<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
October 20, 1997
Date of Report
(Date of Earliest Event Reported)
CAPITOL COMMUNITIES CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Nevada 915636 88-0361144
(State of Incorporation) (Commission File No.) (I.R.S. Employer
Identification No.)
25550 Hawthorne Boulevard, Suite 207, Torrance, CA 90505
(Address of Principal Executive Offices)
Registrant's Telephone Number: 310-375-2266
<PAGE>
ITEM 5. OTHER EVENTS.
1. Century Realty, Inc. Settlement and Release Agreement. For background
relating to this topic, see "ITEM 3. LEGAL PROCEEDINGS" in the Company's amended
Annual Report on Form 10-KSB filed with the Securities and Exchange Commission
on October 14, 1997.
On October 20, 1997, Capitol Communities Corporation (hereinafter referred
to as the "Company," which includes the Predecessor Corporation, AWEC Resource,
Inc.), Capital Development of Arkansas, Inc., a wholly-owned subsidiary of the
Company (the "Operating Subsidiary") and Century Realty, Inc. ("Century")
entered into a Settlement and Release Agreement ("Settlement Agreement"),
effective September 30, 1997. The Settlement Agreement was entered to settle the
foreclosure action instituted by Century, on August 12, 1996, against the
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 ("Century Note I"). As a result of cross-default provisions, an
unsecured $350,000 Century promissory note ("Century Note II") 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. Commencing
November 17, 1997, the Company must make a total of five consecutive payments of
$17,500 on the 17/th/ of each month ("Option Payments"), with 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. Contemporaneously with the
execution of the Settlement Agreement, the Company delivered to the escrow agent
a Warranty Deed conveying to Century Tract D and an approximately 3.5 acre tract
of land adjoining Tract D (hereinafter referred to as the "Corner Tract"). In
return, Century delivered to the escrow agent certificates for 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. Upon payment in full of the Option Payments and the
Purchase Price, the escrow agent shall deliver the Quitclaim Deed and the stock
certificates to the Company. If the Company defaults on any of the Option
Payments, or the Purchase Price, Century shall be entitled to receive from the
escrow agent the Warranty Deed for Tract D and the Corner Lot and the
certificates for 700,000 shares of the Company's common stock.
A copy of the Settlement Agreement is attached hereto as Exhibit 10.20 and
incorporated herein by this reference.
2. Resure Inc. Settlement and Release Agreement. For background relating to
this topic, see "ITEM 1, DESCRIPTION OF BUSINESS --Business Development," "ITEM
2. DESCRIPTION OF BUSINESS -- Business Development," and "ITEM 6. MANAGEMENT'S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION -- Liquidity and Capital Resources"
in the Company's amended Annual Report on Form 10-KSB filed with the Securities
and Exchange Commission on October 14, 1997.
Effective September 30, 1997, Capitol Communities Corporation (hereinafter
referred to as the "Company," which includes the Predecessor Corporation, AWEC
Resource, Inc.), Capital
<PAGE>
Development of Arkansas, Inc., a wholly-owned subsidiary of the Company (the
"Operating Subsidiary") and Mark Boozell, Director of Insurance of the State of
Illinois (the "Liquidator"), as liquidator for Resure, Inc. ("Resure") entered
into a Debt Settlement and Release Agreement ("Settlement 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 shall
modify and amend the $3,500,000 recourse note payable to Resure ("Resure Note
I") to become due and payable in full on September 1, 1999. Resure shall apply
the amount of $525,460, currently being held a cash collateral account, 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 $150,000 remaining
in the Resure cash collateral account shall be retained by the Liquidator. As
part of the Settlement Agreement, The Liquidator agreed to release 342.22 acres
of the Company's single-family residential property ("Parcel 2") 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 ("Parcel 1") shall
be retained by the Liquidator as collateral on the modified Resure Note I.
The Settlement Agreement further provides that the Liquidator shall
terminate the Company's $3,500,000 non-recourse note ("Resure Note II") 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 shall
terminate the Resure Debenture, which was issued by Resure as consideration for
the Resure Note II, and deliver it to the Liquidator.
As additional consideration to the Liquidator to enter into the Settlement
Agreement, the Company agreed to pay a developer's fee of $2,000 ("Developer's
Fee") for each lot sold in Parcel 1 and Parcel 2. 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 lot; and $5,844.20 per lot 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 solely against Parcel 1.
A copy of the Debt Settlement and Release Agreement is attached hereto as
Exhibit 10.21 and incorporated herein by this reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits
Exhibit No.
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Exhibit 10.21 Century Realty, Inc. Settlement and Release Agreement signed
October 20, 1997, effective September 30, 1997.
Exhibit 10.22 Debt Settlement and Release dated effective September 30, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, as amended, the registrant has duly caused this report to be signed on is
behalf by the undersigned hereunto duly authorized.
Dated: November 4, 1997 CAPITOL COMMUNITIES CORPORATION
BY: /s/ Michael G. Todd
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Michael G. Todd
President and Chairman of
the Board
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EXHIBIT INDEX
Exhibit Description Page
- ------- ----------- ----
10.21 Century Realty, Inc. Settlement and
Release Agreement signed October 20,
1997, effective September 30, 1997,
between Capitol Development of Arkansas,
Inc., Capitol Communities Corporation
and Century Realty, Inc.
10.22 Debt Settlement and Release dated
effective September 30, 1997,
between Capitol Development of Arkansas,
Inc., Capitol Communities Corporation
and Mark Boozell, Director of Insurance
of the State of Illinois, as liquidator
for Resure, Inc.
<PAGE>
EXHIBIT 10.21
SETTLEMENT AND RELEASE AGREEMENT
This Settlement and Release Agreement (this "Agreement"), made effective as
of September 30, 1997, by and among Capitol Development of Arkansas, Inc., an
Arkansas corporation (f/k/a AWEC Development Corporation) (the "Borrower"),
Capitol Communities Corporation, a Nevada corporation (successor by merger to
AWEC Resources, Inc. and the sole shareholder of Capitol Development of
Arkansas, Inc.) ("CCC"), and Century Realty, Inc., a corporation organized and
existing under the laws of the State of Texas, and which owns property in
Pulaski County, Arkansas, but does business exclusively in Dallas, Texas
("Century"). The Borrower, CCC and Century are sometimes collectively referred
to herein as the "Parties", or individually referred to herein as the "Party".
RECITALS:
A. There is pending before the Chancery Court of Pulaski County, Arkansas,
First Division, in a case styled Century Realty, Inc. v. Capitol Development of
Arkansas, Inc., f/k/a AWEC Development Corporation, and AWEC Resources, Inc.,
Case No. EQ 96-5510 (the "Chancery Court Action"), a Foreclosure Complaint filed
by Century, as Plaintiff, against the Borrower and CCC, as Defendants.
Furthermore, there is pending in that same Chancery Court Action a Counterclaim
filed by Borrower and CCC against Century for a claim of usury and other
charges. All matters in the Chancery Court Action are contested.
B. Century holds legal and beneficial title to 700,000 shares of common
capital stock of CCC (the "CCC Stock"). Borrower executed a Promissory Note
dated September 11, 1995 (the "Unsecured Note") in the principal amount of
$350,000.00 payable to Century. Also, Borrower executed and delivered a
Promissory Note dated September 11, 1995 (the "Secured Note") in the principal
amount of $1,400,000.00 payable to Century.
C. The Secured Note is secured by a Mortgage dated September 11, 1995 (the
"Mortgage") and recorded with the Pulaski County Circuit Clerk and Recorder's
Office as Instrument No.95-53329, encumbering approximately 36 acres of land
which are described as Tracts D-1, D-2 and D-3, Maumelle, Town Center, Maumelle,
Pulaski
<PAGE>
County, Arkansas (hereinafter referred to as "Tract D").
