US Securities and Exchange Commission
Washington, DC 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ..... to ..........
Commission file number 33-85102
SEVEN FIELDS DEVELOPMENT COMPANY
(Name of small business issuer in its charter)
Pennsylvania 25-1561828
(State or other jurisdiction of(IRS Employer
incorporation or organization)Identification No.)
2200 GARDEN DRIVE, SUITE 200, MARS, PA 16046-7846
(Address of principal executive offices)(Zip Code)
(724) 776-5070
(Issuer's telephone number, including area code)
Securities registered under Section 12(b) of the Exchange Act:
<TABLE>
<S> <C>
Title of each class Name of each exchange on which registered
</TABLE>
Securities registered under Section 12(g) of the Exchange Act:
Beneficial Interest, par value $1.00 per share
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No.
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-KSB or any amendment to this Form 10-KSB. [ X ]
Issuer's revenues for its most recent fiscal year: $14,167,271
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The aggregate market value of the issuer's voting stock held by
non-affiliates as of January 29, 1999, is indeterminable. There is no
known market for the issuer's Beneficial Interests, and the exact terms of
any private sales of such Beneficial Interests which did occur are not
known to the issuer.
As of January 29, 1999, there were 3,484,392 shares of the issuer's
Beneficial Interests outstanding.
Transitional Small Business Disclosure Format (check one):
Yes ; No X
DOCUMENTS INCORPORATED BY REFERENCE
NONE
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PART I
Item 1. Description of Business
Background and Reorganization
Seven Fields Development Company (the "Company") is a Pennsylvania
business trust engaged in the business of developing and selling real estate
in the western Pennsylvania area. The Company was organized in 1994 and is
the surviving company in a merger (the "Merger") effected on April 30, 1995
with Seven Fields Development Corporation (the "Corporation").
The Merger was part of a comprehensive plan (the "Reorganization Plan") to
reorganize the Corporation from a Pennsylvania business corporation into a
Pennsylvania business trust (the "1995 Reorganization"). Pursuant to the
Reorganization Plan, the following actions were taken:
(1) The Corporation formed Seven Fields Development (PA), Inc. ("Seven
Fields PA"), which made an offer (The "Exchange Offer") to acquire all of
the outstanding shares of common stock of the Corporation ("Corporation
Stock") and all outstanding general unsecured subordinated debt of the
Corporation ("Corporation Debt") in exchange for shares of common stock of
Seven Fields PA, on the basis of one share of Seven Fields PA common stock
for each unit consisting of a combination of one share of Corporation Stock
plus $19 original principal amount of Corporation Debt.
(2) The Corporation formed Seven Fields (DEL), Inc. ("Seven Fields DEL")
as a wholly owned subsidiary of Seven Fields PA and formed the Company as a
Pennsylvania business trust.
(3) The Corporation formed Seven Fields Management, Inc. as a
wholly-owned subsidiary of Seven Fields PA to be the sole trustee of the
Company.
(4) The Corporation and the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") pursuant to which the Corporation merged with
and into the Company and each shareholder of the Corporation received one
share of beneficial interest in the Company (a "Company Share") in exchange
for each share of Corporation Stock held of record.
(5) Each of the Company, Seven Fields PA, Seven Fields DEL and Seven
Fields Management adopted plans of liquidation.
In accordance with the Reorganization Plan, shareholders of the Corporation
were asked to approve the proposed Merger and to accept the Exchange Offer.
Holders of approximately 83% of the outstanding Corporation Stock and
Corporation Debt accepted the Exchange Offer and received shares of Seven
Fields PA stock in exchange thereof. In the Merger, those holders of
Corporation Stock and Corporation Debt who did not accept the Exchange Offer,
together with Seven Fields PA as the holder of all Corporation Stock
tendered in the Exchange Offer, received Company Shares in exchange for their
Corporation Stock. Such persons also continue to hold their Corporation Debt
which became an obligation of the Company as a result of the Merger
(hereinafter referred to as "Company Debt").
The purpose of the 1995 Reorganization was to consolidate the economic and
voting interests of those Corporation shareholders who accepted the Exchange
Offer into a single equity security, and to eliminate, on a consolidated
entity basis, the large shareholders' deficit which was created as a result
of the Corporation's reorganization under Chapter 11 of the Federal
Bankruptcy Code on November 7, 1987.
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Seven Fields Development Corporation (November 7, 1987, through April 30, 1995)
The Corporation was the surviving corporation in the merger of four
predecessor corporations (the "Predecessors") pursuant to an Amended Plan of
Reorganization effective November 7, 1987 (the "Bankruptcy Plan").
The Predecessors had marketed and sold investments in multi-family
residential housing developments in Western Pennsylvania. From 1976 to 1986,
the Predecessors received approximately $57,000,000 of investment funds from
over 2,600 investors (the "Investors"). Investors' investment balances,
including reinvestment of returns, exceeded $69,000,000 when the Predecessors
filed petitions for reorganization under Chapter 11 of the US Bankruptcy Code
in 1986.
Pursuant to the Bankruptcy Plan, the stock and interests of the
Predecessor's shareholders were canceled and the approximately 2,600
Investors received shares of Corporation Stock with a par value equal to 5%
of their claims (approximately $3.5 million). The remaining 95% of the
Investors' claims (approximately $66.6 million) were deemed
to be general unsecured debt of the Corporation, subordinated to existing
liens and priorities and any future secured debt of the Corporation.
Furthermore, the Bankruptcy Plan prohibited the holders of the Corporation
Debt from filing any suit, taking any judgment or undertaking, continuing or
completing any collection activities. Payment on the Corporation Debt would
be determined and made from time to time by the Board of Directors of the
Corporation as and when funds were available.
The Bankruptcy Plan further provided that the Corporation, as may be
authorized by its Board of Directors, would periodically distribute
available funds, without interest, in pro rata repayment of the claims of
the Investors and that all activities of the Corporation would seek to
achieve the goal of full payment of all claims of the Investors (the holders
of Corporation Stock and Corporation Debt). The Company, as survivor to the
Merger, remains subject to the Bankruptcy Plan.
Operating Activities (November 7, 1987 through October 31, 1998)
Since it commenced business on November 7, 1987, the Company ("Company",
as used hereinafter refers to the entity existing since November 7, 1987),
has focused its attention primarily on managing and selling its rental
properties; developing and selling its undeveloped property as individual
residential and commercial lots; and constructing and selling homes.
The ultimate goal of the Company is to enhance the liquidation value of its
assets so as to return to the holders of Company Stock and Company Debt the
maximum amount at the earliest possible time. Total repayment of the
Company Debt will not be possible and no payment on the Company Stock will
occur because the Company Debt must be paid in full before any distribution
on Company Stock can be made. For this reason, in the 1995 Reorganization
the Company retained the Corporation's prior debt/equity structure so as to
maintain proportionality of all future distributions. See Item 6.
Management's Discussion and Analysis or Plan of Operations - Business Plan
and Objectives.
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In furtherance of its plan to liquidate, the Company is in the process of
developing the unimproved land at Seven Fields for the purpose of building
and selling residential and commercial units. In 1991, the Company
completed a Master Plan for development of Seven Fields. Seven Fields Borough
agreed in concept with the Master Plan and adopted a zoning ordinance. The
Master Plan consists of 18 separately identifiable parcels of which seven are
designated single family containing 260 acres, five are designated multifamily
containing 59 acres, five are designated commercial containing 86 acres and
two are designated multifamily containing 59 acres. In 1992, the Company
acquired forty adjacent acres located in Cranberry Township that are
designated for single family use.
In August 1990, the Company began construction of single family homes at
Seven Fields under the trade name "Hawthorne Construction Company". During
1998, the Company committed to purchase 3 single family and 8
townhouse lots in the Nevillewood Development in the Pittsburgh south hills
area. As of October 31, 1998, the Company had closed on two of the single
family and 2 of the townhouse lots in Nevillewood. This activity in Nevillewood
marks the first time that the Company has expanded its construction
activities beyond the Seven Fields vicinity since its 1987 reorganization.
During fiscal 1997, the Company began construction of 11 homes and 29
multi-family units, sold 14 homes and 24 multi-family units and at October
31, 1997 had an inventory of 11 homes and 31 multi-family units. In fiscal
1998, the Company began construction including its activities in Nevillewood
of 13 homes and 33 multi-family units, sold 14 homes and 25 multi-family
units and at October 31, 1998, had an inventory of 9 houses and 39 multi-
family units either completed or under construction.
The Company's home construction activities have proceeded by subdivisions
and phases. In the Brandywine Woods Subdivision, the Company built single
family homes having sales prices between $150,000 and $180,000. The
Colonial Heights Subdivision is divided into three phases with single family
homes ranging in price from $170,000 to $250,000. In the Company's
Brandywine Commons Subdivision, the Company built fourplex units which were sold
at prices ranging between $115,000 and $175,000. During 1995, the Company
commenced development of the Northridge Manor Subdivision, a 45 lot single
family home subdivision located on 17 acres north of Rt. 228, and the
Georgetowne Manor Subdivision, a 77 unit townhouse subdivision located on 10
acres near the Company's existing townhouses. In 1996 development commenced
in the Hawthorne Commons Subdivision of 96 fourplex units and Phase
I of the Northridge Estates Subdivision of 56 single-family lots. Homes in
the Northridge Manor Subdivision are being sold for prices ranging from
$175,000 to $210,000 and townhouse units in the Georgetowne Manor Subdivision
are being sold for $100,000 to $125,000. Homes in the Hawthorne Commons and
Northridge Estates range in price between $140,000 and $220,000 and between
$200,000 and $250,000 respectively. During 1998, the Company completed
developmet of Phase 2 Northridge Estates consisting of 43 single family lots
being sold for approximately $45,000 each. Also during 1998, the
Company sold all of its remaining original townhouses. The Company is doing
all of the construction of the fourplexes and townhouses as well as most of
the construction in its Northridge Manor Subdivision, and 10% in Northridge
Estates. Approximately eight other builders are currently constructing homes at
Seven Fields.
In fiscal 1995, the Company completed construction of a two-story office
building at Seven Fields (the "Office Building"), began development of areas
north of Rt. 228 for the first time, and developed and sold its first
commercial lot. The Office Building, which consists of 9,434 usable square
feet plus a garage-basement, is used as the Company's offices and maintenance
facility. The Company leases one floor of the Office Building to the Borough
as its municipal offices. The Company has granted the Borough an option to
purchase the Office Building at fair market value at the end of its five-year
lease. The Company, so as to facilitate its plans to develop its property
north of Rt. 228, has spent significant amounts to extend utility service to
this area. This cost is being allocated to the subdivisions north of Rt. 228.
During fiscal 1997, improvements to the Mars-Crider Road, an important
access road in Cranberry Township and Seven Fields Borough to the Company's
subdivisions north of Route 228, were substantially completed at a total
cost of approximately $940,000. During fiscal 1997 and 1998, the Company
made significant improvements to Route 228 which divides the Company's
property. These improvements, which cost nearly $2.0 million, have
facilitated the development of the Company's property located north of
Route 228 by the Company, or other developers who have purchased property
from the Company.
During 1998, the Company also completed a new sales center, sold several
additional commercial parcels of property, and sold its Moon Township
property.
The Company, under the name "Castle Creek Water Company", provides and
charges the residents of Seven Fields Borough and parts of Cranberry and
Adams Townships for water services under authority granted it by the
Pennsylvania Public Utilities Commission ("PUC") on November 29, 1991.
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The area in which Seven Fields is located has seen increasing residential
and commercial development in the past few years due to its proximity to
Pittsburgh, which is enhanced by Interstate 279 which directly connects the
area to downtown Pittsburgh.
Demand for the Company's single-family homes was stable in 1998 compared
to 1997.
The real estate development business has substantial inherent risks, any of
which might have a serious effect on the Company's future development plans.
Most notably, these risks include possible new governmental regulations,
or revised interpretation or application of existing regulations. Changes in
the economy which might tend to reduce the demand for the Company's developed
lots and houses are possible. Increased competition could occur from other
developers or builders. Presently there are numerous other developments which
are under construction and will provide substantial competition to the
Company. A substantial increase in home mortgage interest rates historically
has caused an almost immediate decline in demand for new housing, which could
have a dramatic negative impact on the Company's plans.
The Company's prime property was carved from Cranberry Township, which has
continued to be one of the higher growth areas and better real estate markets
in Pennsylvania. Future economic stagnation, if it affects the southern
Butler County area, could inhibit the Company's ability to sell its lots and
houses in a timely manner. However, the Company believes it is well
positioned to respond accordingly because of the phased nature of its
development activities.
At this time, the business of the Company is not seasonal in nature, nor is
it dependent upon any patents or trademarks. However, the ability of the
Company to carry on the development of its property depends upon its success
in procuring the necessary governmental approvals, licenses and permits and in
generating internally, or obtaining from outside sources, sufficient capital
to facilitate this development activity. The Company presently employs 27 full-
time and 8 part-time employees.
Sources of materials required by the Company for its development and
construction activities are ample. The Company purchases its materials from
suppliers that sell primarily to the home construction industry in Western
Pennsylvania and the Company is not dependent on any one supplier for its
materials.
The cost of materials in the home construction industry has historically
fluctuated significantly on a national basis as a result of changes in supply
and demand for particular materials.
The Company incurs significant costs so as to comply with various
environmental laws. Such costs are considered a normal cost of operations,
and have historically not caused the Company's selling prices for lots and
houses to be uncompetitive.
The Company anticipates spending an additional $300,000 during 1999 for
completion of the storm water control and wetlands work north of Route 228.
The cost of these improvements will be charged to the developments north of
Route 228. It is also anticipated that the Company will either incur $350,000
to grade the commercial property adjoining the planned Rt. 228 intersection,
or reduce the selling price of this commercial property in exchange for the
buyer's agreement to construct the required improvements.
Rather than developing the garden apartments that were planned, the Company
has sold part of this partially developed parcel to another developer, and
also intends selling the remainder of the parcel.
The estimated costs to be incurred during the fiscal years 1999 to 2003 for
the development of residential and commercial lots and construction of
residential and commercial building units are summarized on Page 8.
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<CAPTION>
Capitalized Development And Construction
October 31, 1998
Unsold Capitalized
Net Lots Units Costs
<S> <C> <C> <C> <C>
The following schedules summarize the Company's capitalized development
costs and its development plans for the five years ending October 31, 2003.
Capitalized Development And Construction
</TABLE>
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<CAPTION>
October 31, 1998
Net Unsold Capitalized
Acres Lots Units Costs
<S> <C> <C> <C> <C>
Land Development
Substantially Completed Subdivisions
South of Rt. 228 125 277 4 $ 76,082
Northridge Manor 17 45 15 308,638
Northridge Estates Phase I 31 56 11 324,347
Northridge Estates Phase II 22 43 36 1,122,989
Multi Family
Georgetowne Manor 10 77 32 414,107
Hawthorne Commons 24 96 86 1,952,089
Commercial
Phase P 18 5 2 210,542
Phase Q 5 3
Phase J 22 2
Phase M 18 5 1 794,357
Phase I, Garden Apartments & Other 0.8 1 1 79,511
Phase I Office Land 1.2 1
Phase O 4 1
Total - Currently Under Development 298 612 188 5,282,662
Accumulated Costs of Property
to be Developed in the Future 171 3,038,721
House Construction
Houses Completed 2 340,142
Houses Under Construction 7 784,134
Fourplex & Townhouses Completed 5 718,442
Fourplex & Townhouses Under Construction 34 1,620,568
Additional Housing Starts -
(Nominal Costs Incurred) 143,311
Total - House Construction 48 3,606,597
Development Costs Classified as
Property Buildings & Equipment
Office Building 3 1 1,263,208
Real Estate Sales Office 2.7 1 515,893
Water Authority Assets 374,881
5.7 2 2,153,982
Total Capatilized Development
and Construction 474.7 614 $ 14,081,962
</TABLE>
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Estimated Additional Costs
To Be Incurred Fiscal 1999-2003 (000's)
<TABLE>
<S> <C> <C> <C> <C> <C>
1999 2000 2001 2002 2003
Total Development Costs $ 453 $ 1,334 $ 1,187 $ 876 $ 35
Building Costs 8,548 7,024 6,064 6,304 5,804
Total Development And
Building Costs $9,001 $8,358 $ 7,251 $ 7,180 $ 5,839
</TABLE>
Financial Information Relating to Industry Segments
and Classes of Products
Year Ended
October 31, (000's)
<TABLE>
<S> <C> <C>
1998 1997
Sales to Unaffiliated Customers
Rental and General Operations $ 243 $ 579
Land Development, House Construction and PUC 13,924 10,352
Regulated Services
Total Sales $ 14,167 $ 10,931
Operating Income
Rental and General Operations $ (105 ) $ (210 )
Land Development, House Construction and PUC 2,273 1,577
Regulated Services
Total Operating Income $ 2,168 $ 1,367
Identifiable Assets
Rental and General Operations $ 3,120 $ 6,808
Land Development, House Construction and PUC
Regulated Services (Including
Land Held for Future Development) 14,138 13,439
Total Identifiable Assets $ 17,258 $ 20,247
</TABLE>
See Item 7. Financial Statements.
Item 2. Description of Property
The Company's principal asset is a real estate development known as Seven
Fields, located mainly in the Borough of Seven Fields and partially in Adams
and Cranberry Townships, Butler County, Pennsylvania. The development
originally consisted of 540.2 acres including required open space, of which
24.5 acres are in Adams Township, and 40 are in Cranberry Township, however
a substantial amount of this acreage has already been developed and sold by
the Company.
When the Company commenced business in 1987, Seven Fields consisted of a
townhouse development on approximately 27 acres and approximately 513 acres
of mostly undeveloped land.
The townhouse complex originally had a total of 237 rental units owned by
the Company, 39 units owned by individual homeowners, a swimming pool,
tennis courts, playground and sewage disposal plant.
In 1989, the Company began offering its townhouse units for sale and as of
October 31, 1998, had sold all of the units.
The Company's remaining property located in Seven Fields Borough, Cranberry
Township and Adams Township consists of approximately 20 separate, partially
developed and undeveloped residential and commercial parcels. The areas
south of Rt. 228 have been subdivided and improved with roads, sidewalks and
underground utility lines and are substantially developed. The areas north
of Rt. 228 are currently being developed. See Item 1. Description of
Business and Note 12 to the Financial Statements.
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The property in Adams Township was sold in 1997 in two separate sales. The
Company constructed a 9,434 square foot office building in 1995, part of
which is used for its operations and the remainder is leased to Seven Fields
Borough, and as of October 31, 1998, completed construction of a real estate
sales center north of Rt. 228.
The Company also sold 40 acres of unimproved commercial and residential
property located in Moon Township, Allegheny County, Pennsylvania (the "Moon
Township Property") in 1998.
The Company purchased 2 single-family lots and 2 townhouse lots in the
Nevillewood Community, Collier Township, a suburb southwest of Pittsburgh
during 1998. In addition, the Company is committed to purchase 7 additional
lots in Nevillewood over the next 29 months.
The Company also holds mortgage notes receivable related to the sale of
certain of the original 237 townhouses. See Item 6. Management's Discussion
and Analysis or Plan of Operation-Financial Condition and Not 4 to
Financial Statements.
The mortgages and other outstanding liens on the Company's Seven Fields
property are discussed in Item 6. Management's Discussion And Analysis or
Plan of Operation - Financial Condition.
Item 3. Legal Proceedings
The Company is not a party to any currently pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to security holders for a vote during the
fourth quarter of the Company's fiscal year ended October 31, 1998.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
(a) Market Information There is no established public trading market
for the Company Shares and the Company is not aware of the terms of any
transactions in Company Shares.
(b) Holders As of October 31, 1998, there were 773 holders of Company
Shares, which is the only outstanding class of equity of the Company.
(c) Dividends No cash dividends on the Company Shares were declared
by the Company during its last two fiscal years and there can be no assurance
that any cash dividends will ever be declared.
Item 6. Management's Discussion and Analysis or Plan of Operation
The following discussion is an analysis of the Company's financial
condition and results of operations for the fiscal years ended October 31,
1998 and 1997. This discussion should be read in conjunction with the
Company's financial statements and notes thereto included elsewhere herein.
All references herein to a fiscal year refer to the Company's fiscal year
ended on October 31 of such year.
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Business Plan and Objectives
The Company's primary business objective is to repay, to the fullest extent
possible as soon as possible, the claims of the Investors. Based upon the
combined total of appraised market values of the Company's properties,
the Company does not believe it will be able to repay the entire amount of
the Company Debt. Nevertheless, as required by the Bankruptcy Plan, the
Company plans to pursue this objective by continuing to develop and sell its
existing properties. See Item 1. - Description of Business. Until 1998 the
Company had no plans to acquire and develop any other properties except minor
acquisitions which might enhance the development of existing properties.
However, during 1998, the Company acquired or committed to acquire a total of
11 lots in the Nevillewood Community, a southwest suburb of Pittsburgh. The
Company has begun building single family and townhouse units on these lots.
In total the Company will be able to build 35 housing units on these 11 lots.
The Company, since the bankruptcy reorganization, has expended substantial
effort and resources in resolving many of the hurdles necessary to carry out
its plans. A master plan for development of its existing properties has been
prepared, zoning approval for the plan has been obtained, municipal sewerage
service has become available, and all known necessary governmental
requirements can be met in order to facilitate the continued timely and
economic development of its property. See Item 1. - Description of Business.
Financial Condition
The Company's liabilities exceed its assets because of the $66.6 million of
Company Debt that was not discharged by the Bankruptcy Plan. Upon
commencement of its operations in 1987, the Company had $6.4 million of
additional liabilities, $5.3 million of that was indebtedness secured by
mortgages on the Company's real estate holdings and $694,000 of which were
administrative costs incurred in the Bankruptcy Court proceedings. The
Company's assets upon commencement of operations totaled $18.1 million, and
its opening shareholders' deficit was $54.8 million. As of October 31, 1998,
such deficit had decreased to $41.5 million, principally because of profits
generated from operations and the Company's recognition of a $4 million
deferred tax asset in fiscal 1994 as a result of the Company's
adoption of FAS 109.
The Company, in 1987, recorded its principal assets-land, buildings,
equipment and furnishings - at their appraised value as determined by
appraisals performed in 1986 in connection with the Bankruptcy Court
proceedings.
Because of the many unresolved questions regarding the operation of the
predecessors and the resulting legal complexities involved in the
reorganization of the predecessors into the Company pursuant to the
Bankruptcy Plan, the Company has calculated its income (loss) for
purposes of preparing its post-bankruptcy reorganization federal and state
tax returns by adjusting the basis of its assets for tax purposes to an
amount estimated to approximate the Investors' original investment,
including reinvestments, less deductions for depreciation allowed or
allowable.
The Company also filed lawsuits, against the shareholders of and companies
affiliated with the Predecessors to recover certain assets. To the extent
that the Company has been successful in recovering any of such assets, the
shareholders' deficit has decreased by the amount of any such recovery. On
November 15, 1995, the Company settled all existing litigation. See Item 3.
Legal Proceedings.
The Company's financial condition improved during fiscal 1998 and 1997 as a
result of the generation of net income of $831,000, and $762,000 respectively.
The Company's investment in residential and commercial development phases
from which lots are currently being sold and phases from which lots can be
sold in the first half of 1999 was $5.2 million at October 31, 1998. The
Company's inventory of completed, unsold lots at Seven Fields decreased from
226 to 188 in fiscal 1998, however, the Company has committed to purchase
an additional 11 lots at Nevillewood where it will build 35 houses and
townhouses.
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During 1997, development work in the 77 lot Georgetowne Manor, 96 lot
Hawthorne Commons, and 56 lot Phase I of Northridge Estates was completed.
In 1997 the Company sold 6 separate commercial lots totaling 33 acres for a
total gross sales price of $2,215,000. In 1998 the Company completed the 43
lot Northridge Estates Phase II Subdivision and sold 4 of its commercial
parcels consisting of approximately 11.4 acres for $1,251,000. In addition,
the Company sold its remaining 74 original townhouses for $4,136,000,
sixty-five of which were sold in bulk to a single investor for $3,542,500.
The sale of the 40-acre parcel located in Moon Township was also finalized
for $575,000 in 1998. The expected sale of the Town Center and Town Village
area totaling 34 acres did not close and the buyer opted out of the agreement
of sale due to the inability to obtain the zoning changes which were required
for the planned development. Construction of the Rt. 228 improvements were
substantially completed and construction of the storm water detention pond
was begun in 1998. The final cost of the Rt. 228 improvements was
approximately $2.0 million and the estimated cost of the storm water
detention pond is $525,000. The Company does not plan to invest significant
additional amounts in any of the remaining commercial lots, other than those
amounts that would be recoverable at the time of sale.
During 1997, the Company substantially completed the reconstruction of
Mars-Crider Road at a total cost of $940,000, the cost of which has been
proportionately added to all residential phases north of Route 228. Most of
the site development work between Route 228 and Mars-Crider, including base
roads and required utility extension has been completed, the cost of which
was proportionately added to the phases benefiting from these improvements.
In November 1995, the Company obtained a $750,000 loan from PNC Bank, N.A.
secured by a mortgage on its Office Building and also negotiated a $1,000,000
line of credit from National City Bank which was increased to
$2,250,000 in 1998, that is being used in its home building activities. In
1996, the Company obtained additional lines of credit of $1,000,000 and
$750,000 from First Western Bank, the proceeds of which are also being used
for the construction of homes in the Company's Hawthorne Commons and
Georgetown Manor Subdivisions. In 1997, a $250,000 working capital line of
credit was obtained from PNC Bank. At October 31, 1998, the Company had
available borrowing capacity under its lines of credit of approximately $4
million compared to $2 million at October 31, 1997.
The Company had $3,607,000 invested in completed and partially completed
residential units at October 31, 1998 compared to $3,687,000 at October 31,
1997. This investment decreased slightly during fiscal 1998 despite the fact
the Company had 48 completed and partially completed units at October 31, 1998
as compared with 42 at October 31, 1997. The construction progress of the
48 units at October 31, 1998 was not as advanced as the 42 units in 1997.
All new performance and maintenance bonding requirements were met through
the Company's new commercial bonding line that is no longer collateralized by
the Company's real estate. At October 31, 1997, the Company had
bonds outstanding of approximately $1,250,000.
The Company's cash position remained constant in 1998 as a result of cash
generated from operations including utilization of deferred tax assets and
depreciation of $2,414,000, a decrease in lot and house inventory of $201,000,
recovery of basis on the sale of townhouses of $939,000, and a net decrease in
other assets and liabilities of $397,000, offset by net repayment of
mortgages and notes payable of $1,535,000, and Company debt of $2,331,000 and
capital expenditures of $92,000.
It is the Company's plan to make annual distributions in partial repayment of
the Company Debt.
