<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
June 28, 1999
Date of Report
(Date of Earliest Event Reported)
CAPITOL COMMUNITIES CORPORATION
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Nevada 0-23450 88-0361144
(State of Incorporation) (Commission File No.) (I.R.S. Employer Identification No.)
</TABLE>
25550 Hawthorne Boulevard, Suite 207, Torrance, CA 90505
(Address of Principal Executive Offices)
Registrant's Telephone Number: 310-375-2266
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On March 29, 1999, a Contribution Agreement was entered into between
Capitol Communities Corporation's subsidiary, Capitol Development of Arkansas,
Inc. (the "Company") and Trade Partners, Inc. ("Trade Partners"), a unaffiliated
third party, for the purpose of forming TradeArk Properties, LLC ("TradeArk
Properties"), a Michigan limited liability company to develop and sell real
estate. On June 1, 1999, an amendment to the Contribution Agreement was executed
by the parties extending the closing date (the "Closing Date") to no later than
June 30, 1999. On June 14, 1999, the Closing Date, the parties performed all of
the terms and obligations of the Contribution Agreement, including the
capitalization of TradeArk Properties.
Trade Partners, a Michigan corporation that acquires, holds and transfers
life insurance policies on persons with limited life expectancies, referred to
as viatical settlement contracts, contributed to TradeArk Properties viatical
settlement contracts that the parties determined had a discounted net present
value of $8,300,000. The capital contribution provides Trade Partners with a
64.84% membership interest in TradeArk Properties.
The Company contributed certain tracts of real property its owns in
Maumelle, Arkansas (the "Maumelle Property"), including 192 acres of single-
family lots; 19 acres of multi-family lots; 40 acres of commercial lots; and 6
acres of commercial lots, (collectively known as the "Contributed Maumelle
Property"). TradeArk Properties assumed $3,800,000 in debt collateralized by the
Contributed Maumelle Property. The fair market value of the Contributed Maumelle
Property was determined by the parties to be $8,300,000, which after the assumed
debt, represented a capital contribution by the Company of $4,500,000 or a
35.16% membership interest in TradeArk Properties.
Simultaneously on the Closing Date, and pursuant to the terms of the
Contribution Agreement, TradeArk Properties secured a $4,000,000 loan from New
Era Life Insurance Company ("New Era"). The loan has a fixed interest rate of
13% per annum, and matures in 30 months when all accrued interest and principal
is due. $3,156,581.92 of the New Era loan proceeds were used to retire loans
held by the Company and secured by part of the Contributed Property. The New Era
loan is secured by the Contributed Property and viaticals.
After legal fees and other closing costs, the Company received $930,713.18
from the New Era loan proceeds from TradeArk Properties. The Company intends to
use the proceeds for operating capital and expenses.
TradeArk Properties anticipates commencing the development and sale of
finished residential lots on part of the Contributed Property in September 1999.
On March 31, 1999, a Plan and Agreement for Corporate Separation
("Separation Plan") was entered into between the Company and Charlie
Corporation, a related party. On June 14, 1999, the parties executed a First
Amendment to the Plan and Agreement for Corporate Separation. Under the
2
<PAGE>
terms of the Separation Agreement, Charlie Corporation exchanged 2,839,689
shares of the Company's common stock for all of the issued and outstanding
capital stock in the Company's subsidiaries, Capitol Resorts, Inc. (the "Resort
Subsidiary"), and Capitol Resorts of Florida, Inc., (the "Florida Resorts
Subsidiary"). The exchange also included the Resort Subsidiary's solely-owned
interest in Capitol Club, Exchange Services, Capitol Resorts International and
Entry Resorts Marketing, and the Florida Resorts Subsidiary's solely-owned
interest in Capitol SB Development. Under the terms of the Separation Agreement,
Charlie Corporation assumed the liabilities, including $2,100,000 in related
debt, for the Resort Subsidiary and Florida Resorts Subsidiary, effective June
14, 1999.
With the exchange the Company disposed of its interest in approximately 36
acres of land and improvements near Disney World in Osceola County, Florida held
by Capitol SB Development, and the rights to a ground lease and improvements
referred to as the Ocean Palms Resort located in Pompano Beach, Florida. The
Ocean Palms Resort property consist of a 53 long term leasehold 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 parties determined that the fair market value of the stock in the
Resorts Subsidiary and the Florida Resorts was $3,344,987, and the fair market
value of the Company's stock was $3,344,987.
The Company is holding the 2,839,689 shares as treasury shares.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(A) and (b). The financial statements required to be filed with this Report are
not presently available. The Company will file the required financial statements
as an amendment to this Form 8-K, as soon as practical but not later than 60
days after the date of the filing of this Report.
(c) EXHIBIT
The following Exhibits are filed as part of this Report.
10.37. Contribution Agreement, dated March 29, 1999, between Capitol
Development of Arkansas, Inc., and Trade Partners, Inc.
10.38. Amendment to Contribution Agreement, dated June 1, 1999.
10.39. Plan And Agreement For Corporation Separation, dated March 31, 1999,
between Capitol Communities Corporation and Charlie Corporation.
3
<PAGE>
10.40. First Amendment To Plan And Agreement For Corporation Separation,
dated June 14, 1999.
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: June 25, 1999 CAPITOL COMMUNITIES CORPORATION
BY: /s/ Michael G. Todd
------------------------
Michael G. Todd
President and Chairman of
the Board
4
<PAGE>
EXHIBIT 10.37
CONTRIBUTION AGREEMENT
(Real Estate located in Pulaski County, Arkansas and Viaticals)
For good and valuable consideration, the receipt and sufficiency
of which are acknowledged, this Contribution Agreement (this
"Agreement") is made effective on the date indicated hereinbelow that
the last party executed this Agreement (the "Effective Date"), between
Capitol Development of Arkansas, Inc., an Arkansas corporation
("CDA"), and Trade Partners, Inc., a Michigan corporation ("Trade
Partners").
PREMISES:
A. Trade Partners is in the business of acquiring, holding and
transferring life insurance policies on persons with limited life
expectancies, referred to as viatical settlement contracts.
B. CDA owns several large tracts of land in Maumelle, Pulaski
County, Arkansas, referred to herein as the Maumelle Tracts.
C. Trade Partners and CDA desire to form a new limited liability
company pursuant to Arkansas law and having the name, TradeArk
Properties, LLC ("TradeArk"). Trade Partners and CDA shall be the
initial members of TradeArk and shall capitalize TradeArk by Trade
Partners contributing certain viatical settlement contracts described
herein and CDA contributing the Maumelle Tracts subject to certain
secured debt of CDA which will be paid by TradeArk.
WITNESSETH:
1. Conveyance of Maumelle Tracts. CDA agrees to contribute to
-----------------------------
TradeArk marketable fee simple title to the following described real
property and improvements, together with all easements, improvements
and appurtenant rights (hereafter collectively called the "Maumelle
Tracts");
1.1 Pine Ridge Tract. That approximately 192 acre tract of land
----------------
described on Exhibit 1.1, affixed hereto and by this reference made a
part hereof (hereinafter referred to as the "Pine Ridge Tract");
1.2 Rector Mountain Tract. That approximately 19 acre tract of
---------------------
land described on Exhibit 1.2, affixed hereto and by this reference
made a part hereof (hereinafter referred to as the "Rector Mountain
Tract");
<PAGE>
1.3 Tract D. That approximately 40 acre tract of land described on
Exhibit 1.3, affixed hereto and by this reference made a part hereof
(hereinafter referred to as the "Tract D Tract"); and
1.4 Tract E. That approximately 6 acre tract of land described on
Exhibit 1.4, affixed hereto and by this reference made a part hereof
(hereinafter referred to as the "Tract E Tract").