D. In addition to Tract D, Borrower holds legal and beneficial title to an
approximate 3.5 acre tract of land adjoining Tract D which is described on
Exhibit "A" affixed hereto and by this reference made a part hereof (the "Corner
Tract"). Borrower represents that the Corner Tract is unencumbered by any liens,
including the lien of the Mortgage.
E. The Borrower, CCC and Century desire to enter into this Agreement in
order to settle all claims pursuant to the Chancery Court Action and to
establish an escrow for delivery of rights concerning Tract D, the Corner Tract
and the CCC Stock.
F. Contemporaneously with the execution of this Agreement, Century has paid
the 1996 general taxes for Tract D in the total sum of $39,587.39 and has timely
paid the 1997 special tax assessment by the Maumelle, Arkansas Multi-Purpose
Improvement District No.2 on Tract D in the sum of $92,470.00 for total advances
for taxes paid by Century in the sum of $132,057.39. Copies of the receipts for
special and general taxes paid by Century are marked Exhibit "B", affixed
hereto, and by this reference made a part hereof.
G. This Agreement is intended to be the Settlement Agreement referred to in
that letter of intent for settlement from Lax, Vaughan, Pender & Evans, P.A.
dated October 10, 1997, a copy of which is marked Exhibit "C" affixed hereto and
by this reference made a part hereof (the "Letter of Intent").
NOW, THEREFORE, in consideration of the above recitals, which by this
reference are incorporated herein, together with the mutual representations and
agreements set forth below, the Parties expressly agree as follows:
1. Settlement Terms: Deliveries Into Escrow. Contemporaneously with the
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execution of this Agreement, Borrower shall execute and deliver to Standard
Abstract & Title Company (the "Escrow Agent") a Warranty Deed conveying to
Century, in lieu of foreclosure, Tract D and the Corner Tract (the "Century
Deed"), and Century shall endorse in blank and deliver to the Escrow Agent the
certificates for the CCC Stock, Century shall execute and deliver to Escrow
Agent a complete satisfaction (the "Satisfaction") of the Consent
<PAGE>
Decree as defined in Section 2 hereof, and Century shall execute a Quitclaim
Deed to Tract D and the Corner Tract in favor of the Borrower and deliver same
to the Escrow Agent (the "Borrower Deed"). Contemporaneously with the execution
of this Agreement, Borrower will have paid to Century the sum of $17,500.00, the
receipt of which is hereby acknowledged by Century. Furthermore, Borrower may
pay to Century the sum of $17,500.00 each month (the "Option Payments") for a
total of five consecutive monthly payments with the first such payment being due
on November 17, 1997, and each additional payment due on the 17th of each month
--
thereafter. A "Default" shall occur with regard to an Option Payment only if an
Option Payment remains unpaid after four (4) business days after notice is given
to Borrower and CCC as provided in Section 5 hereof. In the event that all such
payments are not in default, then Borrower shall have the right to pay off the
debts pursuant to the Secured Note, Unsecured Note and Mortgage and purchase the
CCC Stock by paying to the Escrow Agent, in escrow, the sum of $2,132,057.39
(the "Purchase Price"). All Option Payments and the Purchase Price shall be made
by wire to transfer to Century in accordance with written instructions given to
Borrower contemporaneously with the execution of the Agreement. If the Purchase
Price is timely delivered to the Escrow Agent, then the Escrow Agent shall
deliver the Purchase Price to Century and simultaneously deliver the
Satisfaction, the Century Deed, the Borrower Deed and the CCC Stock to Borrower
whereupon the Escrow shall terminate. In either instance, the obligations due
Century pursuant to the Secured Note and the Unsecured Note shall be satisfied
in full. If there is a default in Borrower's payment of the Option Payments then
the Escrow Agent shall delivery to Century the Satisfaction, the Century Deed,
the Borrower Deed and the CCC Stock. In addition, even if the Option Payments
are made in a timely fashion but the Purchase Price is not delivered on or
before the 17th day of April, 1998, then the Escrow Agent shall deliver to
Century the Satisfaction, the Century Deed, the Borrower Deed and the CCC Stock.
The Escrow shall terminate the earlier of April 17, 1998 or upon default in the
making of the Option Payments, whichever occurs first. The parties agree that
the Option Payments are to be given as consideration for Borrower's right to
purchase the CCC Stock and to repurchase Tract D and the Corner Tract pursuant
hereto if Borrower timely pays the Purchase Price and is not consideration for
the use or
<PAGE>
forbearance of the use of money.
2. Mutual Release. Upon execution of this Agreement, the Parties shall
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each execute a Consent Foreclosure Decree for the Chancery Court Action granting
to Century an in r~m judgment for the sums claimed by Century in the Chancery
Court Action in substantially the form which is marked Exhibit "C", attached
hereto and by this reference made a part hereof (the "Consent Decree").
Notwithstanding the entry of the Consent Decree, Century hereby releases and
forever discharges the Borrower and CCC and their respective agents, employees,
officers, directors, servants, representatives, attorneys, successors and
assigns, from any and all causes of actions, suits, claims and demands of every
kind and character, known or unknown, without limitation, including any action
at law or in equity, which Century has or may ever have against the Borrower or
CCC, provided, however, the rights and obligations arising pursuant to this
Agreement and the Consent Decree are excepted. Borrower and CCC hereby release
and forever discharge Century and its agents, employees, officers, directors,
servants, representatives, attorneys, successors and assigns, from any and all
causes of action, suits, claims and demands of every kind and character, known
or unknown, without limitation, including any action at law or in equity and
more specifically the counterclaim of Borrower and CCC in the Chancery Court
Action, which Borrower or CCC has or may ever have against Century, provided,
however, the rights and obligations arising pursuant to this Agreement are
excepted. It is the intention of the Parties that the Consent Decree is given to
protect the superior lien rights of Century in and to Tract D Borrower's option
to pay the Purchase Price pursuant to Section 1 hereof. Therefore, prior to
termination of the escrow pursuant to Section 1 hereof, Century covenants and
agrees to take no action whatsoever to enforce of the Consent Decree and will
not permit or cause the foreclosure sale to occur pursuant to the Consent
Decree.
3. Representations of Century (a)Century hereby acknowledges and
--------------------------
represents to Borrower and CCC that Century and its advisors, counsel and
representatives have had the opportunity to review CCC's and Borrower's records
and documents, including, but not limited to (i) all of CCC's 1934 Act filings,
and ask questions of CCC's President, specifically including a draft of CCC's
Amended Annual Report Form 10-KSB for its fiscal year end September 30, 1996,
with a substantially similar document to be filed with the Securities and
Exchange Commission (the "SEC") on or about October 14, 1997 and (ii) the Debt
Settlement and Release Agreement
<PAGE>
between Borrower, CCC and the Director of Insurance of the State of Illinois, as
Liquidator for Resure, Inc., dated effective September 30, 1997, and discuss
this Agreement with Century's attorneys and accountants.
(b) Century represents and warrants to Borrower and CCC that the execution,
delivery and performance by Century of this Agreement and the other agreements
and instruments to be delivered hereunder are within Century's corporate powers,
have been duly authorized by all necessary corporate actions of Century, require
(in respect of Century) no action by or in respect of, or filing with, any
governmental body, agency or official, and do not contravene, or constitute a
default under, any provision of law or regulation applicable to Century or
Century's certificates of incorporation or by-laws or of any agreement,
judgment, injunction, order, decree or other instrument binding upon Century.