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Results of Operations
The increase in operating income was the result of a $1,648,000 increase in
gross profit on the sale of the 74 original townhouses compared to 17 in 1997
offset by a $750,000 decrease in gross profit resulting from the sale of
residential and commercial lots and houses, a decrease in general and
administrative and operating costs of $121,000, an increase in water revenue
of $25,000, and a decline in rental revenues of $336,000 and depreciation
expense of $92,000 as a result of the sale of townhouses, leaving fewer
available for rent.
Interest income increased from $32,000 to $71,000 as a result of the
Company having more excess cash available to invest during 1998 than 1997.
Net income included a provision for deferred income taxes of $1,388,000 in
1998, compared to $508,000 in 1997. The 1998 and 1997 deferred income tax
provision resulted from the Company's periodic evaluation of its ability to
generate sufficient future profits to utilize its deferred tax assets. It is
anticipated that deferred income tax provisions will be recorded in future
years that, at a minimum, approximate statutory income tax rates.
During fiscal 1998, the Company generated gross revenues of $14,167,000,
an increase of $3,236,000 over 1997. Gross revenues from sales of houses and
developed lots increased by $712,000 in fiscal 1998 over 1997, townhouse
sales increased by $2,834,000 as a result of 57 more units sold and rental
revenues declined by $336,000 in fiscal 1998.
The Company's cost of lots and houses sold, expressed as a percentage of
sales, increased from 79 % in fiscal 1997 to 88% in fiscal 1998 because of
the lower sales and lower margin earned on the sale of commercial lots. The
cost of townhouses sold in fiscal 1998 expressed as a percentage of sales
decreased from 55.9 % in 1997 to 46% in fiscal 1998. The average sales price
of townhouses sold in fiscal 1998 was $55,900 compared to $76,500 in fiscal
1997, however, the Company also expended greater funds to improve the
townhouses and incurred higher selling expenses so as to facilitate their
sale at retail in 1997.
The Company's sales of houses constructed, lots developed and existing
townhouses during fiscal 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
Fiscal 1998 Fiscal 1997
<S> <C> <C>
Moon Township 1 0
Lot Sales 4 6
Lot Sales - Single & Multi-Family 67 60
Townhouse Sales 18 19
Single Family House Sales 14 14
Fourplex House Sales 7 5
Townhouse Sales - Original Construction 74 17
</TABLE>
The four commercial lots sold in fiscal 1998 generated $1,251,000 in gross
revenues compared to the six sold in fiscal 1997 for $2,215,000. The 67
single and multifamily lots sold in fiscal 1998 generated gross revenues of
$2,175,000, or an average of $32,400, compared to gross revenues of $1,817,500
for 60 lots sold in fiscal 1997 or an average of $30,200. The change in
average lot price is a result of a change in the mix of lots sold in 1998.
The Company's revenue from the sale of single family houses was $2.6 million
in fiscal 1998 compared to $2.3 million in fiscal 1997. Fourteen single-
family houses were sold in 1998 and 1997. The Company generated revenues of
$1,074,000 from the sale of 7 fourplex units during fiscal 1998 compared to
$722,000 in
-12-
<PAGE>
1997 from the sale of 5 fourplex units. During 1998, the Company also
generated gross revenue of $1,944,000 from the sale of 18 newly constructed
townhouse units in the 77 unit Georgetowne Manor Subdivision compared to
$1,853,000 from 19 units in 1997. The sale of the Moon Twp. Property also
generated $575,000 in 1998.
Liquidity and Capital Resources
The Company has pursued the development of its property in phases. It has
used cash generated from the sale of its properties to reduce pre-
reorganization debt, to develop its property and, until such litigation was
completed in 1995, to fund the litigation efforts to recover assets from
former shareholders of the Predecessors.
The Company's primary objective is to repay to the fullest extent possible,
and at the earliest possible time, the Company Debt. To this end it
distributed $2.0 million of the net proceeds from the sale of its Virginia
Manor property in January, 1993, made additional distributions of $1.3
million in December 1993, $2.0 million in December 1994, and $2.0 million in
December 1995, $1.0 million in December 1996, $2.3 million in February 1998
and intends to make additional future distributions in repayment of the
Company Debt which will further deplete the Company's capital resources.
Because the Company has the dual objective of maximizing the cumulative
return to its Investors, which is best accomplished through expanded
development and construction activities, and to repay the Company Debt
as soon as possible, which management believes is best accomplished by
annual distributions, it is important for the Company to maintain external
sources of capital to facilitate accomplishing both of these objectives.
Management also believes that since a market for the Company Stock and
Company Debt has not developed, it is important to provide the Investors with
an annual return of some of their investment.
In 1994, the Company obtained a five-year, $1.7 million mortgage loan to
replace an existing mortgage loan. The Company also has established a
bonding line in the amount of $2.0 million which until 1998 was collateralized
by a first mortgage on 30 of its rental townhouses. During 1996, the Company
also borrowed an additional $750,000 secured by a mortgage on its Office
Building and negotiated a $1 million line of credit which was subsequently
increased to $2,250,000 in 1998 to be used for the construction of houses in
certain subdivisions, a $1 million line of credit to be used for the
construction of fourplexes in its Hawthorne Commons Subdivision and a
$750,000 line of credit to be used for the construction of townhouses in its
Georgetowne Manor Subdivision. In 1997, a $250,000 working capital line was
obtained from PNC Bank. The Company has approximately $4 million of
borrowing capacity available in these lines of credit at October 31, 1998.
The Company will continue to incur significant development costs related to
development activities north of Rt. 228. These development costs exceeded
$1.0 million in 1997 and 1998, and are also expected to exceed $500,000 in
1999, and are related to general development north of Rt. 228. Therefore, the
payback on these expenditures is longer term than expenditures for the
development of specific phases. The 1996, 1997, and 1998 expenditures include
approximately $900,000 for the reconstruction of Mars-Crider Road, and $2.0
million for Rt. 228 improvements. During fiscal 1999, the Company expects to
generate significant cash flows from the sale of lots and houses in its
Northridge Manor, Georgetowne Manor, Hawthorne Commons and Northridge Estates
Subdivisions, from the sale of commercial lots and the sale of houses and
townhouses at Nevillewood. See Item 1 Description of Business and Note
12 to the Financial Statements.
In fiscal 1997 cash flows from operating activities were reduced as a
result of the Company increasing its investment in its inventory of completed
and under construction lots and houses by $1,476,000. In 1998 cash of
$201,000 was generated as a result of a reduction of lot and house inventory.
In 1997, the Company distributed $997,000 in partial repayment of the
Company's debt, and increased its investment by $1,952,000 in its inventory
of completed and partially completed houses, development of finished
commercial and residential building lots, and in the Mars-Crider Road and Rt.
228 improvements.
-13-
<PAGE>
The Company generated the cash necessary to finance these activities from an
increase in its outstanding bank debt of $615,000 and generation of net pre-
tax income of $1,271,000. Although the Company has begun to recognize
income tax expense it probably will not be required to make substantial
cash payments for income taxes for several years.
The Company's cash position remained constant in 1998 since it repaid bank
notes and mortgages of $1.5 million and Company Debt of $2.3 million with the
cash it generated from operations and the disposal of its remaining original
townhouses.
Other Matters - Year 2000 Issue
The Company's management is in the process of evaluating the impact of the
failure of software used in the Company's administrative and accounting
activities to address date sensitive matters after the year 1999. None of the
software used by the Company is integral to its operations, and therefore if
the necessary upgrades to its software are not made on a timely basis the
impact would be minimal. The Company's accounting software is licensed from
third party vendors, and the Company has already installed year 2000 compliant
upgrades at a nominal cost.
Recent Accounting Developments
For the most part all of these new pronouncements only enhance disclosure
of certain financial information. Initially the Company does not believe
that there will be a material financial impact or significant change in
disclosure upon adoption of these new standards.
Item 7. Financial Statements
The financial statements of the Company are set forth following Item 13 of
this Form 10-KSB.
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act.
The Company, as a Pennsylvania business trust, is managed by its sole
trustee, Seven Fields Management, a wholly owned subsidiary of Seven Fields
PA. Pursuant to the Company's Deed of Trust and Bylaws, the number of
trustees of the Company has been set at one. The term of office of Seven
Fields Management as trustee is one year and expires at the next annual
meeting of the Company's shareholders.
-14-
<PAGE>
Certain information about the Directors and executive officers of Seven
Fields Management, the sole trustee of the Company, is set forth below. Each
of the Directors serves for a three-year term expiring in the year
indicated, and is elected by Seven Fields PA, the sole shareholder of Seven
Fields Management. Each such person is also a director of Seven Fields PA
and Seven Fields DEL and except for directors first elected subsequent to
April 30, 1995, each was a director of the Corporation prior to the 1995
Reorganization.
<TABLE>
<CAPTION>
Director of
Director Corporation Term Expires
Name Age Since Since
<S> <C> <C> <C> <C>
Michael Burkhart 55 1996 N/A 1999
Samuel A. Goldberg 74 1995 1988 1999
Robert A. Janusey 47 1998 N/A 2001
Cheryl Kirchner 51 1997 N/A 2001
Alexander Lindsay, Jr. 52 1995 1990 2000
Paul Voytik 74 1995 1988 2000
George K. Wright 72 1995 1988 2000
</TABLE>
<TABLE>
<S> <C> <C> <C>
Darell Craig 48 Chief Executive Officer Employed Since 1991
Lynn Hoffman-Kyle 44 Chief Financial Officer Employed Since 1988
</TABLE>
Michael H. Burkhart has been a Certified Public Accountant since 1972 and
is a member of the American Institute of Certified Public Accountants, the
Pennsylvania Institute of Certified Public Accountants and the National
Association of Certified Valuation Analysts. Mr. Burkhart has practiced in
public accounting since 1968, was a partner with Hinds, Lind, Miller & Co.,
Certified Public Accountants, until 1995, when he founded his present firm.
Much of Mr. Burkhart's professional background involves working with
construction and land development companies in the tax, accounting and
management services areas.
Samuel A. Goldberg was employed by the Mine, Safety and Health
Administration of the United States Department of Labor, as Manager of an
Analytical Laboratory for Industrial Hygiene from 1970 to December 1985
when he retired. As manager, his responsibilities included preparing a
budget, determining personnel and equipment requirements and preparing bid
submission on chemical analysis instruments. He currently serves as a
member of the Board of Directors of East Boro's J.W.V. Housing Corporation
and East Boro's J.W.V. Homeless Veterans Corporation.
Robert A. Janusey is Vice President of Shiloh Industrial Contractors, Inc.
a commercial and industrial contractor which he co-founded in 1986. Mr.
Janusey, who holds a BS in civil engineering from Geneva College was also a
project manager for Chapman Corporation from 1980 to 1986 and a draftsman for
Janusey & Associates from 1976 to 1980.
Cheryl Kirchner is a registered nurse with over 20 years experience in the
field of health care management and the development of patient care systems.
She received a Bachelor's Degree from Youngstown State University
with a major in Nursing, and a Master's Degree in Health Service
Administration from St. Francis College. As owner of a geriatric care
management service, she developed systems of support for the elderly and
their families.
Alexander H. Lindsay, Jr. is the President of the law firm of Lindsay,
Jackson & Martin, P.C. in Butler, Pennsylvania, and specializes in
litigation. He is a former Butler County and Cranberry Township solicitor.
From 1975 until 1980, he was an Assistant United States Attorney for the
Western District of Pennsylvania, and from 1977 until 1980 he was Chief of
the Public Corruption Section of the United States Attorney's Office in
Pittsburgh.
-15-
<PAGE>
From 1972 to 1973 he was an Assistant District Attorney for Butler County. He
is a 1968 graduate of Washington and Jefferson College and a 1971 graduate of
the University of Pittsburgh School of Law. Mr. Lindsay is a director
of Southwest National Corp. and its subsidiary, Southwest National Bank.
Paul Voytik has been Chairman of the Corporation since January 1989, Chief
Executive Officer from 1989 to 1998 and President of the Corporation since
February 1988. He was employed at Westinghouse Electric Corporation
for 29 years, 24 of which he served as an Engineering Manager, until his
retirement in November 1985. Thereafter, he served as a consultant to
Westinghouse until 1986. In 1986 he became Vice President and a director of
Piedmont Atlantic Corporation, which engaged in land development in Chapel
Hill, North Carolina. He has over 35 years of experience in building,
contracting, and land development.
George Wright has been Vice President of the Corporation since February
1988. He was employed by Gulf Research & Development for 42 years until his
retirement in February 1985. At the time of his retirement, he held
the position of Director of Safety, Security & Fire Prevention for a 95-acre
research complex of Gulf Oil Corporation.
Darell Craig has been employed by the Corporation as Chief Operating
Officer since September 1991 and Chief Executive Office since 1998. A
graduate of the University of Pittsburgh, Mr. Craig has been a manager of
land development and single and multi family home construction for over
twenty years.
Lynn Hoffman-Kyle prior to being named Chief Financial Officer in December
1997 was employed by the Corporation as Controller since 1988. A graduate of
Pennsylvania State University, Ms. Hoffman-Kyle has held various accounting
positions during the past twenty years.
The Company is not aware of any trustee, officer or beneficial owner of
more than ten percent of the Company Shares who failed to file on a timely
basis forms required by Section 16(a) of the Exchange Act during the fiscal
year ended October 31, 1998.
Item 10. Executive Compensation
The following table is a summary of certain information concerning the
compensation awarded or paid to, or earned by, the Company's chief executive
officer during each of the last three fiscal years. No officer or director of
the Company, except as indicated in the following table, had total annual
salary and bonus in excess of $100,000 during any of the last three fiscal
years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-term Compensation
Annual Compensation Awards Payouts
All
Other Restricted Other
Name and Annual Stock Options/ LTIP Compen-
principal Fiscal Salary Bonus Comp. Awards SARS Payouts sation
position Year ($) ($) ($) ($) (#) ($) ($)
(a) (b) (c) (d) (e) (f) (g) (h) (i)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Paul Voytik 1998 53,760 0 0 N/A 0 N/A 0
(President 1997 39,655 0 0 N/A 0 N/A 0
and Chief 1996 37,354 0 0 N/A 0 N/A 0
Executive
Officer)
Darell Craig 1998 82,445 34,594 0 N/A 0 N/A 0
Chief 1997 78,340 4,990 0 N/A 0 N/A 0
Executive 1996 76,635 4,989 0 N/A 0 N/A 0
Officer
</TABLE>
Pursuant to the terms of a Management and Administrative Services
Agreement, the Company reimburses Seven Fields Management for all of its
expenses related to the Company, including the costs incurred by Seven
Fields PA and Seven Fields DEL, including director's fees, salaries, and
costs related to shareholder services. Such reimbursement is in lieu of a
trustee fee.
-16-
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information as of January 29, 1999 regarding
the amount and nature of ownership of Company Shares by each person known by
the Company to be the beneficial owner of more than 5% of the
outstanding Company Shares, by Seven Fields Management, the sole trustee of
the Company, by each of the directors of Seven Fields Management, and by all
of such directors and the executive officers of the Company as a group. Each
such individual has sole voting and investment power with respect to the
shares listed except as otherwise indicated in the footnotes to the table.
<TABLE>
<CAPTION>
Percentage of
Name and Address of Amount and Nature of Outstanding
Beneficial Owner (1) Beneficial Ownership Company Shares
<S> <C> <C>
Seven Fields (DEL), Inc. 2,905,514 83
Seven Fields
Management, Inc. 0 0
Paul Voytik 2,905,514 (2) 83
Michael H. Burkhart 2,905,514 (2) 83
George K. Wright 2,905,514 (2) 83
Samuel A. Goldberg 2,905,514 (2) 83
Robert A. Janusey 2,905,514 (2) 83
Cheryl Kirchner 2,905,514 (2) 83
Alexander Lindsay, Jr. 2,905,514 (2) 83
All directors of the
sole trustee and
Executive officers
of the Company
as a group (9 persons) 2,905,514 83
</TABLE>
(1) The address of each person is 2200 Garden Drive, Suite 200, Mars,
Pennsylvania 16046-7846.
(2) Represents shares held by Seven Fields (DEL), Inc., of which the named
person is a director and with respect to which such person shares voting and
investment power.
The following table sets forth information as of January 29, 1999 regarding
the amount and interest ownership of shares of common stock of Seven Fields
PA by each of the directors of Seven Fields Management, the sole Trustee of
the Company and by all of such directors and executive officers of the Company
as a group. Seven Fields PA is the sole shareholder of Seven Fields DEL,
which owns approximately 83% of the outstanding Company shares. Each
person has sole voting and investment power with respect to the shares listed
except as otherwise indicated.
-17-
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Name and Address of Amount and Nature of Outstanding
Beneficial Owner (1) Beneficial Ownership Company Shares
<S> <C> <C>
Paul Voytik 13,599.89(2) *
George K. Wright 14,173.63(2) *
Samuel A. Goldberg 745.97 *
Roberet A. Janusey 257.18 *
Cheryl Kirchner 1,183.61 *
Alexander Lindsay, Jr. 0
Michael Burkhart 0
All directors of
the sole trustee and
executive officers
of the Company as
a group (9 persons) 29,960.28 .90
<FN>
* Indicates ownership of less than 1% of the common stock of
Seven Fields (PA).
(1) The address of each person is 2200 Garden Drive, Suite 200, Mars,
Pennsylvania 16046-7846.
(2) All shares held jointly with spouse.
</TABLE>
Item 12. Certain Relationships and Related Transactions
None.
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits.
<TABLE>
<CAPTION>
<S> <C>
EXHIBIT NO. DESCRIPTION
3.1 Deed of Trust of the Registrant (5)
3.2 By-Laws of the Registrant (5)
4.1 Excerpt of Amended Plan of Reorganization (1)
4.2 Specimen Certificate for shares of beneficial
interest in Registrant (5)
4.3 Specimen Note representing general unsecured
subordinated debt of Registrant after
separation of stock and debt (2)
-18-
<PAGE>
4.4 Shareholder Protection Rights Agreement (3)
4.5 Amendment dated October 11, 1994 to Shareholder
Protection Rights Agreement (5)
10.1 Rates, rules and regulations governing the
distribution of water service - PA Public Utility
Commission (3)
10.2 Plan and Agreement of Merger between the Registrant
and Seven Fields Development Corporation (5)
10.3 Mortgage Note dated October 28, 1994 of the
Registrant to PNC Bank, National Association (6)
10.4 Open End Mortgage and Security Agreement dated
October 28, 1994 between the Registrant
and PNC Bank, National Association (6)
10.5 Assignment of Rents, Leases and Profits dated October
28, 1994 between the Registrant and
PNC Bank, National Association (6)
10.6 Amendment to Loan Documents of October 28, 1994 and
release from mortgage between registrant and PNC
Bank National Association dated May 1, 1996 (8)
10.7 Amendment to Loan Documents of October 28, 1994
related to financial covenant for the
maintenance of minimum tangible net worth, between
the Registrant and PNC Bank National Association (8)
10.10 Settlement Agreement with former majority
shareholder (7)
10.11 Promissory Note dated November 29, 1995 to PNC Bank (7)
10.12 Open End Mortgage and Security Agreement dated
November 29, 1995 to PNC Bank (7)
10.13 Assignment of Rents dated November 29, 1995 to PNC
Bank (7)
10.14 Revolving Line of Credit Loan Agreement dated
November 13, 1995 between the Registrant
and Integra Bank (7)
10.15 Open End Mortgage and Security Agreement dated
November 13, 1995 between the
Registrant and Integra Bank (7)
10.17 Office Lease dated August 1, 1995 between the
Registrant and The Borough of Seven Fields (7)
10.18 Management and Administrative Services Agreement
dated April 30, 1995 (7)
10.19 Revolving line of credit loan agreement, open-end
mortgage and security agreement, and
revolving line of credit note dated August 13, 1996
between the Registrant and First Western
Bank, National Association (8)
10.20 Revolving line of credit loan agreement, open-end
mortgage and security agreement, cross-
default agreement, and revolving line of credit note
dated November 25, 1996 between the
Registrant and First Western Bank, National
Association (8)
-19-
<PAGE>
10.21 Agreement of sale with CMS-Nevillewood Limited
Partnership to acquire 8 building lots for
$896,000.
10.22 Agreement of sale of 65 townhouses with Edward Feree.
10.23 Purchase money mortgage with Watersoft Inc. (Feree)
related to sale of 65 townhouses.
10.24 Mortgage note with Watersoft (Feree) related to sale
of 65 townhouses.
10.25 Amended and restated revolving credit facility with
National City Bank for $2,250,000.
27 Financial Data Schedule
(1) Filed as exhibit to the Registrant's Registration
Statement on Form 10 filed October 23, 1989
and incorporated herein by reference.
(2) Filed as exhibit to the Registrant's Annual Report on
Form 10-K filed February 13, 1991 and
incorporated herein by reference.
(3) Filed as exhibit to the Registrant's Annual Report on
Form 10-K filed January 29, 1992 and
incorporated herein by reference.
(4) Filed as exhibit to the Registrant's Annual Report on
Form 10-K filed on February 10, 1993
and incorporated herein by reference.
(5) Filed as exhibit to Registration Statement on Form
S-4, File No. 33-85102, and incorporated
herein by reference.
(6) Filed as exhibit to Registrant's Annual Report on
Form 10-KSB filed January 27, 1995 and
incorporated herein by reference.
(7) Filed as exhibit to Registrant's Annual Report on
Form 10-KSB filed January 26, 1996 and
incorporated herein by reference.
(8) Filed as exhibit to Registrant's Annual Report on
Form 10-KSB filed January 24, 1997 and
incorporated herein by reference.
(9) Filed as exhibit to Registrant's Annual Report on
Form 10KSB filed January 28, 1998 and
incorporated herein by reference.
</TABLE>
(b) Reports on Form 8-K.
None
-20-
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
SEVEN FIELDS DEVELOPMENT
COMPANY
By
PAUL VOYTIK
Paul Voytik
President
Date: January 29, 1999
In accordance with the Exchange Act, this report has been
signed below by the following persons on behalf of the registrant in the
capacities and on the dates indicated as directors.
<TABLE>
<S> <C> <C>
Signature Title Date
PAUL VOYTIK President (Principal Executive January 29, 1999
Paul Voytik Officer) and Director *
LYNN HOFFMAN-KYLE Chief Financial January 29, 1999
Lynn Hoffman-Kyle Officer (Principal
Financial and
Accounting Officer)
GEORGE K. WRIGHT Director * January 29, 1999
George K. Wright
CHERYL KIRCHNER Director * January 29, 1999
Cheryl Kirchner
MICHAEL BURKHART Director * January 29, 1999
Michael Burkhart
<FN>
* Directors of Seven Fields Management, Inc., the sole Trustee of
the Registrant
</TABLE>
<PAGE>
SEVEN FIELDS DEVELOPMENT COMPANY
ITEM 13 (A) INDEX TO FINANCIAL STATEMENTS
Page Reference
Independent Auditors' Report....................................... F-1
Balance Sheets
at October 31, 1998 and October 31, 1997.................... F-2
Statements of Operations for the years ended October 31, 1998
and October 31, 1997........................................ F-4
Statements of Shareholders' Deficiency for the years ended
October 31, 1998 and October 31, 1997....................... F-6
Statements of Cash Flows for the years ended October 31, 1998 and
October 31, 1997............................................ F-7
Notes to Financial Statements...................................... F-8
F
<PAGE>
Independent Auditors' Report
The Trustee and Shareholders
Seven Fields Development Company
Mars, PA
We have audited the accompanying balance sheets of Seven Fields Development
Company (the "Company") as of October 31, 1998 and October 31, 1997 and the
related statements of operations, shareholders' deficiency and cash flows
for each of the two years in the period ended October 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of October
31, 1998 and October 31, 1997 and the results of its operations and its cash
flows for each of the two years in the period ended October 31, 1998 in
conformity with generally accepted accounting principles.
O'Connor, Greenblatt & Company
December 30, 1998
Sewickley, PA
F-1
<PAGE>
SEVEN FIELDS DEVELOPMENT COMPANY
BALANCE SHEETS
AS OF OCTOBER 31, 1998 AND 1997
ASSETS
<TABLE>
1998 1997
<S> <C> <C>
Cash $ 106,865 $ 225,807
Temporary investments, Note 10 308,103 195,710
Total Cash And
Temporary Investments 414,968 421,517
Accounts and notes receivable,
net of allowances of
$57,492 and $57,589 199,482 197,690
Mortgage notes receivable, Note 4 497,918 61,114
Capitalized development costs, Notes 2, 12 5,282,662 5,365,267
Capitalized house construction costs, net of
allowances, Notes 2, 12 3,606,597 3,687,231
Prepaid expenses and deposits 78,445 391,600
Property not currently under development, Net of
allowances of $123,788 in 1997, Notes 2, 12 3,038,721 3,077,133
Tenant security deposits 40,740
Deferred income tax assets, Note 9 2,096,129 3,483,784
Property, Buildings And Equipment,
Notes 2, 3, 6, 7
Land 484,756 359,725
Buildings 1,294,345 3,373,859
Equipment and furnishings 845,934 1,393,155
Construction in progress 449,757
Total Property, Buildings And Equipment 2,625,035 5,576,496
Accumulated Depreciation (581,633) (2,055,493)
Total Property, Buildings And Equipment, Net
Of Accumulated Depreciation 2,043,402 3,521,003
Total Assets $ 17,258,324 $ 20,247,079
<FN>
See Notes to Financial Statements.
</TABLE>
F-2
<PAGE>
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
LIABILITIES
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Accounts payable and accrued expenses $ 580,812 $ 696,329
Accrued estimated costs related to
developed lots and buildings sold,
Note 2 1,041,873 812,427
Notes payable - credit lines, Note 6 196,000 918,157
Mortgages payable, Note 7 972,461 1,785,570
Customer deposits and advances 106,245 133,046
Tenant security deposits 40,740
General unsecured debt - minority
investors, Note 1,8,11 9,501,710 9,897,933
General unsecured debt - Seven
Fields (DEL) Inc., Notes 1, 8, 11 46,372,015 48,306,984
Total Liabilities 58,771,116 62,591,186
</TABLE>
<TABLE>
<CAPTION>
SHAREHOLDERS' DEFICIENCY
<S> <C> <C>
Shares of beneficial interest, $1 par value,
5,000,000 shares authorized, 3,484,392
and 3,484,560 shares issued and outstanding,
Notes 1, 2, 11 3,484,392 3,484,560
Shareholders' deficit - excess of
non-discharged debt over assets on
November 7, 1987 (Date of reorganization)
Notes 1, 2 (52,235,399) (52,235,399)
Retained earnings, since November 7, 1987
(Date of Reorganization) 7,238,215 6,406,732
Total Shareholders' Deficiency (41,512,792) (42,344,107)
Total Liabilities And
Shareholders' Deficiency $ 17,258,324 $ 20,247,079
</TABLE>
F-3
<PAGE>
SEVEN FIELDS DEVELOPMENT COMPANY
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED OCTOBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Gross Revenue
Rental income $ 188,361 $ 524,230
Fees & other operating income 54,704 54,461
Water revenue 185,499 160,154
Developed lot & house sales 9,603,121 8,890,865
Townhouse unit sales 4,135,586 1,301,124
14,167,271 10,930,834
Costs And Expenses
Cost of Developed Lots And 8,449,160 6,986,853
Houses Sold
Cost Of Townhouses Sold 1,912,857 726,775
Other Operating Expenses* 596,180 778,385
General & Administrative Expenses* 846,590 785,204
Depreciation Expense 194,921 286,360
11,999,708 9,563,577
Operating Income 2,167,563 1,367,257
Interest Expense* (19,590) (129,022)
Interest Income 71,165 32,305
Income Before Provision for
Income Taxes 2,219,138 1,270,540
Provision For Income Taxes, Note 9 1,387,655 508,216
Net Income $ 831,483 $ 762,324
Net Income Per Share, Basic and Diluted
$ .24 $ .22
Weighted Average Number Of Shares 3,484,455 3,484,560
* See details on the following page.