CDA and Trade Partners agree that the value of the Maumelle Tracts is
agreed to be Eight Million Three Hundred Thousand Dollars
($8,300,000.00) (the "Agreed Land Value"). TradeArk shall assume at
Closing debt of CDA associated with the Maumelle Tracts in the exact
amount of Three Million Eight Hundred Thousand Dollars ($3,800,000.00)
(the "Maumelle Assumed Debt"), which shall be identified by CDA at
Closing. Some of the Maumelle Assumed Debt is secured by mortgages
(the "Assumed Mortgages") on certain parcels of the Maumelle Tracts.
2. Conveyance of Viatical Settlement Contracts. Trade Partners
-------------------------------------------
agrees to contribute to TradeArk on the terms hereafter stated, the
Viatical Settlement Contracts for life insurance policies on
individuals with a limited life expectancy (the "Viatical Settlement
Contracts," "VSC's" or "Policies") which are described on Exhibit 2,
affixed hereto and by this reference made a part hereof. CDA and Trade
Partners agree that the value of the Viatical Settlement Contracts is
agreed to be Eight Million Three Hundred Thousand Dollars
-------
($8,300,000.00) (the "Agreed Viaticals Value").
3. Title, Survey And Environmental Assessment.
-------------------------------------------
3.1 Title Commitment. On or before 5:00 o'clock p.m., central
----------------
daylight savings time on the 5/th/ day after the Effective Date, CDA
will provide to the Trade Partners a preliminary binder for issuance
of an ALTA owner's title insurance policy (the "Title Commitment")
reflecting TradeArk as the proposed insured, in the amount equal to
the Agreed Land Value, issued by Beach Abstract & Guaranty Company, as
agent for Chicago Title Insurance Company, showing fee simple title to
the Maumelle Tracts to be in CDA, together with copies of all
documents listed therein as exceptions to title. The Title Commitment
shall include endorsements for zoning, non-imputation for any matters
known to CDA as exception to the matters known to insured and
undisclosed exception, contiguity (where applicable), access, tax
parcel number, and survey, and the Commitment shall be without the
"standard exceptions" that may be removed upon receipt of an owner's
affidavit
2
<PAGE>
and a survey certified to the rifle company. Trade Partners shall be
allowed ten (10) business days after receipt of all of the surveys
described below, the Title Commitment, and all exceptions to title
referenced in the Title Commitment to notify CDA in writing of any
objections to CDA's title to the Maumelle Tracts. Title objections may
also include any objections arising out of Trade Partners' review of
the surveys described below. Said objections shall be in writing or be
deemed waived. Objections may be determined by Trade Partners in the
sole discretion of Trade Partners. Any exception to title disclosed in
the Title Commitment and not objected to by Trade Partners and the
Assumed Mortgages shall be deemed a "Permitted Exception". Upon
receipt of any written objections, CDA shall promptly undertake to
correct the defects in title objected to by Trade Partners. If CDA is
unable to correct such defects within five (5) days after Trade
Partners' receipt of any written objections to rifle, Trade Partners
will have the option to waive such defect or terminate this Agreement,
in which event neither party shall have any further rights or
obligations hereunder. If the rifle binder discloses judgments,
bankruptcies or other exceptions against other persons having names
the same as or similar to that of CDA, CDA, on request, shall deliver
to Trade Partners and the title company affidavits showing that such
judgments, bankruptcies or other exceptions are not against CDA. CDA
shall also deliver any affidavits and documentary evidence required by
the title company to eliminate all exceptions other than the Permitted
Exceptions appearing in the title binder.
3.2 Title Policy. On the Closing Date, CDA shall, at CDA's sole
------------
cost and expense, provide TradeArk with an owner's policy of title
insurance on the parcels of the Maumelle Tracts then being conveyed
pursuant to the Title Commitment.
3.3 Survey. On or before 5:00 o'clock p.m. central daylight
savings time on the 15/th/ day after the Effective Date, CDA shall
deliver to Trade Partners current ALTA-ACSM surveys of the Maumelle
Tracts certified to TradeArk and the title company, with the signature
and seal of a Registered Land Surveyor for the State of Arkansas
showing all easements affecting the land, the relation of the land to
public thoroughfares for access purposes, the location of all
buildings, and improvements and legal description compatible with
Exhibits 1.1, 1.2, 1.3 and 1.4, and sufficient to convey title to the
Maumelle Tracts.
3.4 Environmental Assessments. Prior to execution of this
-------------------------
Agreement, CDA has, at CDA's sole cost and expense, delivered to Trade
Partners new or updated Phase I environmental site assessments for the
Maumelle Tracts prepared by an environmental consultant, which are
reasonably acceptable to Trade Partners.
3
<PAGE>
4. Representations and Warranties of CDA. To induce Trade
-------------------------------------
Partners to enter into this Agreement, CDA makes the following
representations and warranties, each of which is material and relied
upon by Trade Partners:
4.1 Authorization. CDA is an Arkansas corporation which is (i)
-------------
duly organized, validly existing and in good standing under the laws
of the State of Arkansas, (ii) has the power and authority to
contribute and convey the Maumelle Tracts; and (iii) prior to the
Closing, shall have taken all actions required for the consummation of
the transactions contemplated by this Agreement, or any other document
delivered or to be delivered in connection with this Agreement;
4.2 Title. CDA is the sole owner of good, fee simple,
-----
unencumbered, marketable title to all of the real property to be
contribute to TradeArk under this Agreement, subject only to the liens
and encumbrances expressly stated in the Title Commitment, and those
to be satisfied at or prior to Closing.
4.3 No Contract Violations. The performance of the obligations of
----------------------
CDA under this Agreement will not violate any contract, document,
order, or judgment applicable to CDA.
4.4 No Litigation. There are no claims, litigation, or
-------------
proceedings, pending, or, to the best of CDA's knowledge after due
inquiry, threatened against the Maumelle Tracts.
4.5. No Transfer. CDA will not transfer, lease or otherwise
-----------
encumber the Maumelle Tracts prior to Closing.
4.6. No Improvements. No improvements, repairs or other
---------------
construction has occurred on the Maumelle Tracts within 120 days prior
to the effective date of this Agreement.
4.7. No Leases or Contracts. There are no written or oral leases
----------------------
or occupancy agreements for any space on the Maumelle Tracts. There
are no contracts or other agreements (other than as set forth in the
Title Commitment) that could be binding on the Maumelle Tracts, except
for a development agreement which CDA has entered with The Hathaway
Group for the development of an office building on approximately five
(5) acres of the Tract D Tract.
4
<PAGE>
4.8. No Law Violations. There are not now outstanding, with
-----------------
respect to the Maumelle Tracts, any notices of any uncorrected
violations of any laws, statutes, ordinances, roles or regulations.
4.9. No Condemnation. No condemnation proceedings or eminent
---------------
domain proceedings are now pending or, to the best of Seller's
knowledge, after due inquiry, contemplated against the Maumelle
Tracts.
4.10. No Assessments. No improvements have been installed or, to
--------------
the best of CDA's knowledge, after due inquiry, are contemplated which
could give rise to a special assessments against the Maumelle Tracts.
4.11. Utility Availability. To the best of CDA's knowledge, after
due inquiry, all water, sewer, gas, electricity, oil, telephone, cable
and other utilities required for the development of the Maumelle
Tracts, either enter the Maumelle Tracts through adjoining public
streets, or if they pass through adjoining private land, do so in
accordance with legal, valid and enforceable permanent public or
private easements which will inure to the benefit of Trade Partners.