4. Representations of Borrower and CCC.
-----------------------------------
(A) Borrower and CCC hereby represent and warrant that on the date of
execution of this Agreement, that Tract D and the Corner Tract are free from all
claims, liens, security interests and encumbrances other than the Mortgage and
unpaid real estate taxes, if any, which are in the process of being paid by
Century or are not yet due and owing.
(B) Borrower and CCC represent and warrant to Century that the execution,
delivery and performance by Borrower and CCC of this Agreement and the other
agreements and instruments to be delivered hereunder are within Borrower's and
CCC's corporate powers, have been duly authorized by all necessary corporate
actions of Borrower and CCC, require (in respect of Borrower and CCC) no action
by or in respect of, or filing with, any governmental body, agency or official,
and do not contravene, or constitute a default under, any provision of law or
regulation applicable to Borrower or CCC or Borrower's and CCC's certificates of
incorporation or by-laws or of any agreement, judgment, injunction, order,
decree or other instrument binding upon Borrower or CCC.
(C) Borrower and CCC represent and warrant to Century that they have no
knowledge or notice that there exists or any prior use has caused a violation of
Environmental Laws as hereinafter defined, in regard to the Corner Tract. For
purposes of this Agreement, the term "Environmental Laws" shall include any and
all Federal, State or local laws, statutes, rules, regulations, ordinances or
orders (and any judicial interpretations thereof) governing, regulating, or
otherwise providing for the protection of environmental quality and/or human
health, safety and welfare, through the control, management, and/or restriction
of the use, handling, manufacture, generation, processing,
<PAGE>
treatment, storage, emission, discharge, disposal, release or spillage of any
contaminant, chemical, material, pollutant or waste that may have hazardous,
toxic or other adverse impacts on the environment or human health, safety and
welfare, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 (42 U.S.C. (S) 9601 et
--
seq..("CERCLA"), the Hazardous Materials Transportation Act (49 U.S.C (S) 1002),
- ---
the Resource Conservation and Recovery Act of 1976 (42 U.S.C. (S) 6901 et seq.
-- ---
("RCRA"), the Toxic Substance Control Act (15 U.S.C. (S) 2601 et seq.),
-- ---
the Federal Water Pollution Control Act (33 U.S.C. (S) 1251 et seq.),
-- ---
the Clear Air Act (42 U.S.C. (S) 7401 et seq., the Safe Drinking Water Act (42
-- ---
U.S.C. (S) 300 f et seq.) and the Emergency Planning and Community Right-to-
-- ---
Know Act of 1986 (42 U.S.C. (S) 11001 et seq.), each as heretofore and hereafter
-- ---
amended or supplemented, and any analogous present or future local, state or
federal statutes, rules and regulations promulgated thereunder or pursuant
thereto. Furthermore, Borrower and CCC hereby agree to defend, identify and
hold Century and its successors and assigns harmless from and against any and
all claims, proceedings under any Environmental Law(s), lawsuits, administrative
proceedings, liabilities, lawsuits, demands, fines, penalties, judgments,
orders, notice letters, damages, costs and expenses (including, without
limitations, cleanup costs and reasonable attorneys' fees, engineers fees, or
consultants fees arising by reason of any of the aforesaid), arising from, out
of, or by reason of any breach of the representation and warranty contained in
this paragraph.
5. Notices. Any notice, request, demand, statement, authorization,
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approval or consent required or permitted under this Agreement shall be in
writing and shall be made by, and deemed duly given upon (a) personal delivery
or (b) facsimile transmission, to the following addresses and facsimile numbers:
<PAGE>
IF TO CENTURY: Century Realty, Inc.
10670 North Central Expressway
Suite 300
Dallas, TX 75231
ATTN: Bruce Endendyk
Telephone:(214) 692-4700
Facsimile:(214) 373-0810
WITH A COPY TO: James R. Pender
LAX, VAUGHAN, PENDER & EVANS, P.A.
400 West Capitol Avenue
24th Floor
Little Rock, AR 72201
Telephone:(501) 376-6565
Facsimile:(501) 376-6666
IF TO BORROWER OR CCC: Capitol Communities Corporation
25550 Hawthorne Boulevard
Suite 207
Torrance, CA 90505
ATTN: Michael G. Todd
Telephone:(310) 375-2266
Facsimile:(310) 375-3841
AND ALSO TO: Capitol Development of Arkansas, Inc.
P.O. Box 13246
Maumelle, AR 72113
ATTN: David R. Paes
Telephone:(501) 791-3488
Facsimile:(501) 791-3505
WITH A COPY TO: G. Robert Hardin
HARDIN & GRACE, P.A.
410 West Third Street, Suite 200
Little Rock, AR 72201
Telephone:(501) 378-7900
Facsimile:(501) 376-6337
<PAGE>
or to such other address, facsimile number and/or such other additional parties
as any party may specify by notice given in accordance with this Section 5.
6. Nature of Settlement. Settlement pursuant to this Agreement is being
--------------------
made by the Parties solely for the purpose of avoiding the expense and
inconvenience of litigation and in order to effect the business transactions as
set forth herein and shall not be construed as an admission on the part of any
of the Parties of any unlawful or wrongful conduct or of any liability
whatsoever as to any of the Parties, all of which is expressly denied.
7. Applicable Law. To the extent that it is not controlled by the laws of
--------------
the United States of America, this Agreement shall be construed in accordance
with and governed by the laws of the State of Arkansas.
8. Binding Effect. This Agreement shall apply to, and inure to the benefit
--------------
of, and bind all the Parties hereto and their respective heirs, successors and
assigns.
9. Execution and Interpretation. This Agreement may be executed in multiple
----------------------------
counterparts, each of which shall constitute an original and all of which
together shall constitute one instrument. Signatures on this instrument sent by
telecopy may be treated as original signatures. Any covenant set forth in the
body of this Agreement which may be in conflict with the Letter of Intent shall
be resolved in favor of the provisions set forth in this Agreement.
10. Acceptance by and Obligations of Escrow Agent. Upon acknowledgment of
---------------------------------------------
receipt of a copy of this Agreement by Escrow Agent, this Agreement will also
serve as the escrow instructions to the Escrow Agent and the Escrow Agent shall
perform its duties and obligations as follows:
<PAGE>
(A) Conflicting Demands. Escrow Agent will be obligated to perform
-------------------
only the duties that are expressly set forth herein. In case of conflicting
demands upon Escrow Agent, it may (i) refuse to comply therewith as long as such
disagreement continues and make no delivery or other disposition of any funds,
instruments or property then held (and Escrow Agent shall not be or become
liable in any way for such failure or refusal to comply with such conflicting or
adverse claims or demands); and (ii) continue to so refrain and so refuse to act
until all differences have been adjusted by agreement and Escrow Agent has been
notified thereof in writing signed by Century, Borrower and CCC, or (iii) shall
submit any such disagreement regarding the proper delivery of the instruments,
funds and property to arbitration administered by the American Arbitrators
Association under the Commercial Arbitration Rules and judgment on the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. The prevailing party in such a dispute shall be awarded reasonable
attorney's fees.
(B) No Obligation to Take Legal Action. Escrow Agent shall not be under any
--------------------------------------
obligation to take any legal action in connection with this Agreement or for its
enforcement, or to appear in, prosecute, or defend any action or legal
proceeding which, in its opinion, would or might involve it in any costs,
expense, loss or liability, unless and as often as required by it, it is
furnished with satisfactory security and indemnity against all such costs,
expenses, losses, or liabilities.