<FN>
See Notes To Financial Statements.
</TABLE>
F-4
<PAGE>
SEVEN FIELDS DEVELOPMENT COMPANY
STATEMENTS OF OPERATIONS - CONTINUED
DETAILS OF OTHER OPERATING EXPENSES,
GENERAL AND ADMINISTRATIVE EXPENSES AND INTEREST EXPENSE
FOR THE YEARS ENDED OCTOBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Other Operating Expenses
Payroll, payroll taxes and benefits $ 685,754 $ 760,351
Repairs and maintenance 129,136 215,547
Utilities 118,646 139,719
Insurance 94,534 136,689
Property taxes 83,497 138,189
Other operating supplies and services 118,876 97,295
Total Other Operating Expenses 1,230,443 1,487,790
Less Expenses Capitalized To Development
And Construction (634,263) (709,405)
Net Other Operating Expenses $ 596,180 $ 778,385
General And Administrative Expenses
Payroll, payroll taxes and benefits $ 405,517 $ 416,070
Professional fees 112,193 119,819
Other general and administrative expenses 396,872 308,715
Total General And Administrative Expenses 914,582 844,604
Less Expenses Capitalized To Development
And Construction (67,992) (59,400)
Net General And Administrative Expenses $ 846,590 $ 785,204
Interest Expense
Total interest expense $ 151,666 $ 245,819
Less interest capitalized to development and
house construction (132,076) (116,797)
Net Interest Expense $ 19,590 $ 129,022
<FN>
See Notes To Financial Statements.
</TABLE>
F-5
<PAGE>
SEVEN FIELDS DEVELOPMENT COMPANY
STATEMENTS OF SHAREHOLDERS' DEFICIENCY
FOR THE YEARS ENDED OCTOBER 31, 1998 AND 1997
<TABLE>
Shareholders' Retained
Deficit Earnings
As Of Since
Bene- November November Total
ficial Interest 7, 7, Shareholders'
Shares Amount 1987 1987 Deficiency
<S> <C> <C> <C> <C> <C>
Balance,
October 31,
1996 3,484,560 $3,484,560 $(52,235,399) $5,644,408 $(43,106,431)
Net Income
Year Ended
October 31,
1997 762,324 762,324
Balance,
October 31,
1997 3,484,560 $3,484,560 $(52,235,399) $6,406,732 $(42,344,107)
Year Ended
October 31,
1998:
Net Income 831,483 831,483
Retired
Shares (168) (168) (168)
Balance,
October 31,
1998 3,484,392 $3,484,392 $(52,235,399) 7,238,215 (41,512,792)
<FN>
See Notes To Financial Statements.
</TABLE>
F-6
<PAGE>
SEVEN FIELDS DEVELOPMENT COMPANY
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED OCTOBER 31, 1998 AND 1997
<TABLE>
<S> <C> <C>
Cash Flows From Operating Activities 1998 1997
Net income $ 831,483 $ 762,324
Provision for deferred income taxes 1,387,655 508,216
Depreciation 194,921 286,360
Capitalized development costs incurred (3,545,553) (2,989,270)
Capitalized house construction costs incurred (5,213,184) (5,473,589)
Cost of lots and houses sold 8,960,386 6,986,853
Changes in other assets and liabilities:
Other assets 352,103 125,343
Other liabilities 46,224 437,432
Net Cash Flows Provided By
Operating Activities 3,014,035 643,669
Cash Flows From Investing Activities:
Additions to property, buildings & equipment (91,766) (562,342)
Payments on notes receivable 50,696 693
Sale of property, buildings, & equipment 886,944 320,412
Total Cash Flows Provided
By (Used In)Investing Activities 845,874 (241,237)
Cash Flows From Financing Activities:
Repayment of general unsecured debt (2,331,192) (997,931)
Net borrowings (repayments) on credit lines (722,157) 788,157
Proceeds from borrowings 310,000
Repayment of loans payable (1,123,109) (173,011)
Total Cash Flows Used In
Financing Activities (3,866,458) (382,785)
Net Increase (Decrease) In Cash And (6,549) 19,647
Temporary Investments
Cash And Temporary Investments, 421,517 401,870
Beginning of Period
Cash And Temporary Investments,
End of Period $ 414,968 $ 421,517
Interest Expense Included In Net
Income Above $ 19,590 $ 129,022
Interest Paid And Included In
Capitalized Development
And House Construction Costs 132,076 116,797
Total Interest Paid $ 151,666 $ 245,819
Income Taxes Paid None None
Supplemental Schedule Of Non-cash
Investing And Financing Activities:
Mortgage Note Received From Sale
of Property $ 487,500
<FN>
See Notes To Financial Statements.
</TABLE>
F-7
<PAGE>
SEVEN FIELDS DEVELOPMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998 AND 1997
Note 1 Organization And Business
Merger And Restructuring
Seven Fields Development Company, a Pennsylvania Business Trust (the
"Company") is the successor by merger to Seven Fields Development
Corporation (the "Corporation"), effective April 30, 1995. Use of the term
Company hereinafter refers to Seven Fields Development Corporation from
November 7, 1987 through April 30, 1995 and Seven Fields Development Company
thereafter. In the merger agreement, the Company succeeded to all of the
assets, liabilities and historical operations of the Corporation, and the
Company is to continue the business of the Corporation, which ceased to
exist as a separate corporate entity upon consummation of the merger.
The above described merger was a component of a comprehensive
restructuring of the Corporation pursuant to which approximately 83% of its
shareholders and debt-holders ("Investors") exchanged their stock and debt
("Company Debt") for the common stock of a newly formed holding company -
Seven Fields Development (PA), Inc. ("Seven Fields PA"). As a result of
this restructuring, Seven Fields PA holds 83% of the stock and debt of the
Company through a wholly owned subsidiary, Seven Fields (DEL), Inc.
Organization Structure, Management And Objectives
The Company was formed for the purpose of merging with the Corporation and
thereafter carrying on the business of the Corporation with the objective of
maximizing the value of its assets and effecting a dissolution and complete
liquidation of its business assets and affairs as soon as practicable. Such
liquidation is expected to occur over an extended period of time, as its
assets are sold and developed in a manner designed to maximize distributions
to the Investors as defined below.
The sole trustee of the Company is Seven Fields Management, Inc. which is
also a wholly owned subsidiary of Seven Fields PA. The directors and officers
of Seven Fields Management,Inc. are the same persons who were the directors
and officers of the Corporation. The executive officers of the Company are
the same persons who were the executive officers of the Corporation.
The Company as survivor of the merger, remains subject to the Bankruptcy
Plan under which the Corporation commenced operations on November 7, 1987, as
is more fully described below.
Business And Operations
The Company's current major activities are the development of its
undeveloped property located in Seven Fields Borough, Butler County, PA, and
operation of the municipal water service in Seven Fields Borough. Prior to
January 1998, the Company also rented townhouses located in Seven
Fields Borough. Since 1987, the Company sold these townhouses as individual
residences and in January 1998 sold the remaining 65 townhouses in a bulk
sale. All of these activities focus on the single goal of maximizing the
assets of the Company and ultimately distributing such assets to its
Investors in complete liquidation at the earliest appropriate time.
Since the bankruptcy Reorganization in 1987, the Company has sold four
rental properties, repaid five million dollars of debt other than Company
Debt, and returned approximately $10.6 million to its Investors through debt
repayments.
F-8
<PAGE>
SEVEN FIELDS DEVELOPMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998 AND 1997
(CONTINUED)
Note 1 Continued
Prior to 1998 the Company was not actively acquiring additional property
for development. In 1998 the Company committed to purchase 11 lots in
Nevillewood, a southwest suburb of Pittsburgh, at a total cost of
approximately $1.0 million. The Company is constructing single family
homes and townhouses on these completed lots. It will not be until at least
the years 2000 - 2005 before development of its remaining undeveloped
property at Seven Fields is completed, unless sales of some of its
remaining property are made in bulk.
The Company - Before November 7, 1987 (Date of Reorganization)
Seven Fields Development Corporation was formed pursuant to an amended plan
of reorganization effective November 7, 1987 (the "Plan"). The Corporation,
formerly known as Earned Capital Corporation, was the surviving company of
the reorganization proceedings of Earned Capital Corporation, Managed
Properties, Inc., Canterbury Village, Inc. and Eastern Arabian, Inc. (the
"Debtors") all of which merged, pursuant to the Plan, to form the Company.
The Debtors were formed in 1976 primarily for the purpose of marketing and
managing investments in multi-family residential housing developments. From
1976 until May 1986, when the Debtors filed for reorganization under Chapter
11 of the Federal Bankruptcy Code, they acquired four significant real estate
projects. The Debtors obtained funding to acquire and/or develop these
projects by selling to investors what was purported to be percentage
interests in a particular real estate development that would be managed by the
Debtors. From 1976 to 1986 the Debtors received approximately $57,000,000
from over 2,600 investors (the "Investors"). These Investors had no
management control over the Debtors' affairs. Management of the
Debtors was vested exclusively with four stockholders who owned 100% of the
stock of the Debtors. Investors' investment balances, including
reinvestments, exceeded $69,000,000 when the Debtors filed petitions for
reorganization with the Bankruptcy Court.
The Plan Of Reorganization And The Company Subsequent To November 7, 1987
The Plan transferred 100% ownership of the Debtors from the four former
stockholders to the more than 2,600 Investors, merged the Debtors into the
Company, removed the former shareholders from having involvement in the
management or ownership of the reorganized company, and required the
repayment in full all debt, secured and unsecured, to creditors on the same
terms of agreements then in existence. The Plan also, despite assets with a
market value far less than the obligation of the Company to the Investors,
did not reduce the face amount of the Company's obligation to those
Investors. The liability to the Investors, representing 95% of the
Investors' claims, remained a general unsecured debt of the Company and the
Company waived discharge of such debt. These non-discharged debts are
subordinated to any existing liens and priorities and any future secured
debt, and the claimant-creditor, his heirs, assigns or successors may not
file suit or take any judgment, or undertake any collection activities.
The Company's Deed of Trust states that the Company's Trustees may declare
and pay to the holders of the Company's shares of beneficial interest ("Company
Shares"), such liquidating distributions as they deem proper and advisable.
However, there is no assurance that any liquidating distribution will ever
be declared or paid. Holders of Company shares could only receive a
liquidating distribution after all debt had been repaid. Presently, and
for the foreseeable future, it is unlikely that there would
F-9
<PAGE>
SEVEN FIELDS DEVELOPMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998 AND 1997
(CONTINUED)
Note 1 Continued
be any residual assets available for distribution on Company shares.
The general, unsecured debt issued to the Investors bears no interest and
is subordinate to existing and future secured debt of the Company. As
indicated above, the Plan specified that this debt would be paid as soon as
possible. Presently, and for the foreseeable future, the assets of
the Company are inadequate to pay a substantial part of this debt. Upon
liquidation, payment of this general, unsecured debt ranks behind
payment of existing and future secured debt of the Company but before payment
to holders of Company Shares.
The restructuring effected in 1995, on a consolidated basis and at the
parent company level, eliminated 83% of the debt outstanding to Investors
through their exchange of their debt for common stock of Seven Fields
(PA), Inc. Because of the requirement of retaining proportionality and the
priority of the debt over Company shares, the debt has remained unchanged at
the Company level, although 83% of such debt is held by the Company's parent.
Note 2 Summary Of Significant Accounting Policies
Reorganization
Merger And Basis Of Presentation
The merger qualifies as a tax-free reorganization and was accounted for in
a manner similar to a pooling of interests. For comparative purposes,
certain 1997 amounts have been reclassified to conform to the presentation
adopted in 1998.
Reorganization On November 7, 1987
Although the Corporation was the successor in the merger of the four
Debtors pursuant to the Plan, the Company was being treated for accounting
purposes as if it were a newly created corporation at November 7, 1987.
Most significantly, the assets upon reorganization have been stated
at their appraised value instead of historical cost. Total assets of the
Corporation at November 7, 1987 were $18,145,669, including fair
market value of all real estate and horses in the amount of $16,792,582 and
historical cost for all other assets of $1,353,087. Since total Investor
balances exceeded $69,000,000 and other liabilities exceeded $5,000,000,
the Company emerged from bankruptcy reorganization proceedings with a
shareholders' deficiency of $54,812,544. Assets received from the
shareholders and related parties of the debtors and pre-reorganization
claims against the Company have been treated as an adjustment of
Pre-Reorganization Deficit at November 7, 1987. In addition, as more fully
explained in Note 9, $4,080,000 of deferred tax assets was recognized on
November 1, 1993.
Use Of Estimates
The preparation of the Company's financial statements requires management
to make estimates and assumptions that affect the amounts reported at the
date of the financial statements for assets, liabilities, revenues and
expenses and disclosure of contingencies. Actual results could differ from
those estimates. The Company makes significant estimates related to common
area development costs that it expects to incur in the future, and costs to
complete specific subdivisions of lots from which lots are being sold.
F-10
<PAGE>
SEVEN FIELDS DEVELOPMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998 AND 1997
(CONTINUED)
Note 2 Continued
Fixed Assets And Depreciation
Fixed assets are recorded at cost except for assets transferred to the
Corporation pursuant to the Plan, which are recorded at appraised value as
determined in the bankruptcy reorganization proceedings.
The carrying value of such assets is estimated to be not in excess of net
realizable value. No accumulated depreciation was recorded as of the
Corporation's reorganization on November 7, 1987, and the Company has used
straight line and double declining balance methods utilizing the half year
convention in the year of acquisition since bankruptcy reorganization. The
Company has selected estimated useful lives for the assets received pursuant
to the Plan that approximates the original estimated lives of personal
property and the residual lives of the real property.
Development Costs And Other Capitalized Costs
It is the Company's policy to capitalize all material costs related to
the development of its property. Costs, including but not limited to legal,
engineering, planning and construction, which are specifically identifiable
to each phase, are capitalized to the individual phase, and costs which are
incurred which benefit all phases being developed or to be developed in the
future are allocated to those phases. Costs that are included in the
general and administrative cost center and directly related to development
activities are capitalized to the development phases under construction
during the period. Material interest costs, are capitalized during the
construction period of each phase based on the average interest rate of the
Company's outstanding debt. The full cost of construction, including
overhead, and construction period interest of completed and partially
completed houses, has been capitalized.
Estimated costs for amenities and common areas related to phases from
which lots are being sold are accrued and a proportionate part of such costs
are included in the cost of lots sold.
Revenue Recognition
The Company recognizes revenue on the sale of lots when settlement occurs,
or the collectibility of any related receivable is reasonably assured and the
Company has completed substantially all obligated development related to the
lots sold.
Revenue is recognized upon settlement for houses that the Company
constructs provided construction is substantially completed.
The Company recognizes revenue on the sale of its townhouse units at
settlement. Sales of lots, or housing units from phases or multi unit
buildings where development or construction is not substantially complete is
accounted for in accordance with the percentage of completion method, based
on estimated cost to be incurred. Rental revenue from the Company's
townhouses is recognized on a monthly basis. The Company's leases with its
residential tenants are of six-months or one year duration and are
typically renewed by the tenant.
PUC Regulated Activities
The Company was granted permission by the Pennsylvania Utility Commission
(PUC) to charge for
F-11
<PAGE>
SEVEN FIELDS DEVELOPMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998 AND 1997
(CONTINUED)
Note 2 Continued
the water services that the Company provides the residents of Seven Fields
Borough effective November 29, 1991.
In accordance with regulations promulgated by the PUC, the Company is
required to apply for permission from the PUC to establish, or change the
rates it charges its customers, follow PUC accounting policies and
procedures, and adhere to all other rules established by the PUC.
Capitalized Development And House Construction Costs
The cost of the inventory of unsold lots is determined based on the lower
of the average lot cost for each phase or market. The cost of unsold
constructed houses is based on the lower of cost or market for each house.
Provision For Losses
Provisions for losses on notes and accounts receivable and lots and houses
are charged to operations to reduce the carrying amount so as to not exceed
net realizable value.
Cash And Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid investments, not otherwise restricted, with a maturity of three
months or less at the time of purchase to be cash equivalents.
Note 3 Real Estate Rental Activities
A summary of the historical cost of properties held for rent at Seven
Fields that are included in property, buildings and equipment on the
balance sheets is as follows. These properties include a commercial office
building and a sales center in 1998 and 1997, and 74 residential townhouses
in 1997.
F-12
<PAGE>
SEVEN FIELDS DEVELOPMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998 AND 1997
(CONTINUED)
Note 3 Continued
<TABLE>
<CAPTION>
October 31,
1998 1997
<S> <C> <C>
Land $ 484,756 $ 359,725
Buildings 1,294,345 3,373,859
Equipment And Improvements 314,157
Assets Under Construction 449,757
Total Rental Properties 1,779,101 4,497,498
Accumulated Depreciation (89,556) (1,445,956)
Total Rental Properties, Net. $ 1,689,545 $ 3,051,542
</TABLE>
During 1995 the Company completed construction of a two-story
office building having 9,434 square feet. The Company occupies 4,717 square
feet and rents 4,717 square feet to the Borough of Seven Fields under
terms of a five-year lease that expires July 31, 2000. The Borough is
required to pay all utilities and 50% of the operating costs of the building.
The Company has granted the Borough an option to purchase the building
at the end of the lease at a then fair market value to be determined on the
basis of the average of two appraisals. The Company leases a real estate
sales office that it constructed in 1995 under terms of a three year lease
which expires January 21, 2001. The lease also contains two
one-year renewal options at a rent adjusted for the change in the CPI and
requires the Lessee to pay all utilities and maintenance of the property.
Minimum lease payments to be received under non-cancelable operating leases
at October 31, 1998 are as follows:
<TABLE>
<S> <C>
1999 $ 77,083
2000 70,302
2001 7,000
Thereafter
Total $ 154,385
Total
Note 4 Mortgage Notes Receivable (Mortgage Assignments)
Commencing in 1993, the Company began financing the purchase of certain
of the townhouse units which it sells to individuals. Such financing is
facilitated by the Company receiving an assignment of the mortgage note
granted by the buyer of the individual townhouse to the mortgagee -
Howard Hanna Financial Services. The Company has not perfected its security
interest in the underlying collateral in that it is the Company's policy to
not record these assignments with the Butler County Recorder of Deeds. The
Company intends to sell the remaining mortgage it holds in the open market
when market conditions are favorable.
The Company sold its 65 remaining townhouses in bulk in January 1998. As
partial consideration, the Company accepted a mortgage note in the amount of
$487,500 and was granted a second mortgage secured by the 65 townhouses sold.
This mortgage note which bears interest at 7 1/2% is repayable at the rate of
$7,500 for each townhouse the mortgagor sells but not less than $255,000 by
F-13
<PAGE>
SEVEN FIELDS DEVELOPMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998 AND 1997
(CONTINUED)
Note 4 Continued
July 28, 2000, an additional $127,500 by July 28, 2001, and the remaining
principal balance by July 28, 2002.
The Company charges operations with any credit loss it incurs on an
individual loan basis, and losses because of market changes on an aggregate
basis. Market value is determined based on the current discount
rates for mortgages of identical terms and interest rates. The Company held
the following mortgage note and note assignment at October 31, 1998 and 1997:
</TABLE>
<TABLE>
<CAPTION>
Bulk Retail Total
Sale Sale 1998 1997
<S> <C> <C> <C> <C>
Number of Mortgage Notes 1 1 2 1
Approximate Average
Interest Rate 7.5% 8.125% 8.125% 8.125%
Final Maturity Date 2002 2024 2024 2024
Face Amount of Mortgage Notes 487,500 62,910 550,410$ 62,910
Carrying Amount of
Mortgage Notes
(Market Value) $ 435,000 $ 62,918 $ 497,918 $ 61,114
<CAPTION>
Reconciliation Of The Carrying Amounts of Notes
Bulk Retail Total
Sale Sale 1998 1997
<S> <C> <C> <C> <C>
Beginning Balances $ 61,114 $ 61,114 $ 61,807
New Loans $ 487,500 487,500
Principal Collected (52,500) (534) (53,034) (693)
Market Valuation Change
and Realized Gains
or (Losses) 2,338 2,338
Ending Balance $ 435,000 $ 62,918 $ 497,918 $ 61,114
Delinquent Loans 1 1 0
Principal Amount of
Delinquent Loans $ 61,686 $ 61,686 0
</TABLE>
Note 5 Commitments, Surety And Litigation
Litigation
The Company has concluded all litigation with the former majority
shareholder of the Debtors as a result of a settlement that was finalized in
November 1995.
F-14
<PAGE>
SEVEN FIELDS DEVELOPMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998 AND 1997
(CONTINUED)
Note 5 Continued
Surety
The Company is contingently liable under terms of maintenance and
performance bonds totaling $1,250,000 to a commercial surety company. To
date, the Company has successfully completed, to the extent possible,
and to the satisfaction of the Borough and other governmental units, each of
its previous subdivisions and other construction, and each of its prior bonds
have been duly released.
Purchase Commitment
The Company has entered into a lot purchase agreement for the acquisition
of three single family lots and eight townhouse building lots in the
Nevillewood development. Under terms of this agreement as of October 31,
1998, the Company is obligated to purchase one additional single family
lot in 1999 for $65,000 and three additional townhouse lots in 1999 at a
total cost of $336,000 and three lots in 2000 for an additional $336,000.
The Company will build four townhouse units on each lot and as of
October 31, 1998 has closed on two of the eight lots and has eight townhouse
units under construction.
Note 6 Notes Payable - Credit Lines
The Company utilizes a revolving credit line in the amount of $2,250,000
($1,000,000 in 1997) with National City Bank. Interest is payable monthly at
the bank's prime rate plus 1/2%. The credit line is to be used for individual
house construction in Seven Fields and Nevillewood in an amount not to
exceed $1.5 million, and for townhouse construction at Nevillewood in an
amount not to exceed $750,000 and is secured by the constructed homes for
which the loan proceeds are used, and by the Company's remaining lots in its
Northridge Manor Subdivision. The credit line matures June 1, 2002 and
advances outstanding more than 12 months are to be repaid over a 48-month
term. National City may call the notes outstanding on May 1 of each year,
however, the Company is allowed 180 days to repay the balance in full. No
balance was outstanding at October 31 1998.
The Company maintains a revolving credit line of $1,000,000 with First
Western Bank, with interest payable monthly at the bank's prime rate plus
1/2%. The credit line is to be used for constructing up to 12
homes in the Hawthorne Commons Subdivision, and is secured by the Company's
property in that subdivision. Borrowings are limited to $80,000 for each
house, and any outstanding principal is required to be repaid upon the sale
of each house. At October 31, 1998, the total outstanding balance amounted
to $196,000 with interest payable at 8 1/4%.
The Company also utilizes a third revolving line of credit in the amount of
$750,000. The proceeds under this credit line are restricted to the
construction of townhouses in the Company's Georgetowne Manor Subdivision.
Advances under this credit line bear interest at First Western Bank's
prime rate plus 1/2%. No balance was outstanding at October 31, 1998.
The Company also maintains a $250,000 working capital credit line with
PNC Bank with interest payable at the bank's prime rate plus .625%. At
October 31, 1998, the Company had no amount outstanding under this credit
line.
F-15
<PAGE>
SEVEN FIELDS DEVELOPMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998 AND 1997
(CONTINUED)
Note 7 Mortgages Payable
On November 29, 1995, the Company granted PNC Bank a mortgage on its office
building to secure a term loan in the amount of $750,000. This loan has a
balance of $668,449 at October 31, 1998. The proceeds of this loan were used
to replenish its working capital, and to carry on its development and
construction activities. This office building was completed in August 1995
at a cost of $1,263,207. Interest is based on PNC's prime rate plus 1/2%
or is fixed at 2 1/4% above PNC's fully absorbed cost of funds, and is being
amortized over a 15 year term, but matures on December 10, 2000. At October
31, 1998, monthly principal and interest payments are $7,265 based on the
current interest rate of 8.12%, which has been fixed through December 10, 1999.
The Company must also comply with certain financial covenants including at
all times having a tangible net worth (defined as net worth plus general
unsecured debt less deferred tax assets) of $10,000,000, a current
ratio of 2 to 1; debt to net worth (adjusted for general unsecured debt and
deferred tax assets) of .5 to 1; and debt service coverage of 1.1 to 1. It
is anticipated that the $10 million net worth covenant will periodically be
reduced in future years to facilitate the Company's planned liquidation of
its assets and distribution of the proceeds of such liquidation to its Debt-
holders.
The Company also granted National City Bank a $250,000 mortgage secured on
its real estate sales office that has a net book value of $510,000. This
loan, having a balance of $244,012 at October 31, 1998, bearing interest on a
floating basis (7.91% at October 31, 1998) and maturing January 8, 2003,
requires the Company to make 60 monthly principal and interest payments of
$2,376 with the balance payable at maturity.
The Company also granted mortgages totaling $60,000 on two lots it
purchased at Nevillewood. These loans bear interest at Prime plus 1% if not
paid by April 1999, and are repayable upon sale of the lots upon which the
Company is presently building two homes. Aggregate maturities of
long term debt at October 31, 1998 are as follows:
<TABLE>
<S> <C>
1999 $ 102,740
2000 46,369
2001 609,664
2002 11,801
2003 201,887
$ 972,461
</TABLE>
Note 8 Fair Value Of Financial Instruments
The following methods and assumptions were used to estimate the fair value
of financial instruments at October 31, 1998:
Cash and temporary investments: The carrying amount reported in the balance
sheet for cash and temporary investments approximate fair value.
Accounts and notes receivable, deposits, and accounts payable: The carrying
amounts of these assets and liabilities in the balance sheet approximate fair
value.