4.12. Environmental Compliance. For purposes of this paragraph,
------------------------
Hazardous Material shall mean asbestos, asbestos-containing materials,
polychlorinated biphenyls (PCBs), petroleum products and any other
hazardous, dangerous or toxic materials, wastes and substances which
are defined, determined or identified as such in any federal, state or
local laws, roles, regulations, ordinances, orders, codes or statutes,
in each case as amended including, without limitation, the Resource
Conservation and Recovery Act (42 U.S.C. (S) 6901 et seq.), Safe
Drinking water Act (42 U.S.C. (S) 3000(f) et seq.), Toxic Substances
Control Act (15 U.S.C. (S) 2601 et seq.,), Clean Air Act (42 U.S.C.
(S) 7401 et seq.), Comprehensive Environmental Response, Compensation
and Liability Act (42 U.S.C. (S) 9601 et seq.) and any law, statute,
regulation, role or ordinance of the State in which the Premises is
located and any other governmental entity with jurisdiction over the
Premises or any part thereof, concerning such hazardous, special or
toxic materials, wastes or substances or any judicial or
administrative interpretation of such laws, rules or regulations (all
of the foregoing being herein collectively called "Environmental
Laws"). Except as disclosed on Exhibit 4.12 attached hereto, to the
best knowledge of CDA'
(1) The Maumelle Tracts are and at all times have been in
compliance with all Environmental Laws;
5
<PAGE>
(2) No notice, demand, claim or other communication has been
given to or served on CDA or on previous owners of the Maumelle
Tracts from any entity, governmental body or individual claiming
any violation of any of the Environmental Laws or demanding
payment, contribution, indemnification, remedial action, removal
action or any other action or inaction with respect to any actual
or alleged environmental damage or injury to persons, property or
natural resources, and no basis for any of the foregoing exists;
(3) No underground storage tanks are or ever were located on
the Maumelle Tracts;
(4) The soil, surface water and ground water of, under on or
around the Maumelle Tracts are free from any Hazardous Material;
(5) The Maumelle Tracts have never been used for or in
connection with the manufacture, refinement, treatment, storage,
generation, transport or hauling of any Hazardous Material in
excess of levels permitted by applicable Environmental Laws or
the disposal of any such material;
(6) No asbestos or asbestos-containing materials have been
installed, used or incorporated into or disposed of on the
Maumelle Tracts;
(7) No PCBs are or ever have been located on, in or used in
connection with the Maumelle Tracts; and
(8) No investigation, administrative order, administrative
order by consent, consent order, agreement, litigation, or
settlement is proposed or in existence or threatened or
anticipated, with respect to or arising from the presence of any
Hazardous Material or the transport of Hazardous Material with
respect to the Maumelle Tracts.
4.13 Subdivisions. The preliminary plat approved for the Pine
------------
Ridge Tract is in compliance with applicable laws and ordinances. CDA
is not aware of any legal or other matters that could interfere with
the construction of street improvements in the subdivisions or the
sale of lots in the subdivisions. CDA is not aware of any legal or
other impediments
6
<PAGE>
to the development of the other residentially-zoned Maumelle Tracts as
residential subdivisions.
5. Right of Termination by Trade Partners. Without limiting any
--------------------------------------
of the fights of Trade Partners provided for elsewhere in this
Agreement, it is agreed that the obligation of Trade Partners to close
under this Agreement is conditioned upon the accuracy of all of CDA
warranties and representations and the due compliance by CDA with all
of its agreements set forth in this Agreement. If on the Closing Date,
Trade Partners determines that any of CDA representations or
warranties is untrue in any material respect, or if CDA has not
complied in all material respects with any of CDA agreements,
covenants or obligations in this Agreement, then Trade Partners may
elect to terminate this Agreement by notice given to the CDA, in which
event neither CDA nor Trade Partners shall have any further fights or
obligations hereunder. CDA's representations and warranties shall not
merge with the contract and shall survive the Closing of this
Agreement.
6. Indemnity For CDA's Breach. In the event the transaction set forth
--------------------------
in this Agreement is consummated, CDA agrees to indemnify Trade
Partners and hold Trade Partners harmless and defend Trade Partners
from and against any and all loss, cost, claims, liabilities, damages
and expenses, including, without limitation, reasonable attorneys'
fees, arising as the result of a breach of any material
representations, warranties, covenants, agreements or obligations of
the Seller set forth in this Agreement. CDA's covenants pursuant to
this Section 6 shall not merge with the contract and shall survive the
Closing of this Agreement.
7. Representations and Warranties of Trade Partners. To induce CDA
-------------------------------------------------
to enter into this Agreement, Trade Partners makes the following
representations and warranties, each of which is material and relied
upon by CDA:
7.1 Authorization. Trade Partners is a corporation which (i) is
-------------
duly organized, validly existing and in good standing under the laws
of the State of Michigan, (ii) has the power and authority to
contribute and convey the Viatical Settlement Contracts; and (iii)
prior to the Closing, shall have taken all actions required for the
consummation of the transactions contemplated by this Agreement, or
any other document delivered or to be delivered in connection with
this Agreement;
7.2 Ownership of Viaticals. On the Closing Date, Trade Partners
----------------------
will be the owner of all beneficial interests in the Viatical
Settlement Contracts and shall furnish to
7
<PAGE>
CDA evidence, representations and warranties of such ownership at
Closing, whereupon all such beneficial interests shall be conveyed to
TradeArk in such a manner as is satisfactory to both Trade Partners
and CDA.
7.3 Payment of Premiums for Policies. Trade Partners hereby
--------------------------------
represents and warrants to CDA that at Closing all past premiums due
on the Policies have been fully and timely paid and Trade Partners
hereby covenants and agrees with CDA that all premiums on the Policies
shall be fully and timely paid in the future at Trade Partner's
expense.
8. Right of Termination by CDA. Without limiting any of the
---------------------------
fights of the CDA provided for elsewhere in this Agreement, it is
agreed that the obligation of the CDA to close under this Agreement is
conditioned upon the accuracy of all of the Trade Partners' material
warranties and representations and the due compliance by the Trade
Partners with all of its agreements set forth in this Agreement. If on
the Closing Date, the CDA determines that any of Trade Partners'
representations or warranties is untrue and in any material respect,
or if Trade Partners has not complied in all material respects with
any of the Trade Partners' material agreements, covenants or
obligations in this Agreement, then CDA may elect to terminate this
Agreement by notice given to Trade Partners, in which event neither
CDA nor Trade Partners shall have any further rights or obligations
hereunder. Trade Partners' representations and warranties shall not
merge with the contract and shall survive the Closing of this
Agreement.
9. Indemnity For Trade Partners' Breach. In the event the
------------------------------------
transaction set forth in this Agreement is consummated, Trade Partners
agrees to indemnify CDA and hold CDA harmless and defend CDA from and
against any and all loss, cost, claims, liabilities, damages and
expenses, including, without limitation, reasonable attorneys' fees,
arising as the result of a breach of any material representations,
warranties, covenants, agreements or obligations of Trade Partners set
forth in this Agreement. Trade Partners' covenants pursuant to this
Section 9 shall not merge with the contract and shall survive the
Closing of this Agreement.
10. Tax Prorations. The following items shall be apportioned as of
--------------
11'59 p.m. on the day immediately preceding the Closing Date: real
estate taxes, including general taxes and special improvement district
charges, due and payable prior to and accrued with regard to the year
in which the Closing occurs; the general real estate taxes for the
year of Closing so prorated (billed in arrears in the year following
the year of Closing) will be deemed to be equal to the amount of the
general real estate taxes assessed for the year immediately
8
<PAGE>
preceding the year in which the Closing occurs, and the proration
shall be based on that AMOUNT.