(C) Status of Escrow Agent. Escrow Agent's duties hereunder shall be
----------------------
limited to the safekeeping of money, instruments and securities received by it
as Escrow Agent and for their disbursement in accordance with the written escrow
instructions given it in accordance with this Escrow Agreement.
(D) Written Instructions of Parties. Notwithstanding any contrary
-------------------------------
provision contained herein, Escrow Agent shall, at all times, have full right
and authority to pay over and disburse the money, instruments and property in
accordance with the joint written instructions signed by Century, Borrower and
CCC and their assigns.
(E) Specific Instructions. If Century gives the Escrow Agent written notice
---------------------
of Borrower and CCC's default of this Agreement, and the Borrower and CCC cannot
within four (4) business days of the request provide to
<PAGE>
the Escrow Agent satisfactory proof of timely payment to Century all of the
Option Payments when due in accordance with the terms of the Agreement or
payment to Century of the Purchase Price by or prior to midnight April 17, 1998,
then the Escrow Agent is specifically instructed to deliver to Century the
Satisfaction, the Borrower Deed, the Century Deed and the CCC Stock. Upon
written notice and satisfactory proof of payment to Century of the Option
Payments and the Purchase Price in accordance with the terms of the Agreement,
the Escrow Agent is specifically instructed to notify Century of such written
notice given by Borrower and CCC and if Century does not dispute such payment in
written form within four (4) business days, then the Escrow Agent is instructed
to deliver to Borrower and CCC the Satisfaction, the Borrower Deed, the Century
Deed and the CCC Stock.
(F) Provisions Relating to Escrow Agent. Escrow Agent shall hold the money,
-----------------------------------
instruments and property under the terms and conditions of this Agreement and
shall perform the duties imposed upon it thereby. If at any time in performing
its duties Escrow Agent is required to receive, accept, or act upon any notice
or writing purported to have been executed or issued by or on behalf of the
other parties, Escrow Agent shall not be required to inquire as to the authority
or genuineness of signature of any person who executed or otherwise issued such
writing, or otherwise be required to pass upon any aspect of such instruments
that may be essential for their validity. Escrow Agent may act in reliance upon
the advice of counsel in reference to any matter relating hereto, and shall not
be liable for any acts or omissions of any kind unless occasioned by its own
negligence or willful misconduct. Escrow Agent shall not be bound in any way by
any other agreement regardless of whether it has knowledge of the provisions of
such other agreement.
(G) Century and Borrower each agree to pay to Escrow Agent one-half the
fees and expenses charged or incurred by Escrow Agent in performing its duties
pursuant to this Agreement. The Escrow Agent shall receive $2,132.00 for its
services rendered as Escrow Agent pursuant to this Agreement.
(H) Century, Borrower and CCC agree to indemnify and hold Escrow Agent
harmless from any liability incurred by Escrow Agent providing services pursuant
to this Agreement not caused by the negligence or willful misconduct of Escrow
Agent.
<PAGE>
11. Opinion of Counsel of CCC and Borrower. Upon execution of this
--------------------------------------
Agreement, Borrower and CCC have caused its counsel to issue the opinion to
Century marked Exhibit "D", affixed hereto and by this reference made a part
hereof.
12. THE PARTIES HERETO STATE THAT EACH HAVE READ THIS AGREEMENT, HAVE BEEN
REPRESENTED BY LEGAL COUNSEL AND UNDERSTAND ITS TERMS AND FREELY AND VOLUNTARILY
SIGN THIS AGREEMENT ON THE DATE FIRST ABOVE WRITTEN.
IN WITNESS WHEREOF, the Parties have executed this Agreement effective on the
date first above mentioned.
CENTURY REALTY, INC.
BY: /s/ Bruce A. Endendyk
NAME: Bruce A. Endendyk
TITLE: Executive Vice President
BORROWER:
CAPITOL DEVELOPMENT OF ARKANSAS, INC.
BY: /s/ David R. Paes
NAME: David R. Paes
TITLE: Vice President
CCC:
CAPITOL COMMUNITIES CORPORATION
BY: /s/ David R. Paes
NAME: David R. Paes
TITLE: Vice President
<PAGE>
EXHIBIT 10.22
IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS
COUNTY DEPARTMENT, CHANCERY DIVISION
IN THE MATTER OF THE LIQUIDATION OF RESURE, INC. NO. 97CH01974
ORDER
THIS CAUSE COMING ON TO BE HEARD upon the Petition of the Liquidator for an
order approving a certain Debt Settlement and Release Agreement; the Court
having jurisdiction over the parties hereto and the subject matter hereof; the
Court having reviewed the pleadings filed herein and having heard counsel for
the Liquidator thereon, and the Court then being otherwise advised in the
premises;
IT IS ORDERED:
1. That the Debt Settlement and Release Agreement, and the Liquidator's
participation therein, which is the subject of the Liquidator's instant Petition
and attached thereto as Exhibit "A", be and the same is hereby approved in
accordance with Section 193 of the Illinois Insurance Code, 215 ILCS 5/193.
-----------------------
ENTERED
ENTERED ) CLERK OF THE CIRCUIT COURT
AURELIA PUCINSKI
OCT 24 1997
JUDGE Ellis E. Reid
Judge Presiding
Peter G. Gallanis
Dale A. Coonrod
Counsel to the Receiver
222 Merchandise Mart Plaza
Suite 1450
Chicago, Illinois 60654
(312) 836-9500
Attorney Code #16819
<PAGE>
IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS
COUNTY DEPARTMENT, CHANCERY DIVISION
) IN THE MATTER OF THE LIQUIDATION OF RESURE, INC.
) NO.97 CH 01974
PETITION FOR APPROVAL OF CERTAIN
DEBT SETTLEMENT AND RELEASE AGREEMENT
NOW COMES MARK BOOZELL, Director of Insurance of the State of Illinois
("Liquidator" or "Director"), in his capacity as the statutory and court
affirmed Liquidator of RESURE, INC. ("Resure"), by and through one of his
attorneys, and petitions this Honorable Court for an order approving the debt
settlement and release agreement set forth hereinbelow, and in support thereof
states as follows:
I. LIQUIDATION PROCEEDINGS
-----------------------
1. On February 27, 1997, the Circuit Court of Cook County, Illinois,
Chancery Division (the "Supervising Court") entered an Order of Liquidation With
A Finding of Insolvency as, to and against Resure pursuant to Article XIII of
the Illinois Insurance Code (the"Code"), 215 IL-CS 5/187, et seq. Said Order, by
-----------------------
its terms, authorized and directed the Director to take immediate possession and
control of the property, assets, business and affairs of Resure; to marshal and
liquidate the assets, business and affairs of Resure; and, to take such action
as the nature of the cause and the interests of Resure, its policyholders,
creditors and stockholders, or the general public may require.
<PAGE>
2. Pursuant to the Court's Order of Liquidation, and by operation of law,
the Director is vested with tide to all property, assets, contracts and rights
of action of Resure, in accordance with Section 191 of the Code, 215 IL-CS
----
5/191, and the Director is authorized, as Liquidator, to deal with the property,
assets, business and affairs of Resure and to sue and defend for Resure, or for
the benefit of Resure's policyholders and creditors, in the courts in his name
as the Liquidator of Resure, or in the name of the Resure.
3. Pursuant to his statutorily mandated duty to marshal the assets of
Resure for the benefit of the policyholders and creditors of Resure, the
Director, as Liquidator, has pursued, and continues to pursue, various Resure
assets, including the claims which are the subject of the Liquidator's instant
petition.