F-16
<PAGE>
SEVEN FIELDS DEVELOPMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998 AND 1997
(CONTINUED)
Note 8 Continued
General unsecured debt - minority investors and general unsecured debt -
Seven Fields (DEL) Inc.: The carrying amount of general unsecured debt -
minority investors of $9,501,710 and general unsecured debt - Seven Fields
(DEL) Inc. of $46,372,015 is materially in excess of the fair value of these
financial instruments. As more fully described in Notes 1 and 11, the
general unsecured debt is non-interest bearing, has no maturity date, and
legal action by the debt holder to collect is precluded. Furthermore, since
the Company emerged from bankruptcy proceedings in 1987, there have been no
known sales of the debt in the open market. The amount of this debt which is
ultimately repaid, and the timing of such repayment, is totally
dependent upon the Company's success in developing its property and
liquidating and distributing the proceeds from sales of its assets to the
debt-holders. Consequently, this debt is more characteristic of an equity
instrument having a preference upon liquidation, bears no interest or
dividend rate, has no fixed cash stream, or maturity date. Because of these
factors, it is not practicable to determine the fair value of the general
unsecured debt.
Notes Payable - Credit lines and mortgages payable: The carrying amounts of
notes payable, credit lines and mortgages payable approximate fair value
since interest rates of the mortgages and credit line notes approximate
interest rates currently available to the Company on other debt instruments
and the credit line interest rates are of a variable nature.
Note 9 Income Taxes
The Company recognized deferred tax assets of $4,080,000 on November 1,
1993, as a result of adopting statement of financial accounting standard
No. 109 "Accounting For Income Taxes". The net deferred tax asset of
$4,080,000 is a result of higher tax basis of the Company's assets
than the basis recognized for financial reporting purposes at the time of
reorganization. Recognition of this deferred tax asset reduced the
Shareholders' Deficit created at reorganization.
As of October 31, 1998, the Company has federal and state net operating
loss carryforwards for tax purposes which, if not utilized, expire as follows:
<TABLE>
<CAPTION>
October 31, Federal State
<S> <C> <C>
2003 $ 2,364,433
2004 3,911,434
2005 4,605,975
2006 626,911 $ 434,857
2007 870,453
2008 3,892,382 454,879
2009 1,202,522
2010 1,125,160
2011 436,732
2012
2013 676,571
$ 19,712,573 $ 889,736
</TABLE>
F-17
<PAGE>
SEVEN FIELDS DEVELOPMENT COMPANY
NOTES TO FINANCIAL STATEMENT
OCTOBER 31, 1998 AND 1997
(CONTINUED)
Note 9 Continued
For Pennsylvania income tax purposes, net operating losses generated in
fiscal 1996 and thereafter may be carried over for ten years. The maximum
net operating loss that may be used in any fiscal year is $1,000,000.
Adoption of FAS 109 permitted the Company to recognize deferred tax assets
substantially equivalent to the estimated tax benefits to be derived from the
excess of the tax basis of the Company's assets at reorganization over the
asset amounts used for financial reporting purposes. The Company has also
estimated the extent to which the deferred tax assets should be reduced by
a valuation allowance so that the assets will not be carried in excess of
estimated realizable value.
The net realizability of the deferred income tax assets is re-evaluated
periodically. The deferred tax asset which the Company estimates will be
realizable is calculated annually to be an amount not to exceed 7 times
the average pre-tax income for the latest two fiscal years at the tax rates
in effect at that time. The Company's ability to utilize its deferred tax
assets is based on its ability to generate sufficient pre-tax income in the
future prior to its complete liquidation, which is limited by the total property
which the Company has available to develop in the future. In 1997 and 1998,
the Company began increased the deferred tax valuation allowance
so as to reduce its net deferred tax assets to amounts which will not exceed
utilization of such assets based on its property which remains to be sold.
At October 31, 1998, the significant components of the Company's deferred
tax assets are as follows:
<TABLE>
<CAPTION>
Federal State Total
<S> <C> <C> <C>
Tax over financial
reporting basis of assets
originating at reorganization $ 956,921 $ 312,371 $ 1,269,292
Net operating loss carryforwards
resulting from the utilization
of the higher tax basis of assets
since reorganization 7,098,521 228,098 7,326,619
Potential tax benefit at
October 31, 1998 8,055,442 540,469 8,595,911
Valuation allowance - Reduction for
estimated unutilized deferred
tax assets 6,482,821 16,961 6,499,782
Net Deferred Tax Assets $1,572,621 $ 523,508 $ 2,096,129
</TABLE>
Significant components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
Year Ended October 31,
1998 1997
<S> <C> <C>
Deferred
Federal $1,165,963 $ 381,374
State 221,692 126,842
Provision For Income Taxes $1,387,655 $ 508,216
</TABLE>
F-18
<PAGE>
SEVEN FIELDS DEVELOPMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998 AND 1997
(CONTINUED)
Note 9 Continued
A reconciliation of income taxes with the amounts which would result from
applying the US statutory rate follows:
Year Ended October 31,
<TABLE>
<CAPTIONED>
1998 1997
<S> <C> <C>
Tax at US Statutory Rate $ 754,506 $ 427,214
State Income Taxes Net of Federal Benefit 146,316 83,017
Utilization of Deferred Income Tax Asset (2,015)
Increase in Valuation Allowance 486,833
Provision For Income Taxes $1,387,655 $ 508,216
</TABLE>
Note 10 Temporary Investments
Temporary investments at October 31, 1998 and 1997 consist of $308,103 and
$195,710 respectively invested in PNC Bank's PNC Investment Short Term
Common Trust Fund. The underlying securities which consist of US Treasury
and US Government Agency obligations and repurchase agreements relating to
such obligations have average maturities of 20 to 60 days. The proceeds are
deposited automatically to the Company's operating account as needed. Cost
and market value of temporary investments are identical to each other at
October 31, 1998 and 1997.
Note 11 Capital Stock And Subordinated Debt
The Company, at the time of its bankruptcy reorganization on November 7,
1987, as prescribed by the Plan, issued to the Investors certificates
intended to represent shares of common stock and general, unsecured debt
of the Company. The certificates representing the shares state (a) the
number of shares issued, (b) total amount of the Investor's claim and (c)
the amount of such claim as represented by the shares and the undischarged
indebtedness owed to Investors by the Company. The certificates
also have the following statement printed thereon: "The equity and debt
interests represented hereby are not severable." The Board of Directors of
the Company, on August 25, 1989, passed a resolution that provided that the
shares and the debt held by each Investor shall be severable and separately
transferable.
The two separate instruments have the following characteristics.
GENERAL UNSECURED DEBT (SUBORDINATED DEBT)
: Subordinate to all existing debt at Reorganization (November 7, 1987)
: Subordinate to all future secured debt incurred
: Non-interest bearing
: Legal action to collect is precluded
: No voting rights
F-19
<PAGE>
SEVEN FIELDS DEVELOPMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998 AND 1997
(CONTINUED)
Note 11 Continued
: Issued at 95% of face value of Investors' account balance regardless of
the value of the underlying assets available to pay this debt
TRUST SHARES
: Voting stock
: Issued at 5% of face value of Investors' account balance
: Presently and for the foreseeable future has no liquidation value
because of the excess of debt over assets
: Presently and for the foreseeable future will not have dividends
declared and it is anticipated that no dividends will ever be paid
because of the excess of the Company's debt over its assets
Subsequent to the merger and restructuring described in Note 1, 83% of the
Company's stock and debt is held by Seven Fields DEL, a wholly owned
subsidiary of Seven Fields PA. Seven Fields PA acquired 83% of the Company's
debt and stock in exchange for its common stock from those Investors (83%)
who accepted the Seven Fields PA's exchange offer.
Note 12 Capitalized Development Costs, House Construction Costs, PUC
Regulated Water Costs And Property Held For Investment And Future Development
The Company has incurred substantial costs in continuing the development of
certain of its property located at Seven Fields, Butler County, PA. The
Company's development and house construction activities for the years ended
October 31, 1998 and October 31, 1997 are summarized below for each of the
areas of significant activity.
F-20
<PAGE>
SEVEN FIELDS DEVELOPMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1998 AND1997
(CONTINUED)
Note 12 Continued
The following information summarizes development activities for 1998.
<TABLE>
<CAPTION>
Sub-
stantially
Com-
pleted
Sub-
divisions North George- North
South of Ridge towne Ridge Hawthorne
Route 228 Manor Manor Estates Commons
<S> <C> <C> <C> <C> <C>
Total Acres 125 17 10 53 24
Total Lots 277 45 77 99 96
Unsold Lots 4 15 32 47 86
Balance
October 31,
1997 $164,943 $562,760 $637,408 $790,660 $1,953,567
1998 Costs
Capitalized:
Reclassify Land
Costs 317,362
Selling,
Engineering &
Supervision 3,177 27,413 26,561 95,166 6,722
Excavation &
Construction 1,032 47,057 (2,347) 988,810 152,135
Overhead Allocated 3,816 3,816 3,816 3,498
Interest 22,500
Total Accumulated
Costs 169,152 641,046 665,438 2,218,314 2,115,922
Less Cost of Lots &
Houses Sold 93,070 332,408 251,331 770,978 163,833
Balance October 31,
1998 $ 76,082 $308,638 $414,107 $1,447,336 $1,952,089
Classification of
Costs:
Capitalized
Development Costs $ 76,082 $308,638 $414,107 $1,447,336 $1,952,089
Capitalized House
Construction Costs
Property Not
Currently Under
Development - - - - -
Land (Related to
Rental Properties) - - - - -
Buildings (Rental
Properties)
Equipment And
Furnishings (1) - - - - -
$ 76,082 $308,638 $414,107 $1,447,336 $1,952,089
(1) Equipment and
Furnishings used
in development
and construction
Other Equipment and
Furnishings
Total Equipment
and Furnishings
<S> <C> <C> <C> <C>
Estimated additional
costs to be incurred
in next five years:
(000's) 1999 2000 2001 2002
Land Development $ 453 $ 1,334 $1,187 $ 876
Building Construction $ 8,548 $7,024 $6,064 $ 6,304
Total $ 9,001 $8,358 $7,251 $ 7,180
</TABLE>
F-21
<PAGE>
<TABLE>
<CAPTION>
Commercial Commercial Moon Twp.,
Parcels Parcels Route 228,
South of North of Unutilized Water & Office
Route 228 Route 228 Parcels Other Buildings Houses Total
<S> <C> <C> <C> <C> <C> <C>
47 22 171 40 6 515
10 1 605
3 187
$350,424 $ 229,685 $ 2,559,631 $1,553,859 $1,712,965 $3,687,231 $14,203,133
155,427 166,295 (639,084)
120,915 81,450 54,559 183,564 591,850 1,191,377
23,526 920,354 1,033,123 (784,200) 66,136 4,411,420 6,857,046
3,816 10,800 30,492 120,000 180,054
7,400 89,914 119,814
654,108 1,408,584 3,038,721 960,623 1,779,101 8,900,415 22,551,424
351,055 614,227 598,742 5,293,818 8,469,462
$303,053 $ 794,357 $ 3,038,721 $ 361,881 $1,779,101 $ 3,606,597 $14,081,962
$303,053 $ 794,357 $ (13,000)$ $ 5,282,662
3,606,597 3,606,597
3,038,721 3,038,721
484,756 484,756
1,294,345 1,294,345
374,881 374,881
$303,053 $ 794,357 $ 3,038,721 $ 361,881 $1,779,101 $ 3,606,597 $14,081,962
$ 374,881
471,053
$ 845,934
2003
$ 35
$ 5,804
$ 5,839
</TABLE>
F-22
<PAGE>
SEVEN FIELDS DEVELOPMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998 AND 1997
(CONTINUED)
Note 12 Continued
The following information summarizes development activities for 1997.
<TABLE>
<CAPTION>
Substan-
tially
Completed
Sub-
divisions North George- North
South of Ridge town Ridge Hawthorne
Route 228 Manor Manor Estates Commons
<S> <C> <C> <C> <C> <C>
Total Acres 125 17 10 31 24
Total Lots 277 45 77 56 96
Unsold Lots 8 29 50 28 93
Balance October 31, 1996 $378,703 $709,665 $785,994 $ 1,228,115 $ 1,302,336
1997 Costs Capitalized:
Reclassify Land Costs
Selling Expenses 18,561 19,994 22,400 11,471 15,880
Engineering
& Supervision 1,403 6,091 18,285 13,899 52,013
Excavation
& Construction (28,598) 22,401 71,577 67,809 652,614
Overhead Allocated 4,752 4,752 4,752 9,504
Interest
370,069 762,903 903,008 1,326,046 2,032,347
Less Cost of Houses &
Lots Sold 205,126 200,143 265,600 535,386 78,780
Balance October 31, 1997 $164,943 $562,760 $637,408 $ 790,660 $1,953,567
Classification of Costs:
House Construction
& Development $164,943 $562,760 $637,408 $ 790,660 $1,953,567
Unutilized Land
Property, Plant
& Equipment $164,943 $562,760 $637,408 $ 790,660 $1,953,567
</TABLE>
<TABLE>
F-23
<PAGE>
Commercial
Commercial Parcels Moon Twp.,
Parcels North of Route 228,
South of Route 228 Unutilized Water & Office
Route 228 Phase M Parcels Other Buildings Houses Total
<S> <C> <C> <C> <C> <C> <C>
45 18 199 40 5.7
11 18 5
4 14 3
$597,640 $ $2,150,075 $1,011,134 $1,263,208 $2,842,203 $12,269,073
125,128 229,630 (417,709) 15,191 47,760
88,493 49,109 57,500 346,861 630,269
27,558 13,652 129,872 140,922 24,833 105,267 533,795
54,240 312,839 683,137 446,558 367,911 4,902,599 7,553,087
11,880 1,251 14,256 8,253 59,400
13,500 11,000 1,000 108,546 134,046
$904,939 $619,981 $2,559,631 $1,682,305 $1,712,965 $8,305,476 $21,179,670
554,515 390,296 128,446 4,618,245 6,976,537
$350,424 $229,685 $2,559,631 $1,553,859 $1,712,965 $3,687,231 $14,203,133
$3,687,231 $ 3,687,231
$350,424 $229,685 $ $ 675,820 $ 5,365,267
2,559,631 517,502 3,077,133
360,537(2) 1,712,965(1) 2,073,502
350,424 229,685 2,559,631 1,553,859 1,712,965 3,687,231 14,203,133
</TABLE>
Reconciliation of Development Activities with Balance Sheet Classifications
<TABLE>
<CAPTION>
Con- Equipt-
Land Building struction ment Total
<S> <C> <C> <C> <C> <C>
Costs Included
Above $241,971 $1,021,237 $449,757 (1)$1,712,965
Equipment Costs
Included Above $ 360,537 (2) 360,537
Assets Not
Considered
Develop-
ment
Related 117,754 2,352,622 1,032,618 3,502,994
Total
Balance
Sheet
Classifi-
cation $359,725 $3,373,859 $449,757 $1,393,155 $ 5,576,496
</TABLE>
F-24
<PAGE>
SEVEN FIELDS DEVELOPMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998 AND 1997
(CONTINUED)
Note 13 Business Segment Information
<TABLE>
<CAPTION>
For The Year Ended October 31, (000's)
1998 1997
Develop-
Development, ment,
Construction Rental Con-
Rental & and struction
General & PUC General & PUC
Operations Activities Total Operations Activities Total
<S> <C> <C> <C> <C> <C> <C>
Gross
Operating
Revenue $ 243 $ 13,924 $ 14,167 $ 579 $ 10,352 $ 10,931
Costs &
Operating
Expenses 224 11,580 11,804 615 8,663 9,278
Depreciation
Expense 124 71 195 174 112 286
Operating
Income
(Loss) (105) 2,273 2,168 (210) 1,577 1,367
Total
Identifi-
able
Assets 3,120 14,138 17,258 6,808 13,439 20,247
Capital
Expendi-
tures $ 0 92 92 0 562 562
</TABLE>
Note 14 Concentration Of Credit Risks
The Company's customers are the general public for the rental of apartments
in its rental project and customers, mostly residential home owners, to which
water utility services are provided. The Company has historically incurred
minimal credit losses.
From time to time the Company maintains cash deposits with its principal
bank in excess of the FDIC insured limits.
The Company began financing certain of the sales of its townhouses during
1993. The mortgage originator, in whose name the mortgage is recorded as a
first mortgage on the townhouse sold, assigns the mortgage note to the
Company, which assumes all of the market and credit risks related to
the note. As of October 31, 1998 and 1997, the Company held $61,686 and
$62,219 respectively of these mortgage note assignments. The Company's
interest in the underlying collateral is not perfected in that it is
the Company's policy to not record the mortgage note assignments with the
Butler County Recorder of Deeds. The effect of changes in market
interest rates in recent years has not had a material effect on the Company.
The Company also holds a mortgage note for $435,000 secured by a second
mortgage on 65 townhouses it sold in a bulk sale during 1998.
Note 15 Environmental Matters
The Company knows of no environmental risks associated with its properties
and operations.
Note 16 Related Party Transactions
A director of Seven Fields PA provided the Company with certain legal
services and was paid $1,701. The Company's management believes that the
Company received services of economic value equivalent to the amounts paid.
F-25
<PAGE>
SEVEN FIELDS DEVELOPMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998 AND 1997
(CONTINUED)
Note 16 Continued
The Company made available a $135,000 construction loan to a homeowners
association of property owners that have purchased the Company's townhouses.
The loan bears interest at 10.25% and principal repaid during 1998 amounted
to $26,577. The loan was used for certain improvements to townhouses in the
Castle Creek development, and is secured by all present and future
homeowner's fees. The loan matures November 1, 2001. The total amount
outstanding at October 31, 1998 was $98,126. A second construction loan of
$58,000 was made available to the same homeowners association in August 1997.
Interest is set at 10.25% and the loan matures in November 1, 2002. No
amount was outstanding on this loan at October 31, 1998.
The Company established this homeowners association to facilitate the
management of certain common costs related to the townhouses and has
provided varying degrees of support to the homeowners association since
its establishment.
F-26
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<S> <C>
3.1 Deed of Trust of the Registrant (5)
3.2 By-Laws of the Registrant (5)
4.1 Excerpt of Amended Plan of Reorganization (1)
4.2 Specimen Certificate for shares of beneficial
interest in Registrant (5)
4.3 Specimen Note representing general unsecured
subordinated debt of Registrant after separation
of stock and debt (2)
4.4 Shareholder Protection Rights Agreement (3)
4.5 Amendment dated October 11, 1994 to Shareholder
Protection Rights Agreement (5)
10.1 Rates, rules and regulations governing the
distribution of water service - PA Public Utility
Commission (3)
10.2 Plan and Agreement of Merger between the Registrant
and Seven Fields Development Corporation (5)
10.3 Mortgage Note dated October 28, 1994 of the
Registrant to PNC Bank, National Association (6)
10.4 Open End Mortgage and Security Agreement dated
October 28, 1994 between the Registrant and
PNC Bank, National Association (6)
10.5 Assignment of Rents, Leases and Profits dated October
28, 1994 between the Registrant and PNC
Bank, National Association (6)
10.6 Amendment to Loan Documents of October 28, 1994 and
release from mortgage between registrant and PNC Bank,
National Association dated May 1, 1996 (8)
10.7 Amendment to Loan Documents of October 28, 1994
related to financial covenant for the
maintenance of minimum tangible net worth, between
the Registrant and PNC Bank, National Association (8)
10.10 Settlement Agreement with former majority shareholder (7)
10.11 Promissory Note dated November 29, 1995 to PNC Bank (7)
10.12 Open End Mortgage and Security Agreement dated
November 29, 1995 to PNC Bank (7)
10.13 Assignment of Rents dated November 29, 1995 to PNC Bank (7)
10.14 Revolving Line of Credit Loan Agreement dated
November 13, 1995 between the Registrant and Integra Bank (7)
10.15 Open End Mortgage and Security Agreement dated
November 13, 1995 between the Registrant and Integra Bank (7)
10.16 Agreement for Assignment of Sales Agreements and
Contract Deposits dated November 13, 1995
between the Registrant and Integra Bank (7)
<PAGE>
10.17 Office Lease dated August 1, 1995 between the
Registrant and The Borough of Seven Fields (7)
10.18 Management and Administrative Services Agreement
dated April 30, 1995 (7)
10.19 Revolving line of credit loan agreement, open-end
mortgage and security agreement, and revolving line of
credit note dated August 13, 1996 between the Registrant and
First Western Bank National Association (8)
10.20 Revolving line of credit loan agreement, open-end
mortgage and security agreement, cross-default
agreement, and revolving line of credit note dated
November 25, 1996 between the Registrant and
First Western Bank National Association (8)
10.21 Agreement of sale with CMS
10.22 Agreement of Sale of 65 townhouses with Edward Feree.
10.23 Purchase money mortgage with Watersoft Inc. (Feree)
related to sale of 65 townhouses.
10.24 Mortgage note with Watersoft (Feree) related to sale
of 65 townhouses.
10.25 Amended and restated revolving credit facility with
National City Bank for $2,250,000.
27 Financial Data Schedule 1998
(1) Filed as exhibit to the Registrant's Registration
Statement on Form 10 filed October 23,
1989 and incorporated herein by reference.
(2) Filed as exhibit to the Registrant's Annual Report on
Form 10-K filed February 13, 1991
and incorporated herein by reference.
(3) Filed as exhibit to the Registrant's Annual Report on
Form 10-K filed January 29, 1992
and incorporated herein by reference.
(4) Filed as exhibit to the Registrant's Annual Report on
Form 10-K filed on February 10,
1993 and incorporated herein by reference.
(5) Filed as exhibit to Registration Statement on Form
S-4, File No. 33-85102, and
incorporated herein by reference.
(6) Filed as exhibit to Registrant's Annual Report on
Form 10-KSB filed January 27, 1995 and
incorporated herein by reference.
(7) Filed as exhibit to Registrant's Annual Report on
Form 10-KSB filed January 26, 1996 and
incorporated herein by reference.
(8) Filed as exhibit to Registrant's Annual Report on
Form 10-KSB filed January 24, 1997,
and incorporated herein by reference.
(9) Filed as exhibit to Registrant's Annual Report on
Form 10-KSB filed January 28, 1998 and
incorporated herein by reference.
</TABLE>
<PAGE>
AGREEMENT OF SALE
THIS, AGREEMENT OF SALE, made this 3rd day of December, 1997,
by and between
Seven Fields Development Company
2200 Garden Drive
Mars, PA 16046-7846
hereinafter referred to as "SELLER"
and
Edward B. Ferree
hereinafter referred to as "PURCHASER"
WITNESSETH:
For and in consideratjon of the mutual covenants and conditions
contained herein, and with the intention of being legally bound
hereby, SELLER and PURCHASER agree as follows:
1. Property.
In accordance with the terms and conditions of this Agreement,
SELLER agrees to sell and convey, and PURCHASER agrees to
purchase all townhouse apartment Units and associated lots
located in the Castle Creek Phase I subdivision which are owned
by SELLER at the time of the closing, the number of which shall
in any case be no more than sixty-nine (69) nor less than sixty-five (65).
The sale and conveyance shall include said townhouse apartment Units and
associated lots along with all rights and appurtenances thereto arid
thereon PURCHASER shall purchase the Property subject to any leases in
effect on the date of the closing. All such leases shall be assigned by
SELLER to PURCHASER at the closing pursuant to an assignment of lease, the
form of which is attached hereto as Exhibit "A.." It is a condition of this
Agreement that at 1east 56 of the units be under lease at the
time of closing.
All leases shall be delivered to PURCHASER at Closing. Copies of
all leases shall be delivered to PURCHASER within fourteen (14)
days of the date hereof.
The townhouse apartment Units located in the Castle Creek Phase I
subdivision which SELLER owns as of the date of this Agreement
are shown on attached Exhibit "B." SELLER shall have the
unrestricted right to continue to offer for sale and to sell
individual Units shown on Exhibit A after the date of this
Agreement. SELLER agrees to take all Units off the market and
hold them for sale to the BUYER upon receipt of written notice
that BUYER has received a letter of commitment for financing
along with a copy of the letter, provided that any pending sale
agreements with third parties for townhouses will be consummated
by SELLER and such townhouses will not be included in this
transaction.
From and after the date of PURCHASER's loan commitment letter,
PURCHASER shall have the right to market the property and
negotiate potential leases and sales of Units with prospective
purchasers and tenants; provided that PURCHASER shall not
consummate the lease or sale of any Unit prior to Closing.
2. Purchase Price.
The Purchase Price for the Property shall equal Fifty-four
Thousand Five Hundred ($54,500.00) Dollars per townhouse Unit,
Fifty-two Thousand ($52,000.00) Dollars for the real estate and
Two Thousand Five Hundred ($2,500.00) Dollars for appliances and
other personal property, payable as follows:
a. Forty-seven Thousand ($47,000.00) Dollars per Unit shall be
paid at closing.
b. Seven Thousand Five Hundred ($7,500.00) Dollars per Unit
plus interest at the rate of Seven and One-Half (7 1/2%) Percent
per annum from the date of the original closing shall be paid at
the time the PURCHASER receives proceeds from the sale of a Unit,
regardless of the purchase price for the particular Unit.
3. Promissory Note and Second Mortgage.
In order to evidence and secure its obligation to pay the Seven
Thousand Five Hundred ($7,500.00) Dollars per Unit set forth in
paragraph 2b., above, PURCHASER shall deliver to the SELLER at
Closing a Promissory Note and a recordable Second Mortgage on the
property in an aggregate principal amount equal to Seven Thousand
Five Hundred ($7,500.00) Dollars multiplied by the number of
Units conveyed to PURCHASER at the Closing. The form of the
Promissory Note is attached hereto as Exhibit "C." The Second
Mortgage, the form of which is attached hereto as Exhibit "D,"
and lien thereof shall be against the entire property and have
priority over all other liens and encumbrances which PURCHASER
may cause to be placed against the Property, excepting only a
first mortgage lien in favor of the lender providing financing to
the PURCHASER for the purchase of the Property as set forth
herein.
Upon subsequent sale by the PURCHASER of individual Units, and
upon payment to SELLER of the amount due for each such Unit under
paragraph 2.b. hereof, SELLER shall provide a written release in
a form satisfactory to PURCHASER and PURCHASER's lender,
releasing the Units sold from the lien of the Second Mortgage.
4. Term of Promissory Note and Second Mortgage
The promissory Note and the Second Mortgage which secure it shall
be payable as follows:
a. Two and one-half (2 1/2) years after the closing, a
principal amount equal to Two Hundred Fifty Five Thousand
($255,000.00) Dollars plus interest at the rate of seven and one-half
(7 1/2%) percent per annum from the date of closing shall become
due and payable. PURCHASER shall receive credit against the
principal amount then due for all principal payments previously
made pursuant to paragraph 2.b. above and interest shall be
computed on the balance remaining after such credit is applied.
b. Three and one-half (3 1/2) years after the Closing, an
additional principal amount equal One Hundred Twenty-seven
Thousand Five Hundred ($127,500.00) Dollars plus interest at the
rate of seven and one-half (7 1/2%) percent per annum from the
date of Closing shall become due and payable. PURCHASER shall
receive credit against the principal amount then due for all
principal payments previously made pursuant to paragraph 2.b.
above which shall have not been previously credited to PURCHASER
pursuant to subparagraph 4.a. hereof. Interest shall be computed
on the balance remaining after such credit is applied.
c. Four and one-half (4 1/2) years after the date of Closing
the remaining principal balance shall become due and payable plus
interest at the rate of seven and one-half (7 1/2%) percent per
annum from the date of Closing. PURCHASER shall receive credit
against the remaining principal balance for all principal
payments previously made pursuant to subparagraph 2.b. above
which shall have not been previously credited to PURCHASER
pursuant to subparagraphs 4.a. and 4.b. above. Interest shall be
computed on the balance remaining after such credit is applied.
d. PURCHASER shall have the right at any time to make additional
principal payments without penalty.