11. Closing and Closing Documents.
-----------------------------
11.1 Closing and Closing Date. The closing (the "Closing") of the
------------------------
transactions contemplated hereby shall, subject to the provisions of
this Agreement, occur effective March 31, 1999, unless CDA and Trade
Partners agree to an earlier date, provided that all documents to
effect the closing transfer shall be completed and delivered in
escrow, pursuant to terms acceptable to both CDA and Trade Partners,
for final delivery upon completion of all closing matters on or before
April 30, 1999. At the Closing, CDA shall transfer to TradeArk title
to the Maumelle Tracts, subject to the Assumed Mortgages and Trade
Partners shall transfer to TradeArk those Viatical Settlement
Contracts referred to in Section 2.
11.2 CDA's Closing Obligations. On the Closing Date, CDA shall
-------------
deliver and perform the following items:
(a) To TradeArk, the general warranty deeds (the "Deeds") in
recordable form which is marked Exhibit 11.2(a) and affixed
hereto, conveying the Maumelle Tracts to TradeArk then being
conveyed free and clear of all liens and encumbrances except the
Permitted Encumbrances;
(b) To TradeArk, an affidavit in a form acceptable to the
title insurance company certifying that the Maumelle Tracts then
being conveyed arc free from claims for mechanic's, materialman's
and laborer's liens;
(c) To Trade Partners, appropriate resolutions from the
directors and shareholders (if required) of CDA authorizing the
transactions contemplated hereby and the execution and delivery
of all of the documents executed in connection with this
Agreement, and an opinion of legal counsel for CDA confirming due
authorization;
(d) To Trade Partners, a certificate of CDA dated as of the
Closing Date certifying that all of CDA's representations and
warranties set forth in this Agreement remain true as of the
Closing Date, or if not,
9
<PAGE>
specifying the respect in which such representation or warranty
is no longer true,
(e) CDA shall satisfy each requirement of the Title
Commitment as to the parcels of the Maumelle Tracts then being
conveyed;
(f) To TradeArk, the policy of title insurance issued
pursuant to the Title Commitment; and
(g) Such other documents as may be reasonably required by
Trade Partners or TradeArk to effectuate the conveyance of the
Maumelle Tracts.
11.3 Trade Partners' Closing Obligations. On the Closing
-----------------------------------
Date, Trade Partners shall deliver and perform the
following items'
(a) To TradeArk, those documents necessary to transfer to
TradeArk Trade Partners' ownership of the units in the Trust
applicable to the Viatical Settlement Contracts described on
Exhibit 2. The Trust shall include provisions acceptable to CDA
and Trade Partners to ensure that (i) the trustee of the Trust
has no discretion as to its actions but follows only the
directives of TradeArk or its assignees, and (ii) the policies
are not subject to the claims of any creditors of the Trust
(other than creditors of TradeArk).
(b) To TradeArk and CDA, a third-party mortality profile
issued by American Viatical Services of each person with a
limited life expectancy who is insured by the Policies whose
benefits are conveyed pursuant to the Funding Agreement, which
report must have been issued within six (6) months prior to the
date of Closing;
(c) To TradeArk and CDA, copies of the Policies;
(d) To CDA, satisfactory collateral or assurances as CDA and
Trade Partners shall reasonably approve, securing or assuring the
obligations of Trade Partners to pay premiums due on the
Policies; and
10
<PAGE>
(e) An agreement between Trade Partners, TradeArk and CDA,
in form reasonably acceptable to Trade Partners and CDA,
obligating Trade Partners to arrange for the payment of the
premiums of the Viatical Settlement Contracts, the tracking of
the viators, the filing of a claim for payment of death benefits,
and the payment of the death benefits to TradeArk.
(f) Funding for a loan to TradeArk in an amount necessary to
satisfy in full the Maumelle Assumed Debt and cause TradeArk to
satisfy the Assumed Debt in full at Closing.
12. Costs, Brokers and Termination.
------------------------------
12.1 CDA Costs. CDA will pay the following costs' CDA's
---------
attorneys' fees, the cost of the surveys and the environmental
assessments all abstracting costs, costs incurred in issuing the Title
Commitment (including any search charges and service fee and the title
insurance policy issued pursuant to the Commitment), one-half of the
revenue stamps, and filing fees due with respect to the recording of
any mortgage satisfactions or releases of any liens.
12.2 Trade Partners' Costs. Trade Partners will pay the following
---------------------
costs' Trade Partners' attorneys' fees, costs incurred in connection
with Trade Partners' due diligence investigation, any premium on any
mortgagee's policy of title insurance insuring Trade Partners' lender,
one-half of the revenue stamps and the fees for recording the Deeds.
12.3 Brokers; Indemnity. Each of Trade Partners and CDA represent
------------------
and warrants to the other that neither it nor its agents, officers or
employees, have entered into any agreement, engaged, used the services
of or otherwise dealt with any broker or real estate agent in
connection with this transaction, provided, however, (i) CDA has
entered into an agreement with Commercial Mortgage Underwriters, Inc.,
a California corporation, pursuant to which CDA is obligated to pay a
broker's fee to Commercial Mortgage Underwriters, Inc., and (ii)
Christine Zmudka, a principal of Trade Partners, is a real estate
broker, doing business as "Resource Realty Exchange Group," licensed
under the law of the State of Michigan. CDA and Trade Partners agree
to indemnify and hold each other harmless and defend each other from
and against any claim, loss, damage and liability, including without
limitation reasonable attorneys' fees resulting from the claims of any
broker or real estate agent if there is a breach of the foregoing
warranty and representation
11
<PAGE>
by the party against whom indemnification is sought. The provisions of
this Section shall survive the Closing hereunder.
13. Condemnation. If, prior to the Closing Date, all or any
------------
portions of the Maumelle Tracts are taken by eminent domain (or is the
subject of a pending or contemplated taking which has not been
consummated, CDA shall notify the Trade Partners of such fact and
Trade Partners shall have the option (which option shall be set forth
in a notice from Trade Partners to CDA given not later than five (5)
business days after receipt of CDA's notice):
(a) To terminate this Agreement, in which event neither
party shall have any further rights or obligations
hereunder; or
(b) Acquiesce in the conveyance to TradeArk of title to
the Maumelle Tracts (other than the portion so taken)
without any abatement of the Agreed Land Value, in which
event CDA shall assign and mm over to TradeArk at the
Closing, and TradeArk shall be entitled to receive and keep,
all amounts awarded or to be awarded as the result of the
taking.
If Trade Partners does not select one of the options within the
time indicated, Trade Partners shall be deemed to have elected
subsection 13(b) hereof
14. Conditions to Obligations of Trade Partners. The obligations
-------------------------------------------
of Trade Partners under this Agreement shall be subject to the
following conditions, any of which may be waived by Trade Partners'
14.1 Representations and Warranties Tree at Closing. Trade
----------------------------------------------
Partners shall not have discovered any material error, misstatement or
omission in the representations and warranties made by the CDA in
Section 4 hereof; the respective representations and warranties made
by the CDA herein shall be deemed to have been made again at and as of
the time of the applicable Closing and shall then be tree in all
material respects; CDA shall have performed and complied in all
material respects with all covenants, agreements and conditions
required by this Agreement to be performed or complied with by them at
or prior to the applicable Closing Date; and Trade Partners shall have
received a certificate, dated as of the Closing Date and providing to
the effect set forth in this Section 14.1.
12
<PAGE>
14.2 Consents. CDA shall have obtained and delivered to Trade Partners
--------
written consents or approvals of all persons or entities whose consent or
approval is required to consummate the transactions contemplated herein.
