e10vq
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2010
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission file number 1-10466
The St. Joe Company
(Exact name of registrant as specified in its charter)
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Florida
(State or other jurisdiction of
incorporation or organization)
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59-0432511
(I.R.S. Employer
Identification No.) |
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133 South WaterSound Parkway
WaterSound, Florida
(Address of principal executive offices)
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32413
(Zip Code) |
(850) 231-6482
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES þ NO o
Indicate by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such
files). YES þ NO o
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
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Large accelerated filer þ |
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Accelerated filer o |
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Non-accelerated filer o
(Do not check if a smaller reporting company) |
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Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). YES o NO þ
As of
October 28, 2010, there were 122,943,048 shares of common stock, no par value,
issued and 92,624,703 outstanding, with 30,318,345 shares of treasury stock.
THE ST. JOE COMPANY
INDEX
2
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
THE ST. JOE COMPANY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
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September 30, |
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December 31, |
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2010 |
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2009 |
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(Unaudited) |
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ASSETS
|
Investment in real estate |
|
$ |
746,791 |
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$ |
749,500 |
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Cash and cash equivalents |
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196,402 |
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163,807 |
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Notes receivable |
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11,365 |
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|
11,503 |
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Pledged treasury securities |
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25,757 |
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27,105 |
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Prepaid pension asset |
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39,756 |
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42,274 |
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Property, plant and equipment, net |
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13,695 |
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15,269 |
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Income taxes receivable |
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63,690 |
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Other assets |
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25,138 |
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26,290 |
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$ |
1,058,904 |
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$ |
1,099,438 |
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LIABILITIES AND EQUITY
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LIABILITIES: |
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Debt |
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$ |
38,323 |
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$ |
39,508 |
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Accounts payable |
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12,377 |
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13,781 |
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Accrued liabilities and deferred credits |
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96,719 |
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92,548 |
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Deferred income taxes, net |
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38,232 |
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57,281 |
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Total liabilities |
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185,651 |
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203,118 |
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EQUITY: |
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Common stock, no par value;
180,000,000 shares authorized;
122,947,940 and 122,557,167 issued at
September 30, 2010 and December 31,
2009, respectively |
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934,553 |
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|
924,267 |
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Retained earnings |
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881,211 |
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914,362 |
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Accumulated other comprehensive (loss) |
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(11,678 |
) |
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(12,558 |
) |
Treasury stock at cost, 30,307,714 and
30,275,716 shares held at September 30,
2010 and December 31, 2009,
respectively |
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(931,166 |
) |
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(930,124 |
) |
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Total stockholders equity |
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872,920 |
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895,947 |
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Noncontrolling interest |
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333 |
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373 |
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Total equity |
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873,253 |
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896,320 |
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Total liabilities and equity |
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$ |
1,058,904 |
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$ |
1,099,438 |
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The accompanying notes are an integral part of these consolidated financial statements.
3
THE ST. JOE COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands except per share amounts)
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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2010 |
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2009 |
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2010 |
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2009 |
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Revenues: |
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Real estate sales |
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$ |
10,866 |
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$ |
24,271 |
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$ |
15,536 |
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$ |
53,008 |
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Resort and club revenues |
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8,755 |
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9,685 |
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24,144 |
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24,796 |
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Timber sales |
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6,817 |
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7,053 |
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21,036 |
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20,392 |
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Other revenues |
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667 |
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913 |
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1,724 |
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2,952 |
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Total revenues |
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27,105 |
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41,922 |
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62,440 |
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101,148 |
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Expenses: |
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Cost of real estate sales |
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3,335 |
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22,452 |
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5,066 |
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38,168 |
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Cost of resort and club revenues |
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8,786 |
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9,605 |
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24,920 |
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26,009 |
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Cost of timber sales |
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5,289 |
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5,139 |
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14,810 |
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14,765 |
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Cost of other revenues |
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515 |
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701 |
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1,597 |
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1,849 |
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Other operating expenses |
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12,300 |
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8,751 |
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27,838 |
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32,091 |
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Corporate expense, net |
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9,821 |
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6,008 |
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23,287 |
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20,144 |
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Depreciation and amortization |
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3,356 |
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3,730 |
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10,295 |
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11,546 |
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Pension settlement charge |
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44,678 |
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Impairment losses |
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11,063 |
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|
555 |
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|
32,561 |
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Restructuring charges |
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1,654 |
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1,834 |
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4,352 |
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1,845 |
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Total expenses |
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45,056 |
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69,283 |
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112,720 |
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223,656 |
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Operating loss |
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(17,951 |
) |
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(27,361 |
) |
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(50,280 |
) |
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(122,508 |
) |
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Other (expense) income: |
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Investment income, net |
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392 |
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|
764 |
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|
1,227 |
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|
2,160 |
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Interest expense |
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(5,171 |
) |
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(65 |
) |
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(7,401 |
) |
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|
(332 |
) |
Other, net |
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1,081 |
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|
533 |
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2,450 |
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1,457 |
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Total other (expense) income |
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(3,698 |
) |
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|
1,232 |
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|
(3,724 |
) |
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3,285 |
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Loss from continuing operations before equity in (loss) of
unconsolidated affiliates and income taxes |
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(21,649 |
) |
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(26,129 |
) |
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(54,004 |
) |
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(119,223 |
) |
Equity in (loss) of unconsolidated affiliates |
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(50 |
) |
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(66 |
) |
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(479 |
) |
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(81 |
) |
Income tax (benefit) |
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(8,573 |
) |
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(11,827 |
) |
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(21,302 |
) |
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(47,525 |
) |
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Loss from continuing operations |
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(13,126 |
) |
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(14,368 |
) |
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(33,181 |
) |
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(71,779 |
) |
Loss from discontinued operations, net of tax |
|
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|
(187 |
) |
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|
|
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(409 |
) |
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Net loss |
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(13,126 |
) |
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(14,555 |
) |
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(33,181 |
) |
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(72,188 |
) |
Less: Net loss attributable to noncontrolling interest |
|
|
(10 |
) |
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|
(60 |
) |
|
|
(30 |
) |
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|
(817 |
) |
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Net loss attributable to the Company |
|
$ |
(13,116 |
) |
|
$ |
(14,495 |
) |
|
$ |
(33,151 |
) |
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$ |
(71,371 |
) |
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LOSS PER SHARE |
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Basic |
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Loss from continuing operations attributable to the Company |
|
$ |
(0.14 |
) |
|
$ |
(0.16 |
) |
|
$ |
(0.36 |
) |
|
$ |
(0.78 |
) |
Loss from discontinued operations attributable to the Company |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Net loss attributable to the Company |
|
$ |
(0.14 |
) |
|
$ |
(0.16 |
) |
|
$ |
(0.36 |
) |
|
$ |
(0.78 |
) |
|
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Diluted |
|
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|
|
|
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|
Loss from continuing operations attributable to the Company |
|
$ |
(0.14 |
) |
|
$ |
(0.16 |
) |
|
$ |
(0.36 |
) |
|
$ |
(0.78 |
) |
Loss from discontinued operations attributable to the Company |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to the Company |
|
$ |
(0.14 |
) |
|
$ |
(0.16 |
) |
|
$ |
(0.36 |
) |
|
$ |
(0.78 |
) |
|
|
|
|
|
|
|
|
|
|
|
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|
The accompanying notes are an integral part of these consolidated financial statements.
4
THE ST. JOE COMPANY
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(Unaudited)
(Dollars in thousands)
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Accumulated |
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Common Stock |
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Other |
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|
|
|
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|
Outstanding |
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|
Retained |
|
|
Comprehensive |
|
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Treasury |
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|
Noncontrolling |
|
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|
Shares |
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Amount |
|
|
Earnings |
|
|
Income (Loss) |
|
|
Stock |
|
|
Interest |
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|
Total |
|
Balance at December 31,
2009 |
|
|
92,281,451 |
|
|
$ |
924,267 |
(1) |
|
$ |
914,362 |
(1) |
|
$ |
(12,558 |
) |
|
$ |
(930,124 |
) |
|
$ |
373 |
|
|
$ |
896,320 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
Comprehensive (loss): |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) |
|
|
|
|
|
|
|
|
|
|
(33,151 |
) |
|
|
|
|
|
|
|
|
|
|
(30 |
) |
|
|
(33,181 |
) |
Amortization of pension and
postretirement benefit costs,
net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
880 |
|
|
|
|
|
|
|
|
|
|
|
880 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(32,301 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10 |
) |
|
|
(10 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuances of restricted stock |
|
|
337,967 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeitures of restricted stock |
|
|
(126,080 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock |
|
|
178,886 |
|
|
|
5,083 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,083 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess (reduction in) tax
benefit on options exercised
and vested restricted stock |
|
|
|
|
|
|
(227 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(227 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of stock-based
compensation |
|
|
|
|
|
|
5,430 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,430 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of treasury shares |
|
|
(31,998 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,042 |
) |
|
|
|
|
|
|
(1,042 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2010 |
|
|
92,640,226 |
|
|
$ |
934,553 |
|
|
$ |
881,211 |
|
|
$ |
(11,678 |
) |
|
$ |
(931,166 |
) |
|
$ |
333 |
|
|
$ |
873,253 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The opening balance of common stock and retained earnings was
adjusted by $2.6 million and ($1.6) million, respectively, for an
immaterial correction. Refer to Note 1, Correction of Prior
Period Error. |
The accompanying notes are an integral part of these consolidated financial statements.
5
THE ST. JOE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
|
2010 |
|
|
2009 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(33,181 |
) |
|
$ |
(72,188 |
) |
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
10,295 |
|
|
|
12,365 |
|
Stock-based compensation |
|
|
4,730 |
|
|
|
7,455 |
|
Equity in loss of unconsolidated joint ventures |
|
|
479 |
|
|
|
81 |
|
Deferred income tax (benefit) |
|
|
(19,692 |
) |
|
|
(17,670 |
) |
Pension settlement |
|
|
|
|
|
|
44,678 |
|
Impairment losses |
|
|
555 |
|
|
|
32,561 |
|
Cost of operating properties sold |
|
|
3,260 |
|
|
|
32,090 |
|
Expenditures for operating properties |
|
|
(9,487 |
) |
|
|
(7,511 |
) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Notes receivable |
|
|
739 |
|
|
|
3,168 |
|
Other assets |
|
|
4,206 |
|
|
|
7,037 |
|
Accounts payable and accrued liabilities |
|
|
3,683 |
|
|
|
(1,829 |
) |
Income taxes receivable |
|
|
63,870 |
|
|
|
4,427 |
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
29,457 |
|
|
|
44,664 |
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment |
|
|
(1,117 |
) |
|
|
(3,429 |
) |
Proceeds from the disposition of assets |
|
|
50 |
|
|
|
1,694 |
|
Distributions from unconsolidated affiliates |
|
|
401 |
|
|
|
535 |
|
|
|
|
|
|
|
|
Net cash (used in) investing activities |
|
|
(666 |
) |
|
|
(1,200 |
) |
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Distribution to noncontrolling interest |
|
|
(10 |
) |
|
|
(1,569 |
) |
Proceeds from exercises of stock options |
|
|
5,083 |
|
|
|
467 |
|
Excess tax (benefits) from stock-based compensation |
|
|
(227 |
) |
|
|
(739 |
) |
Taxes paid on behalf of employees related to stock-based compensation |
|
|
(1,042 |
) |
|
|
(541 |
) |
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
3,804 |
|
|
|
(2,382 |
) |
|
|
|
|
|
|
|
Net increase in cash and cash equivalents |
|
|
32,595 |
|
|
|
41,082 |
|
Cash and cash equivalents at beginning of period |
|
|
163,807 |
|
|
|
115,472 |
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
196,402 |
|
|
$ |
156,554 |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
6
THE ST. JOE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, unless otherwise stated)
(Unaudited)
1. Description of Business and Basis of Presentation
Description of Business
The St. Joe Company (the Company) is a real estate development company primarily engaged in
residential, commercial and industrial development and rural land sales. The Company also has
significant interests in timber. Most of its real estate operations, as well as its timber
operations, are within the State of Florida.
Basis of Presentation
The accompanying unaudited interim financial statements have been prepared in accordance with
the rules and regulations of the Securities and Exchange Commission (SEC) for reporting on
Form 10-Q. Accordingly, certain information and footnotes required by generally accepted
accounting principles in the United States for complete financial statements are not included
herein. The consolidated interim financial statements include the accounts of the Company and all
of its majority-owned and controlled subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation. The December 31, 2009 balance sheet amounts
have been derived from the Companys December 31, 2009 audited financial statements.
The statements reflect all normal recurring adjustments that, in the opinion of management,
are necessary for fair presentation of the information contained
herein. The consolidated interim statements should be read in conjunction with the financial statements and
notes thereto included in the Companys Annual Report on Form 10-K for the year ended December 31,
2009. The Company adheres to the same accounting policies in preparation of its interim financial
statements. As permitted under generally accepted accounting principles, interim accounting for
certain expenses, including income taxes, are based on full year assumptions. For interim
financial reporting purposes, income taxes are recorded based upon
estimated annual effective income tax
rates.
Certain prior period amounts have been reclassified to conform to the current periods
presentation.
Correction of Prior Period Error
In the first quarter of 2010, the Company determined that approximately $2.6 million
($1.6 million net of tax) of stock compensation expense related to the acceleration of the service
period for retirement eligible employees should have been recognized in periods prior to 2010.
Accordingly, the consolidated balance sheet for December 31, 2009 has been adjusted to reduce
deferred income taxes, net, by $1.0 million and increase common stock by $2.6 million to reflect
the correction of this error, with a corresponding $1.6 million reduction recorded to retained
earnings. This correction is similarly reflected as an adjustment to common stock and retained
earnings as of December 31, 2009 in the consolidated statement of changes in equity. The
correction of this error also affected the consolidated statements of operations for the
three months and nine months ended September 30, 2009 and consolidated statement of cash flows for
the nine months ended September 30, 2009. These corrections were not considered material to prior
period financial statements.
New Accounting Standards
In January 2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards
Update No. 2010-06, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures
about Fair Value Measurements (ASU 2010-06). ASU 2010-06 requires some new disclosures and
clarifies some existing disclosure requirements about fair value measurement as set forth in
Codification Subtopic 820-10. ASU 2010-06 amends Codification Subtopic 820-10 to now require (1) a
reporting entity to disclose separately the amounts of significant transfers in and out of Level 1
and Level 2 fair value measurements and describe the reasons for the transfers; (2) in the
reconciliation for fair value measurements using significant unobservable inputs, a reporting
entity should present separately information about purchases, sales, issuances, and settlements,
and (3) a reporting entity should provide disclosures about the valuation techniques and inputs
used to measure fair value for both recurring and nonrecurring fair value measurements. ASU
2010-06 is effective for interim and annual reporting periods beginning after December 15, 2009,
except for the disclosures about purchases, sales, issuances, and settlements in the roll forward
of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years
7
beginning after December 15, 2010, and for interim periods within those fiscal years. The
adoption of ASU No. 2010-06 did not have a material impact on the Companys financial position or
results of operations.
In December 2009, the FASB issued ASU 2009-16, Transfers and Servicing (Topic 860)
Accounting for Transfers of Financial Assets (ASU 2009-16) and ASU 2009-17, Consolidations (Topic
810) Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities
(ASU 2009-17). ASU 2009-16 formally codifies Statement of Financial Accounting Standards
(SFAS) No. 166, Accounting for Transfers of Financial Assets, while ASU 2009-17 codifies
SFAS 167, Amendments to FASB Interpretation No. 46(R). ASU 2009-16 represents a revision to the
provisions of former SFAS 140, Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities, and will require more information about transfers of financial
assets, including securitization transactions, and where entities have continuing exposure to the
risks related to transferred financial assets. It eliminates the concept of a qualifying
special-purpose entity (QSPE), changes the requirements for derecognizing financial assets and
requires additional disclosures. ASU 2009-17 represents a revision to former Financial
Interpretation No. 46 (Revised December 2003), Consolidation of Variable Interest Entities, and
changes how a reporting entity determines when an entity that is insufficiently capitalized or is
not controlled through voting (or similar rights) should be consolidated. The determination of
whether a reporting entity is required to consolidate another entity is based on, among other
things, the other entitys purpose and design and the reporting entitys ability to direct the
activities of the other entity that most significantly impact the other entitys economic
performance.
The updates require a number of new disclosures. ASU 2009-16 enhances information reported to
users of financial statements by providing greater transparency about transfers of financial assets
and an entitys continuing involvement in transferred financial assets. ASU 2009-17 requires a
reporting entity to provide additional disclosures about its involvement with variable interest
entities and any significant changes in risk exposure due to that involvement. A reporting entity
will be required to disclose how its involvement with a variable interest entity affects the
reporting entitys financial statements. The updates to the Codification are effective at the
start of a reporting entitys first fiscal year beginning after November 15, 2009, or January 1,
2010, for a calendar year-end entity. ASU 2009-16 and ASU 2009-17 were adopted by the Company as
required on January 1, 2010. The adoption of ASU 2009-16 and ASU 2009-17 did not have a material
impact on the Companys financial position or results of operations. Although the Company holds a
retained interest in bankruptcy remote entities that were previously considered QSPEs, the
financial position and results of such QSPEs are not consolidated in the Companys financial
statements. The Company evaluated the accounting requirements of ASU 2009-17 and determined that
it would not be required to consolidate the financial position and results of the QSPEs as the
Company is not the primary decision maker with respect to activities that could significantly
impact the economic performance of the QSPEs, nor does the Company perform any service activity
related to the QSPEs.
2. Stock-Based Compensation and Earnings Per Share
Stock-Based Compensation
Stock-based compensation cost is measured at the grant date based on the fair value of the
award and is typically recognized as expense on a straight-line basis over the requisite service
period, which is the vesting period. Stock-based compensation cost may be recognized over a
shorter requisite service period if an employee meets retirement eligibility requirements.
Additionally, the 15% discount at which employees may purchase the Companys common stock through
payroll deductions is being recognized as compensation expense. Upon exercise of stock options or
vesting of restricted stock, the Company will issue new common stock.
Service-Based Grants
A summary of service-based non-vested restricted share activity as of September 30, 2010 and
changes during the nine month period are presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average |
|
|
Number of |
|
Grant Date Fair |
Service-Based Non-Vested Restricted Shares |
|
Shares |
|
Value |
Balance at December 31, 2009 |
|
|
299,815 |
|
|
$ |
36.66 |
|
Granted |
|
|
160,923 |
|
|
|
27.58 |
|
Vested |
|
|
(121,616 |
) |
|
|
40.12 |
|
Forfeited |
|
|
(28,070 |
) |
|
|
30.76 |
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2010 |
|
|
311,052 |
|
|
$ |
31.15 |
|
|
|
|
|
|
|
|
|
|
8
As of September 30, 2010, there was $2.2 million of unrecognized compensation cost, adjusted
for estimated forfeitures, related to non-vested restricted stock and stock option compensation
arrangements which will be recognized over a weighted average period of four years.
Market Condition Grants
The Company grants to select executives and other key employees non-vested restricted stock
whose vesting is based upon the achievement of certain market conditions which are defined as the
Companys total shareholder return as compared to the total shareholder return of certain peer
groups during a three year performance period.
The Company currently uses a Monte Carlo simulation pricing model to determine the fair value
of its market condition awards. The determination of the fair value of market condition-based
awards is affected by the stock price as well as assumptions regarding a number of other variables.
These variables include expected stock price volatility over the requisite performance term of the
awards, the relative performance of the Companys stock price and shareholder returns to those
companies in its peer groups and a risk-free interest rate assumption. Compensation cost is
recognized regardless of the achievement of the market condition, provided the requisite service
period is met.
A summary of the activity during the nine months ended September 30, 2010 is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average |
|
|
Number of |
|
Grant Date Fair |
Market Condition Non-Vested Restricted Shares |
|
Shares |
|
Value |
Balance at December 31, 2009 |
|
|
503,247 |
|
|
$ |
23.95 |
|
Granted |
|
|
177,044 |
|
|
|
21.23 |
|
Vested |
|
|
|
|
|
|
|
|
Forfeited |
|
|
(98,010 |
) |
|
|
23.56 |
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2010 |
|
|
582,281 |
|
|
$ |
23.19 |
|
|
|
|
|
|
|
|
|
|
As of September 30, 2010, there was $4.0 million of unrecognized compensation cost, adjusted
for estimated forfeitures, related to market condition non-vested restricted shares which will be
recognized over a weighted average period of three years. At September 30, 2010, the Company has
accrued $0.8 million related to cash liability awards that may be payable to terminated employees
who had been granted market condition restricted shares.
Total stock-based compensation recognized in the consolidated statements of operations is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30, |
|
September 30, |
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
Stock-based compensation expense |
|
$ |
1,911 |
|
|
$ |
872 |
|
|
$ |
4,730 |
|
|
$ |
7,455 |
|
Earnings (Loss) Per Share
Basic earnings (loss) per share is calculated by dividing net income (loss) by the average
number of common shares outstanding for the period. Diluted earnings (loss) per share is
calculated by dividing net income (loss) by the weighted average number of common shares
outstanding for the period, including all potentially dilutive shares issuable under outstanding
stock options and service-based non-vested restricted stock. Stock options and non-vested
restricted stock are not considered in any diluted earnings per share calculations when the Company
has a loss from continuing operations. Non-vested restricted shares subject to vesting based on
the achievement of market conditions are treated as contingently issuable shares and are considered
outstanding only upon the satisfaction of the market conditions.
The following table presents a reconciliation of average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Basic average shares outstanding |
|
|
91,773,482 |
|
|
|
91,496,677 |
|
|
|
91,635,193 |
|
|
|
91,357,912 |
|
Net effect of stock options assumed to be exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net effect of non-vested restricted stock assumed to be vested |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted average shares outstanding |
|
|
91,773,482 |
|
|
|
91,496,677 |
|
|
|
91,635,193 |
|
|
|
91,357,912 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
Approximately
0.1 million and 0.2 million shares were excluded from the computation of diluted
earnings (loss) per share during the three months ended September 30, 2010 and 2009, respectively,
and 0.1 million and 0.2 million during the nine months ended September 30, 2010 and 2009,
respectively, as the effect would have been anti- dilutive.
3. Fair value measurements
The Company follows the provisions of ASC 820 for its financial and non-financial assets and
liabilities. ASC 820 among other things, defines fair value, establishes a consistent framework
for measuring fair value and expands disclosure for each major asset and liability category
measured at fair value on either a recurring or nonrecurring basis. ASC 820 clarifies that fair
value is an exit price, representing the amount that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants. As such, fair value is
a market-based measurement that should be determined based on assumptions that market participants
would use in pricing an asset or liability. As a basis for considering such assumptions, ASC 820
establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair
value as follows:
Level 1. Observable inputs such as quoted prices in active markets;
Level 2. Inputs, other than the quoted prices in active markets, that are observable either
directly or indirectly; and
Level 3. Unobservable inputs in which there is little or no market data, which require the
reporting entity to develop its own assumptions.
Assets and liabilities measured at fair value on a recurring basis are as follows:
Fair value as of September 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices in |
|
|
Significant Other |
|
|
Significant |
|
|
|
Fair Value |
|
|
Active Markets for |
|
|
Observable |
|
|
Unobservable |
|
|
|
September 30, |
|
|
Identical Assets |
|
|
Inputs |
|
|
Inputs |
|
|
|
2010 |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
Recurring: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in money market |
|
$ |
188,308 |
|
|
$ |
188,308 |
|
|
$ |
|
|
|
$ |
|
|
Retained interest in QSPEs |
|
|
10,179 |
|
|
|
|
|
|
|
|
|
|
|
10,179 |
|
Standby guarantee liability |
|
|
(791 |
) |
|
|
|
|
|
|
|
|
|
|
(791 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total, net |
|
$ |
197,696 |
|
|
$ |
188,308 |
|
|
$ |
|
|
|
$ |
9,388 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value as of December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices in |
|
|
Significant Other |
|
|
Significant |
|
|
|
Fair Value |
|
|
Active Markets for |
|
|
Observable |
|
|
Unobservable |
|
|
|
December 31, |
|
|
Identical Assets |
|
|
Inputs |
|
|
Inputs |
|
|
|
2009 |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
Recurring: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in money market |
|
$ |
143,985 |
|
|
$ |
143,985 |
|
|
$ |
|
|
|
$ |
|
|
Retained interest in QSPEs |
|
|
9,881 |
|
|
|
|
|
|
|
|
|
|
|
9,881 |
|
Standby guarantee liability |
|
|
(791 |
) |
|
|
|
|
|
|
|
|
|
|
(791 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total, net |
|
$ |
153,075 |
|
|
$ |
143,985 |
|
|
$ |
|
|
|
$ |
9,090 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During 2008 and 2007, the Company sold 79,031 acres and 53,024 acres, respectively, of
timberland in exchange for 15-year installment notes receivable in the aggregate amount of $108.4
million and $74.9 million, respectively. The installment notes are fully backed by irrevocable
letters of credit issued by Wells Fargo Bank, N.A. The Company contributed the installment notes
to bankruptcy remote QSPEs.
During 2008 and 2007, the QSPEs monetized $108.4 million and $74.9 million, respectively, of
installment notes by issuing debt securities to third party investors equal to approximately 90% of
the value of the installment notes. Approximately $96.1 million and $66.9 million in net proceeds
were distributed to the Company during 2008 and 2007, respectively. The debt securities are
payable solely out of the assets of the QSPEs and proceeds from the letters of credit. The
investors in the QSPEs have no recourse against the Company for payment of the debt securities or
related interest expense.
10
The QSPEs financial position and results are not consolidated in the Companys financial
statements as the Company is not the primary decision maker with respect to the activities that
could significantly impact the economic performance of the QSPEs, nor does the Company perform any
service activity related to the QSPEs.
The Company has recorded a retained interest with respect to the monetization of certain
installment notes through the use of QSPEs, which is recorded in other assets. The retained
interest is an estimate based on the present value of cash flows to be received over the life of
the installment notes. The Companys continuing involvement with the QSPEs is in the form of
receipts of net interest payments, which are recorded as interest income and approximated
$0.3 million for each of the nine months ended September 30, 2010 and 2009,
respectively. In addition, the Company will receive the payment of the remaining principal on the
installment notes during 2022 and 2023.
In accordance with ASC 325, Investments Other, Subtopic 40 Beneficial Interests in
Securitized Financial Assets, the Company recognizes interest income over the life of the retained
interest using the effective yield method with discount rates ranging from 2%-7%. This income
adjustment is being recorded as an offset to loss on monetization of notes over the life of the
installment notes. In addition, fair value may be adjusted at each reporting date when, based on
managements assessment of current information and events, there is a favorable or adverse change
in estimated cash flows from cash flows previously projected. The Company did not record any
impairment adjustments as a result of changes in previously projected cash flows during the first
nine months of 2010 or 2009.
The following is a reconciliation of the Companys retained interest in QSPEs:
|
|
|
|
|
|
|
2010 |
|
Balance January 1 |
|
$ |
9,881 |
|
Additions |
|
|
|
|
Accretion of interest income |
|
|
298 |
|
|
|
|
|
Balance September 30 |
|
$ |
10,179 |
|
|
|
|
|
In the event of a failure and liquidation of the financial institution involved in our
installment sales, the Company could be required to write-off the remaining retained interest
recorded on its balance sheet in connection with the installment sale monetization transactions,
which would have an adverse effect on the Companys results of operations and balance sheet.
On October 21, 2009, the Company entered into a strategic alliance agreement with Southwest
Airlines to facilitate the commencement of low-fare air service to the new Northwest Florida
Beaches International Airport. The Company has agreed to reimburse Southwest Airlines if it incurs
losses on its service at the new airport during the first three years of service by making
specified break-even payments. There was no reimbursement required during the third quarter of
2010 and a carryover profit will be applied to the reimbursement calculation for the fourth quarter of 2010.
The agreement also provides that Southwest Airlines profits from the air service
during the term of the agreement will be shared with the Company up to the maximum amount of our
break-even payments.
The term of the agreement extends for a period of three years ending May 23, 2013. Although
the agreement does not provide for maximum payments, the agreement may be terminated by the Company
if the break-even payments to Southwest Airlines exceed $14.0 million in the first year of air
service or $12.0 million in the second year. Southwest Airlines may terminate the agreement if its
actual annual revenues attributable to the air service at the new airport are less than certain
minimum annual amounts established in the agreement.
The Company measured the associated standby guarantee liability at fair value based upon a
discounted cash flow analysis based on managements best estimates of future cash flows to be paid
by the Company pursuant to the strategic alliance agreement. These cash flows are based on
numerous estimates including future fuel costs, passenger load factors, air fares, and seasonality.
The fair value of the liability could fluctuate up or down significantly as a result of changes in
assumptions related to these estimates and could have a material impact on the Companys operating
results.
The Company carried a standby guarantee liability of $0.8 million at September 30, 2010 and
December 31, 2009 related to this strategic alliance agreement. The Company reevaluates this
estimate quarterly.
The Company reviews its long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable. Homes and
homesites substantially completed and ready for sale are measured at lower of carrying value or
fair value less costs to sell. The fair value of homes and homesites is determined based upon
final sales prices of inventory sold during the period (level 2 inputs). For inventory held for
sale, estimates of selling prices based on current market data are utilized (level 3 inputs). For
projects under development, an estimate of future cash flows on an undiscounted basis is performed
using estimated future expenditures necessary to maintain and complete the
11
existing
project and
using managements best estimates about future sales prices,
sales volume, sales velocity and holding
periods (level 3 inputs). In addition, the estimated length of
expected development periods, related economic cycles and inherent uncertainty with respect to
these projects, such as the impact of change in development plans and
the Companys intent and ability to hold the projects through
the development period, could result in changes to these estimates. The Companys assets measured at fair value on a nonrecurring basis are
those assets for which the Company has recorded valuation adjustments and write-offs during the
current period. The assets measured at fair value on a nonrecurring basis during the nine months
ended September 30, 2009 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices in |
|
Significant Other |
|
Significant |
|
|
|
|
|
|
Active Markets for |
|
Observable |
|
Unobservable |
|
Fair Value |
|
|
|
|
Identical Assets |
|
Inputs |
|
Inputs |
|
September 30, |
|
Total |
|
|
(Level 1) |
|
(Level 2) |
|
(Level 3) |
|
2009 |
|
Losses |
Non-financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in real estate |
|
|
|
|
|
$ |
25,613 |
|
|
$ |
6,952 |
|
|
$ |
32,565 |
|
|
$ |
13,250 |
|
Long-lived
assets sold or held for sale with a carrying amount of $45.8 million were written
down to their fair value of $32.6 million, resulting in a loss
of $13.3 million, which was included
in impairment losses for the nine months ending September 30, 2009.
For
the nine months ended September 30, 2010, impairment charges
related to the investment in real estate were $0.1 million.
4. Derivative Financial Instruments
The Company accounts for derivative financial instruments in accordance with ASC 815
- -Derivatives and Hedging (ASC 815). ASC 815 requires that an entity recognize all derivatives,
as defined, as either assets or liabilities at fair value. The Company uses derivative instruments
to manage its exposure to cash flow risks inherent in its standby guarantee agreement with
Southwest Airlines and does not hold or issue derivative instruments for speculative or trading
purposes.
As discussed in Note 3, the Companys agreement with Southwest Airlines includes variable cost
components which could have a significant impact on the Companys cash flows. Airline operators
are inherently dependent upon fuel to operate, and therefore, are effected by changes in jet fuel
prices. During the second quarter of 2010, the Company entered into a short-term financial
derivative instrument to mitigate any potential adverse impact which may result from an increase in
jet fuel costs. Specifically, the Company entered into a collar transaction in which the Company
purchased a call option and sold a put option against the underlying cost of jet fuel for a portion
of Southwest Airlines estimated fuel volumes. This derivative instrument is not designated as a
hedge and changes in the fair value of this derivative instrument are recognized in other, net on a
monthly basis. There was no initial net cost of the derivative contracts, and there was no gain or
(loss) recognized during the three months ended September 30, 2010.
5. Discontinued Operations
In December 2009, the Company sold Victoria Hills Golf Club as part of the bulk sale of
Victoria Park and sold the St. Johns Golf and Country Club. The Company has classified the
operating results associated with these golf courses as discontinued operations as these operations
had identifiable cash flows and operating results, and the Company has no continuing involvement in
their operations.
On February 27, 2009, the Company sold its remaining inventory and equipment assets related to
its Sunshine State Cypress mill and mulch plant.
12
Discontinued operations presented on the consolidated statements of operations for the three
and nine months ended September 30, 2009 included the following:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, 2009 |
|
|
September 30, 2009 |
|
Victoria Hills Golf Club Residential Segment |
|
|
|
|
|
|
|
|
Aggregate revenues |
|
$ |
557 |
|
|
$ |
1,982 |
|
Pre-tax loss |
|
|
(274 |
) |
|
|
(510 |
) |
Income taxes (benefit) |
|
|
(107 |
) |
|
|
(199 |
) |
|
|
|
|
|
|
|
Loss from discontinued operations, net |
|
$ |
(167 |
) |
|
$ |
(311 |
) |
|
|
|
|
|
|
|
St. Johns Golf and Club Residential Segment |
|
|
|
|
|
|
|
|
Aggregate revenues |
|
$ |
715 |
|
|
$ |
2,321 |
|
|
|
|
|
|
|
|
Pre-tax (loss) income |
|
|
(32 |
) |
|
|
93 |
|
Income taxes |
|
|
(12 |
) |
|
|
36 |
|
|
|
|
|
|
|
|
(Loss) income from discontinued operations, net |
|
$ |
(20 |
) |
|
$ |
57 |
|
|
|
|
|
|
|
|
Sunshine State Cypress Forestry Segment |
|
|
|
|
|
|
|
|
Aggregate revenues |
|
|
|
|
|
$ |
1,707 |
|
|
|
|
|
|
|
|
Pre-tax loss |
|
|
|
|
|
|
(377 |
) |
Pre-tax gain on sale |
|
|
|
|
|
|
124 |
|
Income taxes (benefit) |
|
|
|
|
|
|
(99 |
) |
|
|
|
|
|
|
|
Loss from discontinued operations |
|
|
|
|
|
$ |
(154 |
) |
|
|
|
|
|
|
|
Total loss from discontinued operations, net |
|
$ |
(187 |
) |
|
$ |
(408 |
) |
|
|
|
|
|
|
|
13
6. Investment in Real Estate
Real estate by segment includes the following:
|
|
|
|
|
|
|
|
|
|
|
September 30, 2010 |
|
|
December 31, 2009 |
|
Operating property: |
|
|
|
|
|
|
|
|
Residential real estate |
|
$ |
178,338 |
|
|
$ |
173,190 |
|
Rural land sales |
|
|
139 |
|
|
|
139 |
|
Forestry |
|
|
60,569 |
|
|
|
61,890 |
|
Other |
|
|
510 |
|
|
|
510 |
|
|
|
|
|
|
|
|
Total operating property |
|
|
239,556 |
|
|
|
235,729 |
|
|
|
|
|
|
|
|
Development property: |
|
|
|
|
|
|
|
|
Residential real estate |
|
|
466,712 |
|
|
|
470,364 |
|
Commercial real estate |
|
|
62,173 |
|
|
|
59,385 |
|
Rural land sales |
|
|
7,522 |
|
|
|
7,699 |
|
Other |
|
|
305 |
|
|
|
305 |
|
|
|
|
|
|
|
|
Total development property |
|
|
536,712 |
|
|
|
537,753 |
|
|
|
|
|
|
|
|
Investment property: |
|
|
|
|
|
|
|
|
Commercial real estate |
|
|
1,753 |
|
|
|
1,753 |
|
Rural land sales |
|
|
|
|
|
|
5 |
|
Forestry |
|
|
952 |
|
|
|
522 |
|
Other |
|
|
5,901 |
|
|
|
5,902 |
|
|
|
|
|
|
|
|
Total investment property |
|
|
8,606 |
|
|
|
8,182 |
|
|
|
|
|
|
|
|
Investment in unconsolidated affiliates: |
|
|
|
|
|
|
|
|
Residential real estate |
|
|
1,958 |
|
|
|
2,836 |
|
|
|
|
|
|
|
|
Total real estate investments |
|
|
786,832 |
|
|
|
784,500 |
|
Less: Accumulated depreciation |
|
|
(40,041 |
) |
|
|
(35,000 |
) |
|
|
|
|
|
|
|
Investment in real estate |
|
$ |
746,791 |
|
|
$ |
749,500 |
|
|
|
|
|
|
|
|
Included in operating property are Company-owned amenities related to residential real estate,
the Companys timberlands, and land and buildings developed by the Company and used for commercial
rental purposes. Development property consists of residential real estate land and inventory
currently under development to be sold. Investment property primarily includes the Companys land
held for future use.
7. Notes Receivable
Notes receivable consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
September 30, 2010 |
|
|
December 31, 2009 |
|
Various builders |
|
$ |
1,727 |
|
|
$ |
1,795 |
|
Pier Park Community Development District |
|
|
2,761 |
|
|
|
2,641 |
|
Perry Pines mortgage note |
|
|
6,263 |
|
|
|
6,263 |
|
Various mortgages and other |
|
|
614 |
|
|
|
804 |
|
|
|
|
|
|
|
|
Total notes receivable |
|
$ |
11,365 |
|
|
$ |
11,503 |
|
|
|
|
|
|
|
|
The Company evaluates the need for an allowance for doubtful notes receivable at each
reporting date. Notes receivable balances are adjusted to net realizable value based upon a review
of entity specific facts or when terms are modified. During the second quarter of 2010, the
Company recorded a $0.5 million write-down resulting from a renegotiated builder note receivable.
During the second quarter of 2009, the Company determined the Advantis note receivable was
uncollectible and
14
accordingly recorded a charge of $7.4 million related to the write-off of the outstanding
balance. In addition, the Company received a deed in lieu of foreclosure related to a $4.0 million
builder note receivable during the second quarter of 2009 and renegotiated terms related to certain
other builder notes receivable during the third quarter of 2009. These events resulted in
impairment charges of $0.1 million and $1.7 million during the three and nine month periods ended
September 30, 2009, respectively.
8. Restructuring
The Company announced on March 17, 2010 that it is relocating its corporate headquarters from
Jacksonville, Florida to its VentureCrossings Enterprise Centre to be developed adjacent to the new
Northwest Florida Beaches International Airport in Bay County, Florida. The Company will also be
consolidating existing offices from Tallahassee, Port St. Joe and South Walton County into the new
location. The relocation is expected to be completed during 2011.
The Company has incurred and expects to incur additional charges to earnings in connection
with the relocation related primarily to termination and relocation benefits for employees, as well
as certain ancillary facility-related costs. Such charges have been and are expected to be
cash expenditures. Based on employee responses to the announced relocation, the Company
estimates that total relocation costs should be approximately
$5.5 million (pre-tax) of which $2.0
million was recorded in first nine months of 2010. The relocation costs include relocation
bonuses, temporary lodging expenses, resettlement expenses, tax payments, shipping and storage of
household goods, and closing costs for housing transactions. These estimates are based on
significant assumptions, such as home values and actual results could differ materially from these
estimates. In addition the Company estimates total cash termination benefits of approximately $2.2
million (pre-tax) of which $1.8 million was recorded in the
first nine months of 2010. Also, during the third quarter of 2010,
the Company purchased the home of an executive for $1.9 million.
The charges associated with the Companys 2010 restructuring and reorganization program by
segment are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential Real |
|
|
Commercial Real |
|
|
Rural Land |
|
|
|
|
|
|
|
|
|
|
|
|
Estate |
|
|
Estate |
|
|
Sales |
|
|
Forestry |
|
|
Other |
|
|
Total |
|
Three months ended September 30, 2010: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-time termination and relocation
benefits to employees |
|
$ |
211 |
|
|
$ |
29 |
|
|
$ |
70 |
|
|
$ |
187 |
|
|
$ |
1,137 |
|
|
$ |
1,634 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative restructuring charges,
January 1, 2010 through September 30, 2010 |
|
$ |
905 |
|
|
$ |
38 |
|
|
$ |
763 |
|
|
$ |
187 |
|
|
$ |
1,898 |
|
|
$ |
3,791 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining estimated one-time termination
and relocation benefits to employees |
|
$ |
290 |
|
|
$ |
8 |
|
|
$ |
221 |
|
|
$ |
395 |
|
|
$ |
2,927 |
|
|
$ |
3,841 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The company also incurred an additional $0.5 million related to prior restructurings during the
first nine months of 2010. At September 30, 2010, the remaining accrued liability associated with
restructurings and reorganization programs consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at |
|
|
|
|
|
|
|
|
|
|
Balance at |
|
|
|
|
|
|
December 31, |
|
|
Costs |
|
|
|
|
|
|
September 30, |
|
|
Due within |
|
|
|
2009 |
|
|
Accrued |
|
|
Payments |
|
|
2010 |
|
|
12 months |
|
One-time
termination and
relocation benefits
to employees 2010
relocation |
|
$ |
|
|
|
$ |
3,791 |
|
|
$ |
(2,734 |
) |
|
$ |
1,057 |
|
|
$ |
1,057 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One-time
termination
benefits to
employees 2009
and prior |
|
$ |
4,460 |
|
|
$ |
538 |
|
|
$ |
(4,890 |
) |
|
$ |
108 |
|
|
$ |
108 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
4,460 |
|
|
$ |
4,329 |
|
|
$ |
(7,624 |
) |
|
$ |
1,165 |
|
|
$ |
1,165 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9. Debt
Debt consists of the following:
|
|
|
|
|
|
|
|
|
|
|
September 30, 2010 |
|
|
December 31, 2009 |
|
Non-recourse defeased debt |
|
|
25,757 |
|
|
|
27,105 |
|
Community Development District debt |
|
|
12,566 |
|
|
|
12,403 |
|
|
|
|
|
|
|
|
Total debt |
|
$ |
38,323 |
|
|
$ |
39,508 |
|
|
|
|
|
|
|
|
15
The aggregate scheduled maturities of debt subsequent to September 30, 2010 are as follows
(a):
|
|
|
|
|
2010 |
|
$ |
476 |
|
2011 |
|
|
1,982 |
|
2012 |
|
|
2,018 |
|
2013 |
|
|
1,586 |
|
2014 |
|
|
1,507 |
|
Thereafter |
|
|
30,754 |
|
|
|
|
|
Total |
|
$ |
38,323 |
|
|
|
|
|
|
|
|
(a) |
|
Includes debt defeased in connection with the sale of the Companys
office portfolio in the amount of $25.8 million. |
The Company has a $125 million revolving Credit Agreement (the Credit Agreement) with Branch
Banking and Trust Company and Deutsche Bank. The Credit Agreement expires on September 19, 2012. The Credit
Agreement contains covenants relating to leverage, unencumbered asset value, net worth, liquidity
and additional debt. The Credit Agreement does not contain a fixed charge coverage covenant. The
Credit Agreement also contains various restrictive covenants pertaining to acquisitions,
investments, capital expenditures, dividends, share repurchases, asset dispositions and liens. The
following includes a summary of the Companys more significant financial covenants:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
Covenant |
|
2010 |
Minimum consolidated tangible net worth |
|
$ |
800,000 |
|
|
$ |
872,009 |
|
Ratio of total indebtedness to total asset value |
|
|
50.0 |
% |
|
|
2.8 |
% |
Unencumbered leverage ratio |
|
|
2.0 |
x |
|
|
98.5 |
x |
Minimum liquidity |
|
$ |
20,000 |
|
|
$ |
320,002 |
|
The Company was in compliance with its debt covenants at September 30, 2010.
The Credit Agreement contains customary events of default. If any event of default occurs,
lenders holding two-thirds of the commitments may terminate the Companys right to borrow and
accelerate amounts due under the Credit Agreement. In the event of bankruptcy, all amounts
outstanding would automatically become due and payable and the commitments would automatically
terminate.
10. Employee Benefit Plans
The Company sponsors a cash balance defined benefit pension plan that covers substantially all
of its salaried employees. A summary of the net periodic benefit expense follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Service cost |
|
$ |
511 |
|
|
$ |
362 |
|
|
$ |
1,322 |
|
|
$ |
1,079 |
|
Interest cost |
|
|
337 |
|
|
|
447 |
|
|
|
1,148 |
|
|
|
4,393 |
|
Expected return on assets |
|
|
(248 |
) |
|
|
(1,263 |
) |
|
|
(3,191 |
) |
|
|
(8,078 |
) |
Prior service costs |
|
|
160 |
|
|
|
177 |
|
|
|
535 |
|
|
|
532 |
|
Settlement loss |
|
|
894 |
|
|
|
617 |
|
|
|
2,486 |
|
|
|
45,294 |
|
Curtailment charges |
|
|
|
|
|
|
|
|
|
|
1,347 |
|
|
|
|
|
Actuarial loss |
|
|
|
|
|
|
57 |
|
|
|
|
|
|
|
1,015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit expense |
|
$ |
1,654 |
|
|
$ |
397 |
|
|
$ |
3,647 |
|
|
$ |
44,235 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On June 18, 2009, the Company, as plan sponsor of The St. Joe Company Pension Plan (the
Pension Plan), signed a commitment for the Pension Plan to purchase a group annuity contract from
Massachusetts Mutual Life Insurance Company for the benefit of the retired participants and certain
other former employee participants in the Pension Plan. Current employees and former employees
with cash balances in the Pension Plan are not affected by the transaction. The purchase price of
the group annuity contract was approximately $101.0 million, which was funded from the assets of
the Pension Plan on June 25, 2009 and included a premium to assume these obligations. The
transaction resulted in the transfer and settlement of pension benefit obligations of approximately
$93.0 million, which represented the obligation prior to the annuity purchase
16
for the affected retirees and vested terminated employees. In addition, the Company recorded
a non-cash settlement pre-tax charge to earnings during the third quarter of 2009 of $44.7 million.
The Company also recorded a pre-tax credit in the amount of $44.7 million in Accumulated Other
Comprehensive Income on its Consolidated Balance Sheet offsetting the non-cash charge to earnings.
The Company remeasures its plan assets and benefit obligation at each December 31. As a
result of settlements and curtailments which occurred during the nine months ended September 30,
2010, the Company was required to remeasure its plan assets and benefit obligation as of September
30, 2010.
11. Income Taxes
The Company had approximately $1.4 million of total unrecognized tax benefits as of September
30, 2010 and December 31, 2009, none of which, if recognized, would materially affect its effective
income tax rate. The Company recognizes interest and/or penalties related to income tax matters in
income tax expense. The Company had accrued interest of $0.2 million and $0.3 million (net of tax
benefit) at September 30, 2010 and December 31, 2009, respectively, related to uncertain tax
positions. There were no significant changes to unrecognized tax benefits including interest and
penalties during the third quarter of 2010, and the Company does not expect any significant changes
to its unrecognized tax benefits during the next twelve months.
On March 23, 2010, the Patient Protection and Affordable Care Act (the PPACA) was signed
into law, and, on March 30, 2010, the Health Care and Education Reconciliation Act of 2010 (the
HCERA and, together with PPACA, the Acts), which makes various amendments to certain aspects of
the PPACA, was signed into law. The Acts effectively change the tax treatment of federal subsidies
paid to sponsors of retiree health benefit plans that provide prescription drug benefits that are
at least actuarially equivalent to the corresponding benefits provided under Medicare Part D.
The Company recognized a noncash charge of approximately $0.6 million during the quarter ended
March 31, 2010 to reduce deferred tax assets to reflect the change in the tax treatment of the
federal subsidy.
The change in the tax treatment of the federal subsidy only affects the application of tax law
to the Companys prescription drug plans that are actuarially equivalent to Medicare Part D and is
not expected to result in an increase in the pre-tax cost of providing such plans to its retirees
and employees.
12. Segment Information
The Company conducts primarily all of its business in four reportable operating segments:
residential real estate, commercial real estate, rural land sales and forestry. The residential
real estate segment develops and sells homesites and now, to a lesser extent, homes, following the
Companys exit from homebuilding. The commercial real estate segment sells developed and undeveloped
land as well as leases land. The rural land sales segment primarily sells parcels of land included in the
Companys timberland holdings. The forestry segment produces and sells pine pulpwood, sawtimber
and other forest products.
The Company uses loss from continuing operations before equity in income (loss) of
unconsolidated affiliates, income taxes and noncontrolling interest for purposes of making
decisions about allocating resources to each segment and assessing each segments performance,
which the Company believes represents current performance measures.