5. Earnest Money Deposit. PURCHASER has delivered an Earnest
Money Deposit in the amount of Seventy-five Thousand ($75,000.00)
Dollars to be held in an interest- bearing escrow account by
Anthony P. Picadio, Esquire during the pendency of this
Agreement. If PURCHASER defauults under this Agreement, and
SELLER is not in default, SELLER shall be entitled to receive the
Escrow Deposit plus interest earned as liquidated damages as
provided in this Agreement. If SELLER defaults under this
Agreement, PURCHASER shall be entitled to receive a return of the
Escrow Deposit plus interest earned as provided in this
Agreement.
6. Condition of the Property
a. Exterior Condition. The townhouse Units which are being sold
hereunder are presently undergoing exterior renovation. SELLER
shall use its best efforts to complete the exterior renovation of
all Units prior to the Closing. Three Thousand ($3,000.00)
Dollars shall be escrowed at the closing with the closing agent
for each Unit which has not yet had its exterior renovation
completed. The escrowed amount shall be paid to SELLER upon
completion of the exterior renovation by SELLER and acceptance by
PURCHASER. Exterior renovation of all Units shall be completed no
later than January 1, l998. If not completed by that date, SELLER
shall be paid from the escrow for any portion of the work
completed and the balance of the Escrow fund shall be paid to
PURCHASER and PURCHASER shall thereafter complete the exterior
renovations.
b. Interior Condition. The SELLER warrants that the interior
condition of the Units on date of closing shall be as it existed
on the date PURCHASER shall have received its financing
commitment letter.
c. Other Conditions. In all other respects, the property shall
be sold "as is" on the date of Closing without any warranty or
representations concerning its state of repair or physical
condition except as may otherwise be provided herein. PURCHASER,
however, shall receive any existing warranties or guarantees by
third parties which may exist for any part of the structure,
appliances or other personal property.
7. Title
a. Title to be Conveyed. At the closing the SELLER will convey
or cause to be conveyed to PURCHASER, by a general warranty deed
in recordable form, good and indefeasible title, free and clear
of any and all liens, encumbrances, conditions, easements and
restrictions, except for the Permitted Exceptions (as hereinafter
defined) and for general real estate taxes which are not yet due
and payable, subject only to any existing leases in effect on the
date of closing. SELLER shall also deliver to PURCHASER at the
closing a quit claim deed respecting any mineral rights it might
possess with respect to the Property.
b. Commitment for Title Insurance. PURCHASER shall obtain, at
its own cost and expense, a title insurance commitment for the
Property. If the title commitment shows exceptions to title which
are unacceptable to PURCHASER (the "Unpermitted Exceptions"),
PURCHASER shall so notify SELLER and SELLER shall have thirty
(30) days from the date of delivery of such notice to cure the
Unpermitted Exceptions by removing or correcting them, or
committing to insure over them. If SELLER, after using
reasonable efforts, is unable to cure all of the Unpermitted
Exceptions within the foregoing thirty (30) day period, PURCHASER
shall have the option (to be exercised by delivery of written
notice to SELLER within ten (10) days after the expiration of
said thirty (30) day period) either to:
(1) terminate this Agreement (without either party being deemed
at fault, with Escrow Deposit plus interest earned plus any other
monies spent on the transaction by PURCHASER to be returned to
PURCHASER); Or
(2) proceed pursuant to this Agreement and
accept title subject to the remaining Unpermitted Exceptions.
Those title exceptions which are acceptable to PURCHASER,
together with those exceptions that PURCHASER elects to take
pursuant to (ii) above, shall be known as the Permitted
Exceptions, and shall be listed on Exhibit "B," attached hereto.
PURCHASER agrees that SELLER need not remove liens, mortgages,
deeds of trust, trust deeds, security interests or contract
interests affecting the Property and constituting Unpermitted
Exceptions prior to the Closing of the sale of the Property.
8. Survey. within ten (10) days after the effective Date of this
Agreement, SELLER, at SELLER's sole cost and expense shall
deliver or cause to be delivered to PURCHASER a current survey
(".Survey") prepared by a licensed surveyor acceptable to
PURCHASER and the Title Company.
9. Closing. The closing of the sale of the Property by SELLER
to PURCHASER shall occur on or before 2/15/98. Time is of the
essence with respect to the Closing date. The Closing shall be
held at a location specified by the PURCHASER.
a. SELLER's Obligations. At the Closing, SELLER shall deliver
the following Documents (the "Closing Documents) to PURCHASER or
title insurer as applicable.
i. General Warranty Deed;
ii. Assignment of leases of all Units then rented;
iii. Non-Foreign Affidavit;
iv. Good Standing Certificate, Corporate Lien Certificate,
Corporate Resolution, Incumbency Certificate, and affidavit that
sale does not constitute more than 50% of assets of corporation.
v. Municipal Lien letter and paid real estate tax receipts;
vi. Transfer Tax Return and Closing or Settlement Statement
(unless prepared by title insurer);
vii. All documents, instruments and records relating to the
Property, including without limitation maintenance contracts,
restrictive covenants, permits and licenses, and existing third-party
warranties and guarantees;
viii. Such other instruments and documentation which may
reasonably be required by PURCHASER's first lender and/or title
insurer, including without limitation, mechanics liens waivers
and release of liens.
b. PURCHASER'S Obligations. At the Closing, PURCHASER shall pay
to SELLER that portion of the Purchase Price set forth in
paragraph 2.a. hereof (adjusted to reflect the earnest money
deposit and any applicable prorations), and shall deliver to
SELLER, in a form acceptable to SELLER'S counsel, the Promissory
Note and Second Mortgage referred to in paragraphs 3 and 4
hereof. PURCHASER shall pay to title insurer all other amounts
necessary for Closing (including, but not limited to, title
insurance premiums, transfer taxes, recording fees, etc.).
10. Adjustments and Prorations. Real estate taxes and rents shall
be prorated to the date of Closing of the Property on the basis
of the calendar year. SELLER and PURCHASER shall share equally
the amount of any real property transfer tax. PURCHASER shall pay
the fee of the title insurer to act as closing agent. PURCHASER
shall receive all security deposits and prepaid rents. All unpaid
rents as of the date of Closing shall belong to SELLER and SELLER
shall have the right to collect same.
11. SELLER's Warranties and Representations. PURCHASER's
obligation to close this transaction are expressly contingent
upon the truth and correctness of the following warranties and
representations, which warranties and representations shall also
be deemed made as of the time of the Closing. Nothing herein
shall preclude PURCHASER from waiving any one or more of the
warranties and representations, provided, however, that said
waiver is in writing to SELLER.
a. SELLER's Authority. The person Signing this Agreement as
SELLER, or on behalf of the SELLER, has the full right, power and
authority to enter into this Agreement as SELLER, and to carry
Out SELLER's obligations, including the conveyance of the
Property to PURCHASER as provided in this Agreement, without the
joinder of another person.
b. Title. SELLER has and will convey to PURCHASER at Closing,
good, marketable, indefeasible fee simple title to the Property,
free and clear of all conditions, exceptions, or reservations,
except for the Permitted Exceptions as defined in paragraph 7
hereof, insurable by a responsible title insured selected by
PURCHASER, at regular rates.
c. Compliance with Regulations. There is no known condition
existing with respect to the Property or the operation of the
Property that violates any restrictive covenant, or any township,
county, state or federal regulation, code, ordinance or statute
in effect on the date of this Agreement, including the violation
of any zoning ordnance or user restriction, and SELLER has not
received any notice relating to any such violation.
d. Condemnation. 'There is no pending or threatened condemnation
or similar proceeding affecting the Property or any portion
thereof, nor has SELLER knowledge that any such action is
presently contemplated. SELLER agrees to give PURCHASER prompt
notice of any actual, threatened or contemplated condemnation or
similar proceeding between the date hereof and the Closing.
e. Maintenance Agreements. There no maintenance agreements in
effect with respect to the Property.
f. Actions. There is no action, suit, proceeding or claim
affecting SELLER or the land or any portion thereof relating to
or presently being prosecuted for the reduction of the assessed
valuation or taxes or other impositions payable in respect to any
portion of the land.
g. Property Taxes. All real estate and valorem taxes levied
against the land and any penalties or interest hereon and all
assessments of any kind for periods prior to the year of Closing
have been paid in full by the SELLER.
h. Non-Foreign Status. SELLER is not a "foreign person" as
defined under Section 1445(f) of the Internal Revenue Service
Code; and, at Closing, SELLER shall furnish Purchaser an
affidavit confirming same in such form as PURCHASER's attorney
may reasonably require.
i. Schedule 1 attached hereto is a true and complete list of
all leases in force and effect at the Propert as of the date of
this Agreement and SELLER is the sole owner of landlord's right,
title and interest in and to such leases. The leases are valid
and enforceable and have not been altered, modified or amended
except as indicated on Schedule 1, and no rents under any of the
leases has been paid more than thirty (30) days in advance.
Seller has received no notice of default and to Seller's
knowledge no default has occurred under any of such leases.
SELLER represents and warrants that no tenant has any right of
first refusal purchase any portion of the Property except as
provided in the leases, and that none of the leases has been
assigned or is subject to a sublease except as indicated on
Schedule 1.
j. SELLER has delivered or made available to Purchaser all
documents and information in SELLER's possession related to the
Property, including all permits, licenses, authorizations,
official notices and approvals, service contracts, plans, surveys
and studies.
k. To SELLER's knowledge, (i) there is no pending or threatened
environmental investigation or enforcement action with respect to
the Property, (ii), neither SELLER nor any other party has used,
stored or disposed of any hazardous material or toxic substances
in or on the Property in violation of any applicable law, rule,
regulation or ordinance, (iii) there is no asbestos or asbestos-containing
materials at the Property, and (iv) there are no
underground storage tanks located on or under the Property.
l. SELLER has entered into no contracts for improvements to the
Property for which SELLER or its successor would be obligated
that have not been paid in full as of the date of Closing. Any
liens resulting from any such outstanding contracts shall be
discharged by SELLER at no cost to PURCHASER.
m. The execution and delivery of this Agreement and the
consummation of the sale contemplated herein will not constitute
a violation, breach or default by Seller of any other instrument
of which Seller is a party or to which Seller or any portion of
the Property may be subject.
n. There are no real estate tax appeals pending with respect to
the Property.
o . The Property is serviced by a community sewage system.
12. Defaults and Remedies.
a. PURCHASER'S Default and SELLER's Remedies.
i. PURCHASER's Default. Purchaser shall be deemed to be in
default under this Agreement if all of PURCHASER's Conditions for
Closing have been satisfied and PURCHASER fails or refuses to
perform PURCHASER's obligations at Closing for any reason other
than a default by SELLER or termination by PURCHASER under some
provision of this Agreement.
ii. SELLER's Remedies. if PURCHASER is deemed to be in default
under this Agreement, SELLER shall be entitled to receive the
Earnest Money Deposit, which shall be delivered to SELLER by the
escrow agent on receipt of written notice from SELLER that
PURCHASER has defaulted under this Agreement. It is agreed
between PURCHASER and SELLER that such amount shall be liquidated
damages for a default of PURCHASER under this Agreement because
of the difficulty, inconvenience, and uncertainty of ascertaining
actual damages of such default.
b. SELLER's Defaults and PURCHASER's Remedies.
i. SELLER's Defaults. SELLER shall be deemed to be in default
under this Agreement on the occurrence of any one or more of the
following events:
(1) Any of SELLER's warranties or representations set forth in
this Agreement is or become untrue at any time on or before the
Closing.
(2) SELLER fails to meet, comply with, or perform any covenant,
agreement, or obligation within the time limits and in the manner
required by this Agreement.
ii. Purchaser's Remedies. If SELLER is deemed to be in
default under this Agreement, Purchaser may, at PURCHASER's sole
option, do any one or more of the following:
(1) Terminate this Agreement by written notice delivered to
SELLER on or before the date of Closing and receive a return of
Escrow Deposit plus interest earned.
(2) Enforce specific performance of this Agreement against
SELLER.
13. Commission. if the transaction provided for under this
Agreement is actually consummated (but not otherwise), then, at
Closing, SELLER agrees to pay Howard Hanna Company a commission
that has been agreed upon between SELLER and broker under
separate contract. The parties acknowledge that PURCHASER has not
dealt with or incurred any liability to any broker in connection
with this transaction and that SELLER is responsible for any
commission payable to any broker.
14. Condemnation. If, during the pendency of this Agreement and
prior to Closing, condemnation proceedings are commenced with
respect to any portion of the Property, both the SELLER and the
PURCHASER, by their respective attorneys, shall have the right to
appear and defend their interest in the Property in such
proceedings, and any award in condemnation shall become the
Property of the SELLER and the Purchase Price shall be reduced by
an amount equal to the net award received by SELLER; provided,
however, the PURCHASER or the SELLER may at any time on or prior
to the Closing terminate this Agreement by delivery of written
notice to the other party if, and only if, condemnation
proceedings with respect to any portion of the Property have been
commenced or concluded. In the event of such termination, the
Earnest Money Deposit shall be immediately refunded to the
Purchaser.
l5. Risk of Loss. If prior to closing all or part of the
property is destroyed by fire or other casualty, PURCHASER may
terminate this Agreement and receive the deposit and accrued
interest thereon.
16. Miscellaneous
a. Assignment of Agreement. This Agreement may be assigned by
Purchaser only to any partnership or other entity in which Edward
E. Ferree owns a majority or controlling interest. Upon any such
assignment. Edward E. Ferree shall be relieved of any and all
personal liability for performance of purchaser's obligations
hereunder.
b. Survival of Covenants. Any of the representations,
warranties, covenants and agreements of the parties, as well as
any rights and benefits of the parties, pertaining to a period of
time following the Closing shall survive the Closing and shall
not be merged therein.
c. Notices. Any notice or other communication required or
permitted hereby, or convenient to the SELLER or the PURCHASER in
the consummation of the transaction contemplated hereby, shall be
deemed delivered when deposited (i) in a receptacle of the United
States Postal Service, as registered or certified mail, return
receipt requested, postage prepaid, or (ii) with any expedited
courier service, fees prepaid, and addressed to the respective
parties.
d. Parties Bound. This Agreement shall be binding upon and
insure to the benefit of the parties to this Agreement and their
respective heirs, executors, administrators, legal
representatives, successors and assigns.
e. Severability. If any of the terms and
conditions hereof shall for any reason be held to be invalid,
illegal, or unenforceable in any respect such invalidity,
illegality, or unenforceability shall not affect any other of the
terms and conditions hereof and the terms and conditions hereof
thereafter shall be construed as if such invalid, illegal, or
unenforceable term or condition had never been contained herein.
f. Entire Agreement. The terms and conditions hereof relating to
the subject matter described herein (i) constitute the entire
agreement and understanding between the SELLER and the PURCHASER,
(i) supersede all prior agreements and understandings, written or
oral, between the PURCHASER and the SELLER, and (iii) may not be
modified or amended except by an instrument mutually executed
and delivered by the SELLER and PURCHASER.
g. Continuation. Unless otherwise expressly stated, all of the
representations and warranties contained in the Agreement shall
be true as of the date hereof and as of the Closing Date, and
further, shall survive the Closing of this transaction, the
payment of any consideration required, the execution of all
closing documents and any inspections made by or on behalf of the
PURCHASER.
h. Interpretation. Words of any gender used in this Agreement
shall be held and construed to include any other gender, and
words in the singular number shall be held to include the plural,
and vice versa, unless the context requires otherwise.
i. Signage. After PURCHASER receives a financing commitment
letter, PURCHASER shall have the right to erect signage on the
Property with the SELLER'S approval.
j. Waiver. Either the PURCHASER or the SELLER may specifically
waive any breach of the terms and conditions hereof by the other
party, but no waiver of similar
or other breaches of the terms and conditions hereof. All
remedies, rights, undertakings, obligations and agreements
contained herein shall be cumulative and not mutually exclusive.
k. Attorney's Fees Should either the PURCHASER or the SELLER
employ an attorney or attorneys to enforce any of the terms and
conditions hereof, or to protect any right, title or interest
created or evidenced hereby, the non-prevailing party ill any
action pursued in courts of competent jurisdiction shall pay to
the prevailing party all reasonable costs, damages, and expenses,
including attorneys' fees, expended or incurred by the prevailing
party.
l. Governing Law. The terms and conditions hereof shall be
governed by and construed in accordance with the laws of the
state where the Property is located.
m. Headings. The headings herein are for reference purposes only
and shall not affect the meaning or interpretation of the terms
and conditions hereof.
n. Effective Date. The effective Date of the Agreement shall be
the date that the SELLER executes the Agreement of Sale.
o. Financing Contingency. PURCHASER's obligations under this
Agreement are contingent upon PURCHASER obtaining an acceptable
commitment for a mortgage loan in the amount of Three Million
Eight Thousand Four Hundred ($3,008,400.00) Dollars for a term of
at least fifteen (15) years, at lender's stated interest rate of
not more than eight and one-half (81/2%) percent per annum. If
PURCHASER has not received an acceptable commitment within thirty
(30) days following the date hereof, PURCHASER or SELLER may
terminate this Agreement, in which event the Escrow Deposit plus
interest earned thereon shall be returned to PURCHASER; provided,
that PURCHASER may elect to waive this contingency clause in
which case this Agreement shall continue in full force and in
effect as if no such contingency had existed. Such waiver shall
occur if PURCHASER fails to apply for such financing within ten
(10) days following the date hereof.
p. Risk of Loss. SELLER shall bear all risk of loss with respect
to the Property up to the date that title is transferred to
Purchaser in accordance with this Agreement.
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement On the day first
above written.
AMENDED AND RESTATED REVOLVING LINE OF CREDIT NOTE
THIS AMENDED AND RESTATED REVOLVING LINE OF CREDIT NOTE
(hereinafter the "Restated Note') by and between SEVEN FIELDS
DEVELOPMENT COMPANY, a Pennsylvania Business Trust, having a
current mailing address at 2200 Garden Drive, Suite 200, Mars,
Pennsylvania, 16046 (hereinafter referred to as '1Borrower")
AND
NATIONAL CITY BANK OF PENNSYLVANIA, having its principal office
at National City Center, 20 Stanwix Street, Pittsburgh,
Pennsylvania 15222 (hereinafter referred to as "Lender'1)
WITNESSETH THAT:
WHEREAS, Borrower has executed and delivered to Lender a
Revolving Line of Credit Note dated November 13, 1995 (the
"Note") in the principal amount of One Million Dollars
($1,000,000.00) (hereinafter referred to as the "Loan" or "Line
of Credit") and a Revolving Line of Credit Loan Agreement dated
November 13, 1995 (the "Loan Agreement") , said Loan being
secured by Mortgages (hereinafter individually and collectively
referred to as the "Mortgage") (hereinafter the "Mortgaged
Premises") encumbering all those certain Lots or pieces of ground
described in said Mortgages; and
WHEREAS, Borrower and Lender desire to amend and restate
the Note to increase the amount of the loan to Two Million Two
Hundred Fifty Thousand Dollars ($2,250,000.00), and to extend the
term of the Loan subject to the terms and conditions contained
herein -
Guarantor Seven Fields Development (PA) Inc., a Pennsylvania Corporation.
Improvements - Speculative and pre-sold single family
dwellings or townhouses being constructed by Borrower on each of
the individual Lots comprising the Mortgaged Premises, which
dwellings or townhouses are being financed under the Line of
Credit.
Loan - The Two Million Two Hundred Fifty Thousand Dollar
($2,250,000.00) Line of Credit Loan from Lender to Borrower.
Loan Proceeds - As defined in the Revolving Line of Credit
Loan Agreement.
Loan Closing - The time of delivery and execution of this
Restated Note and the Amended Revolving Line of Credit Loan
Agreement.
Loan Security Documents - All documents and items
considered by Lender to be related to the Loan, including but not
limited to
(a) this Restated Note; (b) the Open-End Mortgage and Security
Agreement(s); (c) the Amended Revolving Line of Credit Loan
Agreement; (d) the Agreement of Guaranty and Suretyship and
Completion of the Project; and e) all other miscellaneous Loan
documents. All Loan Security Documents shall be in form and
substance satisfactory to Lender.
Loan Term - The term commencing on Loan Closing and
continuing until June 1, 2002.
Lots - Each of the developed Lots which are encumbered by
the Mortgages and for which Lots the Loan Proceeds have beenadvanced hereunder
and under the terms of the Revolving Line of Credit Loan Agreement.
Pre-Sold Home - A home or townhouse ("Improvements") sold
to a third party, under the terms of an Approved Contract, in
which the third party has paid a minimum of five (5%) percent to
Borrower of the purchase price of such home or townhouse.
Unsold Speculative Home - A home or townhouse
("Improvements") being constructed by Borrower, with advances
under the terms of the Loan in the absence of an Approved
Contract.
Approved Contract - A bona fide Agreement of Sale and
Construction Contract for the Lot and Improvements executed by
third parties and the Borrower, with a minimum of five (5%)
percent earnest money deposit paid by a third party, which
Agreement of Sale and Construction Contract are acceptable to
Lender with respect to terms, form and content.
This Note will be secured, inter alia, by the various Open-
End Mortgage and Security Agreements (the "Mortgages") executed
by the Borrower in favor of Lender, encumbering Lots located in
Western Pennsylvania, and elsewhere as approved by Lender, as
more particularly described in said Mortgages, and all
buildings, fixtures and personal property located or to be
located thereon (the "Mortgaged Premises"), and by the Loan
Security Documents as previously defined herein.
1. Interest Rate. From the date hereof, including the
period following entry of any judgment, interest shall be charged
on the outstanding principal balance of the Loan at the
Applicable Interest Rate as specified herein. The term
"Applicable Interest Rate" is defined as follows: The Applicable
Interest Rate to be charged on Loan Proceeds advanced shall equal
Lender's Prime Rate of interest plus one-half of one percent
(.50%) per annum. The Applicable Interest Rate in all
circumstances shall change and be adjusted automatically with
each change in the Prime Rate. As used herein, the term "Prime
Rate" is defined as the fluctuating rate per annum which is
publicly announced from time to time by Lender as being its so-
called "prime rate", with each change in the Prime Rate
automatically, immediately, and without notice changing the rate
applicable to the Loan. The Prime Rate is not necessarily the
lowest rate of interest then available from Lender on
fluctuating-rate loans. Lender reserves the right to substitute
a new interest rate that is based on comparable information, at
any time during the term of the Loan, in the event the Prime Rate
is no longer available.
2. Payments.
(a) Interest Payments - Borrower shall pay monthly
installments of interest only on the outstanding principal
balance at the Applicable Interest Rate commencing on the first
day of the first (1st) month following (i) Loan Closing, or, if
later, (ii) the first Loan disbursement, and on the first day of
each succeeding month thereafter.
(b) Mandatory Principal Reduction.
(I) LOTS - In the event that any Lot is financed under this Line
of Credit, at or subsequent to Loan Closing, for a period of time
longer than twelve (12) months following the date of the Closing
for such Lot, in addition to the monthly interest payments due
hereunder, Borrower shall pay to Lender monthly payments of
principal, amortized over forty-eight (48) months, on the
outstanding balance advanced for said Lot, which principalpayments shall
commence on the first day of the thirteenth (13th)
month following such Lot Closing.
(II) Speculative Improvements - Borrower shall pay to Lender
monthly principal installments of One Thousand Dollars
($1,000.00) per month on any Speculative single-family
Improvements financed under the Line of Credit for a period of
time longer than twelve (12) months following the date of the
execution of the Construction Loan Payout Schedule for such
Speculative Improvements, said principal payments to commence the
1st day of the thirteenth (13th) month following the execution of
the Construction Loan Payout Schedule for such Speculative
Improvements.
(c) Release Fees. Upon conveyance of any Lot, Lender
will require, in order to release such Lot from the lien of a
Mortgage (as hereinafter defined), the payment of a release fee
("Release Fee") equal to the amount of funds advanced by Lender
under the Line of Credit for such Lot and Improvements thereon
plus the Use Fee (as hereinafter set forth) due with respect to
said Lot and Improvements. Notwithstanding the foregoing, Lender
shall not be required to release any Lot from the lien of the
Mortgage encumbering that Lot if Borrower is in default under the
Loan. Upon receipt, if Borrower is not in default, the Release
Fee shall be applied to the reduction of the unpaid outstanding
principal balance of the Loan. Otherwise, the Release Fee shall
be applied to accrued interest, principal or other costs of the
Mortgaged Premises in such priority as Lender shall determine.
(d) Call Date. Notwithstanding any provisions of
this Note to the contrary, on May 1 of each calendar year as long
as any sums are outstanding under the Line of Credit, commencing
May 1, 1999, Lender shall be permitted to review the Loan and, in
the event of any financial deterioration of Borrower as
determined by
the Lender in its sole discretion, Lender shall be permitted to
call the Loan, by giving written notice to Borrower, said notice
setting a date (the "Call Date") by which Call Date Borrower must
obtain substitute financing and satisfy all obligations under the
Line of Credit. The Call Date may not be less than one hundred
eighty (180) days after the date of said Notice. All outstanding
principal under the Line of Credit, together with all accrued
interest thereon, and any other sums or costs advanced or
incurred by Lender in connection therewith, shall be due and
payable no later than the Call Date.
3. Loan Fees.
(i) Commitment Fee - Borrower shall pay to Lender a
Commitment Fee equal to three quarters of one percent (.75%) of
the principal amount of the Loan, or Sixteen Thousand Eight
Hundred Seventy-Five Dollars ($16,875.00), as follows:
(a) the sum of Four Thousand Two Hundred Eighteen and
75/100 Dollars ($4,218.75) payable at Loan closing;
(b) the sum of Four Thousand Two Hundred Eighteen and
75/100 Dollars ($4,218.75) payable on the first day of the
thirteenth (13th) month following Loan Closing; this fee shall
not be due and payable in the event Lender has given written
notice to Borrower setting forth a Call Date for the Loan, as
defined in Paragraph 2 (d) herein, prior to the first day of the
thirteenth (13th) month following Loan Closing.
