpaid balance so secured at any one time shall not exceed a maximum
principal amount of $15,000,000 plus interest thereon and any fees or costs
incurred by Mortgagee as provided in this Mortgage and any disbursements made
for the payment of taxes, levies or insurance on the Mortgaged Property, with
interest on such disbursements, provided nevertheless that the provisions of
this section shall not be construed to obligate the Mortgagee to make such
future advances.
MORTGAGOR WARRANTS TO AND COVENANTS WITH MORTGAGEE as follows:
1. Title. As of the date hereof (a) Mortgagor has good and marketable title to
the Leasehold Estate and other Mortgaged Property subject to no lien, charge or
encumbrance except for such exemptions to title as are set forth in the
Commitment issued by Attorneys' Title Insurance Fund, Inc. being Commitment No.
C-1599250 shall be approved in writing by Mortgagee; (b) this Mortgage is and
shall retain a valid and enforceable lien on the Mortgagor's interest in the
Mortgaged Property subject only to the matters referred to in subparagraph (a)
hereof; (c) Mortgagor shall preserve such title, and all of its rights in and to
the Mortgaged Property, and shall forever warrant and defend the validity and
priority of the lien hereof against the claims of all persons and entities
whomsoever, subject only to the matters referred to in subparagraph (a) hereof,
and (d) Mortgagor has full power and lawful authority to mortgage the Mortgaged
Property and grant a security interest therein in the manner and form herein
done or intended hereafter to be done.
2. Payment and Performance. (a) Mortgagor shall punctually pay or cause to be
-----------------------
paid the Aggregate Debt, in the amounts and at the times and places that the
same may be due, and perform and comply with all of the terms, covenants,
conditions and obligations contained herein and in the Loan Documents.
3. Taxes and Other Charges. Mortgagor shall pay all taxes of every kind and
-----------------------
nature (including real and personal property, income, gross receipts, franchise,
profits, sales and withholding taxes), all general and special assessments,
water and sewer rents and charges, and all levies, permits, inspection and
license fees and other public charges now or hereinafter levied or assessed
against the Mortgaged Property as liens or assessments (hereinafter individually
called a "Tax" and collectively the "Taxes" as the same shall become due and
payable from time to time and before interest or penalties accrue thereon and
before a lien could be placed upon the Mortgaged Property; provided, however,
that Mortgagor shall not be required to pay any Tax to the extent that
nonpayment thereof is permitted while the validity thereof is being contested,
so long as (a) Mortgagor notifies Mortgagee in writing of its intention to
contest the validity thereof /1/ (b) the validity thereof is being contested in
good faith by Mortgagor and (c) Mortgagor deposits with Mortgagee if Mortgagee
so requests an amount deemed sufficient to make such payment if the contest is
unsuccessful. Notwithstanding the forgoing, Mortgagor shall under no
circumstances permit a lien to be placed upon the Mortgagor's interest in the
Mortgaged Property or permit the Mortgaged property to be sold or advertised for
sale for nonpayment of any Tax. Mortgagor shell not apply for or dais any
deduction from the taxable value of the Mortgaged Property because of the
existence of the Notes or this Mortgage. Subject to Mortgagor's right to contest
any Tax as hereinabove provided, Mortgagor shell deliver to Mortgagee receipts
evidencing the payment of such Tax on or before the 1st day on which any Tax may
be paid without interest or penalties or a lien being placed upon the
Mortgagor's interest in the Mortgaged Property or as soon thereafter as such
receipts are available.
4. Insurance. (a) Mortgagor shall keep the Mortgaged Property insured at all
times throughout the term of this Mortgage in accordance with the terms of the
Lease which shall include but not be limited to and paying for all and
<PAGE>
maintaining the following:
(i) Policies of insurance against loss or damage by fire, lightning,
windstorms, hail, explosion, vandalism, malicious mischief and damage from
------------
aircraft and vehicles, flooding, collapse and such other hazards as are
presently included in standard "All-Risk Coverage" endorsements in the location
of the Mortgaged Property provided, however, so long as construction is in
progress at any portion of the Mortgaged Property, fire insurance coverage for
such portion of the Mortgaged Property, fire insurance coverage for such portion
shall be pursuant to a "Builders Risk Completed Value Non-Reporting Form" and if
the fire insurance policies shall be in such Builders Risk form, such portion of
the Mortgaged Property may not be occupied unless Mortgagor's insurer
acknowledges to Mortgagee in writing that such insurance shall remain in effect,
notwithstanding the occupancy of such portion of the Mortgaged Property.
The amount of such insurance shall be acceptable to Mortgagee but in any event
in at least such amount as would prevent Mortgagor from becoming a co-insurer.
Such policies shall name Mortgagee as mortgagee thereunder
(ii) In the event that any portion of the Mortgaged Property shall be leased,
policies of rent insurance against loss of income arising out of damage or
destruction by fire or the perils of "All-Risk Coverage" so called in an amount
equal to the projected yearly rental income from the Mortgaged Property.
(iii) Policies of flood hazard insurance an required by a commercial
institutional lender law or evidence acceptable to Mortgagee that flood
insurance is not so required for the Mortgaged Property.
(iv) Policies of Commercial General liability insurance to afford protection
to a combined single limit as determined from time to time by Mortgagee, but not
less than $1,000,000.
Such policies shall name Mortgagee as "Additional Insured" there-under.
(v) Such other insurance coverage on the Mortgaged Property or Mortgagor's
Operations thereon or any replacements or substitutions therefor, or additions
thereto, and in such amounts as may from time to time be reasonably required by
Mortgagee against other insurance hazards or casualties which at the time are
commonly insured against in the case of premises and businesses similarly
situated.
(b) All insurance shall be non-assessable, subject to the approval of
Mortgagee as to insurance agents and companies, amounts, deductible amounts,
contents and form of policies and expiration dates, and shall contain a non-
contributory mortgagee clause or additional insured clause, as applicable, in
favor of and reasonably satisfactory to Mortgagee. Such policies shall provide
for the payment of all costs and expenses incurred by Mortgagee in the event of
any contested claim and all policies shall provide that Mortgagee shall be given
at least thirty (30) days written notice of cancellation, non-renewal or
material change.
(c) Not less then thirty (30) days prior to the expiration date of expiration
soon policy, Mortgagor will deliver to Mortgagee a prepaid renewal policy or
policies (or certificates evidencing insurance if the policies are master
policies).
(d) In the event of the occurrence of any loss or damage to the Mortgaged
Property or any part thereof, Mortgagor will give immediate written notice
thereof to Mortgagee, and Mortgages may make proof of loss that if not made
promptly by Mortgagor. Mortgagee may, on behalf of Mortgagor, adjust and
compromise any claims under such insurance and collect and receive the proceeds
thereof and endorse drafts, and Mortgagee and each of
<PAGE>
Mortgagee's officers is hereby irrevocably appointed attorney-in-fact of
Mortgagor for such purposes. Each insurance company is hereby authorized and
directed to make payment under such policies of casualty, rent and/or business
interruption insurance, including return of unearned premiums, directly to
Mortgagee, and Mortgagor appoints Mortgagee, irrevocably, as Mortgagor's
attorney-in-fact to endorse any draft therefor.
(e) Mortgagee shall have the right, at its election, to retain and apply the
proceeds of any casualty insurance to reduction of the principal amount due
under both or either of the Note, and/or to retain and apply the proceeds of any
rent insurance on account of the payments of the regular monthly installments of
principal and interest as they fall due, month by month, or to restoration or
repair of the property damaged. Notwithstanding the foregoing, upon the written
request of Mortgagor, Mortgagee shall make soon w~m. available to Mortgagor for
repair and restoration of the damaged property, provided that (a) there is not
then in existence an __ of Default and no event has occurred which, with the
giving of notice or passage of time or both, would constitute an event of
Default, (b) Mortgagor shall deposit with Mortgagee at least twenty (20) days
prior to the commencement of any such repair or restoration an amount equal to
the diff_ between the cost to repair the damaged property (as reasonably
estimated by Mortgagee) and the sums made available by Mortgagee on account or
such insurance, and (0) soon repair and restoration can be completed within six
months from the date of the loss.
(f) If requested by Mortgagee (but not more often than once every year),
Mortgagor shall have the then replacement and insurable values of the buildings
and improvements determined by the underwriter of fire insurance on the
Mortgaged Property, or, if such underwriter will not act, by a qualified
appraiser satisfactory to Mortgagee, and shall deliver such determination to
Mortgagee.
(g) Mortgagor shall promptly comply with and conform to (i) all provisions of
each insurance policy and (ii) all requirements of the insurers thereunder
applicable to Mortgagor or the Mortgaged property, or to the use, manner of use,
occupancy, possession, operation, maintenance, alteration or repair of any of
the Mortgaged Property, even if such compliance necessitate, structural changes
or improvements or results in interference with the use or enjoyment of any of
the Mortgaged Property. Mortgagor shall not change the present use of any of the
Mortgaged Property in any manner which would permit the insurer to cancel or
increase the premium for any insurance policy.
(h) If Mortgagee shall acquire title to the Mortgaged Property either by
virtue of a deed in lieu of foreclosure, or a judicial sale thereof pursuant to
proceedings udder the Note of this Mortgage, then all of Mortgagor's estate,
right, title and interest in and to all such policies, including unearned
premiums thereon and the proceeds thereof, shall vest in Mortgagee.