The accounting policies of the segments are the same as those described above in the summary
of significant accounting policies and in our Form 10-K. Total revenues represent sales to
unaffiliated customers, as reported in the Companys consolidated statements of operations. All
intercompany transactions have been eliminated. The caption entitled Other consists of corporate
general and administrative expenses, net of investment income.
17
Information by business segment is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Operating Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate |
|
$ |
12,316 |
|
|
$ |
32,391 |
|
|
$ |
30,813 |
|
|
$ |
64,972 |
|
Commercial real estate |
|
|
3,690 |
|
|
|
2,188 |
|
|
|
4,137 |
|
|
|
2,877 |
|
Rural land sales |
|
|
4,282 |
|
|
|
290 |
|
|
|
6,454 |
|
|
|
12,907 |
|
Forestry |
|
|
6,817 |
|
|
|
7,053 |
|
|
|
21,036 |
|
|
|
20,392 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated operating revenues |
|
$ |
27,105 |
|
|
$ |
41,922 |
|
|
$ |
62,440 |
|
|
$ |
101,148 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
before equity in (loss) of
unconsolidated affiliates and
income taxes : |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate |
|
$ |
(16,575 |
) |
|
$ |
(19,694 |
) |
|
$ |
(34,975 |
) |
|
$ |
(57,181 |
) |
Commercial real estate |
|
|
1,539 |
|
|
|
(550 |
) |
|
|
(215 |
) |
|
|
(1,826 |
) |
Rural land sales |
|
|
3,548 |
|
|
|
(467 |
) |
|
|
3,949 |
|
|
|
9,197 |
|
Forestry |
|
|
767 |
|
|
|
1,234 |
|
|
|
4,399 |
|
|
|
3,451 |
|
Other |
|
|
(10,928 |
) |
|
|
(6,652 |
) |
|
|
(27,162 |
) |
|
|
(72,864 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated loss from
continuing operations before
equity in (loss) of
unconsolidated affiliates and
income taxes |
|
$ |
(21,649 |
) |
|
$ |
(26,129 |
) |
|
$ |
(54,004 |
) |
|
$ |
(119,223 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2010 |
|
|
December 31, 2009 |
|
Total Assets: |
|
|
|
|
|
|
|
|
Residential real estate |
|
$ |
634,273 |
|
|
$ |
641,953 |
|
Commercial real estate |
|
|
67,141 |
|
|
|
63,830 |
|
Rural land sales |
|
|
14,393 |
|
|
|
14,617 |
|
Forestry |
|
|
61,694 |
|
|
|
62,082 |
|
Other |
|
|
281,403 |
|
|
|
316,956 |
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
1,058,904 |
|
|
$ |
1,099,438 |
|
|
|
|
|
|
|
|
13. Contingencies
The Company has retained certain self-insurance risks with respect to losses for third party
liability and property damage.
At September 30, 2010 and December 31, 2009, the Company was party to surety bonds of
$15.7 million and $28.1 million, respectively, and standby letters of credit in the amount of
$1.4 million which may potentially result in liability to the Company if certain obligations of the
Company are not met.
The Company and its affiliates are involved in litigation on a number of matters and are
subject to various claims which arise in the normal course of business, including claims resulting
from construction defects and contract disputes. When appropriate, the Company establishes
estimated accruals for litigation matters which meet the requirements of ASC 450
Contingencies. The Company has recorded an $8.8 million
reserve in connection with a contract dispute involving the 1997
purchase of land for its former Victoria Park community. The Company
has appealed an adverse trial court decision in this matter to a Florida court of appeals.
The
Company is also subject to claims arising out of environmental laws and regulations.
These claims may include the obligation to remove or limit the effects on the environment
of the disposal or release of certain wastes or substances at various sites, including sites
which have been previously sold. Pending claims include the Companys former paper mill
site in Gulf County, certain adjacent properties and other properties.
These claims may be subject to various Consent Agreements and Brownfield Site
Rehabilitation Agreements with the Florida Department of Environmental Protection.
The Company is in the process of
assessing and rehabilitating certain of its properties.
It
is the Companys policy to accrue and charge against earnings environmental cleanup costs when
it is probable that a liability has been incurred and an amount can be reasonably estimated.
As assessments and cleanups proceed, these accruals are reviewed and adjusted, if necessary,
as additional information becomes available. Aggregate environmental-related accruals
were $1.6 million at September 30, 2010 and $1.7 million at December 31, 2009 respectively.
Although
in the opinion of management none of our litigation matters or governmental proceedings is
expected to have a material adverse effect on the Companys consolidated financial position,
results of operations or liquidity, it is possible that actual amounts of liabilities
resulting from such matters could be material.
18
On October 21, 2009, the Company entered into a strategic alliance agreement with Southwest
Airlines to facilitate the commencement of low-fare air service to the new Northwest Florida
Beaches International Airport. The Company has agreed to reimburse Southwest Airlines if it incurs
losses on its service at the new airport during the first three years of service. See Note 3 for
further discussion of this standby guarantee.
14. Concentration of Risks and Uncertainties
Financial instruments that potentially subject the Company to a concentration of credit risk
consist of cash, cash equivalents, notes receivable and retained interests. The Company deposits
and invests excess cash with major financial institutions in the United States. Balances may
exceed the amount of insurance provided on such deposits.
Some of the Companys notes receivable are from homebuilders and other entities associated
with the real estate industry. As with many entities in the real estate industry, revenues have
contracted for a number of these companies, and they may be increasingly dependent on their
lenders continued willingness to provide funding to maintain ongoing liquidity. The Company
evaluates the need for an allowance for doubtful notes receivable at each reporting date.
There are not any other entity specific facts which currently cause the Company to believe
that the remaining notes receivable will be realized at amounts below their carrying values;
however, due to the slump in real estate markets and tightened credit conditions, the
collectability of these receivables represents a significant risk to the Company and changes in the
likelihood of collectability could adversely impact the accompanying financial statements.
The Companys real estate investments are concentrated in the State of Florida. A prolonged
slump in the Florida real estate market and the economy could have an adverse impact on the
Companys real estate values.
The Company believes the large oil spill in the Gulf of Mexico from the Deepwater Horizon
incident had and will continue to have a negative impact on our properties, results of operations
and stock price and has created uncertainty about the future of the Gulf Coast region. The Company
has filed several lawsuits against the parties responsible for the oil spill seeking the recovery of
damages. The Company cannot be certain, however, of the amount of any recovery or the ultimate
success of its claims.
19
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
We make forward-looking statements in this Report, particularly in this Managements
Discussion and Analysis, pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Any statements in this Report that are not historical facts are
forward-looking statements. You can find many of these forward-looking statements by looking for
words such as intend, anticipate, believe, estimate, expect, plan, should,
forecast, or similar expressions. In particular, forward-looking statements include, among
others, statements about the following:
|
|
|
future operating performance, revenues, earnings and cash flows; |
|
|
|
future residential and commercial demand, opportunities and entitlements; |
|
|
|
development approvals and the ability to obtain such approvals, including possible legal
challenges; |
|
|
|
the number of units or commercial square footage that can be supported upon full build
out of a development; |
|
|
|
the number, price and timing of anticipated land sales or acquisitions; |
|
|
|
estimated land holdings for a particular use within a specific time frame; |
|
|
|
the levels of resale inventory in our developments and the regions in which they are
located; |
|
|
|
the development of relationships with strategic partners, including commercial developers
and homebuilders; |
|
|
|
future amounts of capital expenditures; |
|
|
|
the amount and timing of future tax refunds; |
|
|
|
timeframes for future construction and development activity; and |
|
|
|
the projected economic impact of the new Northwest Florida Beaches International Airport. |
Forward-looking statements are not guarantees of future performance. You are cautioned not to
place undue reliance on any of these forward-looking statements. These statements are made as of
the date hereof based on current expectations, and we undertake no obligation to update the
information contained in this Report. New information, future events or risks may cause the
forward-looking events we discuss in this Report not to occur.
Forward-looking statements are subject to numerous assumptions, risks and uncertainties.
Factors that could cause actual results to differ materially from those contemplated by a
forward-looking statement include the risk factors described in our annual report on Form 10-K for
the year ended December 31, 2009 and our quarterly reports on Form 10-Q, as well as, among others,
the following:
|
|
|
a delay in the recovery of real estate markets in Florida and across the nation, or any
further downturn in such markets; |
|
|
|
any renewed crisis in the national financial markets and the financial services and
banking industries; |
|
|
|
a delay in the recovery of national economic conditions, or any further economic
downturn; |
|
|
|
economic conditions in Northwest Florida, Florida as a whole and key areas of the
southeastern United States that serve as feeder markets to our Northwest Florida operations; |
|
|
|
the adverse impact to Northwest Florida, the Gulf of Mexico and other coastal states
resulting from the Deepwater Horizon oil spill in the Gulf of Mexico; |
|
|
|
the possible negative effects from any future oil spill incidents in the Gulf of Mexico
or perceived risk regarding the possibility of future oil spill incidents; |
|
|
|
possible negative effects from oil or natural gas drilling if permitted off the coast of
Northwest Florida; |
|
|
|
availability of mortgage financing, increases in foreclosures and increases in interest
rates; |
|
|
|
changes in the demographics affecting projected population growth in Florida, including
the migration of Baby Boomers; |
|
|
|
the inability to raise sufficient cash to enhance and maintain our operations and to
develop our real estate holdings; |
|
|
|
an event of default under our credit facility, or the restructuring of such debt on terms
less favorable to us; |
|
|
|
possible future write-downs of the book value of our real estate assets and notes
receivable; |
|
|
|
the termination of sales contracts or letters of intent due to, among other factors, the
failure of one or more closing conditions or market changes; |
|
|
|
the failure to attract homebuilding customers for our developments, or their failure to
satisfy their purchase commitments; |
|
|
|
the failure to attract desirable strategic partners, complete agreements with strategic
partners and/or manage relationships with strategic partners going forward; |
|
|
|
natural disasters, including hurricanes and other severe weather conditions, and their
impact on current and future demand for our products in Florida; |
|
|
|
the expense and management distraction associated with possible securities class action litigation; |
20
|
|
|
whether our developments receive all land-use entitlements or other permits necessary for
development and/or full build-out or are subject to legal challenge; |
|
|
|
local conditions such as the supply of homes and homesites and residential or resort
properties or a decrease in the demand for real estate in our area; |
|
|
|
timing and costs associated with property developments; |
|
|
|
the pace of commercial and economic development in Northwest Florida; |
|
|
|
competition from other real estate developers; |
|
|
|
decreases in pricing of our products and the related profit margins; |
|
|
|
increases in operating costs, including real estate taxes and the cost of construction
materials; |
|
|
|
changes in the amount or timing of federal and state income tax liabilities resulting
from either a change in our application of tax laws, an adverse determination by a taxing
authority or court, or legislative changes to existing laws; |
|
|
|
the failure to realize significant improvements in job creation and public infrastructure
in Northwest Florida, including the expected economic impact of the new Northwest Florida
Beaches International Airport; |
|
|
|
a reduction or termination of air service at Northwest Florida Beaches International
Airport, especially any reduction or termination of Southwest Airlines service; |
|
|
|
potential liability under environmental laws or other laws or regulations; |
|
|
|
changes in laws, regulations or the regulatory environment affecting the development of
real estate or forestry activities; |
|
|
|
potential liability relating to construction defects; |
|
|
|
fluctuations in the size and number of transactions from period to period; |
|
|
|
the prices and availability of labor and building materials; |
|
|
|
increases in homeowner insurance rates and deductibles for property in Florida,
particularly in coastal areas, and decreases in the availability of property insurance in
Florida; |
|
|
|
high property tax rates in Florida, future increases in such rates and changes in
property tax classifications; |
|
|
|
significant tax payments arising from any acceleration of deferred taxes; |
|
|
|
increases in gasoline prices; and |
|
|
|
acts of war, terrorism or other geopolitical events. |
Overview
We own a large inventory of land suitable for development in Florida. The majority of our
land is located in Northwest Florida and has a very low cost basis. In order to optimize the value
of these core real estate assets, we seek to reposition portions of our substantial timberland
holdings for higher and better uses. We seek to create value in our land by securing entitlements
for higher and better land-uses, facilitating infrastructure improvements, developing community
amenities, undertaking strategic and expert land planning and development, parceling our land
holdings in creative ways, performing land restoration and enhancement and promoting economic
development.
We have four operating segments: residential real estate, commercial real estate, rural land
sales and forestry.
Our residential real estate segment generates revenues from:
|
|
|
the sale of developed homesites to retail customers and builders; |
21
|
|
|
the sale of parcels of entitled, undeveloped land; |
|
|
|
the sale of housing units built by us; |
|
|
|
resort and club operations; |
|
|
|
brokerage fees on certain transactions. |
Our
commercial real estate segment generates revenues from the sale or
lease of developed and undeveloped
land for retail, multi-family, office, hotel, industrial uses and rental income. Our
rural land sales segment generates revenues from the sale of parcels of undeveloped land and rural
land with limited development, easements, and mitigation bank credits. Our forestry segment
generates revenues from the sale of pulpwood, sawtimber and forest products and conservation land
management services.
Our business, financial condition and results of operations continued to be adversely effected
during the third quarter of 2010 by the real estate downturn and economic recession in the United
States. This challenging environment has exerted negative pressure on the demand for all of our
real estate products and contributed to our net loss for the first nine months of 2010.
We believe the large oil spill in the Gulf of Mexico from the Deepwater Horizon incident had
and will continue to have a negative impact on our properties, results of operations and stock
price and has created uncertainty about the future of the Gulf Coast region. The Company has filed
several lawsuits against parties responsible for the oil spill seeking the recovery of damages.
The Company cannot be certain, however, of the amount of any recovery or the ultimate success of
its claims.
Critical Accounting Estimates
The discussion and analysis of our financial condition and results of operations are based
upon our consolidated financial statements, which have been prepared in accordance with accounting
principles generally accepted in the United States of America. The preparation of these financial
statements requires us to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities.
We base these estimates on historical experience, available current market information and on
various other assumptions that management believes are reasonable under the circumstances.
Additionally we evaluate the results of these estimates on an on-going basis. Managements
estimates form the basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from these estimates
under different assumptions or conditions.
The critical accounting policies that we believe reflect our more significant judgments and
estimates used in the preparation of our consolidated financial statements are set forth in Item 7
of our annual report on Form 10-K for the year ended December 31, 2009. There have been no
significant changes in these policies during the first nine months of 2010.
Investment in Real Estate and Cost of Real Estate Sales. Costs associated with a
specific real estate project are capitalized during the development period. We capitalize costs
directly associated with development and construction of identified real estate projects. Indirect
costs that clearly relate to a specific project under development, such as internal costs of a
regional project field office, are also capitalized. We capitalize interest (up to total interest
expense) based on the amount of underlying expenditures and real estate taxes on real estate
projects under development. If we determine not to complete a project, any previously capitalized
costs are expensed in the period such determination is made.
Real estate inventory costs include land and common development costs (such as roads, sewers
and amenities), multi-family construction costs, capitalized property taxes, capitalized interest
and certain indirect costs. Construction costs for single-family homes are determined based upon
actual costs incurred. A portion of real estate inventory costs and estimates for costs to complete
are allocated to each unit based on the relative sales value of each unit as compared to the
estimated sales value of the total project. These estimates are reevaluated at least annually, and
more frequently if warranted by market conditions or other factors, with any adjustments being
allocated prospectively to the remaining units available for sale. The accounting estimate related
to inventory valuation is susceptible to change due to the use of assumptions about future sales
proceeds and related real estate expenditures. Managements assumptions about future housing and
homesite sales prices, sales volume and sales velocity require significant judgment because the
real estate market is cyclical and highly sensitive to changes in economic conditions. In addition,
actual results could differ from managements estimates due to changes in anticipated development,
construction and overhead costs.
Fair Value Measurements We follow the fair value provisions of ASC 820 Fair Value
Measurements and Disclosures (ASC 820) for our financial and non-financial assets and
liabilities. ASC 820, among other things, defines fair value, establishes a consistent framework
for measuring fair value and expands disclosure for each major asset and liability category
measured at fair value on either a recurring or nonrecurring basis. ASC 820 clarifies that fair
value is an exit price, representing the amount that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants. As such, fair value is
a market-based
measurement that should be determined based on assumptions that market participants would use in
pricing an asset or liability. As a basis for considering such assumptions, ASC 820 establishes a
three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as
follows:
|
|
|
Level 1. |
|
Observable inputs such as quoted prices in active markets; |
|
|
|
Level 2. |
|
Inputs, other than the quoted prices in active markets, that are observable either
directly or indirectly; and |
|
|
|
Level 3. |
|
Unobservable inputs in which there is little or no market data, such as
internally-developed valuation models which require the reporting entity to develop its own
assumptions. |
Our
investment in real estate utilizes Level 2 and Level 3 inputs in fair value calculations and
the associated underlying assumptions as follows:
Investment in real estate Our investments in real estate are carried at cost unless
circumstances indicate that the carrying value of the assets may not be recoverable. If we
determine that an impairment exists due to the inability to recover an assets carrying value, a
provision for loss is recorded to the extent that the carrying value exceeds estimated fair value.
If such assets were held for sale, the provision for loss would be recorded to the extent that the
carrying value exceeds estimated fair value less costs to sell.
Depending on the asset, we use varying methods to determine fair value, such as (i) analyzing
expected future cash flows, (ii) determining resale values by market, or (iii) applying a
capitalization rate to net operating income using prevailing rates in a given market.
Homes and homesites substantially completed and ready for sale are measured at the lower of
carrying value or fair value less costs to sell. The fair value of homes and homesites is
determined based upon final sales prices of inventory sold during the period (level 2 inputs). For
inventory held for sale, estimates of selling prices based on current market data are utilized
(level 3 inputs). For projects under development, an estimate of future cash flows on an
undiscounted basis is performed using estimated future expenditures necessary to maintain and
complete the existing project and using managements best
estimates about future sales prices, sales volume, sales velocity and
holding periods (level 3 inputs). In addition, the estimated length of expected development periods, related economic cycles and inherent uncertainty with respect to these projects, such as the impact of changes in development plans and our intent and ability to hold the projects through the development period, could result in changes to these estimates.
Correction of Prior Period Error
In the first quarter of 2010, we determined that approximately $2.6 million ($1.6 million net
of tax) of stock compensation expense related to the acceleration of the service period for
retirement eligible employees should have been recognized in periods prior to 2010. Accordingly,
the consolidated balance sheet for December 31, 2009 has been adjusted to reduce deferred income
taxes, net, by $1.0 million and increase common stock by $2.6 million to reflect the correction of
this error, with a corresponding $1.6 million reduction recorded to retained earnings. The
correction is similarly reflected as an adjustment to common stock and retained earnings as of
December 31, 2009 in the consolidated statement of changes in equity. The correction of this error
also impacted the consolidated statements of operations for the three and nine months ended
September 30, 2009 and cash flows for the nine months ended September 30, 2009. These corrections
were not considered material to prior period financial statements.
22
Recently Issued Accounting Standards
See Note 1 to our unaudited consolidated financial statements included in this report for
recently issued accounting standards.
Results of Operations
Net
loss decreased by $1.4 million
to a loss of $(13.1), or $(0.14) per share, in the
third quarter of 2010, compared to a net loss of $(14.5) million, or $(0.16) per share, for the
third quarter of 2009. Included in our results for the three months ended September 30 are the
following notable charges:
2010:
|
|
|
a non-cash charge of $8.8 million for a reserve for an adverse trial court verdict in a
lawsuit involving a contract dispute; the matter is being appealed to the Florida Court of
Civil Appeals. |
|
|
|
|
legal and clean-up costs resulting from the Deepwater Horizon incident of $2.6 million. |
|
|
|
|
a restructuring charge of $1.7 million related to the consolidation of our offices. |
2009:
|
|
|
$11.1 million of non-cash impairment charges consisting of $0.9 million of impairments
associated with homes and homesites in our residential segment, a $9.0 million write-down
related to the settlement of our Saussy Burbank notes receivable, a $0.1 million write-down
of builder notes receivable and $1.1 million of write-downs related to other long-term
assets; and |
|
|
|
$1.8 million restructuring charge related to one-time termination benefits. |
Net loss
decreased by $38.2 million to a loss of $(33.2) million, or $(0.36) per share, in the
first nine months of 2010, compared to $(71.4) million, or $(0.78) per share, for the first nine
months of 2009. Included in our results for the nine months ended September 30 are the following
notable charges:
2010:
|
|
|
a non-cash charge of $8.8 million for a reserve for an adverse trial court verdict in a
lawsuit involving a contract dispute; the matter is being appealed to the Florida Court of
Civil Appeals. |
|
|
|
|
a restructuring charge of $4.4 million related to the consolidation of our offices. |
|
|
|
|
legal and clean-up costs resulting from the Deepwater Horizon incident of $2.6 million. |
2009:
|
|
|
$32.6 million of impairment charges consisting of a $6.7 million write-down related to
our SevenShores condominium and marina development project, $6.5 million of impairments
associated with homes and homsites in our residential segment, a $9.0 million write-down
related to the settlement of our Saussy Burbank notes receivable, a $7.4 million write-off
of the Advantis note receivable, a $1.9 million write-down of builder notes receivable and
$1.1 million of write-downs related to other long-term assets; |
|
|
|
$44.7 million non-cash pension settlement charge related to the purchase of annuities
with plan assets for certain participants in our pension plan; and |
|
|
|
$1.8 million restructuring charge related to one-time termination benefits. |
Results for the three and nine months ended September 30, 2009 reported in discontinued
operations primarily include the operations of Victoria Hills Golf Club, St. Johns Golf and Country
Club and Sunshine State Cypress.
23
Consolidated Results
Revenues and expenses. The following table sets forth a comparison of revenues and certain
expenses of continuing operations for the three and nine months ended September 30, 2010 and 2009.
|
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|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
|
2010 |
|
|
2009 |
|
|
Difference |
|
|
% Change |
|
|
2010 |
|
|
2009 |
|
|
Difference |
|
|
% Change |
|
|
|
(Dollars in millions) |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate sales |
|
$ |
10.9 |
|
|
$ |
24.3 |
|
|
$ |
(13.4 |
) |
|
|
(55.1 |
)% |
|
$ |
15.5 |
|
|
$ |
53.0 |
|
|
$ |
(37.5 |
) |
|
|
(70.8 |
)% |
Resort and club revenues |
|
|
8.8 |
|
|
|
9.7 |
|
|
|
(0.9 |
) |
|
|
(9.3 |
)% |
|
|
24.2 |
|
|
|
24.8 |
|
|
|
(0.6 |
) |
|
|
(2.4 |
)% |
Timber sales |
|
|
6.8 |
|
|
|
7.0 |
|
|
|
(0.2 |
) |
|
|
(2.9 |
)% |
|
|
21.0 |
|
|
|
20.4 |
|
|
|
0.6 |
|
|
|
2.9 |
% |
Other revenues |
|
|
0.6 |
|
|
|
0.9 |
|
|
|
(0.3 |
) |
|
|
(33.3 |
)% |
|
|
1.7 |
|
|
|
2.9 |
|
|
|
(1.2 |
) |
|
|
(41.4 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
27.1 |
|
|
|
41.9 |
|
|
|
(14.8 |
) |
|
|
(35.3 |
)% |
|
|
62.4 |
|
|
|
101.1 |
|
|
|
(38.7 |
) |
|
|
(38.3 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of real estate sales |
|
|
3.3 |
|
|
|
22.5 |
|
|
|
(19.2 |
) |
|
|
(85.3 |
)% |
|
|
5.1 |
|
|
|
38.2 |
|
|
|
(33.1 |
) |
|
|
(86.6 |
)% |
Cost of resort and club
revenues |
|
|
8.8 |
|
|
|
9.6 |
|
|
|
(0.8 |
) |
|
|
(8.3 |
)% |
|
|
24.9 |
|
|
|
26.0 |
|
|
|
(1.1 |
) |
|
|
(4.2 |
)% |
Cost of timber sales |
|
|
5.3 |
|
|
|
5.1 |
|
|
|
0.2 |
|
|
|
3.9 |
% |
|
|
14.8 |
|
|
|
14.8 |
|
|
|
|
|
|
|
|
|
Cost of other revenues |
|
|
0.5 |
|
|
|
0.7 |
|
|
|
(0.2 |
) |
|
|
(28.6 |
)% |
|
|
1.6 |
|
|
|
1.8 |
|
|
|
(0.2 |
) |
|
|
(11.1 |
)% |
Other operating expenses |
|
|
12.3 |
|
|
|
8.8 |
|
|
|
(3.5 |
) |
|
|
(39.8 |
)% |
|
|
27.8 |
|
|
|
32.1 |
|
|
|
(4.3 |
) |
|
|
(13.4 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
30.2 |
|
|
$ |
46.7 |
|
|
$ |
(16.5 |
) |
|
|
(35.3 |
)% |
|
$ |
74.2 |
|
|
$ |
112.9 |
|
|
$ |
(38.7 |
) |
|
|
(34.3 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The decrease in real estate sales revenues and cost of real estate sales for the three months
and nine months ended September 30, 2010 compared to 2009 was primarily due to decreased sales in
our residential real estate segment. Residential real estate sales continue to remain weak as a
result of various factors, including oversupply, depressed prices within the Florida real estate
markets, poor economic conditions and the oil spill from the Deepwater Horizon incident in the Gulf
of Mexico. In addition, our rural land sales decreased during the nine months of 2010 compared to
2009 as a result of our planned reduction in large tract rural land sales as well as weakened
demand.
Other
operating expenses increased by $3.5 million, or 39.8% for the third quarter of 2010
compared to 2009. The increases for the quarter ended September 30,
2010 were due
to a $4.9 million reserve for litigation. For the nine months ended
September 30, 2010 as compared to 2009 other operating expenses
decreased by $4.3 million or 13.4%, which was due to lower
general and administrative expenses as a result of our restructuring
efforts and the sale of certain properties in 2009, which reduced 2010
carrying costs. For further detailed discussion of revenues and expenses, see Segment Results below.
Corporate expense. Corporate expense, consisting of corporate general and administrative
expenses, was $9.8 million and $6.0 million, during the three months ended September 30, 2010 and
2009, respectively, an increase of 63.3% or $3.8 million. For the nine months ended September 30,
2010 and 2009, corporate expense was $23.3 million and $20.1 million respectively, an increase of
15.9% or $3.2 million. Included in the three months ended September 30, 2010 were legal and
clean-up costs resulting from the Deepwater Horizon incident of $2.6 million. Our overall employee
and administrative costs have decreased as a result of reduced headcount and cost savings
initiatives. Corporate expense for the third quarter of 2010 and 2009 included pension expense of
$1.7 million and $0.4 million, respectively. Corporate expense for the nine months ended September
30, 2010 included pension expense of $3.6 million compared to pension income of $0.4 million for
the nine months ended September 30, 2009.
Pension settlement charge. On June 18, 2009, as plan sponsor, we signed a commitment for the
pension plan to purchase a group annuity contract from Massachusetts Mutual Life Insurance Company
for the benefit of the retired participants and certain other former employee participants in our
pension plan. Current employees and former employees with cash balances in the pension plan were
not affected by the transaction. The purchase price of the annuity was approximately
$101.0 million, which was funded from the assets of the pension plan on June 25, 2009 and included
a premium to assume these obligations. The transaction resulted in the transfer and settlement of
pension benefit obligations of approximately $93.0 million, which represented the obligation prior
to the annuity purchase for the affected retirees and vested terminated employees. In addition, we
recorded a non-cash settlement charge to earnings during the third quarter of 2009 of
$44.7 million. We also recorded a $44.7 million pre-tax credit in Accumulated Other Comprehensive
Income on our Consolidated Balance Sheet offsetting the non-cash charge to earnings. As a result
of this transaction, we were able to significantly increase the funded status ratio of the pension
plan, thereby reducing the potential for future funding requirements.
Impairment Losses. We review our long-lived assets for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be recoverable. Homes and
homesites substantially completed and ready for sale are measured at the lower of carrying value or
fair value less costs to sell. For projects under development, an
24
estimate of future cash flows on an undiscounted basis is performed using estimated future
expenditures necessary to maintain and complete the existing project
and
using managements best
estimates about future sales prices, sales volume, sales velocity and
holding periods. In addition, the estimated length of expected
development periods, related economic cycles and inherent uncertainty with respect to these
projects, such as the impact of change in development plans and
our intent and ability to hold the projects through
the development period, could result in changes to these estimates. During the nine months ended
September 30, 2010, we recorded impairment charges on homes and homesites of $0.1 million, in the
residential real estate segment. During the first nine months of 2010 we also recorded a $0.5
million write-down resulting from a renegotiated builder note receivable in the residential
segment.
During the third quarter of 2009 we recorded impairment charges of $11.1 million as follows:
$9.0 million write-down related to the settlement of the Saussy Burbank notes receivable, a
$0.1 million write-down of builder notes receivable and a $1.1 million impairment charge related to
other long-term assets; and 0.9 million write-down related to completed unsold homes and homesites.
During
the first nine months of 2009 we recorded impairment charges of $32.6 million as
follows: $6.5 million impairment charge related to completed unsold homes and homesites;
$6.7 million write-down of the SevenShores condominium and marina development project; $9.0 million
write-down related to the settlement of the Saussy Burbank notes receivable; a $7.4 million
write-off of the Advantis note receivable; $1.9 million write-down of builder notes receivable; and
$1.1 million impairment charge related to other long-term assets.
A continued decline in demand and market prices for our real estate products may require us to
record additional impairment charges in the future. In addition, due to the ongoing difficulties in
the real estate markets and tightened credit conditions, we may be required to write-down the
carrying value of our notes receivable when such notes are determined to not be collectible.
Restructuring charge. We announced on March 17, 2010 that we are relocating our corporate
headquarters from Jacksonville, Florida to our VentureCrossings Enterprise Centre to be developed
adjacent to the new Northwest Florida Beaches International Airport in Bay County, Florida. We
will also be consolidating existing offices from Tallahassee, Port St. Joe and South Walton County
into the new location. The relocation is expected to be completed during 2011.
We
have incurred and expect to incur additional charges to earnings in connection with the relocation related primarily to
termination and relocation benefits for employees, as well as certain ancillary facility-related
costs. Such charges are expected to be cash expenditures. Based on employee responses to the
announced relocation, we estimate that total relocation costs should be approximately $5.5 million
(pre-tax), of which $2.0 million was recorded in the first nine months of 2010. The relocation
costs include relocation bonuses, temporary lodging expenses, resettlement expenses, tax payments,
shipping and storage of household goods, and closing costs for housing transactions. These
estimates are based on significant assumptions, such as current home values however actual results
could differ materially from these estimates.
In addition, we estimate total cash termination benefits to be approximately $2.2 million
(pre-tax) of which $1.8 million was recorded in the first nine months of 2010. Most of the
termination and relocation benefits described above are expected to be incurred through the third
quarter of 2011.
Also, during the third quarter, we purchased the home of an executive for $1.9 million.
See Note 8 to our consolidated financial statements for further information
regarding our restructuring charges.
Other (expense) income. Other (expense) income consists of investment income, interest
expense, gains on sales and dispositions of assets, fair value adjustment of
our retained interest in monetized installment notes receivable and other income. Other (expense)
income was $(3.7) million and $1.2 million for the three months ended September 30, 2010 and 2009,
respectively, and $(3.7) million and $3.3 million for the nine months ended September 30, 2010 and
2009, respectively.
Investment income, net decreased by $0.4 million and $0.9 million during the three and nine
months ending September 30, 2010 compared to 2009, respectively, primarily as a result of lower
investment returns on our cash balances.
Interest expense increased by $5.1 million and $7.1 million during the three and nine months
ended September 30, 2010 compared to 2009 primarily due to interest recorded on a reserve for
litigation of $4.1 million and interest on our community development district debt obligations not
being capitalized in 2010 due to reduced spending levels.
Equity in (loss) income of unconsolidated affiliates. We have investments in affiliates that
are accounted for by the equity method of accounting. Equity in (loss) income primarily related to
joint ventures within our residential real estate segment which are now substantially sold out.
25
Income tax (benefit) expense. Income tax (benefit) expense, including income tax on
discontinued operations, totaled $(8.6) million and $(11.9) million for the three months ended
September 30, 2010 and 2009, respectively and $(21.3) million
and $(47.8) million for the nine
months ended September 30, 2010 and 2009, respectively. Our effective tax rate was 39.5% and 45.0%
for the three months ended September 30, 2010 and 2009, respectively, 39.1% and 40.0% for the nine
months ended September 30, 2010 and 2009, respectively.
Discontinued
Operations. (Loss) from discontinued operations, net of tax,
totaled $(0.2) million and $(0.4) million in the three months and nine months ended September 30, 2009,
respectively. See our Residential Real Estate and Forestry sections below for further detail on
discontinued operations.
Segment Results
Residential Real Estate
Our residential real estate segment typically plans and develops mixed-use resort, primary and
seasonal residential communities of various sizes, located primarily on our existing land. We own
large tracts of land in Northwest Florida, including significant Gulf of Mexico beach frontage and
waterfront properties, and land near Jacksonville and Tallahassee.
Our residential sales remain weak. The real estate downturn, economic recession and the oil
spill from the Deepwater Horizon incident in the Gulf of Mexico have all exerted negative pressure
on the demand for real estate products in our markets. Inventories of resale homes and homesites
remain high in our markets and prices remain depressed. We also believe that the oil spill has
negatively impacted our resort and club operating results. We do not expect any significant
favorable changes in market conditions in the near term.
Homes and homesites substantially completed and ready for sale are measured at the lower of
carrying value or fair value less costs to sell. For projects under development, an estimate of
future cash flows on an undiscounted basis is performed. In 2009, the overall decrease in demand
and market prices for residential real estate indicated that certain carrying amounts within our
residential real estate segment were not recoverable. In the third quarter of 2009, we recorded
impairment charges of $0.9 million related to completed and unsold homes and homesites, and a $0.1
million write-down of builder notes receivable. In addition, we recorded an impairment charge of
$9.0 million in the third quarter of 2009 related to the settlement of our Saussy Burbank notes
receivable and $0.6 million related to a residential segment intangible asset.
For the first nine months of 2009, we recorded impairment charges of $24.7 million in the
residential segment consisting of the following: $6.7 million write-down related to the
SevenShores condominium project, $6.5 million of impairments associated with homes and homesites, a
$9.0 million write-down related to the settlement of the Saussy Burbank note receivable, a $1.9
million write-down of builder notes receivable and a $0.6 million write-down of a residential
segment intangible asset.
For the nine months
ended September 30, 2010 we recorded impairment charges of
$0.6 million.
26
The table below sets forth the results of continuing operations of our residential real estate
segment for the three and nine months ended September 30, 2010 and 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
(In millions) |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate sales |
|
$ |
3.0 |
|
|
$ |
21.9 |
|
|
$ |
5.1 |
|
|
$ |
37.6 |
|
Resort and club revenues |
|
|
8.7 |
|
|
|
9.7 |
|
|
|
24.2 |
|
|
|
24.8 |
|
Other revenues |
|
|
0.6 |
|
|
|
0.8 |
|
|
|
1.5 |
|
|
|
2.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
12.3 |
|
|
|
32.4 |
|
|
|
30.8 |
|
|
|
65.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of real estate sales |
|
|
2.3 |
|
|
|
21.1 |
|
|
|
3.8 |
|
|
|
35.2 |
|
Cost of resort and club revenues |
|
|
8.8 |
|
|
|
9.6 |
|
|
|
24.9 |
|
|
|
26.0 |
|
Cost of other revenues |
|
|
0.5 |
|
|
|
0.7 |
|
|
|
1.6 |
|
|
|
1.8 |
|
Other operating expenses |
|
|
9.6 |
|
|
|
6.4 |
|
|
|
19.7 |
|
|
|
24.8 |
|
Depreciation and amortization |
|
|
2.5 |
|
|
|
2.7 |
|
|
|
7.6 |
|
|
|
8.3 |
|
Restructuring charges |
|
|
0.2 |
|
|
|
0.8 |
|
|
|
0.9 |
|
|
|
0.9 |
|
Impairment losses |
|
|
|
|
|
|
10.7 |
|
|
|
0.6 |
|
|
|
24.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
|
23.9 |
|
|
|
52.0 |
|
|
|
59.1 |
|
|
|
121.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (expense) |
|
|
(5.0 |
) |
|
|
(0.1 |
) |
|
|
(6.7 |
) |
|
|
(0.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax (loss) from continuing operations |
|
$ |
(16.6 |
) |
|
$ |
(19.7 |
) |
|
$ |
(35.0 |
) |
|
$ |
(57.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate sales include sales of land, homes and homesites. Cost of real estate sales includes
direct costs (e.g., development and construction costs), selling costs and other indirect costs
(e.g., construction overhead, capitalized interest, warranty and project administration costs).
Resort and club revenues and cost of resort and club revenues include results of operations from
the WaterColor Inn, WaterColor and WaterSound Beach vacation rental programs and other resort,
golf, club and marina operations. Other revenues and cost of other revenues consist primarily of
brokerage fees and rental operations.
Three Months Ended September 30, 2010 and 2009
The following table sets forth the components of our real estate sales and cost of real estate
sales related to homes and homesites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2010 |
|
|
Three Months Ended September 30, 2009 |
|
|
|
Homes |
|
|
Homesites |
|
|
Total |
|
|
Homes |
|
|
Homesites |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions) |
|
|
|
|
|
|
|
|
|
Sales |
|
$ |
0.5 |
|
|
$ |
2.5 |
|
|
$ |
3.0 |
|
|
$ |
7.9 |
|
|
$ |
1.3 |
|
|
$ |
9.2 |
|
Cost of sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct costs |
|
|
0.3 |
|
|
|
1.0 |
|
|
|
1.3 |
|
|
|
6.2 |
|
|
|
0.6 |
|
|
|
6.8 |
|
Selling costs |
|
|
0.1 |
|
|
|
0.2 |
|
|
|
0.3 |
|
|
|
0.6 |
|
|
|
0.1 |
|
|
|
0.7 |
|
Other indirect costs |
|
|
0.0 |
|
|
|
0.7 |
|
|
|
0.7 |
|
|
|
0.8 |
|
|
|
0.1 |
|
|
|
0.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of sales |
|
|
0.4 |
|
|
|
1.9 |
|
|
|
2.3 |
|
|
|
7.6 |
|
|
|
0.8 |
|
|
|
8.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
$ |
0.1 |
|
|
$ |
0.6 |
|
|
$ |
0.7 |
|
|
$ |
0.3 |
|
|
$ |
0.5 |
|
|
$ |
0.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit margin |
|
|
20 |
% |
|
|
24 |
% |
|
|
23 |
% |
|
|
4 |
% |
|
|
39 |
% |
|
|
9 |
% |
Units sold |
|
|
1 |
|
|
|
21 |
|
|
|
22 |
|
|
|
35 |
|
|
|
12 |
|
|
|
47 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27
The following table sets forth home and homesite sales activity by geographic region and
property type.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Month Ended September 30, 2010 |
|
|
Three Month Ended September 30, 2009 |
|
|
|
Closed |
|
|
|
|
|
|
Cost of |
|
|
Gross |
|
|
Closed |
|
|
|
|
|
|
Cost of |
|
|
Gross |
|
|
|
Units |
|
|
Revenues |
|
|
Sales |
|
|
Profit |
|
|
Units |
|
|
Revenues |
|
|
Sales |
|
|
Profit |
|
|
|
(Dollars in millions) |
|
Northwest Florida: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Resort and Seasonal |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Single-family homes |
|
|
1 |
|
|
$ |
0.5 |
|
|
$ |
0.4 |
|
|
$ |
0.1 |
|
|
|
2 |
|
|
$ |
0.9 |
|
|
$ |
0.8 |
|
|
$ |
0.1 |
|
Homesites |
|
|
12 |
|
|
|
2.0 |
|
|
|
1.5 |
|
|
|
0.5 |
|
|
|
8 |
|
|
|
1.0 |
|
|
|
0.7 |
|
|
|
0.3 |
|
Primary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homesites |
|
|
7 |
|
|
|
0.4 |
|
|
|
0.3 |
|
|
|
0.1 |
|
|
|
2 |
|
|
|
0.1 |
|
|
|
|
|
|
|
0.1 |
|
Northeast Florida: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Primary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Single-family homes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homesites |
|
|
2 |
|
|
|
0.1 |
|
|
|
0.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Central Florida: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Primary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Single-family homes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6 |
|
|
|
1.3 |
|
|
|
1.2 |
|
|
|
0.1 |
|
Multi-family homes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22 |
|
|
|
5.0 |
|
|
|
4.9 |
|
|
|
0.1 |
|
Townhomes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5 |
|
|
|
0.7 |
|
|
|
0.7 |
|
|
|
|
|
Homesites |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
0.2 |
|
|
|
0.1 |
|
|
|
0.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
22 |
|
|
$ |
3.0 |
|
|
$ |
2.3 |
|
|
$ |
0.7 |
|
|
|
47 |
|
|
$ |
9.2 |
|
|
$ |
8.4 |
|
|
$ |
0.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Also included in real estate sales are land sales of $12.7 million with related cost of sales
of $12.7 million for the third quarter of 2009, primarily related to the sale of SevenShores
condominium and marina development project.
Our Northwest Florida resort and seasonal communities included WaterColor, WaterSound Beach,
WaterSound, WaterSound West Beach, WindMark Beach, RiverCamps on Crooked Creek, SummerCamp Beach
and Wild Heron, while primary communities included Hawks Landing and Southwood. Our Northeast
Florida communities include RiverTown, and in 2009 our Central Florida communities included Artisan
Park and Victoria Park, all of which are primary. Artisan Park and Victoria Park were sold in the
last half of 2009.
Homesite closings, revenues and gross profit increased for the
three months ended September 30, 2010 primarily due to sales to homebuilders some of which may generate
additional revenues and gross profit in future periods upon sale to the end-user.
The
Northwest Florida resort and seasonal homesites include four
homesites closed during the three months ended September 30, 2010
with an additional $1.2 million of revenues and $0.8 million of costs deferred due to less than sufficient down
payments to qualify for full revenue recognition on sales financed directly by us. In the Central Florida region, the three months
ended September 30, 2009 included the auction of 22 multi-family homes.
Resort and club revenues included revenues from the WaterColor Inn, WaterColor and WaterSound
Beach vacation rental programs and other resort, golf, club and marina operations. Resort and club
revenues were $8.7 million in the third quarter of 2010, with $8.8 million in related costs,
compared to revenues totaling $9.7 million with $9.6 million in related costs in the third quarter
of 2009. Resort and club revenues decreased $1.0 million related to the oil spill from the
Deepwater Horizon incident in the Gulf of Mexico. Cost of resort and club revenues decreased $0.8
million as a result of reduced staffing levels and more efficient operation of our resorts and
clubs.
Other operating expenses included salaries and benefits, marketing, project administration,
support personnel, other administrative expenses and litigation
reserves. Other operating
expenses were $9.6 million in
the third quarter of 2010 compared to $6.4 million in the third
quarter of 2009. Reductions in employee and other costs were offset
by a $4.9 million reserve for litigation involving a contract dispute
related to a 1997 purchase of land for our former Victoria Park
community.
Other
expense increased $4.9 million during the third quarter of 2010
which was primarily
due to interest expense of $4.1 million related to the litigation
reserve as discussed above.
28
Nine Months Ended September 30, 2010 and 2009
The following table sets forth the components of our real estate sales and cost of real estate
sales related to homes and homesites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2010 |
|
|
Nine Months Ended September 30, 2009 |
|
|
|
Homes |
|
|
Homesites |
|
|
Total |
|
|
Homes |
|
|
Homesites |
|
|
Total |
|
|
|
(Dollars in millions) |
|
Sales |
|
$ |
0.5 |
|
|
$ |
4.5 |
|
|
$ |
5.0 |
|
|
$ |
21.1 |
|
|
$ |
3.8 |
|
|
$ |
24.9 |
|
Cost of sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct costs |
|
|
0.3 |
|
|
|
2.2 |
|
|
|
2.5 |
|
|
|
15.5 |
|
|
|
1.8 |
|
|
|
17.3 |
|
Selling costs |
|
|
0.1 |
|
|
|
0.3 |
|
|
|
0.4 |
|
|
|
3.3 |
|
|
|
0.2 |
|
|
|
3.5 |
|
Other indirect costs |
|
|
0.0 |
|
|
|
0.8 |
|
|
|
0.8 |
|
|
|
1.5 |
|
|
|
0.2 |
|
|
|
1.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of sales |
|
|
0.4 |
|
|
|
3.3 |
|
|
|
3.7 |
|
|
|
20.3 |
|
|
|
2.2 |
|
|
|
22.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
$ |
0.1 |
|
|
$ |
1.2 |
|
|
$ |
1.3 |
|
|
$ |
0.8 |
|
|
$ |
1.6 |
|
|
$ |
2.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit margin |
|
|
20 |
% |
|
|
27 |
% |
|
|
26 |
% |
|
|
4 |
% |
|
|
42 |
% |
|
|
10 |
% |
Units sold |
|
|
1 |
|
|
|
43 |
|
|
|
44 |
|
|
|
72 |
|
|
|
28 |
|
|
|
100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table sets forth home and homesite sales activity by geographic region and
property type.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2010 |
|
|
Nine Months Ended September 30, 2009 |
|
|
|
Closed |
|
|
|
|
|
|
Cost of |
|
|
Gross |
|
|
Closed |
|
|
|
|
|
|
Cost of |
|
|
Gross |
|
|
|
Units |
|
|
Revenues |
|
|
Sales |
|
|
Profit |
|
|
Units |
|
|
Revenues |
|
|
Sales |
|
|
Profit |
|
|
|
(Dollars in millions) |
|
Northwest Florida: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Resort and Seasonal |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Single-family homes |
|
|
1 |
|
|
$ |
0.5 |
|
|
$ |
0.4 |
|
|
$ |
0.1 |
|
|
|
19 |
|
|
$ |
8.7 |
|
|
$ |
8.3 |
|
|
$ |
0.4 |
|
Homesites |
|
|
28 |
|
|
|
3.6 |
|
|
|
2.7 |
|
|
|
0.9 |
|
|
|
19 |
|
|
|
2.8 |
|
|
|
1.9 |
|
|
|
0.9 |
|
Primary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homesites |
|
|
13 |
|
|
|
0.8 |
|
|
|
0.5 |
|
|
|
0.3 |
|
|
|
7 |
|
|
|
0.7 |
|
|
|
0.2 |
|
|
|
0.5 |
|
Northeast Florida: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Primary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Single-family homes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
0.6 |
|
|
|
0.5 |
|
|
|
0.1 |
|
Homesites |
|
|
2 |
|
|
|
0.1 |
|
|
|
0.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Central Florida: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Primary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Single-family homes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14 |
|
|
|
3.4 |
|
|
|
3.3 |
|
|
|
0.1 |
|
Multi-family homes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26 |
|
|
|
6.0 |
|
|
|
5.9 |
|
|
|
0.1 |
|
Townhomes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11 |
|
|
|
2.4 |
|
|
|
2.3 |
|
|
|
0.1 |
|
Homesites |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
0.3 |
|
|
|
0.1 |
|
|
|
0.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
44 |
|
|
$ |
5.0 |
|
|
$ |
3.7 |
|
|
$ |
1.3 |
|
|
|
100 |
|
|
$ |
24.9 |
|
|
$ |
22.5 |
|
|
$ |
2.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Also included in real estate sales are land sales of $0.1 million with related cost of sales
of $0.1 million for the nine months ended September 30, 2010 and $12.7 million of sales and related
costs of $12.7 million for the first nine months of 2009, primarily related to the sale of SevenShores
condominium and marina development project.
Our Northwest Florida resort and seasonal communities included WaterColor, WaterSound Beach,
WaterSound, WaterSound West Beach, WindMark Beach, RiverCamps on Crooked Creek, SummerCamp Beach
and Wild Heron, while primary communities included Hawks Landing and Southwood. Our Northeast
Florida communities included RiverTown and St. Johns Golf and Country Club, and our Central Florida
communities included Artisan Park and Victoria Park, all of which are primary. St. Johns Golf and
Country Club, Artisan Park and Victoria Park were all sold in the last half of 2009.
29
Homesite
closings and revenues increased for the nine months ended September
30, 2010 primarily due to sales to homebuilders some of which may generate additional revenues and
gross profit in future periods upon sale to the end-user.