(c) the sum of Four Thousand Two Hundred Eighteen and
75/100 Dollars ($4,218.75) payable on the first day of the
twenty-fifth (25th) month following Loan closing; this fee shall
not be due and payable in the event Lender has given written
notice to Borrower setting forth a Call Date for the Loan, as
defined in Paragraph 2 (d) herein, prior to the first day of the
twenty-fifth (25th) month following Loan Closing.
(d) the sum of Four Thousand Two Hundred Eighteen and
75/100 Dollars ($4,218.75) payable on the first day of the
thirty-seventh (37th) month following Loan closing; this fee
shall not be due and payable in the event Lender has given
written notice to Borrower setting forth a Call Date for the
Loan, as defined in Paragraph 2 (d) herein, prior to the first
day of the thirty-seventh (37th) month following Loan Closing.
Borrower shall pay to Lender a Commitment Fee equal to one-halfof
one percent (.50%) of the principal amount of the Loan, or Two
Thousand Two Hundred Fifty Dollars ($2,250.00), as follows:
(ii) Use Fee - Borrower shall pay to Lender a Use Fee
equal to one-quarter of one percent (.25%) of the principal
amount advanced by Borrower under this Line of Credit towards the
acquisition of a lot and/or construction of Improvements on a
Lot, said Use Fee to be paid at the time of release of each Lot
and Improvements under the Line of Credit.
4. Maturity Date. If not sooner paid, the entire unpaid
principal balance of the Loan, together with all accrued interest
thereon, and all other sums advanced or incurred by Lender in
connection therewith pursuant to this Note or any other Loan
Security Document shall become due and payable in full on June 1,
2002.
5. Late Charges. If any installment of principal or
interest due under this Note or any escrow or other payment
required to be made under the Mortgage is not paid within ten
days after it has become due, Borrower will pay to the Lender a
late charge equal to the greater of Twenty Dollars ($20.00) or
five percent (5%) of such payment amount.
6. Tender of Payment. Interest, principal and any other
sums payable hereunder shall be payable in lawful money of the
United States of America to Lender at the address set forth
above, or at such other place as Lender, from time to time, may
designate in writing.
Payment of any installment of principal and/or interest or
any other sum due to Lender under any Loan Security Document
shall be deemed to be made only if and when and on the date
Lender receives such installment or other sum, at Lender's
aforementioned address, in cash or other immediately available
funds. If payment is received after 12:00 noon Pittsburgh time,
the payment will not be deemed received until the following
business day. If payment is made by check, payment shall be
deemed to be made if and when the check is collected and Lender
is credited with immediately available funds. If any check is
returned for insufficient funds in the account on which it is
drawn or if it is not collected for any other reason that is the
fault of Borrower, a late charge (as provided in Paragraph 4
above) shall be due on the amount of the payment represented by
the check, and interest at the Default Rate shall be due on such
amount from the due date of the payment until payment is actually
made.
7. Payment of Insurance. Taxes and Assessments. At least
annually, unless more frequently requested by Lender, Borrower
shall provide proof of payment of all required insurance, real
estate taxes and any municipal assessments levied on any of the
Mortgaged Premises. At any time during the term of the Loan, at
Lender's option, Borrower shall establish an escrow reserve with
the Lender for the payment of premiums for all fire and extended
coverage insurance, real estate taxes and municipal assessments
levied on the Mortgaged Premises, and thereafter the monthly
installments due under this Note shall also include escrow
payments equal to one-twelfth (1/12th) of the annual premiums for
such insurance, all required real estate taxes and any municipal
assessments in order to permit payment of these obligations on or
before their respective due dates. No interest shall be payable
on such escrowed funds. 8. Calculation of Interest on Outstanding
Balance. Until the Loan is paid in full, both before and after any default,
interest on the outstanding balance of the Loan shall becalculated on a
360-day year, but charged on the actual number of days elapsed in
any calendar year or part thereof.
9. Default Interest Rate. If a default continues beyond
its applicable grace period, if any, or if an Event of Default
exists, interest shall continue to accrue thereafter on the
entire unpaid principal balance at a rate (the "Default Rate") of
200 basis points ~two percent (2.0%) per annum] in excess of the
rate set forth in this Note, but not greater than permitted by
law, until the Loan is paid in full, including the period
following entry of any judgment.
10. Events of Default. At the option of the Lender, each
of the following is an Event of Default under this Note: (a) if
Borrower default in the payment of any installment of principal
or interest or other sum payable hereunder and the default
continues for five (5) days after the day on which the payment is
due; (b) if there occurs any Event of Default in the Mortgages or
any of the other Loan Security Documents; (c) if any proceeding
under the Bankruptcy Code or any law of the United States or of
any State relating to insolvency, receivership, or debt
adjustment is instituted by the Borrower, or if any such
proceeding is instituted against Borrower and is consented to by
the respondent or remains undismissed for thirty (30) days, or if
relief in bankruptcy is granted to Borrower or if a trustee or
receiver is appointed for any substantial part of the property of
any thereof, and such appointment shall not have been vacated
within thirty (30) days thereafter, or if Borrower make an
assignment for the benefit of creditors, admits in writing an
inability to pay debts generally as they become due or becomes
insolvent; or (d) if Borrower default under any note, document,
instrument or other agreement between Lender and Borrower or any
affiliate of Borrower, which default continues after the
expiration of any applicable grace period.
11. CONFESSION OF JUDGMENT. UPON ANY DEFAULT HEREUNDER OR
UNDER ANY OF THE LOAN SECURITY DOCUMENTS, AFTER THE EXPIRATION OF
ANY APPLICABLE GRACE PERIODS, BORROWER AUTHORIZE ANY ATTORNEY OF
ANY COURT OF RECORD TO APPEAR FOR BORROWER IN ANY JURISDICTION
WHICH PERMITS THE ENTRY OR JUDGMENT BY CONFESSION AND CONFESS
JUDGMENT OR JUDGMENTS FOR THE UNPAID PRINCIPAL BALANCE OF THE
LOAN, ACCRUED INTEREST, AND OTHER SUMS OUTSTANDING HEREUNDER,
TOGETHER WITH THE COSTS OF SUIT AND AN ATTORNEY'S COMMISSION AS
HEREINAFTER PROVIDED, AS OF ANY TERM, AGAINST BORROWER IN FAVOR
OF THE HOLDER (LENDER) HEREOF. THE AUTHORITY HEREIN GRANTED TO
CONFESS JUDGMENT SHALL NOT BE EXHAUSTED BY ANY EXERCISE THEREOF,
BUT SHALL CONTINUE FROM TIME TO TIME AND AT ALL TIMES UNTIL FULL
PAYMENT IS MADE OF ALL AMOUNTS WHICH ARE DUE HEREUNDER OR UNDER
ANY OTHER LOAN SECURITY DOCUMENT. BORROWER AGREE THAT ANY REAL
ESTATE THAT MAY BE LEVIED UPON PURSUANT TO A JUDGMENT OBTAINED BY
VIRTUE HEREOF, ON ANY WRIT OF EXECUTION ISSUED HEREON, MAY BE
SOLD UPON ANY SUCH WRIT IN WHOLE OR IN PART IN ANY ORDER DESIRED
BY THE HOLDER (LENDER) OF THIS NOTE. FOLLOWING THE ENTRY OF
JUDGMENT, INTEREST SHALL CONTINUE TO ACCRUE AT THE RATES SET
FORTH HEREIN.
12. Acceleration of Loan Upon Default. Upon any Event of
Default, the entire unpaid principal balance of the Loan,
together with all accrued interest, and all other sums owing
hereunder or under the Mortgages or any other Loan Security
Document shall, at the option of the holder hereof, become
immediately due and payable, without presentation, demand or
further action of any kind.
Upon acceleration of the outstanding principal balance of
the Loan, interest shall continue to accrue thereafter at the
rate equal to 200 basis points (2.0%) in excess of the Applicable
Rate, but not to exceed the highest rate permitted by law, until
the Loan is paid in full, including the period following
entry of any judgment. The failure of the holder hereof to
accelerate the outstanding principal of the Loan upon the
occurrence of an Event of Default hereunder shall not constitute
a waiver of such Event of Default, or any default, or of the
right to accelerate the Loan at any time thereafter.
13. Waiver of Notice. The Lender may exercise any right,
remedy or option to which it is entitled upon a default or Event
of Default (under any of the Loan Security Documents) without
giving any prior notice to Borrower or any other party, except as
such notice is clearly set forth and specifically required by the
provisions of this Note or such other Loan Security Document.
14. Attorney's Fees and Costs of Recovery and Satisfaction.
If the Lender or any subsequent holder hereof retains the
services of counsel in order to cure any Event of Default or to
enforce a remedy under this Note or the Mortgages, reasonable
attorney's fees shall be payable by Borrower to the holder and
shall be secured by the Mortgages. Borrower shall pay the costs,
title searches and all other costs incurred by the holder in
connection with proceedings to recover any sums due hereunder.
Borrower shall also pay any reasonable charge of the holder in
connection with the satisfaction of this Note and/or Mortgages of
record.
15. Waiver of Borrower. Endorsers and Guarantors.
Borrower, all endorsers and Guarantors of this Note, severally
waive to the extent permitted by law presentment, demand, protest
and notice of nonpayment, the benefit of any laws which now or
hereafter might otherwise authorize the stay of any execution to
be issued on any judgment recovered on this Note, or the
exemption of any property from levy and sale thereunder, and all
errors, defects and imperfections whatsoever of a procedural nature
in the entering of the said judgment or any process or
proceedings relating thereto. Borrower agree that the Mortgaged
Premises or any portion thereof may be sold on writ of execution.
16. Renewals and Extensions. Borrower, all endorsers and
Guarantors hereof, and all others who may be liable for all or
any part of the indebtedness evidenced by this Note consent to
any number of renewals or extensions of the time of payment of
any sum due under this Note or the Mortgages or any other Loan
Security Document or for the performance of any covenant,
condition or agreement thereof, or the taking or release of other
or additional security, all without notice, and such actions when
taken shall not release or discharge the liability of Borrower or
of any such endorsers or such persons liable.
17. Remedies Cumulative and Concurrent. The remedies of
the Lender or any subsequent holder hereof as provided herein, or
in the Mortgages or any other Loan Security Documents, and all
warrants of attorney herein and in said Mortgages contained,
shall be cumulative and concurrent, and may be pursued
singularly, successively, or together against Borrower, and/or
the Mortgaged Premises at the sole discretion of the holder, and
such warrants shall not be exhausted by any exercise thereof but
may be exercised as often as occasion therefor shall occur; and
the failure to exercise any such right or remedy shall not be
construed as a waiver or release of the same.
18. Waiver. The Lender or any subsequent holder hereof
shall not be deemed, by any act of omission or commission, to
have waived any of its rights or remedies hereunder unless such
waiver is in writing and signed by the Lender or any subsequent
holder hereof, and then only to the extent specifically set forth
in the writing. A waiver as to one event shall not be construedas
continuing or as a bar to or waiver of any right or remedy as
to a subsequent event.
19. Usury. Nothing herein contained or in any other Loan
Security Document, nor any transaction related hereto shall be
construed or shall operate either presently or prospectively to
require Borrower (a) to pay interest at a rate greater than is
now lawful in such case to contract for, but shall require
payment of interest only to the extent of such lawful rate, or
(b) to make any payments or to do any act contrary to law, but if
any clause or provision herein contained shall otherwise so
operate to invalidate this Note, in whole or in part, then such
clause or provision only shall be held for naught as though not
herein contained and the remainder of this Note shall remain
operative and in full force and effect. Any interest paid in
excess of the lawful rate shall be refunded to Borrower. Such
refund shall be made by application of the excessive amount of
interest paid against any sums outstanding hereunder and shall be
applied in such order as the holder may determine. If the
excessive amount of interest paid exceeds the sums outstanding
hereunder, the portion exceeding the said sums outstanding
hereunder shall be refunded in cash by the holder. Any such
crediting or refund shall not cure or waive any default by
Borrower hereunder or under the Mortgages. Borrower agree,
however, that in determining whether or not any interest payable
hereunder exceeds the highest rate permitted by law, any non-
principal payment (except payments specifically stated herein to
be "interest") ,including, without limitation, late charges,
shall be deemed,to the extent permitted by law, to be an expense,
fee, premium or penalty rather than interest.
20. Subsequent Loans. The Mortgages shall extend to and
cover any additional loans made by Lender to Borrower at any time
or times heretofore or hereafter.
21. No Affiliation. The Lender or any subsequent holder
hereof shall in no event be construed for any purpose to be a
partner, joint venturer or associate of Borrower or any lessee,
operator, concessionaire or licensee of Borrower in the conduct
of their respective businesses.
22. Notices. All Notices shall be given to Borrower at:
SEVEN FIELDS DEVELOPMENT COMPANY
2200 Garden Drive, Suite 200
Mars, Pennsylvania 16046
Attention: Darell L. Craig, Chief Operating Officer
and to Lender at:
National City Bank of Pennsylvania
National City Center, 20 Stanwix Street,
Pittsburgh, Pennsylvania 15222
Attention: Vice President Commercial Real Estate
Department
Except as otherwise provided in this Note, all notices
hereunder shall be in writing and shall be deemed to have been
duly given for all purposes when delivered in person or when
deposited in the United States mail, by registered or certified
mail, return receipt requested, postage prepaid, directed to the
party to receive the same at its address stated above or at such
other address as may be substituted by notice given as herein
provided.
23. Assignment. Borrower's obligations hereunder shall
extend to and bind Borrower's heirs, executors, administrators,
successors and assigns. This Note is fully assignable by Lender.
24. Governing Law. This Note is secured by Mortgages on
real estate situate in the Commonwealth of Pennsylvania and shall
be deemed made under and governed by the laws of the Commonwealth
of Pennsylvania in all respects, including matters of
construction, performance and enforcement.
25. Severability. Wherever possible, each provision of
this Note shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Note
or any portion thereof shall be prohibited by or invalid under
such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this
Note.
26. Incorporation of Other Loan Documents. All of the
Loan Security Documents are hereby fully incorporated by
reference into this Note with the same force and effect as though
fully set out herein.
27. Time of the Essence. Time is of the essence with
respect to each and every provision of this Note.
28. Headings. The headings in sections and titles of this
Note are inserted for convenience only and shall not be deemed to
constitute a part of this Note.
WARNING: THIS DOCUMENT CONTAINS A PROVISION AUTHORIZING
THE ENTRY OF JUDGMENT BY CONFESSION. THIS MEANS THAT A JUDGMENT
COULD BE ENTERED AGAINST YOU WITHOUT NOTICE OR A TRIAL. THIS
COULD RESULT IN YOUR PROPERTY BEING SOLD BY THE SHERIFF IN ORDER
TO SATISFY THIS JUDGMENT. BY SIGNING THIS DOCUMENT YOU
ACKNOWLEDGE THAT YOU HAVE READ AND UNDERSTOOD ALL OF THE TERMS
CONTAINED HEREIN.
IN WITNESS WHEREOF, Borrower, intending to be legally bound
hereby, has duly executed this Note as of the day and year first
above written.
WITNESS/ATTEST: SEVEN FIELDS DEVELOPMENT COMPANY,
a Pennsylvania Business Trust
Darell L. Craig
Chief Operating Officer
AGREEMENT OF SALE
THIS AGREEMENT OF EXCHANGE AND SALE made this 31st day
of March, 1998, by and between CMS-NEVILLEWOOD LIMITED
PARTNERSHIP, with an address of 4001 Muirfield Drive,
Nevillewood, PA 15142 (hereinafter referred to as "Seller"),
AND
SEVEN FIELDS DEVELOPMENT COMPANY, with an address of 2200 Garden
Drive, Suite 200, Mars, PA 16046 (hereinafter referred to as
"Buyer").
W I T N E S SE T H:
WHEREAS, Seller is the owner in fee simple of certain
real estate located within the Nevillewood Planned Residential
Development ("PRD"), Collier Township, Allegheny County,
Pennsylvania, known as Lots 901 through 908, inclusive of the
Nevillewood No. 15, Phase 5-A-3 and 5-A-4 Plan, as recorded in
the Recorder's Office of Allegheny County,Pennsylvania in Plan
Book Volume 207, pages 116 through 119 (the "Property"), and
Buyer desires to acquire all of Seller's right, title and
interest in and to the Property upon the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual
covenants, terms and conditions herein contained, and for other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and intending to be legally bound,
the parties hereto hereby agree as follows:
1. The Property. Subject to the terms and conditions contained
herein, Seller hereby agrees to sell and Buyer hereby agrees to
buy all of the subdivided lots (the "Lots", or individually a
"Lot") comprising the Property for the total purchase price of
Eight Hundred Ninety-Six Thousand Dollars ($896,000.00), to be
paid in cash or certified funds and to be closed and paid as
follows:
(a) Buyer shall purchase one Lot on or before April 30, 1998
(each date on which a closing must occur on a Lot hereinafter
called a "Settlement Date"), and shall pay the sum of One
Hundred Twelve Thousand Dollars ($112,000.00);
(b) Buyer shall purchase one Lot on or before September 30, 1998,
and shall pay the sum of One Hundred Twelve Thousand Dollars
($112,000.00);
Buyer shall purchase one Lot on or before January 31, 19999,
and shall pay the sum of One Hundred Twelve Thousand Dollars
($112,000.00);
(d) Buyer shall purchase one Lot on or before May 31, 1999, and
shall pay the sum of One Hundred Twelve Thousand Dollars
($112,000.00);
(e) Buyer shall purchase one Lot on or before September 30, 1999,
and shall pay the sum of One Hundred Twelve Thousand Dollars
($112,000.00);
(f) Buyer shall purchase one Lot on or before January 31, 2000,
and shall pay the sum of One Hundred Twelve Thousand Dollars
($112,000.00);
(g) Buyer shall purchase one Lot on or before May 31, 2000, and
shall pay the sum of One Hundred Twelve Thousand Dollars
($112,000.00);
(h) Buyer shall purchase one Lot on or before September 30, 2000,
and shall pay the sum of One Hundred Twelve Thousand Dollars
($112,000.00).
2. Representations and Warranties.
(a) The Buyer hereby represents and warrants to Seller that: (i)
The Buyer has fully investigated the Property and the
appurtenances thereto; (ii) neither the Seller nor any agent,
attorney, employee or representative of the Seller has made any
representations whatsoever regarding the subject matter of this
exchange and sale or any part thereof, except as expressly set
forth in this Agreement; (iii) the Buyer, in executing,
delivering and performing this Agreement, does not rely
on any statement or information to whomsoever made, by and
individual, firm or corporation, and is acquiring the Property
and all appurtenances thereto "As Is:, except as hereinafter set
forth in the Paragraph 2; (iv) Buyer is a Pennsylvania
corporation, duly authorized to enter into this Agreement of
Sale, which is a valid an legally binding obligation to Buyer;
and (v) Compliance and entry into this Agreement of Sale and
consummation of the transactions contemplated hereby
do not conflict with nor will result in a breach or constitute a
default under any contract, agreement, indenture or other
undertakings to which Buyer is a party or by which Buyer is
bound.
(b) The Seller hereby warrants and represents to Buyer that: (i)
Seller has the requisite power and authority to enter into and
carry out the terms of this Agreement; (ii) there is no
litigation or action pending or threatened against or relating to
Seller or to the Property which would materially affect the
validity of this Agreement or any action taken or to be taken by
Seller pursuant hereto; (iii) Seller has not entered into any
contract or agreement of any kind the performance of which by the
other party thereto would give rise to a lien on any portion of
the Property (other than liens such as mortgage liens that will
be satisfied at closing); (iv) to Seller's actual knowledge, the
Property is not located in any regulated wet land or area of
special flood hazard development of which would be limited or
precluded by law; (v) Seller has not received any notice of any
uncorrected violations of housing, safety or fire ordinances
concerning the Property; (vi) Seller is a Delaware limited
partnership, and the general partner is duly authorized,
pursuant to a partnership agreement, to enter into this Agreement
of Sale, which is a valid and legally binding obligation to
Seller; (vii) compliance and entry into this
Agreement of Sale and consummation of the transactions
contemplated hereby do not conflict with nor will result in a
breach or constitute a default under any contract, agreement,
indenture or other undertakings to its Seller is a party or by
which Seller is bound; (viii) to Seller's actual knowledge, the
Property is free from contamination from, and does not contain
any, hazardous waste or hazardous substances (as are regulated
under the Resource Conservation Recovery Act or the Comprehensive
and Environmental Response, Compensation and Liability Act); and
(ix)to Seller's actual knowledge, there are no legal, regulatory
or contractual provisions in effect which would prevent Buyer
from developing the Property into eight four-unit townhouse
complexes, with one four-unit townhouse complex on each lot
(provided, however, Buyer acknowledges that it must apply for and
obtain final approvals/permits for the grading, construction, and
other matters to be able to proceed with the development and
construction)
3. Condition of the Settlement. Buyer's obligation hereunder
shall be subject to the following:
(a) Buyer's obligation to proceed with the Settlement on the
first Lot transaction shall be subject to Buyer receiving on or
before April 15, 1998, at Buyer's sole expense, a commitment
for title insurance from any reputable title insurance company,
by which the title insurance company agrees to insure Buyer that
it will have a fee simple interest in the Property, free and
clear of all liens and encumbrances which would prohibit the
development of the Property into eight four-unit townhouse
complexes (the "Title Commitment").If Buyer does not secure any
title commitment, by such date, this contingency shall be deemed
waived. If the title commitment received by such date is not a
Title Commitment, then Buyer shall notify Seller on or before
March 31, 1998 of such fact, and Seller shall have thirty days to
attempt to resolve the issues so as to cause the title company to
issue a Title Commitment. If Seller fails to cause the title
company to so issue a Title Commitment, then Buyer may elect to,
on or before April 30, 1998, (i) waive the condition
described in this Paragraph 3(a) or (ii) terminate this Agreement
and recover any hand-money deposit, at which time this Agreement
shall be null and void and there shall be no further
obligations hereunder. If Buyer shall not have notified Seller
on or before March 31, 1998 of any title defect, or notify Seller
of its election on or before April 30, 1998, as applicable, then
Buyer shall be conclusively deemed to have elected to waive the
condition described in this Paragraph 3(a).
(b) Buyer's obligation to proceed with any Settlement, after
Settlement on the first Lot, shall be subject to the issuance, on
or before thirty (30) days prior to the Settlement date, of a
title commitment by any reputable title company, which indicates
that, as to the subject Lot, there are no liens, encumbrances, or
defects in the title appearing after the first Lot closing, in
addition to those set forth in the Title Commitment described
above, which would prohibit the developmentof the subject Lot
into a four-unit townhouse complex. If Buyer does not secure any
title commitment by such date this contingency shall be deemed
waived. If the title commitment received by such date is not a
Title Commitment, then Buyer shall notify Seller on or before
thirty days prior to such Settlement date of such fact, and
Seller shall have thirty days to attempt to resolve the issues so
as to cause the title company to issue a Title Commitment. If
Seller fails to cause the title company to so issue a Title
Commitment, then Buyer may elect to, on or before the Settlement
Date, (i) waive the condition described in this Paragraph 3(b) or
(ii) terminate this Agreement and recover any hand-money deposit,
at which time this Agreement shall be null and void and there
shall be no further obligations hereunder. If Buyer shall not
have notified Seller on or before thirty days before the
Settlement Date of any title defect, or notify Seller of
its election on or before the Settlement Date, as applicable,
then Buyer shall be conclusively deemed to have elected to waive
the condition described in this Paragraph 3(b) for such Lot
Settlement.
Buyer's obligation to proceed with any Settlement shall be
subject to Seller performing the site development work on the
Property described in paragraph 1 of Exhibit "A", attached
hereto, in a good and workmanlike manner, such that so much of
the work is completed on and around the subject Lot to permit
Buyer to begin construction of a four-unit townhouse complex
upon the subject Lot. If Seller fails to so complete such
development work in or around the subject Lot, the parties agree
to extend the time period for such Settlement for
thirty days to accomplish such completion. Where such work is
failed to be completed on or before such extended date, then
Buyer may elect to, on or before date, (i) waive the condition
described in this Paragraph 3 or (ii) terminate this Agreement
and recover any hand-money deposit, at which time this Agreement
shall be null and void and there shall be no further
obligations hereunder. If Buyer shall not notify Seller of its
election on or before the extended Settlement date, then Buyer
shall be conclusively deemed to have elected to waive the
condition described in this Paragraph 3 for such Lot Settlement.
4. Settlement. On or before each Settlement Date, the
following conditions shall be satisfied:
(a) Seller shall deliver to Buyer a special warranty deed (the
"Deed") conveying to Buyer fee simple title to each Lot. Buyer
shall pay the fees payable in connection with the recording of
the Deed or other instruments.
(b) The sale and conveyance of each Lot by Seller to Buyer shall
be closed at 10:00 a.m. on the Settlement Date at the offices of
Papernick & Gefsky, P.C., 34th Floor, One Oxford Centre,
Pittsburgh, Pennsylvania 15219 (or shall other place as the
parties may mutually agree).
All real estate taxes, charges, and assessments shall be prorated
between Seller and Buyer as of the Settlement Date according to
the number of days each party owns each Lot
during the fiscal year of the taxing bodies (or other appropriate
year, in the case of assessments of other charges). The real
estate taxes on each Lot shall, if not individually assessed, be
determined on the basis of the total real estate taxes assessed
against the unimproved property of Seller of which the Lot is a
part for the tax year in which the settlement occurs and
multiplying it by a fraction, the numerator of which is the area
of the Lot and the denominator of which is the total developable
area of all lots included in such blanket assessment.
(d) Seller and Buyer shall share equally the cost of any real
estate transfer or documentary stamp taxes required to be affixed
to the Deed (the "Transfer Tax").
(e) Seller shall pay for the preparation of deed and Buyer shall
pay the fees and costs payable in connection with the recording
of the Deed. Buyer shall be responsible for the payment of any
and all title insurance or search fees or premiums.
(f) Buyer shall pay any fees or costs in connection with any
loan, or the assumption of the loan with any lender, including,
but not limited to, any taxes, recording fees or costs of any
title insurance policy or endorsement issued to any lender.
5. Default.
(a) If Buyer defaults Seller may elect to: (1) retain any hand
money deposited on account hereunder as liquidated damages as the
parties agree that the hand money is a reasonable
settlement of Seller's damages and is not a penalty; if Seller
chooses this remedy, upon notice to Buyer, this Agreement will be
terminated and the parties release of further liability; or (2)
apply any such hand money toward Seller's damages which may
include, but are not limited to, loss of bargain, consequential
damages and attorney's fees prior to default.
(b) If Seller defaults Buyer may elect to: (1) rescind this
Agreement and waive any claim for loss of bargain; and if Buyer
chooses this remedy, Seller will cause to be paid to Buyer the
hand money, if any, and the direct costs which Buyer incurred in
preparation for settlement, including, without limitation, title
examination fees, mortgage loan fees and expenses, survey costs,
inspection costs and attorney's fees prior to Seller's default;
when Seller has made such payments in full to Buyer this
Agreement will terminate; or (2) file an action for specific
performance including consequential damages; or (3) file an
action at law for damages for loss of bargain.