(i) If Mortgagee shall consent to the use of insurance primate (or a
condemnation award) for restoration:
(A) prior to commencement of restoration, the contracts, contractors,
plans and specifications for the restoration shall be approved by Mortgagee, and
Mortgagee shall be provided with mechanics' lien insurance (if available) and a
surety bond insuring satisfactory completion of the restoration, soon insurance
and bond to be in form acceptable to Mortgagee);
-6-
<PAGE>
(B) disbursements shall be made from time to time in an amount not exceeding
the cost of the work completed since the last disbursement, upon receipt of
satisfactory evidence from an architect or engineer retained by Mortgagee at
Mortgagor's expense to supervise restoration of the stage of like manner in
accordance with the contracts, plans and specifications;
(C) Mortgagee may retain ten percent (10%) of the restoration fund until the
restoration is fully completed; and
(D) the restoration fund shall be deposited in a restricted non-interest
bearing account with Mortgagee (the "restoration account")
(j) If Mortgagor deposits funds with Mortgagee in accordance with Paragraph
(a) above, such funds shall be disbursed and expanded before any funds in the
restoration account. Any sum so added by Mortgagor which reins in the
restoration fund upon completion of restoration shall be refunded to Mortgagor.
All insurance or condemnation _ if any, remaining after completion of repairs or
restoration or after the occurrence of any Event of Default hereunder shall be
applied by Mortgagee to sums then due and payable under both or either of the
Notes and thereafter to the then outstanding principal balance of (Pounds)
Note.
(k) Mortgagor shall not take out separate insurance concurrent in form or
contributing in the event of loss with that required to be maintained under this
Paragraph 4, unless Mortgages is included thereon as a named insured with loss
payable to Mortgagee under a standard mortgage endorsement. Mortgagor shall
immediately notify Mortgagee whenever any such separate insurance is taken out,
specifying the insurer thereunder and full particulars as to the policies
evidencing the same.
5. Tax and Insurance Escrow. Upon the request of Mortgagee (which request
may, at the sole discretion of Mortgagee be made at any time subsequent to the
occurrence of an Event of Default) Mortgagor shall pay or cause to be paid to
Mortgagee on the first day of each month a sum equal to one-twelfth (1/12) of
the amount of (a) all real estate taxes, water and sewer charges and assessments
if any, as estimated from time to time by Mortgagee, becoming due with respect
to the Mortgaged Property on the next succeeding date upon which the same shall
be due and payable and (b) all premiums, computed on an annual basis, for the
insurance requited to be carried pursuant to Paragraph 4 hereof. All soon
amounts (hereinafter, the "Escrows") shall be held by Mortgagee in such manner
as it sees fit without any obligation to invest the same, provided however, that
if and to the extent that Mortgagee is required under applicable law to invest
the Escrow for the benefit of Mortgagor, Mortgagee shall also have the right to
charge a reasonable service fee in connection therewith unless prohibited under
applicable law. The escrows shall be applied to the payment of the respective
items in respect of which the Escrows were deposited, or at Mortgagee's option
to the payment of any such items in such order of priority as Mortgagee shall
determine, as the same become due and payable. If, prior to the date upon which
any of the aforesaid items shall be due and payable, the amount of Escrows than
on deposit therefor shall be insufficient to pay such item, Mortgagor within
five (5) days after demand is made therefor shall deposit the amount of such
deficiency with Mortgagee. If there is an event of default hereunder, Mortgagee
may at its option apply the Escrows or any part thereof in payment of any unpaid
portion of the Aggregate Debt. If, when making any assignment of this Mortgage,
the then mortgagee shall pay over to its assignee the then balance of the
Escrows then such assigning mortgagee shall have no further obligation or
liability to Mortgagor with respect to such deposits.
6. Additions. Alterations. Removals and Repairs.
--------------------------------------------
-7-
<PAGE>
(a) Mortgagor shall not cause or permit any building, structure or improvement
or other Property now or hereafter ~red by the lien of this Mortgage and
comprising part of the Mortgaged Property to be removed or demolished in whole
or in part, or any fixture comprising part of the Mortgaged Property to be
removed, severed or destroyed, without the prior written consent of Mortgagee
which consent shall not be unreasonably withheld or delayed. Mortgagor may make
non-structural changes to the Mortgaged Property as may be required by
Mortgagor's hotel franchiser without the prior consent of the Mortgagee.
~Notwithstanding the foregoing, Mortgagor may remove any fixture on condition
that simultaneously with, or prior to such removal, such fire shall be replaced
with other property to perform the function of the property removed and of a
value at least equal to that of the replaced property and free from any title
retention or security agreement or other encumbrance. By such removal and
replacement, Mortgagor shall be deemed to have subjected such equipment to the
lien of this Mortgage. Mortgagor will not abandon or cause or permit any waste
to the Mortgaged Property.
(b) Throughout the term of this Mortgage, Mortgagor, at its sole cost and
expense, will take good care of the Mortgaged Property and the sidewalks, curbs
and vaults, if any, adjoining the Mortgaged Property and will keep the same in
good order and condition and make all necessary repairs thereto, interior and
exterior, structural and nonstructural, ordinary and extra-ordinary, and
unforseen and foreseen all repairs made by Mortgagor shall be at least equal in
quality and class to the original work. The necessity for and adequacy of
repairs to the buildings and improvements pursuant to this Paragraph 6 hereof
shall be measured by the standard which is appropriate for structures of similar
construction and class, provided that Mortgagor shall in any event make all
repairs necessary to avoid any structural damage or injury to the buildings and
other Improvements and to keep the buildings and other Improvements in a proper
condition for their intended uses.
(c) Throughout the term of this Mortgage, Mortgagor, at its sole cost and
expense, shall promptly comply with all present and future laws, ordinances,
orders, rules, regulations and requirements of all federal, state and municipal
governments, courts, debarments, commissions, boards and officers, and national
or local Boards of Fire Underwriters, or any other body exercising functions
similar to those of any of the foregoing which may be applicable to the
Mortgaged Property, the maintenance and use thereof and the sidewalks, curbs and
vaults adjoining the Mortgaged Property, whether or not such law, ordinance,
order, rule, regulation or requirement shall necessitate structural changes or
improvements. Mortgagor will comply with all orders and notices of violations
thereof issued by any governmental authority. Mortgagor will pay all licenses
fees and similar municipal charges and maintain all licenses, permits and
authorizations required for the use of the Mortgaged Property and the other
areas now or hereafter used in connection therewith and will not, unless so
required by any governmental agency having jurisdiction, discontinue use of the
Mortgaged Property without prior written consent of Mortgagee.
7. Condemnation. In the event that the whole or any part of the Mortgaged
------------
Property secured by this Mortgage is condemned or been for any period of time,
or there is any other injury to or decease in value of the Mortgaged Property as
a result of any public or quasi-public authority or corporation exercising the
power or eminent domain or otherwise, all sums awarded as damages for such
condemnation or taking to which Mortgagor is entitled shall be paid over
immediately to Mortgagee. Upon the receipt thereof, Mortgagee may deduct and
withhold from the amount actually received any costs, charges or fees incurred
by Mortgagee in connection with the recovery of such award (hereinafter,
("Mortgagee's Costs"), and thereafter Mortgagee may apply
-8-
<PAGE>
all or any portion of the balance to the discharge of the Aggregate Debt and, at
the option of Mortgagee, may pay over any sums not so applied to Mortgagor for
the purpose of restoring or repairing the Mortgaged Property, in which event the
Aggregate Debt shall not be reduced by that amount. Notwithstanding the fore-
going, in the event that Mortgagee, at the option of Mortgagee, elects to make
such sues available to Mortgagor for repair and restoration of the Mortgaged
Property, the availability of such funds and the restoration of the Mortgaged
Property shall be governed by the provisions of Paragraph 4(h) hereof. Mortgagor
hereby irrevocably appoints Mortgagee as attorney-in-fact for Mortgagor for the
purpose of collection of any or all proceeds available in connection with the
condemnation of the Mortgaged Property. If the Mortgaged Property is
transferred, through foreclosure or otherwise, prior to the receipt by Mortgagee
of such award or payment, Mortgagee shall have the right, whether or not a
deficiency judgment on either or both of the Notes shall have been sought,
recovered or denied, to receive such award or payment, or a portion thereof
sufficient to pay the Aggregate Debt, whichever is less.
8. No Secondary Financing
----------------------
(a) Without the prior written consent of Mortgagee, which consent
shall not be unreasonably withheld by Mortgagee, Mortgagor shall not create or
cause or permit to exist any lien on, or security interest in Mortgagor's
interest in the Mortgaged Property, including any fixture~, equipment or other
items of personal property owned by Mortgagor which are intended to be or _ pert
of the Mortgaged Property, and shall not incur any secured indebtedness for
money borrowed to purchase, improve or operate the Mortgaged Property or any
part thereof, other than the indebtedness secured hereby.
(b) Mortgagor shall promptly discharge, at Mortgagor's cost and
expense, all liens, encumbrances and charges upon the Mortgagor's interest in
Mortgaged Property, or any part thereof or interest therein; provided, however,
that Mortgagor shall have the right to contest in good faith the validity of any
such lien, encumbrances or charge, if Mortgagor shall first deposit with
Mortgagee a bond or other security satisfactory to Mortgagee in such amount as
Mortgagee shall reasonably require, and provided further that Mortgagor shall
thereafter diligently proceed to cause such lien, encumbrance or charge to be
removed and die-charged. If Mortgagor shall fail to discharge any such lien,
encumbrance or charge, then, in addition to any other right or remedy of
Mortgagee, Mortgagee may, but shall not be obligated to, discharge the same,
either by paying the amount claimed to be due, or by procuring the discharge of
such lien by depositing in court a bond for the amount claimed or otherwise
giving security for such claim, or in such manner as is or may be prescribed by
law.