Resort
and club revenues were $24.2 million for the nine months ended September 30, 2010, with
$24.9 million in related costs compared to revenue totaling $24.8 million for the nine months ended
September 30, 2009, with $26.0 million in related costs.
Revenues decreased $0.6 million as a
result of the decline in resort and club revenues since the oil spill. Cost of resort and club
revenues decreased $1.1 million as a result of reduced staffing levels and more efficient operation
of our resorts and clubs.
Other operating expenses included salaries and benefits, marketing, project administration,
support personnel and other administrative expenses. Other operating
expenses were $19.7 million
for the nine months ended September 30, 2010 compared to $24.8 million for the nine months ended
September 30, 2009. The decrease of $5.1 million in operating expenses was primarily due to
reductions in employee costs along with reductions in marketing and homeowners association funding
costs, certain warranty and other project costs and real estate taxes, which savings were created
by the sale of certain projects during 2009, These savings were
partially offset by a $4.9 million reserve for litigation in the
third quarter ended September 30, 2010.
We recorded restructuring charges in our residential real estate segment of $0.9 million
during the first nine months of 2010 and 2009, respectively, in connection with our corporate
headquarters relocation.
Other
expense increased $6.2 million during the first nine months of 2010 as compared to the
first nine months of 2009 which was primarily
due to interest expense of $4.1 million related to the litigation
reserve as discussed above.
Commercial Real Estate
Our commercial real estate segment plans, develops and entitles our land holdings for a broad
range of retail, office, hotel, industrial and multi-family uses. We sell or lease and develop
commercial land and provide development opportunities for national and regional retailers as well
as strategic partners in Northwest Florida. We also offer land for commercial and light industrial
uses within large and small-scale commerce parks, as well as for a wide range of multi-family
rental projects. Consistent with residential real estate, the markets for commercial real estate,
particularly retail, remain weak.
The table below sets forth the results of the continuing operations of our commercial real
estate segment for the three and nine months ended September 30, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
(In millions) |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate sales |
|
$ |
3.6 |
|
|
$ |
2.1 |
|
|
$ |
3.9 |
|
|
$ |
2.5 |
|
Other revenues |
|
|
|
|
|
|
0.1 |
|
|
|
0.2 |
|
|
|
0.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
3.6 |
|
|
|
2.2 |
|
|
|
4.1 |
|
|
|
2.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of real estate sales |
|
|
0.8 |
|
|
|
1.3 |
|
|
|
0.8 |
|
|
|
1.7 |
|
Restructuring charge |
|
|
|
|
|
|
0.6 |
|
|
|
|
|
|
|
0.6 |
|
Other operating expenses |
|
|
1.5 |
|
|
|
1.0 |
|
|
|
4.6 |
|
|
|
2.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
|
2.3 |
|
|
|
2.9 |
|
|
|
5.4 |
|
|
|
5.2 |
|
Other income |
|
|
0.2 |
|
|
|
0.2 |
|
|
|
1.1 |
|
|
|
0.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax income (loss) from continuing operations |
|
$ |
1.5 |
|
|
$ |
(0.5 |
) |
|
$ |
(0.2 |
) |
|
$ |
(1.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
There were three commercial land sales in Northwest Florida during the nine months ended September
30, 2010 for a total of 16.7 acres at an average price of $236,000 per acre including a 10 acre
sale in Walton County to Wal-Mart for $2.5 million. There were two commercial land sales during
the nine months ended September 30, 2009 for a total of 5.61 acres at an average price of $369,000.
Sales and cost of sales also included previously deferred revenue and gain on sales, based on
percentage-of-completion accounting.
We also entered into a build-to-suit lease with
CVS Pharmacy for a 1.7 acre site that we own in Port St. Joe. Upon completion of the construction, we will own the facility and
collect ground and building rent under a long-term lease.
30
Other revenues primarily relate to lease income associated with a long-term land lease with
the Port Authority of Port St. Joe.
Much of our commercial real estate activity is focused on the opportunities presented by the
new Northwest Florida Beaches International Airport, which opened in May 2010. We believe these
commercial opportunities will be significantly enhanced by Southwest Airlines service to the new
airport. We continue pre-development activity at our VentureCrossings Enterprise Centre, an
approximately 1,000 acre project adjacent to the airport site. The land is being planned for
office, retail, hotel and industrial users. We expect, over time, that the new international
airport will expand our customer base as it connects Northwest Florida with the global economy and
as the area is repositioned from a regional to a national destination.
Rural Land Sales
Our rural land sales segment markets and sells tracts of land of varying sizes for rural
recreational, conservation and timberland uses. The land sales segment prepares land for sale for
these uses through harvesting, thinning and other silviculture practices, and in some cases,
limited infrastructure development. While we have reduced our offerings of rural land, like
residential and commercial land, demand for rural land has also declined as a result of the current
difficult market conditions.
The table below sets forth the results of operations of our rural land sales segment for the
three and nine months ended September 30, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
(In millions) |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate sales |
|
$ |
4.3 |
|
|
$ |
0.3 |
|
|
$ |
6.5 |
|
|
$ |
12.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of real estate sales |
|
|
0.3 |
|
|
|
|
|
|
|
0.4 |
|
|
|
1.3 |
|
Other operating expenses |
|
|
0.6 |
|
|
|
0.9 |
|
|
|
2.0 |
|
|
|
2.8 |
|
Restructuring charge |
|
|
0.1 |
|
|
|
0.1 |
|
|
|
0.8 |
|
|
|
0.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
|
1.0 |
|
|
|
1.0 |
|
|
|
3.2 |
|
|
|
4.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income |
|
|
0.2 |
|
|
|
0.3 |
|
|
|
0.7 |
|
|
|
0.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax income from continuing operations |
|
$ |
3.5 |
|
|
$ |
(0.4 |
) |
|
$ |
4.0 |
|
|
$ |
9.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rural land sales for the three and nine months ended September 30 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
Number of |
|
Average Price |
|
Gross Sales |
|
Gross |
|
|
Sales |
|
Acres |
|
per Acre |
|
Price |
|
Profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions) |
|
(In millions) |
Three Months Ended: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2010 |
|
|
2 |
|
|
|
226 |
|
|
$ |
3,212 |
|
|
$ |
0.7 |
|
|
$ |
0.5 |
|
September 30, 2009 |
|
|
1 |
|
|
|
140 |
|
|
$ |
2,065 |
|
|
$ |
0.3 |
|
|
$ |
0.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2010 |
|
|
7 |
|
|
|
340 |
|
|
$ |
4,409 |
|
|
$ |
1.5 |
|
|
$ |
1.2 |
|
September 30, 2009 |
|
|
10 |
|
|
|
6,485 |
|
|
$ |
1,990 |
|
|
$ |
12.9 |
|
|
$ |
11.6 |
|
During September 2010, we also conveyed 322 acres to the Florida Department of Transportation
(FDOT) as part of our 4,000 acre sale to FDOT in 2006. As a result, we recognized $3.5 million
of previously deferred revenue and gain this quarter. There was an additional $0.4 million of
sales and gain recognized during the third quarter and nine months ended September 30, 2010 from
other previously deferred sales, as well as $0.4 million from an easement transaction.
During the fourth quarter 2009, we also began selling credits to developers, utility companies
and other users from our wetland mitigation banks. Included in real estate sales was $0.6 million
related to the sale of nine mitigation bank credits at an average sales price of $66,000 per credit
during the first nine months of 2010.
31
During 2009, we made a strategic decision to sell fewer acres of rural land as we generated
cash from other sources. We are employing the same strategy in 2010. We may, however, rely on
rural land sales as a significant source of revenues and cash in the future.
During the nine months ended September 30, 2009, we closed the following significant sales:
930 acres in Wakulla County for $3.9 million or $4,234 per acre and 4,492 acres in Liberty County
for $5.9 million, or $1,305 per acre. Average sales prices per acre vary according to the
characteristics of each particular piece of land being sold and its highest and best use. As a
result, average prices will vary from one period to another.
Forestry
Our forestry segment focuses on the management and harvesting of our extensive timber
holdings. We grow, harvest and sell sawtimber, pulpwood and forest products and provide land
management services for conservation properties. On February 27, 2009, we completed the sale of
the inventory and equipment assets of Sunshine State Cypress.
The table below sets forth the results of the continuing operations of our forestry segment
for the three and nine months ended September 30, 2010 and 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
(In millions) |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timber sales |
|
$ |
6.8 |
|
|
$ |
7.0 |
|
|
$ |
21.0 |
|
|
$ |
20.4 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of timber sales |
|
|
5.3 |
|
|
|
5.1 |
|
|
|
14.8 |
|
|
|
14.8 |
|
Other operating expenses |
|
|
0.5 |
|
|
|
0.5 |
|
|
|
1.5 |
|
|
|
1.6 |
|
Depreciation and amortization |
|
|
0.5 |
|
|
|
0.6 |
|
|
|
1.6 |
|
|
|
1.8 |
|
Restructuring charge |
|
|
0.2 |
|
|
|
|
|
|
|
0.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
|
6.5 |
|
|
|
6.2 |
|
|
|
18.1 |
|
|
|
18.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income |
|
|
0.5 |
|
|
|
0.4 |
|
|
|
1.5 |
|
|
|
1.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax income from continuing operations |
|
$ |
0.8 |
|
|
$ |
1.2 |
|
|
$ |
4.4 |
|
|
$ |
3.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2010 and 2009
We have a wood fiber supply agreement with Smurfit-Stone Container Corporation
(Smurfit-Stone) which expires on June 30, 2012. During the third quarter of 2010, Smurfit-Stone
emerged from bankruptcy protection which was filed in 2008. Sales under this agreement were $3.6
million (167,000 tons) in the third quarter of 2010 and $3.8 million (181,000 tons) during the
third quarter of 2009. Open market sales in the third quarter totaled $3.2 million (106,000 tons)
in 2010 as compared to $3.2 million (157,000 tons) in 2009. Although sales were constant
year-over-year, fewer tons of pulpwood were sold in the third quarter of 2010 as compared to the
third quarter of 2009. Net stumpage prices for both sawtimber and pulpwood increased
year-over-year, due to improvement in the end-user markets and a decrease in the availability of raw
materials.
Cost of sales for the forestry segment increased $0.2 million in 2010 compared to 2009. The
increase in cost of goods sold was to due to our efforts to improve timber inventory information
over our large timberland holdings, partially offset by reduced harvesting and delivery expenses.
Nine Months Ended September 30, 2010 and 2009
Sales under the wood fiber supply agreement with Smurfit-Stone were $10.8 million (509,000
tons) in 2010 and $11.2 million (529,000 tons) in 2009. During the first nine months of 2010, we
delivered fewer tons to Smurfit-Stone under the fiber agreement.
Open market sales totaled $9.4 million (362,000 tons) in 2010 as compared to $8.6 million
(425,000 tons) in 2009. This increase in revenues was a result of improved log pricing partially
offset by a reduction in log sales volume. Net stumpage prices for sawtimber and pulpwood
increased year-over-year due to improved end-user markets and reduced
availability of raw materials.
32
Our 2010 and 2009 revenues included $0.3 million and $0.6 million, respectively, related to
revenue we received for land management services. The 2010 revenue total also included $0.6
million related to the Biomass Crop Assistance Program sponsored by the federal government during
the first four months of 2010. Cost of sales year-over-year was constant at $14.8 million.
Discontinued operations related to the sale of Sunshine State Cypress for the three and nine
months ended September 30, 2009 are as follows:
|
|
|
|
|
|
|
|
|
|
|
Three months Ended |
|
|
Nine months Ended |
|
|
|
September 30, 2009 |
|
|
September 30, 2009 |
|
|
|
(In millions) |
|
|
|
2009 |
|
|
2009 |
|
Sunshine State Cypress |
|
|
|
|
|
|
|
|
Aggregate revenues |
|
$ |
|
|
|
$ |
1.7 |
|
|
|
|
|
|
|
|
Pre-tax (loss) |
|
|
|
|
|
|
(0.4 |
) |
Pre-tax gain on sale |
|
|
|
|
|
|
0.1 |
|
|
|
|
|
|
|
|
Income tax (benefit) |
|
|
|
|
|
|
(0.1 |
) |
|
|
|
|
|
|
|
(Loss) from discontinued operations, net |
|
$ |
|
|
|
$ |
(0.2 |
) |
|
|
|
|
|
|
|
Liquidity and Capital Resources
As of September 30, 2010, we had cash and cash equivalents of $196.4 million, compared to
$163.8 million as of December 31, 2009. We invest our excess cash primarily in government-only
money market mutual funds, short term U.S. treasury investments and overnight deposits, all of
which are highly liquid, with the intent to make such funds readily available for operating
expenses and strategic long-term investment purposes.
We believe that our current cash position, our undrawn $125.0 million revolving credit
facility and the cash we expect to generate from operating activities will provide us with
sufficient liquidity to satisfy our working capital needs and capital expenditures and provides us
with the financial flexibility to withstand the current market downturn.
As more fully described in Note 9 of our consolidated financial statements, our $125.0 million
revolving credit facility contains covenants relating to leverage, unencumbered asset value, net
worth, liquidity and additional debt. The credit facility does not contain a fixed charge coverage
covenant. The credit facility also contains various restrictive covenants pertaining to
acquisitions, investments, capital expenditures, dividends, share repurchases, asset dispositions
and liens.
We have entered into a strategic alliance agreement with Southwest Airlines to facilitate
low-fare air service to the new Northwest Florida Beaches International Airport. We have agreed to
reimburse Southwest Airlines if it incurs losses on its service at the new airport during the first
three years of service by making break-even payments. There was no reimbursement required during
the third quarter of 2010 and a carryover profit will be applied to
the reimbursement calculation for the fourth quarter of 2010. The agreement also provides that Southwests profits
from the air service during the term of the agreement will be shared with us up to the maximum
amount of our break-even payments. These cash payments and reimbursements could have a significant
effect on our cash flows and results of operations going forward, depending on the results of
Southwests operations of the air service. In order to mitigate potential losses that may arise
from changes in Southwest Airlines jet fuel costs, we have entered into a short term premium
neutral collar arrangement with respect to the underlying cost of jet fuel for a portion of
Southwest Airlines estimated fuel volumes.
Cash Flows from Operating Activities
Net cash provided by operations was $29.5 million and $44.7 million for the nine months ended
September 30, 2010 and 2009, respectively. During the nine months ended September 30, 2010 and
2009, capital expenditures relating to our residential real estate segment were $5.5 million and
$4.8 million, respectively. Additional capital expenditures for our operating properties were
$4.1 million and $2.7 million, respectively, which primarily related to commercial real estate
development.
We received tax refunds of $67.7 million and $32.3 million in the third quarter of 2010 and
2009, respectively which related to certain loss carrybacks which expired in 2010.
33
Cash Flows from Investing Activities
Net cash used in investing activities was $0.7 million and $1.2 million in the first nine
months of 2010 and 2009, respectively. We are not considering any significant investments at this
time.
Cash Flows from Financing Activities
Net cash provided by (used) in financing activities was $3.8 million and $(2.4) million in the
first nine months of 2010 and 2009, respectively.
Off-Balance Sheet Arrangements
There were no material changes to the quantitative and qualitative disclosures about
off-balance sheet arrangements presented in our Form 10-K for the year ended December 31, 2009,
during the third quarter of 2010.
Contractual Obligations and Commercial Commitments
There have been no material changes in the amounts of our contractual obligations and
commercial commitments presented in our Form 10-K for the year ended December 31, 2009, during the
third quarter of 2010.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes to the quantitative and qualitative disclosures about
market risk set forth in our Form 10-K for the year ended December 31, 2009, during the third
quarter of 2010.
Item 4. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures. Our Chief Executive Officer and Chief
Financial Officer have evaluated the effectiveness of the Companys disclosure controls and
procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange
Act of 1934, as amended (the Exchange Act)) as of the end of the period covered by this report.
Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded
that, as of the end of the period covered by this report, our disclosure controls and procedures
are effective in bringing to their attention on a timely basis material information relating to the
Company (including its consolidated subsidiaries) required to be included in the Companys periodic
filings under the Exchange Act.
(b) Changes in Internal Controls. During the quarter ended September 30, 2010, there were no
changes in our internal controls that have materially affected, or are reasonably likely to
materially affect, our internal controls over financial reporting.
34
PART II OTHER INFORMATION
Item 1. Legal Proceedings
We have filed three lawsuits against the parties responsible for the Deepwater Horizon
oil spill in the Gulf of Mexico. The oil spill has had a negative impact on our properties,
results of operations and stock price. The three lawsuits are described as follows:
On August 4, 2010, we filed a lawsuit in the Superior Court of the State of Delaware in New
Castle County against Halliburton Energy Services, Inc. (Halliburton). The lawsuit alleges that
Halliburton, the cementing contractor for the oil well, was grossly negligent in its management of
the well cementing process leading to the blowout of the well. We are seeking compensatory and
punitive damages.
On August 26, 2010, we filed a lawsuit in the Superior Court of the State of Delaware in New
Castle County against M-I, L.L.C. (a/k/a M-I SWACO). The lawsuit alleges that M-I SWACO, the
drilling fluid contractor for the drilling rig, was grossly negligent in the way that it managed
and conducted the use of drilling fluids to maintain well control leading to the blowout of the
well. We are seeking compensatory and punitive damages.
On October 12, 2010, we filed a lawsuit in the Superior Court of the State of Delaware in New
Castle County against Transocean Holdings, LLC, Transocean Offshore Deepwater Drilling, Inc.,
Transocean Deepwater, Inc. and Triton Asset Leasing GmbH (collectively, Transocean). The
lawsuit alleges that Transocean, the owner of the drilling rig, was grossly negligent in the
operation and maintenance of the drilling rig and its equipment and in overseeing drilling
activities on the rig leading to the blowout of the well. We are seeking compensatory and punitive
damages.
All
three of these cases have been removed by the defendants to the U.S.
District Court for the District of Delaware, and we have filed motions
to remand each case back to Delaware state court.
We were also involved during the third quarter of 2010 in routine litigation on a number of
matters and were subject to claims which arose in the normal course of business, none of which, in
the opinion of management, is expected to have a material adverse effect on our consolidated
financial position, results of operations or liquidity.
Item 1A. Risk Factors
The
Deepwater Horizon oil spill has had an adverse impact on us.
The ruptured oil well from the Deepwater Horizon incident in the Gulf of Mexico was permanently
contained in September 2010. Much uncertainty remains, however, about the extent of the
environmental damage from the oil and other pollutants that have been discharged into the Gulf and
the duration of the negative effects from the spill. Although the full economic and environmental
effects of the oil spill are uncertain at this time, we believe that it has had, and will continue
to have, a negative impact on our properties, results of operations and stock price. Future oil
spill incidents, or the prospect of future oil spill incidents, could also negatively affect us. We
have commenced legal proceedings to recover damages from the parties responsible for the oil spill.
We cannot be certain, however, of the amount of any recovery or the ultimate success of our
claims.
Our stock price may decline or fluctuate significantly due to market factors outside of our
control.
The market price of our common stock has been volatile and has recently experienced a significant
decline. Our stock price may decline or fluctuate further in response to many external factors
outside our control. Such factors may cause the market price of our common stock to decline
regardless of our financial condition, results of operation, business or prospects and could result
in substantial losses for our shareholders.
Possible securities class action litigation could have an adverse effect on our business and stock
price.
The market price of our common stock has been volatile and has recently experienced a significant
decline. In the past, securities class action litigation and/or inquiries or investigations have
often been instituted against companies following a substantial decline in its stock price. In
fact, several law firms have recently issued press releases soliciting plaintiffs for a possible
securities class action suit against us. This type of litigation, if instituted against us, could
result in substantial costs and divert our managements attention and resources.
35
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
Our Board of Directors has authorized a total of $950.0 million for the repurchase of our
outstanding common stock from shareholders from time to time (the Stock Repurchase Program), of
which $103.8 million remained available at September 30, 2010. There is no expiration date for the
Stock Repurchase Program; however, we have no present intention to repurchase any shares under the
Stock Repurchase Program. In addition, our $125.0 million revolving credit facility requires that
we not repurchase stock in amounts in excess of any cumulative net income that we have earned since
January 1, 2007.
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(d) |
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(c) |
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Maximum Dollar |
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Total Number of |
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Amount that |
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(a) |
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(b) |
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Shares Purchased |
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May Yet Be |
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Total Number |
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Average |
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as Part of Publicly |
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Purchased Under |
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of Shares |
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Price Paid |
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Announced Plans |
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the Plans or |
Period |
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Purchased(1) |
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per Share |
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or Programs |
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Programs |
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|
|
(In thousands) |
Month Ended July 31, 2010 |
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$ |
|
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|
|
|
|
|
$ |
103,793 |
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Month Ended August 31, 2010 |
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$ |
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|
|
$ |
103,793 |
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Month Ended September 30, 2010 |
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$ |
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$ |
103,793 |
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(1) |
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Represents shares surrendered by executives as payment for the strike
prices and taxes due on exercised stock options and/or taxes due on
vested restricted stock. |
Item 3. Defaults Upon Senior Securities
None.
Item 4. Removed and Reserved.
Item 5. Other Information
None.
36
Item 6. Exhibits
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Exhibit |
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Number |
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Description |
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3.1 |
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Amended and Restated Articles of Incorporation of the Company,
as amended (incorporated by reference to Exhibit 3.1 to the
Companys Quarterly Report on Form 10-Q for the quarter ended
June 30, 2010). |
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3.2 |
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Amended and Restated Bylaws of the Company, as amended
(incorporated by reference to Exhibit 3.2 to the Companys
Quarterly Report on Form 10-Q for the quarter ended June 30,
2010). |
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10.1 + |
|
|
Credit Agreement dated September 19, 2008 by and among the
Company and Branch Banking and Trust Company, as agent and
lender; Deutsche Bank Trust Company Americas, as lender; and
BB&T Capital Markets, as lead arranger ($125 million credit
facility), as amended by the First, Second, Third, Fourth and
Fifth Amendments thereto. |
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31.1 |
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Certification by Chief Executive Officer. |
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31.2 |
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Certification by Chief Financial Officer. |
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32.1 |
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Certification by Chief Executive Officer. |
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32.2 |
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Certification by Chief Financial Officer. |
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99.1 |
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Supplemental Information regarding Land-Use Entitlements,
Sales by Community and other quarterly information. |
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101 * |
|
|
The following information from the Companys Quarterly Report
on Form 10-Q for the quarterly period ended September 30,
2010, formatted in XBRL (eXtensible Business Reporting
Language): (i) the Consolidated Balance Sheets, (ii) the
Consolidated Statements of Operations, (iii) the Consolidated
Statement of Changes in Equity (iv) the Consolidated
Statements of Cash Flow and (v) Notes to the Consolidated
Financial Statements, tagged as blocks of text. |
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|
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+ |
|
The Credit Agreement, as amended, is being re-filed at the
request of the Securities and Exchange Commission in order to
include the disclosure schedules to the Credit Agreement from
September 2008. |
|
* |
|
In accordance with Regulation S-T, the XBRL-related
information in Exhibit 101 to this Quarterly Report on Form
10-Q shall be deemed to be furnished and not filed. |
37
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
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The St. Joe Company
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Date: November 2, 2010 |
/s/ Wm. Britton Greene
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Wm. Britton Greene |
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President and Chief Executive Officer |
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|
Date: November 2, 2010 |
/s/ Janna L. Connolly
|
|
|
Janna L. Connolly |
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|
Senior Vice President and Chief Accounting Officer |
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|
38
exv10w1
Exhibit 10.1
CREDIT AGREEMENT
dated as of
September 19, 2008
among
THE ST. JOE COMPANY
as Borrower,
The Initial Guarantors Listed Herein,
The Lenders Listed Herein
and
BRANCH BANKING AND TRUST COMPANY,
as Administrative Agent
and
BB&T CAPITAL MARKETS,
as Lead Arranger
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is dated as of September 19, 2008 among THE ST. JOE COMPANY, a Florida
corporation, as borrower, the INITIAL GUARANTORS listed on the signature pages hereof, as
guarantors, the LENDERS listed on the signature pages hereof and BRANCH BANKING AND TRUST COMPANY,
as Administrative Agent.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. The terms as defined in this Section 1.01 shall, for all
purposes of this Agreement and any amendment hereto (except as otherwise expressly provided or
unless the context otherwise requires), have the meanings set forth herein:
Acquisition means any transaction or series of related transactions for the purpose of, or
resulting in, directly or indirectly, (a) the acquisition by the Borrower or any Subsidiary of all
or substantially all of the assets of a Person (other than a Subsidiary) or of any business or
division of a Person (other than a Subsidiary), (b) the acquisition by the Borrower or any
Subsidiary of more than 50% of any class of Voting Stock (or similar ownership interests) of any
Person (provided that formation or organization of any Wholly Owned Subsidiary shall not constitute
an Acquisition to the extent that the amount of the Investment in such entity is permitted under
Sections 5.08 and 5.12), or (c) a merger, consolidation, amalgamation or other combination by the
Borrower or any Subsidiary with another Person (other than a
Subsidiary) if the Borrower or such
Subsidiary is the surviving entity; provided that in any merger involving the Borrower, the
Borrower must be the surviving entity.
Adjusted London InterBank Offered Rate applicable to any Interest Period means a rate per
annum equal to the quotient obtained (rounded upwards, if necessary, to the next higher 1/100th of
1%) by dividing (i) the applicable London InterBank Offered Rate for such Interest Period by
(ii) 1.00 minus the Euro-Dollar Reserve Percentage.
Administrative Agent means BB&T, in its capacity as administrative agent for the Lenders,
and its successors and permitted assigns in such capacity.
Administrative Agents Letter Agreement means that certain letter agreement, dated as of
July 23, 2008, between Borrower and the Administrative Agent relating to the terms of this
Agreement, and certain fees from time to time payable by the Borrower to the Administrative Agent,
together with all amendments and modifications thereto. If there is any conflict between the
provisions of this Agreement and the provisions of the Administrative Agents Letter Agreement, the
provisions of this Agreement will control.
Administrative Questionnaire means an Administrative Questionnaire in a form supplied by the
Administrative Agent.
Advances means collectively the Revolver Advances. Advance means any one of such Advances,
as the context may require.
Affiliate of any Person means (i) any other Person which directly, or indirectly through one
or more intermediaries, controls such Person, (ii) any other Person which directly, or indirectly
through one or more intermediaries, is controlled by or is under common control with such Person,
or (iii) any other Person of which such Person owns, directly or indirectly, 10% or more of the
common stock or equivalent equity interests.
Agreement means this Credit Agreement, together with all amendments and supplements hereto.
Applicable Laws means all international, foreign, Federal, state and local statutes,
treaties, rules, guidelines, regulations, ordinances, codes, executive orders, and administrative
or judicial precedents or authorities, including the interpretation or administration thereof by
any Governmental Authority charged with the enforcement, interpretation or administration thereof,
and all applicable administrative orders, directed duties, requests, licenses, authorizations and
permits of, and agreements with, any Governmental Authority, in each case whether or not having the
force of law.
Applicable Margin has the meaning set forth in Section 2.06(a).
Applicable Percentage means with respect to any Lender, the percentage of the total Revolver
Commitments represented by such Lenders Revolver Commitment. If the Revolver Commitments have
terminated or expired, the Applicable Percentages shall be determined based upon the Revolver
Commitments most recently in effect, giving effect to any assignments.
Approved Fund means any Fund that is administered or managed by (a) a Lender, (b) an
Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a
Lender.
Assignment and Assumption means an assignment and assumption entered into by a Lender and an
Eligible Assignee (with the consent of any party whose consent is required by Section 9.07), and
accepted by the Administrative Agent, in substantially the form of Exhibit I or any other form
approved by the Administrative Agent.
Bank Products means any: (1) Hedging Agreements; and (2) other services or facilities
provided to any Loan Party by the Administrative Agent or any Lender (each, in such capacity, a
Bank Product Bank) (but excluding Cash Management Services) with respect to (a) credit cards, (b)
purchase cards, (c) merchant services constituting a line of credit, and (d) leasing.
Bankruptcy Code means the United States Bankruptcy Reform Act of 1978 (11 U.S.C. §§101, et.
seq.), as amended from time to time.
Base Rate means for any Base Rate Advance for any day, the rate per annum equal to the
higher as of such day of (i) the Prime Rate, or (ii) one-half of one percent (0.5%) above the
Federal Funds Rate. For purposes of determining the Base Rate for any day, changes in the Prime
Rate or the Federal Funds Rate shall be effective on the date of each such change.
Base Rate Advance means, with respect to any Advance, such Advance when such Advance bears
or is to bear interest at a rate based upon the Base Rate.
BB&T means Branch Banking and Trust Company, and its successors.
Borrower means The St. Joe Company, a Florida corporation, and its successors and its
permitted assigns.
Borrowing means a borrowing hereunder consisting of Revolver Advances made to the Borrower:
(i) at the same time by all of the Lenders, in the case of Syndicated Borrowings, or (ii) by BB&T,
for Swing Advances. A Borrowing is a Syndicated Borrowing if such Advances are made pursuant to
Section 2.01(a) or a Swing Line Borrowing if such Advance is made pursuant to Section 2.01(b). A
Borrowing is a Base Rate Borrowing if such Advances are Base Rate Advances. A Borrowing is a
Euro-Dollar Borrowing if such Advances are Euro-Dollar Advances. A Borrowing is a Tranche
Euro-Dollar Borrowing if such Advances are Tranche Euro-Dollar Advances. A Borrowing is an Index
Euro-Dollar Borrowing if such Advances are Index Euro-Dollar Advances.
Capital Expenditures means for any period the sum of all capital expenditures incurred
during such period by the Borrower and its Consolidated Subsidiaries, as determined in accordance
with GAAP.
Capital Securities means, with respect to any Person, any and all shares, interests
(including membership interests and partnership interests), participations or other equivalents
(however designated, whether voting or non-voting) of such Persons capital (including any
instruments convertible into equity), whether now outstanding or issued after the Closing Date.
Cash Equivalents means: (a) securities issued or directly and fully guaranteed or insured by
the United States of America or any agency thereof (provided that the full faith and credit of the
United States is pledged in support thereof) with maturities of not more than one year from the
date acquired; (b) time deposits and certificates of deposit with maturities of not more than one
(1) year from the date acquired issued by a United States federal or state chartered commercial
bank of recognized standing having capital and surplus in excess of $500 million, and which bank or
its holding company has a short-term commercial paper rating of at least A-1 or the equivalent by
Standard & Poors Rating Services or at least P-1 or the equivalent by Moodys Investors Service,
Inc.; and (c) investments in money market funds (i) which mature not more than seven (7) days from
the date acquired, (ii) with respect to which there has been no failure to honor a request for
withdrawal, (iii) which are registered under the Investment Company Act of 1940, as amended, (iv)
which have net assets of at least $500,000,000 and (v) at least 85% of those assets consist of
securities and other obligations of the type referenced in clauses (a) and (b) above.
Cash Management Services means any one or more of the following types of services or
facilities provided to any Loan Party by the Administrative Agent or any Lender (each, in such
capacity, a Cash Management Bank): (a) ACH transactions, (b) cash management services, including,
without limitation, controlled disbursement
services, treasury, depository, overdraft, and electronic funds transfer services, (c) foreign
exchange facilities, (d) credit or debit cards, and (e) merchant services not constituting a Bank
Product.
CERCLA means the Comprehensive Environmental Response Compensation and Liability Act, 42
U.S.C. §9601 et seq. and its implementing regulations and amendments.
CERCLIS means the Comprehensive Environmental Response Compensation and Liability
Information System established pursuant to CERCLA.
Change in Control means the occurrence after the Closing Date of any of the following: (i)
any Person or two or more Persons acting in concert shall have acquired beneficial ownership
(within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities
Exchange Act of 1934) of 25% or more of the outstanding shares of the Voting Stock of the Borrower;
or (ii) as of any date a majority of the board of directors of the Borrower consists of individuals
who were not either (A) directors of the Borrower as of the corresponding date of
the previous
year, (B) selected or nominated to become directors by the board of directors of the Borrower of
which a majority of such board consisted of individuals described in clause (A), or (C) selected or
nominated to become directors by the board of directors of the Borrower of which a majority of such
board consisted of individuals described in clause (A) and individuals described in clause (B).
Change in Law means the occurrence, after the date of this Agreement, of any of the
following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change
in any law, rule, regulation or treaty or in the administration, interpretation or application
thereof by any Governmental Authority or (c) the making or issuance of any request, guideline or
directive (whether or not having the force of law) by any Governmental Authority.
Closing Certificate has the meaning set forth in Section 3.01(d).
Closing Date means September 19, 2008.
Code means the Internal Revenue Code of 1986, as amended, or any successor Federal tax code.
Any reference to any provision of the Code shall also be deemed to be a reference to any successor
provision or provisions thereof.
Collateral shall mean (i) all property which secures the Obligations pursuant to the
Collateral Documents and (ii) the Timberland Collateral.
Collateral Diligence Enhancement Event means any time the Administrative Agent in its
reasonable discretion determines that St. Joe Timberland owns less than 250,000 acres of real
property.
Collateral Documents means, collectively, the Pledge Agreement, the REIT Pledge Agreement
and all other agreements (including control agreements), instruments and other documents, whether
now existing or hereafter in effect, pursuant to which the Borrower or any Subsidiary shall grant
or convey (or shall have granted or conveyed) to the Secured Parties a Lien in, or any other Person
shall acknowledge any such Lien in, property as security for all or any portion of the Obligations,
as any of them may be amended, modified or supplemented from time to time. After the occurrence of
a Trigger Event, the term Collateral Documents shall include, without limitation, the Timberland
Collateral Documents.
Compliance Certificate has the meaning set forth in Section 5.01(c).
Consolidated Net Income means, for any period, the Net Income of the Borrower and its
Consolidated Subsidiaries determined on a consolidated basis, but excluding (i) extraordinary items
and (ii) any equity interests of the Borrower or any Subsidiary in the unremitted earnings of any
Person that is not a Subsidiary.
Consolidated Subsidiary means at any date any Subsidiary or other entity the accounts of
which, in accordance with GAAP, would be consolidated with those of the Borrower in its
consolidated financial statements as of such date.
Consolidated Tangible Net Worth means, at any time, Stockholders Equity less the sum of the
value, (to the extent reflected in determining Stockholders Equity) as set forth or reflected on
the most recent consolidated balance sheet of the Borrower and its Consolidated Subsidiaries, on a
consolidated basis prepared in accordance with GAAP, of
(A) Any surplus resulting from any write-up of assets subsequent to December 31, 2007;
(B) All assets which would be treated as intangible assets for balance sheet presentation
purposes under GAAP, including without limitation goodwill (whether representing the excess of cost
over book value of assets acquired, or otherwise), trademarks, tradenames, copyrights, patents and
technologies, and unamortized debt discount and expense;
(C) To the extent not included in (B) of this definition, any amount at which the Capital
Securities of the Borrower appear as an asset on the balance sheet of the Borrower and its
Consolidated Subsidiaries;
(D) Any amount at which the net obligations of the Borrower and its Subsidiaries with respect
to interest rate
protection agreements, foreign currency exchange agreements or other hedging
agreements appear as an asset on the balance sheet of the Borrower and its Consolidated
Subsidiaries;
(E) Loans or advances to stockholders of the Borrower;
(F) Loans or advances to directors, officers, managers or employees thereof; and
(G) To the extent not included in (B) of this definition, deferred expenses.
Control means the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the ability to exercise voting
power, by contract or otherwise. Controlling and Controlled have meanings correlative thereto.
Controlled Group means all members of a controlled group of corporations and all trades or
businesses (whether or not incorporated) under common control which, together with any Loan Party,
are treated as a single employer under Section 414 of the Code.
Costs of Acquisition means, with respect to any Acquisition, as at the date of entering into
any agreement therefor, the sum of the following (without duplication): (i) the value of
the Capital Securities of the Borrower or any Subsidiary to be transferred in connection therewith,
(ii) the amount of any cash and fair market value of other property (excluding property described
in clause (i) and the unpaid principal amount of any debt instrument) given as consideration, (iii)
the amount (determined by using the face amount or the amount payable at maturity, whichever is
greater) of any Debt incurred, assumed or acquired by the Borrower or any Subsidiary in connection
with such Acquisition, (iv) all additional purchase price amounts in the form of earnouts and other
contingent obligations that should be recorded on the financial statements of the Borrower and its
Subsidiaries in accordance with GAAP, (v) all amounts paid in respect of covenants not to compete,
consulting agreements that should be recorded on financial statements of the Borrower and its
Subsidiaries in accordance with GAAP, and other affiliated contracts in connection with such
Acquisition, (vi) the aggregate fair market value of all other consideration given by the Borrower
or any Subsidiary in connection with such Acquisition, and (vii) out of pocket transaction costs
for the services and expenses of attorneys, accountants and other consultants incurred in effecting
such transaction, and other similar transaction costs so incurred. For purposes of determining the
Cost of Acquisition for any transaction, (A) the Capital Securities of the Borrower shall be valued
(I) in the case of capital stock that is then designated as a national market system security by
the National Association of Securities Dealers, Inc. (NASDAQ) or is listed on a national
securities exchange, the average of the last reported bid and ask quotations or the last prices
reported thereon, and (II) with respect to any other Capital Securities, as determined by the board
of directors of the Borrower, (B) the Capital Securities of any Subsidiary shall be valued as
determined by the board of directors of such Subsidiary, and (C) with respect to any Acquisition
accomplished pursuant to the exercise of options or warrants or the conversion of securities, the
Cost of Acquisition shall include both the cost of acquiring such option, warrant or convertible
security as well as the cost of exercise or conversion.
Credit Party Expenses means, without limitation, (a) all reasonable out-of-pocket expenses
incurred by the Administrative Agent and its Affiliates, in connection with this Agreement and the
other Loan Documents, including without limitation (i) the reasonable fees, charges and
disbursements of (A) counsel for the Administrative Agent, (B) outside consultants for the
Administrative Agent, (C) appraisers, (D) commercial finance examinations, and (E) all such
out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of the
Obligations; and (ii) in connection with (A) the syndication of the credit facilities provided for
herein, (B) the administration, management, execution and delivery of this Agreement and the other
Loan Documents, and the preparation, negotiation, administration and management of any amendments,
modifications or waivers of the provisions of this Agreement and the other Loan Documents (whether
or not the transactions contemplated thereby shall be consummated), or (C) the enforcement or
protection of its rights in connection with this Agreement or the Loan Documents or efforts to
preserve, protect, collect, or enforce the Collateral, and (b) with respect to the Letter of Credit
Issuer, and its Affiliates, all reasonable out-of-pocket expenses incurred in connection with the
issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment
thereunder; and (c) all reasonable out-of-pocket expenses incurred by the Secured Parties who are
not the Administrative Agent, the Letter of Credit Issuer or any Affiliate of any of them, after
the occurrence and during the continuance of an Event of Default.
Debt of any Person means at any date, without duplication, (i) all obligations of such
Person for borrowed money; (ii) all obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments; (iii) all
obligations of such Person to pay the deferred
purchase price of property or services, except trade accounts payable arising in the ordinary
course of business; (iv) all obligations of such Person as lessee under capital leases; (v) all
obligations of such Person to reimburse any bank or other Person in respect of amounts payable
under a bankers acceptance; (vi) all Redeemable Preferred Securities of such Person; (vii) all
obligations (absolute or contingent) of such Person to reimburse any bank or other Person in
respect of amounts which are available to be drawn or have been drawn under a letter of credit or
similar instrument; (viii) all Debt of others secured by a Lien on any asset of such Person,
whether or not such Debt is assumed by such Person; (ix) all Debt of others Guaranteed by such
Person (except for guaranties of customary exceptions for fraud, misapplication of funds,
environmental indemnities and other similar exceptions to non-recourse liability); (x) all net
obligations of such Person with respect to interest rate protection agreements, foreign currency
exchange agreements or other hedging agreements not entered into in the ordinary course of business
to hedge or mitigate the risk of interest rate changes in respect of existing Debt (valued as the
termination value thereof computed in accordance with a method approved by the International Swap
Dealers Association and agreed to by such Person in the applicable hedging agreement, if any); (xi)
all obligations of such Person under any synthetic lease, tax retention operating lease, sale and
leaseback transaction, asset securitization, off-balance sheet loan or other off-balance sheet
financing product; (xii) all obligations of such Person to purchase securities or other property
arising out of or in connection with the sale of the same or substantially similar securities or
property; (xiii) such Persons pro rata share of the Debt of any Unconsolidated Affiliate of such
Person and (xiv) all obligations of such Person created or arising under any conditional sale
or other title retention agreement with respect to property acquired by such Person. The Debt of
any Person shall include the Debt of any other entity (including any partnership in which such
Person is a general partner) to the extent such Person is liable therefore as a result of such
Persons ownership interest in or other relationship with such entity, except to the extent the
terms of such Debt provide that such Person is not liable therefor.
Default means any condition or event which constitutes an Event of Default or which with the
giving of notice or lapse of time or both would, unless cured or waived in writing, become an Event
of Default.
Default Rate means, with respect to the Advances, on any day, the sum of 2% plus the then
highest interest rate (including the Applicable Margin) which may be applicable to any Advance
(irrespective of whether any such type of Advance is actually outstanding hereunder).
Defaulting Lender has the meaning given that term in Section 2.15.
Dollars or $ means dollars in lawful currency of the United States of America.
Domestic Business Day means any day except a Saturday, Sunday or other day on which
commercial banks in North Carolina are authorized or required by law to close.
Eligible Assignee means (a) a Lender, (b) an Affiliate of a Lender, (c) an Approved Fund,
and (d) any other Person (other than a natural person) approved by (i) the Administrative Agent,
and (ii) unless a Default has occurred and is continuing, the Borrower (each such approval not to
be unreasonably withheld or delayed); provided that notwithstanding the foregoing,
Eligible Assignee shall not include the Borrower or any of the Borrowers Affiliates or
Subsidiaries.
Environmental Authority means any foreign, federal, state, local or regional government that
exercises any form of jurisdiction or authority under any Environmental Requirement.
Environmental Authorizations means all licenses, permits, orders, approvals, notices,
registrations or other legal prerequisites for conducting the business of a Loan Party or any
Subsidiary of a Loan Party required by any Environmental Requirement.
Environmental Judgments and Orders means all judgments, decrees or orders arising from or in
any way associated with any Environmental Requirements, whether or not entered upon consent or
written agreements with an Environmental Authority or other entity arising from or in any way
associated with any Environmental Requirement, whether or not incorporated in a judgment, decree or
order.
Environmental Laws means any and all federal, state, local and foreign statutes, laws,
regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants,
franchises, licenses, agreements or other governmental restrictions relating to the environment or
to emissions, discharges or releases of pollutants, contaminants, petroleum or
petroleum products,
chemicals or industrial, toxic or hazardous substances or wastes into the environment, including,
without limitation, ambient air, surface water, groundwater or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, petroleum or petroleum products, chemicals or industrial, toxic or
hazardous substances or wastes or the clean-up or other remediation thereof.
Environmental Liabilities means any liabilities, whether accrued, contingent or otherwise,
arising from and in any way associated with any Environmental Requirements.
Environmental Notices means notice from any Environmental Authority or by any other person
or entity, of possible or alleged noncompliance with or liability under any Environmental
Requirement, including without limitation any complaints, citations, demands or requests from any
Environmental Authority or from any other person or entity for correction of any violation of any
Environmental Requirement or any investigations concerning any violation of any Environmental
Requirement.
Environmental Proceedings means any judicial or administrative proceedings arising from or
in any way associated with any Environmental Requirement.
Environmental Releases means releases as defined in CERCLA or under any applicable federal,
state or local environmental law or regulation and shall include, in any event and without
limitation, any release of petroleum or petroleum related products.
Environmental Requirements means any legal requirement relating to health, safety or the
environment and applicable to a Loan Party, any Subsidiary of a Loan Party or the Properties,
including but not limited to any such requirement under CERCLA or similar state legislation and all
federal, state and local laws, ordinances, regulations, orders, writs, decrees and common law.
ERISA means the Employee Retirement Income Security Act of 1974, as amended from time to
time, or any successor law and all rules and regulations from time to time promulgated thereunder.
Any reference to any provision of ERISA shall also be deemed to be a reference to any successor
provision or provisions thereof.
Euro-Dollar Advance means, with respect to any Advance, such Advance during Interest Periods
when such Advance bears or is to bear interest at a rate based upon the London InterBank Offered
Rate. A Euro-Dollar Advance is a Tranche Euro-Dollar Advance if such Euro-Dollar Advance has an
Interest Period described in subsection (1) of the definition of Interest Period. A Euro-Dollar
Advance is an Index
Euro-Dollar Advance if such Euro-Dollar Advance has an Interest Period described in subsection
(2) of the definition of Interest Period.
Euro-Dollar Business Day means any Domestic Business Day on which dealings in Dollar
deposits are carried out in the London interbank market.
Euro-Dollar Reserve Percentage has the meaning set forth in Section 2.06(c).
Event of Default has the meaning set forth in Section 6.01.
Excluded Subsidiary means: (1) any Subsidiary (a) formed as or converted to a special
purpose entity for the sole purpose of holding title to assets which are or are to become
collateral for any secured Debt of such Subsidiary and (b) which is prohibited from Guaranteeing
the Debt of any other Person pursuant to (i) any document, instrument or agreement evidencing such
secured Debt or (ii) a provision of such Subsidiarys organizational documents which provision was
included in such Subsidiarys organizational documents as a condition to the extension of such
secured Debt; and (2) any Subsidiary (other than St. Joe Finance Company) in which the Borrower,
directly or indirectly, owns less than 100% of the Capital Securities of such Subsidiary.
Excluded Taxes means, with respect to the Administrative Agent, any Lender or any other
recipient of any payment to be made by or on account of any obligation of the Borrower hereunder,
(a) taxes imposed on or measured by its overall net income (however denominated), and franchise
taxes imposed on it (in lieu of net income taxes), by the jurisdiction (or any political
subdivision thereof) under the laws of which such recipient is organized or in which its
principal
office is located or, in the case of any Lender, in which its applicable lending office is located,
(b) any branch profits taxes imposed by the United States of America or any similar tax imposed by
any other jurisdiction in which the Borrower is located and (c) in the case of a Foreign Lender,
any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such
Foreign Lender becomes a party hereto (or designates a new lending office) or is attributable to
such Foreign Lenders failure or inability (other than as a result of a Change in Law) to comply
with Section 2.12(e), except to the extent that such Foreign Lender (or its assignor, if any) was
entitled, at the time of designation of a new lending office (or assignment), to receive additional
amounts from the Borrower with respect to such withholding tax pursuant to Section 2.12(e).
Facing Fee has the meaning given such term in Section 2.07(d).
Federal Funds Rate means, for any day, the rate per annum (rounded upward, if necessary, to
the next higher 1/100th of 1%) equal to the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on
such day, as published by the Federal Reserve Bank of New York on the Domestic Business Day next
succeeding such day, provided that (i) if the day for which such rate is to be determined is not a
Domestic Business Day, the Federal Funds Rate for such day shall be such rate on such transactions
on the next
preceding Domestic Business Day as so published on the next succeeding Domestic Business Day,
and (ii) if such rate is not so published for any day, the Federal Funds Rate for such day shall be
the average rate charged to BB&T on such day on such transactions as determined by the
Administrative Agent.
Financing means (i) any transaction or series of transactions for the incurrence by a Loan
Party of any Debt in a principal amount greater than $25,000,000 or for the establishment of a
commitment to make advances which would constitute Debt of a Loan Party in a principal amount
greater than $25,000,000 and not by its terms subordinate and junior to other Debt of a Loan Party,
(ii) an obligation incurred in a transaction or series of transactions in which assets of a Loan
Party are sold and leased back, or (iii) a sale of accounts or other receivables or any interest
therein; provided however, Qualified Installment Sale Transactions shall be excluded from this
definition.
Fiscal Quarter means any fiscal quarter of the Borrower.
Fiscal Year means any fiscal year of the Borrower.
Foreign Lender means any Lender that is organized under the laws of a jurisdiction other
than that in which the Borrower is resident for tax purposes. For purposes of this definition, the
United States of America, each State thereof and the District of Columbia shall be deemed to
constitute a single jurisdiction.
Fund means any Person (other than a natural person) that is (or will be) engaged in making,
purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in
the ordinary course of its business.