6. COAL NOTICE. THIS DOCUMENT MAY NOT SELL, CONVEY, TRANSFER,
INCLUDE OR INSURE THE TITLE TO THE COAL AND RIGHT TO SUPPORT
UNDERNEATH THE SURFACE LAND DESCRIBED OR REFERRED TO HEREIN, AND
THE OWNER OR OWNERS OF SUCH COAL MAY HAVE THE COMPLETE LEGAL
RIGHT TO REMOVE ALL OF SUCH COAL AND IN THAT CONNECTION, DAMAGE
MAY RESULT TO THE SURFACE OF THE LAND ANY HOUSE, BUILDING OR
OTHER STRUCTURE ON OR IN SUCH LAND. THE INCLUSION OF THIS NOTICE
DOES NOT ENLARGE, RESTRICT OR MODIFY ANY LEGAL RIGHTS OR ESTATE
OTHERWISE CREATED, TRANSFERRED, EXCEPTED OR RESERVED BY THIS
INSTRUMENT. (This notice is set forth in the manner provided in
Section 1 of the Act of July 17, 1957, P.L. 984, as
amended, and is not intended as notice of unrecorded instruments,
if any). Unless this notice is stricken, the deed for the
property will contain this notice and will also contain, and
Buyer will sign, the notice specified in the Bituminous Mine
Subsidence and Land Conservation Act of 1966.
7. Builder Requirements. It is acknowledged and agreed that
Buyer must adhere to all requirements set forth by the Seller for
qualified builders in the Nevillewood Plan, or with
regard to the Property specifically, and all conditions of the
Declaration of Covenants of the Nevillewood Plan. Also, Buyer
must perform the work set forth in paragraph 2 of Exhibit "A" in
a good and workmanlike manner and at all times adhere to the
Builder Addendum attached hereto.
8. Legal Fees. Seller shall be responsible for legal fees
incurred by it to its legal counsel. Buyer shall be responsible
for legal fees incurred by him to his legal counsel.
9. Condemnation and Casualty.
(a) Seller represents and warrants that it has no knowledge of
any existing or threatened proceeding of any entity to condemn
the Property or to take any part thereof under the right of
eminent domain, and if Seller acquires such knowledge, Seller
agrees that it shall promptly notify Buyer.
(b) If (i) an eminent domain proceeding against the Property
shall have been commenced or (ii) all or any part of the Property
shall have been damaged or destroyed by fire or other casualty
and the amount of such damage is greater than or equal to
$100,000.00, then Buyer may elect to terminate this Agreement, or
in the case of fire or other casualty, to postpone the Settlement
Date until such time the damage has been fully repaired. If
prior to the Settlement Date all or any part of the Property
shall have been damaged or destroyed by fire or other casualty
and the amount of such damage is less than $100,000.00, then this
Agreement shall continue in full force and effect, provided, that
Buyer may elect to postpone the Settlement Date until such time
as the damage has been fully repaired. If Buyer elects not to
terminate this Agreement or to postpone the Settlement Date, then
on the Settlement Date, Seller shall assign to Buyer all of
Seller's rights, if any, in and to (i) the awards, or (ii) the
insurance proceeds, whichever the case may be.
If Buyer elects to terminate this Agreement pursuant to the terms
of this subparagraph, then Seller shall promptly return to Buyer
the Deposit, all interest earned thereon, and all other
monies paid on account of the transactions contemplated by this
Agreement, whereupon this Agreement shall become null and void
and both parties shall be released of all further liability
hereunder.
10. Assignment. Buyer may assign this Agreement to a
corporation, partnership or other entity of which Buyer, or its
shareholders, own a controlling interest, but which will not
relieve Buyer from liability hereunder. Except as expressly set
forth in the preceding sentence, Buyer may not sell, assign or
transfer this Agreement or any right, title or interest herein to
any entity without the prior written consent of Seller. This
Agreement and all of its terms and conditions shall otherwise
extend to and be binding upon the parties hereto and their
respective heirs, successors and assigns.
11. Amendments. This Agreement may be amended, renewed,
extended or canceled only by a written instrument executed on
behalf of each of the parties hereto by an authorized
representative of each party, and neither party shall at any time
in any way assert or contend that any amendment, extension or
cancellation of this Agreement (or of any part or parts,
including this paragraph, hereof) has been made other than by a
written instrument so executed.
12. Entire Agreement. This Agreement constitute the entire and
only agreement between the parties, and supersede and cancel any
and all pre-existing agreements and understandings
between the parties or any of them relating to the subject matter
hereof. Any and all prior and contemporaneous negotiations and
preliminary drafts and prior versions of this Agreement,
whether signed or unsigned, between the parties or any of them
leading up to their execution shall not be used by any part to
construe the Agreement. No representation, inducement,
promise, understanding, condition or warranty not set forth
herein has been made or relied on by any party.
13. Construction. This Agreement shall be governed by and
performed in accordance with the laws of the Commonwealth of
Pennsylvania. The parties hereto consent to jurisdiction and
venue being laid in the state and federal courts of the
Commonwealth of Pennsylvania for the purpose of any action or
actions brought concerning this Agreement.
14. Notices. All notices or request that may at any time be
required or permitted to be given hereunder shall be deemed to
have been properly given if personally delivered in writing, sent
by telecopy, or sent by registered or certified mail, return
receipt requested, postage prepaid, addressed to the parties as
set forth in the first page of this Agreement, or to such other
name and address as shall be furnished in writing by either party
to the other. All notices and requests shall be effective when
personally delivered, telecopied, or if properly addressed, when
mailed.
15. Sewage Facility Notice: The following notice is given under
the Pennsylvania Sewage Facilities Act of January 24, 1966, No.
537 P.L. 1535, as amended: The Property is vacant land and is
therefore not serviced by a community sewage system. Buyer has
knowledge of all the requirements to connect to such system.
16. Captions. The captioned sections in this Agreement are used
for convenience only and they in no way defined, limit or
prescribe the scope or intent of this Agreement or any provisions
hereof.
17. Possession. Possession of the property shall be given at
the time of closing.
18. Risk of Loss. Risk of loss of the Property will remain upon
Seller until Settlement.
19. Municipal Improvements. Seller will pay any municipal claim
against the Property if the ordinance or resolution authorizing
the work or improvement is adopted prior to the date of this
Agreement. Buyer will pay any municipal claim against the
Property if the ordinance or resolution authorized the work or
improvement is adopted on or after the date of this Agreement.
20. Force Majeure. The provisions of this paragraph shall be
applicable, whenever time limits are set forth herein, if there
shall occur, during the time when this Agreement is in full
force and effect, any strike, lockout, or labor dispute; act of
God, governmental restriction, regulation or control; enemy or
hostile governmental action, civil commotion, insurrection,
revolution, sabotage; or other similar condition beyond the
reasonable control of the Buyer or Seller, including fuel
shortages. If either Buyer or Seller shall, as the result of
such event, fail punctually to perform any obligation required by
the provisions of this Agreement, then such obligation shall be
punctually performed as soon as practicable after such event
shall abate. If the Buyer or Seller shall, as a result of such
event, be unable to exercise any right or option
within any time limit provided therefor in this Agreement, such
time limit shall be deemed extended for a period of equal to the
duration of such event.
21. Recording. Buyer shall not record this Agreement and any
such recording shall constitute a
default by Buyer hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed as of the day and year first above written.
WITNESS: SELLER:
CMS -NEVILLEWOOD LIMITED PARTNERSHIP
SEVEN FIELDS DEVELOPMENT COMPANY
BUILDER ADDENDUM TO AGREEMENT OF SALE
The following provisions supplement and modify the foregoing
Purchase Contract (the "Contract") by and between the parties
hereto:
1. Buyer shall perform its work upon the Property, and
conduct all building operations, in a neat, professional and
workmanlike manner, in compliance with all federal, state and
municipal laws, regulations and ordinances. Buyer agrees to take
all necessary action to protect the streets, sidewalks, common
areas, landscaping, curbs, utilities, amenities, and other
portions of the Nevillewood Planned Residential Development
("PRD") from any and all damage or incident, due to any
construction upon the Property (including any damage caused by
equipment or workmen, or due to any site preparation or
construction). Buyer shall respond and address to
all complaints made by any property owners in the PRD, or any
governmental authorities, effectively and promptly.
2. Buyer shall indemnify and hold Seller harmless from and
against any and all liability, including, but not limited to any
liability for injuries suffered to any person, property or thing,
on account of Buyer's operations, construction and use of the
Property, including but not limited to, due to any
endorsements, water discharge or subsidence onto an adjacent
property. This indemnity shall include, without limitation, any
cost, fines, or other charges, including attorneys' fees, which
Seller may suffer or become liable for as a result of Buyer's
actions or inactions in connection with the Property.
3. Notwithstanding anything to the contrary contained in the
Agreement, or in the Declaration, Buyer covenants and agrees to
cause construction of four single-family residential
dwellings to commence on each Lot within sixty (60) days after
Settlement and to cause such construction to be completed and a
certificate of occupancy issued within eight (8) months of the
date on which construction is begun. Buyer agrees, and the deed
of conveyance to Buyer may provide, that if development or
construction on the Lot shall not have been commenced in good
faith within the required time period, then at any time after the
expiration of such period and prior to commencement of
construction, Seller shall have the right to require the
conveyance of the Lot to Seller or any third party designated by
Seller by special warranty deed (subject to the same exceptions
to title set forth in the deed of conveyance to Buyer and subject
to standard and customary easements that do not hinder the use
of development of and/or construction of improvements upon
the Property or any portion thereof) for a total consideration
equal to the Purchase Price paid by Buyer hereunder, less fifteen
percent (15%). Upon conveyance, Seller shall pay the
owner the repurchase price in funds immediately available in the
metropolitan Pittsburgh, Pennsylvania area. Ad valorem taxes and
assessments shall be prorated as of the date of such reconveyance
in the manner provided in this Contract. All transfer taxes and
fees and recording fees shall be borne by the owner upon
reconveyance. If the title proposed to be conveyed to
Seller is subject to any lien, encumbrance or other defect which
is not permitted in this Paragraph, Seller, in addition to all
other rights and remedies which it may have at law or in
equity, may remove any such lien, encumbrance or defect and
deduct all costs and expenses incurred by Seller (including, but
not limited to, attorney's fees and paralegal's fees) from the
amount of the purchase price otherwise payable as provided in
this Paragraph.
4. Buyer agrees to comply with any and all requirements set
forth by Seller from time to time in connection with the
construction of improvements upon the Lot specifically, the PRD
generally, and the particular subdivision in which the Property
is located. Currently, the Developer-builder requirements
include:
a. All of the Property, borrow areas, and fill areas
disturbed during construction must have all required erosion
controls in place within 48 hours prior to any construction as
per the Builders Specification and Utility Plan submitted by
Seller.
b. Any and all topsoil or earth material stockpiles
must have a silt fence around the low side and must be seeded
within one (1) week of storage with seed and straw mulch. If
seed does not take, stockpile must be reseeded.
c. All access to and from the Property must be through the
rock construction entrance. No other access to the Property
will be permitted.
d. Buyer must use the subject Lot only for construction.
There shall be no staging of any material or equipment on any
lot, common area, golf course property, or otherwise, other
than on the Property.
e. All trash papers, building material, brush and trimmings
must be kept in dumpsters or other approved containers. No
debris is to be left on the Property. The Property must be
cleaned at the end of each day.
f. The Property requires sidewalks as per sidewalk
detail on the Builders Specification Utility Plan. All
sidewalks are the Buyer's responsibility and must be installed
and approved by the municipality and Seller before an occupancy
permit is granted.
g. All sanitary sewer laterals and wye locations and elevations
must be taken into consideration before setting the final floor
elevation.
h. There shall be no dumping of any excess material or topsoil
generated from foundation excavation or lot grading on any other
lot or property. Buyer must first submit a plan to show
where on-lot controls will be placed, the keyways required and
what seeding and mulching program will be used, along with a
schedule of completion.
I. All building and landscape plans must be submitted to the
Architectural Control Committee of the Association for review
and approval before starting any construction. Any
change from the approved plan must be approved by the same Board.
All building plans must show finished first floor elevation and
basement elevation.
j. No "for sale" sign, builders sign, or any other sign, shall
be permitted on the Property unless it is purchased from Seller.
5. It is acknowledged between the parties that Seller, and
not Buyer, is responsible for the payment of any commission that
may be due and owing to Howard Hanna Company, on account of the
sale of the Property. Seller shall sign a separate listing
agreement with Howard Hanna Company and agrees to pay any and all
such commission that may be due and owing on account of any sale
of this Property; however, where no such listing agreement has
been executed, Seller agrees to pay Howard Hanna Company a
commission of six percent (6%) of the gross sales price in
connection with the sale of the Property. Therefore, Seller
hereby indemnifies and holds Buyer harmless on account of from
any and all commission claimed by Howard Hanna Company.
IN WITNESS WHEREOF, the parties have set their hands and seals as
of the date indicated on
the Contract.
BUYER:
SELLER
Exhibit "A"
1. This is site development work that Seller is to perform in
accordance with Section 3 of the Agreement:
(a) Clearing and Grubbing
(b) Grading (elevation cuts to be in conformance with Buyer's
reasonable design criteria), except final grading which is the
responsibility of Buyer;
(c) Overall Erosion Control Plan; and
(d) Extensions of the following underground utilities to
the Lots (not connections to and through Lots, which are to be
performed by Buyer): Storm Sewers and Inlets; Sanitary
Sewer; Water Main; Gas line; Electric/telephone/television
cable.
2. The remainder of the work on the Property required or
desirable for construction of the townhouse complexes, including
without limitation, utility extensions, road paving, sidewalks
and the construction of the dwellings, is the responsibility of
the Buyer.
PURCHASE MONEY MORTGAGE
MADE this 28th day of January, 1998 by and between WATERSOFT,
INC., a Pennsylvania corp., with a business address at P.O. Box
427, Saxonburg, PA 16056,(the "Mortgagor") and SEVEN FIELDS
DEVELOPMENT COMPANY, a PA Business Trust with a business
address at 2200 Garden Drive, Mars, Pennsylvania 16046 (the
"Mortgagee").
WHEREAS, in connection with the purchase by Mortgagor of that
certain real property situate in the Borough of Seven Fie1ds,
County of Butler, Commonwealth of Pennsylvania and more
particularly described in Exhibit A attached hereto and made a
part hereof (the "Land"), Mortgagor has executed and delivered to
Mortgagee a Mortgage Note dated of even date herewith (the
"Mortgage Note") in the principal sum four hundred eighty-seven
thousand , five hundred dollars ($487,500.00), the terms and
conditions of which are specifically incorporated
herein by reference.
NOW, THEREFORE, Mortgagor, in consideration of the debt evidenced
by the Mortgage Note and as security for the payment of the
Mortgage Note, does hereby grant and convey unto
Mortgagee, its successors and assigns, Mortgagor's interest in
the Land, together with all the buildings, structures and
improvements of every kind and description now or hereafter
erected or placed on the Land (the "Improvements").
TOGETHER with the revisions, reminders, easements, rents,
income, issues and profits arising or issuing from the Land and
from the Improvements thereon, including, but not limited to, the
rents, income, issues and profits arising or issuing from all
leases and subleases flow or hereafter entered into covering all
or any part of said Land and for the Improvements, all of which
leases, subleases, rents, issues and profits are hereby assigned
and, if requested by Mortgagee, shall be caused to be further
assigned to Mortgagee by Mortgagor. The foregoing
assignment shall include without limitation, cash or securities
deposited under leases to secure performance by lessees of their
obligations thereunder, whether such cash or securities are to be
held until the expiration of the terms of such leases or applied
to one or more installments of rent coming due prior to the
expiration of such term subject to the rights of lessees
thereunder Mortgagee, or any officer of Mortgagee, is hereby
irrevocably appointed attorney-in-fact for Mortgagor to collect
such rents, issues and profits alter default by Mortgagor, such
power being coupled with an interest. Mortgagor will execute and
deliver to Mortgagee on demand such assignments and instruments
as Mortgagee may require to implement, confirm, maintain and
continue the assignment hereunder.
ALL of which property hereinabove described, together with all of
which collateral is now existing or hereafter arising, now owned
or hereafter acquired, due or to become due, including
proceeds, products, and insurance proceeds to secure payment of
the Mortgage Note, being hereinafter collectively called the
"Mortgaged Property."
TO HAVE AND TO HOLD the same unto Mortgagee, its successors and
assigns, forever.
PROVIDED, HOWEVER, that if Mortgagor shall pay to Mortgagee the
debt evidenced by the Mortgage Note, and Mortgagor shall keep and
perform each of its other covenants, conditions
and agreements set forth in this Mortgage, then this Mortgage and
the estate hereby granted and conveyed shall become null and
void.
This conveyance is intended as a mortgage and is given for the
purpose of securing payment of the Mortgage Note and performance
of the other obligations of Mortgagor referred to above.
This Mortgage is executed and delivered subject to the following
covenants, conditions and agreements:
1. Payment of Principal and Interest. Mortgagor agrees to pay
when due to Mortgagee, the payments of principal and interest
evidenced by the Mortgage Note.
2.Impositions.
(a) Mortgagor's Duty to Pay. Until payment in full of the debt
evidenced by the Mortgage Note and termination of all
obligations, duties and commitments of Mortgagor under the
Mortgage Note, Mortgagor will (i) on or prior to the date on
which any interest or penalties shall commence to accrue thereon,
pay, discharge and upon request of Mortgagee furnish to
Mortgagee proper receipts for all taxes, general and special,
water and sewer rent charges, excise levies, vault and other
license or permit fees, city taxes, transit taxes, levies and
assessments of every kind and all charges for utilities and
utility services, and which may have been or may
hereafter be charged, assessed, levied, confirmed, imposed upon,
or grow or become due and payable out of, or in respect to, or
against, die Mortgaged Property, or any part thereof, or any
appurtenance thereto (collectively, the "Impositions"), by any
lawful authority or public utility, or which may become a lien
thereon, (ii) pay all ground rents reserved from the Mortgaged
Property and pay and discharge all mechanics' liens which may be
filed against said premises, (iii) pay and discharge any
documentary, stamp or other tax, including interest and penalties
thereon, if any, now or hereafter becoming payable hereon, (iv)
provide, renew and keep alive by paying the necessary premiums
and charges thereon such policies of hazard and liability
insurance upon the buildings and improvements now or hereafter
erected upon the Mortgaged Property as are required by this
Mortgage.
(b) Proof of Payment. Mortgagor, upon request of Mortgagee, will
furnish to Mortgagee within fifteen (15) days after the date when
any Impositions would become delinquent, official receipts
of the appropriate taxing authority or other authority to which
the charge is payable, or other evidence reasonably satisfactory
to Mortgagee evidencing the payment thereof.
(c) Evidence of Payment. The certificate, advice or bill of the
appropriate official designated by law to make or issue the same
or to receive payment of any Imposition, of nonpayment of such
imposition shall be prima facie evidence that such Imposition is
due and unpaid at the time of the making or issuance of such
certificate, advice or bill.
3. Risk of loss: Insurance. Mortgagor, at its sole expense,
shall keep the Mortgaged Property continuously insured against
loss or damage by fire, earthquake and flood, with extended
coverage, and against such other hazards as Mortgagee may
reasonably require (including, without limitation, loss of
income) with an insurance company acceptable to Mortgagee, and in
such total amounts as Mortgagee may reasonably require from time
to time. In addition, Mortgagor shall carry comprehensive general
public liability insurance, naming Mortgagor and
Mortgagee as insureds, in such amounts as Mortgagee may from time
to time reasonably require. Mortgagor shall also carry rental
loss insurance. All policies, including policies for any amounts
carried in excess of the required minimum and policies not
specifically required by Mortgagee, shall be in form satisfactory
to Mortgagee, shall contain a waiver of subrogation endorsement,
shall be maintained in full force and effect, with premiums
prepaid, and shall provide for at least thirty (30) days' prior
notice of cancellation and modification to Mortgagee. Duplicate
originals of all policies shall be delivered to Mortgagee and
shall bc endorsed with a standard mortgagee
clause in favor of Mortgagee. If the insurance, or any part
thereof, shall expire, or be withdrawn, or become void by
Mortgagor's breach of any condition thereof, or become, in
Mortgagee's opinion, unsafe by reason of the financial condition
of any company in which the insurance may
then be carried, or if for any reason whatever the insurance
shall be unsatisfactory to Mortgagee, Mortgagor shall place new
insurance satisfactory to Mortgagee. All renewal policies, with
satisfactory evidence of premiums prepaid for one (1) year, shall
be delivered to Mortgagee at least thirty (30) days before
expiration of the old policies or succeeding renewals as the case
may be. In the event of loss covered by any property insurance,
Mortgagor will give immediate notice
thereof to Mortgagee, and Mortgagee may make proof of loss if not
made promptly by Mortgagor. Risk of loss of, damage to or
destruction of, the Mortgaged Property is and shall
remain upon Mortgagor.
4. Maintenance and Improvements. Mortgagor shall maintain the
Improvements in good order and condition, ordinary wear and tear
excepted. Mortgagor shall make no alteration ,addition or
structural change to the Mortgaged Property or any Improvement on
the property which has a cost or fair market value in excess of
$5,000.00 or remove or destroy any Improvement located
upon the Mortgaged Property, without the prior written consent of
Mortgagee which shall not be unreasonably withheld. In no event
shall Mortgagor undertake any alternation or addition to the
Mortgaged Property which reduces the economic value of the
Mortgaged Property.
5. Right to Remedy Defaults. In the event that Mortgagor should
fail to pay taxes, assessments, water and sewer charges or other
lienable claims or insurance premiums, or fail to make necessary
repairs or permit waste, or otherwise fail to comply with its
obligations hereunder~or under tile Mortgage Note, then
Mortgagee, at its election and without notice to
Mortgagor, shall have the right to make any payment or
expenditure which Mortgagor should have made, or which Mortgagee
deems advisable to protect the security of this Mortgage or the
Mortgaged Property, without prejudice to any of Mortgagee's
rights or remedies available hereunder or otherwise, at law or in
equity. All such Sums, as well as costs, advanced by
Mortgagee pursuant to this Mortgage shall be due immediately from
Mortgagor to Mortgagee and shall be secured hereby.
6. Tenant Leases. Mortgagor shall use its best efforts and shall
pursue all of its legal rights and remedies to cause all leases
for space in the Improvements which are entered into in the
future (collectively the "Tenant Leases") to remain in full force
and effect in accordance with their terms and will perform all of
its obligations thereunder and shall use its best efforts and
shall pursue its legal rights and remedies to cause all lessees
thereunder to perform all of their obligations under such Tenant
Leases and shall use its best efforts to obtain and deliver to
Mortgagee at such times as Mortgagee may reasonably request,
subordination agreements from tenants in the Improvements
subordinating their rights to possession of the improvements
under their leases to the lien of the Mortgage. Mortgagor shall
not: (a) execute an assignment or pledge of the Tenant leases or
the rents thereunder other than in favor of Mortgagee or the
holder of the First Mortgage, or (b) accept any prepayment of
rents due under any Tenant lease more than 30
days before the due date of such rents. Mortgagor shall not,
without the prior written notice to Mortgagee, amend, modify,
extend or consent to the surrender of any Tenant lease or give
any consent to any tenant pursuant to any Tenant Lease.
Mortgagor shall promptly (a) perform all of the provisions of the
Tenant leases on the part of the landlord thereunder to be
performed; (b) appear in and defend any action or proceeding in
any manner connected with the Tenant Leases or the obligations of
Mortgagor thereunder; (c) use its best efforts and pursue all of
its legal rights and remedies to, within twenty (20) days after a
request by Mortgagee, deliver to Mortgagee a certificate from
each tenant under the Tenant leases identifying such Tenant lease
with particularity and stating that no default by Mortgagor
or such tenant has occurred under tile applicable Tenant lease
and no rent thereunder has been prepaid except for the current
month; (d) within ten (10) days alter request by Mortgagee,
deliver to Mortgagee a written statement containing the names of
all tenants, the terms of all Tenant leases and the spaces
occupied and rentals payable thereunder, and a statement of all
Tenant Leases which are then in default, including the nature of
the default; (e) deliver to Mortgagee promptly copies of any
notices of default which Mortgagor may at any time forward
to or receive from a tenant of any Tenant lease; and (f) within
ten (10) days after execution, deliver to Mortgagee a copy of a
fully executed counterpart of each Tenant lease.
7. Inspection. Mortgagee shall have the right to enter upon the
Mortgaged Property at any reasonable hour for the purpose of
inspecting the order, condition and repair of the Mortgaged
Property.
8. Compliance with laws. Mortgagor shall comply with all present
and future laws, ordinances, rules and regulations of any
governmental authority having an effect on Mortgagor or the
Mortgaged Property. Mortgagor agrees that all Improvements on the
Mortgaged Property, whether now existing or hereinafter erected,
shall at all times comply with all local, state and
federal building and safety statutes, ordinances, regulations,
and requirements.
9. Further Assurances. Mortgagor will, from time to time, make,
do, execute and acknowledge, as the situation may require from
time to time, such further acts, deeds, conveyances, mortgages,
security agreements, financing statements, continuation
statements and other assurances in law
as may be required for the purpose of effectuating the intent
hereof and for better assuring and confirming to Mortgagee, its
successors and assigns, the lien and security interest created by
this Mortgage.
10. Warranty of Title: Liens. Except for exterior renovation to
the Improvements to be performed by Mortgagee, Mortgagor will
pay, or bond, or cause to be paid or bonded, from time
to time when the same shall become due, all claims and demands of
mechanics, materialmen, laborers, and others which, if unpaid,
might result in, or permit the creation of, a lien on the
Mortgaged Property or any part thereof, or on the revenues,
rents, issues, income and profits arising therefrom. Mortgagor
hereby warrants and covenants that it is the lawful owner of a
fee simple interest in the Land and the Improvements; that
Mortgagor has good right and lawful
authority to convey and encumber the same; and that the Mortgaged
Property is free and clear from all liens and encumbrances except
for liens in favor of Mortgagee, liens and emcumbrances
consented to in writing by Mortgagee, and the first mortgage lien
held by Pittsburgh Home Savings Bank recorded in the real estate
records of Butler County at MBV, Page the "FirstMortgage"). This
Mortgage is subject and subordinate to the First Mortgage.
Mortgagor will do or cause to be done everything necessary so
that the lien and priority of this Mortgage shall be
fully preserved, at the sole cost of Mortgagor, without expense
to Mortgagee.