(c) Mortgagor shall not suffer or permit the holder of any subordinate
mortgage or other subordinate lien, whether or not consented to by Mortgagee, to
terminate any lease of all or any portion of the Mortgaged Property, whether or
not such lease is subordinate (whether by law or the terms of such lease or a
separate agreement) to the lien of this Mortgage, without first obtaining the
prior written consent of Mortgagee. The holder of any subordinate mortgage or
other subordinate lien shall have no such right, whether by foreclosure of its
mortgage or lien or otherwise, to terminate any such lease, whether or not
permitted to do so by Mortgagor or as a matter of law, and any such attempt to
terminate any such lease shall be ineffective and void.
(d) Mortgagor shall faithfully and fully comply with and abide by each
and every term, covenant and condition of all other mortgages now or, if
permitted by Mortgagee, hereinafter encumbering the Mortgaged Property, or any
part whether
-9-
<PAGE>
inferior or superior to the lien of this Mortgage ("Other Mortgages"), and never
permit the same to go into default. A default or delinquency under any such
Other Mortgages shall automatically and immediately constitute a default under
this Mortgage, __me Mortgages is _ expressly authorized, at the option of the
Mortgagee, to advance all sums necessary to keep any superior mortgage or
mortgages in good standing, and all sums so advanced, together with interest
thereon at the rate set forth in the Note applicable to a period when default
exists thereunder, shall be secured by this Mortgage, and shall be subject to
the provisions hereof. The Mortgagor agrees that the Mortgagor shall not make
any agreement with the holder of any superior mortgage which shall in any way
modify or extend any of the terms or conditions of such superior mortgage, nor
shall the Mortgagor request or accept any future advances under such superior
mortgage without the express written consent of the Mortgagee, nor shall any
negative amortization be permitted under any such superior mortgage without the
express written consent of the Mortgagee. The Mortgagor will furnish to the
Mortgagee, upon demand, proof of payment of all items which are required to be
paid by the Mortgagor pursuant to the Other Mortgages. The Mortgagor shall
execute and deliver, on request of the Mortgages, such instruments as the
Mortgages may deem useful or required to permit the Mortgagee to take such
action as the Mortgages considers desirable to preserve the interest of the
Mortgagee in the Mortgaged Property.
9. Transfer of Title.
-----------------
(a) Unless Mortgagee gives its prior consent in writing, which consent
shall not be unreasonably withheld, it shall be an event of default under this
Mortgage and the Note if Mortgagor transfers, or attempt to transfer
voluntarily, involuntarily or by operation of law, all or any part of its
leasehold interest in the Real Property or Appurtenances or its legal title to
any other portion of the Mortgaged Property of any pert thereof under and
subject to this Mortgage, or any equitable or beneficial interest therein. The
transfer of any or all of the voting shares of stock in the Mortgagor to a
holding company, all of which holding company's voting shares of stock are held
solely by Romulo Bandeira De Souza G. Neto and members of his immediate family,
shall not require prior approval of Mortgages, or constitute a prohibited
transfer, or constitute an event entitling Mortgages to declare the Note to be
due and payable. Any consent given by Mortgages hereunder shall pertain only to
the proposed transfer of title for which the consent was requested and shall not
obligate Mortgages to approve any further transfers or relieve any person or
entity of liability to pay any amount secured hereby agrees that it will not
condition its consent to a transfer or an the interest rate, prepayment of
Principal reduction of term or other adverse modification of the Note or
Mortgage.
(b) It is further understood and agreed that Mortgagee shall not
consent to (i) any transfer of less than the entirety of Mortgagor U interest in
Mortgaged Property, or (ii) any transfer in any form which has the effect of
creating additional expense to or charges against the Mortgaged Property. No
encumbrance, subordinate mortgage or junior lien may be created without the
express written consent of Mortgagee which consent may be withheld at
Mortgagee's sole discretion.
10. Leases; Management.
------------------
(a) Mortgagor hereby represents and warrants to Mortgagee that there are no sub-
leases or agreements sub-lease all or any part of the Mortgaged Property now in
effect. Mortgagor covenants and agrees that all sub-leases now or hereafter
affecting the Mortgaged Property shall be subordinate to the lien of this
Mortgage. Mortgagor agrees not to enter into any sub-lease for all or any part
of the Mortgaged Property without the prior
- 10 -
<PAGE>
written consent of Mortgages which consent may be withheld at Mortgagee's sole
discretion.
(b) In the event that Mortgagee consents to any future sub-lease of
the Mortgaged Property:
(i) Mortgagor agrees that all future sub-leases of all or any part of
the Mortgaged Property shall be on such form of sub-lease as shall be first be
approved by Mortgagee.
(ii) Mortgagor shall promptly (A) perform all of the provisions of the
sub-leases on the part of the sub-landlord thereunder to be perform; (B) enforce
all of the provisions of the sub-lease on the part of the sub-tenants thereunder
to be performed; (C) appear in and defend any action or proceeding arising
under, growing out of or in any manner connected with the sub-leases or the
obligations of Mortgagor as sub-landlord or of the sub-tenants thereunder; and
(D) deliver to Mortgagee, within twenty (20) days after a request by Mortgagee a
written statement containing the names of all sub-tenants, the term of all
subleases and the space occupied and rentals payable thereunder, and a statement
of all sub-leases which are then in default, including the nature and magnitude
of the default.
(iii) Mortgagor agrees and each sub-lease shall provide that in the
event of a default by Mortgagor and the enforcement by Mortgagee of any remedy
under this Mortgage, the tenant under each lease shall at Mortgagee's request
attorn to Mortgagee or any other person or entity succeeding to the interest of
Mortgages as a result of such enforcement and shall recognize Mortgagee or such
successor in interest as sub-landlord under the lease without change in the
--
provisions thereof; provided, however, that Mortgagee or such successor in
interest shall not be bound by (A) any payment of an installment of rent or
additional rent which may have been made more than thirty days before the due
date of such installment, (B) any amendment or modification to the sub-lease
made without the consent of Mortgagee or such successor in interest, or (C) any
existing off-sets or defenses.
(iv) Mortgagor agrees to render to Mortgagee within ten (10) days after
written demand therefor a detailed certified statement of Mortgagor specifying
the rents and profits received from the Mortgaged Property for the quarter-
annual period specified in such demand, the disbursements made for such period
and the names of all sub-tenants of the Mortgaged Property, together with true
and correct copies of all sub-leases for which rent is so accounted.
(c) Mortgagor shall not enter into any agreement for the management or
operation of the Mortgaged Property with a third party without the prior consent
of Mortgagee which consent shall not be unreasonably withheld or delayed.
11. Hazardous Substances; Wastes.
----------------------------
(a) To the best of Mortgagor's knowledge without any investigation: (i) the
Mortgaged Property has not been used to treat, produce, handle, transfer,
process, or otherwise release, or for the generation, manufacture, storage or
disposal of, and there has not been transported to or from the Mortgaged
Property, any Hazardous Substances or Wastes (as those term are herein-after
defined); (ii) there are no Hazardous Substances or Wastes present on the
Mortgaged Property in violation of any applicable law; (iii) Mortgagor has made
no use of the Mortgaged Property that may, under any federal, state or local law
or regulation, require any closure or cessation of the use of the Mortgaged
Property or any part thereof or impose upon the Mortgagor or its successors any
monetary ligations; (iv) the Mortgagor has not been identified and has no
knowledge that it will or may be iden-
- 11 -
<PAGE>
tified in any litigation, proceeding or investigation as a responsible party or
potentially responsible party for any liability for disposal or release of any
Hazardous Substances or Wastes; (y) no lien or super lien has been recorded,
asserted or threatened against the Mortgaged Property for any liability in
connection with any Hazardous Substances or Wastes_ (vi) the Mortgaged Property
is in compliance with all federal, state and local laws and regulations relating
to environmental setters; and (vii) there are no underground storage tanks
located on or under the Mortgaged Property.
(b) The Mortgagor will not, and will not permit any sub-tenant or any other
occupant of the Mortgaged Property to store, use, generate, treat or dispose of
any Hazardous Substances or Wastes on the Mortgaged Property in violation of any
applicable law. The Mortgagor promptly shall advise the Mortgagee in writing
of and with respect to any known pending or threatened claim, demand or action
by any governmental authority or third party relating to an "-Hazardous
Substances or Wastes affecting the Mortgaged Property or the discovery of any
Hazardous Substances or Wastes on the Mortgaged Property or any real property
adjoining the Mortgaged Property. The Mortgagee shall have the right, but not
the obligations, to join in or participate in any legal proceedings or actions
initiated in connection with any Hazardous Substances or Wastes directly or
indirectly affecting the Mortgaged Property. The Mortgagor shall reimburse the
Mortgagee for attorneys' fees in connection therewith and Mortgagor shall
indemnify, defend and hold harmless the Mortgagee from and against any claims,
demands, loss or liabilities, including but not limited to costs of remedies
action, response costs, personal injury and property damage, directly or
indirectly arising out of or attributable to the use, treatment, handling,
transfer, processing, generation, deposit, storage, release, threatened
release, discharge, disposal, burial, dumping, spilling, leak_ or other presence
of Hazardous Substances and Wastes on or under the Mortgaged Property; provided,
however, that this indemnification shall not be applicable to any claims,
demands, losses, or liabilities arising out of or attributable to the use,
treatment, handling, transfer, processing, generation, deposit, storage,
release, threatened release, discharge, disposal, burial, dumping, spilling,
leaking, or other presence of Hazardous Substance and Wastes on, or under the
Mortgaged Property by a party other than Mortgagor and occurring subsequent to
such time as Mortgagee may have become mortgagee in possession of the Mortgaged
Property or occurring after record title to the Mortgaged Property has passed
from Mortgagor to any party not controlled by or under common control with
Mortgagor. Mortgagor shall not, without obtaining the Mortgagee's prior written
consent, enter into any settlement, agreement, consent decree or other
compromise in respect to any Hazardous Substances or Wastes, directly or
indirectly affecting the Mortgaged Property if in the Mortgagee's judgement,
such action could impair the value of the Mortgagee's security. In the event
that it is determined that there is any contamination of the Mortgaged Property
by Hazardous Substances or Wastes (i) Mortgagor shall at its sole cost and
expense, promptly remediate such contamination in compliance with all
applicable federal, state and local laws, codes and ordinances and (ii)
Mortgagee may require Mortgagor to provide additional collateral security for
the Loans in an amount equal to the appraised value of the Mortgaged Property
and Mortgagor shall do so within twenty (20) days of Mortgagee's request there-
for.