GAAP means generally accepted accounting principles in the United States applied on a basis
consistent with those which, in accordance with Section 1.02, are to be used in making the
calculations for purposes of determining compliance with the terms of this Agreement.
Governmental Authority means the government of the United States of America or any other
nation, or of any political subdivision thereof, whether state or local, and any agency, authority,
instrumentality, regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to
government (including any supra-national bodies such as the European Union or the European Central
Bank).
Guarantee by any Person means any obligation, contingent or otherwise, of such Person
directly or indirectly guaranteeing any Debt or other obligation of any other Person and, without
limiting the generality of the foregoing, any obligation, direct or indirect, contingent or
otherwise, of such Person (i) to secure, purchase or pay (or advance or supply funds for the
purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership
arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to
provide collateral security, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for the
purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or in part),
provided that the term Guarantee shall not include endorsements for collection or deposit
in the ordinary course of business. The term Guarantee used as a verb has a corresponding
meaning.
Guaranteed Obligations means the Obligations, including without limitation, any and all
liabilities, indebtedness and obligations of any and every kind and nature, heretofore, now or
hereafter owing, arising, due or payable from the Borrower to one or more of the Lenders, the
Letter of Credit Issuer, the Hedge Counterparties, any Secured Party, the Administrative Agent, or
any of them, arising under or evidenced by this Agreement, the Notes, the Collateral Documents or
any other Loan Document.
Guarantors means collectively: (a) the Initial Guarantors, and (b) all Material Domestic
Subsidiaries acquired, formed or otherwise in existence after the Closing Date.
Hazardous Materials includes, without limitation, (a) solid or hazardous waste, as defined
in the Resource Conservation and Recovery Act of 1980, 42 U.S.C. §6901 et seq. and its implementing
regulations and amendments, or in any applicable state or local law or regulation, (b) any
hazardous substance, pollutant or contaminant, as defined in CERCLA, or in any applicable
state or local law or regulation, (c) gasoline, or any other petroleum product or by-product,
including crude oil or any fraction thereof, (d) toxic substances, as defined in the Toxic
Substances Control Act of 1976, or in any applicable state or local law or regulation and (e)
insecticides, fungicides, or rodenticides, as defined in the Federal Insecticide, Fungicide, and
Rodenticide Act of 1975, or in any applicable state or local law or regulation, as each such Act,
statute or regulation may be amended from time to time.
Hedge Counterparty means any Person that (i) has provided the Administrative Agent with a
fully executed designation notice, substantially in the form of Schedule A Designation
Notice and (ii) enters into a Hedging Agreement with the Borrower that is permitted by Section 5.34
to the extent that (a) such Person is a Lender or any other Person that was a Lender at the time it
entered into the Hedging Agreement but has ceased to be a Lender under the Credit Agreement or (b)
such Person is a Lender on the Closing Date or becomes a Lender after the Closing Date in
connection with the primary syndication thereof and the Hedging Agreement was entered into on or
prior to the Closing Date (even if such Person ceases to be a Lender); provided, in the case of a
Hedging Agreement with a Person who is no longer a Lender, such Person shall be considered a Hedge
Counterparty only through the stated maturity date (without extension or renewal) of such Hedging
Agreement.
Hedge Transaction of any Person shall mean any transaction (including an agreement with
respect thereto) now existing or hereafter entered into by such Person that is a rate swap, basis
swap, forward rate transaction, commodity swap, interest rate option, foreign exchange transaction,
cap transaction, floor transaction, collateral transaction,
forward transaction, currency swap transaction, cross-currency rate swap transaction, currency
option or any other similar transaction (including any option with respect to any of these
transactions) or any combination thereof, whether linked to one or more interest rates, foreign
currencies, commodity prices, equity prices or other financial measures.
Hedging Agreement means each agreement between the Borrower and a Hedge Counterparty that
governs one or more Hedge Transactions entered into pursuant to Section 5.34, which agreement shall
consist of a Master Agreement in a form published by the International Swaps and Derivatives
Association, Inc., together with a Schedule thereto in the form the Administrative Agent shall
approve in writing, and each Confirmation thereunder confirming the specific terms of each such
Hedge Transaction.
Hedging Obligations of any Person shall mean any and all obligations of such Person, whether
absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired under
(i) any and all Hedge Transactions, (ii) any and all cancellations, buy backs, reversals,
terminations or assignments of any Hedge Transactions and (iii) any and all renewals, extensions
and modifications of any Hedge Transactions and any and all substitutions for any Hedge
Transactions.
Identified Mortgaged Property means Properties described in Schedule 1.01 Identified
Mortgaged Property (as such schedule is amended from time to time pursuant to the terms of this
Agreement), which Properties shall not at any time: (i) include any Encumbered Land (as defined in
Section 5.13(l); or (ii) consist of fewer than 200,000 acres in the aggregate.
Indemnified Taxes means Taxes other than Excluded Taxes.
Initial Guarantors means (i) St. Joe Timberland Company, (ii) St. Joe Finance Company, a
Florida corporation and (iii) St. Joe Residential Acquisitions, Inc., a Florida corporation.
Interest Payment Date means: (i) as to each Index Euro-Dollar Advance, the first day of each
month; and (ii) as to each Base Rate Advance, the first day of each month.
Interest Period means: (i) with respect to each Tranche Euro-Dollar Borrowing, the period
commencing on the date of such Borrowing and ending on the numerically corresponding day in the
first, second or third month thereafter, as the Borrower may elect in the applicable Notice of
Borrowing; provided that:
(a) any Interest Period (subject to clause (c) below) which would otherwise end on a day
which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar
Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which
case such Interest Period shall end on the next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar
month (or on a day for which there is no numerically corresponding day in the appropriate
subsequent calendar month) shall, subject to clause (c) below, end on the last Euro-Dollar
Business Day of the appropriate subsequent calendar month; and
(c) no Interest Period may be selected that begins before the Termination Date and would
otherwise end after the Termination Date.
(ii) with respect to each Base Rate Borrowing and each Index Euro-Dollar Borrowing, a calendar
month (commencing on the first day of each calendar month and ending on the last day of each
calendar month regardless of whether a Base Rate Borrowing or Index Euro-Dollar Borrowing is
outstanding on either date); provided that:
(a) the initial Interest Period applicable to Base Rate Borrowings and Index Euro-Dollar
Borrowings shall mean the period commencing on the Closing Date and ending September 30, 2008;
and
(b) the last Interest Period applicable to Base Rate Borrowings and Index Euro-Dollar
Borrowings under this Agreement shall end on the Termination Date.
Investment means any investment in any Person, whether by means of (i) purchase or
acquisition of all or substantially all of the assets of such Person (or of a division or line of
business of such Person), (ii) purchase or acquisition of obligations or securities of such Person,
(iii) capital contribution to such Person, (iv) loan or advance to such Person, (v) making of a
time deposit with such Person, (vi) Guarantee or assumption of any obligation of such Person or
(vii) by any other means.
Joinder Agreement means a Joinder and Reaffirmation Agreement substantially in the form of
Exhibit D.
Land means land on which no development (other than improvements that are not material or
are temporary in nature) has occurred.
Lender means each lender listed on the signature pages hereof as having a Revolver
Commitment (including for the avoidance of doubt any signature page executed by an Additional
Lender pursuant to a joinder agreement in accordance with Section 2.14) and their respective
successors and assigns.
Lending Office means, as to each Lender, its office located at its address set forth on the
signature pages hereof (or identified on the signature pages hereof as its Lending Office) or such
other office as such Lender may hereafter designate as its Lending Office by notice to the Borrower
and the Administrative Agent.
Letter of Credit means a letter of credit issued by the Letter of Credit Issuer for the
account of the Borrower pursuant to Article XI.
Letter of Credit Application Agreement means, with respect to a Letter of Credit, such form
of application therefor (whether in a single or several documents) as the Letter of Credit Issuer
may employ in the ordinary course of business for its own account, whether or not providing for
collateral security, with such modifications thereto as may by agreed upon by the Letter of Credit
Issuer and the Borrower and are not materially adverse to the interests of the Lenders; provided,
however, that in the event of any conflict between the terms of any Letter of Credit Application
Agreement and
this Agreement, the terms of this Agreement shall control.
Letter of Credit Fee has the meaning set forth in Section 2.07(c).
Letter of Credit Issuer means BB&T.
Letter of Credit Obligations means, at any particular time, the sum of (a) the Reimbursement
Obligations at such time, (b) the aggregate maximum amount available for drawing under the Letters
of Credit at such time and (c) the aggregate maximum amount available for drawing under Letters of
Credit the issuance of which has been authorized by the Letter of Credit Issuer but which have not
yet been issued.
Lien means, with respect to any asset, any mortgage, deed to secure debt, deed of trust,
lien, pledge, charge, security interest, security title, preferential arrangement which has the
practical effect of constituting a security interest or encumbrance, servitude or encumbrance of
any kind in respect of such asset to secure or assure payment of a Debt or a Guarantee, whether by
consensual agreement or by operation of statute or other law, or by any agreement, contingent or
otherwise, to provide any of the foregoing. For the purposes of this Agreement, the Borrower or any
Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease
or other title retention agreement relating to such asset.
Liquidity means at any time the sum of: (1) the aggregate cash of the Borrower and its
Consolidated Subsidiaries that are Guarantors, (2) the aggregate Cash Equivalents of the Borrower
and its Consolidated Subsidiaries that are Guarantors, and (3) the Total Unused Revolver
Commitments.
Loan Documents means this Agreement, the Notes, the Letter of Credit Application Agreements,
the Collateral Documents, the Hedging Agreements, any other document evidencing or securing the
Advances or the Letters of Credit, and any other document or instrument delivered from time to time
in connection with this Agreement, the Notes, the Letter of Credit Application Agreements, the
Collateral Documents, the Hedging Agreements, the Advances or the Letters of Credit, as such
documents and instruments may be amended or supplemented from time to time.
Loan Parties means collectively the Borrower and each Guarantor that is now or hereafter a
party to any of the Loan Documents.
London InterBank Offered Rate has the meaning set forth in Section 2.06(c).
Margin Stock means margin stock as defined in Regulations T, U or X of the Board of
Governors of the Federal Reserve System, as in effect from time to time, together with all official
rulings and interpretations issued thereunder.
Margin and Fee Rate Certificate has the meaning set forth in Section 5.01(i).
Material Adverse Effect means with respect to any event, act, condition or occurrence of
whatever nature (including any adverse determination in any litigation, arbitration, or
governmental investigation or proceeding), whether singly or in conjunction with any other event or
events, act or acts, condition or conditions, occurrence or occurrences, whether or not related, a
material adverse change in, or a material adverse effect upon, any of (a) the financial condition,
operations, business or properties of the Loan Parties and their respective Subsidiaries taken as a
whole, (b) the rights and remedies of the Administrative Agent or the Lenders under the Loan
Documents, or the ability of the Borrower or any other Loan Party to perform its obligations under
the Loan Documents to which it is a party, as applicable, or (c) the legality, validity or
enforceability of any Loan Document.
Material Contract has the meaning given such term in Section 4.33.
Material Domestic Subsidiary means any Subsidiary: (1) which is organized under the laws of
any state or territory of the United States of America; (2) which is not an Excluded Subsidiary;
and (3) as to which more than $25,000,000 of Total Asset Value is attributable; provided that, in
no event (and notwithstanding the definition of Excluded Subsidiary) shall Subsidiaries that are
not Loan Parties account for more than 10% of the aggregate Total Asset Value of the Borrower and
its Subsidiaries. For purposes of the foregoing proviso, Qualified SPEs and any Excluded
Subsidiary
described in subsection 1 of the definition of Excluded Subsidiary, the sole purpose of which is to
defease debt of such Subsidiary and which owns Cash Equivalents in an amount reasonably determined
to be sufficient to defease such debt, shall be disregarded.
Material Foreign Subsidiary means any Subsidiary which is: (1) not a Material Domestic
Subsidiary; and (2) to which more than $25,000,000 of Total Asset Value is attributable.
Mortgage means, collectively the fee simple and leasehold mortgages, deeds of trust and
deeds to secure debt by the Borrower executed and delivered, or to be executed and delivered,
pursuant to Section 5.38, in form and content substantially similar to Exhibit J and otherwise
satisfactory to the Administrative Agent and in each case granting a Lien to the Administrative
Agent (or a trustee for the benefit of the Administrative Agent) for the benefit of the Secured
Parties in Collateral constituting real property (including certain real property leases) and
related personalty, as such documents may be amended, modified or supplemented from time to time.
Mortgaged Property means, collectively, (i) the Identified Mortgaged Property, (ii) any
Property owned by St. Joe Timberland from time to time and (iii) any other Mortgaged Property (as
defined in any Mortgage).
Mortgaged Property Security Documents means collectively, the Mortgages and all other
agreements, instruments and other documents, whether now existing or hereafter in effect, pursuant
to which the Borrower or any Subsidiary grants or conveys to the Administrative Agent and the
Secured Parties a Lien in, or any other Person acknowledges any such Lien in, real property as
security for all or any portion of the Obligations, as any of them may be amended, modified or
supplemented from time to time.
Mortgaged Property Support Documents means, for each Mortgaged Property, (i) the title
commitment pertaining thereto (in the case of a Collateral Diligence Enhancement Event) and the
Title Policy pertaining thereto (in the case of a Trigger Event), (ii) surveys (unless the title
insurance company will insure over the absence of survey), flood hazard certifications and
environmental assessments thereof in form and substance satisfactory to Administrative Agent,
prepared by recognized experts in their respective fields acceptable to the Administrative Agent,
(iii) opinions of local counsel with respect to the Mortgages in form and substance satisfactory
to the Administrative Agent (in the case of a Trigger Event), and (iv) such other documentation as
the Administrative Agent may reasonably require, in each case as shall be in form and substance
reasonably acceptable to the Administrative Agent.
Multiemployer Plan has the meaning set forth in Section 4001(a)(3) of ERISA.
Net Income means, as applied to any Person for any period, the aggregate amount of net
income of such Person, after taxes, for such period, as determined in accordance with GAAP.
Net Proceeds of Capital Securities/Conversion of Debt means any and all proceeds (whether
cash or non-cash) or other consideration received by the Borrower or any Subsidiary of the Borrower
in respect of the issuance of Capital Securities (including, without limitation, the aggregate
amount of any and all Debt converted into Capital Securities), after deducting therefrom all
reasonable and customary costs and expenses (including reasonable and customary brokerage and
investment banking fees and commissions) incurred by the Borrower or Subsidiary directly in
connection with the issuance of such Capital Securities.
Notes means collectively the Revolver Notes and Swing Advance Note and any and all
amendments, consolidations, modifications, renewals, substitutions and supplements thereto or
replacements thereof. Note means any one of such Notes.
Notice of Borrowing has the meaning set forth in Section 2.02.
Notice of Continuation or Conversion has the meaning set forth in Section 2.03.
Obligations means the collective reference to all of the following indebtedness obligations
and liabilities: (a) the due and punctual payment by the Borrower of: (i) the principal of and
interest on the Notes (including without limitation, any and all Revolver Advances and Swing
Advances), when and as due, whether at maturity, by acceleration, upon one or more dates set for
prepayment or otherwise and any renewals, modifications or extensions thereof, in whole
or in part;
(ii) each payment required to be made by the Borrower under this Agreement and the Letter of Credit
Application Agreements, when and as due, including payments in respect of reimbursement of
disbursements, interest thereon, and obligations, if any, to provide cash collateral and any
renewals, modifications or extensions thereof, in whole or in part; and (iii) all other monetary
obligations of the Borrower to the Secured Parties under this Agreement and the other Loan
Documents to which the Borrower is or is to be a party and any renewals, modifications or
extensions thereof, in whole or in part; (b) the due and punctual performance of all other
obligations of the Borrower under this Agreement and the other Loan Documents to which the Borrower
is or is to be a party, and any renewals, modifications or extensions thereof, in whole or in part;
(c) the due and punctual payment (whether at the stated maturity, by acceleration or otherwise) of
all obligations (including any and all Hedging Obligations arising under the Hedging Agreements and
obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would
become due), indebtedness and liabilities of the Borrower, now existing or hereafter incurred
under, arising out of or in connection with any and all Hedging Agreements and any renewals,
modifications or extensions thereof (including, all obligations, if any, of the Borrower as
guarantor under the Credit Agreement in respect of Hedging Agreements), and the due and punctual
performance and compliance by the Borrower with all of the terms, conditions and agreements
contained in any Hedging Agreement and any renewals, modifications or extensions thereof; (d) the
due and punctual payment and performance of all indebtedness, liabilities and obligations of any
one or more of the Borrower and Guarantors arising out of or relating to any Bank Products; (e) the
due and punctual payment and performance of all indebtedness, liabilities and obligations of any
one or more of the Borrower and Guarantors arising out of or relating to any Cash Management
Services; and (f) the due and punctual payment and performance of all obligations of each of the
Guarantors under the Credit Agreement and the other Loan Documents to which they are or are to be a
party and any and all renewals, modifications or extensions thereof, in whole or in part.
OFAC means The Office of Foreign Assets Control of the U.S. Department of the Treasury.
Officers Certificate has the meaning set forth in Section 3.01(e).
Operating Documents means with respect to any corporation, limited liability company,
partnership, limited partnership, limited liability partnership or other legally authorized
incorporated or unincorporated entity, the bylaws, operating agreement,
partnership agreement, limited partnership agreement, shareholder agreement or other
applicable documents relating to the operation, governance or management of such entity.
Organizational Action means with respect to any corporation, limited liability company,
partnership, limited partnership, limited liability partnership or other legally authorized
incorporated or unincorporated entity, any corporate, organizational or partnership action
(including any required shareholder, member or partner action), or other similar official action,
as applicable, taken by such entity.
Organizational Documents means with respect to any corporation, limited liability company,
partnership, limited partnership, limited liability partnership or other legally authorized
incorporated or unincorporated entity, the articles of incorporation, certificate of incorporation,
articles of organization, certificate of limited partnership or other applicable organizational or
charter documents relating to the creation of such entity.
Other Taxes means all present or future stamp or documentary taxes or any other excise or
property taxes, charges or similar levies arising from any payment made hereunder or under any
other Loan Document or from the execution, delivery or enforcement of, or otherwise with respect
to, this Agreement or any other Loan Document.
Participant has the meaning assigned to such term in clause (d) of Section 9.07.
PBGC means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all
of its functions under ERISA.
Permitted Encumbrances means Liens described in Section 5.13(b), (d), (g), (h), (j), (l) and
(m).
Person means a natural person, a corporation, a limited liability company, a partnership
(including without limitation, a joint venture), an unincorporated association, a trust or any
other entity or organization, including, but not limited to, a Governmental Authority.
Plan means at any time an employee pension benefit plan which is covered by Title IV of
ERISA or subject to
the minimum funding standards under Section 412 of the Code and is either (i)
maintained by a member of the Controlled Group for employees of any member of the Controlled Group
or (ii) maintained pursuant to a collective bargaining agreement or any other arrangement under
which more than one employer makes contributions and to which a member of the Controlled Group is
then making or accruing an obligation to make contributions or has within the preceding 5 plan
years made contributions.
Pledge Agreement means the Equity Pledge Agreement, dated as of the Closing Date,
substantially in the form of Exhibit N, pursuant to which Borrower pledges to the
Administrative Agent for the benefit of the Secured Parties, among other things, (i) all of the
capital stock and equity interests of St. Joe Timberland; and (ii) sixty-five percent (65%) of the
capital stock and equity interests of each current or future Material Foreign Subsidiary.
Prime Rate refers to that interest rate so denominated and set by BB&T from time to time as
an interest rate basis for borrowings. The Prime Rate is but one of several interest rate bases
used by BB&T. BB&T lends at interest rates above and below the Prime Rate. The Prime Rate is not
necessarily the lowest or best rate charged by BB&T to its customers or other banks.
Proceeds shall have the meaning given to it under the U.C.C. and shall include without
limitation the collections and distributions of Collateral, cash or non-cash.
Properties means all real property owned, leased or otherwise used or occupied by a Loan
Party, any Subsidiary of a Loan Party or any Unconsolidated Affiliate of a Loan Party, wherever
located. Property means any one of such Properties.
Qualified Installment Sale Note means a promissory note evidencing the consideration due to
the seller in a Qualified Installment Sale Transaction, which promissory note is secured by a
standby letter of credit, guaranty or other similar form of credit enhancement (a) issued for the
account of the purchaser in such Qualified Installment Sale Transaction by a Person having a credit
rating of A or A2 from Standard & Poors Rating Services or Moodys Investors Service, Inc. at the
time of issuance and (b) in an amount not less than the principal amount of such promissory note
plus accrued interest for a period which is at least thirty days longer than the interval at which
interest is due and payable under such promissory note.
Qualified Installment Sale Transaction means the sale of real and personal property of the
Borrower or a Subsidiary in exchange for a Qualified Installment Sale Note in an aggregate
principal amount not to exceed $200,000,000 issued by the purchaser of such real and personal
property, which Qualified Installment Sale Note is assigned, together with the standby letter of
credit, guaranty or other similar form of credit enhancement securing such instrument, for cash to
a Qualified SPE which in turn will issue its Qualified Senior Notes in an aggregate principal
amount not to exceed $200,000,000 directly to a purchaser thereof or to a trustee acting on behalf
of Persons acquiring interests in such Qualified Senior Notes in a private placement.
Qualified Senior Note means the senior promissory note(s) or taxable variable rate demand
bonds issued by a Qualified SPE directly to a purchaser thereof or to a trustee acting on behalf of
Persons acquiring interests in such note(s) or bonds in a private placement in connection with a
Qualified Installment Sale Transaction and secured solely by a Qualified Installment Sale Note and
related letter of credit, guaranty
or other similar form of credit enhancement held by such Qualified SPE; provided that
in no event shall the Borrower or any Subsidiary of the Borrower (other than the Qualified SPE)
have any indebtedness, liability or obligations under or in connection with such Qualified Senior
Note.
Qualified SPE means a Wholly Owned Subsidiary of the Borrower formed as a special purpose
entity in connection with a Qualified Installment Sale Transaction for the sole purpose of (a)
owning and holding the Qualified Installment Sale Note issued in connection with such Qualified
Installment Sale Transaction, together with the standby letter of credit, guaranty or other similar
form of credit enhancement securing such Qualified Installment Sale Note, (b) issuing a Qualified
Senior Note to be secured solely by such Qualified Installment Sale Note and related standby letter
of credit, guaranty or other similar form of credit enhancement and (c) and engaging in other
activities incidental to the foregoing.
Quarterly Payment Date means each March 31, June 30, September 30 and December 31, or, if
any such day is not a Domestic Business Day, the next succeeding Domestic Business Day.
Redeemable Preferred Securities of any Person means any preferred stock or similar Capital
Securities (including, without limitation, limited liability company membership interests and
limited partnership interests) issued by such Person which is at any time prior to the Termination
Date either (i) mandatorily redeemable (by sinking fund or similar payments or otherwise) or (ii)
redeemable at the option of the holder thereof.
Register has the meaning set forth in Section 9.07(c).
Reimbursement Obligations means the reimbursement or repayment obligations of the Borrower
to the Letter of Credit Issuer pursuant to Section 11.05 with respect to Letters of Credit.
REIT Pledge Agreement means the Pledge Agreement, dated as of the Closing Date, pursuant to
which St. Joe Finance Company pledges to the Administrative Agent for the benefit of the Secured
Parties, among other things, all of its right, title and interest in, to and under the Collateral
described therein.
Related Parties means, with respect to any Person, such Persons Affiliates and the
partners, directors, officers, employees, agents and advisors of such Person and of such Persons
Affiliates.
Required Lenders means at any time Lenders having at least 66-2/3% of the aggregate amount
of the Revolver Commitments or, if the Revolver Commitments are no longer in effect, Lenders
holding at least 66-2/3% of the aggregate outstanding principal amount of the Revolver Notes and
the Letter of Credit Obligations.
Responsible Officer means (a) with respect to the Borrower, the chief executive officer, the
president, the chief financial officer, controller or treasurer, and any other officer or similar
official thereof responsible for the administration of the obligations of the Borrower in respect
of this Agreement, and (b) with respect to any Subsidiary, the chief executive officer or the chief
financial officer of such Subsidiary.
Restricted Payment means (i) any dividend or other distribution on any shares of the
Borrowers or any of its Subsidiaries Capital Securities (except dividends payable solely in
shares of its Capital Securities); or (ii) any payment on account of the purchase, redemption,
retirement or acquisition of (a) any shares of the Borrowers or any of its Subsidiaries Capital
Securities (except shares acquired upon the conversion thereof into other shares of its Capital
Securities or shares surrendered by officers or directors in connection with the vesting of
restricted Capital Securities or the exercise of options, warrants or other rights to acquire
shares) or (b) any option, warrant or other right to acquire shares of the Borrowers or any of its
Subsidiaries Capital Securities.
Revolver Advance means an advance made to the Borrower under this Agreement pursuant to
Section 2.01(a) or a Swing Advance made to the Borrower under this Agreement pursuant to Section
2.01(b). A Revolver Advance is a Tranche Euro-Dollar Advance if such Revolver Advance has an
Interest Period described in subsection (1) of the definition of Interest Period. A Revolver
Advance is an Index Euro-Dollar Advance if such Revolver Advance is a Euro-Dollar Advance and has
an Interest Period described in subsection (2) of the definition of Interest Period.
Revolver Commitment means, with respect to each Lender, (i) the amount set forth opposite
the name of such Lender on the signature pages hereof, or (ii) as to any Lender which enters into
an Assignment and Assumption (whether as transferor Lender or as assignee thereunder), the amount
of such Lenders Revolver Commitment after giving effect to such Assignment and Assumption, in each
case as such amount may be reduced from time to time pursuant to Sections 2.08 and 2.09.
Revolver Notes means the promissory notes of the Borrower, substantially in the form of
Exhibit B hereto, evidencing the obligation of the Borrower to repay the Revolver Advances,
together with all amendments, consolidations, modifications, renewals, substitutions and
supplements thereto or replacements thereof and Revolver Note means any one of such Revolver
Notes.
Sale/Leaseback Transaction means any arrangement with any Person providing, directly or
indirectly, for the leasing by any Loan Party or any of its Subsidiaries of real or personal
property which has been or is to be sold or transferred by any Loan Party or such Subsidiary to
such Person or to any other Person to whom funds have been or are to be advanced by such Person on
the security of such property or rental obligations of any Loan Party or such Subsidiary.
Sanctioned Entity shall mean (i) a country or a government of a country, (ii) an agency of
the government of a country, (iii) an organization directly or indirectly
controlled by a country or its government, (iv) a person or entity resident in or determined
to be resident in a country, that is subject to a country sanctions program administered and
enforced by OFAC described or referenced at
http://www.ustreas.gov/offices/enforcement/ofac/ or as otherwise published from time to
time.
Secured Parties shall mean collectively: (1) the Administrative Agent in its capacity as
such under this Agreement, the Collateral Documents and the other Loan Documents; (2) the Lenders,
(3) the Hedge Counterparties in their capacity as such under the Hedging Agreements; (4) the Letter
of Credit Issuer; and (5) the successors and assigns of the foregoing.
Security Agreement means the General Security Agreement, substantially in the form of
Exhibit H, by and between St. Joe Timberland and the Administrative Agent for the benefit of the
Secured Parties to be executed and delivered upon the occurrence of a Trigger Event.
SJF Mortgages means the mortgages described in Item 1 on Schedule 5.13. The SJF Mortgages
shall not be recorded without the prior written consent of the Administrative Agent and shall be
subordinated pursuant to the Subordination Agreement.
St. Joe Timberland means St. Joe Timberland Company of Delaware, L.L.C., a Delaware limited
liability company.
Stockholders Equity means at any time, the shareholders and other interest owners equity
of the Borrower and its Consolidated Subsidiaries, as set forth or reflected on the most recent
consolidated balance sheet of the Borrower and its Consolidated Subsidiaries prepared in accordance
with GAAP, but excluding any Redeemable Preferred Securities of the Borrower or any
of its respective Consolidated Subsidiaries. Shareholders and other interest owners equity
generally would include, but not be limited to (i) the par or stated value of all outstanding
Capital Securities, (ii) capital surplus, (iii) retained earnings, and (iv) various deductions such
as (A) purchases of treasury stock, (B) valuation allowances, (C) receivables due from an employee
stock ownership plan, (D) employee stock ownership plan debt guarantees, and (E) translation
adjustments for foreign currency transactions.
Swing Advance means an Advance made by BB&T pursuant to Section 2.01(b), which must be a
Base Rate Advance.
Swing Advance Note means the promissory note of the Borrower, substantially in the form of
Exhibit B-2, evidencing the obligation of the Borrower to repay the Swing Advances,
together with all amendments, consolidations, modifications, renewals, and supplements thereto.
Subordination Agreement has the meaning set forth in Section 5.10.
Subsidiary of any Person means a corporation, partnership or other entity of which shares of
stock or other ownership interests having ordinary voting power (other than stock or such other
ownership interest having such power only by reason of the happening of a contingency) to elect a
majority of the board of directors or other managers of such corporation, partnership or other
entity are at the time owned, or the management of which is otherwise controlled, directly or
indirectly through one or more intermediaries, or both, by such Person. Unless otherwise qualified,
all references to a Subsidiary or to Subsidiaries in this Agreement shall refer to a Subsidiary
or Subsidiaries of the Borrower.
Syndicated Borrowing has the meaning set forth in the definition of Borrowing.
Taxes means all present or future taxes, levies, imposts, duties, deductions, withholdings,
assessments, fees or other charges imposed by any Governmental Authority, including any interest,
additions to tax or penalties applicable thereto.
Termination Date means the earlier to occur of (i) September 19, 2011, (ii) the date the
Revolver Commitments are terminated pursuant to Section 6.01 following the occurrence of an Event
of Default, or (iii) the date the
Borrower terminates the Revolver Commitments entirely pursuant to
Section 2.09.
Third Parties means all lessees, sublessees, licensees and other users of the Properties,
excluding those users of the Properties in the ordinary course of the Borrowers business and on a
temporary basis.
Timberland Collateral means the Mortgaged Properties and all other property and assets
intended to be encumbered by the Timberland Collateral Documents.
Timberland Collateral Documents means collectively the Mortgages, Security Agreement and all
other agreements (including control agreements), instruments and other documents, whether now
existing or hereafter in effect, pursuant to which St. Joe Timberland shall grant or convey (or
shall have granted or conveyed) to the Secured Parties a Lien in, or any other Person shall
acknowledge any such Lien in, property as security for all or any portion of the Obligations, as
any of them may be amended, modified or supplemented from time to time.
Title Policy means with respect to each Mortgaged Property, the mortgagee title insurance
policy (together with such endorsements as the Administrative Agent may reasonably require) issued
to the Administrative Agent in respect of such Mortgaged Property by an insurer selected by St. Joe
Timberland and reasonably acceptable to Administrative Agent, insuring (in an amount reasonably
satisfactory to the Administrative Agent not to exceed the aggregate commitments of the Lenders)
the Lien of the Administrative Agent for the benefit of the Secured Parties on such Mortgaged
Property to be duly perfected and first priority, subject only to usual and customary exceptions
and such other exceptions as shall be acceptable to the Administrative Agent;
provided that in no event shall such exceptions be other than those permitted by Section 5.13.
Total Asset Value means the sum of all of the following (without duplication) of the
Borrower and its Subsidiaries on a consolidated basis determined in accordance with GAAP applied on
a consistent basis: (a) with respect to Land, an amount equal to $2,000 per acre, plus (b) the
undepreciated GAAP book value of all other tangible assets of the Borrower, each of the Guarantors
and their respective Subsidiaries that would, in accordance with GAAP, be classified as assets on a
consolidated balance sheet of the Borrower, the Guarantors and their respective Subsidiaries as of
such date. The Borrowers pro rata share of assets held by Unconsolidated Affiliates will be
included in Total Asset Value calculations consistent with the above described treatment for wholly
owned assets.
Total Indebtedness means all Debt of the Borrower and all Subsidiaries determined on a
consolidated basis.
Total Unused Revolver Commitments means at any date, an amount equal to: (A) the aggregate
amount of the Revolver Commitments of all of the Lenders at such time, less (B) the sum of the
aggregate outstanding principal amount of the Revolver Advances of all of the Lenders at such time
and the Letter of Credit Obligations.
Trigger Event shall mean the occurrence of any Event of Default.
U.C.C. shall mean the Uniform Commercial Code as in effect in the State of North Carolina
or, when the context relates to perfection or priority of a security interest, the Uniform
Commercial Code as in effect from time to time.
Unconsolidated Affiliate means, with respect to any Person, any other Person in whom such
Person holds an Investment, which Investment is accounted for in the financial statements of such
Person on an equity basis of accounting and whose financial results would not be consolidated under
GAAP with the financial results of such Person on the consolidated financial statements of such
Person.
Undrawn Amounts means as of any date the aggregate undrawn amount of all Letters of Credit
then issued and outstanding.
Unencumbered Asset Value means Total Asset Value determined with respect to assets and
Properties which are not encumbered by a Lien.
Unsecured Debt means Debt which is not secured by a Lien.
USA Patriot Act means the Uniting and Strengthening America by Providing Appropriate Tools
Required to
Intercept and Obstruct Terrorism Act of 2001, Pub. L. 107-56, signed into law
October 26, 2001.
Voting Stock means securities (as such term is defined in Section 2(1) of the Securities Act
of 1933, as amended) of any class or classes, the holders of which are ordinarily, in the absence
of contingencies, entitled to cast votes in any election of any corporate directors (or Persons
performing similar functions).
Wholly Owned Subsidiary means any Subsidiary all of the Capital Securities of which are at
the time directly or indirectly owned by the Borrower; provided that for purposes of this
definition the preferred shareholders of St. Joe Finance Company shall be disregarded.
SECTION 1.02. Accounting Terms and Determinations. Unless otherwise specified herein,
all terms of an accounting character used herein shall be interpreted, all accounting
determinations hereunder shall be made, and all financial statements required to be delivered
hereunder shall be prepared in accordance with GAAP, applied on a basis consistent (except for
changes concurred in by the Borrowers independent public accountants or otherwise required by a
change in GAAP) with the most recent audited consolidated financial statements of the Borrower and
its Consolidated Subsidiaries delivered to the Administrative Agent for distribution to the
Lenders, unless with respect to any such change concurred in by the Borrowers independent public
accountants or required by GAAP, in determining compliance with any of the provisions of this
Agreement or any of the other Loan Documents: (i) the Borrower shall have objected to determining
such compliance on such basis at the time of delivery of such financial statements, or (ii) the
Required Lenders shall so object in writing within 30 days after the delivery of such financial
statements, in either of which events such calculations shall be made on a basis consistent with
those used in the preparation of the latest financial statements as to which such objection shall
not have been made (which, if objection is made in respect of the first financial statements
delivered under Section 5.01 hereof, shall mean the financial statements referred to in
Section 4.04).
SECTION 1.03. Use of Defined Terms. All terms defined in this Agreement shall have the
same meanings when used in any of the other Loan Documents, unless otherwise defined therein or
unless the context shall otherwise require.
SECTION 1.04. Terms Generally. The definitions of terms herein shall apply equally to
the singular and plural forms of the terms defined. Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter forms. The words include,
includes and including shall be deemed to be followed by the phrase without limitation. The
word will shall be construed to have the same meaning and effect as the word shall. Unless the
context requires otherwise (a) any definition of or reference to any agreement, instrument or other
document herein shall be construed as referring to such agreement, instrument or other document as
from time to time amended, supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference herein to any Person
shall be construed to include such Persons successors and assigns, (c) the words herein,
hereof and hereunder, and words of similar import, shall be construed to refer to this
Agreement in its entirety and not to any particular provision
hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be
construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement,
(e) any reference to any law or regulation herein shall, unless otherwise specified, refer to such
law or regulation as amended, modified or supplemented from time to time; (f) the words asset and
property shall be construed to have the same meaning and effect and to refer to any and all
tangible and intangible assets and properties, including cash, securities, accounts and contract
rights; and (g) titles of Articles and Sections in this Agreement are for convenience only, and
neither limit nor amplify the provisions of this Agreement.
ARTICLE II
THE CREDIT
SECTION 2.01. Commitments to Make Advances.
(a) Syndicated Revolver Advances Each Lender severally agrees, on the terms and
conditions set forth herein, to make Revolver Advances to the Borrower from time to time
before the Termination Date; provided that, immediately after each such Revolver
Advance is made, the aggregate outstanding principal amount of Revolver Advances by such
Lender together with such Lenders Applicable Percentage of the aggregate outstanding
principal amount of all Swing Advances and Letter of Credit Obligations shall not exceed the
amount of the Revolver Commitment of such Lender at such time, provided
further that the aggregate principal amount of all Revolver Advances, together with
the aggregate principal amount of all Letter of Credit Obligations and Swing Advances shall
not exceed the aggregate
amount of the Revolver Commitments of all of the Lenders at such
time. Each Syndicated Borrowing under this Section 2.01 shall be in an aggregate principal
amount of $500,000 or any larger multiple of $100,000 (except that any such Syndicated
Borrowing may be in the aggregate amount of the Total Unused Revolver Commitments less Swing
Advances) and shall be made from the several Lenders ratably in proportion to their respective
Revolver Commitments. Within the foregoing limits, the Borrower may borrow under this Section,
repay or, to the extent permitted by Section 2.10, prepay Revolver Advances and reborrow under
this Section 2.01 at any time before the Termination Date.
(b) Swing Advances. In addition to the foregoing, BB&T shall from time to time,
upon the request of the Borrower, if the applicable conditions precedent in Article III have
been satisfied, make Swing Advances to the Borrower in an aggregate principal amount at any
time outstanding not exceeding $5,000,000; provided that, immediately after such Swing Advance
is made, the conditions set forth in Section 2.01(a) shall have been satisfied. Each Swing
Advance Borrowing under this Section 2.01(b) shall be in an aggregate principal amount of
$500,000 or any larger multiple of $100,000. Within the foregoing limits, the Borrower may
borrow under this Section 2.01(b), prepay and reborrow under this Section 2.01(b) at any time
before the Termination Date. All Swing Advances shall be made as Base
Rate Advances. At any time, upon the request of BB&T, each Lender other than BB&T shall,
on the third Domestic Business Day after such request is made, purchase a participating
interest in Swing Advances in an amount equal to its ratable share (based upon its respective
Revolver Commitment) of such Swing Advances. On such third Domestic Business Day, each Lender
will immediately transfer to BB&T, in immediately available funds, the amount of its
participation. Whenever, at any time after BB&T has received from any such Lender its
participating interest in a Swing Advance, the Administrative Agent receives any payment on
account thereof, the Administrative Agent will distribute to such Lender its participating
interest in such amount (appropriately adjusted, in the case of interest payments, to reflect
the period of time during which such Lenders participating interest was outstanding and
funded); provided, however, that in the event that such payment received by the Administrative
Agent is required to be returned, such Lender will return to the Administrative Agent any
portion thereof previously distributed by the Administrative Agent to it. Each Lenders
obligation to purchase such participating interests shall be absolute and unconditional and
shall not be affected by any circumstance, including, without limitation: (i) any set-off,
counterclaim, recoupment, defense or other right which such Lender or any other Person may
have against BB&T requesting such purchase or any other Person for any reason whatsoever;
(ii) the occurrence or continuance of a Default or the termination of the Revolver
Commitments; (iii) any adverse change in the condition (financial, business or otherwise) of
any Loan Party or any other Person; (iv) any breach of this Agreement by any Loan Party or any
other Lender; or (v) any other circumstance, happening or event whatsoever, whether or not
similar to any of the foregoing.
SECTION 2.02. Method of Borrowing Advances.
(a) The Borrower shall give the Administrative Agent notice in the form attached hereto
as Exhibit A (a Notice of Borrowing) prior to (i) 11:00 A.M. (Eastern time) at least one
Domestic Business Day before each Base Rate Borrowing, and each Index Euro-Dollar Borrowing,
and (ii) 11:00 A.M. (Eastern time) at least three (3) Euro-Dollar Business Days before each
Tranche Euro-Dollar Borrowing, specifying:
(i) the date of such Borrowing, which shall be a Domestic Business Day in the case
of a Base Rate Borrowing or Index Euro-Dollar Borrowing and a Euro-Dollar Business Day
in the case of a Tranche Euro-Dollar Borrowing,
(ii) the aggregate amount of such Borrowing,
(iii) whether the Revolver Advances comprising such Borrowing are to be Base Rate
Advances, Tranche Euro-Dollar Advances or Index Euro-Dollar Advances, or stating that
such Borrowing is to be a Swing Line Borrowing and
(iv) in the case of a Tranche Euro-Dollar Borrowing, the duration of the Interest
Period applicable thereto, subject to the provisions of the definition of Interest
Period.
(b) Upon receipt of a Notice of Borrowing, the Administrative Agent shall promptly notify
each Lender of the contents thereof and (unless such Borrowing is a Swing Line Borrowing) of
such Lenders ratable share of such Borrowing and such Notice of Borrowing, once received by
the Administrative Agent, shall not thereafter be
revocable by the Borrower.
(c) Not later than 11:00 A.M. (Eastern time) on the date of each Borrowing, each Lender
shall make available its ratable share of such Borrowing, in Federal or other funds
immediately available in Winston-Salem, North Carolina, to the Administrative Agent at its
address referred to in or specified pursuant to Section 9.01. Unless the Administrative Agent
determines that any applicable condition specified in Article III has not been satisfied:
(1) in the case of a Syndicated Borrowing the Administrative Agent will disburse the funds so
received from the Lenders to the Borrower; and (2) in the case of a Swing Line Borrowing BB&T
will make available to the Borrower the amount of any such Swing Line Borrowing.
(d) Notwithstanding anything to the contrary contained in this Agreement, no Tranche
Euro-Dollar Borrowing may be made if there shall have occurred a Default, which Default shall
not have been cured or waived.
(e) In the event that a Notice of Borrowing fails to specify whether the Revolver
Advances comprising such Borrowing are to be Base Rate Advances, Tranche Euro-Dollar Advances
or Index Euro-Dollar Advances, such Revolver Advances shall be made as Base Rate Advances. If
the Borrower is otherwise entitled under this Agreement to repay any Revolver Advances
maturing at the end of an Interest Period applicable thereto with the proceeds of a new
Borrowing, and the Borrower fails to repay such Revolver Advances using its own moneys and
fails to give a Notice of Borrowing in connection with such new Borrowing, a new Borrowing
shall be deemed to be made on the date such Revolver Advances mature in an amount equal to the
principal amount of the Revolver Advances so maturing, and the Revolver Advances comprising
such new Borrowing shall be Base Rate Advances.
(f) Notwithstanding anything to the contrary contained herein, there shall not be more
than four (4) Interest Periods outstanding at any given time; provided that for purposes of
this Section 2.02(f), all Base Rate Advances shall constitute one Interest Period and all
Index Euro-Dollar Advances shall constitute one Interest Period.
SECTION 2.03. Continuation and Conversion Elections. By delivering a notice (a Notice
of Continuation or Conversion), which shall be substantially in the form of
Exhibit C, to the Administrative Agent on or before 12:00 P.M., Eastern time, on a Domestic
Business Day (or Euro-Dollar Business Day, in the case of Tranche Euro-Dollar Advances
outstanding), the Borrower may from time to time irrevocably elect, by notice one Domestic Business
Day prior in the case of a continuation of or conversion to Base Rate Advances or Index Euro-Dollar
Advances or three (3) Euro-Dollar Business Days prior in the case of a continuation of or
conversion to Tranche Euro-Dollar Advances, that all, or any portion in an aggregate principal
amount of $500,000 or any larger integral multiple of $100,000 be, (i) in the case of Base Rate
Advances, converted into Euro-Dollar Advances or (ii) in the case of Euro-Dollar Advances,
converted into Base Rate Advances or continued as Euro-Dollar Advances; provided, however,
that (x) each such conversion or continuation shall be pro rated among the applicable outstanding
Revolver Advances of all Lenders that have made such Revolver Advances, and (y) no portion of the
outstanding principal amount of any Revolver Advances may be continued as, or be converted into,
any Tranche Euro-Dollar Advance when any Default has occurred and is continuing. In the absence of
delivery of a Notice of Continuation or Conversion with respect to any Tranche Euro-Dollar Advance
at least three (3) Euro-Dollar Business Days before the last day of the then current Interest
Period with respect thereto, such Tranche Euro-Dollar Advance shall, on such last day,
automatically convert to a Index Euro-Dollar Advance.
SECTION 2.04. Notes. The Revolver Advances of each Lender shall be evidenced by a
single Revolver Note payable to the order of such Lender for the account of its Lending Office in
an amount equal to the original principal amount of such Lenders Revolver Commitment. Upon the
request of BB&T, the Swing Advances may be evidenced by a single Swing Advance Note payable to the
order of BB&T in the original principal amount of $5,000,000. Upon receipt of each Lenders Note
pursuant to Section 3.01, the Administrative Agent shall deliver such Note to such Lender. Each
Lender shall record, and prior to any transfer of its Note shall endorse on the schedule forming a
part thereof appropriate notations to evidence, the date, amount and maturity of, and effective
interest rate for, each Advance made by it, the date and amount of each payment of principal made
by the Borrower with respect thereto and such schedule shall constitute rebuttable presumptive
evidence of the principal amount owing and unpaid on such Lenders Note; provided that the
failure of any Lender to make, or any error in making, any such recordation or endorsement shall
not affect the obligation of the Borrower hereunder or under the Note or the ability of any Lender
to assign its Notes. Each Lender is hereby irrevocably authorized by the Borrower so to endorse its
Notes and to attach to and make a part of any Note a continuation of any such schedule as and when
required.
SECTION 2.05. Maturity of Advances. Each Revolver Advance included in any Borrowing
shall mature, and
the principal amount thereof, together with all accrued unpaid interest thereon,
shall be due and payable on the Termination Date.
SECTION 2.06. Interest Rates.
(a) Applicable Margin shall be determined by the Administrative Agent from time to
time, based upon the ratio of Total Indebtedness to Total Asset Value (as set forth in the
Margin and Fee Rate Certificate most recently delivered by the Borrower pursuant to Section
5.01(j)), as follows:
|
|
|
|
|
|
|
|
|
Ratio of Total Indebtedness |
|
Euro-Dollar Loans and |
|
Base |
to Total Asset Value |
|
Letters of Credit |
|
Rate Loans |
Greater than or equal to 45% |
|
|
1.75 |
% |
|
|
0 |
% |
Greater than or equal to 35%
but less than 45% |
|
|
1.50 |
% |
|
|
0 |
% |
Greater than or equal to 25%
but less than 35% |
|
|
1.25 |
% |
|
|
0 |
% |
Greater than or equal to 15%
but less than 25% |
|
|
1.125 |
% |
|
|
0 |
% |
Greater than or equal to 5%
but less than 15% |
|
|
1.0 |
% |
|
|
0 |
% |
Less than 5% |
|
|
0.75 |
% |
|
|
0 |
% |
Any adjustment to the Applicable Margin shall be effective (a) in the case of a Margin and Fee
Rate Certificate delivered in connection with quarterly financial statements of the Borrower
delivered pursuant to Section 5.01(b), as of the date 55 days following the end of the last
day of the applicable Fiscal Quarter covered by such Margin and Fee Rate Certificate, (b) in
the case of a Margin and Fee Rate Certificate delivered in connection with annual financial
statements of the Borrower delivered pursuant to Section 5.01(a), as of the date 85 days
following the end of the last day of the applicable Fiscal Year covered by such Margin and Fee
Rate Certificate, and (c) in the case of any other Margin and Fee Rate Certificate, as of the
date 5 Domestic Business Days following the Administrative Agents request for such Margin and
Fee Rate Certificate. If the Borrower fails to deliver a Margin and Fee Rate Certificate
pursuant to Section 5.01(j), the Applicable Margin shall be determined as if the ratio of
Total Indebtedness to Total Asset Value is greater than 45% until the date of the delivery of
the required Margin and Fee Rate Certificate. As of the Closing Date, and thereafter until
changed as provided above, the Applicable Margin shall be determined as if the ratio of Total
Indebtedness to Total Asset Value is less than 5%. Any change in the Applicable Margin on any
day shall result in a corresponding change, effective on and as of such day, in the interest
rate applicable to the Advances and in the fees applicable to each Letter of Credit
outstanding on such day; provided, that no Applicable Margin shall be decreased pursuant to
this Section 2.06 if a Default is in existence on such day. In the event that any financial
statement or Margin and Fee Rate Certificate delivered pursuant to Section 5.01 is shown to
be, or becomes known to be, inaccurate (regardless of whether this Agreement or the Revolver
Commitments are in effect when such inaccuracy is discovered, provided that neither the
Administrative Agent nor any Lender shall request payment pursuant to this sentence more than
two years after the termination of this Agreement and the Revolver Commitments and the payment
in
full of the principal of and interest on all Advances), and such inaccuracy, if corrected,
would have led to the application of a higher Applicable Margin under this Section 2.06 for
any period rather than the Applicable Margin applied for such period, then (i) the Borrower
shall immediately deliver to the Administrative Agent a corrected Margin and Fee Rate
Certificate and related financial information for such period, (ii) the Applicable Margin
shall be at the actual Applicable Margin under this Section 2.06 for such period, and
(iii) the Borrower shall immediately pay to the Administrative Agent, for the account of the
Lenders, the accrued additional interest owing as a result of such increased Applicable Margin
for such period. The provisions of this Section 2.06(a) and this definition shall not limit
the rights of the Administrative Agent and the Lenders with respect to Sections 2.06(b) or
2.06(c) or Article VI and shall survive the termination of this Agreement and the Revolver
Commitments. For the purposes of determining the ratio of Total Indebtedness to Total Asset
Value, indebtedness of a Qualified SPE attributable to Qualified Senior Notes shall be
excluded and Qualified Installment Sale Notes shall not be included in determinations of Total
Asset Value.