14.3 Delivery, of Closing Documents. CDA shall have delivered to Trade
------------------------------
Partners and TradeArk each of the closing documents listed and set forth herein,
together with any additional documents which Trade Partners may reasonably
request in writing to effect the transactions contemplated herein.
14.4 Financing. TradeArk shall have received a binding financing commitment
---------
on terms and conditions acceptable to Trade Partners for the transactions
contemplated by this Agreement on or before the Final Closing.
14.5 "Due Diligence" Period. Trade Partners shall be entitled to make any
---------------------
inspections, investigations, testing or other analysis of all or any portion of.
the Maumelle Tracts. CDA expressly authorizes Trade Partners to enter onto the
Maumelle Tracts for the purposes of the foregoing investigations. Trade Partners
shall have until 5:00 p.m.E.S.T., on the tenth day after the Effective Date (the
"Due Diligence Period") to undertake the foregoing investigations; however, if
the tenth day is not a business day, the Due Diligence Period shall be extended
until 5'00 p.m.E.S.T, of the first business day following the tenth day. CDA
shall have the right to undertake its due diligence with regard to the Viatical
Settlement Contracts during the Due Diligence Period. If Trade Partners
determines, in its sole discretion, that it is not satisfied with the Maumelle
Tracts or if CDA determines, in its sole discretion, that it is not satisfied
with the Viatical Settlement Contracts, the dissatisfied party may, by written
notice to the other sent prior to the expiration of the Due Diligence Period,
terminate this Agreement, and thereafter, neither party shall have any
obligations under this Agreement.
15. Conditions to Obligations of CDA. The obligations of CDA under this
--------------------------------
Agreement, shall be subject to the following conditions, any of which may be
waived by CDA:
15.1 Representations and Warranties True at Closing. CDA shall not have
----------------------------------------------
discovered any material error, misstatement or omission in the representations
and warranties made by the Trade Partners in Section 7 hereof, the respective
representations and warranties made by the Trade Partners herein shall be deemed
to have been made again at and as of the time of the applicable Closing and
shall then be true in all material respects; Trade Parmers shall have performed
and complied in all material respects with all covenants, agreements
13
<PAGE>
and conditions required by this Agreement to be performed or complied
with by them at or prior to the applicable Closing; and CDA shall have
received a certificate, dated as of the applicable Closing Date and
providing to the effect set forth in this Section 15.1.
15.2 Consents. Trade Partners shall have obtained and delivered to
--------
CDA written consents or approvals of all persons or entities whose
consent or approval is required to consummate the transactions
contemplated herein.
15.3 Delivery of Closing Documents. Trade Partners shall have
-----------------------------
delivered to CDA and TradeArk each of the closing documents listed and
set forth herein, together with any additional documents which CDA may
reasonably request in writing to effect the transactions contemplated
herein.
15.4 Financing. TradeArk shall have received a binding financing
commitment on terms and conditions acceptable to CDA for the
transactions contemplated by this Agreement on or before the Final
Closing
16. TradeArk Organization; Operating Agreement. The obligations
------------------------------------------
of CDA and Trade Partners, under this Agreement, shall be subject to
CDA and Trade Partners organizing TradeArk prior to Closing as a
manager managed limited liability company under the laws of the state
of Arkansas and prior to Closing entering into an operating agreement
(the "Operating Agreement") for TradeArk. Among other provisions, the
Operating Agreement shall provide' (i) that CDA shall have an initial
capital account in TradeArk in the mount of Four Million Five Hundred
Thousand Dollars ($4,500,000.00) and shall have a 35.16% interest in
TradeArk upon contribution of the Maumelle Tracts and the assumption
by TradeArk of the Maumelle Assumed Debt; (ii) that Trade Partners
shall have an initial capital account in TradeArk in the amount of
Eight Million Three Hundred Thousand Dollars ($8,300,000.00) and shall
have a 64.84% interest in TradeArk upon contribution of the Viatical
Settlement Contracts to TradeArk; (iii) that the day-to-day
development activities of TradeArk shall be managed by a manager
selected by a majority of the member interests in TradeArk; (iv) that,
without unanimous approval of all the members of TradeArk, neither the
Manager nor any Member shall amend the Operating Agreement, sell any
assets to a party related to or controlled by any Member or the
Manager, enter into any employment agreement with any person or
contract with any company related to, controlled by or owning any
interest in any member of TradeArk, sell any asset for less than the
minimum sale price of said assets established by the members of
TradeArk from time to time.
14
<PAGE>
17. Miscellaneous.
--------------
17.1 Notices.
--------
(a) All notices, demands or requests made pursuant to,
under or by virtue of this Agreement must be in writing and
mailed to the party to which the notice, demand or request is
being made by postage, prepaid, certified or registered mail,
remm receipt requested, as follows:
TO CDA: Michael G. Todd
Capitol Communities Corporation
25550 Hawthorne Boulevard, Suite 207
Torrence, CA 90505
Telecopier: (310)375-3941
WITH A COPY TO: G. Robert Hardin
Hardin & Grace, P.A.
410 West Third Street, Suite 200
Little Rock, AR 72201
Telecopier: (501) 376-6337
TO TRADE
PARTNERS: Trade Partners, Inc.
Suite 570, Grand Plaza Place
220 Lyons Court, NW
Grand Rapids, MI 49503
Atto: Thomas J. Smith, President
Telecopier: (616) 456-9390
WITH A COPY TO: Jonathan W. Anderson
Varnum, Riddering, Schmidt & Howlett, LLP
Bridgewater Place
P.O. Box 352
Grand Rapids, MI 49501-0352
Telecopier: (616) 336-7000
15
<PAGE>
(b) Any such notice, demand or request shall be deemed to
have been rendered or given on the date of mailing.
(c) Notice of any address change shall be given in accordance
with the provisions of this Section.
17.2 Entire Agreement. This Agreement and the Exhibits attached
----------------
hereto contain all of the terms agreed upon between the parties with
respect to the subject matter hereof and supersedes any and all prior
written understandings. All provisions of this Agreement shall survive
closing.
17.3 Amendments. This Agreement may not be changed, modified or
----------
terminated except by an instrument executed by the parties hereto.
17.4 Waiver. No waiver by either party of any failure or refusal
------
of the other party to comply with any of its obligations shall be
deemed a waiver of any other or subsequent failure or refusal so to
comply.
17.5 Successors and Assigns. This Agreement shall be binding upon
----------------------
and shall insure to the benefit of the parties hereto and their
respective successors and assigns. Trade Partners may assign its
interest in this Agreement.
17.6 Section Headings. The headings of the various Sections of
----------------
this Agreement have been inserted only for the purposes of
convenience, and are not part of this Agreement and shall not be
deemed in any manner to modify, explain, qualify or restrict any of
the provisions of this Agreement.
17.7 Governing Law. This Agreement shall be governed by and in
-------------
accordance with the laws of the State of Arkansas applicable to
contracts made and to be performed wholly within that State.
17.8 Counterparts. This Agreement may be executed in counterparts
------------
as if each party executed one document.
17.9 Exhibit List. The following exhibits are attached to this
------------
Agreement and incorporated by reference:
16
<PAGE>
Exhibit 1.1 - Pine Ridge Tract
Exhibit 1.2 - Rector Mountain Tract
Exhibit 1.3 - Tract D Tract
Exhibit 1.4 - Tract E Tract
Exhibit 2 - Description of the Viatical Settlement
Contracts.
Exhibit 4.12 - Environmental Matters Known to CDA.
Exhibit 11.2(a) - Form of Warranty Deed
IN WITNESS WHEREOF, the parties have executed this Agreement on
the dates indicated hereinbelow.