(c) For the purpose hereof: (i) "Hazardous Substances" shall mean any
flammable explosives, radioactive materials, asbestos, urea formaldehyde,
hazardous water, petroleum products, toxic substances or any other elements or
compounds designed as a "hazardous substance," "pollutant" or "contaminant" in
the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), 42 U.S.C. Section 9601 et. Seq. or in
- 12 -
<PAGE>
the Resource Conservative and Recovery Act, 42 U.S.C. Section 6901 et.seq. or
any other applicable federal, state or local law or regulation end (ii) "wastes"
shall mean any hazardous~ wastes, residual wastes, solid wastes or other wastes
as those terms are defined in the applicable federal, state or local laws and
regulations.
12. Required Notice Mortgagor shall give Mortgagee prompt written notice~
---------------
action or proceeding purporting to affect the Mortgaged Property of which it has
actual knowledge including, without limitation, the following: (a) a fire or
other casualty causing material damage to the Mortgaged Property; (b) receipt of
notice of condemnation or threatened condemnation of the Mortgaged Property or
any part thereof, (c) receipt of notice from any governmental authority relating
to the structure, use or occupancy of the Mortgaged Property' (4) receipt of any
notice from any tenant or landlord of all or any portion of the Mortgaged
Property, (e) receipt of any notice from the holder of any lien or security
interest in the Mortgaged property; or (f) commencement of any litigation
effecting the Mortgaged Property in which the amount in dispute exceeds $10,000.
Mortgagee shall have the right, but not the obligation, to appear in or defend
any such action or proceeding to the ease extent as Mortgagor. Furthermore,
Mortgagee shall have the right, but not the obligation, to bring any action or
proceeding, in the name and on behalf of itself or Mortgagor, which Mortgagee,
in its discretion, feels should be brought to protect its interest in the
Mortgaged Property or any pert thereof.
13. Mortgagee's Right to Cure. Mortgagee shall have the right, but not the
-------------------------
obligation, at Mortgagee's election and without notice to Mortgagor, to cure any
default by Mortgagor hereunder or under the Note or under any mortgage or with
respect to any security interest, lien, lease or encumbrance which is or may
become senior in lien end position to this Mortgage. Any payments made or
expenses incurred by Mortgagee in the exercise of such right shall not release
Mortgagor from Mortgagor's obligation or constitute a waiver of Mortgagor's
default hereunder. Any such payments made or expenses incurred by Mortgagee
shall be repayable by Mortgagor on demand by Mortgagee, together with interest
thereon at the rate specified in the Note from the data such payments was made
or such expenses was incurred, end the aggregate amount thereof, including such
interest, shall become part of the Aggregate Debt end shall be secured by the
lien of this Mortgage.
14. Certificate of No Offsets. Within five (5) days after being requested to
-------------------------
do so by Mortgagee, Mortgagor shall furnish to Mortgagee or any proposed
assignee of this Mortgage a written statement, duly executed, acknowledged end
certified by Mortgagor, setting forth the remaining unpaid amount of the Ag
gregate Debt end whether there exist any uncured defaults, offsets or defenses
thereto.
15. Right to Inspect. Mortgagor shall permit Mortgage and its agents to enter
----------------
end inspect the Mortgaged Property or any part thereof at all reasonable times.
16. Revenue, Tax or Other Stamps. Mortgagor shall pay he solely responsible
----------------------------
the cost of any revenue, tax or other stamps flow or hereafter required by the
laws of the State of Florida or the United States to be affixed to the Note or
this Mortgage end if any taxes are imposed under the laws of the State of
Florida or the United States or any other jurisdiction with respect to recording
debts secured by a mortgage, or with respect to recording evidences of
indebtedness so secured, Mortgagor shall pay or reimburse Mortgagee upon demand
the amount of such taxes without credit against any indebtedness evidenced by
the Note. If Mortgagor does not or, for any reason, may not do 80, Mortgagee may
at its option accelerate the indebtedness evidenced
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<PAGE>
by the Note to maturity as in the case of default by Mortgagor under the Note.
17. Possession. Until an Event of Default shall have occurred under this
------------
Mortgage, Mortgagor shall be permitted to retain actual possession of the
Mortgaged Property, to manage, operate, use and enjoy the same and all rights
appertaining thereto and to collect, receive, take, use and enjoy the Income and
Rents. The right of Mortgagor to collect the Income and Rents may be revoked by
Mortgagee at any time and from time to time after an Event of Default has
occurred under this Mortgage or the Note, by giving notice of such revocation to
Mortgagor, following the giving of such notice, Mortgages may retain and apply
the Income and Pants toward payment of the Aggregate Debt in such priority and
proportions as Mortgagee, in its discretion, shall determine.
18. Events of Default. The occurrence of any one or more of the
------ -- -------
following events shall constitute an event of default ("Event of Default")
hereunder:
(a)The occurrence of any event of default under the Note
(b) Mortgagor shall fail to observe and perform any of the non-monetary
covenants or agreements on its part to be observed or performed under this
Mortgage within thirty (30) days after written notice from Mortgagee of such
non-compliance;
(c) Any representation or warranty of Mortgagor under this Mortgage or
the Note shall be untrue in any material respect;
(d) If any improvement essential to the continued operation of the
Mortgaged Property is substantially damaged or destroyed by an uninsured
casualty.
19. Remedies. Upon the occurrence of any event of default:
--------
(a) The Aggregate Debt shall, at the option of Mortgages, become due and
payable immediately without presentment, demand, notice of nonpayment, protest,
notice of protest or other notice of dishonor, all of which are hereby expressly
waived by Mortgagor.
(b) Mortgagee may institute appropriate proceeding, at law or equity to
collect the amount of the Aggregate Debt then due (by acceleration or
otherwise), or for specific performance of any of the covenants of Mortgagor
under this Mortgage (and Mortgagor acknowledges that all such covenants may be
specifically enforce by Mortgagee by injunction or other appropriate equitable
remedy), or to recover damages for any breach thereof, or to institute an action
of mortgage Foreclosure against the Mortgaged Property, or take such other
action at law or in equity for the enforcement of this Mortgage and realization
on the mortgage security or any other security herein or elsewhere provided for,
and proceed therein to final judgment and execution for the Aggregate Debt, with
interest as specified in paragraph 21 below, together with costs and expenses as
specified in paragraph 21 below.
(a) With or without demand upon Mortgagor for the surrender of
possession, Mortgagee may enter upon and take possession of the Mortgaged
property, breaking locks if necessary and without liability for trespass,
damages or otherwise and, upon so doing, Mortgagee may, in its discretion and in
addition to any of its other rights, as Mortgagee in possession, alter, improve,
complete or repair the Mortgaged property (and in so doing Mortgages shell have
the right to use the Mortgaged Property and to
- 14 -
<PAGE>
expend such amount for that purpose as Mortgagee shall deem best, all of which,
with interest thereon at the rate specified in the Term Note from date of
payment, shall be repayable by the Borrowers on dem_ and shall be secured
hereby), and operate, rent, sell or lease the same in the name of Mortgagor or
Mortgagee upon such terms and conditions as Mortgagee shall deem appropriate,
and Mortgagor hereby irrevocably appoints Mortgagee attorney-in-fact for
Mortgagor for all such purposes.
(d) Mortgagee may further, by summary proceedings, initiate an action for
possession or otherwise dispose any tenants, users or occupiers of the Mortgaged
Property than or thereafter in default in the payment of any rent or other
charge for the use thereof, and any tenants or other users or occupiers whose
leasehold estates or rights to use the Mortgaged Property are subordinate to the
lien of this Mortgage, whether or not any such tenant user or occupier is so in
default; and Mortgagor hereby irrevocably appoints Mortgagee attorney-in-fact of
Mortgagor for all such ~ If Mortgagor remains in possession after demand by
Mortgagee for surrender of possession of the Mortgaged Property, such continued
possession by Mortgagor shall be 55 tenant of Mortgagee, and Mortgagor agrees to
pay monthly in advance to Mortgagee such rent for the Mortgaged Property 50
occupied as Mortgagee may demand, and in default of so doing, Mortgagor may also
be dispossessed by summary proceedings or otherwise. In case of the appointment
of a receiver of the rents, the foregoing agreement of Mortgagor to pay rent
shall inure to the benefit of such receiver.
(e) With or without taking possession of the Mortgaged property,
Mortgagee may collect and receive all the Income and Rents and, after deducting
the cost of all alterations, improvements, repairs, completion, partial
completion, operation, sale, rental, leasing commissions and charges, including,
but not limited to, counsel fees, incurred by Mortgagee, apply the net income to
the sums secured hereby in such manner as Mortgagee in its discretion shall
determine. Mortgages shall be liable to account only for the Income and Rents
actually received.