II. THE CLAIMS
----------
4. On or about September 11, 1995, prior to these receivership
proceedings, Resure entered into a certain Loan Agreement (the "Loan Agreement")
with AWEC Development Corporation ("AWEC")/1 /pursuant to which Resure loaned to
AWEC the principal sum of Three Million Five Hundred Thousand and No/100 Dollars
($3,500,000.00); said Loan Agreement being evidenced by, inter alia, a
Promissory Note, dated September 11, 1995, executed by AWEC, as Maker, payable
to the order of Resure, as Payee (the "Loan Note").
<PAGE>
5. The Loan Agreement and Loan Note are secured by, inter alia, a
Mortgage, dated effective September 11, 1995, executed and delivered by AWEC, as
Mortgagor, in favor of Resure, as Mortgagee, and recorded in the Real Estate
Records of Pulaski County, Arkansas on September 12, 1995 as Instrument No.95-
53327. The Mortgage has
1. On January 29,1996, AWEC Development Corporation changed its name to
Capitol Development of Arkansas, Inc. been modified and amended by duly executed
and recorded First and Second Amendments to Mortgage (collectively the "Loan
Mortgage") The Loan Mortgage places a first mortgage on a certain 701.03 acre
tract of unimproved land ("Parcel 1") and a junior second mortgage on a certain
409.73 acre tract of unimproved land ("Parcel 2"); both parcels being located in
the City of Maumelle, Pulaski County, Arkansas.
6. The principal outstanding balance of the Loan Note, as of September
30, 1997, is Three Million Five Hundred Thousand and No Dollars ($3,500,000.00),
and Capitol Development of Arkansas, Inc. ("Capitol Development")is currently in
default under the terms of the Loan Note (with interest thereon having been paid
only through June 30, 1996).
7. In or about September 11, 1995, prior to these receivership proceedings,
Resure entered into a certain Contribution Agreement (the "Contribution
Agreement") with AWEC, pursuant to which AWEC executed and delivered to Resure a
Non-Recourse Promissory Note, dated September 11, 1995, in the original
principal sum of Three
<PAGE>
Million Five Hundred Thousand and No/100 Dollars ($3,500,000.00) (the
"Contribution Note") in exchange for which Resure issued to AWEC a Subordinated
Surplus Debenture, dated September 11, 1995, in the original principal sum of
Three Million Five Hundred Thousand and No/100 Dollars ($3,500,000.00) (the
"Debenture").
8. The Contribution Agreement and Contribution Note are
secured by, inter alia, a Non-Recourse Mortgage, dated effective September 11,
1995, executed and delivered by AWEC, as Mortgagor, in favor of Resure, as
Mortgagee, and recorded in the Real Estate Records of Pulaski County, Arkansas
on September 12, 1995 as Instrument No.95-53328. The Non-Recourse Mortgage has
been modified and amended by a duly executed and recorded Modified and Restated
Non-Recourse Mortgage and a First Amendment to Modified and Restated Non-
Recourse Mortgage (collectively the "Contribution Mortgage"). The Contribution
Mortgage places a first mortgage lien on Parcel 2.
9. The principal outstanding balance of the Contribution Note, as of
September 30, 1997, is Three Million Five Hundred Thousand and No Dollars
(2) Capitol Development of Arkansas, Inc., an Arkansas corporation, was
formerly known as AWEC Development Corporation (see Footnote No.1).
<PAGE>
($3,500,000.00), and Capitol Development is currently in default under the terms
of the Contribution Note (with interest thereon having been paid only through
December 31, 1996).
10. By letter dated April 29, 1997, the Director, through counsel, advised
and duly notified Capitol Development that the Liquidator had determined and
declared that the Loan Agreement, Loan Note, Contribution Agreement and
Contribution Note, and each of them, were in default due to Capitol
Development's failure to make the required payments under those agreement; and,
further, that as a result thereof, there has been an "Event of Default" as
defined under the Loan Mortgage and Contribution Mortgage.
11. That Capitol Development and Capitol Communities Corporation ("CCC")3
have asserted certain claims against Resure in connection with the circumstances
surrounding the Loan Agreement, the Loan Note, the Loan Mortgage, the
Contribution Agreement, the Contribution Note, the Contribution Mortgage and the
Debenture. Capitol Development and CCC claim to have, inter alia, a legal right
to rescind the transaction involving the Contribution Agreement, Contribution
Note and Debenture.
12. That Capitol Development, CCC, Resure and the Liquidator (the
'Parties") desire to enter into an agreement to settle all of
3
Capitol Communities Corporation, a Nevada corporation, is a successor by
merger to AWEC Resources, Inc. and the sole shareholder of Capitol Development.
<PAGE>
Capitol Development's defaults; to settle all of Capitol Development's and CCC's
claims against Resure; and to resolve any and all other disputes that may now
exist between the Parties.
III. THE SETTLEMENT
--------------
13. Section 193(2) of the Code, 215 ILCS 5/193(2), authorizes the
----
Director, subject to the approval of the Court, to sell or compromise all debts
or claims owing to the company (Resure).
14. The Parties, through their respective counsel, have negotiated an
agreement for the settlement of all disputes in these regards as evidenced by
the Debt Settlement and Release Agreement (the "Settlement Agreement") attached
hereto and made a part hereof as Exhibit "A".
15. The Settlement Agreement is comprised of three basic elements; those
being:a)that Capitol Development shall honor its obligations under the Loan
Agreement and Loan Note; b) that, in return for certain consideration, the
Liquidator shall terminate the Contribution Agreement and Contribution Note, and
deliver the same to Capitol Development; and c) that Capitol Development shall
terminate the Debenture, and deliver the same to the Liquidator.
<PAGE>
16. More specifically, the Parties have agreed to the following terms
which are set forth in more detail in the Settlement Agreement:
A. Loan Agreement - Loan Note
--------------------------
(i) The amount of $525,460.00, presently being held by the Liquidator(4),
shall be applied as installment payments due and owing pursuant to the
Loan Agreement and Loan Note for payments of interest which were due
October 1, 1996; January 1, 1997; April 1, 1997; and October 1, 1997.
(ii) The Loan Agreement and Loan Note shall be modified to provide that the
entire principal balance shall become due and payable in full on
September 1, 1999 (acceleration of Loan Note).
(iii) The Liquidator shall release Parcel 2 from the encumbrance of the Loan
Mortgage.
B. Contribution Agreement - Contribution Note - Debenture
------------------------------------------------------
(i) Capitol Development and Resure shall terminate the Contribution
Agreement, Contribution Note and the Debenture.
(ii) The balance of the May Release Payment, after application to the Loan
Note payments (approximately $150,000.00) shall be retained, without
any restriction as to its use, by the Liquidator.
4 On or about May 16, 1997, Capitol Development sold to a third party
67.51 acres of land (part of Parcel 2). In order to obtain the necessary partial
releases of the liens created by the Loan and Contribution Mortgages, Capitol
Development delivered to the Liquidator the total sum of $803,174.91. Of this
amount, $128,074.91 was applied by the Liquidator to then unpaid interest due on
the Contribution Note and $675,100.00 (the "May Release Payment") was paid to
obtain the releases pursuant to the terms of the Contribution Mortgage; such May
Release Payment to he held, by the Liquidator, as collateral for the
Contribution Note pursuant to a certain Security Agreement dated September 11,
1995.