CAPITOL DEVELOPMENT OF ARKANSAS, INC.
DATE OF EXECUTION
3/29/99 By: /s/ Michael G. Todd
President
TRADE PARTNERS, INC.
DATE OF EXECUTION:
By: /s/ Thomas J. Smith
3/29/99 President
<PAGE>
EXHIBIT 10.38
AMENDMENT TO
CONTRIBUTION AGREEMENT
(Real Estate located in Pulsaki County, Arkansas and Viaticals)
For good and valuable consideration, the receipt and sufficiency of which
are acknowledged, this Amendment to Contribution Agreement (this "Amendment") is
made effective on the date indicated hereinbelow that the last party executed
this Agreement (the "Effective Date"), between Capitol Development of Arkansas,
Inc., an Arkansas corporation ("CDA"), and Trade Partners, Inc., a Michigan
corporation ("Trade Partners").
RECITALS:
A. Trade Partners and CDA entered into a Contribution Agreement, dated
effective,March 29, 1999 (the "Contribution Agreement"), which by its terms
required a closing effective March 31, 1999, with all closing matters to be
finally delivered on or before April 15, 1999.
B. As of the effective date of this Amendment, all closing matters have
not been finalized and the parties desire to organize TradeArk contemporaneously
herewith by filing the Articles of Organization marked Exhibit "A", affixed
hereto and by this reference made a part hereof (the "Articles"), and by
executing the Operating Agreement for TradeArk marked Exhibit "B", affixed
hereto and by this reference made a part hereof (the "Initial Operating
Agreement"), and then partially capitalize TradeArk pursuant to the Operating
Agreement as a partial closing of the Contribution Agreement and the parties
agree that all additional closing matters be deferred and completed as set forth
herein.
WITNESSETH:
1. The execution and contribution of the capital contributions set forth
in the Initial Operating Agreement shall constitute a partial closing of the
Contribution Agreement on or before June 30, 1999 (the "Extended Closing Date").
Trade Partners agrees that the due diligence condition of Section 14.5 of the
Contribution Agreement is hereby deemed satisfied, except that Trade Partners
reserves the right to approve the title insurance commitments and the surveys.
Each of Trade Partners and CDA agree that their respective conditions in Section
14 and Section 15 respectively as to the VSC's and the portions of the Maumelle
Tracts being contributed pursuant to the terms of the Initial Operating
Agreement are hereby deemed satisfied, except that Trade Partners financing
condition remains unsatisfied.
2. At the time of the Extended Closing Date, Trade Partners and CDA shall
amend the Initial Operating Agreement consistent with the provisions of Section
16 of the Contribution Agreement consistent with the provisions of Section 16,
whereupon CDA shall contribute to
<PAGE>
TradeArk the balance of the Maumelle Tracts subject to the Maumelle Assumed Debt
which have not been contributed and assumed pursuant to the Initial Operating
Agreement and Trade Partners shall contribute to TradeArk the balance of the
Viatical Settlement Contracts which have not been contributed pursuant to the
Initial Operating Agreement.
3. All other terms of the Contribution Agreement are hereby affirmed to
the extent not herein amended. All capitalized terms set forth herein shall have
the meaning attributed to same in the Contribution Agreement unless otherwise
defined herein. The Recitals set forth herein above are hereby incorporated by
this reference as part of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the dates
indicated hereinbelow.
CAPITOL DEVELOPMENT OF ARKANSAS, INC.
DATE OF EXECUTION:
5/26/99 BY: /s/ Michael G. Todd
- ------- Michael G. Todd
Its: President
TRADE PARTNERS INC.
DATE OF EXECUTION:
6/1/99 BY: /s/ Thomas J. Smith
- ------ Thomas J. Smith
Its: President
2
<PAGE>
EXHIBIT 10.39
PLAN AND AGREEMENT FOR CORPORATE SEPARATION
This PLAN AND AGREEMENT FOR CORPORATE SEPARATION (this "Agreement") made
effective March 31, 1999, among Capitol Communities Corporation, a Nevada
corporation (hereinafter called the Corporation) and Charlie Corporation, a
Nevada corporation (hereinafter called "Charlie").
Recitals
A. Charlie owns 2,839,689 shares of common capital stock of the
Corporation, representing approximately forty-one and 73/100 percent
(41.73%) of all of the outstanding capitol stock of the Corporation.
B. Prescott LP, a California limited partnership (herein after
called "Prescott") owns approximately 2,851,589 shares of common capital
stock of the Corporation, representing approximately forty-one and 90/100
percent (41.90%) of all of the outstanding capitol stock of the Corporation
and 895,917 shares of common capital stock of the Corporation, representing
approximately thirteen and 16/100 percent (13.16 %) of all of the
outstanding capital stock of the Corporation are freely traded shares held
by persons unrelated to Charlie and Prescott (the "Public Shareholders").
213,641 shares of common capital stock of the Corporation, representing
approximately Three and 21/100 percent (3.21%) of all of the outstanding
capital stock of the Corporation are owned by other parties (the "Other
Non-Public Shareholders"). Excluded from the foregoing calculations of
outstanding shares are 700,000 shares of capital stock of the Corporation
held by Capitol Development of Arkansas, Inc., the Corporations wholly
owned subsidiary, 100,000 shares of capital stock of the Corporation held
by the transfer agent for the Corporation which are being canceled
concurrently herewith as provided in Section 2.5 hereof, and 285,000 shares
of capital stock of the Corporation which have been registered pursuant to
an S-8 SEC Registration and are held in a custodial account subject to
release only upon the payment to the Corporation therefor of $4.00 per
share.
C. The Corporation owns all the outstanding shares of stock of
Capitol Development of Arkansas, Inc., an Arkansas corporation
(hereinafter called "CDA").
D. The Corporation owns all the outstanding shares of stock of
Capitol Resort, Inc., an Arkansas corporation (herein after called
"Arkansas Resorts") and all the outstanding shares of stock of Capitol
Resorts of Florida, Inc. ("Florida Resorts"). Arkansas Resorts owns all of
the outstanding shares of stock of Capitol Club International, Inc., a
Florida corporation ("Capitol Club"), Entry Resorts International, LLC, a
New Hampshire limited liability company ("ER/") and Entry Resorts
Marketing, LLC, a New Hampshire limited liability company ("EMI"). Florida
Resorts owns all of the outstanding shares of stock of Capitol SB
Development, Inc., a Florida corporation ("SB Development").
AGREEMENT FOR CORPORATE SEPARATION/PAGE 1
<PAGE>
E. For many years past the Corporation has been engaged in the separate
businesses of residential real estate development and home building business
through its subsidiary, CDA, on the one hand, and the resort and resort
marketing business, on the other hand.
F. A majority of the shareholders of the Corporation have agreed upon a
division of the businesses of the Corporation so that the resort and resort
marketing business (hereinafter called the "Resort Business") operated by
Arkansas Resorts and Florida Resorts will be owned solely by Charlie
(hereinafter sometimes referred to as the "Resort Group"), and residential real
estate development and homebuilding business (hereinafter called the
"Homebuilding Business") will continue to be operated in the Corporation which
will be owned by Prescott and the Public Shareholders (hereinafter called the
"Homebuilding Group").
G. All the Resort Business which has been operated by the Corporation through
one or more subsidiaries throughout the years has been previously conveyed to
either Arkansas Resorts or Florida Resorts (both companies are sometimes
cumulatively referred to herein as "Resorts").