(b) Each Base Rate Advance shall bear interest on the outstanding principal amount
thereof, for each day from the date such Advance is made until it becomes due, at a rate per
annum equal to the Base Rate for such day plus the Applicable Margin. Such interest shall be
payable on each Interest Payment Date. Any overdue principal of and, to
the extent permitted
by applicable law, overdue interest on any Base Rate Advance shall bear interest, payable on
demand, for each day until paid in full at a rate per annum equal to the Default Rate.
(c) Each Euro-Dollar Advance shall bear interest on the outstanding principal amount
thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of:
(1) the Applicable Margin, plus (2) the applicable Adjusted London InterBank Offered Rate for
such Interest Period. Such interest shall be payable for each Interest Period on the last day
thereof, provided that interest on Index Euro-Dollar Advances shall be payable on each
Interest Payment Date while such Index Euro-Dollar Advance is outstanding and the date such
Index Euro-Dollar Advance is converted to a Tranche Euro-Dollar Advance or repaid. Any overdue
principal of and, to the extent permitted by applicable law, overdue interest on any
Euro-Dollar Advance shall bear interest, payable on demand, for each day until paid in full at
a rate per annum equal to the Default Rate.
The London InterBank Offered Rate applicable to any Euro-Dollar Advance means for the
Interest Period of such Euro-Dollar Advance the rate per annum determined on the basis of the
rate for deposits in Dollars offered for a term comparable to such Interest Period, which rate
appears on the display designated as Reuters Screen LIBOR01 Page (or such other successor page
as may replace Reuters Screen LIBOR01 Page or such other service or services as may be
nominated by the British Bankers Association for the purpose of displaying London InterBank
Offered Rates for U.S. dollar deposits) determined as of 11:00 a.m. London, England time, two
(2) Euro-Dollar Business Days prior to the first day of
such Interest Period, provided that if no such offered rates appear on such page,
the London InterBank Offered Rate for such Interest Period will be the arithmetic average
(rounded upward, if necessary, to the next higher 1/100th of 1%) of rates quoted by not less
than two (2) major lenders in New York City, selected by the Administrative Agent, at
approximately 10:00 A.M., New York City time, two (2) Euro-Dollar Business Days prior to the
first day of such Interest Period, for deposits in Dollars offered by leading European banks
for a period comparable to such Interest Period in an amount comparable to the principal
amount of such Euro-Dollar Advance.
Euro-Dollar Reserve Percentage means for any day that percentage (expressed as a
decimal) which is in effect on such day, as prescribed by the Board of Governors of the
Federal Reserve System (or any successor) for determining the maximum reserve requirement for
a member bank of the Federal Reserve System in respect of Eurocurrency liabilities (or in
respect of any other category of liabilities which includes deposits by reference to which the
interest rate on such Euro-Dollar Advance is determined or any category of extensions of
credit or other assets which includes loans by a non-United States office of any Lender to
United States residents). The Adjusted London InterBank Offered Rate shall be adjusted
automatically on and as of the effective date of any change in the Euro-Dollar Reserve
Percentage.
(d) The Administrative Agent shall determine each interest rate applicable to the
Advances hereunder in accordance with the terms of this Agreement. The Administrative Agent
shall give prompt notice to the Borrower and the Lenders by telecopy of each rate of interest
so determined, and its determination thereof shall be conclusive in the absence of manifest
error.
(e) After the occurrence and during the continuance of an Event of Default (other than an
Event of Default under Sections 6.01(g) or (h)), the principal amount of the Advances (and, to
the extent permitted by applicable law, all accrued interest thereon) may, at the election of
the Required Lenders, bear interest at the Default Rate; provided, however, that automatically
whether or not the Required Lenders elect to do so, (i) any overdue principal of and, to the
extent permitted by law, overdue interest on the Advances shall bear interest payable on
demand, for each day until paid at a rate per annum equal to the Default Rate, and (ii) after
the continuance and during the continuance of an Event of Default described in Section 6.01(g)
or 6.01(h), the principal amount of the Advances (and, to the extent permitted by applicable
law, all accrued interest thereon) shall bear interest payable on demand for each day until
paid at a rate per annum equal to the Default Rate.
SECTION 2.07. Fees.
(a) The Borrower shall pay to the Administrative Agent for the ratable account of each
Lender a facility fee equal to the product of: (i) the aggregate of the daily average amounts
of such Lenders Commitment, times (ii) a per annum percentage
equal to the Applicable Facility Fee Rate. Such facility fee shall accrue from and
including the Closing Date to and including the Termination Date. Facility fees shall be
payable quarterly in arrears on each Quarterly Payment Date and on the Termination Date;
provided that should the Revolver Commitments be
terminated at any time prior to the
Termination Date for any reason, the entire accrued and unpaid fee shall be paid on the date
of such termination.
(b) The Applicable Facility Fee Rate shall be determined by the Administrative Agent
from time to time, based upon the ratio of Total Indebtedness to Total Asset Value (as set
forth in the Margin and Fee Rate Certificate most recently delivered by the Borrower pursuant
to Section 5.01(j)), as follows:
|
|
|
|
|
Ratio of Total Indebtedness |
|
Applicable Facility |
to Total Asset Value |
|
Fee Rate |
Less than 5% |
|
|
0.125 |
% |
Greater than or equal to 5% but less than 15% |
|
|
0.15 |
% |
Greater than or equal to 15% but less than 25% |
|
|
0.20 |
% |
Greater than or equal to 25% but less than 35% |
|
|
0.25 |
% |
Greater than or equal to 35% but less than 45% |
|
|
0.30 |
% |
Greater than or equal to 45% |
|
|
0.35 |
% |
Any adjustment to the Applicable Facility Fee Rate shall be effective (a) in the case of a
Margin and Fee Rate Certificate delivered in connection with quarterly financial statements of
the Borrower delivered pursuant to Section 5.01(b), as of the date 55 days following the end
of the last day of the applicable Fiscal Quarter covered by such Margin and Fee Rate
Certificate, (b) in the case of a Margin and Fee Rate Certificate delivered in connection with
annual financial statements of the Borrower delivered pursuant to Section 5.01(a), as of the
date 85 days following the end of the last day of the applicable Fiscal Year covered by such
Margin and Fee Rate Certificate, and (c) in the case of any other Margin and Fee Rate
Certificate, as of the date 5 Domestic Business Days following the Administrative Agents
request for such Margin and Fee Rate Certificate. If the Borrower fails to deliver a Margin
and Fee Rate Certificate pursuant to Section 5.01(j), the Applicable Facility Fee Rate shall
be determined as if the ratio of Total Indebtedness to Total Asset Value is greater than 45%
until the date of the delivery of the required Margin and Fee Rate Certificate. As of the
Closing Date, and thereafter until changed as provided above, the Applicable Facility Fee Rate
shall be determined as if the ratio of Total Indebtedness to Total Asset Value is less than
5%. In no event shall the Applicable Facility Fee Rate be decreased pursuant to this
Section 2.07 if a Default is in existence on such day. In the event that any financial
statement or Margin and Fee Rate Certificate delivered pursuant to Section 5.01 is shown to
be, or becomes known to be, inaccurate (regardless of whether this Agreement or the Revolver
Commitments are in effect when such inaccuracy is discovered, provided that neither the
Administrative Agent nor any Lender shall request payment pursuant to this sentence more than
two years after the termination of this Agreement and the
Revolver Commitments and the payment in full of the principal of and interest on all
Advances), and such inaccuracy, if corrected, would have led to the application of a higher
Applicable Facility Fee Rate under this Section 2.07 for any period rather than the Applicable
Facility Fee Rate applied for such period, then (i) the Borrower shall immediately deliver to
the Administrative Agent a corrected Margin and Fee Rate Certificate and related financial
information for such period, (ii) the Applicable Facility Fee Rate shall be at the actual
Applicable Facility Fee Rate under this Section 2.07 for such period, and (iii) the Borrower
shall immediately pay to the Administrative Agent, for the account of the Lenders, the accrued
additional interest owing as a result of such increased Applicable Facility Fee Rate for such
period. The provisions of this Section 2.07(b) and this definition shall not limit the rights
of the Administrative Agent and the Lenders with respect to Article VI and shall survive the
termination of this Agreement and the Revolver Commitments. For the purposes of determining
the ratio of Total Indebtedness to Total Asset Value, indebtedness of a Qualified SPE
attributable to Qualified Senior Notes shall be excluded and Qualified Installment Sale Notes
shall not be included in determinations of Total Asset Value.
(c) The Borrower shall pay to the Administrative Agent for the ratable account of each
Lender, with respect to each Letter of Credit, a per annum letter of credit fee (the Letter
of Credit Fee) equal to the product of: (i) the aggregate average daily Undrawn Amounts,
times (ii) a per annum percentage equal to the Applicable Margin for Letters of Credit
(determined in accordance with Sections 2.06 and 2.13 hereof). Such Letter of Credit Fees
shall be payable in arrears for each Letter of Credit on each Quarterly Payment Date during
the term of each respective Letter of Credit and on the termination thereof (whether at its
stated expiry date or earlier). The Applicable Margin for Letters of Credit shall be as
determined in Section 2.06(a).
(d) The Borrower shall pay to the Administrative Agent for the account of the Letter of
Credit Issuer a facing fee (the Facing Fee) with respect to each Letter of Credit equal to
the product of: (i) the face amount of such letter of credit, times (ii) one-eighth (1/8th) of
one percent (0.125%). Such Facing Fee shall be due and payable on such
date as may be agreed
upon by the Letter of Credit Issuer and the Borrower. The Borrower shall pay to the Letter of
Credit Issuer, for its own account, transfer fees, drawing fees, modification fees, extension
fees and such other fees and charges as may be provided for in any Letter of Credit
Application Agreement or otherwise charged by the Letter of Credit Issuer. No Lender shall be
entitled to any portion of the Facing Fees or any other fees payable by the Borrower to the
Letter of Credit Issuer pursuant to this Section 2.07(d).
(e) The Borrower shall pay to the Administrative Agent, for the account and sole benefit
of the Administrative Agent, such fees and other amounts at such times as set forth in the
Administrative Agents Letter Agreement.
SECTION 2.08. Optional Termination or Reduction of Commitments. The Borrower may, upon
at least 3 Domestic Business Days irrevocable written notice to the Administrative Agent,
terminate at any time, or proportionately reduce from time to time by an aggregate amount of at
least $10,000,000 or any larger multiple of $1,000,000, the Revolver Commitments; provided,
however: (1) each termination or reduction, as the case may be, shall be permanent and irrevocable;
(2) no such termination or reduction shall be in an amount greater than the Total Unused Revolver
Commitments on the date of such termination or reduction; and (3) no such reduction pursuant to
this Section 2.08 shall result in the aggregate Revolver Commitments of all of the Lenders being
reduced to an amount less than $40,000,000, unless the Revolver Commitments are terminated in their
entirety, in which case all accrued fees (as provided under Section 2.07) shall be payable on the
effective date of such termination. Each reduction shall be made ratably among the Lenders in
accordance with their respective Revolver Commitments.
SECTION 2.09. Termination of Commitments. The Revolver Commitments shall terminate on
the Termination Date and any Revolver Advances then outstanding (together with accrued interest
thereon) shall be due and payable on such date.
SECTION 2.10. Optional Prepayments.
(a) The Borrower may, upon at least one (1) Domestic Business Days notice to the
Administrative Agent, prepay any Base Rate Borrowing or Index Euro-Dollar Borrowing in whole
at any time, or from time to time in part in amounts aggregating at least $500,000 or any
larger integral multiple of $100,000 (or any lesser amount equal to the outstanding balance of
such Advance), by paying the principal amount to be prepaid together with accrued interest
thereon to the date of prepayment. Each such optional prepayment shall be applied first to any
Swing Line Advances outstanding and then to prepay ratably the Base Rate Advances and Index
Euro-Dollar Advances of the several Lenders included in such Base Rate Borrowing or Index
Euro-Dollar Borrowing, as the case may be.
(b) Subject to any payments required pursuant to the terms of Article VIII for such
Tranche Euro-Dollar Borrowing, the Borrower may, upon at least three (3) Euro-Dollar Business
Days prior written notice, prepay in minimum amounts of $5,000,000 with additional increments
of $100,000 (or any lesser amount equal to the outstanding balance of such Advances) all or
any portion of the principal amount of any Tranche Euro-Dollar Borrowing prior to the maturity
thereof, by paying the principal amount to be prepaid together with accrued interest thereon
to the date of prepayment and such payments required pursuant to the terms of Article VIII.
Each such optional prepayment shall be applied to prepay ratably the Tranche Euro-Dollar
Advances of the several Lenders included in such Tranche Euro-Dollar Borrowing.
(c) Upon receipt of a notice of prepayment pursuant to this Section 2.10, the
Administrative Agent shall promptly notify each Lender of the contents thereof and of such
Lenders ratable share of such prepayment and such notice, once received by the Administrative
Agent, shall not thereafter be revocable by the Borrower.
SECTION 2.11. Mandatory Prepayments.
(a) On each date on which the Revolver Commitments are reduced or terminated pursuant to
Section 2.08 or Section 2.09, the Borrower shall repay or prepay such principal amount of the
outstanding Revolver Advances, if any (together with interest accrued thereon and any amount
due under Section 8.05), as may be necessary so that after such payment the aggregate unpaid
principal amount of the Revolver Advances does not exceed the aggregate amount of the Revolver
Commitments as then reduced. Each such payment or prepayment shall be applied first to any
Swing Advances outstanding, and then ratably to the Revolver Advances of the several Lenders
outstanding on the date of payment or prepayment in the following order or priority:
(i) first, to Base Rate Advances; (ii) second, to Index Euro-Dollar Advances; and
(iii) lastly, to Tranche Euro-Dollar Advances.
(b) In the event that the aggregate principal amount of all Advances, together with the
aggregate principal amount of the Swing Line Advances and Letter of Credit Obligations at any
one time outstanding shall at any time exceed the aggregate amount of the Revolver Commitments
of all of the Banks at such time, the Borrower shall immediately repay so much of the Advances
and Swing Line Advances as is necessary in order that the aggregate principal amount of the
Advances thereafter outstanding, together with the aggregate principal amount of the Swing
Line Advances and Letter of Credit Obligations shall not exceed the aggregate amount of the
Revolver Commitments of all of the Banks at such time.
(c) If at any time the ratio of Total Indebtedness to Total Asset Value is in excess of
50%, the Borrower shall immediately repay so much of the Revolver Advances as is necessary in
order that the ratio of Total Indebtedness to Total Asset Value is, after giving effect to
such repayment, no greater than 50%. Each such payment or prepayment shall be applied first to
any Swing Advances outstanding, and then ratably to the Revolver Advances of the several
Lenders outstanding on the date of payment or prepayment in the following order or priority:
(i) first, to Base Rate Advances, (ii) second, to Index Euro-Dollar Advances, and (iii) lastly
to Tranche Euro-Dollar Advances.
(d) Hedging Obligations Unaffected. Any repayment or prepayment made pursuant to
this Section shall not affect the Borrowers obligation to continue to make payments under any
Hedging Agreement, which shall remain in full force and effect notwithstanding such repayment
or prepayment, subject to the terms of such Hedging Agreement.
SECTION 2.12. General Provisions as to Payments.
(a) The Borrower shall make each payment of principal of, and interest on, the Revolver
Advances and of fees hereunder without any set off, counterclaim or any deduction whatsoever,
not later than 11:00 A.M. (Eastern time) on the date when due, in Federal or other funds
immediately available in Winston-Salem, North
Carolina, to the Administrative Agent at its address referred to in Section 9.01. The
Administrative Agent will promptly distribute to BB&T each such payment received on account of
the Swing Advances and to each Lender its ratable share of each such payment received by the
Administrative Agent for the account of the Lenders.
(b) Whenever any payment of principal of, or interest on, the Base Rate Advances or of
fees shall be due on a day which is not a Domestic Business Day, the date for payment thereof
shall be extended to the next succeeding Domestic Business Day. Whenever any payment of
principal of or interest on, the Euro-Dollar Advances shall be due on a day which is not a
Euro-Dollar Business Day, the date for payment thereof shall be extended to the next
succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another
calendar month, in which case the date for payment thereof shall be the next preceding
Euro-Dollar Business Day. If the date for any payment of principal is extended by operation of
law or otherwise, interest thereon shall be payable for such extended time.
(c) Funding by Lenders; Presumption by Administrative Agent. Unless the
Administrative Agent shall have received notice from a Lender prior to the proposed date of
any Borrowing that such Lender will not make available to the Administrative Agent such
Lenders share of such Borrowing, the Administrative Agent may assume that such Lender has
made such share available on such date in accordance with Section 2.02 and may, in reliance
upon such assumption, make available to the Borrower a corresponding amount. In such event, if
a Lender has not in fact made its share of the applicable Borrowing available to the
Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to
the Administrative Agent forthwith on demand such corresponding amount with interest thereon,
for each day from and including the date such amount is made available to the Borrower to but
excluding the date of payment to the Administrative Agent, at (i) in the case of a payment to
be made by such Lender, the greater of the Federal Funds Rate and a rate determined by the
Administrative Agent in accordance with banking industry rules on interbank compensation and
(ii) in the case of a payment to be made by the Borrower, the interest rate applicable to Base
Rate Advances. If the Borrower and such Lender shall pay such interest to the Administrative
Agent for the same or an overlapping period, the Administrative Agent shall promptly remit to
the Borrower the amount of such interest paid by the Borrower for such period. If such Lender
pays its share of the applicable Borrowing to the Administrative Agent, then the amount so
paid shall constitute such Lenders Advance included in such Borrowing. Any payment by the
Borrower shall be without prejudice to any claim the Borrower may have against a Lender that
shall have failed to make such payment to the Administrative Agent.
(d) Payments by Borrower; Presumptions by Administrative Agent. Unless the
Administrative Agent shall have
received notice from the Borrower prior to the date on which
any payment is due to the Administrative Agent for the account of the Lenders hereunder that
the Borrower will not make such payment, the Administrative Agent may assume that the Borrower
has made such payment on
such date in accordance herewith and may, in reliance upon such assumption, distribute to
the Lenders the amount due. In such event, if the Borrower has not in fact made such payment,
then each of the Lenders severally agrees to repay to the Administrative Agent forthwith on
demand the amount so distributed to such Lender, with interest thereon, for each day from and
including the date such amount is distributed to it to but excluding the date of payment to
the Administrative Agent, at the greater of the Federal Funds Rate and a rate determined by
the Administrative Agent in accordance with banking industry rules on interbank compensation
(e) Taxes.
(i) Payments Free of Taxes. Any and all payments by or on account of any
obligation of the Borrower hereunder or under any other Loan Document shall be made free
and clear of and without reduction or withholding for any Indemnified Taxes or Other
Taxes, provided that if the Borrower shall be required by applicable law to
deduct any Indemnified Taxes (including any Other Taxes) from such payments, then
(A) the sum payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under this
Section) the Administrative Agent or Lender, as the case may be, receives an amount
equal to the sum it would have received had no such deductions been made, (B) the
Borrower shall make such deductions and (C) the Borrower shall timely pay the full
amount deducted to the relevant Governmental Authority in accordance with applicable
law.
(ii) Payment of Other Taxes by the Borrower. Without limiting the
provisions of paragraph (i) above, the Borrower shall timely pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.
(iii) Indemnification by the Borrower. The Borrower shall indemnify the
Administrative Agent and each Lender, within 10 days after demand therefor, for the full
amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other
Taxes imposed or asserted on or attributable to amounts payable under this Section) paid
by the Administrative Agent or such Lender, as the case may be, and any penalties,
interest and reasonable expenses arising therefrom or with respect thereto, whether or
not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted
by the relevant Governmental Authority. A certificate as to the amount of such payment
or liability delivered to the Borrower by a Lender (with a copy to the Administrative
Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender, shall
be conclusive absent manifest error.
(iv) Evidence of Payments. As soon as practicable after any payment of
Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority, the
Borrower shall deliver to the Administrative Agent the original
or a certified copy of a receipt issued by such Governmental Authority evidencing
such payment, a copy of the return reporting such payment or other evidence of such
payment reasonably satisfactory to the Administrative Agent.
(v) Status of Lenders. Any Foreign Lender that is entitled to an exemption
from or reduction of withholding tax under the law of the jurisdiction in which the
Borrower is resident for tax purposes, or any treaty to which such jurisdiction is a
party, with respect to payments hereunder or under any other Loan Document shall deliver
to the Borrower (with a copy to the Administrative Agent), at the time or times
prescribed by applicable law or reasonably requested by the Borrower or the
Administrative Agent, such properly completed and executed documentation prescribed by
applicable law as will permit such payments to be made without withholding or at a
reduced rate of withholding. In addition, any Lender, if requested by the Borrower or
the Administrative Agent, shall deliver such other documentation prescribed by
applicable law or reasonably requested by the Borrower or the Administrative Agent as
will enable the Borrower or the Administrative Agent to determine whether or not such
Lender is subject to backup withholding or information reporting requirements.
Without limiting the generality of the foregoing, in the event that the Borrower is
resident for tax purposes in the United States of America, any Foreign Lender shall
deliver to the Borrower and the Administrative Agent (in such number of copies as shall
be requested by the recipient) on or prior to the date on which such Foreign Lender
becomes a Lender under this Agreement (and from time to time thereafter upon the request
of the
Borrower or the Administrative Agent, but only if such Foreign Lender is legally
entitled to do so), whichever of the following is applicable:
(A) duly completed copies of Internal Revenue Service Form W-8BEN claiming
eligibility for benefits of an income tax treaty to which the United States of
America is a party,
(B) duly completed copies of Internal Revenue Service Form W-8ECI,
(C) in the case of a Foreign Lender claiming the benefits of the exemption for
portfolio interest under section 881(c) of the Code, (x) a certificate to the
effect that such Foreign Lender is not (1) a bank within the meaning of section
881(c)(3)(A) of the Code, (2) a 10 percent shareholder of the Borrower within the
meaning of section 881(c)(3)(B) of the Code, or (3) a controlled foreign
corporation described in section 881(c)(3)(C) of the Code and (y) duly completed
copies of Internal Revenue Service Form W-8BEN, or
(D) any other form prescribed by applicable law as a basis for claiming
exemption from or a reduction in United States Federal
withholding tax duly completed together with such supplementary documentation
as may be prescribed by applicable law to permit the Borrower to determine the
withholding or deduction required to be made.
(vi) Treatment of Certain Refunds. If the Administrative Agent or a Lender
determines, in its sole discretion, that it has received a refund of any Taxes or Other
Taxes as to which it has been indemnified by the Borrower or with respect to which the
Borrower has paid additional amounts pursuant to this Section, it shall pay to the
Borrower an amount equal to such refund (but only to the extent of indemnity payments
made, or additional amounts paid, by the Borrower under this Section with respect to the
Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of
the Administrative Agent or such Lender, as the case may be, and without interest (other
than any interest paid by the relevant Governmental Authority with respect to such
refund), provided that the Borrower, upon the request of the Administrative
Agent or such Lender, agrees to repay the amount paid over to the Borrower (plus any
penalties, interest or other charges imposed by the relevant Governmental Authority) to
the Administrative Agent or such Lender in the event the Administrative Agent or such
Lender is required to repay such refund to such Governmental Authority. This paragraph
shall not be construed to require the Administrative Agent or any Lender to make
available its tax returns (or any other information relating to its taxes that it deems
confidential) to the Borrower or any other Person.
SECTION 2.13. Computation of Interest and Fees. Interest on the Advances shall be
computed on the basis of a year of 360 days and paid for the actual number of days elapsed
(including the first day but excluding the last day). Facility fees, letter of credit fees and any
other fees payable hereunder shall be computed on the basis of a year of 360 days and paid for the
actual number of days elapsed (including the first day but excluding the last day).
SECTION 2.14. Increase in Commitments.
(a) The Borrower shall have the right, and prior to the date sixty (60) days prior to the
Termination Date by written notice to and in consultation with the Administrative Agent, to
request an increase in the aggregate Revolver Commitments (each such requested increase, a
Commitment Increase), by having one or more existing Lenders increase their respective
Revolver Commitments then in effect (each, an Increasing Lender), by adding as a Lender with
a new Revolver Commitment hereunder one or more Persons that are not already Lenders (each, an
Additional Lender), or a combination thereof, provided that (i) any such request for
a Commitment Increase shall be in a minimum amount of $20,000,000, (ii) immediately after
giving effect to any Commitment Increase, (y) the aggregate Revolver Commitments shall not
exceed $200,000,000 and (z) the aggregate of all Commitment Increases effected shall not
exceed $100,000,000, (iii) no Default or Event of Default shall have occurred and be
continuing on the applicable
Commitment Increase Date (as hereinafter defined) or shall result from any Commitment
Increase, (iv) immediately after giving effect to any Commitment Increase (including any
Borrowings in connection therewith and the application of the proceeds thereof), the Borrower
shall be in compliance with the covenants contained in Article V, (v) no Commitment Increase
shall be effective until the Administrative Agent has consented to such Commitment Increase in
writing which consent may not be unreasonably withheld; and (vi) the Borrower shall give the
existing Lenders the right of first refusal for participating in any such Commitment Increase
by providing such notice to the Administrative Agent fifteen (15) Domestic Business Days
before making a request to any Person that
is not already a Lender. An existing Lender shall
have priority over Additional Lenders to participate in such requested Commitment Increase if
such existing Lender provides written notice of its election to participate within fifteen
(15) Domestic Business Days of such existing Lenders receipt of such notice. Such notice from
the Borrower shall specify the requested amount of the Commitment Increase. No Lender shall
have any obligation to become an Increasing Lender. Any fees paid by the Borrower for a
Commitment Increase to an Increasing Lender, an Additional Lender, the Administrative Agent or
BB&T, as arranger, shall be for their own account and shall be in an amount, if any, mutually
agreed upon by each such party and the Borrower, in each partys sole discretion.
(b) Each Additional Lender must qualify as an Eligible Assignee (the selection of which
shall include the prior approval of the Administrative Agent). The Borrower and each
Additional Lender shall execute a joinder agreement, and the Borrower and each Lender shall
execute all such other documentation as the Administrative Agent and the Borrower may
reasonably require, all in form and substance reasonably satisfactory to the Administrative
Agent and the Borrower, to evidence the Revolver Commitment adjustments referred to in
Section 2.14(e).
(c) If the aggregate Revolver Commitments are increased in accordance with this Section
2.14, the Borrower (in consultation with the Administrative Agent), Increasing Lender(s) (if
any) and Additional Lender(s) (if any) shall agree upon the effective date (the Commitment
Increase Date, which shall be a Domestic Business Day not less than thirty (30) days prior to
the Termination Date). The Administrative Agent shall promptly notify the Lenders of such
increase and the Commitment Increase Date.
(d) Notwithstanding anything set forth in this Section 2.14 to the contrary, the Borrower
shall not incur any Revolver Advances pursuant to any Commitment Increase (and no Commitment
Increase shall be effective) unless the conditions set forth in Section 2.14(a) as well as the
following conditions precedent are satisfied on the applicable Commitment Increase Date:
(i) The Administrative Agent shall have received the following, each dated the
Commitment Increase Date and in form and substance reasonably satisfactory to the
Administrative Agent:
(A) a supplement to this Agreement signed by each Increasing Lender (if any)
and Additional Lender (if any), setting forth the reallocation of Commitments
referred to in Section 2.14(e), all other documentation required by the
Administrative Agent pursuant to Section 2.14(b) and such other modifications,
documents or items as the Administrative Agent, such Lenders or their counsel may
reasonably request;
(B) an instrument, duly executed by each Borrower and each Guarantor, if any,
acknowledging and reaffirming its obligations under this Agreement, the Collateral
Documents, and the other Loan Documents to which it is a party;
(C) a certificate of the secretary or an assistant secretary of the Borrower
and each Guarantor, certifying to and attaching the resolutions adopted by the
board of directors (or similar governing body) of such party approving or
consenting to such Commitment Increase;
(D) a certificate of the Chief Financial Officer of each Borrower, certifying
that (x) as of the Commitment Increase Date, all representations and warranties of
the Borrower and the Guarantors contained in this Agreement and the other Loan
Documents are true and correct (except to the extent any such representation or
warranty is expressly stated to have been made as of a specific date, in which case
such representation or warranty is true and correct as of such date),
(y) immediately after giving effect to such Commitment Increase (including any
Borrowings in connection therewith and the application of the proceeds thereof),
the Borrower is in compliance with the covenants contained in Article V, and (z) no
Default or Event of Default has occurred and is continuing, both immediately before
and after giving effect to such Commitment Increase (including any Borrowings in
connection therewith and the application of the proceeds thereof);
(E) an opinion or opinions of counsel for the Borrower and the Guarantors, in
a form satisfactory to Administrative Agent and covering such matters as
Administrative Agent may reasonably request, addressed to the Administrative Agent
and the Lenders, together with such other documents, instruments and certificates
as the Administrative Agent shall have reasonably requested; and
(F) such other documents or items that the Administrative Agent, such Lenders
or their counsel may reasonably request.
(ii) In the case of any Borrowing of Revolver Advances in connection with such
Commitment Increase for the purpose of funding an Acquisition, the applicable conditions
set forth in this Agreement with respect to Acquisitions shall have been satisfied.
(e) On the Commitment Increase Date, (i) the aggregate principal outstanding amount of
the Revolver Advances (the Initial Advances) immediately prior to giving effect to
the Commitment Increase shall be deemed to be repaid, (ii) immediately after the effectiveness
of the Commitment Increase, the Borrower shall be deemed to have made new Borrowings of
Revolver Advances (the Subsequent Borrowings) in an aggregate principal amount equal
to the aggregate principal amount of the Initial Advances and of the types and for the
Interest Periods specified in a Notice of Borrowing delivered to the Administrative Agent in
accordance with Section 2.01(a), (iii) each Lender shall pay to the Administrative Agent in
immediately available funds an amount equal to the difference, if positive, between (y) such
Lenders pro rata percentage (calculated after giving effect to the Commitment Increase) of
the Subsequent Borrowings and (z) such Lenders pro rata percentage (calculated without giving
effect to the Commitment Increase) of the Initial Advances, (iv) after the Administrative
Agent receives the funds specified in clause (iii) above, the Administrative Agent shall pay
to each Lender the portion of such funds equal to the difference, if positive, between
(y) such Lenders pro rata percentage (calculated without giving effect to the Commitment
Increase) of the Initial Advances and (z) such Lenders pro rata percentage (calculated after
giving effect to the Commitment Increase) of the amount of the Subsequent Borrowings, (v) the
Lenders shall be deemed to hold the Subsequent Borrowings ratably in accordance with their
respective Revolver Commitments (calculated after giving effect to the Commitment Increase),
(vi) the Borrower shall pay all accrued but unpaid interest on the Initial Advances to the
Lenders entitled thereto, and (vii) the signature pages hereto shall be amended to reflect the
Revolver Commitments of all Lenders after giving effect to the Commitment Increase. The deemed
payments made pursuant to clause (i) above in respect of each Tranche Euro-Dollar Advance
shall be subject to indemnification by the Borrower pursuant to the provisions of Section 8.05
if the Commitment Increase Date occurs other than on the last day of the Interest Period
relating thereto.
SECTION 2.15. Defaulting Lenders.
(a) Generally. If for any reason any Lender (a Defaulting Lender) shall fail or
refuse to perform any of its obligations under this Agreement or any other Loan Document to
which it is a party within the time period specified for performance of such obligation or, if
no time period is specified, if such failure or refusal continues for a period of two Domestic
Business Days after notice from the Administrative Agent, then, in addition to the rights and
remedies that may be available to the Administrative Agent or the Borrower under this
Agreement or Applicable Laws, such Defaulting Lenders right to participate in the
administration of the Advances, this Agreement and the other Loan Documents, including without
limitation, any right to vote in respect of, to consent to or to direct any action or inaction
of the Administrative Agent or to be taken into account in the calculation of the Required
Lenders, shall be suspended during the pendency of such failure or refusal. If a Lender is a
Defaulting Lender because it has failed to make timely payment to the Administrative Agent of
any amount required to be paid to the Administrative Agent
hereunder (without giving effect to any notice or cure periods), in addition to other
rights and remedies which the Administrative Agent or the Borrower may have under the
immediately preceding provisions or otherwise, the Administrative Agent shall be entitled
(i) to collect interest from such Defaulting Lender on such delinquent payment for the period
from the date on which the payment was due until the date on which the payment is made at the
Federal Funds Rate, (ii) to withhold or setoff and to apply in satisfaction of the defaulted
payment and any related interest, any amounts otherwise payable to such Defaulting Lender
under this Agreement or any other Loan Document and (iii) to bring an action or suit against
such Defaulting Lender in a court of competent jurisdiction to recover the defaulted amount
and any related interest. Any amounts received by the Administrative Agent in respect of a
Defaulting Lenders Advances shall not be paid to such Defaulting Lender and shall be held
uninvested by the Administrative Agent and either applied against the purchase price of such
Advances under the following subsection (b) or paid to such Defaulting Lender upon such
Defaulting Lenders curing of its default.
(b) Purchase or Cancellation of Defaulting Lenders Revolver Commitment. Any
Lender who is not a Defaulting Lender may, but shall not be obligated, in its sole discretion,
to acquire all or a portion of a Defaulting Lenders Revolver Commitment. Any Lender desiring
to exercise such right shall give written notice thereof to the Administrative Agent and the
Borrower no sooner than 2 Domestic Business Days and not later than 5 Domestic
Business Days
after such Defaulting Lender became a Defaulting Lender. If more than one Lender exercises
such right, each such Lender shall have the right to acquire the amount of such Defaulting
Lenders Revolver Commitment in proportion to the Revolver Commitments of the other Lenders
exercising such right. If after such 5th Domestic Business Day, the Lenders have
not elected to purchase all of the Revolver Commitment of such Defaulting Lender, then the
Borrower may, by giving written notice thereof to the Administrative Agent, such Defaulting
Lender and the other Lenders, either (i) demand that such Defaulting Lender assign its
Revolver Commitment to an Eligible Assignee subject to and in accordance with the provisions
of Section 9.07(b) for the purchase price provided for below or (ii) terminate the Revolver
Commitment of such Defaulting Lender, whereupon such Defaulting Lender shall no longer be a
party hereto or have any rights or obligations hereunder or under any of the other Loan
Documents. No party hereto shall have any obligation whatsoever to initiate any such
replacement or to assist in finding an Eligible Assignee. Upon any such purchase or
assignment, the Defaulting Lenders interest in the Advances and its rights hereunder (but not
its liability in respect thereof or under the Loan Documents or this Agreement to the extent
the same relate to the period prior to the effective date of the purchase except to the extent
assigned pursuant to such purchase) shall terminate on the date of purchase, and the
Defaulting Lender shall promptly execute all documents reasonably requested to surrender and
transfer such interest to the purchaser or assignee thereof, including an appropriate
Assignment and Acceptance Agreement and, notwithstanding Section 9.07(b), shall pay to the
Administrative Agent an assignment fee in the amount of $3,500.00. The purchase price for the
Revolver Commitment of a
Defaulting Lender shall be equal to the amount of the principal balance of the Advances
outstanding and owed by the Borrower to the Defaulting Lender. Prior to payment of such
purchase price to a Defaulting Lender, the Administrative Agent shall apply against such
purchase price any amounts retained by the Administrative Agent pursuant to the last sentence
of the immediately preceding subsection (a). The Defaulting Lender shall be entitled to
receive amounts owed to it by the Borrower under the Loan Documents which accrued prior to the
date of the default by the Defaulting Lender, to the extent the same are received by the
Administrative Agent from or on behalf of the Borrower. There shall be no recourse against any
Lender or the Administrative Agent for the payment of such sums except to the extent of the
receipt of payments from any other party or in respect of the Loans.
ARTICLE III
CONDITIONS TO BORROWINGS
SECTION 3.01. Conditions to Closing and First Borrowing. The obligation of each Lender
to make an Advance on the Closing Date (and the obligation of the Letter of Credit Issuer to issue
a Letter of Credit on the Closing Date) is subject to the satisfaction of the conditions set forth
in Section 3.02 and the following additional conditions:
(a) receipt by the Administrative Agent from each of the parties hereto of a duly
executed counterpart of this Agreement signed by such party;
(b) receipt by the Administrative Agent of a duly executed Revolver Note for the account
of each Lender, complying with the provisions of Section 2.04;
(c) receipt by the Administrative Agent of an opinion of Foley & Lardner LLP, as counsel
to the Loan Parties, dated as of the Closing Date (or in the case of an opinion delivered
pursuant to Section 5.27 hereof such later date as specified by the Administrative Agent) in a
form satisfactory to Administrative Agent and covering such matters set forth in
Exhibit E hereto and such additional matters relating to the transactions contemplated
hereby as the Administrative Agent may reasonably request;
(d) receipt by the Administrative Agent of a certificate (the Closing Certificate),
dated the Closing Date, substantially in the form of Exhibit F hereto, signed by a Responsible
Officer of the Borrower, to the effect that, to his knowledge, (i) no Default has occurred and
is continuing on the Closing Date and (ii) the representations and warranties of the Loan
Parties contained in Article IV are true on and as of the Closing Date;
(e) receipt by the Administrative Agent of all documents which the Administrative Agent
or any Lender may reasonably request relating to the existence of each Loan Party, the
authority for and the validity of this Agreement, the Notes and the other Loan Documents, and
any other matters relevant hereto, all
in form and substance satisfactory to the Administrative Agent, including without
limitation a certificate of incumbency of each Loan Party (the Officers Certificate),
signed by the Secretary, an Assistant Secretary, a member, manager, partner, trustee or
other
authorized representative of the respective Loan Party, substantially in the form of Exhibit G
hereto, certifying as to the names, true signatures and incumbency of the officer or officers
of the respective Loan Party, authorized to execute and deliver the Loan Documents, and
certified copies of the following items: (i) the Loan Partys Organizational Documents;
(ii) the Loan Partys Operating Documents; (iii) if applicable, a certificate of the Secretary
of State of such Loan Partys state of organization as to the good standing or existence of
such Loan Party, and (iv) the Organizational Action, if any, taken by the board of directors
of the Loan Party or the members, managers, trustees, partners or other applicable Persons
authorizing the Loan Partys execution, delivery and performance of this Agreement, the Notes
and the other Loan Documents to which the Loan Party is a party;
(f) receipt by the Administrative Agent of a Notice of Borrowing;
(g) the Pledge Agreement and the REIT Pledge Agreement, each in form and content
satisfactory to the Administrative Agent, shall have been duly executed by the applicable Loan
Parties and such documents shall have been delivered to the Administrative Agent and shall be
in full force and effect and each document (including each U.C.C. financing statement)
required by law or reasonably requested by the Administrative Agent to be filed, registered or
recorded in order to create in favor of the Administrative Agent for the benefit of the
Secured Parties, upon filing, recording or possession by the Administrative Agent, as the case
may be, a valid, legal and perfected first-priority security interest in and lien on the
Collateral described in the Pledge Agreement and the REIT Pledge Agreement shall have been
delivered to the Administrative Agent; the Loan Parties shall also deliver or cause to be
delivered the certificates (with undated stock powers executed in blank) for all equity
interests pledged to, and instruments representing any Debt (together with an effective
endorsement) pledged to, Administrative Agent for the benefit of the Secured Parties;
(h) the Administrative Agent shall have received the results of a search of the U.C.C.
filings (or equivalent filings) made with respect to the Loan Parties in the states (or other
jurisdictions) in which the Loan Parties are organized, the chief executive office of each
such Person is located, any offices of such persons in which records have been kept relating
to Collateral described in the Pledge Agreement, the REIT Pledge Agreement and the other
jurisdictions in which U.C.C. filings (or equivalent filings) are to be made pursuant to the
preceding paragraph, together with copies of the financing statements (or similar documents)
disclosed by such search, and accompanied by evidence satisfactory to the Administrative Agent
that the Liens other than Permitted Liens indicated in any such financing statement (or
similar document) have been released to the satisfaction of Administrative Agent;
(i) receipt by the Administrative Agent of the Subordination Agreement;
(j) receipt by the Administrative Agent and approval by the Lenders of the insurance
required under this Agreement;
(k) the Borrower shall have paid all fees required to be paid by it on the Closing Date,
including all fees required hereunder and under the Administrative Agents Letter Agreement to
be paid as of such date, and shall have reimbursed the Administrative Agent for all fees,
costs and expenses of closing the transactions contemplated hereunder and under the other Loan
Documents, including the reasonable legal and other document preparation costs incurred by the
Administrative Agent;
(l) the repayment in full and termination of the Loan Agreement dated as of July 22,
2005, among Borrower, Wachovia Bank, National Association, as Administrative Agent, and the
lenders and other financial institutions party thereto, as amended;
(m) receipt by the Administrative Agent of all Mortgaged Property Support Documents as
the Administrative Agent may reasonably request with respect to the Identified Mortgaged
Property that are in the possession or control of the Loan Parties, including, without
limitation, recordable legal descriptions for the Identified Mortgaged Property and copies of
title insurance, deeds, surveys and other related materials;
(n) receipt by the Administrative Agent, to the extent requested by the Administrative
Agent, of such financial statements and financial information for St. Joe Timberland that are
in the possession or control of the Loan Parties, listings of properties owned by the Loan
Parties, status of improvements to such properties, past property sales information and
contracts, detailed three-year financial projections, and disclosures on unconsolidated
subsidiaries and affiliates and guarantees (financial and performance);
(o) receipt by the Administrative Agent and Lenders of Borrowers financial and business
projections; and
(p) such other documents or items as the Administrative Agent, the Lenders or their
counsel may reasonably request.
SECTION 3.02. Conditions to All Borrowings. The obligation of each Lender to make an
Advance on the occasion of each Borrowing, the obligation of BB&T to make a Swing Advance and the
obligation of the Letter of Credit Issuer to issue a Letter of Credit is subject to the
satisfaction of the following conditions:
(a) receipt by the Administrative Agent of a Notice of Borrowing as required by
Section 2.02;
(b) receipt by the Administrative Agent of such documentation as the Administrative Agent
shall reasonably require to confirm that the ratio of Total Indebtedness to Total Asset Value
is no greater than 50%; provided, however, (i) indebtedness of a Qualified SPE attributable to
Qualified Senior Notes shall be excluded and (ii) Qualified Installment Sale Notes shall not
be included in determinations of Total Asset Value;
(c) the fact that, immediately before and after such Borrowing (or issuance of a Letter
of Credit, as the case may be), no Default shall have occurred and be continuing;
(d) the fact that the representations and warranties of the Loan Parties contained in
Article IV of this Agreement shall be true, on and as of the date of such Borrowing (or
issuance of a Letter of Credit, as the case may be) (except to the extent such representation
or warranty is expressly stated to have been made as of a specific date, in which case such
representation or warranty is true and correct as of such date);
(e) the fact that, immediately after such Borrowing: (A) the aggregate outstanding
principal amount of the Revolver Advances of each Lender will not exceed the amount of its
Revolver Commitment and (B) the aggregate outstanding principal amount of the Revolver
Advances will not exceed the aggregate amount of the Revolver Commitments of all of the
Lenders as of such date; and
(f) the fact that, immediately after such Borrowing (or issuance of a Letter of Credit,
as the case may be) (i) the aggregate outstanding principal amount of the Revolver Advances of
each Lender together with such Lenders Applicable Percentage of the aggregate outstanding
principal amount of all Swing Line Advances, and Letter of Credit Obligations, will not exceed
the amount of its Revolver Commitment and (ii) the aggregate outstanding principal amount of
the Revolver Advances together with the aggregate outstanding principal amount of all Swing
Line Advances, and Letter of Credit Obligations, will not exceed the lesser of the aggregate
amount of the Revolver Commitments of all of the Lenders as of such date.
Each Borrowing and each Notice of Continuation or Conversion hereunder shall be deemed to be a
representation and warranty by the Loan Parties on the date of such Borrowing as to the truth and
accuracy of the facts specified in clauses (c) and (d) of this Section.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower and Guarantors represent and warrant that:
SECTION 4.01. Existence and Power. The Borrower is a corporation, and each Guarantor
is a corporation, limited liability company or other legal entity duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation or organization, as
the case may be, is duly qualified to transact business in every jurisdiction where, by the nature
of its business, such qualification is necessary, and has all organizational powers and all
governmental licenses, authorizations, consents and approvals required to carry on its business as
now conducted, except where the failure to be so qualified or to have the required licenses,
authorizations, consents or approvals would not reasonably be expected to have a Material Adverse
Effect.
SECTION 4.02. Organizational and Governmental Authorization; No Contravention. The
execution, delivery
and performance by each Loan Party of this Agreement, the Notes, the Collateral
Documents, the Timberland Collateral Documents and the other Loan Documents to which such Loan
Party is a party (i) are within such Loan Partys organizational powers, (ii) have been duly
authorized by all necessary Organizational Action, (iii) require no action by or in respect of, or
filing with, any Governmental Authority which has not been obtained or made (iv) do not contravene,
or constitute a default under, any provision of applicable law or regulation or of the
Organizational Documents and Operating Documents of such Loan Party or of any material agreement,
judgment, injunction, order, decree or other instrument binding upon such Loan Party or any of its
Subsidiaries, and (v) do not result in the creation or imposition of any Lien on any asset of such
Loan Party or any of its Subsidiaries, other than pursuant to the terms of the Loan Documents.
SECTION 4.03. Binding Effect. This Agreement constitutes a valid and binding agreement
of the Loan Parties enforceable in accordance with its terms, and the Notes, the Collateral
Documents, the Timberland Collateral Documents and the other Loan Documents, when executed and
delivered in accordance with this Agreement, will constitute valid and binding obligations of the
Loan Parties party to such Loan Document enforceable in accordance with their respective terms,
provided that the enforceability hereof and thereof is subject in each case to general
principles of equity and to bankruptcy, insolvency and similar laws affecting the enforcement of
creditors rights generally.
SECTION 4.04. Financial Information.
(a) The audited consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries as of December 31, 2007, and the related consolidated statements of income,
shareholders equity and cash flows for the Fiscal Year then ended, reported on by KPMG, LLP,
copies of which have been delivered to the Administrative Agent for delivery to each of the
Lenders, and the unaudited consolidated financial statements of the Borrower and its
Consolidated Subsidiaries for the interim period ended June 30, 2008, copies of which have
been delivered to each of the Lenders, fairly present, in conformity with GAAP (subject in the
case of the unaudited financial statements to footnotes and year-end adjustments), the
consolidated financial position of the Borrower and its Consolidated Subsidiaries as
of such dates and their consolidated results of operations and cash flows for such
periods stated.
(b) Since December 31, 2007, there has been no event, act, condition or occurrence having
a Material Adverse Effect.
SECTION 4.05. Litigation. There is no action, suit or proceeding pending, or to the
knowledge of the Loan Parties threatened, against or affecting the Loan Parties or any of their
respective Subsidiaries before any court or arbitrator or any Governmental Authority which would
reasonably be expected to have a Material Adverse Effect.