(f) If Mortgagee shall so elect, Mortgagor shall not resist or
contest, but shall join in any petition to any court by Mortgagee for the
appointment of a receiver or receivers of the Mortgaged Property or any part
thereof, and of all the Income and Rents therefrom, with such powers as the
court making such appointment shall confer, and Mortgagor hereby appoints
Mortgagee attorney-in-fact of Mortgagor for all such purposes.
(g) All deposits held in connection with the rental, lease, license or
use of space or other facilities on the Mortgaged property at the tine of the
occurrence of such Event of Default, all interest of Mortgagor in all premiums
for, or dividends upon, any insurance for the Mortgaged Property, and all
refunds or rebates of taxes and assessments upon the Mortgaged Property, are
hereby assigned to Mortgagee, to the extent permitted by law, as further
security for the payment of the Aggregate Debt during the continuance of any
such Event of Default until the Aggregate Debt has bean paid in full.
(h) To the extent now or hereafter permitted by law and subject to
such grace periods and notice requirements thereby imposed, Mortgagee may cause
a judicial sale of the Mortgaged property in accordance with this subparagraph
(h). Such sale may be made without demand on Mortgagor at the time and place
fixed in the notice of such sale, and such sale may be of the Mortgaged property
as a whole or in separate lots or parcels, and in such order as Mortgagee may
determine, at public auction to the highest bidder for cash in lawful money of
the United States, payable at tine of sale. Such sale of the Mortgaged Property
may be postponed by public ~ at the time and place of sale and may be further
postponed from time to time thereafter by
- 15 -
<PAGE>
public announcement at the time fixed by the preceding postponement. Any person
or entity, including Mortgagee, may purchase at such sale. After deducting all
costs, fees, and expanses of Mortgagee, including cost of evidence of title in
connection with such sale, the proceeds of sale shall be applied to payment of
the Aggregate Debt. The Mortgaged Property may be sold as aforesaid either
before, after, or during the pendency of any proceedings for power with respect
to the enforcement of the provisions of any of the Loan Documents or the
collection of the amount of the Aggregate Debt. The provisions of this
subparagraph (h) are not intended to and shall not adversely affect Mortgagee's
rights to conduct a non-judicial sale of such portions of the Mortgaged Property
as constitute personal property.
(i)Mortgagee may pursue any and all other remedies which are otherwise available
to Mortgagee at law or in equity.
20. Remedies Cumulative. etc.
-------------------------
(a) No right or remedy conferred upon or reserved to Mortgagee under any of the
Loan Documents or with respect to any Collateral, or now or hereafter existing
at law or in equity or by statute or other legislative enactment, is intended to
be exclusive of any other such right or remedy and each and every such right or
remedy shall be cumulative and concurrent, and shall be pursued separately,
concurrently, successively or otherwise, at the sole discretion of Mortgagee,
and shall so be exhausted by any one exercise thereof but may be exercised as
often as occasion therefor shall occur. No act of Mortgagee shall be deemed or
construed as an election to proceed under any one such right or remedy to the
exclusion of any other such right or remedy; furthermore, each such right or
remedy of Mortgagee shall be separate, distinct and cumulative and none shall be
given effect to the exclusion of any other. The failure to exercise or delay in
exercising any such right or remedy or the failure to insist upon strict
performance of any term of the Note or this Mortgage, shall not be construed as
a waiver or release of the same, or of any event of default thereunder, or of
any obligation or liability of Mortgagor thereunder.
(b) The recovery of any judgment by Mortgagee or the levy of execution udder any
judgment upon the Mortgaged Property shall not affect in any manner, or to any
extent, the lien of this Mortgage upon the Mortgaged Property, or any security
interest in any other Collateral, or any rights, remedies or powers of Mortgagee
with respect to any Collateral, but such lien and such security interest and
such rights, remedies and powers of Mortgagee shall continue unimpaired as
before. Further, the entry of any judgment by Mortgagee shall not affect in any
way the interest payable hereunder on any amounts due to Mortgagee, but interest
shall continue to accrue on such amounts at the Default Rate (as hereinafter
defined) after the entry of any judgment and continuing until distribution of
the proceeds of any Sheriff's sale.
(a) Mortgagor hereby waives presentment, demand, notice of nonpayment, protest,
notice of protest or other notice of dishonor, and any and all other notices in
connection with any default in the payment of, or any enforcement of the payment
of, the Aggregate Debt (except as otherwise specifically provided in Paragraph
18 hereof). To the extent permitted by law, Mortgagor waives the right to any
stay of execution and the benefit of all exemption laws now or hereinafter in
effect.
(d) Mortgagor agrees that Mortgagee may release, compromise, forbear with
respect to, waive, suspend, extend or renew any of the terms of the Note (and
Mortgagor hereby waives any notice of any of the foregoing), and that the Note
may be amended, supplemented or modified by Mortgagee and the other signatory
parties and that Mortgagee may resort to any Collateral in such order and manner
as it may think fit or accept the assignment, substitution,
<PAGE>
exchange or pledge of any other collateral in place of, or release for such
consideration, or none, as it may require all or any portion of any Collateral,
without in any way affecting the validity of its lien over or other security
interest in the remainder of any such Collateral (or the priority thereof or the
position of any subordinate holder of any lien or other security interest with
respect thereto); and any action taken by Mortgagee pursuant to any of the
foregoing shall in no way be construed as a waiver or release of any right or
remedy of Mortgagee, or of any Event of Default, or of any liability or
obligation of Mortgagor, under any of the Note on this Mortgage
a) To the extent permitted by law, Mortgagor shall not at any time insist
upon, or plead, or in any manner whatever claim or take any benefit or advantage
of any stay or extension or moratorium law, or any exemption from execution or
sale of the Mortgaged Property, wherever enacted, now or at any time hereafter
in force, which may affect the covenants and terms of performance of this
Mortgage, nor claim, take, or insist upon any benefit or advantage of any law
now or hereafter in force providing for the valuation or appraisal of the
Mortgaged Property, prior to any sale of any of Mortgagor's interest therein;
nor, after any such sale or sales, claim or exercise any right under any statute
heretofore or hereafter enacted to redeem the Real Property so sold or any part
thereof, and Mortgagor hereby expressly waives all benefit or advantage of any
such law or laws, and covenants not to hinder, delay, or impede the execution of
any power herein granted to us though no such law or laws had been made or
enacted. Mortgagor further waives and releases all procedural errors, defects
and imperfections in any proceeding instituted by Mortgagee under the Note or
this Mortgage.
(f) Mortgagor, for itself and for all persons hereafter claiming through or
under it or who may at any time hereinafter become holders of liens junior to
the lien of this Mortgage, hereby expressly waives and releases all rights to
direct the order in which any of the Mortgaged property shall be sold in the
event of any sale or sales pursuant hereto and to have any of the Mortgaged
Property and/or any other property now or hereafter constituting security for
the Aggregate Debt marshaled upon any foreclosure of this Mortgage or of any
other security for any of the Aggregate Debt.
21. Default Rate; Penalty. Following the occurrence of any Event of Default
---------------------
and continuing (notwithstanding the entry of any judgment by Mortgagee against
Mortgagor) either until the date such Event of Default is cured to the
satisfaction of the Mortgagee or until the Aggregate Sum, and all other sums
payable under the Note is paid in full, whichever occurs first, the principal
sum outstanding under the Note shall bear interest at the highest rate permitted
under the laws of the State of Florida (the "Default Rate") (unless applicable
law provides that a statutory rate shall apply notwithstanding such a contract
rate) and shall be secured by this Mortgage and by all other Collateral.
22. Counsel Fees. If Mortgagee retains the services of counsel in order to
cure any default under this Mortgage or the Note, or if Mortgagee becomes a
party to any suit or proceeding affecting the Mortgaged Property or title
thereto, the lien created by this Mortgage or Mortgagee's interest therein, or
following an Event or Events of Default hereunder if Mortgagee engages counsel
to collect any of the indebtedness or to enforce performance of the agreements,
conditions, covenants, provisions or stipulations of this Mortgage or the Note,
Mortgagee's costs, expenses and reasonable counsel fees, whether or not suit is
instituted, shall be payable by Mortgagor to Mortgagee on demand and shall be
secured hereby. Mortgagor shall pay the cost of the title search and all other
costs incurred by Mortgagee in connection with proceedings to recover any sums
secured hereby. Mortgagor shall also pay any reasonable charge of Mortgagee in
connection with the satisfaction of this Mortgage of record.
-17-
<PAGE>
23. Renewals. This Mortgage shall secure any and all renewals, or extensions
--------
of the whole or any part of the indebtedness hereby secured however evidenced,
with interest at such lawful rate as may be agreed upon end any such renewals or
extensions or any change in the terms or rate of interest shall not impair in
any manner the validity or of priority of this Mortgage.
24. Severability. In the event that for any reason one or more of the
------------
provisions of this Mortgage or their application to any person or circumstances
shall be held to be invalid, illegal, or unenforceable in any respect or to any
extent, such provisions shall nevertheless remain valid, legal and enforceable
in all such other res_ end to such extent as may be permissible. In addition,
any such invalidity, illegality, or unenforcebility shall not effect any other
provision of this Mortgage, but this Mortgage shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein.