H. The Boards of Directors of Capitol Communities Corporation and Charlie
Corporation deem it advisable and in the best interest of such corporations and
their shareholders that the exchange described hereinabove be completed on the
terms and conditions hereafter set forth and in accordance with all applicable
laws, and have adopted resolutions to that effect.
Now, therefore, in consideration of the recitals, and upon the terms and
conditions hereinafter set forth, the parties have agreed as follows:
Article I
Intended Tax Effect
The Parties to this Agreement intend that the transaction contemplated herein
will qualify as a tax-free corporate separation and exchange pursuant to
Sections 355 and 368 of the Internal Revenue Code (the "Code"). However, neither
- ------------ ---
the Corporation nor Charlie intends to request a ruling by the Commissioner of
Internal Revenue. The Parties will divide the businesses of the Corporation
operated through its subsidiaries, in accordance with this Agreement, so that
Resorts, which operates the Resort Business, will be owned by Charlie and the
Homebuilding Business will continue in the Corporation which will be owned by
the Homebuilding Group, and so that neither Group, after such split-off, will
have any interest in the business owned by the other Group except as set forth
in this Agreement. The terms of this Agreement shall be deemed a plan of
reorganization pursuant to the Code.
Article II
Plan of Corporate Separation
The following Plan of Corporate Separation, hereinafter sometimes referred to
as the Plan, is hereby approved, adopted, and agreed upon:
AGREEMENT FOR CORPORATE SEPARATION/PAGE 2
<PAGE>
2.1. Definitions. As used in the Plan, the following terms shall have the
-----------
following meanings: (a) "Corporation" shall mean Capitol Communities
Corporation, a Nevada corporation.
(b) "Effective Date" shall mean March 31, 1999, and "Date of Closing"shall
be the date when all actions are taken to implement this Plan as agreed by
Charlie and the Corporation but in no event later than April 30, 1999.
(c) "Corporation Balance Sheet" shall mean balance sheet prepared as of
September 30, 1998 in the customary manner from the books and records of the
Corporation and all of its subsidiaries, except for Arkansas Resorts and Florida
Resorts, and their respective subsidiaries, which is affixed hereto. Except as
may hereinafter be otherwise specifically provided, all assets and liabilities
shall be taken at book value for the purpose of preparing the Corporation
Balance Sheet.
(d) "Arkansas Resorts Balance Sheet" shall mean balance sheet prepared as of
September 30, 1998 in the customary manner from the books and records of
Arkansas Resorts and all of its subsidiaries, which is affixed hereto. Except as
may hereinafter be otherwise specifically provided, all assets and liabilities
shall be taken at book value for the purpose of preparing the Arkansas Resorts
Balance Sheet.
(e) "Florida Resorts Balance Sheet" shall mean balance sheet prepared as of
September 30, 1998 in the customary manner from the books and records of Florida
Resorts and all of its subsidiaries, which is affixed hereto. Except as may
hereinafter be otherwise specifically provided, all assets and liabilities shall
be taken at book value for the purpose of preparing the Florida Resorts Balance
Sheet.
(f) "Balance Sheets" shall refer to the Corporation Balance Sheet, the
Arkansas Resorts Balance Sheet and the Florida Resorts Balance Sheet.
2.2. Intercompanv Advances. The Balance Sheets reflect that Resorts is
---------------------
indebted to the Corporation or CDA in the sum of approximately $2,504,751 (the
"Intercompany Advances"). At or prior to Closing, the Corporation shall cause
all of the Intercompany Advances to be contributed as capital to Resorts.
2.3. Pension Plans. Neither the Corporation nor Resorts have any qualified
-------------
pension plans.
2.4. Unknown liabilities. In addition to the liabilities set forth in the
-------------------
Corporation Balance Sheet, the Corporation hereby assumes sole responsibility of
all liabilities, obligations, debts, claims and demands of the Corporation
(including, without limitation, claims for taxes of all kinds, penalties, and
interest, and any liability for violation of the Federal Labor Relations Law or
the Rules and Regulations of the Federal Labor Relations Board and for any
claims for acts or omissions which occurred prior to the Effective Date of this
Agreement), not specifically embraced or provided for in the Corporation Balance
Sheet, concerning or related to the operations of the Homebuilding
AGREEMENT FOR CORPORATE SEPARATION/PAGE 3
<PAGE>
Business or the assets of the Corporation or CDA. In addition to the
liabilities set forth in the Arkansas Resorts Balance Sheet and the
Florida Resorts Balance Sheet, Resorts, jointly and severally, hereby
assumes sole responsibility of all liabilities, obligations, debts,
claims and demands of Resorts (including, without limitation, claims for
taxes of all kinds, penalties, and interest, and any liability for
violation ofthe Federal Labor Relations Law or the Rules and Regulations
of the Federal Labor Relations Board and for any claims for acts or
omissions which occurred prior to the Effective Date of this Agreement),
not specifically embraced or provided for in the Resorts Balance Sheet
and the Florida Resorts Balance Sheet, concerning or related to the
operations of the Resort Business or the assets of Resorts or any of
their subsidiaries.
2.5. Conveyance of Certain CPCY Shares. K. L. Martin ("Martin") and Joseph J.
---------------------------------
Lombardi ("Lombardi") each hold 16,667 shares of the common capital stock of the
Corporation. In addition, certificates for 50,000 shares of the common capital
stock of the Corporation (the "NonVested Shares") are held in the name of each
of Martin and Lombardi and are not vested in either Martin or Lombardi. The
Corporation and Martin entered into a Stock Option Agreement dated as of April
30, 1998 (the "Martin Option Agreement"), pursuant to which Martin was given the
option to acquire shares of stock of the Corporation as provided therein, though
Martin has not exercised any rights pursuant to the Martin Option Agreement. The
Corporation and Lombardi entered into a Stock Option Agreement dated as of April
30, 1998 (the "Lombardi Option Agreement"), pursuant to which Lombardi was given
the option to acquire shares of stock of the Corporation as provided therein,
though Lombardi has not exercised any rights pursuant to the Lombardi Option
Agreement. Both Lombardi and Martin were employees of Resorts or one of their
subsidiaries. As of the effective date of this Agreement, Resorts (through its
subsidiary, Capitol Club, has terminated Lombardi and Martin as its employees
pursuant to its employment agreements with Lombardi and Martin. Therefore, the
Martin Option Agreement and the Lombardi Option Agreement have terminated by
their terms and the NonVested Shares have been forfeited to the Corporation.
Resorts covenants to take all necessary and reasonable action required to obtain
and deliver all of the shares in the Corporation owned by Martin and Lombardi to
the Corporation and to defend, indemnify and hold the Corporation harmless from
and against all claims Martin and Lombardi may make against the Corporation for
the NonVested Shares or pursuant to the Martin Option Agreement or the Lombardi
Option Agreement.
2.6 The Conveyance. To accomplish the plan pursuant to this Agreement,
--------------
Charlie shall transfer by endorsing all its certificates representing its shares
in the Corporation in blank and delivering same to the Corporation in order that
those shares may be canceled by the Corporation. In exchange, the Corporation
shall transfer by endorsing all its certificates representing all the
Corporation's shares in Arkansas Resorts and Florida Resorts to the order of
Charlie and delivering same to Charlie, whereupon Charlie shall then own all of
the outstanding shares of Arkansas Resorts and Florida Resorts.