<PAGE>
(iii) As additional consideration to the Liquidator for entering into the
Settlement Agreement and for terminating the Contribution Agreement
and Contribution Note, Capitol Development will pay Resure a
developer's fee ("Developer's Fee") of Two Million and No/ l00)
Dollars ($2,000,000.00). The Developer's Fee shall be paid in the
amount of Two Thousand and No/100 Dollars ($2,000.00) for each single
family residential lot sold in Parcel 1 and Parcel 2. Capitol
Development's obligation to pay Resure the Developer's Fee on Parcel 1
and Parcel 2 shall be secured by a written amendment to the Loan
Mortgage ("Third Amendment To Mortgage") which shall be recorded
solely against Parcel 1. In the event that any portion of Parcel 1 is
sold prior to being subdivided into single family residential lots,
then the Developer's Fee shall be paid in the sum of Two Thousand
Eight Hundred Fifty Three an No/100 Dollars ($2,853.00) per acre. In
the event that any portion of Parcel 2 is sold prior to being
subdivided into single family residential lots, then the Developer's
Fee shall be paid in the sum of Five Thousand Eight Hundred Forty Four
and 20/100 Dollars ($5,844.20) per acre.
17. The Settlement Agreement will result in a full and final resolution of
all competing claims by and between the Parties.
18. By its terms, the closing of the Settlement Agreement and each of the
obligations, covenants and promises of the Liquidator and Capitol Development
thereunder are conditioned upon (i) the entry of an order from the Supervising
Court approving the terms of the Settlement Agreement; (ii) the recording of the
Third Amended Mortgage, and, (iii) the issuance of an amended title policy
insuring Resure's first lien against Parcel I in the amount of Five Million Five
Hundred Thousand and No/100 Dollars ($5,500,000.00),
<PAGE>
free from any and all prior liens, mortgages or other encumbrances.
19. The Liquidator believes that approval of the Settlement Agreement is
fair and equitable to the Parties, and is beneficial to the Resure Estate and
Resure's policyholders and creditors. The settlement of the subject claims will
save the expense and inconvenience of probable litigation between the Parties,
including the expense of the Liquidator's continued efforts to collect on the
Loan Note and Contribution Note, and if applicable, the expense of fliture
efforts to judicially foreclose on the collateral securing the same. By setding
these issues now, the Liquidator will also avoid the uncertainties of any trial
on the merits, and will recover substantial monies which may otherwise be
difficult to collect if, and when, the Liquidator might obtain a favorable
judgment at any such trial or otherwise.
20. The Liquidator hereby recommends to the Court that approval of the
Settlement Agreement is economically prudent and, therefore, in the best
interests of the Resure Estate, and Resure's policyholders and creditors.
<PAGE>
WHEREFORE, Mark Boozell, Director of Insurance of the State of Illinois, as
Liquidator of Resure, Inc., prays this Honorable Court enter an order approving
the terms of the Settlement Agreement and the Liquidator's participation
therein, for the reasons previously set forth hereinabove.
Respectfully submitted,
Mark Boozell
Director of Insurance of the State of Illinois, as
Liquidator of Resure, Inc.
BY: /s/ Dale A. Coonrod
One of His Attorneys
Peter G. Gallanis
Dale A. Coonrod
Counsel to the Receiver
222 Merchandise Mart Plaza
Suite 1450
Chicago, IL 60654
(312) 836-9500
Attorney Code #16819
<PAGE>
Exhibit A
DEBT SETTLEMENT
AND RELEASE AGREEMENT
This Debt Settlement and Release Agreement ("Agreement"), made effective as
of September 30, 1997, by and among Capitol Development of Arkansas, Inc., an
Arkansas corporation (formerly known as AWEC Development Corporation), (the
"Borrower"), Capitol Communities Corporation, a Nevada corporation (successor by
merger to AWEC Resources, Inc. and the sole shareholder of Capitol Development
of Arkansas, Inc.) ("CCC") and Mark Boozell, Director of Insurance of the State
of Illinois (the "Liquidator"), as liquidator for Resure, Inc. ("Lender"), an
Illinois corporation and syndicate on the Illinois Insurance Exchange. The
Borrower, the Lender and the Liquidator are sometimes collectively referred to
herein as the "Parties".
RECITALS
--------
WHEREAS, pursuant to a Loan Agreement between AWEC Development
Corporation and Lender dated effective September 11, 1995 (the "Loan
Agreement"), Lender loaned to AWEC Development Corporation the principal sum of
Three Million Five Hundred Thousand and No/100 Dollars ($3,500,000.00) (the
"Loan") evidenced by, among other things, a Promissory Note dated September 11,
1995 in the amount of Three Million Five Hundred Thousand and No/bO Dollars
($3,500,000.00) from AWEC Development Corporation payable to the order of
Lender; and
WHEREAS, the Loan is secured by, inter alia. a Mortgage (with Assignment of
----- ----
Leases and Rent securing Loan Note) executed and delivered by AWEC Development
Corporation as of September 11, 1995, and recorded in the Real Estate Records of
Pulaski County, Arkansas on September 12, 1995 as Instrument No.95-53327, as
modified by First Amendment to Mortgage (with Assignment of Leases and Rents,
securing Loan Note) executed September 18, 1995, and recorded in the Real Estate
Records of Pulaski County, Arkansas as Instrument No.95-72591, and as amended by
Second Amendment to Mortgage (With Assignment of Leases and Rents, Securing Loan
Note) executed September 18, 1995 recorded in the Real Estate Records of Pulaski
County, Arkansas as Instrument No.96-12169 (collectively the "Loan Mortgage"),
placing a first mortgage lien on a 701.03 Acre Tract of land ("Parcel 1" as more
particulary described in the attached Exhibit A) and a junior second mortgage on
---------
a 409.73 Acre Tract ("Parcel 2" as more particularly described in the attached
---------
Exhibit
- -------
<PAGE>
B) for that amount; and
- --
WHEREAS, the principal outstanding balance of the Loan as of September 30,
1997 is Three Million Five Hundred Thousand and No/100 Dollars ($3,500,000.00),
and Capitol Development of Arkansas, Inc. is currently in default under the
terms of the Loan (with interest thereon having been paid through June 30,
1996); and
WHEREAS, pursuant to a Contribution Agreement between AWEC Development
Corporation and Lender dated effective September 11, 1995 (the "Contribution
Agreement"), AWEC Development Corporation delivered to Lender a Non-Recourse
Promissory Note dated September 11, 1995 (secured by Parcel 2 as described
herein below) in the original principal sum of Three Million Five Hundred
Thousand and No/100 Dollars ($3,500,000.00) (the "Contribution Note") in
exchange for which the Lender issued to AWEC Development Corporation a
Subordinated Surplus Debenture in the original principal sum of Three Million
Five Hundred Thousand and No/100 Dollars ($3,500,000.00) dated September 11,
1995 (the "Debenture"); and
WHEREAS, the Contribution Note is secured by, inter alia, a Non-Recourse
----------
Mortgage (with Assignment of Leases and Rents securing Contribution Note)
executed and delivered by AWEC Development Corporation as of September 11, 1995,
and recorded in the Real Estate Records of Pulaski County, Arkansas on September
12, 1995, and recorded in the Real Estate Records of Pulaski County, Arkansas on
September 12, 1995 as Instrument No.95-53328, restated by a Modified and
Restated Non-Recourse Mortgage (with Assignment of Leases and Rents, securing
Contribution Note) dated effective September 18, 1995, and recorded in the Real
Estate Records of Pulaski County, Arkansas on December 13, 1995 as Instrument
No.95-72592, which was amended by the First Amendment To Modified and Restated
Non-Recourse Mortgage (With Assignment of leases and Rents, Securing
Contribution Note) recorded in the Real Estate Records of Pulaski County,
Arkansas on February 12, 1996 as Instrument No.96-12168 (the "Contribution
Mortgage"), placing a first mortgage lien on Parcel 2; and
WHEREAS, the principal balance of the Contribution Note as of September 30,
1997 is Three Million Five Hundred Thousand and No/100 Dollars ($3,500,000.00),
and Capitol Development of Arkansas, Inc. is currently in default under the
Contribution Note (with interest thereon having been paid through December 31,
1996); and
WHEREAS, pursuant to an Order of Liquidation with a Finding of Insolvency
entered on February 27, 1997 (the "Liquidation Order") by the Presiding Judge in
the Circuit Court of Cook County, Illinois, County
<PAGE>
Department, Chancery Division, in the case of PEOPLE OF THE STATE OF ILLINOIS.