11. Transfer of Property. Whenever Mortgagor sells or otherwise
transfers a townhouse apartment dwelling unit and/or any plot of
land upon which such unit is placed, as shown on any
recorded map or plat of the Mortgaged Property (a "Unit"),
Mortgagee shall promptly, upon request of Mortgagor and subject
to Mortgagee's receipt of a payment equal to the sum of
$7,500.00 plus interest accrued thereon pursuant to the terms of
the Mortgage Note) for each such Unit sold or transferred,
release the particular Unit or Units from the lien created by
this Mortgage, and shall file in the Recorder's Office of Butler
County such statement of release or partial release as may be
requested by Mortgagor. Payments received by Mortgagee pursuant
to this paragraph 11 shall be applied by Mortgagee towards
repayment of the indebtedness secured hereby until such
indebtedness is paid in full.
12. Events of Default: Any one or more of the following which
continues or shall exist beyond any applicable grace period or
notice, if any, shall constitute an Event of Default hereunder:
(a) Failure of Mortgagor to pay any installment of principal or
interest or any other sum on the date when it is due under the
Mortgage Note or this Mortgage if such failure continues for
thirty (30) consecutive days; or
(b) Mortgagor's nonperformance of or noncompliance with any of
the other agreements, conditions, covenants, provisions or
stipulations contained in the Mortgage Note or in this
Mortgage which continues for a period of thirty (30) consecutive
days; or
(c) If Mortgagor shall make a general assignment for the benefit
of its creditors, or shall admit in writing its inability to pay
its debts as they become due, or shall file a petition in
bankruptcy, or shall be adjudicated bankrupt or insolvent, or
shall file a petition seeking any relief under any present or
future statute, law or regulation relating to bankruptcy or
insolvency or shall file an answer admitting or not contesting
the material allegations of a petition filed against it in any
such proceeding or shall seek or consent to or acquiesce in the
appointment of any trustee or receiver of itself or any material
part of its properties; or
(d) If, within sixty (60) days after the commencement of any
proceeding against Mortgagor seeking any relief under any present
or future statute, law or regulation relating to bankruptcy or
insolvency, such proceeding shall not have been dismissed, or if,
within sixty (60) days after the appointment without the consent
or acquiescence of Mortgagor of any trustee or receiver of
Mortgagor or of any material part of its properties, such
appointment shall not have been vacated; or
(e) One or more judgments for the payment of money shall be
rendered against Mortgagor and, within sixty (60) days after the
entry thereof, such judgment shall nor have been discharged or
execution thereof stayed pending appeal1 or if, within sixty (60)
days alter the expiration of such stay, such judgment shall not
have been discharged unless such judgment is being contested in
good faith and Mortgagor has posted security or provided
reasonable assurance of the ability to pay any such judgment
satisfactory to Mortgagee in its reasonable discretion; provided,
in any event, any such judgment shall be satisfied prior to any
action being taken to enforce such judgment or to sell or possess
any assets in satisfaction or such judgment; or
(f) If any representation or warranty made by Mortgagor in this
Mortgage or other document furnished to Mortgagee pursuant to
this Mortgage proves to be false or misleading in any
material respect; or
(g) If Mortgagee shall have determined (which determination shall
be conclusive if made in good faith) a material adverse change
has occurred in the financial condition of Mortgagor; or
(h) If foreclosure proceedings are instituted against the
Mortgaged Property upon any other lien or claim whether alleged
to be superior or junior to the lien of this Mortgage; or
(i) Any action or proceeding is commenced, excepting an action
to foreclose this Mortgage or to collect the debt secured hereby,
to which action or proceeding Mortgagee is made a party by
reason of the execution of this Mortgage or the Mortgage Note, or
in which it becomes necessary (unless such necessity arises from
the gross negligence or willful misconduct of Mortgagee) to
defend or uphold the lien of this Mortgage or the priority
thereof or possession of the Mortgaged Property, or otherwise
protect the security hereunder; or
(j) If the Improvements are substantially damaged or destroyed by
an uninsured or inadequately insured casualty; or
13. Remedies.
(a) If an Event of Default shall occur, the entire debt secured
hereby shall become immediately due and payable, without
presentment, demand, protest, or notice of any kind, all of which
are hereby expressly waived, and Mortgagee may forthwith, and
without further delay, undertake any one or more of the actions
specified in this paragraph 13:
(1) Foreclosure. Institute an action of mortgage foreclosure, or
take such other action as the law may allow, at law or in equity,
for the enforcement thereof and realization on the mortgage
security or any other security which is herein or elsewhere
provided for, and proceed thereon to final judgment and execution
thereon for the entire unpaid balance of the principal
indebtedness, with interest, at the rates and pursuant to the
methods of calculation specified in the Mortgage Note and this
Mortgage to the date of default and thereafter at the rate
provided in the Mortgage Note together with all other sums
secured by this Mortgage, all costs of suit, interest at the rate
specified in the Mortgage Note on any judgment obtained by
Mortgagee from and after the date of any Sheriff's Sale of the
Mortgaged Property (which may be sold in one parcel or in such
parcels, manner or order as Mortgagee shall elect) until actual
payment is made by the Sheriff of the full amount due Mortgagee,
and an attorneys' reasonable conirnission for collection, without
further stay, any law, usage or custom to the contrary
notwithstanding,
(2) Entry. Mortgagee personally, or by its agents or attorneys,
may enter into and upon all or any part of the Mortgaged
Property, and each and every part thereof, and may exclude
Mortgagor, its agents and servants wholly therefrom without
liability for trespass, damages or otherwise and Mortgagor agrees
to surrender possession to Mortgagee on demand after the
happening of any event of Default; and having and holding the
same, may use, operate, manage and control the Mortgaged Property
and conduct the business thereof, either personally or by its
superintendents, managers, agents, servants, attorneys or
receivers; and upon every such entry, Mortgagee, at the expense
of the Mortgaged Property, from time to time, either by purchase,
repairs or construction, may maintain and restore the Mortgaged
Property, whereof it shall become possessed as aforesaid, may
complete the construction of the buildings, structures and
improvements and in the course of such completion may make such
changes in the contemplated or completed buildings, structures
and improvements as it may deem desirable and may insure the
same; and likewise, from time to time, at the expense of the
Mortgagor, Mortgagee may make all necessary or proper repairs,
renewals and replacements and such useful alterations, additions,
betterments and improvements thereto and thereon as to it may
deem advisable; and in every such case Mortgagee shall have the
right to manage and operate the Mortgaged Property and to carry
on the business thereof and exercise all rights and powers of
Mortgagor with respect thereto either in the name of Mortgagor or
otherwise as it shall deem best; and in addition to Mortgagee's
right to collect all earnings, revenues, rents issues, profits
and income prior to taking possession of the Mortgaged Property,
Mortgagee shall be entitled to collect and receive all earnings,
revenues, rents, issues, profits and income of the Mortgaged
Property and every part thereof, and after deducting the expenses
of conducting the business thereof and of all maintenance,
repairs, renewals, replacements, alterations, additions,
betterments and improvements and amounts necessary to pay for
taxes, assessments, insurance and prior or other proper charges
upon the Mortgaged Property or any part thereof, as well as
just and reasonable compensation for the services of Mortgagee
and for all attorneys, counsel, agents, clerks, servants and
other employees by it properly engaged and employed, Mortgagee
shall apply the moneys arising as aforesaid to the payment of the
debt. Should Mortgagee collect all earnings, revenues, rents
issues, profits and income from the Mortgaged Property, the
moneys so collected shall not be substituted for payment of the
debt nor can they be used to cure the default, without prior
written consent of the Mortgagee.
(3) Receivership,. Have a receiver appointed to enter into
possession of the Mortgaged Property, collect the earnings,
revenues, rents, issues, profits and income therefrom and apply
the same as the court may direct. Mortgagee shall be entitled to
the appointment of a receiver without the necessity of proving
either the inadequacy of the security or the insolvency of
Mortgagor or any other person who may be legally or equitably
liable to pay moneys secured hereby and Mortgagor and each such
person shall be deemed to have waived such proof and to have
consented to the appointment of such receiver. Should Mortgagee
or any receiver collect earnings, revenues, rents, issues,
profits or income from the Mortgaged Property, the moneys so
collected shall not be substituted for payment of the debt nor
can they be used to cure the default, without the prior written
consent of Mortgagee. Mortgagee shall be liable to account
only for earnings, revenues, rents, issues, profits and income
actually received by Mortgagee.
(4) Sale of personal property. Mortgagee shall have such rights
and remedies in respect of so much of the Mortgaged Property as
may, under applicable law, be personal property, or any part
thereof, as are provided by the Code and such other rights and
remedies in respect thereof which it may have at law or in equity
or under this Mortgage, including without limitation the right to
take possession of the Mortgaged Property wherever located and to
sell all or any portion thereof at public or private sale,
without prior notice to Mortgagor1 except as otherwise required
by law (and if notice is required by law, after 10 days' prior
written notice), at such place or places and at such time or
times and in such manner and upon such terms, whether for cash or
on credit, as Mortgagee in its sole discretion may determine.
Mortgagee shall apply the. proceeds of any such sale to the
payment of the principal indebtedness secured hereby.
(5) Sale of the Property. Mortgagee may sell any of the Mortgaged
Property, not specifically designated as personal property and
subject to subparagraph (4) above, in such a manner as it
deems appropriate and in accordance with any applicable law.
Mortgagee shall apply the proceeds of any such sale first to the
payment of the indebtedness secured hereby.
(b) Rights in Pursuit of Remedies. Upon the occurrence of an
Event of Default, Mortgagee in pursuance of the foregoing
remedies, or in addition thereto, (i) shall be entitled to resort
to its several securities for the payment of the sums secured
hereby in such order and manner as Mortgagee may think fit
without impairing Mortgagee's lien in, or rights to, any of such
securities and without affecting the liability of any person,
firm or corporation for the sums secured hereby, except to the
extent that the indebtedness shall have been reduced by the
actual monetary consideration, if any, received by Mortgagee from
the proceeds of such security; (ii) may, in Mortgagee's sole
discretion, release for such consideration, or none, as Mortgagee
may require, any portion of the Mortgaged Property without, as
to the remainder of the security, in any way impairing or
affecting the lien of this Mortgage, or the priority thereof, or
improving the position of any subordinate lienholder with respect
thereto, except to the extent that the indebtedness shall have
been reduced by the actual monetary consideration, if any,
received by Mortgagee for such release; and/or (iii) may accept
the assignment or pledge of any other property in place thereof
as Mortgagee may require without being accountable for so doing
to any other lienor.
(c) Waiver. Mortgagor hereby waives and releases (i) all errors,
defects and imperfections in any proceedings instituted by
Mortgagee under this Mortgage, (ii) all benefit that might accrue
to Mortgagor by virtue of any present or future laws exempting
the Mortgaged Property, or any part of the proceeds arising from
any sale thereof, from attachment, levy or sale under execution,
or providing for any stay of execution, exemption from civil
process, or extension of time for payment, and (iii) all notices
not herein elsewhere specifically required, of Mortgagor's
default or of Mortgagee's exercise, or election to exercise, any
option under this Mortgage. Mortgagor further agrees to waive the
issuance and service of process and enter its voluntary
appearance in any action, suit or proceeding brought in
connection with any Event of Default and if required by
Mortgagee, to consent to the appointment of a receiver or
receivers of the Mortgaged Property and of all the earnings,
revenues, rents, issues, profits and income thereof. Mortgagor
will not at any time insist upon, or plead, or in any manner
whatever, claim or take any benefit or advantage of any right
under any statute heretofore or hereafter enacted to redeem the
property so sold, or any part thereof, and Mortgagor hereby
expressly waives all benefit or advantage of any such Law or
laws, and covenants not to hinder, delay or impede the execution
of any power herein granted or delegated to Mortgagee, but to
suffer and permit the execution of every power as though no such
law or laws had been made or enacted. Mortgagor, for itself and
all who may claim under it, waives, to the extent that it
lawfully may, all right to have the Mortgaged Property marshaled
upon any foreclosure hereof.
(d) Injunctive Relief. In the event of any breach or threatened
breach by Mortgagor of any of the covenants, agreements, terms or
conditions contained in this Mortgage, Mortgagee shall be
entitled to enjoin such breach or threatened breach and shall
have the right to invoke any right and remedy allowed at law or
in equity or by statute or otherwise as though other remedies
were not provided for in this Mortgage.
(e) Continued Lien of Mortgage. No recovery of any judgment by
Mortgagee and no levy of an execution under any judgment upon the
Mortgaged Property or upon any other property of Mortgagor shall
affect in any manner or to any extent, the lien of this Mortgage
upon the Mortgaged Property or any part thereof, or any liens,
rights, powers or remedies of Mortgagee hereunder, but such
liens, rights, powers and remedies of Mortgagee shall continue
unimpaired as before.
(f) Subordination of Tenants' Rights under Leases. In the event
that Mortgagee shall have the right to foreclose this Mortgage,
Mortgagor authorizes Mortgagee at its option to foreclose this
Mortgage, subject to the rights of any tenants of the Mortgaged
Property if Mortgagee .elects that this Mortgage shall be
subordinate to rights of tenants, and the failure to make any
such tenants parties defendant to any such foreclosure proceeding
and to foreclose their rights will not be asserted by Mortgagor
as a defense to any proceeding instituted by Mortgagee to collect
the indebtedness or any deficiency remaining unpaid after the
foreclosure sale of the Mortgaged Property.
14. Application of Proceeds of Foreclosure. Mortgagee shall
apply the proceeds of any foreclosure sale of or other
disposition or realization upon the Mortgaged Property:
(a) First, to the payment or reimbursement of all reasonable
advances, expenses and disbursements of Mortgagee (including,
without limitation, the reasonable fees and costs of its
counsel and agents) incurred in connection with the
administration and enforcement of, or the preservation of any
rights under, this Mortgage;
(b) Second, in satisfaction of the debt evidenced by the Mortgage
Note, whether for principal, interest or expenses in such order
as Mortgagee shall designate; and
(c) Third, the balance, if any, to be distributed to Mortgagor or
as otherwise required by law.
15. Condemnation. Mortgagor agrees that the proceeds of any award
or claim for damages, direct or consequential, in connection with
any condemnation, or other taking of the Mortgaged Property, or
any part thereof, or for conveyance in lieu of condemnation, are
hereby assigned arid shall be paid to Mortgagee, up to the amount
owing under the terms of the Mortgage Note or this Mortgage.
16. Forbearance by Mortgagee: Remedies Cumulative. Any
forbearance by Mortgagee in exercising any right or remedy
hereunder or otherwise afforded by law, shall not be deemed a
waiver of or preclude the later exercise of such right or remedy.
The payment of insurance premiums, taxes, or other hens or
charges by Mortgagee shall not be a waiver of Mortgagee's
right to accelerate the maturity of the indebtedness secured by
this Mortgage. All remedies provided in this Mortgage are
distinct from and cumulative to any other right or remedy under
this Mortgage or afforded by law or equity, and may be exercised
concurrently, independently or successively.
17. Agreements Continuing, Absolute. The agreements and
obligations of Mortgagor hereunder are continuing agreements and
obligations, and are absolute and unconditional irrespective of
the genuiness, validity or enforceability of the Mortgage Note or
any other agreement or agreements now or hereafter entered into
by Mortgagee and/or Mortgagor pursuant to which the debt
evidenced by the Mortgage Note or any part thereof is issued or
of any other circumstance which might otherwise constitute a
legal or equitable discharge of such agreements and
obligations; without limitation upon the foregoing, the
agreements and obligations of Mortgagor shall not in any such way
be affected by (i) any renewa1, refinancing or refunding of such
debt in whole or in part, (ii) any extension of the time of
payment of the Mortgage Note or other instrument or instruments
now or hereafter evidencing the debt or any part thereof, (iii)
any amendment to or modification of the terms of the Mortgage
Note or any other agreement or agreements now or hereafter
entered into by Mortgagee and Mortgagor pursuant to which the
debt or any part thereof is issued or secured, (iv) any
substitution, exchange or release of, or failure to preserve,
perfect or protect, or other dealing in respect of, the Mortgaged
Property or any other property or any security for the payment of
the debt evidenced by the Mortgage Note or any part thereof, (v)
any bankruptcy, insolvency, arrangement, composition, assignment
for the benefit of creditors or similar proceeding commenced by
or against Mortgagor or (vi) any other matter or thing whatsoever
whereby the agreements and obligations of Mortgagor hereunder
would or might otherwise be released or discharged.
18. Partial Invalidity. The invalidity per se or in any
application of any one or more paragraphs of this Mortgage or any
part of any thereof shall not affect the remaining portions of
this Mortgage, all of which are inserted conditionally on their
being held valid in law.
19. Amendment: Successors and Assigns. This Mortgage cannot be
changed or amended except by an agreement in writing signed by
the party against whom enforcement is sought. The covenants,
conditions and agreements contained in this Mortgage shall bind,
and the benefits thereof shall inure to, tile parties hereto and
their respective heirs, executors, administrators, successors and
assigns.
20. Notices: Any notices, or other communications required or
permitted hereunder shall be given by personal delivery or sent
by registered or certified mail, postage prepaid, to the parties
at their addresses set forth above, or to such other address as
either party may designate in writing from time to time.
21. Governing Law. This Mortgage shall be governed by the law of
Pennsylvania. This provision shall not limit the applicability of
federal law to this Mortgage.
IN WITNESS WHEREOF, and intending to be legally bound, Mortgagor
has executed and delivered this Mortgage on the day and year set
forth at the beginning of this Mortgage.
MORTGAGOR:
WATERSOFT, INC.
By:
Edward E. Ferree, President
MORTGAGE NOTE
$ 487,500.00
January 28, 1998
FOR VALUE RECEIVED, and intending to be legally bound hereby,
WATERSOFT, INC. (the "Maker") promises to pay to the order of
SEVEN FIELDS DEVELOPMENT COMPANY (the "Holder") the principal sum
of Four Hundred eighty-seven thousand dollars($487,500.00),
with interest, as set forth below payable as follows:
a. Commencing on the date of this Mortgage Note, Maker, promptly
upon receipt of the proceeds of the sale of a Unit (as defined in
the Purchase Money Mortgage, which is hereinafter
described), shall pay to Holder an amount equal to Seven Thousand
Five Hundred Dollars($7,500.00), plus interest accrued on such
Seven Thousand Five Hundred Dollars ($7,500.00), calculated from
the date of this Mortgage Note until the date of payment, at
the rate of seven and one-half (7-1/2%) percent per annum.
b. On July 28, 2000, a principal amount equal to Two Hundred
Fifty-Five Thousand Dollars ($255,000.00), plus interest at the
rate of seven and one-half (7-1/2%) percent per annum from
the date of Closing, shall become due and payable. Maker shall
receive credit against the principal amount then due for all
principal payments previously made pursuant to paragraph a.
above and interest shall be computed on the balance remaining
after such credit is applied.
c. On July 28, 200l, an additional principal amount equal to One
Hundred Twenty-Seven Thousand Five Hundred Dollars ($127,500.00),
plus interest at the rate of seven and one-half (7 1/2%) percent
per annum from the date of Closing, shall become due and
payable. Maker shall receive credit against the principal amount
then due for all principal payments previously made pursuant to
paragraph a. above which shall have not been previously credited
to Maker pursuant to paragraph b. hereof. Interest shall be
computed on the balance remaining after such credit is
applied.
d. On July 28 , 2002, the remaining principal balance shall
become due and payable, plus interest at the rate of seven and
one-half (7-1/2%) percent per annum from the date of Closing.
Maker shall receive credit against the remaining principal
balance for all principal payments previously made pursuant to
paragraph a. above which shall have not been previously credited
to Maker pursuant to paragraphs b. and c. above. Interest
shall be computed on the balance remaining after such credit is
applied.
Maker shall have the right to prepay this Mortgage Note in full,
or in part, without premium or penalty.
All payments of principal and interest shall be made in
immediately available funds, in lawful money of the United States
of America, at 2200 Garden Drive, Suite 200 Mars. PA 16046, or
at such other place as Holder may direct.
Whenever any payment to be made hereunder shall be stated to be
due or become due on a Saturday, Sunday or public holiday (any
other day being a "Business Day"), such payment shall
be made on the next succeeding Business Day.
This Mortgage Note is the Mortgage Note referred to in, and is
secured by and entitled to the benefits of, the Purchase Money
Mortgage executed and delivered by Maker to Holder and dated
of even date herewith, as the same may be amended, modified or
supplemented from time to time (the "Mortgage"), including, but
not limited to, the Events of Default set forth in paragraph
12 of the Mortgage and the Remedies set forth in paragraph 13 of
the Mortgage, which are specifically incorporated herein as
though set forth herein in their entirety. Capitalized terms not
otherwise defined herein shall have the meanings assigned to them
in the Mortgage.
MAKERS HEREBY IRREVOCABLY AUTHORIZES AND EMPOWERS ANY
ATTORNEY OR THE PROTHONOTARY OR CLERK OF ANY COURT IN THE
COMMONWEALTH OF PENNSYLVANIA, OR ELSEWHERE, TO APPEAR AT ANY TIME
FOR MAKER AFTER A DEFAULT UNDER THIS MORTGAGE NOTE, AND WITH OR
WITHOUT COMPLAINT FILED, AS OF ANY TERM, CONFESS OR ENTER
JUDGMENT AGAINST MAKER FOR THE ENTIRE PRINCIPAL BALANCE OF THIS
MORTGAGE NOTE, ALL ACCRUED INTEREST, LATE CHARGES AND ANY AND ALL
AMOUNTS EXPENDED OR ADVANCED BY HOLDER RELATING TO ANY
COLLATERAL
SECURING THIS MORTGAGE NOTE, TOGETHER WITH INTEREST ON SUCH
AMOUNTS, TOGETHER WITH COSTS OF SUIT AND AN ATTORNEYS' COMMISSION
OF TEN (10%) PERCENT OF THE UNPAID PRINCIPAL BALANCE AND ACCRUED
INTEREST FOR COLLECTION, BUT IN ANY EVENT, NOT LESS THAN FIVE
HUNDRED DOLLARS ($5O0.O0) ON WHICH JUDGMENT OR JUDGMENTS ONE OR
MORE EXECUTIONS MAY ISSUE IMMEDIATELY; AND FOR SO DOING, THIS
NOTE OR A COPY OF THIS NOTE VERIFIED BY AFFIDAVIT SHALL BE
SUFFICIENT WARRANT. THE AUTHORITY GRANTED IN THIS NOTE TO
CONFESS JUDGMENT AGAINST MAKER SHALL NOT BE EXHAUSTED BY ANY
EXERCISE OF THAT AUTHORITY, BUT SHALL CONTINUE FROM TIME TO TIME
AND AT ALL TIMES UNTIL PAYMENT IN FULL OF ALL AMOUNTS DUE UNDER
THIS NOTE. MAKER HEREBY WAIVES ANY RIGHT MAKER MAY HAVE TO
NOTICE OR TO A HEARING IN CONNECTION WITH ANY SUCH CONFESSION OF
JUDGMENT, EXCEPT ANY NOTICE AND/OR HEARING REQUIRED UNDER
APPLICABLE LAW WITH RESPECT TO EXECUTION OF THE JUDGMENT AND
STATES THAT EITHER A REPRESENTATIVE OF HOLDER SPECIFICALLY CALLED
THIS CONFESSION OF JUDGMENT PROVISION TO MAKER' S
ATTENTION OR MAKER HAS BEEN REPRESENTED BY INDEPENDENT
LEGAL COUNSEL. THE LIEN ARISING FROM ANY JUDGMENT CONFESSED OR
ENTERED PURSUANT TO THE FOREGOING AUTHORITY SHALL NOT EXTEND TO
ANY OF MAKER' S RESIDENTIAL REAL PROPERTY AS THAT TERM IS DEFINED
IN THE PENNSYLVANIA ACT OF JANUARY 30, 1974 (PA. LAWS 13, NO. 6)
REFERRED TO AS THE LOAN INTEREST AND PROTECTION LAW, AS AMENDED,
AND THE HOLDER OF ANY JUDGMENT CONFESSED OR ENTERED PURSUANT TO
THE FOREGOING AUTHORITY SHALL NOT, IN ENFORCEMENT OF ANY SUCH
JUDGMENT, EXECUTE, LEVY OR OTHERWISE PROCEED AGAINST ANY SUCH
PROPERTY AND THAT THE HOLDER THEREOF SHALL BE PERMITTED TO
EXECUTE, LEVY OR PROCEED AGAINST SUCH RESIDENTIAL REAL PROPERTY
FROM AND AFTER THE ENTRY OF A JUDGMENT AS CONTEMPLATED BY SECTION
407 OF SUCH LOAN INTEREST AND PROTECTION LAW AND RULES 2981-2986
OF THE PENNSYLVANIA RULES OF CIVIL PROCEDURE, OR SUCCESSOR OR
SIMILAR STATUTES AND RULES. NO LIMITATION OF LIEN OR ANY
EXECUTION, LEVY OR OTHER ENFORCEMENT CONTAINED IN THE
IMMEDIATELY PRECEDING SENTENCE SHALL APPLY WITH RESPECT TO ANY
JUDGMENT OBTAINED OTHER THAN BY THE FOREGOING AUTHORITY TO
CONFESS OR ENTER JUDGMENT.
PRIOR TO SIGNING THIS MORTGAGE NOTE, MAKER READ AND UNDERSTOOD
ALL OF THE PROVISIONS OF THIS MORTGAGE NOTE. MAKER AGREES TO THE
TERMS OF THIS MORTGAGE NOTE AND ACKNOWLEDGES RECEIPT OF A
COMPLETED COPY OF THIS MORTGAGE NOTE.
In addition to the rights and remedies given it by this Mortgage
Note, Holder shall have all rights and remedies allowed by
applicable law.
The obligations of this Mortgage Note shall bind Maker, its
successors and assigns and the benefits hereof shall inure to
Holder, its successors and assigns.
This Mortgage Note is governed by and will be construed and
enforced in accordance with the laws of the Commonwealth of
Pennsylvania.
IN WITNESS WHEREOF, and intending to be legally bound hereby,
Maker has caused this Mortgage Note to be duly executed the day
and year first above written.
ATTEST: WATERSOFT, INC., ("Maker")
By: Edward E. Ferree, President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<CASH> 414,968
<SECURITIES> 0
<RECEIVABLES> 697,400
<ALLOWANCES> 0
<INVENTORY> 11,927,980
<CURRENT-ASSETS> 0
<PP&E> 2,625,035
<DEPRECIATION> (581,633)
<TOTAL-ASSETS> 17,258,324
<CURRENT-LIABILITIES> 0
<BONDS> 56,846,186
<COMMON> 3,484,392
0
0
<OTHER-SE> (44,997,184)
<TOTAL-LIABILITY-AND-EQUITY> 17,258,324
<SALES> 13,924,206
<TOTAL-REVENUES> 14,167,271
<CGS> 10,362,017
<TOTAL-COSTS> 11,999,708
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,590
<INCOME-PRETAX> 2,219,138
<INCOME-TAX> 1,387,655
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 831,483
<EPS-PRIMARY> .24
<EPS-DILUTED> 0
</TABLE>