SECTION 4.06. Compliance with ERISA.
(a) The Loan Parties and each member of the Controlled Group have fulfilled their
obligations under the minimum funding standards of ERISA and the Code with respect to each
Plan and are in compliance with the applicable provisions of ERISA and the Code, and have not
incurred any liability to the PBGC or a Plan under Title IV of ERISA.
(b) Neither the Loan Parties nor any member of the Controlled Group is or ever has been
obligated to contribute to any Multiemployer Plan.
(c) The assets of the Loan Parties or any Subsidiary of any Loan Party do not and will
not constitute plan assets, within the meaning of ERISA, the Code and the respective
regulations promulgated thereunder. The execution, delivery and performance of this Agreement,
and the borrowing and repayment of amounts hereunder, do not and will not constitute
prohibited transactions under ERISA or the Code.
SECTION 4.07. Compliance with Laws; Payment of Taxes. The Loan Parties and their
respective Subsidiaries are in compliance with all applicable laws, regulations and similar
requirements of governmental authorities, except where such compliance is being contested in good
faith through appropriate proceedings or where non-compliance, alone or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect. There have been filed on behalf of the
Loan Parties and their respective Subsidiaries all Federal, state and local income, excise,
property and other tax returns which are required to be filed by them and all taxes due pursuant to
such returns or pursuant to any assessment
received by or on behalf of the Loan Parties or any
Subsidiary have been paid. The charges, accruals and reserves on the books of the Loan Parties and
their respective Subsidiaries in respect of taxes or other governmental charges are, in the opinion
of the Loan Parties, adequate. No Loan Party has been given or been requested to give a waiver of
the statute of limitation relating to the payment of Federal, state, local or foreign taxes.
SECTION 4.08. Subsidiaries. Each of the Subsidiaries of each Loan Party is a
corporation, a limited liability company or other legal entity, duly organized, validly
existing and in good standing under the laws of its jurisdiction of organization, is duly
qualified to transact business in every jurisdiction where, by the nature of its business, such
qualification is necessary, and has all organizational powers and all governmental licenses,
authorizations, consents and approvals required to carry on its business as now conducted, except
where the failure to be so qualified or to have the required licenses, authorizations, consents or
approvals would not reasonably be expected to have a Material Adverse Effect. No Loan Party has any
Subsidiaries or Unconsolidated Affiliates except as listed on Schedule 4.24 and as set
forth in any Compliance Certificate provided to the Administrative Agent and Lenders pursuant to
Section 5.01(c) after the Closing Date, which accurately sets forth each such Subsidiarys complete
name and jurisdiction of organization.
SECTION 4.09. Investment Company Act, Etc. No Loan Party nor any Subsidiary of a Loan
Party is an investment company within the meaning of the Investment Company Act of 1940, as
amended.
SECTION 4.10. All Consents Required. All approvals, authorizations, consents, orders
or other actions of any Person or of any Governmental Authority (if any) required in connection
with the due execution, delivery and performance by the Loan Parties of this Agreement and any Loan
Document to which any Loan Party is a party, have been obtained.
SECTION 4.11. Ownership of Property; Liens. Each of the Loan Parties and their
respective Subsidiaries has title or the contractual right to possess its properties sufficient for
the conduct of its business and none of such properties is subject to any Lien except as permitted
in Section 5.13.
SECTION 4.12. No Default. No Loan Party nor any of their respective Subsidiaries is in
default under or with respect to any agreement, instrument or undertaking to which it is a party or
by which it or any of its property is bound, except where such default would not reasonably be
expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is
continuing.
SECTION 4.13. [Intentionally deleted].
SECTION 4.14. Environmental Matters.
(a) No Loan Party nor any Subsidiary of a Loan Party is subject to any Environmental
Liability which could reasonably be expected to have a Material Adverse Effect and no Loan
Party nor any Subsidiary of a Loan Party has been designated as a potentially responsible
party under CERCLA. None of the Properties has been identified on any current or proposed
(i) National Priorities List under 40 C.F.R. § 300, (ii) CERCLIS list or (iii) any list
arising from a state statute similar to CERCLA.
(b) No Hazardous Materials have been or are being used, produced, manufactured,
processed, treated, recycled, generated, stored, disposed of, managed or otherwise handled at,
or shipped or transported to or from the Properties or are otherwise present at, on, in or
under the Properties, or, to the best of the knowledge of the Loan Parties, at or from any
adjacent site or facility, except for Hazardous Materials, used, produced, manufactured,
processed, treated, recycled, generated, stored, disposed of, and managed or otherwise handled
in the ordinary course of business of such Loan Party or Subsidiary of a Loan Party in
compliance in all material respects with all applicable Environmental Requirements.
(c) The Loan Parties, and each of their respective Subsidiaries, has procured all
Environmental Authorizations necessary for the conduct of the business contemplated on such
Property, and is in compliance in all material respects with all Environmental Requirements in
connection with the operation of the Properties and the Loan Partys, and each of their
respective Subsidiarys, respective businesses.
SECTION 4.15. Compliance with Laws. Each Loan Party and each Subsidiary of a Loan
Party is in compliance with all applicable laws, including, without limitation, all Environmental
Laws and all regulations and requirements of the
Securities and Exchange Commission and the New
York Stock Exchange (including with respect to timely filing of reports), except where the failure
to be in compliance would not reasonably be expected to have a Material Adverse Effect.
SECTION 4.16. Capital Securities. All Capital Securities, debentures, bonds, notes and
all other securities of each Loan Party and their respective Subsidiaries presently issued and
outstanding are validly and properly issued in accordance with all applicable laws, including, but
not limited to, the Blue Sky laws of all applicable states and the federal securities laws. The
issued shares of Capital Securities of each of the Loan Partys respective Subsidiaries are owned
by the Loan Parties free and clear of any Lien or adverse claim.
SECTION 4.17. Margin Stock. No Loan Party nor any of their respective Subsidiaries is
engaged principally, or as one of its important activities, in the business of purchasing or
carrying any Margin Stock, and no part of the proceeds of any Advance will be used to purchase or
carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any
Margin Stock, or be used for any purpose which violates, or which is inconsistent with, the
provisions of Regulation X of the Board of Governors of the Federal Reserve System. Following the
application of the proceeds from each Advance, not more than 25% of the value of the assets, either
of the Borrower only or of the Borrower and its Subsidiaries on a consolidated basis, will be
Margin Stock.
SECTION 4.18. Insolvency. After giving effect to the execution and delivery of the
Loan Documents and the making of the Advances under this Agreement, no Loan Party will be
insolvent, within the meaning of such term as defined in § 101 of Title 11 of the United States
Code or Section 2 of either the Uniform Fraudulent Transfer Act or
the Uniform Fraudulent Conveyance Act, or any other applicable state law pertaining to
fraudulent transfers, as each may be amended from time to time, or be unable to pay its debts
generally as such debts become due, or have an unreasonably small capital to engage in any business
or transaction, whether current or contemplated.
SECTION 4.19. Security Documents. The Collateral Documents (other than the Timberland
Collateral Documents) are effective to create in favor of the Administrative Agent, for the ratable
benefit of the Secured Parties, a legal, valid and enforceable security interest in the Collateral
described therein and, upon filing of one or more UCC financing statements in the appropriate
jurisdictions, and delivery to the Administrative Agent of any instruments or certificated
securities pledged thereunder, Administrative Agent shall have a fully perfected first priority
Lien on, and security interest in, all right, title and interest of the Borrower as pledgor
thereunder, in such Collateral and the Proceeds thereof, in each case prior and superior in any
right to any other Person (subject to Permitted Encumbrances).
SECTION 4.20. Labor Matters. There are no strikes, lockouts, slowdowns or other labor
disputes against any Loan Party or any Subsidiary of any Loan Party pending or, to the knowledge of
any Loan Party, threatened. The hours worked by and payment made to employees of the Loan Parties
and each Subsidiary of any Loan Party have been in compliance with the Fair Labor Standards Act and
any other applicable federal, state or foreign law dealing with such matters. All payments due from
the Loan Parties or any of their respective Subsidiaries, or for which any claim may be made
against the Loan Parties or any of their respective Subsidiaries, on account of wages and employee
health and welfare insurance and other benefits, have been paid or accrued as a liability on the
books of the Loan Party or such Subsidiary, as appropriate. No Loan Party nor any Subsidiary of a
Loan Party is party to a collective bargaining agreement.
SECTION 4.21. Patents, Trademarks, Etc. The Loan Parties and their respective
Subsidiaries own, or are licensed to use, all patents, trademarks, trade names, copyrights,
technology, know-how and processes, service marks and rights with respect to the foregoing that are
material to the businesses, assets, operations, properties or condition (financial or otherwise) of
the Loan Parties and their respective Subsidiaries taken as a whole. The use of such patents,
trademarks, trade names, copyrights, technology, know-how, processes and rights with respect to the
foregoing by the Loan Parties and their respective Subsidiaries, does not infringe on the rights of
any Person, except in cases which, individually and in the aggregate, would not reasonably be
expected to have a Material Adverse Effect.
SECTION 4.22. Insurance. The Loan Parties and each of their Subsidiaries has (either
in the name of such Loan Party or in such Subsidiarys name), with financially sound and reputable
insurance companies, insurance in at least such amounts and against at least such risks (including
on all its property, and public liability and workers compensation) as are usually insured against
in the same general area by companies of established repute engaged in the same or similar
business.
SECTION 4.23. [Intentionally deleted].
SECTION 4.24. Ownership Structure. As of the Closing Date, Schedule 4.24 is a
complete and correct list of all Subsidiaries of the Borrower and of each Loan Party setting forth
for each such Subsidiary, (i) the jurisdiction of organization of such Subsidiary, (ii) each Person
holding any Capital Securities in such Subsidiary, (iii) the nature of the Capital Securities held
by each such Person, and (iv) the percentage of ownership of such Subsidiary represented by such
Capital Securities. Except as disclosed in such Schedule, as of the Closing Date (i) the Borrower
and its Subsidiaries own, free and clear of all Liens and have the unencumbered right to vote, all
outstanding Capital Securities in each Person shown to be held by each of them on such Schedule,
(ii) all of the issued and outstanding Capital Securities of each Person are validly issued, fully
paid and nonassessable and (iii) there are no outstanding subscriptions, options, warrants,
commitments, preemptive rights or agreements of any kind (including, without limitation, any
stockholders or voting trust agreements) for the issuance, sale, registration or voting of, or
outstanding securities convertible into, any additional Capital Securities of any type in, any such
Person.
SECTION 4.25. Reports Accurate; Disclosure. All information, exhibits, financial
statements, documents, books, records or reports furnished by the Loan Parties to the
Administrative Agent or any Lender in connection with this Agreement or any Loan Document,
including without limitation all reports furnished pursuant to Section 4.04, are true, complete and
accurate in all material respects (or will be true, accurate and complete in every material respect
or based on reasonable estimates on the date as of which such information is stated or certified);
it being recognized by the Administrative Agent and the Lenders that the projections and forecasts
provided by Borrower in good faith and based upon reasonable assumptions are not to be viewed as
facts and that actual results during the period or periods covered by any such projections and
forecasts may differ from the projected or forecasted results. Neither this Agreement, nor any Loan
Document, nor any agreement, document, certificate or statement furnished to the Administrative
Agent or the Lenders in connection with the transactions contemplated hereby contains any untrue
statement of material fact or omits to state a material fact necessary in order to make the
statements contained herein or therein not misleading in light of the circumstances under which
they were made. The Loan Parties have considered all facts which, alone or in the aggregate, could
reasonably be expected to have a Material Adverse Effect and have determined that there is no fact
known to any Loan Party which is reasonably likely to have a Material Adverse Effect.
SECTION 4.26. Location of Offices. The Borrowers name is The St Joe Company. The
names of the Initial Guarantors are: (i) St. Joe Timberland Company of Delaware, L.L.C., (ii) St.
Joe Finance Company and (iii) St. Joe Residential Acquisitions, Inc. The location of Borrower
(within the meaning of Article 9 of the Uniform Commercial Code) is 245 Riverside Drive, Suite 500,
Jacksonville, Florida 32202. The Location of each of the Initial Guarantors (within the meaning of
Article 9 of the Uniform Commercial Code) is 245 Riverside Drive, Suite 500, Jacksonville, Florida
32202. Neither the Borrower nor the Initial Guarantor has changed its name, identity,
structure, existence or state of formation, whether by amendment of its Organizational
Documents, by reorganization or otherwise, or has changed its location (within the meaning of
Article 9 of the Uniform Commercial Code) within the four (4) months preceding the Closing Date or
any subsequent date on which this representation is made.
SECTION 4.27. Affiliate Transactions. Except as permitted by Section 5.26, neither the
Borrower nor any Subsidiary nor any other Loan Party is a party to or bound by any agreement or
arrangement (whether oral or written) to which any Affiliate of the Borrower, any Subsidiary or any
other Loan Party is a party.
SECTION 4.28. Brokers Fees. Except as set forth in the Administrative Agents Letter
Agreement, no brokers or finders fee, commission or similar compensation will be payable with
respect to the transactions contemplated hereby. Except as set forth in the Administrative Agents
Letter Agreement, no other similar fees or commissions will be payable by any Loan Party for any
other services rendered to the Borrower or any of its Subsidiaries ancillary to the transactions
contemplated hereby.
SECTION 4.29. Survival of Representations and Warranties, Etc. All statements
contained in any certificate, financial statement (other than financial projections) or other
instrument delivered by or on behalf of the Borrower, any Subsidiary or any other Loan Party to the
Administrative Agent or any Lender pursuant to or in connection with this Agreement or any of the
other Loan Documents (including, but not limited to, any such statement made in or in connection
with any amendment thereto or any statement contained in any certificate, financial statement or
other instrument delivered by or on behalf of any Loan Party prior to the Closing Date and
delivered to the Administrative Agent or any Lender in connection with the underwriting or closing
of the transactions contemplated hereby) shall constitute representations and warranties made by
the Loan Parties in favor of the Administrative Agent and each of the
Lenders under this Agreement.
All such representations and warranties shall survive the effectiveness of this Agreement, the
execution and delivery of the Loan Documents and the making of the Advances.
SECTION 4.30. Loans and Investments. No Loan Party nor any of their respective
Subsidiaries has made a loan, advance or Investment which is outstanding or existing as of August
31, 2008, except as set forth on Schedule 4.30, and since August 31, 2008, no Loan Party
nor any of their respective Subsidiaries has made any loan, advance or Investment that would give
rise to a Default or Event of Default hereunder.
SECTION 4.31. No Default or Event of Default. No event has occurred and is continuing
and no condition exists, or would result from any Advance or from the application of the proceeds
therefrom, which constitutes or would reasonably be expected to constitute a Default or Event of
Default.
SECTION 4.32. USA Patriot Act; OFAC.
(a) No Loan Party nor any Affiliate of a Loan Party is (1) a country, territory,
organization, person or entity named on an OFAC list, (2) a Person that resides or has a place
of business in a country or territory named on such lists or which is designated as a
Non-Cooperative Jurisdiction by the Financial Action Task Force on Money Laundering (FATF),
or whose subscription funds are transferred from or through such a jurisdiction; (3) a
Foreign Shell Bank within the meaning of the Patriot Act, i.e., a foreign lender that does
not have a physical presence in any country and that is not affiliated with a Lender that has
a physical presence and an acceptable level of regulation and supervision; or (4) a person or
entity that resides in or is organized under the laws of a jurisdiction designated by the
United States Secretary of the Treasury under Section 311 or 312 of the Patriot Act as
warranting special measures due to money laundering concerns.
(b) No Loan Party or any Affiliate of a Loan Party (i) is a Sanctioned Entity, (ii) has a
more than 10% of its assets located in Sanctioned Entities, or (iii) derives more than 10% of
its operating income from investments in, or transactions with Sanctioned Entities. The
proceeds of any Advance will not be used and have not been used to fund any operations in,
finance any investments or activities in or make any payments to, a Sanctioned Entity. No Loan
Party or any Affiliate of a Loan Party are in violation of and shall not violate any of the
country or list based economic and trade sanctions administered and enforced by OFAC that are
described or referenced at http://www.ustreas.gov/offices/enforcement/ofac/ or as otherwise
published from time to time.
SECTION 4.33. Material Contracts. Schedule 4.33 is a true, correct and
complete listing of all contracts to which any Loan Party is a party, the breach of or failure to
perform which, either by a Loan Party or other party to such contract, could reasonably be expected
to have a Material Adverse Effect (Material Contract). The Borrower, its Subsidiaries and the
other Loan Parties that is a party to any Material Contract has performed and is in compliance in
all material respects such Material Contract, and no Loan Party has knowledge of any default or
event of default, or event or condition which with the giving of notice, the lapse of time, or
both, would constitute such a default or event of default, that exists with respect to any such
Material Contract.
SECTION 4.34. Mortgaged Properties. Schedule 1.01, as amended by the most recent
Compliance Certificate, if any, delivered by the Borrower to the Administrative Agent, is a correct
and complete list of all Identified Mortgaged Properties. All Mortgaged Properties are owned in fee
simple by St. Joe Timberland. The representations and warranties of St. Joe Timberland set forth in
Sections 6(e), 6(g), 6(j) and 6(k) of the Security Agreement in the form attached hereto as
Exhibit H and in Sections 2.04 and 8.02 of the Mortgage in the form attached hereto as Exhibit J,
with respect to each Property owned by St. Joe Timberland, are true and correct in all material
respects.
ARTICLE V
COVENANTS
The Borrower and Guarantors agree, jointly and severally, that, so long as any Lender has any
Revolver Commitment hereunder or any Obligation remains unpaid:
SECTION 5.01. Information. The Borrower will deliver to the Administrative Agent, who
will then promptly deliver to each of the Lenders:
(a) as soon as available and in any event within 75 days after the end of each Fiscal
Year, a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of the
end of such Fiscal Year and the related consolidated statements of income, shareholders
equity and cash flows for such Fiscal Year, setting forth in each case in comparative form the
figures for the previous Fiscal Year, all certified by KPMG, LLP or other independent public
accountants reasonably acceptable to the Administrative Agent, with such certification to be
free of exceptions and qualifications not acceptable to the Required Lenders;
(b) as soon as available and in any event within 45 days after the end of each of the
first three Fiscal Quarters of each Fiscal Year, a consolidated balance sheet of the Borrower
and its Consolidated Subsidiaries as of the end of such Fiscal Quarter and the related
statement of income and statement of cash flows for such Fiscal Quarter and for the portion of
the Fiscal Year ended at the end of such Fiscal Quarter, setting forth in each case in
comparative form the figures for the corresponding Fiscal Quarter and the corresponding
portion of the previous Fiscal Year, all certified (subject to normal year-end adjustments) as
to fairness of presentation, GAAP and consistency by the chief financial officer of the
Borrower;
(c) simultaneously with the delivery of each set of financial statements referred to in
clauses (a) and (b) above, a certificate, substantially in the form of Exhibit M and with
compliance calculations in form and content satisfactory to the Administrative Agent (a
Compliance Certificate), of the chief financial officers or authorized officers of the
Borrower (i) setting forth in reasonable detail the calculations required to establish whether
the Loan Parties were in compliance with the requirements of Sections 5.03, 5.04, 5.05, 5.06,
5.07, 5.08, 5.09, 5.10, 5.11, 5.12. 5.30 and 5.36 on the date of such financial statements,
(ii) setting forth the identities of the respective Subsidiaries on the date of such financial
statements, (iii) setting forth a list of all Properties acquired and sold or otherwise
transferred by St. Joe Timberland since the date of the delivery of the previous Compliance
Certificate, such list to identify such Propertys location, indicating whether such Property
is an Identified Mortgaged Property and certifying that all documents, information and other
materials required to be delivered pursuant to Section 5.31 have been previously delivered or
are being delivered with respect to any such acquired Property which is Identified Mortgaged
Property, (iv) setting forth the ratio of Total Indebtedness to Total Asset Value as of the
end of the applicable fiscal period and (v) stating whether any Default exists on the date of
such certificate and, if any Default then exists, setting forth the details thereof and the
action which the Loan Parties are taking or propose to take with respect thereto;
(d) simultaneously with the delivery of each set of annual financial statements referred
to in paragraph (a) above, a statement of the firm of independent public accountants which
reported on such statements to the effect that nothing has come to their attention to cause
them to believe that any Default existed on the date of such financial statements;
(e) within 5 Domestic Business Days after any Responsible Officer of the Borrower becomes
aware of the occurrence of any Default, a certificate of the chief financial officers or
authorized officers of the Borrower setting forth the details thereof and the action which the
Borrower is taking or proposes to take with respect thereto;
(f) [Intentionally deleted];
(g) if and when the Borrower or any member of the Controlled Group (i) gives or is
required to give notice to the PBGC of any reportable event (as defined in Section 4043 of
ERISA) with respect to any Plan which might constitute grounds for a termination of such Plan
under Title IV of ERISA, or knows that the plan administrator of any Plan has given or is
required to give notice of any such reportable event, a copy of the notice of such reportable
event given or required to be given to the PBGC; (ii) receives notice of complete or partial
withdrawal liability under Title IV of ERISA, a copy of such notice; or (iii) receives notice
from the PBGC under Title IV of ERISA of an intent to terminate or appoint a trustee to
administer any Plan, a copy of such notice;
(h) promptly after any Responsible Officer of the Borrower knows of the commencement
thereof, notice of any litigation, dispute or proceeding (and any material development in
respect of such proceedings) involving a claim against a Loan Party and/or any Subsidiary of a
Loan Party that would reasonably be expected to result in a Material Adverse Effect;
(i) within 5 Domestic Business Days after any Responsible Officer of the Borrower becomes
aware that during any period of 12 consecutive months Total Asset Value shall decrease by more
than 5.0% of Total Asset Value as of the beginning of such 12-month period;
(j) simultaneously with the delivery of each set of financial statements referred to in
clauses (a) and (b) above, and within 5 Domestic Business Days of the Administrative Agents
request with respect to any other date, a certificate (the Margin and Fee Rate Certificate)
substantially in the form attached hereto as Exhibit K, reflecting the information
needed for a determination of the ratio of Total Indebtedness to Total Asset Value, the
Applicable Margin and the Applicable Facility Fee Rate as at the end of such quarterly
accounting period, fiscal year or other date, as the case may be, in such form as
Administrative Agent shall in its sole discretion approve, together with Borrowers
calculation of the ratio of Total Indebtedness to Total Asset Value, Applicable Margin and
Applicable Facility Fee
Rate, all as at the end of such quarterly accounting period, fiscal year or other date,
as the case may be. Such Margin and Fee Rate Report shall be certified as to truth and
accuracy by the Chief Financial Officer or other authorized officer of Borrower;
(k) within 45 days after the end of each Fiscal Quarter, reports in form and content
reasonably satisfactory to the Administrative Agent, regarding the Mortgaged Property,
including (i) any changes to the information contained in Schedule 1.01, (ii) the current
total number of acres which comprise the Mortgaged Property, and (iii) any sales or transfers
of Mortgaged Property; and
(l) from time to time such additional information regarding the financial position or
business of the Borrower, its Subsidiaries, and each Loan Party as the Administrative Agent,
at the request of any Lender, may reasonably request.
SECTION 5.02. Inspection of Property, Books and Records. The Borrower will (i) keep,
and will cause each of its Subsidiaries to keep, proper books of record and account (in a manner to
allow financial statements to be prepared in conformity with GAAP) of all material dealings and
transactions in relation to its business and activities; (ii) permit, and will cause each
Subsidiary of the Borrower and each Loan Party to permit, during normal business hours and with
reasonable prior notice which notice shall not be required in the case of an emergency, the
Administrative Agent or its designee, at the expense of the Borrower and Loan Parties, to perform
periodic field audits and investigations of the Borrower, the Loan Parties and the Collateral, from
time to time; and (iii) permit, and will cause each Subsidiary to permit, during normal business
hours and with reasonable prior notice, representatives of any Lender at the Borrowers expense to
visit and inspect any of their respective properties, to examine and make abstracts from any of
their respective books of record and account and to discuss their respective affairs, finances and
accounts with their respective officers, and employees, and with the participation of a Responsible
Officer, their independent public accountants. The Loan Parties agree to cooperate and assist in
such visits and inspections, in each case at such reasonable times and as often as may reasonably
be desired.
SECTION 5.03. Ratio of Total Indebtedness to Total Asset Value. The ratio of Total
Indebtedness to Total Asset Value will not at any time exceed 50%. For the purposes of determining
compliance with such covenant, indebtedness of a Qualified SPE attributable to Qualified Senior
Notes shall be excluded and Qualified Installment Sale Notes shall not be included in
determinations of Total Asset Value.
SECTION 5.04. Unencumbered Leverage Ratio. The ratio of Unencumbered Asset Value to
Unsecured Debt shall not at any time be less than 2.00 to 1.00. For the purposes of determining
compliance with such covenant, indebtedness of a Qualified SPE attributable to Qualified Senior
Notes shall be excluded and Qualified Installment Sale Notes shall not be included in
determinations of Total Asset Value.
SECTION 5.05. Capital Expenditures. Capital Expenditures after the Closing Date will
not exceed the aggregate sum of $500,000,000; provided that after giving effect
to the incurrence of any Capital Expenditures permitted by this Section, no Default shall have
occurred and be continuing.
SECTION 5.06. Sale/Leasebacks. The Loan Parties shall not, nor shall they permit any
Subsidiary to, enter into any Sale/Leaseback Transaction in which the fair market value of the real
or personal property to be sold or transferred in such Sale/Leaseback Transaction, when aggregated
with the fair market value of all real or personal property sold or transferred in all
Sale/Leaseback Transactions entered into by any Loan Parties or any Subsidiary after the Closing
Date, shall exceed in the aggregate the amount of $50,000,000.
SECTION 5.07. Minimum Consolidated Tangible Net Worth. Consolidated Tangible Net Worth
shall at no time be less than 95% of the Consolidated Tangible Net Worth on June 30, 2008 plus 100%
of the cumulative Net Proceeds of Capital Stock/Conversion of Debt received during any period after
June 30, 2008, calculated quarterly at the end of each Fiscal Quarter.
SECTION 5.08. Acquisitions. No Loan Party nor any Subsidiary of a Loan Party shall
make any Acquisition, or take any action to solicit the tender of securities or proxies in respect
thereof in order to effect any Acquisition, unless (i) the board of directors or comparable
governing body of the Person to be (or whose assets are to be) acquired has approved such
Acquisition and the line or lines of business of the Person to be acquired are substantially the
same as or reasonably related to one or more line or lines of business conducted by the Borrower,
(ii) no Default or Event of Default shall have occurred and be continuing either immediately prior
to or immediately after giving effect to such Acquisition and the Borrower shall have furnished to
the Administrative Agent and each Lender (A) if the aggregate Costs of Acquisition incurred by any
Loan Party or any Subsidiary of a Loan Party in any single transaction or in a series of related
transactions exceeds $100,000,000, pro forma historical financial statements as of the end of the
most recently completed Fiscal Year of the Borrower and most recent interim Fiscal Quarter, if
applicable giving effect to such Acquisition and (B) a certificate in the form of Exhibit O
prepared on a historical pro forma basis as of the most recent date for which financial statements
have been furnished pursuant to Section 5.01 giving effect to such Acquisition, which certificate
shall demonstrate that no Default or Event of Default would exist immediately after giving effect
thereto, (iii) the Person acquired shall be a Subsidiary, or be merged into the Borrower or a
Wholly Owned Subsidiary of the Borrower, immediately upon consummation of the Acquisition (or if
assets are being acquired, the acquiror shall be the Borrower or a Subsidiary of the Borrower), and
(iv) after giving effect to such Acquisition, the aggregate Costs of Acquisition incurred by the
Loan Parties and all Subsidiaries of the Loan Parties after the Closing Date shall not exceed
$250,000,000 in the aggregate.
SECTION 5.09. Minimum Liquidity. The Borrower will maintain, at all times, Liquidity
of not less than $20,000,000.
SECTION 5.10. Loans or Advances. No Loan Party nor any Subsidiary of a Loan Party
shall make loans or advances to any Person except: (i) employee loans or advances that do not
exceed $10,000,000 in the aggregate at any one time outstanding made in the ordinary course of
business and consistently with practices existing on December 31, 2007; (ii) deposits required by
government agencies or public utilities; (iii) loans or advances to the Borrower or any
Wholly-Owned Subsidiary that is a Guarantor; provided, all such Debt shall be subordinated
in right of payment to the payment in full of the Obligations pursuant to the terms of an
intercompany subordination agreement that is reasonably satisfactory to Administrative Agent
(Subordination Agreement); (iv) existing loans and advances set forth on Schedule 5.10; and
(v) loans and advances not otherwise permitted under this Section 5.10 which do not exceed
$150,000,000 in the aggregate outstanding (exclusive of Qualified Installment Sale Transactions);
provided that after giving effect to the making of any loans, advances or deposits permitted by
clause (i), (ii), (iii) or (v) of this Section, no Default shall have occurred and be continuing.
All loans or advances permitted under this Section 5.10 (other than loans or advances pursuant to
clause (iii)) shall be evidenced by written promissory notes.
SECTION 5.11. Restricted Payments. The Loan Parties will not declare or make any
Restricted Payment during any Fiscal Year, except that:
(a) any Subsidiary of the Borrower may pay Restricted Payments to the Borrower or any
other Wholly Owned Subsidiary of the Borrower; provided that St. Joe Finance Company shall be
permitted to make cash distributions to its preferred shareholders in an amount not to exceed
$20,000 per annum; and
(b) the Borrower may declare or make Restricted Payments to its owners of Capital
Securities payable solely in cash or its common stock provided that the aggregate amount of
Restricted Payments made after January 1, 2008 does not exceed the cumulative Consolidated Net
Income for all fiscal periods after January 1, 2007 (expressly including in such calculations
Fiscal Quarters in which Consolidated Net Income is negative).
The Borrower shall not make any of the Restricted Payments described in clauses (a) and (b)
above unless (i) at the time when any such Restricted Payment is to be made, no Default or Event of
Default has occurred and is continuing or would result therefrom; (ii) after giving effect to the
making of such Restricted Payment, the Borrower would be in compliance with the requirements of
Article V, on a pro forma basis, determined as of the last day of the last Fiscal Quarter of
Borrower for which the Borrower has provided financial statements and the corresponding Compliance
Certificate to the Administrative Agent and Lenders as if such Restricted Payment had been paid
during such Fiscal Quarter; and (iii) the chief executive officer, chief financial officer or other
authorized officer of the respective Borrower shall have certified to the Administrative Agent and
Lenders as to compliance with the preceding clauses (i) and (ii) in a certificate attaching
calculations (however, such requirement for a Compliance Certificate shall not apply to the
Restricted Payments described in clause (a) above).
SECTION 5.12. Investments. No Loan Party nor any Subsidiary of a Loan Party shall make
Investments in any Person except as permitted by Sections 5.08 and 5.10(i) through (v) and except
Investments in (i) Cash and Cash Equivalents, (ii) commercial paper rated A-1 or the equivalent
thereof by Standard & Poors Corporation or P-1 or the equivalent thereof by Moodys Investors
Service, Inc. and in either case maturing within 12 months after the date of acquisition,
(iii) tender bonds the payment of the principal of and interest on which is fully supported by a
letter of credit issued by a United States Bank whose long-term certificates of deposit are rated
at least AA or the equivalent thereof by Standard & Poors Corporation or AA or the equivalent
thereof by Moodys Investors Service, Inc., (iv) any Guarantor; (v) existing Investments set forth
on Schedule 5.12; (vi) Investments in Qualified Installment Sale Transactions, and
(vii) Investments not otherwise permitted under this Section 5.12, made in the ordinary course of
business that do not exceed $250,000,000 in the aggregate at any one time (exclusive of Qualified
Installment Sale Transactions), and at the time when any such Investment is to be made, and after
giving effect thereto, no Default or Event of Default exists.
SECTION 5.13. Negative Pledge. No Loan Party nor any Subsidiary of a Loan Party will
create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it,
except:
(a) Liens existing on the date of this Agreement encumbering assets (other than
Collateral) securing Debt outstanding on the date of this Agreement, in each case as described
and in the principal amounts set forth on Schedule 5.13;
(b) Liens for taxes, assessments or similar charges, incurred in the ordinary course of
business that are not yet due and payable or that are being contested in good faith and with
due diligence by appropriate proceedings;
(c) pledges or deposits made in the ordinary course of business to secure payment of
workers compensation, or to participate in any fund in connection with workers compensation,
unemployment insurance, old-age pensions or other social security programs which in no event
shall become a Lien prior to any Collateral Documents (including any Timberland Collateral
Documents);
(d) Liens of mechanics, materialmen, warehousemen, carriers or other like liens, securing
obligations incurred in the ordinary course of business that: (1) are not yet due and payable
and which in no event shall become a Lien prior to any Collateral Documents (including any
Timberland Collateral Documents); or (2) are being contested diligently in good faith pursuant
to appropriate proceedings and with respect to which the Loan Party has established reserves
reasonably satisfactory to the Administrative Agent and which in no event shall become a Lien
prior to any Collateral Documents (including any Timberland Collateral Documents);
(e) good faith pledges or deposits made in the ordinary course of business to secure
performance of bids, tenders, contracts (other than for the repayment of
borrowed money) or leases, or to secure statutory obligations, or surety, appeal,
indemnity, performance or other similar bonds required in the ordinary course of business
which in no event shall become a Lien prior to any Collateral Document (including any
Timberland Collateral Documents);
(f) any Lien arising out of the refinancing, extension, renewal or refunding of any Debt
secured by any Lien permitted by any of the foregoing clauses of this Section,
provided that (i) such Debt is not secured by any additional assets, and (ii) the
amount of such Debt secured by any such Lien is not increased;
(g) encumbrances consisting of zoning restrictions, easements or other restrictions on
the use of real property, none of which materially impairs the use of such property by
Borrower in the operation of its business, and none of which is violated in any material
respect by existing or proposed restrictions on land use;
(h) (1) that certain Wood Fiber Supply Agreement dated July 1, 2000, between St. Joe
Timberland and Jefferson Smurfit Corporation; and (2) timber or fiber supply agreements which
when combined with all other timber or fiber supply agreements entered into after the date of
this Agreement encumber less than 50,000 acres in the aggregate unless approved by the
Administrative Agent (which consent shall not be unreasonably withheld);
(i) any Lien on Margin Stock;
(j) any Lien imposed as a result of a taking under the exercise of the power of eminent
domain by any governmental body or by any Person acting under governmental authority;
(k) agreements executed by a Qualified SPE and not by any Loan Party relating to a
Qualified Installment Sale Transaction;
(l) Liens on not more than 25,000 acres of Land in the aggregate (the Encumbered Land)
securing Debt (other than indebtedness represented by the Notes) permitted under
Section 5.30(d) in an aggregate amount at any time outstanding not to exceed $125,000,000;
(m) any Lien created by that certain Agreement dated October 27, 2006, between The St.
Joe Company and the Florida Department of Transportation regarding the conveyance of
approximately 4,000 acres for transportation purposes;
(n) Liens securing the Administrative Agent and the Lenders created or arising under the
Loan Documents.
Notwithstanding anything contained in this Section 5.13 to the contrary, no Loan Party or
any Subsidiary of a Loan Party will create, assume or suffer to exist
any Lien on the Collateral except Liens in favor of the Secured Parties under the
Collateral Documents and the Permitted Encumbrances.
SECTION 5.14. Maintenance of Existence, etc. Each Loan Party shall, and shall cause
each Subsidiary of a Loan Party to, maintain its organizational existence and carry on its business
in substantially the same manner and in substantially the same line or lines of business or line or
lines of business reasonably related to the business now carried on and maintained. Any Subsidiary
pledging Collateral hereunder shall be organized as a corporation, limited liability company,
limited partnership or other legal entity.
SECTION 5.15. Dissolution. No Loan Party nor any Subsidiary of a Loan Party shall
suffer or permit dissolution or liquidation either in whole or in part or redeem or retire any
shares of its own Capital Securities or that of any Subsidiary of a Loan Party, except: (1) through
corporate or company reorganization to the extent permitted by Section 5.16, (2) the dissolution of
a Subsidiary (other than St. Joe Timberland) which is not a Material Domestic Subsidiary into the
Borrower or any other Subsidiary and the dissolution of a Material Domestic Subsidiary (other than
St. Joe Timberland) into the Borrower or any other Loan Party; and (3) Restricted Payments
permitted by Section 5.11.
SECTION 5.16. Consolidations, Mergers and Sales of Assets. No Loan Party will, nor
will it permit any Subsidiary of a Loan Party to, consolidate or merge with or into, or sell, lease
or otherwise transfer all or any substantial part of its assets to, any other Person, or
discontinue or eliminate any business line or segment provided that (a) pursuant to the
consummation of an Acquisition permitted under Section 5.08 (but not otherwise) a Loan Party may
merge with another Person if (i) such Person was organized under the laws of the United States of
America or one of its states, (ii) the Loan Party is the Person surviving such merger,
(iii) immediately after giving effect to such merger, no Default shall have occurred and be
continuing, and (iv) if the Borrower merges with another Loan Party, the Borrower is the Person
surviving such merger; (b) Subsidiaries of a Loan Party (excluding Loan Parties) may merge with one
another or with the Borrower (so long as the Borrower is the surviving entity in such case); (c) a
Loan Party and any Subsidiary may sell assets for fair value in the ordinary course of business;
(d) a Subsidiary that is not a Material Domestic Subsidiary may discontinue or eliminate any
nonmaterial business line; and (e) the foregoing limitation on the sale, lease or other transfer of
assets shall not prohibit a transfer of assets (in a single transaction or in a series of related
transactions) unless the assets to be so transferred shall cause St. Joe Timberland to hold less
than 250,000 acres of Land as fee simple owner (excluding any Encumbered Land (as defined in
Section 5.13(l)); provided that, notwithstanding any of the foregoing, after a Trigger Event has
occurred, St. Joe Timberland shall not sell, lease or otherwise transfer, or enter into any
agreement or arrangement to sell, lease or otherwise transfer, any of its Properties or other
assets without the prior written consent of the Administrative Agent (in its sole discretion).
SECTION 5.17. Use of Proceeds. No portion of the proceeds of any Advance or Letter of
Credit will be used by the Borrower or any Subsidiary (i) in connection with, either directly or
indirectly, any tender offer for, or other acquisition of, stock of any corporation with a view
towards obtaining control of such other corporation, except as permitted by Section 5.08
(ii) directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of
purchasing or carrying any Margin Stock, or (iii) for any purpose in violation of any applicable
law or regulation. Except as otherwise provided herein, the proceeds of the Advances and Letters of
Credit shall be used to: (i) refinance existing indebtedness of the Borrower; (ii) for working
capital, capital expenditures and other lawful corporate purposes, and (iii) to pay fees and
expenses incurred in connection with this Agreement. No part of the proceeds of any Advance or
Letter of Credit will be used, whether directly or indirectly, for any purpose that would violate
any rule or regulation of
the Board of Governors of the Federal Reserve System, including
Regulations T, U or X.
SECTION 5.18. Compliance with Laws; Payment of Taxes. Each Loan Party will, and will
cause each Subsidiary of a Loan Party and each member of the Controlled Group to, comply in all
material respects with applicable laws (including but not limited to ERISA and the USA Patriot
Act), regulations and similar requirements of governmental authorities (including but not limited
to PBGC), except where the necessity of such compliance is being contested in good faith through
appropriate proceedings diligently pursued. Each Loan Party will, and will cause each Subsidiary of
a Loan Party to, pay promptly when due all taxes, assessments, governmental charges, claims for
labor, supplies, rent and other obligations which, if unpaid, might become a lien against the
property of a Loan Party or any Subsidiary of a Loan Party, except liabilities being contested in
good faith by appropriate proceedings diligently pursued and against which, if requested by the
Administrative Agent, the Borrower shall have set up reserves in accordance with GAAP. Each Loan
Party will, and will cause each Subsidiary of a Loan Party to, comply in all material respects with
the terms and conditions of all Material Contracts to which it is a party.
SECTION 5.19. Insurance. Each Loan Party will maintain, and will cause each Subsidiary
of a Loan Party to maintain (either in the name of such Loan Party or in such Subsidiarys own
name), with financially sound and reputable insurance companies, insurance on all its Property in
at least such amounts and against at least such risks as are usually insured against in the same
general area by companies of established repute engaged in the same or similar business. Upon
request, the Loan Parties shall promptly furnish the Administrative Agent copies of all such
insurance policies or certificates evidencing such insurance and such other documents and evidence
of insurance as the Administrative Agent shall request.
SECTION 5.20. Change in Fiscal Year. No Loan Party will make any significant change in
accounting treatment or reporting practices, except as required by GAAP, or change its Fiscal Year
without the consent of the Required Lenders.
SECTION 5.21. Maintenance of Property. Each Loan Party shall, and shall cause each
Subsidiary of a Loan Party to, maintain all of its properties and assets in good condition, repair
and working order, ordinary wear and tear excepted.
SECTION 5.22. Environmental Notices. Each Loan Party shall furnish to the Lenders and
the Administrative Agent prompt written notice of all material Environmental Liabilities, pending
or threatened Environmental Proceedings, Environmental Notices, Environmental Judgments and Orders,
and Environmental Releases at, on, in, under or in any way affecting the Properties or any adjacent
property, and all facts, events, or conditions that could reasonably be expected to lead to any of
the foregoing.
SECTION 5.23. Environmental Matters. No Loan Party or any Subsidiary of a Loan Party
will, nor will any Loan Party permit any Third Party to, use, produce, manufacture, process, treat,
recycle, generate, store, dispose of, manage at, or otherwise handle or ship or transport to or
from the Properties any Hazardous Materials except for Hazardous Materials such as cleaning
solvents, pesticides and other similar materials used, produced, manufactured, processed, treated,
recycled, generated, stored, disposed, managed or otherwise handled in minimal amounts in the
ordinary course of business in compliance in all material respects with all applicable
Environmental Requirements.
SECTION 5.24. Environmental Release. Each Loan Party agrees that upon the occurrence
of an Environmental Release at, under or on any of the Properties it will act immediately to
investigate the extent of, and to take appropriate remedial action to eliminate, such Environmental
Release, whether or not ordered or otherwise directed to do so by any Environmental Authority.
SECTION 5.25. Additional Covenants, Etc. In the event that at any time this Agreement
is in effect or any Note remains unpaid any Loan Party shall enter into any agreement, guarantee,
indenture or other instrument governing, relating to, providing for commitments to advance or
guaranteeing any Financing (excluding Qualified Installment Sale Transactions) or to amend any
terms and conditions applicable to any Financing (excluding Qualified Installment Sale
Transactions), which agreement, guarantee, indenture or other instrument includes covenants,
warranties, representations, defaults or events of default (or any other type of restriction which
would have the practical effect of any of the foregoing, including, without limitation, any put
or mandatory prepayment of such debt) or other terms or conditions not substantially as, or in
addition to those, provided in this Agreement or any other Loan Document, or more favorable to the
lender or other counterparty thereunder than those provided in this Agreement or any other Loan
Document, the Loan
Party shall promptly so notify the Administrative Agent and the Lenders.
Thereupon, if the Administrative Agent shall request by written notice to the Loan Party (after a
determination has been made by the Required Lenders that any of the above referenced documents or
instruments contain any provisions which either individually or in the aggregate are more favorable
than one of the provisions set forth herein), the Loan Parties, the Administrative Agent and the
Lenders shall enter into an amendment to this Agreement providing for substantially the same such
covenants,
warranties, representations, defaults or events of default or other terms or conditions as
those provided for in such agreement, guarantee, indenture or other instrument, to the extent
required and as may be selected by the Administrative Agent, such amendment to remain in effect,
unless otherwise specified in writing by the Administrative Agent, for the entire duration of the
term of such Financing (to and including the date to which the same may be extended at the option
of the Loan Party), provided that if any such agreement, guarantee, indenture or other
instrument shall be subsequently modified, supplemented, amended or restated so as to modify, amend
or eliminate from such agreement, guarantee, indenture or other instrument any such covenant,
warranty, representation, default or event of default or other term or condition so made a part of
this Agreement, then unless otherwise required by the Administrative Agent pursuant to this
Section, the Loan Documents shall be modified so as to conform the provisions previously
incorporated pursuant to this Section 5.25 to such provisions as subsequently modified,
supplemented or amended.
SECTION 5.26. Transactions with Affiliates. No Loan Party nor any Subsidiary of a Loan
Party shall enter into, or be a party to, any transaction with any Affiliate of a Loan Party or
such Subsidiary (which Affiliate is not a Loan Party or a Subsidiary of a Loan Party), except as
permitted by law and in the ordinary course of business and pursuant to reasonable terms which are
no less favorable to the Loan Party or such Subsidiary than would be obtained in a comparable arms
length transaction with a Person which is not an Affiliate; provided, however, Qualified
Installment Sale Transactions shall not be subject to the requirement that they be in the ordinary
course of business.
SECTION 5.27. Joinder of Subsidiaries.
(a) The Loan Parties shall cause any Person which becomes a Material Domestic Subsidiary
of a Loan Party after the Closing Date to become a party to, and agree to be bound by the
terms of, this Agreement and the other Loan Documents pursuant to a Joinder Agreement,
substantially in the form attached hereto as Exhibit D and otherwise satisfactory to the
Administrative Agent in all respects and executed and delivered to the Administrative Agent
within fifteen (15) Domestic Business Days after the day on which such Person became a
Material Domestic Subsidiary. The Loan Parties shall also cause the items specified in
Section 3.01(c), (e) and (j) to be delivered to the Administrative Agent concurrently with the
instrument referred to above, modified appropriately to refer to such instrument and such
Subsidiary. The Borrower covenants and agrees that notwithstanding the definition of Material
Subsidiaries and Excluded Subsidiaries at no time shall Subsidiaries that are not Guarantors
own directly or indirectly more than 10% of the aggregate Total Asset Value of the Borrower
and its Subsidiaries. For purposes of the foregoing proviso, Qualified SPEs and any Excluded
Subsidiary described in subsection 1 of the definition of Excluded Subsidiary, the sole
purpose of which is to defease debt of such Subsidiary and which owns Cash Equivalents in an
amount reasonably determined to be sufficient to defease such debt, shall be disregarded.
(b) The Loan Parties shall, or shall cause any Subsidiary (the Pledgor Subsidiary) to
pledge: (a) the lesser of 65% or the entire interest owned by the Loan Parties and such
Pledgor Subsidiary, of the Capital Securities or equivalent equity interests in any Person
which becomes a Material Foreign Subsidiary after the Closing Date; and (b) the entire
interest owned by the Loan Parties and such Pledgor Subsidiary, of the Capital Securities or
equivalent equity interest in any Person which becomes a Material Domestic Subsidiary after
the Closing Date, all pursuant to a Pledge Agreement executed and delivered by the Loan
Parties or such Pledgor Subsidiary to the Administrative Agent within ten (10) Domestic
Business Days after the day on which such Person became a Material Domestic Subsidiary or
Material Foreign Subsidiary, as the case may be, and shall deliver to the Administrative Agent
such shares of capital stock together with stock powers executed in blank. The Loan Parties
shall also cause the items specified in Section 3.01(c), (e) and (j) to be delivered to the
Administrative Agent concurrently with the pledge agreement referred to above, modified
appropriately to refer to such pledge agreement, the pledgor and such Subsidiary.
(c) Once any Subsidiary becomes a party to this Agreement in accordance with Section
5.27(a) or any Capital Securities (or equivalent equity interests) of a Subsidiary are pledged
to the Administrative Agent in accordance with Section 5.27(b), such Subsidiary (including,
without limitation, all Initial Guarantors) thereafter shall remain a party to this Agreement
and the Capital Securities (or equivalent equity interests) in such Subsidiary (including,
without limitation, all initial Subsidiaries) shall remain subject to the pledge to the
Administrative Agent, as the case may be,
even if such Subsidiary ceases to be a Subsidiary;
provided that if a Subsidiary ceases to be a Subsidiary of the Borrower as a result of the
Borrowers transfer or sale of one hundred percent (100%) of the capital stock of such
Subsidiary in accordance with and to the extent permitted by the terms of Section 5.16, the
Administrative Agent and the Lenders agree to release such Subsidiary from this Agreement and
release the Capital Securities of such Subsidiary from the Pledge Agreement.