25. Successors and Assigns. This Mortgage insures to the benefit of Mortgagee
-----------------------
and binds Mortgagor, and their respective successors and assigns, ~ and the
words "Mortgagee" and "Mortgagor" whenever occurring herein shall be deemed to
include such respective successors and assigns. Mortgagee may assign or
otherwise transfer this Mortgage and the Note secured hereby to any other
person, and such other person shall thereupon become vested with all of the
benefits in respect thereof granted to Mortgagee herein or otherwise.
26. Notices. All notices required to be given to any of the parties hereunder
-------
shall be in writing and shall be deemed to have been sufficiently given for all
purposes when presented personally to such party or sent by reputable overnight
courier or certified or registered mail, return receipt requested, to such party
at its address set forth below:
Mortgagor: Lucaya Beach Hotel Corporation
1200 North Ocean Boulevard
Pompano Beach, Florida
Attn: Mr. Romulo De Souza
With a Copy to:
Douglas Bates, Esquire
2701 H. Sunrise Boulevard, Suite 300
Fort Lauderdale, Florida 33304
Mortgagee:
Del-Aire Management Co., Inc.
4541 White Cedar Lane
Delray Beach, Florida 33445
With a copy to:
Lee C. Summers, Esquire
Mattlin & McClosky
5355 Town Center Road
Suite 901
Boca Raton, Florida 33486
<PAGE>
Such notice shall be deemed to be given when received if delivered
personally or by overnight courier or two (2) days after the date mailed if sent
by certified or registered mail, return receipt requested. Any notice of any
change in such address shall also be given in the manner set forth above.
Whenever the giving of notice is required, the giving of such notice may be
waived in writing by the party entitled to receive such notice.
27. Definitions; Number and Gender. In the event Mortgagor consists of
------------------------------
more than one person or entity, the obligations and liabilities hereunder of
each of such persons and entities shall be joint and several and the word
"Mortgagor shall mean all or some of any of them. For purposes of this Mortgage,
the singular shall be deemed to include the plural and the neuter shall be
deemed to include the masculine and feminine, as the context may require. The
words "Real Property". "Mortgaged Property". "Improvements", "Appurtenances,
"Equipment", "Building Equipment", "Intangibles", "Awards", "Insurance
Policies", "Goods" and "Proceeds" shall include any portion of and additions to
the Real property, the Mortgaged Property, the Improvements, the Appurtenances,
the Equipment, the Building Equipment, the Intangibles, the Awards, the
Insurance Policies, the Goods and the Proceeds, respectively.
28. Incorporated by Reference. All of the terms and provisions of the
--------------------------
Note are hereby incorporated herein by reference.
29. Captions. The captions or headings of the paragraphs of this
--------
Mortgage are for convenience only and shall not control or affect the meaning or
construction of any of the terms or provisions of this Mortgage.
30. Governing Law. This Mortgage shall be governed by and construed
--------------
in accordance with the laws of the State of Florida.
IN WITNESS WHEREOF, Mortgagor has executed this Mortgage the day and year
first above written.
LUCAYA BEACH HOTEL CORPORATION
By: /s/ Romulo Bandeira de Souza G. Neto
Romulo Bandeira de Souza G. Neto
Witnesses
/s/ Douglas M. Bates
Douglas M. Bates
/s/ Harriet H. Brewer
Harriet H. Brewer
STATE OF FLORIDA
COUNTY OR BROWARD
I HEREBY CERTIFY that on this day, before me, an officer duly authorized
in the State aforesaid and in the County aforesaid to take acknowledgments,
personally appeared Romulo Bandeira de Souza G. Neto, as President of LUCAYA
BEACH HOTEL CORPORATION to me known to be the person described in and who
executed the foregoing instrument and he acknowledged before me that he executed
the same.
WITNESS my hand and official seal in the County and State last aforesaid
this 26th, day of February l992
---- --------
/s/ Douglas M. Bates
Notary Public
DOUGLAS M. BATES
- 19 -
<PAGE>
NEGOTIABLE PURCHASE MONEY MORTGAGE NOTE
---------------------------------------
Boca Raton, Florida February 26, 1992
FOR VALUE RECEIVED, the undersigned, promises to pay to the order of
DEL-AIRE MANAGEMENT CO., INC. at 4541 White Cedar Lane, Delray Beach, Florida,
or such other place as the Holder may from time to time in writing designate,
the principal sum of ONE MILLION TWO HUNDRED THOUSAND AND NO/l00 DOLLARS
($1,200,000.00), together with interest at the rate of seven and three-forths
percent (7 3/4%) per annum from date hereof until maturity, all payable in
lawful money of the United States of America, payable as follows:
81,200,000.00
Interest and principal shall be payable in fifty-nine (59) monthly
installments of Nine Thousand Eight Hundred Fifty-One and 38/100 Dollars
(89,851.38) each beginning on the first day of April, 1992, with the sixtieth
(60th) and final payment consisting of the unpaid principal balance and interest
accrued and unpaid thereon which shall be due and payable March 1, 1997-
This Note may be prepaid in whole or in part, at any time or from time to
time.
The unpaid principal balance, and all accrued interest thereon, shall become
immediately due and payable, at the option of the Holder, seven (7) days after
the failure of the Maker to pay an installment due hereunder on or before the
due date established in this Note.
Not amending the grace period recited herein, in the event that any payment is
not made within fifteen (15) days from its due date, there shall be assessed a
late fee equal to five percent (5%) of the monthly payment.
This Note is secured by a Purchase Money Mortgage and Security Agreement on a
leasehold interest in real estate and personal property executed simultaneously
with this Note. A default under said purchase Money Mortgage and Security
Agreement shall likewise constitute a default hereunder.
In the event of default, this Note shall bear interest from the date of said
default at the highest permissible rate permitted by the Statutes of the State
of Florida.
<PAGE>
It is agreed that time is of the essence in the performance of all obligations
hereunder and under the Purchase Money Mortgage and Security Agreement.
Maker and all endorsers and guarantor, waive demand, protest and
notice of maturity, non-payment or protest, diligence in collection or
bringing suit, end all requirements necessary to hold it liable as maker. Maker
further agrees, to pay all costs of collection, including reasonable attorneys'
fees in case the principal of this Note or any payment on the principal or any
interest thereon is not paid at the respective maturity thereof, or in case it
becomes necessary to protect the security hereof, whether suit be brought or
not.
The right to plead any and all statutes of limitation as a defense to
any demand on this Note, or any agreement to pay the same, or any demand secured
by the purchase Money Mortgage and Security Agreement securing this Note, is
expressly waived by each and every of the undersigned, endorsers or guarantors
to the fullest extent permitted by law.
All makers, endorsers, guarantors and sureties hereof agree jointly end
severally to pay all costs of collection and of suit and foreclosure, end to the
extent permitted by law, reasonable attorneys' fees.
Any forbearance of Holder in exercising any right or remedy hereunder or under
the purchase Money Mortgage and Security Agreement, or otherwise afforded by
applicable law, shall not be a waiver of or preclude the exercise of any right
or remedy.
The acceptance by Holder of payment of any sum payable hereunder after the due
date of such payment shall not be a waiver of Holder's right to either require
prompt payment when due of all other sums payable hereunder or to declare a
default for failure to make prompt payment. Holder shall at all times have the
right to proceed against any portion of the security held herefor in such order
and in such manner as Holder may deem fit, without waiving any rights with
respect to any other security. No delay or omission on the part of Holder in
exercising any right hereunder shall operate as a waiver of such right or of any
other right under this Note.
<PAGE>
Notwithstanding anything herein or in any installment by which this Note may be
secured to the contrary, no provision contain_ herein or therein which purports
to obligate the under-signed to pay any amount of interest or any fees, costs or
expenses which are in excess of the maximum permitted by applicable law, shall
be effective to the extent it calls for the payment of any interest or other
amount in excess of such maximum. Any such excess shall, at the option of the
Holder of this Note, either be paid to the undersigned or be credited to
principal.
This Note is made in the State of Florida and is to be governed and
construed in accordance with its laws.
LUCAYA BEACH HOTEL CORPORATION
By:Romulo Bandeira De Souza G. Neto president
GUARANTY
--------
The undersigned, Romulo Bandeira De Souza G. Neto, does hereby
absolutely and unconditionally guarantee the performance by Lucaya Beach Hotel
Corporation ("Maker") of all the terms and conditions of this Note and the
Purchase Money Mortgage and Security Agreement referred to herein, including,
but not limited to, the prompt and complete payment by Maker of all sums due
hereunder.
Romulo Bandeira De Souza G. Neto
STATE OF FLORIDA
COUNTY OF PALM BEACH
I HEREBY CERTIFY that on this day, before me, an officer duly
authorized in the State aforesaid and in the County aforesaid to take
acknowledgments, personally appeared Romulo Bandeira De Souza G. Neto, to me
known to be the person described in and who executed the foregoing instrument
and he acknowledged before ma that he executed the same.
WITNESS my hand and official seal in the County and State last
aforesaid this ___ day of ____________, l99_.
I
My Commission Expires:
-3-
<PAGE>
LEGAL DESCRIPTION
-----------------
Lots 14, 15 and 16 in Block 13 of POMPANO BY THE SEA RESUBDIVISION, according to
the P1at thereof, recorded in P1at Book 1, Page 22 of the Public Records of
Broward County, Florida.
TOGETHER WITH that portion of the East one-half of Alta Avenue, lying West of
and adjacent to Lots 14, 15 and 16, in said Block
13.