2.7. Closing. The Plan shall become operative at the Date of Closing. At
-------
2 p.m. on such date, the transactions contemplated by the Plan and by this
agreement shall be consummated at the office of the Corporation. The Corporation
shall assign, transfer, convey, and deliver to Resorts the
AGREEMENT FOR CORPORATE SEPARATION/PAGE 4
<PAGE>
various items of property required by the Plan. Charlie shall deliver to the
Corporation: (a) all of' the shares in the Corporation owned by Charlie, duly
endorsed in blank, with all necessary transfer stamps; (b) resignations of
Herbert Russell and John W. DeHaven, as directors, officers, and employees of
the Corporation and its subsidiaries, effective as of the Date of Closing; and
(c) general releases in favor of the Corporation, excepting only obligations of
the Corporation under the Plan and under this agreement. The Corporation shall
deliver to Charlie: (a) an opinion of counsel for the Corporation to the effect
that Resorts has been duly organized under the laws of Arkansas; (b)
certificates for all the authorized shares of Resorts in such denominations as
may be requested by Charlie on which all issuance taxes for shares have been
paid; (b) resignations of Michael G. Todd, as directors, officers, and employees
of the Resorts and their subsidiaries, effective as of the Date of Closing; and
(c) a general release in favor of Charlie, excepting only obligations of Resorts
and Charlie under the Plan and under this agreement. Each of the parties shall
execute and deliver such further instruments as may be reasonably requested by
any other party in order to carry out the purpose and intent of the Plan and
this agreement. The effectiveness and the closing pursuant to this Agreement is
expressly conditioned upon the closing of that transaction contemplated by that
Contribution Agreement executed contemporaneously herewith by and between CDA
and Trade Partners, Inc., a Michigan corporation.
Article IV
Notices
Any notice or offer or demand required to be sent hereunder shall be sent by
registered United States mail, return receipt requested, addressed to the
respective parties at:
TO THE CORPORATION: Michael G. Todd
25550 Hawthorne Boulevard,
Suite 207
Torrance, California 90505
TO CHARLIE: John W. DeHaven
P.O. Box 13256
10605 D Maumelle Boulevard
Maumelle, Arkansas 72113
Article V Arbitration
Any dispute between Charlie and the Corporation, or any dispute involving the
Corporation and Resorts arising out of and by reason of this agreement or the
Plan set forth herein, or the construction and performance thereof, shall be
settled by arbitration in accordance with the roles and regulations then
obtaining of the American Arbitration Association. Judgment upon any award so
rendered may be obtained by either party in the Circuit Court of the State of
Arkansas, County of Pulaski, under the relevant provisions of the laws of
Arkansas.
AGREEMENT FOR CORPORATE SEPARATION/PAGE 5
<PAGE>
Article VI
Authorization and Benefit
This Agreement and the terms and provisions hereof shall be binding upon and
inure to the benefit of the parties, their personal representatives, successors,
and assigns. This Agreement is being executed by the Corporation pursuant to a
resolution adopted this day at a special meeting of its directors and with a
written consent of a majority of the shareholders, including and excluding the
vote of Charlie. Charlie covenants that at the Date of Closing and
contemporaneously with the transfer of shares of Resorts to Charlie and election
of directors and officers for Resorts, it will cause this Agreement to be
approved and executed by Resorts pursuant to valid authority from all the
shareholders and directors of Resorts.
Article VII
Severability
The invalidity or unenforceability of any provision of this Agreement shall
not affect the validity or enforceability of any other provisions of this
Agreement, which shall remain in full force and effect. If any of the covenants
or provisions of this Agreement are determined to be unenforceable by reason of
its extent, duration, scope or otherwise, then the parties contemplate that the
court making such determination shall reduce such extent, duration, scope or
other provision and enforce them in their reduced form for all purposes
contemplated by this Agreement.
Article VIII
Attorneys Fees and Costs of Transaction
The Corporation and Charlie shall bear their own costs and expenses,
including attorneys fees, incident to the preparation, negotiation, execution
and delivery of this Agreement.
Article VIV
Publicity
No announcement of the Plan or of the purposes of this agreement, either
to customers, for trade journals, or otherwise, shall be made without the prior
approval of the text thereof by both Groups.
Approved:
M.G.T. H.E.R.
AGREEMENT FOR CORPORATE SEPARATION/PAGE 6
<PAGE>
In witness whereof the parties have executed this Agreement the day and
year first above written.
CAPITOL COMMUNITIES CORPORATION
By: /s/ Michael G. Todd
President
CHARLIE CORPORATION
By: /s/ Herbert E. Russell
President
AGREEMENT FOR CORPORATE SEPARATION/PAGE 7
<PAGE>
EXHIBIT 10.40
FIRST AMENDMENT TO
PLAN AND AGREEMENT FOR CORPORATE SEPARATION
This FIRST AMENDMENT (this "Amendment"), dated effective June 14,
1999, amends that PLAN AND AGREEMENT FOR CORPORATE SEPARATION (the
"Agreement") made effective March 31. 1999, among Capitol Communities
Corporation, a Nevada corporation (hereinafter called the Corporation)
and Charlie Corporation, a Nevada corporation (hereinafter called
"Charlie").
1. Section 2.5 of the Agreement is hereby amended to
provide as follows:
"2.5. Conveyance of Certain CPCY Shares. K. L. Martin
----------------------------------
("Martin") and Joseph J. Lombardi ("Lombardi") each hold
16,667 shares of the common capital stock of the
Corporation. In addition, certificates for 50,000 shares of
the common capital stock of the Corporation (the "NonVestcd
Shares") are held in the name of each of Martin and Lombardi
and are not vested in either Martin or Lombard[ The
Corporation and Martin entered into a Stock Option Agreement
dated as of April 30, 1998 (the "Martin Option Agreement"),
pursuant to which Martin was given the option to acquire
shares of stock of the Corporation as provided therein,
though Martin has not exercised any rights pursuant to the
Martin Option Agreement. The Corporation and Lombardi
entered into a Stock Option Agreement dated as of April 30,
1998 (the "Lombardi Option Agreement"), pursuant to which
Lombardi was given the option to acquire shares of stock of
the Corporation as provided therein, though Lombardi has not
exercised any rights pursuant to the Lombardi Option
Agreement. Both Lombardi and Martin were employees of
Resorts or one of their subsidiaries. As of the effective
date of this Agreement, Resorts (through its subsidiary,
Capitol Club, has terminated Lombardi and Martin as its
employees pursuant to its employment agreements with
Lombardi and Martin. Therefore, the Martin Option Agreement
and the Lombardi Option Agreement have terminated by their
terms and the NonVested Shares have been forfeited to the
Corporation. Resorts and the Corporation have entered into a
Settlement Agreement and Mutual Release with each of Martin
and Lombardi, copies of which are marked Exhibits "A-1" and
"A-2" respectively (the "Settlement Agreements"). The
Corporation agrees to pay to each of Martin and Lombardi the
Initial Settlement Payment in the amount of $10,000.00 and
issue to each of Martin and Lombardi 6,666 shares of the
Corporation as provided in Section 4 of each of the
Settlement Agreements. One or before June 30, 1999, Resorts
shall reimburse to the Corporation the total sum of $10,000
of those payments made by the Corporation to Martin and
Lombardi. Resorts covenants to be solely responsible for all
other obligations to Martin and Lombardi pursuant to the
Settlement Agreements and shall indemnify the Corporation
from and such continuing obligations pursuant to the
Settlement Agreements."
FIRST AMENDMENT TO AGREEMENT FOR CORPORATE SEPARATION/PAGE 1
<PAGE>
2. Except as set forth herein, all other terms of the Agreement are hereby
affirmed.
In witness whereof the parties have executed this Agreement the day
and year first above written.
CAPITOL COMMUNITIES CORPORATION
By: /s/ Michael G. Todd
President
CHARLIE CORPORATION
By: /s/ Herbert E. Russell
President
FIRST AMENDMENT TO AGREEMENT FOR CORPORATE SEPARATION/PAGE 2