--------------------------------
ex rel. MARK BOOZELL. DIRECTOR OF INSURANCE OF THE STATE OF ILLINOIS.
- ---------------------------------------------------------------------
Plaintiffs. v. RESURE. INC.. an Illinois Corporation and Syndicate on the
- -------------------------------------------------------------------------
Illinois Insurance Exchange. Defendant, Case No: 97 CH 01974 (the "Chancery
- --------------------------------------
Case"), the Liquidator was authorized and directed to take possession and
control of the property, assets, business and affairs of Lender and vested
Liquidator, by operation of law, with title to all property, assets, contracts
and rights of action of Lender, including, but not limited to, the Loan, the
Contribution Note, the Loan Mortgage and the Contribution Mortgage; and
WHEREAS, on May 16, 1997, Capitol Development of Arkansas, Inc. delivered
to the Liquidator the sum of Eight Hundred Three Thousand One Hundred Seventy-
four and 91/100 Dollars ($803,174.91) (the "Post-Liquidation Payment"), One
Hundred Twenty-eight Thousand Seventy-four and 91/100 Dollars ($128,074.91) of
which was applied by the Liquidator to then unpaid interest due on the
Contribution Note and Six Hundred Seventy-five Thousand One Hundred and No/100
Dollars ($675,100.00) (the "May Release Payment") of which was delivered to
obtain the release of 67.51 acres of land (the "Released Parcel") as more
particularly described in the attached Exhibit C from the Contribution Mortgage
------- -
and to be deposited and held as collateral in a Cash Collateral Account (the
"Collateral Account") for the Contribution Note pursuant to a Security Agreement
dated September 11, 1995; and
<PAGE>
WHEREAS, Borrower and CCC have asserted certain claims against Lender in
connection with the circumstances surrounding the Loan Agreement, the Loan, the
Loan Mortgage, the Contribution Agreement, the Contribution Note, the
Contribution Mortgage and the Debenture; and
WHEREAS, the Parties desire to enter into this Agreement to settle all of
the Borrower's defaults, all of the Borrower's and CCC's claims against Lender
and to resolve any and all other disputes that may now exist between the
Parties.
NOW, THEREFORE, in consideration of the above recitals, which by this
reference are incorporated herein, together with the mutual representations and
agreements set forth below, the Parties expressly agree as follows:
1. Termination of Contribution Agreement. At Closing, Borrower and Lender
----------- -- ----------------------
shall terminate the Contribution Agreement and the Debenture. Upon such
termination, the remaining obligations due Borrower by Lender pursuant to the
Debenture shall be deemed satisfied in full at the Closing by Borrower and the
remaining obligations due Lender and/or Liquidator by Borrower pursuant to the
Contribution Note after application of sums pursuant to Section 2(B) hereof
-----------
shall be deemed satisfied in full at the Closing by Lender and/or Liquidator. At
Closing, Liquidator shall mark "terminated" across the face of the Contribution
Note and deliver same to Borrower and Borrower shall mark "terminated" across
the face of the Debenture and deliver same to Liquidator.
2. Application of May Release Payment. At the Closing, the May Release
----------------------------------
Payment and all interest earned thereon shall be applied and, if applicable,
disbursed from any such collateral account established pursuant to the
Contribution Agreement by the Liquidator at Closing as follows:
(A) $525,460.00 shall be disbursed to Liquidator and applied as
installment payments due pursuant to the Loan for installments of interest due
October 1, 1996; January 1, 1997; April 1, 1997; July 1, 1997; and October 1,
1997
(B) The balance of the May Release Payment and all sums heretofore
earned in any such Collateral Account shall be retained by the Liquidator.
3. Developer's Fee Note. As additional consideration to Liquidator for
--------------------
entering into this Agreement, Borrower hereby agrees to pay Lender a developer's
fee of Two Million and No/100 Dollars ($2,000,000.00) (the "Developer's Fee").
The Developer's Fee shall be paid in the amount of Two Thousand and No/100
Dollars ($2,000.00) (the
<PAGE>
"Deferred Payment") for each lot sold in Parcel 1 and Parcel 2, less and except
the Released Parcel. Borrower covenants and agrees that Parcel 2, less and
except the Released Parcel, shall be developed into at least 1,000 single family
lots and that Parcel 1 shall be developed into at least 2,500 single family
lots. The Borrower's obligation to pay Lender the Developer's Fee on Parcel 1
and Parcel 2 shall be secured by a written amendment to the Loan Mortgage (the
"Third Amended Mortgage") in recordable form which shall be executed by
Borrower, delivered to Liquidator and recorded in the Real Estate Records of
Pulaski County at Closing. The Third Amended Mortgage shall be in substantially
the same form as Exhibit D affixed hereto and shall be recorded solely
---------
against Parcel 1.
In the event that any portion of Parcel 1 is sold prior to being subdivided
into single family residential lots, then the Deferred Payment shall be paid in
the sum of Two Thousand Eight Hundred Fifty Three and No/100 Dollars ($2,853.00)
per acre for property sold in Parcel 1, instead of Two Thousand and No/100
Dollars ($2,000.00) per lot. In the event that any portion of Parcel 2 is sold
prior to being subdivided into single family residential lots, then a Deferred
Payment shall be paid in the sum of Five Thousand Eight Hundred Forty Four and
20/100 Dollars ($5,844.20) per acre for property sold in Parcel 2, instead of
Two Thousand and No/100 Dollars ($2,000.00) per lot.
Borrower hereby agrees to pay Liquidator the Deferred Payment for the sale
of land or lots within Parcel 1 at the time of any such sale and to pay the
Liquidator the Deferred Payment for the sale of land or lots within Parcel 2 on
a quarterly basis. Borrower furthermore agrees to submit to Liquidator a written
repdrt (the "Report") of the lot sales in Parcel 2 on a quarterly basis,
regardless of whether any sales have taken place. Borrower shall deliver the
Report and the Deferred Payment due, if any, to Liquidator on April 15, July 15,
October 15 and January 15 of each year. Borrower shall cooperate with the
Liquidator in the Liquidator's attempts to confirm, whether by title commitment
or otherwise, the status of any sales within Parcel 2. Failure of Borrower to
make any Deferred Payment thirty (30) days after written notice to Borrower that
such payment is due shall constitute an event of default under the Loan
Mortgage, as amended.
Borrower shall pay Lender a late charge for any Deferred Payment not
received by Lender within 10 days after each calendar quarter in the amount of
five percent (5%) of the applicable amount due: such late charge shall apply
separately to each installment past due, but shall only be assessed once as to
each late payment. In addition, in the event of a default in the payment of the
Deferred Payment, the outstanding balance of the Deferred Payment shall bear
interest at the lesser of (i) fifteen percent (15%) per annum; or (ii) the
maximum rate permitted by applicable law to be charged for past due principal
and interest. The Lender agrees to provide Borrower with all reasonably
necessary releases for lots or land sold within Parcel 1, provided that Borrower
-------------
pays all of Lender's reasonably necessary expenses (excluding attorneys' fees)
connected therewith.