TOGETHER WITH the following described property:
Begin at the intersection of the Center Line of Alta Avenue with a westerly
extension of the North boundary of Lot 16, Block 13 as shown on the Plat of
POMPANO BY THE SEA, as recorded in Plat Book 1, Page 22 of the Public Records of
-------
Broward County, Florida; thence westerly along said westerly extension of the
North boundary line of said Lot 16 a distance of 15.91 feet; thence Southerly,
making an included angle of 104 degrees, 14', 30" a distance of 123.76 feet;
thence Easterly with an included angle of 75 degrees, 45', 30" a distance of
45.64 feet to the Center Line of Alta Avenue; thence North along said Center
------
Line a distance of 120.0 feet more or less, to the point of beginning.
<PAGE>
Exhibit 10.36
MORTGAGE AND NOTE MODIFICATION AGREEMENT
THIS AGREEMENT made and entered into this 22nd_ day of January, 1997 by and
between the TRUSTEE OF THE M.B. CO., INC. PENSION PLAN, the TRUSTEE OF E
MENSWEAR-BOYSWEAR CO., INC. PENSION PLAN, the TRUSTEE OF THE DOMENICK GRECO
REVOCABLE TRUST, STANLEY ELKMAN, the TRUSTEE OF THE ARTHUR A. KOBER CO., INC.
EMPLOYEES PROFIT SHARING FUND, and MORTON J. BERMAN, with offices located at
4541 White Cedar Lane, Delray Beach, FL 33044 (hereinafter referred to as
"Mortgagee") and OCEAN PALMS COOPERATIVE ASSOCIATION, INC., a Florida not-for
profit corporation, with offices located at 1200 North Ocean Blvd., Pompano
Beach, F 33016 (hereinafter collectively referred to as "Mortgagor");
WITNESSETH:
WHEREAS, Lucaya Beach Hotel Corporation heretofore executed and
delivered to Del-Aire Management Co., Inc. a certain promissory note
dated the 26th day of February, 1992 in the original principal amount of
ONE MILLION TWO-HUNDRED THOUSAND DOLLARS ($1,200,000.00) (the "Note");
and
WHEREAS, The (Pounds) Note is secured by that certain Purchase Money
Leasehold Mortgage and Security Agreement made by Lucaya Beach Hotel
Corporation in favor of Del-Aire Management Co~, Inc. dated the 26th day
of February 1992, and recorded the 28th day of February, 1992 in
Official Records Book 19218, Page 815, of the Public Records of Broward
County, Florida (the "Mortgage"), which Mortgage encumbers lands more
particularly described in Exhibit "A" attached hereto and by reference
made a part hereof, lying, being and situate in Broward County, Florida
(the "Property"); and
WHEREAS, Mortgagee is the owner and holder of the Note and the Mortgage,
having obtained same by Assignment of Mortgage dated the 28th day of
May, 1993 and recorded in Official Records book 21050, Page 330, of the
Public records of Broward County, Florida; and
WHEREAS, Mortgagor, by virtue of that certain Assignment of Lease dated
October 29, 1996 and recorded November 13, 1996 in Official Records Book
25644, Page 806, of the Public Records of Broward County, Florida, and
with the consent of Mortgagee, did succeed to the interest of Lucaya
Beach Hotel Corporation in the Property;
WHEREAS, Mortgagor and Mortgagee desire to modify the Mortgage and Note
in certain particulars;
NOW, THEREFORE, in consideration of the mutual benefits accruing to the
respective parties under the provisions of this Agreement it is hereby
agreed as follows:
1. Recitals. The foregoing recitals are true and Correct and are
incorporated herein by reference as though set out in full.
<PAGE>
2. Outstanding Principal Balance. As of the date hereof the outstanding
principal balance of the Note (including the $100,000.00 readvancement
made on or about December 20, 1996) is $ 1,158,000.00, the January, 1997
---------------
payment having been received by Mortgagee and credited. The next payment
under the Note and Mortgage is due on February 1, 1997.
3. Interest Rate; Maturity Date; Payment. From and after the 29th day of
October, 1996, the interest rate recited in the Note is increased to
Twelve and Three-quarters percent (12.75%); and the maturity date of the
Note is extended to April 1, 1997. In addition, the monthly payment due
under the Note to and through the maturity date is increased
to $12,303.75.
----------
4. Option To Extend. Mortgagor shall have the right and option to extend
the Note and Mortgage for three (3) consecutive extension periods of one
(1) year each (subject to payment of an annual extension fee in an
amount equal to one percent (1%) of the then outstanding principal
balance of the Note (but not including that portion of the then
outstanding principal balance of the Note which represents the aforesaid
$ 100.000.00 readvancement made on or about December 20, 1996), said
extension fee to be due and payable on or before March 1 each year prior
to the commencement of each extension period); so that said Note and
Mortgage will become all due and payable on the 1st day of April, 1998
(if the first extension is exercised), on the 1st day of April, 1999 (if
the second extension is also exercised), and on the 1st day of April,
2000 (if the third extension is also exercised). In order to exercise
the aforesaid right and option Mortgagor shall, on or before March 1 of
each year prior to the commencement of each extension period, notice the
Mortgagee in writing of Mortgagee's election to exercise the right and
option and, in each such case, such written notice must be accompanied
by the aforesaid appropriate extension fee.
5. Sub-leasing Attornment; Non-disturbance. Notwithstanding anything to
the contrary contained in the Mortgage, Mortgagor shall have the right
to sub-lease individual apartments and commercial spaces on the property
to such sub-tenants and upon such terms and conditions (including, but
not limited to, non-recourse terms) and pursuant to such form of sub-
lease as Mortgagor may from time to time determine (and to modify and
amend such sub-leases as Mortgagor may from time to time determine);
provided that any such sub-lease shall be subordinate to the lien of the
Mortgage; and provided further that each such sub-lease shall provide
that in the event of a default by Mortgagor and the enforcement by
Mortgagee of any remedy under the Mortgage, the tenant under any such
sub-lease shall at Mortgagee's request attorn to Mortgagee or to any
other person or entity succeeding to the interest of Mortgagee as a
result of such enforcement and shall recognize Mortgagee or such
successor in interest as sub-landlord under the sub-lease without change
in the provisions thereof (provided, however, that Mortgagee or such
successor in interest shall not be bound by (a), any payment of an
installment of rent or additional rent which may have been made more
than thirty days before the due date of such installment, or (b) any
existing offsets or defenses. In addition Mortgagee shall and does
hereby agree to execute and deliver a non-disturbance agreement (in form
and content reasonably acceptable to Mortgagor and its counsel) for each
apartment and commercial space upon the Property at the time of the
leasing of each such apartment or
<PAGE>
commercial space and upon concurrent Payment to Mortgagee of a non-
disturbance agreement price for each unit sought to be provided with a
non-disturbance agreement (which non-disturbance agreement price when
paid shall be applied, to the extent of the cash portion thereof,
against the principal amount of the Note and Mortgage) in an amount
equal to seventy-five percent (75%) of the purchase price of such
apartment or commercial space lease, but only where the sale of such
apartment or commercial space lease is the result of a bona fide arms
length transaction; and such non-disturbance agreement price shall be
payable in cash or in purchase money obligations of the apartment or
commercial space tenant, or in any combination thereof (provided that
such portions thereof as are paid in purchase money obligations shall be
held by Mortgagee as additional collateral for the Mortgage; and
seventy-five percent (75%) the monthly Proceeds of such purchase money
obligations shall be applied as and when received upon the indebtedness
represented by the Note and Mortgage, first to accrued interest and then
to principal (and the remaining twenty-five percent (25%) thereof shall
be paid over Mortgagee to Mortgagor). Each of the parties comprising
Mortgagee shall and does hereby make, constitute and appoint DOMENICK
GRECO, whose address is 4541 White Cedar lane, Delray Beach, FL 33044,
its, his or their true and lawful attorney-in-fact for the limited
purpose of executing and delivering and with full power and authority to
execute and deliver, from time to time, the non-disturbance agreements
hereinabove described. The power of attorney herein granted shall
commence and be in full force and effect as of the date of the complete
execution of this instrument and shall remain in full force and effect
thereafter until termination by written notice executed by any one of
the parties comprising Mortgagee, recorded in the Public Records of
Broward County, Florida, and served upon Mortgagor.
6. Escrows for Taxes Insurance and Ground Lease Payments. From and after
the 29th day of October, 1996 Mortgagor will.
.Escrow with Mortgagee's attorney or other acceptable escrow
agent, each month beginning on November 1, 1996 an amount equal to
1/12th of the estimated real estate taxes to be levied against the
Property for the ensuing tax year. Escrowed funds shall be held at
interest for the benefit of Mortgagor.
.Escrow with Mortgagee's attorney or other acceptable escrow
agent, each month beginning on November 1, 1996 an amount equal to
1/12th of the annual lease payment due under the long term lease.
Escrowed funds shall be held at interest for the benefit of Mortgagor.
.Escrow with Mortgagee's attorney or other acceptable escrow
agent, each month beginning on November 1, 1996 an amount equal to
1/12th of the annual premiums for flood, hazard and liability insurance
on the Property. Escrowed funds shall be held at interest for the
benefit of Mortgagor.
7. Transfer. Notwithstanding anything to the contrary contained in the
Mortgage, Mortgagor shall have the right to transfer the Property to a
Florida corporation, partnership, limited partnership or limited
liability company, or to amend the at-tides of incorporation of
Mortgagor or undertake such procedure as may be necessary to convert
Mortgagor from a not-for-profit to a for profit corporation; provided,
however, that no such transfer, amendment and/or conversion shall
relieve Mortgagor of any liability hereunder or jeopardize the status of
<PAGE>
the Mortgage as a first or prior lien. And Notwithstanding anything to
the contrary contained in the Mortgage, Mortgagor shall have the right,
Without the consent of Mortgagee, to enter into any agreement regarding
the management and/or operation of the property; provided, however, no
such agreement shall relieve the Mortgagor of any duty, responsibility
or liability hereunder and any such agreement shall contain a Provision
requiring payment of the monthly payment due each month under the Note
and Mortgage before payment each month to the managing entity under any
such management and/or operations agreement.