SECTION 5.28. No Restrictive Agreement. No Loan Party will, nor will any Loan Party
permit any of its Subsidiaries to, enter into, after the date of this Agreement, any indenture,
agreement, instrument or other arrangement that, directly or indirectly, prohibits or restrains, or
has the effect of prohibiting or restraining, or imposes materially adverse conditions upon, any of
the following by the Loan Party or any such Subsidiary: the incurrence or payment of Debt, the
granting of Liens, the declaration or payment of Restricted Payments or other distributions in
respect of Capital Securities of the Loan Party or any Subsidiary, the making of loans, advances or
Investments or the sale, assignment, transfer or other disposition of property, real, personal,
intangible or tangible.
SECTION 5.29. Partnerships. No Loan Party shall become a general partner in any
general or limited partnership.
SECTION 5.30. Additional Debt. No Loan Party or Subsidiary of a Loan Party shall
directly or indirectly issue, assume, create, incur or suffer to exist any Debt or the equivalent
(including obligations under capital leases), except for: (a) the Debt owed to the Lenders under
the Loan Documents; (b) the Debt existing and outstanding on the Closing Date described on
Schedule 5.30; (c) intercompany Debt permitted by Section 5.10(iii), provided that such
Debt is at all times subordinated to the Obligations pursuant to the Subordination Agreement; and
(d) Debt not otherwise permitted under this Section 5.30, the aggregate outstanding principal
amount of which shall not, at any time, exceed $250,000,000 (provided, however, indebtedness of a
Qualified SPE in respect of Qualified Installment Sale Transactions shall not be subject to this
Section).
SECTION 5.31. Maintenance and Substitution of Identified Mortgaged Property. St. Joe
Timberland at all times (i) shall maintain fee simple ownership of not fewer than 250,000 acres of
Land (excluding any Encumbered Land (as defined in Section 5.13(l)) and (ii) shall have set forth
on Schedule 1.01 a listing and legal descriptions of Property it owns in fee simple that in the
aggregate consists of at least 200,000 acres (excluding any Encumbered Land (as defined in Section
5.13(l)). At any time when no Trigger Event has occurred, the Borrower may substitute or replace
one or more of the Identified Mortgaged Properties with one or more Properties owned in fee simple
by St. Joe Timberland that are not then Identified Mortgaged Properties subject to the following
conditions: (x) the covenants in the preceding sentence are satisfied after giving effect to such
substitution or replacement, (y) receipt by the Administrative Agent of all items described in
Section 3.01(m) with respect to such substitute or replacement Identified Mortgaged Property, all
reasonably satisfactory to the Administrative Agent and (z) receipt by the Administrative Agent of
an updated Schedule 1.01 reflecting such substitution or replacement.
SECTION 5.32. Modifications of Organizational Documents. Except as required by
Applicable Laws or the rules of any national securities exchange, the Borrower shall not, and shall
not permit any Loan Party or other Subsidiary to, amend, supplement, restate or otherwise modify
its Organizational Documents or Operating Documents or other applicable document in a manner
adverse to the Secured Parties.
SECTION 5.33. ERISA Exemptions. The Loan Parties shall not permit any of their
respective assets to become or be deemed to be plan assets within the meaning of ERISA, the Code
and the respective regulations promulgated thereunder.
SECTION 5.34. Hedge Transactions. The Loan Parties will not, and will not permit any
of their Subsidiaries to, enter into any Hedge Transaction, other than Hedge Transactions entered
into in the ordinary course of business (i) to hedge or mitigate risks to which the Loan Parties
are exposed in the conduct of their business or the management of their liabilities, or (ii) with
any counterparty who is or is anticipated to become, at the time that the Hedge Transaction is
entered into, a borrower from a Loan Party or the issuer of a debt or equity interest to a Loan
Party, which Hedge Transaction is entered into to hedge or mitigate risks to which such
counterparty and its affiliates are exposed in the conduct of their businesses or the management of
its liabilities. Solely for the
avoidance of doubt, the Borrower acknowledges that a Hedge Transaction entered into for
speculative purposes or of a speculative nature (which shall be deemed to include, without
limitation, any Hedge Transaction under which any Loan Party is or may become obliged to make any
payment (i) in connection with the purchase by any third party of any common stock or any Debt or
(ii) as a
result of changes in the market value of any common stock or any Debt) is not a Hedge
Transaction entered into in the ordinary course of business to hedge or mitigate risks.
SECTION 5.35. Performance of Loan Documents. Each Loan Party will at its own expense
duly fulfill and comply with all obligations on its part to be fulfilled or complied with under or
in connection with the Collateral, and all documents related thereto and will do nothing to impair
the rights of any Loan Party or the Administrative Agent, as agent for the Secured Parties, or of
the Secured Parties in, to and under the Collateral. Each Loan Party shall clearly and
unambiguously identify each item of the Collateral in its computer or other records to reflect that
the Administrative Agent, as agent for the Secured Parties has the interest therein granted by the
Loan Parties pursuant to the Loan Documents. Schedule 1.01, as amended by the most recent
Compliance Certificate, if any, delivered by the Borrower to the Administrative Agent, is a correct
and complete list of all Identified Mortgaged Properties. All Mortgaged Properties are owned in fee
simple by St. Joe Timberland and shall be owned by St. Joe Timberland at all times. St. Joe
Timberland shall not sell, convey or transfer any of the Properties that it owns in whole or in
part to any third party (including without limitation the Borrower and its Subsidiaries) except for
sales in the ordinary course of business and which are permitted under Section 5.16(d). Upon
execution of the Collateral Documents by the Loan Parties and delivery thereof to the
Administrative Agent, the representations and warranties of the Loan Parties contained in the
Collateral Documents shall be true and correct.
SECTION 5.36. Operating Leases. No Loan Party nor any Subsidiary of a Loan Party shall
create, assume or suffer to exist any operating lease except operating leases which: (A) (1) are
entered into in the ordinary course of business, and (2) the aggregate indebtedness, liabilities
and obligations of the Loan Parties under all such operating leases during any period of four
(4) consecutive Fiscal Quarters do not at any time exceed $5,000,000; (B) are between a Borrower or
Guarantor, as landlord and a Borrower or Guarantor as tenant; or (C) are set forth on
Schedule 5.36.
SECTION 5.37. Deposit Accounts and Cash Management. The Loan Parties shall maintain
their primary demand deposit and cash management accounts with Administrative Agent.
SECTION 5.38. Trigger Event/Collateral Diligence Enhancement Event.
(a) Unless the Revolver Commitments have been terminated or have been suspended and not
reinstated by approval of the Required Lenders, all obligations to provide Cash Management
Services and Bank Products have been terminated, all Hedging Agreements have been terminated,
all Obligations have been paid in full
and all Undrawn Amounts are cash collateralized in accordance with Section 6.03, no later
than 15 days after the date on which a Trigger Event occurs, St. Joe Timberland shall
(i) execute and deliver to the Administrative Agent on behalf of the Secured Parties the
Timberland Collateral Documents (with such modifications thereto as may be reasonably required
by the Administrative Agent), which shall be effective to create in favor of the
Administrative Agent on behalf of the Secured Parties a first priority pledge of and/or a lien
on substantially all of the assets of St. Joe Timberland subject to such exceptions as are
reasonably satisfactory to the Administrative Agent, (ii) deliver and pledge thereunder all
securities, notes, instruments and transfer powers required to be delivered by the terms of
the respective Timberland Collateral Documents, (iii) execute and cause to be filed (and
authorize the Administrative Agent to file) such financing statements and other mortgages as
are required to perfect the pledges and Liens created under the Timberland Collateral
Documents and to obtain the priority of such perfection required by the respective Timberland
Collateral Documents and (iv) cause to be delivered the Mortgaged Property Support Documents
as are reasonably requested by, and as are reasonably satisfactory to, the Administrative
Agent with respect to the Timberland Collateral Documents and the pledges and Liens created
thereunder; provided, however, that in the event the Mortgaged Property Support Documents are
not delivered by St. Joe Timberland in such time period despite the good faith and
commercially reasonable efforts to do so, St. Joe Timberland shall have: (i) an additional
15 days to deliver the Mortgaged Property Support Documents (other than surveys) to the
Administrative Agent, and (ii) so long as St. Joe Timberland diligently exercises commercially
reasonable efforts, such additional time as may reasonably be required, but in no event to
exceed a period of an additional 180 days, to deliver any and all surveys included in the
Mortgaged Property Support Documents to the Administrative Agent.
(b) At any time a Trigger Event has occurred and is continuing, St. Joe Timberland will,
and will cause each of the other Loan Parties to, at the expense of the Loan Parties, make,
execute, endorse, acknowledge, file and/or deliver to the Administrative Agent from time to
time such vouchers, invoices, schedules, confirmatory assignments, conveyances, financing
statements, waivers, bailee agreements, control agreements and other assurances or instruments
and take such further steps relating to the Collateral as the Administrative Agent may
reasonably require.
Furthermore, the Loan Parties will, and will cause the other Loan Parties
to, deliver to the Administrative Agent, from time to time, such Mortgaged Property Support
Documents (including, without limitation, opinions of counsel, title insurance and other
related documents) as may be reasonably requested by the Administrative Agent to assure itself
that this Section 5.38 has been complied with.
(c) If the Administrative Agent or the Required Lenders reasonably determine that they
are required by law or regulation to have appraisals prepared in respect of any Mortgaged
Property of St. Joe Timberland that constitutes or is to constitute Collateral, St. Joe
Timberland will, at its own expense, provide to the Administrative Agent appraisals (or
reimburse the Administrative Agent for such
appraisals as Administrative Agent elects to obtain) which satisfy the applicable
requirements of Applicable Laws, and which shall otherwise be in form and substance reasonably
satisfactory to the Administrative Agent.
(d) Upon the occurrence of a Collateral Diligence Enhancement Event and from time to time
thereafter, the Loan Parties shall promptly deliver to the Administrative Agent such Mortgaged
Property Support Documents as the Administrative Agent may reasonably request in connection
with the Timberland Collateral.
(e) The Borrower agrees that each action required by clauses (c) through (d) of this
Section 5.38 shall be completed as soon as possible, but in no event later than 60 days after
such action is requested to be taken by the Administrative Agent or the Required Lenders, as
the case may be.
SECTION 5.39. Timberland Collateral Property. Upon execution of the Timberland
Collateral Documents by St. Joe Timberland and delivery of the Timberland Collateral Documents to
the Administrative Agent, the Administrative Agent shall have: (i) a first priority Lien upon the
fee simple title to the Mortgaged Property; (ii) a first priority Lien upon the leases and rents
applicable to the Mortgaged Property; (iii) a first priority Lien upon all equipment and fixtures
applicable to the Mortgaged Property and (iv) subject to the filing of the Mortgages and one or
more UCC financing statements in the appropriate jurisdictions, a fully perfected first priority
Lien on, and security interest in, all right, title and interest in and to all other Timberland
Collateral and the Proceeds thereof, in each case prior and superior in any right to any other
Person (subject in each case to Permitted Encumbrances).
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default. If one or more of the following events (Events of
Default) shall have occurred and be continuing:
(a) the Borrower shall fail to pay when due any principal of any Advance (including,
without limitation, any Advance or portion thereof to be repaid pursuant to Section 2.11) or
shall fail to pay when due any Reimbursement Obligation with respect to any Letter of Credit
or shall fail to pay any interest on any Advance within three Domestic Business Days after
such interest shall become due, or any Loan Party shall fail to pay any fee or other amount
payable hereunder within three Domestic Business Days after such fee or other amount becomes
due; or
(b) any Loan Party shall fail to observe or perform any covenant contained in Article V;
provided that in the case of a failure to observe or perform Section 5.02(i), 5.18,
Section 5.19, 5.21, 5.23, 5.24 and 5.37, such failure continues for thirty (30) days and in
the case of a failure to observe or perform Section 5.01
(other than clause (e) thereof), such failure continues for five (5) days, in each case
after the earlier of: (i) the first day on which any Loan Party has knowledge of such failure;
and (ii) written notice thereof has been given to the Borrower by the Administrative Agent; or
(c) any Loan Party shall fail to observe or perform any covenant or agreement contained
or incorporated by reference in this Agreement (other than those covered by clause (a) or
(b) above or clauses (n) or (q) below); provided that such failure continues for thirty days
after the earlier of (i) the first day on which any Responsible Officer of any Loan Party has
knowledge of such failure or (ii) written notice thereof has been given to the Borrower by the
Administrative Agent at the request of any Lender; or
(d) any representation, warranty, certification or statement made or deemed made by the
Loan Parties in Article IV of this Agreement or in any financial statement, material
certificate or other material document or report
delivered pursuant to this Agreement shall
prove to have been untrue or misleading in any material respect when made (or deemed made); or
(e) any Loan Party or any Subsidiary of a Loan Party shall fail to make any payment in
respect of Debt (other than the Notes) having an aggregate principal amount in excess of
$5,000,000 after expiration of any applicable cure or grace period; or
(f) any event or condition shall occur which results in the acceleration of the maturity
of Debt outstanding of any Loan Party or any Subsidiary of a Loan Party in an aggregate
principal amount in excess of $5,000,000 or the mandatory prepayment or purchase of such Debt
by any Loan Party (or its designee) or such Subsidiary of a Loan Party (or its designee) prior
to the scheduled maturity thereof, or enables (or, with the giving of notice or lapse of time
or both, would enable) the holders of such Debt or commitment to provide such Debt or any
Person acting on such holders behalf to accelerate the maturity thereof, terminate any such
commitment or require the mandatory prepayment or purchase thereof prior to the scheduled
maturity thereof, without regard to whether such holders or other Person shall have exercised
or waived their right to do so; or
(g) any Loan Party or any Subsidiary of a Loan Party shall commence a voluntary case or
other proceeding seeking liquidation, reorganization or other relief with respect to itself or
its debts under any Bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, administrator, custodian or other
similar official of it or any substantial part of its property, or shall consent to any such
relief or to the appointment of or taking possession by any such official in an involuntary
case or other proceeding commenced against it, or shall make a general assignment for the
benefit of creditors, or shall fail generally, or shall admit in writing its inability, to pay
its
debts as they become due, or shall take any corporate action to authorize any of the
foregoing; or
(h) an involuntary case or other proceeding shall be commenced against any Loan Party or
any Subsidiary of a Loan Party seeking liquidation, reorganization or other relief with
respect to it or its debts under any Bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver, liquidator,
administrator, custodian or other similar official of it or any substantial part of its
property, and such involuntary case or other proceeding shall remain undismissed and unstayed
for a period of 60 days; or an order for relief shall be entered against any Loan Party or any
Subsidiary of a Loan Party under the federal Bankruptcy laws as now or hereafter in effect; or
(i) any Loan Party or any member of the Controlled Group shall fail to pay when due any
material amount which it shall have become liable to pay to the PBGC or to a Plan under Title
IV of ERISA; or notice of intent to terminate a Plan or Plans shall be filed under Title IV of
ERISA by any Loan Party, any member of the Controlled Group, any plan administrator or any
combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA
to terminate or to cause a trustee to be appointed to administer any such Plan or Plans or a
proceeding shall be instituted by a fiduciary of any such Plan or Plans to enforce Section 515
or 4219(c)(5) of ERISA and such proceeding shall not have been dismissed within 30 days
thereafter; or a condition shall exist by reason of which the PBGC would be entitled to obtain
a decree adjudicating that any such Plan or Plans must be terminated; or
(j) one or more judgments or orders for the payment of money in an aggregate amount in
excess of $5,000,000 shall be rendered against any Loan Party or any Subsidiary of a Loan
Party and such judgment or order shall continue unsatisfied and unstayed for a period of 30
days or any Loan Party or Subsidiary of a Loan Party shall have made payments in settlement of
any litigation or threatened proceeding in excess of $500,000; or
(k) a federal tax lien shall be filed against any Loan Party or any Subsidiary of a Loan
Party under Section 6323 of the Code or a lien of the PBGC shall be filed against any Loan
Party or any Subsidiary of a Loan Party under Section 4068 of ERISA and in either case such
lien shall remain undischarged for a period of 30 days after the date of filing; or
(l) a Change in Control shall occur; or
(m) the Administrative Agent, as agent for the Secured Parties, shall fail for any reason
to have a valid first priority security interest in any of the Collateral (other than, prior
to the time St. Joe Timberland is required to deliver the Timberland Collateral Documents
pursuant to Section 5.38 hereof, the Timberland Collateral); or
(n) a default or event of default shall occur and be continuing under any of the
Collateral Documents, any Letter of Credit or any Letter of Credit Application Agreement or
any Loan Party shall fail to observe or perform any obligation to be observed or performed by
it under any Collateral Document, any Letter of Credit or any Letter of Credit Application
Agreement, and such default, event of default or failure to perform or observe any obligation
continues beyond any applicable cure or grace period provided in such Collateral Document, any
Letter of Credit or any Letter of Credit Application Agreement; or
(o) a default or event of default shall occur and be continuing under any of the Material
Contracts or any Loan Party shall fail to observe or perform any obligation to be observed or
performed by it under any Material Contract, and such default, event of default or failure to
perform or observe any obligation continues beyond any applicable cure or grace period
provided in such Material Contract; or
(p) a default or event of default shall occur and be continuing under any Hedge
Transaction or Hedging Obligation or any Loan Party shall fail to observe or perform any
obligation to be observed or performed by it under any Hedge Transaction or Hedging
Obligation, and such default, event of default or failure to perform or observe any obligation
continues beyond any applicable cure or grace period provided in such Hedge Transaction or
Hedging Obligation; or
(q) (i) any of the Guarantors shall fail to pay when due any Guaranteed Obligations
(after giving effect to any applicable grace period) or shall fail to pay any fee or other
amount payable hereunder when due; or (ii) any Guarantor shall disaffirm, contest or deny its
obligations under Article X; or
(r) if the Borrower at any time fails to own (directly or indirectly, through Wholly
Owned Subsidiaries) 100% of the outstanding shares of the voting stock, voting membership
interests or equivalent equity interests of each Guarantor; or
(s) any Loan Party shall (or shall attempt to) disaffirm, contest or deny its obligations
under any Loan Document; or
(t) the occurrence of any event, act or condition which the Required Lenders determine
either does or would reasonably be expected to have a Material Adverse Effect,
then, and in every such event, the Administrative Agent shall (i) if requested by the Required
Lenders, by notice to the Borrower terminate the Revolver Commitments and they shall thereupon
terminate; (ii) if requested by BB&T, by notice to the Borrower, terminate the Swing Line facility
set forth in Section 2.01(b); (iii) if requested by the Required Lenders, by notice to the Letter
of Credit Issuer, instruct the Letter of Credit Issuer to declare an Event of Default under the
Letter of Credit Application Agreements; and (iv) if requested by the Required Lenders, by notice
to the Borrower declare the Notes (together with accrued interest thereon) and all other amounts
payable hereunder
and under the other Loan Documents to be, and the Notes (together with all accrued interest
thereon) and all other amounts payable hereunder and under the other Loan Documents shall thereupon
become, immediately due and payable without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Loan Parties; provided that if any Event of
Default specified in clause (g) or (h) above occurs with respect to any Loan Party or any
Subsidiary of a Loan Party, without any notice to any Loan Party or any other act by the
Administrative Agent or the Lenders, the Revolver Commitments shall thereupon automatically
terminate and the Swing Line facility set forth in Section 2.01(b) shall thereupon automatically
terminate and the Notes, including without limitation the Swing Advance Note, (together with
accrued interest thereon) and all other amounts payable hereunder and under the other Loan
Documents shall automatically become immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by the Loan Parties.
Notwithstanding the foregoing, the Administrative Agent shall have available to it all rights and
remedies provided under the Loan Documents (including, without limitation, the rights of a secured
party pursuant to the Collateral Documents) and in addition thereto, all other rights and remedies
at law or equity, and the Administrative Agent shall exercise any one or all of them at the request
of the Required Lenders.
SECTION 6.02. Notice of Default. The Administrative Agent shall give notice to the
Borrower of any Default under Section 6.01(c) promptly upon being requested to do so by any Lender
and shall thereupon notify all the Lenders thereof.
SECTION 6.03. Cash Cover. If any Event of Default shall have occurred and be
continuing, the Borrower shall,
if requested by the Administrative Agent, pay to the Administrative
Agent, for the benefit of the Lenders an amount in immediately available funds (which funds shall
be held as collateral pursuant to arrangements satisfactory to the Administrative Agent) equal to
105% of the aggregate Undrawn Amounts available under the Letters of Credit, provided that, if any
Event of Default specified in clause (g) or (h) above occurs, the Borrower shall be obligated to
pay such amount to the Administrative Agent forthwith without any notice to the Borrower or any
other act by the Administrative Agent.
SECTION 6.04. Allocation of Proceeds. If an Event of Default has occurred and not been
waived, and the maturity of the Notes has been accelerated pursuant to Article VI hereof, all
payments received by the Administrative Agent hereunder or under the other Loan Documents, in
respect of any principal of or interest on the Obligations or any other amounts payable by the
Borrower or any other Loan Party hereunder or under the other Loan Documents, shall be applied by
the Administrative Agent in the following order:
(a) To payment of that portion of the Obligations constituting fees, indemnities, Credit
Party Expenses and other amounts (including fees, charges and disbursements of counsel to the
Administrative Agent and amounts payable under Article VIII and Section 2.12) payable to the
Administrative Agent in its capacity as such; and then
(b) To payment of that portion of the Obligations constituting indemnities, Credit Party
Expenses and other amounts (other than principal, interest and fees) payable to the Lenders
and the Letter of Credit Issuer (including fees, charges and disbursements of counsel to the
respective Lenders and the Letter of Credit Issuer and amounts payable under Article VIII and
Section 2.12), ratably among them in proportion to the amounts described in this clause
payable to them; and then
(c) To the extent that Swing Advances have not been refinanced by a Revolver Advance,
payment to BB&T of that portion of the Obligations constituting accrued and unpaid interest on
the Swing Advances; and then
(d) To payment of that portion of the Obligations constituting accrued and unpaid
interest on the Advances and other Obligations, and fees (including facility fees, Letter of
Credit Fees and Facing Fees), ratably among the Lenders and the Letter of Credit Issuer in
proportion to the respective amounts described in this clause payable to them; and then
(e) To the extent that Swing Advances have not been refinanced by a Revolver Advance, to
payment to BB&T of that portion of the Obligations constituting unpaid principal of the Swing
Advances; and then
(f) To payment of that portion of the Obligations constituting unpaid principal of the
Advances and Reimbursement Obligations, ratably among the Lenders and the Letter of Credit
Issuer in proportion to the respective amounts described in this clause held by them; and then
(g) To the Administrative Agent for the account of the Letter of Credit Issuer (for the
benefit of the Letter of Credit Issuer and the Lenders), in respect of outstanding Letters of
Credit pursuant to Section 6.03; and then
(h) To payment of all other Obligations (excluding any Obligations arising from Cash
Management Services and Bank Products), ratably among the Secured Parties in proportion to the
respective amounts described in this clause held by them; and then
(i) To payment of all other Obligations arising from Bank Products and Cash Management
Services to the extent secured under the Collateral Documents, ratably among the Secured
Parties in proportion to the respective amounts described in this clause held by them; and
then
(j) The balance, if any, after all of the Obligations have been indefeasibly paid in
full, to the Loan Parties or as otherwise required by law.
Subject to Article XI, amounts used to cash collateralize the aggregate Undrawn Amount of
Letters of Credit pursuant to clause 6.04(g) above shall be applied to satisfy drawings under such
Letters of Credit as they occur. If any amount remains on deposit as cash
collateral after all Letters of Credit have either been fully drawn or expired, such remaining
amount shall be applied to the other Obligations, if any, in the order set forth above.
ARTICLE VII
THE ADMINISTRATIVE AGENT
SECTION 7.01. Appointment and Authority. Each of the Lenders hereby irrevocably
appoints Branch Banking and Trust Company to act on its behalf as the Administrative Agent
hereunder and under the other Loan Documents and authorizes the Administrative Agent to take such
actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by
the terms hereof or thereof, together with such actions and powers as are reasonably incidental
thereto. The provisions of this Article are solely for the benefit of the Administrative Agent and
the Lenders and neither the Borrower nor any other Loan Party shall have rights as a third party
beneficiary of any of such provisions.
SECTION 7.02. Rights as a Lender. The Person serving as the Administrative Agent
hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and
may exercise the same as though it were not the Administrative Agent and the term Lender or
Lenders shall, unless otherwise expressly indicated or unless the context otherwise requires,
include the Person serving as the Administrative Agent hereunder in its individual capacity. Such
Person and its Affiliates may accept deposits from, lend money to, act as the financial advisor or
in any other advisory capacity for and generally engage in any kind of business with the Borrower
or any Subsidiary or other Affiliate thereof as if such Person were not the Administrative Agent
hereunder and without any duty to account therefor to the Lenders
SECTION 7.03. Exculpatory Provisions. The Administrative Agent shall not have any
duties or obligations except those expressly set forth herein and in the other Loan Documents.
Without limiting the generality of the foregoing, the Administrative Agent:
(a) shall not be subject to any fiduciary or other implied duties, regardless of whether
a Default has occurred and is continuing;
(b) shall not have any duty to take any discretionary action or exercise any
discretionary powers, except discretionary rights and powers expressly contemplated hereby or
by the other Loan Documents that the Administrative Agent is required to exercise as directed
in writing by the Required Lenders (or such other number or percentage of the Lenders as shall
be expressly provided for herein or in the other Loan Documents), provided that the
Administrative Agent shall not be required to take any action that, in its opinion or the
opinion of its counsel, may expose the Administrative Agent to liability or that is contrary
to any Loan Document or applicable law; and
(c) shall not, except as expressly set forth herein and in the other Loan Documents, have
any duty to disclose, and shall not be liable for the failure to disclose, any information
relating to the Borrower or any of its Affiliates that is communicated to or obtained by the
Person serving as the Administrative Agent or any of its Affiliates in any capacity.
The Administrative Agent shall not be liable for any action taken or not taken by it (i) with
the consent or at the request of the Required Lenders (or such other number or percentage of the
Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith shall be
necessary, under the circumstances as provided in Sections 9.05 and 6.01) or (ii) in the absence of
its own gross negligence or willful misconduct. The Administrative Agent shall be deemed not to
have knowledge of any Default unless and until notice describing such Default is given to the
Administrative Agent by the Borrower or a Lender.
The Administrative Agent shall not be responsible for or have any duty to ascertain or inquire
into (i) any statement, warranty or representation made in or in connection with this Agreement or
any other Loan Document, (ii) the contents of any certificate, report or other document delivered
hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance
of any of the covenants, agreements or other terms or conditions set forth herein or therein or the
occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this
Agreement, any other Loan Document or any other agreement, instrument or document or (v) the
satisfaction of any condition set forth in Article III or elsewhere herein, other than to confirm
receipt of items expressly required to be delivered to the Administrative Agent.
SECTION 7.04. Reliance by Administrative Agent. The Administrative Agent shall be
entitled to rely upon, and shall not incur any liability for relying upon, any notice, request,
certificate, consent, statement, instrument, document or
other writing (including any electronic
message, Internet or intranet website posting or other distribution) believed by it to be genuine
and to have been signed, sent or otherwise authenticated by the proper Person. The Administrative
Agent also may rely upon any statement made to it orally or by telephone and believed by it to have
been made by the proper Person, and shall not incur any liability for relying thereon. In
determining compliance with any condition hereunder to the making of an Advance, that by its terms
must be fulfilled to the satisfaction of a Lender, the Administrative Agent may presume that such
condition is satisfactory to such Lender unless the Administrative Agent shall have received notice
to the contrary from such Lender prior to the making of such Advance. The Administrative Agent may
consult with legal counsel (who may be counsel for the Borrower), independent accountants and other
experts selected by it, and shall not be liable for any action taken or not taken by it in
accordance with the advice of any such counsel, accountants or experts.
SECTION 7.05. Delegation of Duties. The Administrative Agent may perform any and all
of its duties and exercise its rights and powers hereunder or under any other
Loan Document by or through any one or more sub-agents appointed by the Administrative Agent.
The Administrative Agent and any such sub-agent may perform any and all of its duties and exercise
its rights and powers by or through their respective Related Parties. The exculpatory provisions of
this Article shall apply to any such sub-agent and to the Related Parties of the Administrative
Agent and any such sub-agent, and shall apply to their respective activities in connection with the
syndication of the credit facilities provided for herein as well as activities as Administrative
Agent.
SECTION 7.06. Resignation of Administrative Agent. The Administrative Agent may at any
time give notice of its resignation to the Lenders and the Borrower. Upon receipt of any such
notice of resignation, the Required Lenders shall have the right, in consultation with the
Borrower, to appoint a successor, which shall be a bank with an office in the United States of
America, or an Affiliate of any such bank with an office in the United States of America. If no
such successor shall have been so appointed by the Required Lenders and shall have accepted such
appointment within 30 days after the retiring Administrative Agent gives notice of its resignation,
then the retiring Administrative Agent may on behalf of the Lenders, appoint a successor
Administrative Agent meeting the qualifications set forth above provided that if the Administrative
Agent shall notify the Borrower and the Lenders that no qualifying Person has accepted such
appointment, then such resignation shall nonetheless become effective in accordance with such
notice and (1) the retiring Administrative Agent shall be discharged from its duties and
obligations hereunder and under the other Loan Documents (except that in the case of any collateral
security held by the Administrative Agent on behalf of the Lenders under any of the Loan Documents,
the retiring Administrative Agent shall continue to hold such collateral security until such time
as a successor Administrative Agent is appointed) and (2) all payments, communications and
determinations provided to be made by, to or through the Administrative Agent shall instead be made
by or to each Lender directly, until such time as the Required Lenders appoint a successor
Administrative Agent as provided for above in this paragraph. Upon the acceptance of a successors
appointment as Administrative Agent hereunder, such successor shall succeed to and become vested
with all of the rights, powers, privileges and duties of the retiring (or retired) Administrative
Agent, and the retiring Administrative Agent shall be discharged from all of its duties and
obligations hereunder or under the other Loan Documents (if not already discharged therefrom as
provided above in this paragraph). The fees payable by the Borrower to a successor Administrative
Agent shall be the same as those payable to its predecessor unless otherwise agreed between the
Borrower and such successor. After the retiring Administrative Agents resignation hereunder and
under the other Loan Documents, the provisions of this Article and Section 9.03 shall continue in
effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective
Related Parties in respect of any actions taken or omitted to be taken by any of them while the
retiring Administrative Agent was acting as Administrative Agent.
SECTION 7.07. Non-Reliance on Administrative Agent and Other Lenders. Each Lender
acknowledges that it has, independently and without reliance upon the Administrative Agent or any
other Lender or any of their Related Parties and based on such documents and information as it has
deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the Administrative Agent or any other Lender or any
of their Related Parties and based on such documents and information as it shall from time to time
deem appropriate, continue to make its own decisions in taking or not taking action under or based
upon this Agreement, any other Loan Document or any related agreement or any document furnished
hereunder or thereunder.
SECTION 7.08. No Other Duties, etc. Anything herein to the contrary notwithstanding,
none of the Arrangers listed on the cover page hereof shall have any powers, duties or
responsibilities under this Agreement or any of the other Loan Documents, except in its capacity,
as applicable, as the Administrative Agent or a Lender hereunder.
SECTION 7.09. Other Agents. The Borrower and each Lender hereby acknowledges that any
Lender designated as an Agent on the signature pages hereof (other than the Administrative Agent)
shall not have any obligations, duties or liabilities hereunder other than in its capacity as a
Lender.
SECTION 7.10. Hedging Agreements, Cash Management Services and Bank Products. Except
as otherwise expressly set forth herein or in any Collateral Document, no Bank Product Bank, Cash
Management Bank or Hedge Counterparty that obtains the guarantees hereunder or any Collateral by
virtue of the provisions hereof or of any Collateral Document shall have any right to notice of any
action or to consent to, direct or object to any action hereunder or under any other Credit
Document or otherwise in respect of the Collateral (including the release or impairment of any
Collateral) or any Guaranty (including the release or impairment of any Guaranty) other than in its
capacity as a Lender and, in such case, only to the extent expressly provided in the Credit
Documents. Notwithstanding any other provision of this Article VII to the contrary, the
Administrative Agent shall not be required to verify the payment of, or that other satisfactory
arrangements have been made with respect to, Obligations arising under or related to Cash
Management Services, Bank Products and Hedging Agreements unless the Administrative Agent has
received written notice of such Obligations, together with such supporting documentation as the
Administrative Agent may request, from the applicable Cash Management Bank, Bank Product Bank or
Hedge Counterparty, as the case may be.
ARTICLE VIII
CHANGE IN CIRCUMSTANCES; COMPENSATION
SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair. If on or prior
to the first day of any Interest Period:
(a) the Administrative Agent determines that deposits in Dollars (in the applicable
amounts) are not being offered in the relevant market for such Interest Period, or
(b) the Required Lenders advise the Administrative Agent that the London InterBank
Offered Rate as determined by the Administrative Agent will not adequately and fairly reflect
the cost to such Lenders of funding the Euro-Dollar Advances for such Interest Period,
the Administrative Agent shall forthwith give notice thereof to the Borrower and the Lenders,
whereupon until the Administrative Agent notifies the Borrower that the circumstances giving rise
to such suspension no longer exist, the obligations of the Lenders to make Euro-Dollar Advances
specified in such notice, or to permit continuations or conversions into Euro-Dollar Advances,
shall be suspended. Unless the Borrower notifies the Administrative Agent at least two (2)
Euro-Dollar Business Days before the date of any Borrowing of Euro-Dollar Advances for which a
Notice of Borrowing has previously been given, or continuation or conversion into such Euro-Dollar
Advances for which a Notice of Continuation or Conversion has previously been given, that it elects
not to borrow or so continue or convert on such date, such Borrowing shall instead be made as a
Base Rate Borrowing, or such Euro-Dollar Advance shall be converted to a Base Rate Advance.
SECTION 8.02. Illegality. If a Change in Law or compliance by any Lender (or its
Lending Office) with any request or directive (whether or not having the force of law) of any
Governmental Authority shall make it unlawful or impossible for any Lender (or its Lending Office)
to make, maintain or fund its Euro-Dollar Advances and such Lender shall so notify the
Administrative Agent, the Administrative Agent shall forthwith give notice thereof to the other
Lenders and the Borrower, whereupon until such Lender notifies the Borrower and the Administrative
Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such
Lender to make or permit continuations or conversions of Euro-Dollar Advances shall be suspended.
Before giving any notice to the Administrative Agent pursuant to this Section, such Lender shall
designate a different Lending Office if such designation will avoid the need for giving such notice
and will not, in the judgment of such Lender, be otherwise disadvantageous to such Lender. If such
Lender shall determine that it may not lawfully continue to maintain and fund any of its portion of
the outstanding Euro-Dollar Advances to maturity and shall so specify in such notice, the Borrower
shall immediately prepay in full the then outstanding principal amount of the Euro-Dollar Advances
of such Lender, together with accrued interest thereon and any amount due such Lender pursuant to
Section 8.05. Concurrently with prepaying such Euro-Dollar Advances, the Borrower shall borrow a
Base Rate Advance in an equal principal amount from such Lender (on which interest and principal
shall be payable contemporaneously with the related Euro-Dollar Advances of the other Lenders), and
such Lender shall make such a Base Rate Advance.
SECTION 8.03. Increased Cost and Reduced Return.
(a) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special deposit, compulsory
loan, insurance charge or similar requirement against assets of,
deposits with or for the account of, or credit extended or participated in by, any
Lender (except any reserve requirement reflected in the applicable Euro-Dollar Reserve
Percentage); or
(ii) subject any Lender to any tax of any kind whatsoever with respect to this
Agreement or any Euro-Dollar Advances made by it, or change the basis of taxation of
payments to such Lender in respect thereof (except for Indemnified Taxes or Other Taxes
covered by Section 2.08(e) and the imposition of, or any change in the rate of, any
Excluded Tax payable by such Lender); or
(iii) impose on any Lender or the London interbank market any other condition, cost
or expense affecting this Agreement or Euro-Dollar Advances by such Lender or
participation therein;
and the result of any of the foregoing is to increase the cost to such Lender of making or
maintaining any Euro-Dollar Advance (or of maintaining its obligation to make any such
Advance), or to reduce the amount of any sum received or receivable by such Lender hereunder
(whether of principal, interest or any other amount) then, upon request of such Lender, the
Borrower will pay to such Lender such additional amount or amounts as will compensate such
Lender for such additional costs incurred or reduction suffered.
(b) If any Lender determines that any Change in Law affecting such Lender or any lending
office of such Lender or such Lenders holding company, if any, regarding capital requirements
has or would have the effect of reducing the rate of return on such Lenders capital or on the
capital of such Lenders holding company, if any, as a consequence of this Agreement, the
Revolver Commitments of such Lender or the Advances made by such Lender, to a level below that
which such Lender or such Lenders holding company could have achieved but for such Change in
Law (taking into consideration such Lenders policies and the policies of such Lenders
holding company with respect to capital adequacy), then from time to time the Borrower will
pay to such Lender such additional amount or amounts as will compensate such Lender or such
Lenders holding company for any such reduction suffered.
(c) A certificate of a Lender setting forth the amount or amounts necessary to compensate
such Lender or its holding company, as the case may be, as specified in paragraph (a) or (b)
of this Section and delivered to the Borrower shall be conclusive absent manifest error. The
Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days
after receipt thereof.
(d) Failure or delay on the part of any Lender to demand compensation pursuant to this
Section shall not constitute a waiver of such Lenders right to demand such compensation,
provided that the Borrower shall not be required to compensate a Lender pursuant to
this Section for any increased costs incurred or reductions suffered more than nine months
prior to the date that such Lender notifies
the Borrower of the Change in Law giving rise to such increased costs or reductions and
of such Lenders intention to claim compensation therefor (except that, if the Change in Law
giving rise to such increased costs or reductions is retroactive, then the nine-month period
referred to above shall be extended to include the period of retroactive effect thereof).
SECTION 8.04. Base Rate Advances Substituted for Affected Euro-Dollar Advances. If
(i) the obligation of any Lender to make or maintain a Euro-Dollar Advance has been suspended
pursuant to Section 8.02 or (ii) any Lender has demanded compensation under Section 8.03, and the
Borrower shall, by at least five (5) Euro-Dollar Business Days prior notice to such Lender through
the Administrative Agent, have elected that the provisions of this Section shall apply to such
Lender, then, unless and until such Lender notifies the Borrower that the circumstances giving rise
to such suspension or demand for compensation no longer apply:
(a) all Advances which would otherwise be made by such Lender as or permitted to be
continued as or converted into Euro-Dollar Advances shall instead be made as or converted into
Base Rate Advances, (in all cases interest and principal on such Advances shall be payable
contemporaneously with the related Euro-Dollar Advances of the other Lenders), and
(b) after its portion of the Euro-Dollar Advance has been repaid, all payments of
principal which would
otherwise be applied to repay such Euro-Dollar Advance shall be applied
to repay its Base Rate Advance instead.
In the event that the Borrower shall elect that the provisions of this Section shall apply to any
Lender, the Borrower shall remain liable for, and shall pay to such Lender as provided herein, all
amounts due such Lender under Section 8.03 in respect of the period preceding the date of
conversion of such Lenders portion of any Advance resulting from the Borrowers election.
SECTION 8.05. Compensation. Upon the request of any Lender, delivered to the Borrower
and the Administrative Agent, the Borrower shall pay to such Lender such amount or amounts as shall
compensate such Lender for any loss, cost or expense incurred by such Lender as a result of:
(a) any payment or prepayment (pursuant to Sections 2.10, 2.11, 6.01, 8.02, 8.06 or
otherwise) of a Euro-Dollar Advance on a date other than the last day of an Interest Period
for such Advance; or
(b) any failure by the Borrower to prepay a Euro-Dollar Advance on the date for such
prepayment specified in the relevant notice of prepayment hereunder; or
(c) any failure by the Borrower to borrow a Euro-Dollar Advance on the date for the
Borrowing of which such Euro-Dollar Advance is a part specified on the Closing Date;
such compensation to include, without limitation, an amount equal to the excess, if any, of (x) the
amount of interest which would have accrued on the amount so paid or prepaid or not prepaid or
borrowed for the period from the date of such payment, prepayment or failure to prepay or borrow to
the last day of the then current Interest Period for such Euro-Dollar Advance (or, in the case of a
failure to prepay or borrow, the Interest Period for such Euro-Dollar Advance which would have
commenced on the date of such failure to prepay or borrow) at the applicable rate of interest for
such Euro-Dollar Advance provided for herein over (y) the amount of interest (as reasonably
determined by such Lender) such Lender would have paid on deposits in Dollars of comparable amounts
having terms comparable to such period placed with it by leading lenders in the London interbank
market (if such Advance is a Euro-Dollar Advance).
SECTION 8.06. Replacement of Lenders. If any Lender requests compensation under
Section 8.03, or if the Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.12(e), or if any Lender
defaults in its obligation to fund Advances hereunder, then the Borrower may, at its sole expense
and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign
and delegate, without recourse (in accordance with and subject to the restrictions contained in,
and consents required by, Section 9.07), all of its interests, rights and obligations under this
Agreement and the related Loan Documents to an assignee that shall assume such obligations (which
assignee may be another Lender, if a Lender accepts such assignment), provided that:
(i) the Borrower shall have paid to the Administrative Agent the assignment fee
specified in Section 9.07;
(ii) such Lender shall have received payment of an amount equal to the outstanding
principal of its Advances and participations in Reimbursement Obligations, accrued interest
thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan
Documents (including any amounts under Section 8.05) from the assignee (to the extent of such
outstanding principal and accrued interest and fees) or the Borrower (in the case of all other
amounts);
(iii) in the case of any such assignment resulting from a claim for compensation under
Section 8.03 or payments required to be made pursuant to Section 2.12(e), such assignment will
result in a reduction in such compensation or payments thereafter; and
(iv) such assignment does not conflict with applicable law.
A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a
result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require
such assignment and delegation cease to apply.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices Generally.
(a) Except in the case of notices and other communications expressly permitted to be
given by telephone (and except as provided in paragraph (b) below), all notices and other
communications provided for herein shall be in writing and shall be delivered by hand or
overnight courier service, mailed by certified or registered mail or sent by telecopier as
follows:
(i) if to the Borrower or any other Loan Party, to it at 245 Riverside Drive,
Suite 500, Jacksonville, Florida 32202 Attention of Stephen W. Solomon (Telecopier No.
(904) 301-4548; Telephone No. (904) 301-4348);
(ii) if to the Administrative Agent, to Branch Banking and Trust Company at 200
West Second Street, 16th Floor, Winston-Salem, NC 27101, Attention of
Michael F. Skorich (Telecopier No. (336) 733-2740; Telephone No. (336) 733-2709);
(iii) if to a Lender, to it at its address (or telecopier number) set forth in its
Administrative Questionnaire.
Notices sent by hand or overnight courier service, or mailed by certified or registered mail,
shall be deemed to have been given when received; notices sent by telecopier shall be deemed
to have been given when sent (except that, if not given during normal business hours for the
recipient, shall be deemed to have been given at the opening of business on the next business
day for the recipient). Notices delivered through electronic communications to the extent
provided in paragraph (b) below, shall be effective as provided in said paragraph (b).
(b) Electronic Communications. Notices and other communications to the Lenders
hereunder may be delivered or furnished by electronic communication (including e-mail and
Internet or intranet websites) pursuant to procedures approved by the Administrative Agent,
provided that the foregoing shall not apply to notices to any Lender pursuant to
Article II if such Lender has notified the Administrative Agent that it is incapable of
receiving notices under such Article by electronic communication. The Administrative Agent or
the Borrower may, in its discretion, agree to accept notices and other communications to it
hereunder by electronic communications pursuant to procedures approved by it, provided
that approval of such procedures may be limited to particular notices or communications.
Unless the Administrative Agent otherwise prescribes, (i) notices and other communications
sent to an e-mail address shall be deemed received upon the senders receipt of an
acknowledgement from the intended recipient (such as by the return receipt requested
function, as available, return e-mail or other written acknowledgement), provided that
if such notice or other communication is not sent
during the normal business hours of the recipient, such notice or communication shall be
deemed to have been sent at the opening of business on the next business day for the
recipient, and (ii) notices or communications posted to an Internet or intranet website shall
be deemed received upon the deemed receipt by the intended recipient at its e-mail address as
described in the foregoing clause (i) of notification that such notice or communication is
available and identifying the website address therefor.
(c) Change of Address, Etc. Any party hereto may change its address or telecopier
number for notices and other communications hereunder by notice to the other parties hereto.
SECTION 9.02. No Waivers. No failure or delay by the Administrative Agent or any
Lender in exercising any right, power or privilege hereunder or under any Note or other Loan
Document shall operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any
rights or remedies provided by law.
SECTION 9.03. Expenses; Indemnity; Damage Waiver.
(a) Costs and Expenses. The Loan Parties shall, jointly and severally, pay
(i) all reasonable out-of-pocket expenses incurred by the Administrative Agent and
its
Affiliates (including the reasonable fees, charges and
disbursements of counsel for the
Administrative Agent), in connection with the syndication of the credit facilities provided
for herein, the preparation, negotiation, execution, delivery and administration of this
Agreement and the other Loan Documents or any amendments, modifications or waivers of the
provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby
shall be consummated) (including, without limitation all expenses incurred in connection with
or pursuant to Section 5.38), and (ii) all out-of-pocket expenses incurred by the
Administrative Agent or any Lender (including the fees, charges and disbursements of any
counsel for the Administrative Agent or any Lender, in connection with the enforcement or
protection of its rights (A) in connection with this Agreement and the other Loan Documents,
including its rights under this Section, or (B) in connection with the Advances made
hereunder, including all such out-of-pocket expenses incurred during any workout,
restructuring or negotiations in respect of such Advances.
(b) Indemnification by the Loan Parties. The Loan Parties shall, jointly and
severally, indemnify the Administrative Agent (and any sub-agent thereof) and each Lender and
each Related Party of any of the foregoing Persons (each such Person being called an
Indemnitee) against, and hold each Indemnitee harmless from, any and all losses,
claims, penalties, damages, liabilities and related expenses (including the fees, charges and
disbursements of any counsel for any Indemnitee), incurred by any Indemnitee or asserted
against any Indemnitee by any third party or by the Borrower or any other Loan Party arising
out of, in connection with, or as a result of
(i) the execution or delivery of this Agreement, any other Loan Document or any agreement
or instrument contemplated hereby or thereby, the performance by the parties hereto of their
respective obligations hereunder or thereunder or the consummation of the transactions
contemplated hereby or thereby, (ii) any Advance or the use or proposed use of the proceeds
therefrom, (iii) any actual or alleged presence or Environmental Releases on or from any
property owned or operated by the Borrower or any of its Subsidiaries, or any Environmental
Liability related in any way to the Borrower or any of its Subsidiaries, or (iv) any actual or
prospective claim, litigation, investigation or proceeding relating to any of the foregoing,
whether based on contract, tort or any other theory, whether brought by a third party or by
the Borrower or any other Loan Party, and regardless of whether any Indemnitee is a party
thereto, provided that such indemnity shall not, as to any Indemnitee, be available to
the extent that such losses, claims, damages, liabilities or related expenses (x) are
determined by a court of competent jurisdiction by final and nonappealable judgment to have
resulted from the gross negligence or willful misconduct of such Indemnitee or (y) result from
a claim brought by the Borrower or any other Loan Party against an Indemnitee for breach in
bad faith of such Indemnitees obligations hereunder or under any other Loan Document, if the
Borrower or such Loan Party has obtained a final and nonappealable judgment in its favor on
such claim as determined by a court of competent jurisdiction.
(c) Reimbursement by Lenders. To the extent that a Loan Party for any reason
fails to pay any amount required under paragraph (a) or (b) of this Section to be paid by it
to the Administrative Agent (or any sub-agent thereof), or any Related Party of any of the
foregoing, each Lender severally agrees to pay to the Administrative Agent (or any such
sub-agent) or such Related Party, as the case may be, such Lenders Applicable Percentage
(determined as of the time that the applicable unreimbursed expense or indemnity payment is
sought) of such unpaid amount, provided that the unreimbursed expense or indemnified
loss, claim, damage, liability or related expense, as the case may be, was incurred by or
asserted against the Administrative Agent (or any such sub-agent) in its capacity as such, or
against any Related Party of any of the foregoing acting for the Administrative Agent (or any
such sub-agent) in connection with such capacity. The obligations of the Lenders under this
paragraph (c) are subject to the provisions of Sections 9.10 and 9.13.