4. Modification of the Loan Note and the Environmental Indemnity. At
-------------------------------------------------------------
Closing, the Borrower and Liquidator shall execute an instrument pursuant to
which (i) the Loan shall be modified to provide that,
<PAGE>
notwithstanding any other provisions of the Loan, the entire principal balance
shall become due and payable in full on September 1, 1999, (ii) all other terms
and conditions of the Loan shall be confirmed, and (iii) the Parties'
Environmental Indemnity Agreement, dated September 11, 1995, shall be affirmed
and recertified. At Closing, Liquidator shall execute an instrument whereby
Liquidator waives any claims for default of the Loan for late payments which
have occurred prior to the Closing Date and applies the sums previously received
pursuant to Section 2(A) hereof.
-----------
5. Mutual Release. At Closing, the Borrower shall execute and deliver to
--------------
Liquidator an instrument which shall provide that Borrower releases and forever
discharges the Liquidator and Lender and their respective agents, employees,
officers, directors, servants, representatives, attorneys, successors and
assigns, from any and all causes of actions, suits, claims and demands of every
kind and character, known or unknown, without limitation, including any action
at law or in equity, which Borrower has or may ever have against the Liquidator
or Lender, provided, however, that such instrument shall not affect any rights
of Borrower and CCC to pursue causes of actions, suits, claims and demands of
every kind and character which Borrower and CCC may have or hold on account of
their own dealings with the Illinois Insurance Exchange, Lord Bissell & Brook,
Talon Re Holdings, Inc., Glenn M. Walker, FCAS MAAA and Schwartz, Furmm &
Miliman (but specifically excluding for such purpose, causes of actions, suits,
claims and demands which the Liquidator shall be entitled to bring on behalf of
all creditors). At Closing, Liquidator, on its behalf and on behalf of Lender,
shall execute and deliver to Borrower an instrument which shall provide that the
Liquidator and Lender shall release and forever discharge the Borrower and its
respective agents, employees, officers, directors, servants, representatives,
attorneys, predecessors, heirs, successors and assigns, from any and all causes
of actions, suits, claims and demands of every kind and character, known or
unknown, without limitation, including any action at law or in equity, which the
Liquidator or Lender have or may ever have against the Borrower, except for
Borrower's continuing obligations pursuant to this Agreement, the Loan
Agreement, Loan and Loan Mortgage (as amended).
6. Partial Release of Loan Mortgage and Full Release Contribution
--------------- -- ------------------------------ ------------
Mortgage. At Closing, the Liquidator shall release Parcel 2 from the encumbrance
- --------
of the Loan Mortgage and shall fully release the Contribution Mortgage. The
Liquidator agrees to execute on behalf of Lender and deliver to Borrower at
Closing such documentation as Borrower's and Liquidator's counsel shall
reasonably deem necessary to file~in the Real Estate Records of Pulaski County,
Arkansas, to evidence the release of Parcel 2 from the encumbrance of the Loan
Mortgage and the full release of the Contribution Mortgage.
7. Condition Precedent of this Agreement. The closing of this Agreement
------------------- -- ---- ---------
and each of the obligations, covenants and promises of Liquidator and Borrower
are expressly conditioned upon (i) the entry of an Order (the "Approval Order")
from the presiding Judge in the Chancery Case approving the terms of this
Agreement and authorizing Liquidator to close pursuant hereto on or before
October 31, 1997, (ii) the recording of the Third Amended Mortgage with the Real
Estate Records of Pulaski County and (iii) the issuance of an amended title
policy by Beach
<PAGE>
Abstract & Guaranty Company insuring Lender's first lien against Parcel 1 in the
amount of Five Million Five Hundred Thousand and No/100 Dollars ($5,500,000),
free from any and all prior liens, mortgages or other encumbrances. Liquidator
agrees to expeditiously petition the court in the Chancery Case and seek the
entry of the Approval Order.
8. Closing. The closing pursuant to this Agreement ("Closing") shall
-------
occur on the third business day after entry of the Approval Order (the "Closing
Date") at 11:00 o'clock a.m. at the offices of Beach Abstract & Guaranty
Company, 100 Center Street, Little Rock, Arkansas, or at such other time and
place as Liquidator and Borrower shall agree. At Closing, Borrower and
Liquidator shall exchange each of the documents and instruments provided herein,
take the actions provided herein and shall execute and deliver such other
instruments and agreements and take such other actions as each of the other
parties shall reasonably require in order to effect the terms of this Agreement.
9. Nature of Settlement. Settlement pursuant to this Agreement is being
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made by the Parties solely for the purpose of avoiding the expense and
inconvenience of litigation and shall not be construed as an admission on the
part of any of the Parties of any unlawful or wrongful conduct or of any
liability whatsoever as to any of the Parties, all of which is expressly denied.
10. Applicable Law. To the extent that it is not controlled by the laws of
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the United States of America, this Agreement shall be construed in accordance
with and governed by the laws of the State of Illinois.
11. Binding Effect. This Agreement shall apply to, inure to the benefit of
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and bind all the Parties hereto and their respective heirs, successors and
assigns.
12. Representation By Borrower. Borrower and CCC represent and warrant to
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Lender and Liquidator that as of September 30, 1997 and on the Closing Date:
(a) The execution, delivery and performance by Borrower and CCC of
this Agreement and the other agreements and instruments to be
delivered hereunder are within Borrower's and CCC's corporate powers,
have been duly authorized by all necessary corporate action of
Borrower and CCC, require (in respect of Borrower and CCC) no action
by or in respect of, or filing with, any governmental body, agency or
official and do not contravene, or constitute a default under, any
provision of law or regulation applicable to Borrower or CCC or of
Borrower's and CCC's certificates of incorporation or bylaws or of any
agreement, judgment, injunction, order, decree or other instrument
binding upon Borrower or CCC;
(b) Both immediately before and after giving effect to each of the
transaction contemplated hereunder, Borrower and CCC, (i) are and will
be able to pay their debts as they become due, (ii) have and will have
assets which have a present fair saleable value greater on a going-
concern basis than their probable liability on their debts as they
become absolute and matured, (iii) have and will have assets on a
going-concern
<PAGE>
basis which will have a fair value greater than the sum
of all their debts, and (iv) do not have unreasonably small capital
and is not engaged in business or transactions (or intend to be
engaged in any business or transactions) for which they have or will
have unreasonably small capital; and
(C) On the closing Date Parcel 1 will be free from all claims, liens,
security interests and encumbrances other than the Loan Mortgage and
unpaid real estate taxes which are not yet due and owing.
13. This Agreement may be executed in multiple counterparts, each of which
shall constitute an original and all of which together shall constitute one
instrument. Signatures on this Agreement sent by telecopy may be treated as
original signatures.
THE PARTIES HEREBY STATE THAT EACH HAVE READ
AGREEMENT, HAVE BEEN REPRESENTED BY LEGAL COUNSEL
UNDERSTAND ITS TERMS AND FREELY AND VOLUNTARILY SIGN
AGREEMENT ON THE DATE FIRST ABOVE WRITTEN.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement.
LIQUIDATOR:
MARK BOOZELL, Director of Insurance of the State of Illinois, as
liquidator for Resure, Inc., an Illinois corporation and syndicate on
the Illinois Insurance Exchange
By: /s/ Peter G. Gallanis
NAME: Peter G. Gallanis
TITLE: Special Deputy Receiver
BORROWER:
CAPITOL DEVELOPMENT OF ARKANSAS, INC.
By: /s/ David R. Paes
NAME: DAVID R. PAES
TITLE: VICE PRESIDENT
CCC:
CAPITOL COMMUNITIES CORPORATION
By: /s/ David R. Paes
NAME: DAVID R. PAES
TITLE: VICE PRESIDENT