8. Purchase Money Security Interests. The taking by Mortgagor or a third
party of a purchase money security interest in any sub-lease of an
apartment or commercial space upon the property in Connection with the
sale of any such sub-lease shall not constitute Prohibited secondary
financing under Section 8 of the Mortgage or require the consent of the
Mortgagee; and the enforcement of any such purchase money security
interest shall not fall within the purview of or limitations contained
in said Section 8.
9. First Leasehold Mortgage. Notwithstanding the changes, amendments and
modifications provided herein, and notwithstanding any transfer or
conveyance of the Property by Mortgagor, and notwithstanding any sub-
leasing of individual apartment- and/or commercial spaces upon the
Property, the Mortgage is and will remain a first leasehold mortgage.
10. Modification of Financing Statement. This Mortgage and Note
Modification Agreement shall also constitute a modification of that
certain UCC- 1 financing Statement recorded February 28, 1992 in
Official Records Book 19218, Page 842, of the Public Records of Broward
County, Florida.
11. Full Force and Effect; Conflicts. This modification in made upon the
express agreement and understanding that, except as herein specifically
set forth, the Mortgage and the Note shall remain unmodified and in full
force and effect. In the event of any conflict between the terms and
provisions of the Mortage or Note and the terms and Provisions of this
Mortgage and Note Modification Agreement, the terms and provisions of
this Mortgage and Note Modification Agreement shall take precedence.
12. Binding Effect. This agreement shall be binding upon and inure to
the benefit of the successors and assigns of the respective parties
hereto.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals
the day and year first above written.
<PAGE>
In the presence of:
Witnesses
/s/ Gayle R. Gerst MORTGAGEE:
TRUSTEE OF THE M.B. CO., INC.
PENSION PLAN
/s/ Domenic Greco
DOMENIC GRECO, as Trustee /s/ Pearl /s/
Pearl Morris
of the M. B. Co. Inc. Pension Plan
/s/ Gayle R. Gerst
TRUSTEE OF THE MENSWEAR-
BOYSWEAR CO., INC. PENSION PLAN
/s/ Pearl Morris
/s/ Domenic Greco
/s/ Gayle R. Gerst DOMENIC GRECO, as Trustee of
The Domenic Greco Revocable Trust
/s/ Pearl Morris /s/ Stanley Elkman
/s/ Gayle R. Gerst STANLEY ELKMAN
TRUSTEE OF THE ARTHUR A. KOBER
/s/ Pearl Morris CO., INC. Employees Profit
/s/ Gayle R. Gerst Sharing Fund
/s/ Morton J. Berman
MORTON J. BERMAN, TRUSTEE
/s/ Pearl Morris /s/ Morton J. Berman
/s/ Gayle R. Gerst MORTON J. BERMAN
MORTGAGOR:
OCEAN PALMS COOPERATIVE
/s/ Christine Search ASSOCIATION, INC., a Florida not-for-
profit corporation
/s/ Rosemary Hansen
By: /s/ Karen Abdallah
Karen Abdallah, President
<PAGE>
State of Florida
County of Palm Beach
The foregoing instrument was acknowledged before me this 22 day of January,
-------
1997, by DOMENICK GRECO as TRUSTEE OF THE M.B. Co., INC. PENSION PLAN who is
personally known to me
- - -------------------
(Signature of Person Taking Acknowledgment)
/s/ Linda L. Means
LINDA L MEANS
COMMISSION # CC 421559
EXPIRES: Nov. 17, 1998
State of Florida
County of Palm Beach
The foregoing instrument was acknowledged before me this 22 day of January,
-------
1997, by DOMENICK GRECO as TRUSTEE OF MENSWEAR-BOYSWEAR CO., INC. PENSION PLAN
who is personally known to me
-------------------
(Signature of Person Taking Acknowledgment)
/s/ Linda L. Means
LINDA L MEANS
COMMISSION # CC 421559
EXPIRES: Nov. 17, 1998
State of Florida
County of Palm Beach
The foregoing instrument was acknowledged before me this 22 day of January,
-------
1997, by DOMENICK GRECO as TRUSTEE OF DOMENIC GRECO REVOCABLE TRUST, who is
personally known to me
- - -------------------
(Signature of Person Taking Acknowledgment)
/s/ Linda L. Means
LINDA L MEANS
COMMISSION # CC 421559
EXPIRES: Nov. 17, 1998
State of Florida
County of Palm Beach
The foregoing instrument was acknowledged before me this 22 day of January,
-------
1997, by MORTON J. BERMAN, as TRUSTEE OF THE ARTHUR A. KOBER CO., INC.,
EMPLOYEES PROFIT SHARING FUND, who is personally known to me
-------------------
(Signature of Person Taking Acknowledgment)
<PAGE>
/s/ Linda L. Means
LINDA L MEANS
COMMISSION # CC 421559
EXPIRES: Nov. 17, 1998
State of Florida
County of Palm Beach
The foregoing instrument was acknowledged before me this 22 day of January,
-------
1997, by STANLEY ELKMAN, who is personally known to me
-------------------
(Signature of Person Taking Acknowledgment)
/s/ Linda L. Means
LINDA L MEANS
COMMISSION # CC 421559
EXPIRES: Nov. 17, 1998
State of Florida
County of Palm Beach
The foregoing instrument was acknowledged before me this 23 day of January,
-------
1997, by KAREN ABDALLAH, as President of OCEAN PALMS COOPERATIVE ASSOCIATION,
INC., a Florida not-for-profit corporation, who is personally known to me
-------------------
(Signature of Person Taking Acknowledgment)
/s/ Audrey L. Gay
AUDREY L. GAY
COMMISSION # CC 415232
EXPIRES: October 20, 1998
<PAGE>
Exhibit "A"
Legal Description
That certain real property being, being and situated in Broward County, Florida,
and more particularly described as follows:
The lessee's interest in a 99 year leasehold created pursuant to lease
dated February 10, 1965 made and entered into by and between Nancy H.
Newell and Jane H. Tubbs, as lessors, and Lighthouse Point Construction
Corp., as lessee, recorded in Official Records Book 2973, Page 677, of
the Public Records of Broward County, Florida, and re-recorded in
Official Records Book 3069, Page 186, of the Public Records of Broward
County, Florida; which leasehold covers the following described real
property; to wit:
Lots 14, 15 and 16 in Block 13 of POMPANO BY THE SEA
RESUBDIVISION, according to the Plat thereof, recorded in Plat Book
1, Page 22 of the Public Records of Broward County, Florida.
TOGETHER WITH that portion of the East one-half of Alta Avenue, lying
West of and adjacent to Lots 14, 15 and 16, in said Block 13.
TOGETHER WITH the following described property:
Begin at the intersection of the Center Line of Alta Avenue with a
westerly extension of the North boundary of Lot 16, Block 13 as shown on
the Plat of POMPANO BY THE SEA, as recorded in Plat book 1, Page 22 of
the Public Records of Broward County, Florida; thence Westerly along
said Westerly extension of the North boundary line of said Lot 16 a
distance of 15.91 feet; thence Southerly, making an included angle of
104 degrees, 14', 30" a distance of 123.76 feet; thence Easterly with an
included angle of 75 degrees, 45', 30" a distance of 45.64 feet to the
Center Line of Alta Avenue; thence North along said Center Line a
distance of 120.0 feet more or less to the point of beginning.
<PAGE>
EXHIBIT 11
CAPITOL COMMUNITIES CORPORATION
Computation of Earnings Per Share
Fiscal Year Ended
September,
1997 1996
---- ----
Shares Outstanding Beginning 7,000,000 7,000,000
Of Period
Shares Issued During Period
October 7, 1996 38,000 -
November 12, 1996 150,000
April 17, 1997 (38,000)
April 25, 1997 (19,000)
May 6, 1997 (19,000)
July 29, 1997 200,000 -
Weighted average number of 7,171,014 7,000,000
shares outstanding
Total 7,171,014 7,000,000
Earnings (loss) applicable to $ 40,807 $(1,109,053)
common shares
Earnings (loss) per share of $(0.006) $(0.158)
common stock
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We consent to the use of our firm's audited financial statements by
reference in the Registration Statement Form S-8 of Capitol Communities
Corporation (the "Company"). Such audited financial statements have been
incorporated by reference from the Company's Annual Report filed on Form 10K-SB
for the fiscal year ended September 30, 1997.
December 23, 1997
/s/ Joel S. Baum, P.A., CPA
Coral Springs, Florida
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
SEPTEMBER 30, 1997 AUDITED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<CASH> 227162
<SECURITIES> 0
<RECEIVABLES> 12096
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 441932
<PP&E> 9468637
<DEPRECIATION> 0
<TOTAL-ASSETS> 10164867
<CURRENT-LIABILITIES> 2676777
<BONDS> 0
7312
0
<COMMON> 0
<OTHER-SE> 4103730
<TOTAL-LIABILITY-AND-EQUITY> 10164867
<SALES> 4139299
<TOTAL-REVENUES> 4210842
<CGS> 1895825
<TOTAL-COSTS> 1895825
<OTHER-EXPENSES> 1447329
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 826881
<INCOME-PRETAX> 40807
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 40807
<EPS-PRIMARY> (.006)
<EPS-DILUTED> (.006)
</TABLE>