(d) Waiver of Consequential Damages, Etc. To the fullest extent permitted by
applicable law, the Loan Parties shall not assert, and hereby waive, any claim against any
Indemnitee, on any theory of liability, for indirect, consequential or punitive damages (as
opposed to direct or actual damages) arising out of, in connection with, or as a result of,
this Agreement, any other Loan Document or any agreement or instrument contemplated hereby,
the transactions contemplated hereby or thereby, any Advance or the use of the proceeds
thereof. No Indemnitee referred to in paragraph (b) above shall be liable for any damages
arising from the use by unintended recipients of any information or other materials
distributed by it through telecommunications, electronic or other information transmission
systems in
connection with this Agreement or the other Loan Documents or the transactions
contemplated hereby or thereby.
(e) Payments. All amounts due under this Section shall be payable promptly after
demand therefor.
SECTION 9.04. Setoffs; Sharing of Set-Offs; Application of Payments.
(a) If an Event of Default shall have occurred and be continuing, each Lender and each of
their respective Affiliates is hereby authorized at any time and from time to time, to the
fullest extent permitted by applicable law, to set off and apply any and all deposits (general
or special, time or demand, provisional or final, in whatever currency) at any time held and
other obligations (in whatever currency) at any time owing by such Lender or any such
Affiliate to or for the credit or the account of the Borrower or any other Loan Party against
any and all of the obligations of the Borrower or such Loan Party now or hereafter existing
under this Agreement or any other Loan Document to such Lender, irrespective of whether or not
such Lender shall have made any demand under this Agreement or any other Loan Document and
although such obligations of the Borrower or such Loan Party may be contingent or unmatured or
are owed to a branch or office of such Lender different from the branch or office holding such
deposit or obligated on such indebtedness. The rights of each Lender and their respective
Affiliates under this Section are in addition to other rights and remedies (including other
rights of setoff) that such Lender or their respective Affiliates may have. Each Lender agrees
to notify the Borrower and the Administrative Agent promptly after any such setoff and
application, provided that the failure to give such notice shall not affect the
validity of such setoff and application.
(b) If any Lender shall, by exercising any right of setoff or counterclaim or otherwise,
obtain payment in respect of any principal of or interest on any of its Advances or other
Obligations (excluding Obligations arising under or related to Cash Management Services, Bank
Products and Hedging Agreements) hereunder or under any other Loan Document resulting in such
Lenders receiving payment of a proportion of the aggregate amount of its Advances and accrued
interest thereon or other such Obligations (excluding Obligations arising under or related to
Cash Management Services, Bank Products and Hedging Agreements) greater than its pro
rata share thereof as provided herein, then the Lender receiving such greater
proportion shall (a) notify the Administrative Agent of such fact, and (b) purchase (for cash
at face value) participations in the Advances and such other Obligations (excluding
Obligations arising under or related to Cash Management Services, Bank Products and Hedging
Agreements) of the other Lenders, or make such other adjustments as shall be equitable, so
that the benefit of all such payments shall be shared by the Lenders ratably in accordance
with the aggregate amount of principal of and accrued interest on their respective Advances
and other amounts owing them, provided that:
(i) if any such participations are purchased and all or any portion of the payment
giving rise thereto is recovered, such participations shall be rescinded and the
purchase price restored to the extent of such recovery, without interest; and
(ii) the provisions of this paragraph shall not be construed to apply to (x) any
payment made by a Loan Party pursuant to and in accordance with the express terms of
this Agreement or (y) any payment obtained by a Lender as consideration for the
assignment of or sale of a participation in any of its Advances to any assignee or
participant, other than to the Borrower or any Subsidiary thereof (as to which the
provisions of this paragraph shall apply
Each Loan Party consents to the foregoing and agrees, to the extent it may effectively do so
under applicable law, that any Lender acquiring a participation pursuant to the foregoing
arrangements may exercise against each Loan Party rights of setoff and counterclaim with
respect to such participation as fully as if such Lender were a direct creditor of each Loan
Party in the amount of such participation.
SECTION 9.05. Amendments and Waivers. Any provision of this Agreement, the Notes or
any other Loan Documents may be amended or waived if, but only if, such amendment or waiver is in
writing and is signed by the Borrower and the Required Lenders (and, if the rights or duties of the
Administrative Agent are affected thereby, by the Administrative Agent); provided that no
such amendment or waiver shall, unless signed by all the Lenders, (i) increase the Revolver
Commitment of any Lender or subject any Lender to any additional obligation, (ii) reduce the
principal of or decrease the rate of interest on any Advance or decrease any fees hereunder, (iii)
defer the date fixed for any payment of principal of (including any extension of the Termination
Date) or interest on any Advance or any fees hereunder, (iv) reduce the amount of principal,
decrease the amount of interest or decrease the amount of fees due on any date fixed for the
payment thereof, (v) change the percentage of the Revolver Commitments or of the aggregate unpaid
principal amount of the Notes, or the percentage of Lenders, which shall be required for the
Lenders or any of them to take any action under this Section or any other provision of this
Agreement, (vi) change the manner of application of any payments made under this Agreement or the
other Loan Documents, (vii) release or substitute all or substantially all of the Collateral held
as security for the Obligations, (viii) change or modify the definition of Required Lenders or
this Section 9.05, (ix) release any guaranty given to support payment of the Guaranteed Obligations
or (x) change or modify
the provisions of Section 5.38 to waive the requirement to grant a security
interest in the Timberland Collateral on the terms described in such Section or to reduce,
substitute or alter all or any substantial portion of the Timberland Collateral to be pledged
thereunder. Notwithstanding the foregoing, (1) the Hedging Agreement, the Administrative Agents
Letter Agreement and the agreements evidencing the Bank Products and Cash Management Services may
be amended, or rights or privileges thereunder waived, in a writing executed only by the parties
thereto and (2) any Commitment Increase meeting the conditions set forth in Section 2.14 shall not
require the consent of any Lender other than those Lenders, if any, which have agreed to increase
their Revolving Commitment in connection with the proposed Commitment Increase and such
Commitment Increase shall not constitute an amendment, modification or waiver under this
Section 9.05.
SECTION 9.06. Margin Stock Collateral. Each of the Lenders represents to the
Administrative Agent and each of the other Lenders that it in good faith is not, directly or
indirectly (by negative pledge or otherwise), relying upon any Margin Stock as collateral in the
extension or maintenance of the credit provided for in this Agreement.
SECTION 9.07. Successors and Assigns.
(a) Successors and Assigns Generally. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective successors
and assigns permitted hereby, except that neither the Borrower nor any other Loan Party may
assign or otherwise transfer any of its rights or obligations hereunder and no Lender may
assign or otherwise transfer any of its rights or obligations hereunder except (i) to an
Eligible Assignee in accordance with the provisions of paragraph (b) of this Section, (ii) by
way of participation in accordance with the provisions of paragraph (d) of this Section or
(iii) by way of pledge or assignment of a security interest subject to the restrictions of
paragraph (f) of this Section (and any other attempted assignment or transfer by any party
hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall be
construed to confer upon any Person (other than the parties hereto, their respective
successors and assigns permitted hereby, Participants to the extent provided in paragraph (d)
of this Section and, to the extent expressly contemplated hereby, the Related Parties of each
of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim
under or by reason of this Agreement.
(b) Assignments by Lenders. Any Lender may at any time assign to one or more
Eligible Assignees all or a portion of its rights and obligations under this Agreement
(including all or a portion of its Revolver Commitment and the Revolver Advances at the time
owing to it); provided that
(i) except in the case of an assignment of the entire remaining amount of the
assigning Lenders Revolver Commitment and the Revolver Advances at the time owing to it
or in the case of an assignment to a Lender or an Affiliate of a Lender or an Approved
Fund with respect to a Lender, the aggregate amount of the Revolver Commitment (which
for this purpose includes Revolver Advances outstanding thereunder) or, if the
applicable Revolver Commitment is not then in effect, the principal outstanding balance
of the Revolver Advances of the assigning Lender subject to each such assignment
(determined as of the date the Assignment and Assumption with respect to such assignment
is delivered to the Administrative Agent or, if Trade Date is specified in the
Assignment and Assumption, as of the Trade Date) shall not be less than $5,000,000,
unless each of the Administrative Agent and, so long as
no Default has occurred and is continuing, the Borrower otherwise consent (each
such consent not to be unreasonably withheld or delayed);
(ii) each partial assignment shall be made as an assignment of a proportionate part
of all the assigning Lenders rights and obligations under this Agreement with respect
to the Revolver Advances or the Revolver Commitment assigned;
(iii) any assignment of a Revolver Commitment must be approved by the
Administrative Agent unless the Person that is the proposed assignee is itself a Lender
with a Revolver Commitment (whether or not the proposed assignee would otherwise qualify
as an Eligible Assignee); and
(iv) the parties to each assignment shall execute and deliver to the Administrative
Agent an Assignment and Assumption, together with a processing and recordation fee of
$3,500, and the Eligible Assignee, if it shall not be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire.
Subject to acceptance and recording thereof by the Administrative Agent pursuant to paragraph (c) of this Section,
from and after the effective date specified in each Assignment and Assumption, the
Eligible Assignee thereunder shall be a party to this Agreement and, to the extent of the
interest assigned by such Assignment and Assumption, have the rights and obligations of a
Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the
interest assigned by such Assignment and Assumption, be released from its obligations under
this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning
Lenders rights and obligations under this Agreement, such Lender shall cease to be a party
hereto) but shall continue to be entitled to the benefits of Sections 8.03 and 9.03 with
respect to facts and circumstances occurring prior to the effective date of such assignment.
Any assignment or transfer by a Lender of rights or obligations under this Agreement that does
not comply with this paragraph shall be treated for purposes of this Agreement as a sale by
such Lender of a participation in such rights and obligations in accordance with paragraph (d)
of this Section.
(c) Register. The Administrative Agent, acting solely for this purpose as an
agent of the Borrower, shall maintain at one of its offices in Winston-Salem, North Carolina a
copy of each Assignment and Assumption delivered to it and a register for the recordation of
the names and addresses of the Lenders, and the Revolver Commitments of, and principal amounts
of the Revolver Advances owing to, each Lender pursuant to the terms hereof from time to time
(the Register). The entries in the Register shall be conclusive, and the Borrower,
the Administrative Agent and the Lenders may treat each Person whose name is recorded in the
Register pursuant to the terms hereof as a Lender hereunder for all purposes of this
Agreement, notwithstanding notice to the contrary. The Register shall be available for
inspection by the Borrower and any Lender, at any reasonable time and from time to time upon
reasonable prior notice
(d) Participations. Any Lender may at any time, without the consent of, or notice
to, the Borrower or the Administrative Agent, sell participations to any Person (other than a
natural person or the Borrower or any of the Borrowers Affiliates or Subsidiaries) (each, a
Participant) in all or a portion of such Lenders rights and/or obligations under
this Agreement (including all or a portion of its Revolver Commitment and/or the Revolver
Advances owing to it); provided that (i) such Lenders obligations under this
Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations and (iii) the Borrower, the
Administrative Agent and the Lenders shall continue to deal solely and directly with such
Lender in connection with such Lenders rights and obligations under this Agreement.
Any agreement or instrument pursuant to which a Lender sells such a participation shall
provide that such Lender shall retain the sole right to enforce this Agreement and to approve
any amendment, modification or waiver of any provision of this Agreement; provided
that such agreement or instrument may provide that such Lender will not, without the consent
of the Participant, agree to any amendment, modification or waiver described in
Section 9.05(a) (i) through (ix) (inclusive) that
affects such Participant. Subject to paragraph (e) of this Section, the Borrower agrees that
each Participant shall be entitled to the benefits of Sections 8.01 through 8.05 inclusive to
the same extent as if it were a Lender and had acquired its interest by assignment pursuant to
paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be
entitled to the benefits of Section 9.04 as though it were a Lender, provided such Participant
agrees to be subject to Section 9.04 as though it were a Lender.
(e) Limitations upon Participant Rights. A Participant shall not be entitled to
receive any greater payment under Section 8.03 than the applicable Lender would have been
entitled to receive with respect to the participation sold to such Participant, unless the
sale of the participation to such Participant is made with the Borrowers prior written
consent. A Participant that would be a Foreign Lender if it were a Lender shall not be
entitled to the benefits of Section 2.12(e) unless the Borrower is notified of the
participation sold to such Participant and such Participant agrees, for the benefit of the
Borrower, to comply with Section 2.12(e) as though it were a Lender.
(f) Certain Pledges. Any Lender may at any time pledge or assign a security
interest in all or any portion of its rights under this Agreement to secure obligations of
such Lender, including any pledge or assignment to secure obligations to a Federal Reserve
Bank; provided that no such pledge or assignment shall release such Lender from any of
its obligations hereunder or substitute any such pledgee or assignee for such Lender as a
party hereto.
SECTION 9.08. Confidentiality. Each of the Administrative Agent and the Lenders agrees
to use reasonable efforts to maintain the confidentiality of the Information (as defined below),
except that Information may be disclosed (a) to its Affiliates and to its and its Affiliates
respective partners, directors, officers, employees, agents, advisors and other representatives (it
being understood that disclosure will only be made to Persons who have a need to know in connection
with the performance of their duties, and that disclosure is made only to Persons who are informed of the
confidential nature of such Information and agree to keep such Information confidential),
(b) to the extent requested by any regulatory authority purporting to have jurisdiction over it
(including any self-regulatory authority, such as the National Association of Insurance
Commissioners), (c) to the extent required by applicable laws or regulations or by any subpoena or
similar legal process, (d) to any other party hereto, (e) in connection with the exercise of any
remedies hereunder or under any other Loan Document or any action or proceeding relating to this
Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder,
(f) subject to an agreement containing provisions substantially the same as those of this Section,
to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of
its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or
its advisors) to any swap or derivative transaction relating to the Borrower and its obligations,
(g) with the consent of the Borrower or (h) to the extent such Information (x) becomes publicly
available other than as a result of a breach of this Section or (y) becomes available to the
Administrative
Agent, any Lender or any of their respective Affiliates on a nonconfidential basis from a
source other than the Borrower and not in violation, to the knowledge of the Administrative Agent,
of any agreement or duty of confidentiality.
For purposes of this Section, Information means all information received from the
Loan Parties or any of their Subsidiaries relating to the Loan Parties or any of their Subsidiaries
or any of their respective businesses, other than any such information that is available to the
Administrative Agent or any Lender on a nonconfidential basis prior to disclosure by the Loan
Parties or any of their Subsidiaries. Any Person required to maintain the confidentiality of
Information as provided in this Section shall be considered to have complied with its obligation to
do so if such Person has exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information.
Notwithstanding anything herein to the contrary, Information shall not include, and the
Borrower, the other Loan Parties, the Administrative Agent, each Lender and the respective
Affiliates of each of the foregoing (and the respective partners, directors, officers, employees,
agents, advisors and other representatives of each of the foregoing and their Affiliates), and any
other party, may disclose to any and all Persons, without limitation of any kind, (a) any
information with respect to the U.S. federal and state income tax treatment of the transactions
contemplated hereby and any facts that may be relevant to understanding such tax treatment, which
facts shall not include for this purpose the names of the parties or any other Person named herein,
or information that would permit identification of the parties or such other Persons, or any
pricing terms or other nonpublic business or financial information that is unrelated to such tax
treatment or facts, and (b) all materials of any kind (including opinions or other tax analyses)
that are provided to any of the Persons referred to above relating to such tax treatment or facts.
SECTION 9.09. Representation by Lenders. Each Lender hereby represents that it is a
commercial lender or financial institution which makes loans in the ordinary course of its business
and that it will make its Advances hereunder for its own account in the ordinary course of such
business; provided, however, that, subject to Section 9.07, the disposition of the
Note or Notes held by that Lender shall at all times be within its exclusive control.
SECTION 9.10. Obligations Several. The obligations of each Lender hereunder are
several, and no Lender shall be responsible for the obligations or commitment of any other Lender
hereunder. Nothing contained in this Agreement and no action taken by the Lenders pursuant hereto
shall be deemed to constitute the Lenders to be a partnership, an association, a joint venture or
any other kind of entity. The amounts payable at any time hereunder to each Lender shall be a
separate and independent debt and each Lender shall be entitled to protect and enforce its rights
arising out of this Agreement or any other Loan Document and it shall not be necessary for any
other Lender to be joined as an additional party in any proceeding for such purpose.
SECTION 9.11. Survival of Certain Obligations. Sections 8.03(a), 8.03(b), 8.05 and
9.03, and the obligations of the Loan Parties thereunder, shall survive, and shall continue to be
enforceable notwithstanding, the termination of this Agreement, and the Revolver Commitments and
the payment in full of the principal of and interest on all Advances.
SECTION 9.12. North Carolina Law. This Agreement and each Note shall be construed in
accordance with and governed by the law of the State of North Carolina.
SECTION 9.13. Severability. In case any one or more of the provisions contained in
this Agreement, the Notes or any of the other Loan Documents should be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the remaining provisions
contained herein and therein shall not in any way be affected or impaired thereby and shall be
enforced to the greatest extent permitted by law.
SECTION 9.14. Interest. In no event shall the amount of interest due or payable
hereunder or under the Notes exceed the maximum rate of interest allowed by applicable law, and in
the event any such payment is inadvertently made to any Lender by the Borrower or inadvertently
received by any Lender, then such excess sum shall be credited as a payment of principal, unless
the Borrower shall notify such Lender in writing that it elects to have such excess sum returned
forthwith. It is the express intent hereof that the Borrower not pay and the Lenders not receive,
directly or indirectly in any manner whatsoever, interest in excess of that which may legally be
paid by the Borrower under applicable law.
SECTION 9.15. Interpretation. No provision of this Agreement or any of the other Loan
Documents shall be construed against or interpreted to the disadvantage of any party hereto by any
court or other governmental or judicial authority by reason of such party having or being deemed to
have structured or dictated such provision.
SECTION 9.16. Counterparts; Integration; Effectiveness; Electronic Execution.
(a) Counterparts; Integration; Effectiveness. This Agreement may be executed in
counterparts (and by different parties hereto in different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a single
contract. This Agreement and the other Loan Documents, and any separate letter agreements with
respect to fees payable to the Administrative Agent, constitute the entire contract among the
parties relating to the subject matter hereof and supersede any and all previous agreements
and understandings, oral or written, relating to the subject matter hereof. Except as provided
in Section 3.01, this Agreement shall become effective when it shall have been executed by the
Administrative Agent and when the Administrative Agent shall have received counterparts hereof
that, when taken together, bear the signatures of each of the other parties hereto. Delivery
of an executed counterpart of a signature page of this Agreement by telecopy shall be
effective as delivery of a manually executed counterpart of this Agreement
(b) Electronic Execution of Assignments. The words execution, signed,
signature, and words of like import in any Assignment and Assumption shall be deemed to
include electronic signatures or the keeping of records in electronic form, each of which
shall be of the same legal effect, validity or enforceability as a manually executed signature
or the use of a paper-based recordkeeping system, as the case may be, to the extent and as
provided for in any applicable law, including the Federal Electronic Signatures in Global and
National Commerce Act, the New York State Electronic Signatures and Records Act, or any other
similar state laws based on the Uniform Electronic Transactions Act.
SECTION 9.17. Jurisdiction; Waiver of Venue; Service of Process; Waiver of Jury Trial:
(a) Submission to Jurisdiction. Each Loan Party irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction of the courts of the
State of North Carolina sitting in Forsyth County and of the United States District Court of
the Middle District of North Carolina, and any appellate court from any thereof, in any action
or proceeding arising out of or relating to this Agreement or any other Loan Document, or for
recognition or enforcement of any judgment, and each of the parties hereto irrevocably and
unconditionally agrees that all claims in respect of any such action or proceeding may be
heard and determined in such North Carolina State court or, to the fullest extent permitted by
applicable law, in such Federal court. Each of the parties hereto agrees that a final judgment
in any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this
Agreement or in any other Loan Document shall affect any right that the Administrative Agent
or any Lender may otherwise have to bring any action or proceeding relating to this Agreement
or any other Loan Document against the Borrower or its properties in the courts of any
jurisdiction.
(b) Waiver of Venue. The Borrower irrevocably and unconditionally waives, to the
fullest extent permitted by applicable law, any objection that it may now or hereafter have to
the laying of venue of any action or proceeding arising out of or relating to this Agreement
or any other Loan Document in any court referred to in paragraph (a) of this Section. Each of
the parties hereto hereby irrevocably waives, to the fullest extent permitted by applicable
law, the defense of an inconvenient forum to the maintenance of such action or proceeding in
any such court.
(c) Service of Process. Each party hereto irrevocably consents to service of
process in the manner provided for notices in Section 9.01. Nothing in this Agreement will
affect the right of any party hereto to serve process in any other manner permitted by
applicable law.
(d) Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED
ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION.
SECTION 9.18. Independence of Covenants. All covenants under this Agreement and the
other Loan Documents shall be given independent effect so that if a particular action or condition
is not permitted by any such covenant, the fact that it would be permitted by an exception to, or
would be otherwise allowed by, another covenant shall not avoid the occurrence of a Default if such
action is taken or such condition exists.
SECTION 9.19. Florida Taxes. In connection with this transaction there may or may not
be due certain documentary stamp taxes and/or intangible taxes imposed by the State of Florida (the
Florida Taxes). In addition to (and not in limitation of) the indemnification with respect to tax
liabilities set forth herein, the Loan Parties agree to indemnify the Lender, its directors,
officers, agents and employees from and against any and all liability, damage, loss, cost, expense
or reasonable attorney fees which may accrue to or be sustained by the Lender or its directors,
officers, agents or employees on account of or arising from any claim or action raised by, filed or
brought by or in the name of any Florida governmental or administrative department with respect to
non-payment of the Florida Taxes against the Lender, or any of its directors, officers, agents or
employees.
SECTION 9.20. Power of Attorney. Each Loan Party hereby irrevocably appoints the
Administrative Agent (such appointment being coupled with an interest) as such Loan Partys
attorney-in-fact, with full authority in the place and stead of such Loan Party and in the name of
such Loan Party, the Administrative Agent or otherwise, from time to time in the Administrative
Agents discretion to take any action and to execute any instrument that the Administrative Agent
may deem reasonably necessary or advisable to accomplish the purposes of this Agreement or the
other Loan Documents, including, without limitation, the following:
(a) to prepare and file any U.C.C. financing statements against such Loan Party as
debtor;
(b) upon the occurrence of a Trigger Event, to prepare, sign, and file for recordation in
any appropriate office evidence of the lien and security interest in
favor of the Administrative Agent for the benefit of the Secured Parties in the
Timberland Collateral in the name of such Loan Party as mortgagor; and
(c) to take or cause to be taken all actions necessary to perform or comply or cause
performance or compliance with the terms of this Agreement, including, without limitation, the
provisions of Section 5.38, to pay or discharge taxes or Liens (other than Permitted
Encumbrances) levied or placed upon or threatened against the Collateral, the legality thereof
and the amounts necessary to discharge the same to be determined by the Administrative Agent
in its sole discretion, any such payments made by the Administrative Agent to become
obligations of such Loan Party to the Administrative Agent, due and payable immediately
without demand.
Anything in this Section 9.20 to the contrary notwithstanding, the Administrative Agent agrees
that, except as provided in Section 9.20(a), it will not exercise any rights under the power of
attorney provided for in this Section 9.20 unless and until a Trigger Event shall have occurred.
SECTION 9.21. Post-Closing Actions. Notwithstanding anything to the contrary contained
in this Agreement or the other Loan Documents, the parties hereto acknowledge and agree that the
actions relating to the Collateral and such other matters described on Annex X shall be completed
in accordance with Annex X. The provisions of Annex X shall be deemed incorporated herein by
reference as fully as if set forth herein in its entirety.
All provisions of this Agreement and the other Loan Documents (including, without limitation,
all conditions precedent, representations, warranties, covenants, events of default and other
agreements herein and therein) shall be
deemed modified to the extent necessary to effect the
foregoing (and to permit the taking of the actions described above within the time periods required
above, rather than as otherwise provided in the Loan Documents); provided that (x) to the extent
any representation and warranty would not be true because the foregoing actions were not taken on
the Closing Date the respective representation and warranty shall be required to be true and
correct in all material respects at the time the respective action is taken (or was required to be
taken) in accordance with the foregoing provisions of this Section 9.21 and (y) all representations
and warranties relating to the Collateral Documents shall be required to be true immediately after
the actions required to be taken by this Section 9.21 have been taken (or were required to be
taken). The acceptance of the benefits of the Advances shall constitute a covenant and agreement by
each Loan Party to each of the Lenders that the actions required pursuant to this Section 9.21 will
be, or have been, taken within the relevant time periods referred to in this Section 9.21 and that,
at such time, all representations and warranties contained in this Agreement and the other Loan
Documents shall then be true and correct without any modification pursuant to this Section 9.21.
The parties hereto acknowledge and agree that the failure to take any of the actions required
above, within the relevant time periods required above, shall give rise to an immediate Event of
Default pursuant to this Agreement.
SECTION 9.22. Right of Administrative Agent to Perform. If any Loan Party fails to
perform or comply with any of its agreements contained herein, the Administrative Agent, at its
option, but without any obligation so to do, may perform or comply, or otherwise cause performance
or compliance, with such agreement; provided, however, that unless a Default has
occurred or time is of the essence, the Administrative Agent shall not exercise this right without
first making demand on the Loan Party and the Loan Party has failed to comply immediately
therewith.
ARTICLE X
GUARANTY
SECTION 10.01. Unconditional Guaranty. Each Guarantor hereby irrevocably,
unconditionally and jointly and severally guarantees, each as a primary obligor and not merely as a
surety, to the Administrative Agent, the Lenders and the other Secured Parties the due and punctual
payment of the principal of and the premium, if any, and interest on the Guaranteed Obligations and
any and all other amounts due under or pursuant to the Loan Documents, when and as the same shall
become due and payable (whether at stated maturity or by optional or mandatory prepayment or by
declaration, redemption or otherwise) in accordance with the terms of the Loan Documents. The
Guarantors guaranty under this Section is an absolute, present and continuing guarantee of payment
and not of collectibility, and is in no way conditional or contingent upon any attempt to collect
from the Borrower, any of the Guarantors or any other guarantor of the Guaranteed Obligations (or
any portion thereof) or upon any other action, occurrence or circumstances whatsoever. In the event
that the Borrower or any Guarantor shall fail so to pay any such principal, premium, interest or
other amount to the Administrative Agent, a Lender or any other Secured Party, the Guarantors will
pay the same forthwith, without demand, presentment, protest or notice of any kind (all of which
are waived by the Guarantors to the fullest extent permitted by law), in lawful money of the United
States, at the place for payment specified in the Loan Documents or specified by such
Administrative Agent in writing, to such Administrative Agent. The Guarantors further agree,
promptly after demand, to pay to the Administrative Agent, the Lenders and the other Secured
Parties the costs and expenses incurred by such Administrative Agent, Lender or other Secured Party
in connection with enforcing the rights of such Administrative Agent, Lenders and the other Secured
Parties against the Borrower and any or all of the Guarantors (whether in a Bankruptcy proceeding
or otherwise) following any default in payment of any of the Guaranteed Obligations or the
obligations of the Guarantors hereunder, including, without limitation, the fees and expenses of
counsel to the Administrative Agent, such Lenders and the other Secured Parties.
SECTION 10.02. Obligations Absolute. The obligations of the Guarantors hereunder are
and shall be absolute and unconditional, irrespective of the validity, regularity or enforceability
of this Agreement, any of the Guaranteed Obligations or any of the Loan Documents, shall not be
subject to any counterclaim, set-off, deduction or defense based upon any claim any of the
Guarantors may have against the Borrower, any other Guarantor or the Administrative Agent, any
Lender or any other Secured Party,
hereunder or otherwise, and shall remain in full force and effect without regard to, and shall
not be released, discharged or in any way affected by, to the fullest extent permitted by law, any
circumstance or condition whatsoever (whether or not any of the Guarantors shall have any knowledge
or notice thereof), including, without limitation:
(a) any amendment or modification of or supplement to any of the Loan Documents or any
other instrument referred to herein or therein, or any assignment or transfer of any thereof
or of any interest therein, or any furnishing
or acceptance of additional security for any of
the Guaranteed Obligations;
(b) any waiver, consent or extension under any Loan Document or any such other
instrument, or any indulgence or other action or inaction under or in respect of, or any
extensions or renewals of, any Loan Document, any such other instrument or any Guaranteed
Obligation;
(c) any failure, omission or delay on the part of the Administrative Agent to enforce,
assert or exercise any right, power or remedy conferred on or available to the Administrative
Agent or any Lender against the Borrower or any Guarantor, any Subsidiary of the Borrower or
any Subsidiary of any Guarantor;
(d) any Bankruptcy, insolvency, readjustment, composition, liquidation or similar
proceeding with respect to the Borrower, any Guarantor, any Subsidiary of the Borrower or any
Subsidiary of any Guarantor or any property of the Borrower, any Guarantor or any such
Subsidiary or any unavailability of assets against which the Guaranteed Obligations, or any of
them, may be enforced;
(e) any merger or consolidation of the Borrower, any Subsidiary of the Borrower or any
Guarantor or any of the Guarantors into or with any other Person or any sale, lease or
transfer of any or all of the assets of any of the Guarantors, the Borrower or any Subsidiary
of the Borrower or any Guarantor to any Person;
(f) any failure on the part of the Borrower, any Guarantor or any Subsidiary of the
Borrower or any Guarantor for any reason to comply with or perform any of the terms of any
agreement with any of the Guarantors;
(g) any exercise or non-exercise by the Administrative Agent, any Lender or any other
Secured Party, of any right, remedy, power or privilege under or in respect of any of the Loan
Documents or the Guaranteed Obligations, including, without limitation, under this Section;
(h) any default, failure or delay, willful or otherwise, in the performance or payment of
any of the Guaranteed Obligations;
(i) any furnishing or acceptance of security, or any release, substitution or exchange
thereof, for any of the Guaranteed Obligations;
(j) any failure to give notice to any of the Guarantors of the occurrence of any breach
or violation of, or any event of default or any default under or with respect to, any of the
Loan Documents or the Guaranteed Obligations;
(k) any partial prepayment, or any assignment or transfer, of any of the Guaranteed
Obligations; or
(l) any other circumstance (other than payment in full) which might otherwise constitute
a legal or equitable discharge or defense of a guarantor or which might in any manner or to
any extent vary the risk of such Guarantor.
The Guarantors covenant that their respective obligations hereunder will not be discharged
except by complete performance of the obligations contained in the Loan Documents and this
Agreement and the final payment in full of the Guaranteed Obligations. The Guarantors
unconditionally waive, to the fullest extent permitted by law (A) notice of any of the matters
referred to in this Section, (B) any and all rights which any of the Guarantors may now or
hereafter have arising under, and any right to claim a discharge of the Guarantors obligations
hereunder by reason of the failure or refusal by the Administrative Agent, any Lender or any other
Secured Party to take any action pursuant to any statute permitting a Guarantor to request that the
Administrative Agent or any Lender attempt to collect the Guaranteed Obligations from the Borrower,
any of the Guarantors or any other guarantor (including without limitation any rights under
Sections 26-7, 26-8 or 26-9 of the North Carolina General Statutes, O.C.G.A. § 10-7-24, or any
similar or successor provisions), (C) all notices which may be required by statute, rule of law or
otherwise to preserve any of the rights of the Administrative Agent, any Lender or any other
Secured Party against the Guarantors, including, without limitation, presentment to or demand of
payment from the Borrower, any of the Subsidiaries of the Borrower or any Guarantor, or any of the
other Guarantors with respect to any Loan Document or this agreement, notice of acceptance of the
Guarantors guarantee hereunder and/or notice to the Borrower, any of the Subsidiaries of the
Borrower or any Guarantor, or any Guarantor of default or protest for nonpayment or dishonor, (D)
any diligence in collection from or protection of or realization upon all or any portion of the
Guaranteed Obligations or any security therefor, any liability hereunder, or any
party primarily or
secondarily liable for all or any portion of the Guaranteed Obligations, and (E) any duty or
obligation of the Administrative Agent, any Lender or any other Secured Party to proceed to collect
all or any portion of the Guaranteed Obligations from, or to commence an action against, the
Borrower, any Guarantor or any other Person, or to resort to any security or to any balance of any
deposit account or credit on the books of the Administrative Agent, any Lender or any other Secured
Party in favor of the Borrower, any Guarantor or any other Person, despite any notice or request of
any of the Guarantors to do so.
SECTION 10.03. Continuing Obligations; Reinstatement. The obligations of the
Guarantors under this Article X are continuing obligations and shall continue in full force
and effect until such time as all of the Guaranteed Obligations (and any renewals and extensions
thereof) shall have been finally paid and satisfied in full. The obligations
of the Guarantors under this Article X shall continue to be effective or be
automatically reinstated, as the case may be, if any payment made by the Borrower, any Guarantor or
any Subsidiary of the Borrower or any Guarantor on, under or in respect of any of the Guaranteed
Obligations is rescinded or must otherwise be restored or returned by the recipient upon the
insolvency, Bankruptcy, dissolution, liquidation or reorganization of the Borrower, any Guarantor
or any such Subsidiary, or upon or as a result of the appointment of a custodian, receiver, trustee
or other officer with similar powers with respect to the Borrower, any Guarantor or any such
Subsidiary or any substantial part of the property of the Borrower, any Guarantor or any such
Subsidiary, or otherwise, all as though such payment had not been made. If an event permitting the
acceleration of all or any portion of the Guaranteed Obligations shall at any time have occurred
and be continuing, and such acceleration shall at such time be stayed, enjoined or otherwise
prevented for any reason, including without limitation because of the pendency of a case or
proceeding relating to the Borrower, any Guarantor or any Subsidiary of the Borrower or any
Guarantor under any Bankruptcy or insolvency law, for purposes of this Article X and the
obligations of the Guarantors hereunder, such Guaranteed Obligations shall be deemed to have been
accelerated with the same effect as if such Guaranteed Obligations had been accelerated in
accordance with the terms of the applicable Loan Documents or of this Agreement.
SECTION 10.04. Additional Security, Etc. The Guarantors authorize the Administrative
Agent on behalf of the Lenders without notice to or demand on the Guarantors and without affecting
their liability hereunder, from time to time (a) to obtain additional or substitute endorsers or
guarantors; (b) to exercise or refrain from exercising any rights against, and grant indulgences
to, the Borrower, any Subsidiary of the Borrower or any Guarantor, any other Guarantor or others;
and (c) to apply any sums, by whomsoever paid or however realized, to the payment of the principal
of, premium, if any, and interest on, and other obligations consisting of, the Guaranteed
Obligations. The Guarantors waive any right to require the Administrative Agent, any Lender or any
other Secured Party to proceed against any additional or substitute endorsers or guarantors or the
Borrower or any of their Subsidiaries or any other Person or to pursue any other remedy available
to the Administrative Agent, any such Lender or any such other Secured Party.
SECTION 10.05. Information Concerning the Borrower. The Guarantors assume all
responsibility for being and keeping themselves informed of the financial condition and assets of
the Borrower, the other Guarantors and their respective Subsidiaries, and of all other
circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations and the nature,
scope and extent of the risks which the Guarantors assume and insure hereunder, and agree that
neither the Administrative Agent, any Lender nor any other Secured Party shall have any duty to
advise the Guarantors of information known to the Administrative Agent, any such Lender or any such
other Secured Party regarding or in any manner relevant to any of such circumstances or risks.
SECTION 10.06. Guarantors Subordination. The Guarantors hereby absolutely
subordinate, both in right of payment and in time of payment, any present and future indebtedness
of the Borrower or any Subsidiary of the Borrower or any Guarantor to any or all of the Guarantors
to the indebtedness of the Borrower or any such Subsidiary or to the Administrative Agent, Lenders
and the other Secured Parties (or any of them), provided that the Guarantors may receive scheduled
payments of principal, premium (if any) and interest in respect of such present or future
indebtedness so long as there is no Event of Default then in existence.
SECTION 10.07. Waiver of Subrogation. Notwithstanding anything herein to the contrary,
until the payment in full of the Guaranteed Obligations, the Guarantors hereby waive any right of
subrogation (under contract, Section 509 of the Bankruptcy Code or otherwise) or any other right of
indemnity, reimbursement or contribution and hereby waive any right to enforce any remedy that the
Administrative Agent, any Lender or any other Secured Party now has or may hereafter have against
the Borrower, any Guarantor or any endorser or any other guarantor of all or any part of the
Guaranteed Obligations, and the Guarantors hereby waive any benefit of, and any right to
participate in, any security or collateral given to the Administrative Agent, any Lender or any
other Secured Party to secure payment or performance of
the Guaranteed Obligations or any other
liability of the Borrower to the Administrative Agent, any Lender or any other Secured Party. The
waiver contained in this Section shall continue and survive the termination of this Agreement and
the final payment in full of the Guaranteed Obligations.
SECTION 10.08. Enforcement. In the event that the Guarantors shall fail forthwith to
pay upon demand of the Administrative Agent, any Lender or any other Secured Party any amounts due
pursuant to this Article X or to perform or comply with or to cause performance or
compliance with any other obligation of the Guarantors under this Agreement the Administrative
Agent, any Lender and any other Secured Party shall be entitled and empowered to institute any
action or proceeding at law or in equity for the collection of the sums so due and unpaid or for
the performance of or compliance with such terms, and may prosecute any such action or proceeding
to judgment or final decree and may enforce such judgment or final decree against the Guarantors
and collect in the manner provided by law out of the property of the Guarantors, wherever situated,
any monies adjudged or decreed to be payable. The obligations of the Guarantors under this
Agreement are continuing obligations and a fresh cause of action shall arise in respect of each
default hereunder.
SECTION 10.09. Miscellaneous. Except as may otherwise be expressly agreed upon in
writing, the liability of the Guarantors under this Article X shall neither affect nor be affected
by any prior or subsequent guaranty by the Guarantors of any other indebtedness to the
Administrative Agent, the Lenders or any other Secured Party. Notwithstanding anything in this
Article X to the contrary, the maximum liability of each Guarantor hereunder shall in no event
exceed the maximum amount which could be paid out by such Guarantor without rendering such
Guarantors obligations under this Article X, in whole or in part, void or voidable under
applicable law, including, without
limitation, (i) the Bankruptcy Code of 1978, as amended, and (ii) any applicable state or
federal law relative to fraudulent conveyances.
ARTICLE XI
LETTER OF CREDIT FACILITY
SECTION 11.01. Obligation to Issue. Subject to the terms and conditions of this
Agreement, and in reliance upon the representations and warranties of the Borrower herein set
forth, the Letter of Credit Issuer shall issue for the account of Borrower, one or more Letters of
Credit denominated in Dollars, in accordance with Article II and this Article XI, from time to time
during the period commencing on the Closing Date and ending thirty (30) days prior to the
Termination Date.
SECTION 11.02. Types and Amounts. The Letter of Credit Issuer shall have no obligation
to issue any Letter of Credit at any time:
(a) if the aggregate maximum amount then available for drawing under Letters of Credit,
after giving effect to the issuance of the requested Letter of Credit, shall exceed any limit
imposed by law or regulation upon the Letter of Credit Issuer;
(b) if, after giving effect to the issuance of the requested Letter of Credit, (i) the
aggregate Letter of Credit Obligations would exceed $30,000,000, (ii) the total number of
Letters of Credit outstanding would exceed fifty (50); or (iii) the conditions set forth in
Section 2.01(a) would not be satisfied;
(c) which has an expiration date (i) more than 365 days after the date of issuance or
(ii) after the fifth (5th) Domestic Business Day prior to the Termination Date.
SECTION 11.03. Conditions. In addition to being subject to the satisfaction of the
conditions contained in Article III, the obligation of the Letter of Credit Issuer to issue any
Letter of Credit is subject to the satisfaction in full of the following conditions:
(a) the Borrower shall have delivered to the Letter of Credit Issuer at such times and in
such manner as the Letter of Credit Issuer may prescribe, a Letter of Credit Application
Agreement and such other documents and materials as may be required pursuant to the terms
thereof all satisfactory in form and substance to the Letter of Credit Issuer and the terms of
the proposed Letter of Credit shall be satisfactory in form and substance to the Letter of
Credit Issuer;
(b) as of the date of issuance no order, judgment or decree of any court, arbitrator or
Authority shall purport by its terms to enjoin or restrain the Letter of Credit Issuer from
issuing the Letter of Credit and no law, rule or regulation applicable to the Letter of Credit
Issuer and no request or directive (whether or not having the force of law) from any
Governmental Authority with jurisdiction over the
Letter of Credit Issuer shall prohibit or request that the Letter of Credit Issuer
refrain from the issuance of letters of credit generally or the issuance of that Letter of
Credit; and
(c) after the issuance of the requested Letter of Credit, the conditions set forth in
Section 2.01(a) shall be satisfied.
SECTION 11.04. Issuance of Letters of Credit.
(a) Request for Issuance. At least three Domestic Business Days before the
effective date for any Letter of Credit, the Borrower shall give the Letter of Credit Issuer a
written notice containing the original signature of an authorized officer or employee of such
Borrower. Such notice shall be irrevocable and shall specify the original face amount of the
Letter of Credit requested (which original face amount shall not be less than $10,000, the
effective date (which day shall be a Domestic Business Day) of issuance of such requested
Letter of Credit, the date on which such requested Letter of Credit is to expire, the amount
of then outstanding Letter of Credit Obligations, the purpose for which such Letter of Credit
is to be issued, whether such Letter of Credit may be drawn in single or partial draws and the
person for whose benefit the requested Letter of Credit is to be issued.
(b) Issuance; Notice of Issuance. If the conditions set forth in Section 11.03
are satisfied, the Letter of Credit Issuer shall issue the requested Letter of Credit. The
Letter of Credit Issuer shall give each Lender written or telex notice in substantially the
form of Exhibit L, or telephonic notice confirmed promptly thereafter in writing, of the
issuance of a Letter of Credit and shall deliver to each Lender in connection with such notice
a copy of the Letter of Credit issued by the Letter of Credit Issuer.
(c) No Extension or Amendment. The Letter of Credit Issuer shall not extend or
amend any Letter of Credit if the issuance of a new Letter of Credit having the same terms as
such Letter of Credit as so amended or extended would be prohibited by Section 11.02 or
Section 11.03.
SECTION 11.05. Reimbursement Obligations; Duties of the Issuing Lender.
(a) Reimbursement. Notwithstanding any provisions to the contrary in any Letter
of Credit Application Agreement:
(i) the Borrower shall reimburse the Letter of Credit Issuer for drawings under a
Letter of Credit issued by it no later than the earlier of (A) the time specified in
such Letter of Credit Application Agreement, or (B) 1 Domestic Business Day after the
payment by the Letter of Credit Issuer;
(ii) any Reimbursement Obligation with respect to any Letter of Credit shall bear
interest from the date of the relevant drawing under the pertinent
Letter of Credit until the date of payment in full thereof at a rate per annum
equal to the Default Rate; and
(iii) in order to implement the foregoing, upon the occurrence of a draw under any
Letter of Credit, unless the Letter of Credit Issuer is reimbursed in accordance with
Subsection (i) above, the Borrower irrevocably authorizes the Letter of Credit Issuer
and the Administrative Agent to treat such nonpayment as a Notice of Borrowing in the
amount of such Reimbursement Obligation and the Lenders to make Advances to Borrower in
such amount regardless of whether the conditions precedent to the making of Advances
hereunder have been met. The Borrower further authorizes the Administrative Agent to
credit the proceeds of such Advance so as to immediately eliminate the liability of the
Borrower for Reimbursement Obligations under such Letter of Credit.
(b) Duties of the Letter of Credit Issuer. Any action taken or omitted to be
taken by the Letter of Credit Issuer in connection with any Letter of Credit, if taken or
omitted in the absence of willful misconduct or gross negligence, shall not put the Letter of
Credit Issuer under any resulting liability to any Lender, or assuming that the Letter of
Credit Issuer has complied with the procedures specified in Section 3.02, relieve that Lender
of its obligations hereunder to the Letter of Credit Issuer. In determining whether to pay
under any Letter of Credit, the Letter of
Credit Issuer shall have no obligation relative to
the Lenders other than to confirm that any documents required to have been delivered under
such Letter of Credit appear to comply on their face, with the requirements of such Letter of
Credit.
SECTION 11.06. Participations.
(a) Purchase of Participations. Immediately upon issuance by the Letter of Credit
Issuer of any Letter of Credit in accordance with the procedures set forth in Section 11.04,
each Lender shall be deemed to have irrevocably and unconditionally purchased and received
from the Letter of Credit Issuer, without recourse or warranty, an undivided interest and
participation, to the extent of such Lenders ratable share of the aggregate Revolver
Commitments, in such Letter of Credit; provided, that a Letter of Credit shall not be entitled
to the benefits of this Section 11.06 if the Letter of Credit Issuer shall have received
written notice from any Lender on or before the Domestic Business Day immediately prior to the
date of the Letter of Credit Issuers issuance of such Letter of Credit that one or more of
the conditions contained in Section 11.03 or Article III is not then satisfied, and, in the
event the Letter of Credit Issuer receives such a notice, it shall have no further obligation
to issue any Letter of Credit until such notice is withdrawn by that Lender or until the
Required Lenders have effectively waived such condition in accordance with the provisions of
this Agreement.
(b) Sharing of Letter of Credit Payments. In the event that the Letter of Credit
Issuer makes any payment under any Letter of Credit for which the Borrower shall not have
repaid such amount to the Letter of Credit Issuer pursuant to Section 11.07
or which cannot be paid by an Advance pursuant to Subsection (iii) of Section 11.05(a),
the Letter of Credit Issuer shall promptly notify each Lender of such failure, and each Lender
shall promptly and unconditionally pay to the Letter of Credit Issuer such Lenders ratable
share of the amount of such payment in Dollars and in same day funds. If the Letter of Credit
Issuer so notifies such Lender prior to 11:00 A.M. (Winston-Salem, North Carolina time) on any
Domestic Business Day, such Lender shall make available to the Letter of Credit Issuer its
ratable share of the amount of such payment on such Domestic Business Day in same day funds.
If and to the extent such Lender shall not have so made its ratable share of the amount of
such payment available to the Letter of Credit Issuer, such Lender agrees to pay to the Letter
of Credit Issuer forthwith on demand such amount together with interest thereon, for each day
from the date such payment was first due until the date such amount is paid to the Letter of
Credit Issuer at the Base Rate. The failure of any Lender to make available to the Letter of
Credit Issuer its ratable share of any such payment shall neither relieve nor increase the
obligation of any other Lender hereunder to make available to the Letter of Credit Issuer its
ratable share of any payment on the date such payment is to be made.
(c) Sharing of Reimbursement Obligation Payments. Whenever the Letter of Credit
Issuer receives a payment on account of a Reimbursement Obligation, including any interest
thereon, as to which the Letter of Credit Issuer has received any payments from the Lenders
pursuant to this Section 11.06, it shall promptly pay to each Lender which has funded its
participating interest therein, in Dollars and in the kind of funds so received, an amount
equal to such Lenders ratable share thereof. Each such payment shall be made by the Letter of
Credit Issuer on the Domestic Business Day on which the funds are paid to such Person, if
received prior to 10:00 am. (Winston-Salem, North Carolina time) on such Domestic Business
Day, and otherwise on the next succeeding Domestic Business Day.
(d) Documentation. Upon the request of any Lender, the Letter of Credit Issuer
shall furnish to such Lender copies of any Letter of Credit, Letter of Credit Application
Agreement and other documentation relating to Letters of Credit issued pursuant to this
Agreement.
(e) Obligations Irrevocable. The obligations of the Lenders to make payments to
the Letter of Credit Issuer with respect to a Letter of Credit shall be irrevocable, not
subject to any qualification or exception whatsoever and shall be made in accordance with, but
not subject to, the terms and conditions of this Agreement under all circumstances (assuming
that the Letter of Credit Issuer has issued such Letter of Credit in accordance with
Section 11.04 and such Lender has not given a notice contemplated by Section 11.06(a) that
continues in full force and effect), including, without limitation, any of the following
circumstances:
(i) any lack of validity or enforceability of this Agreement or any of the other
Loan Documents;
(ii) the existence of any claim, set-off, defense or other right which the Borrower
may have at any time against a beneficiary named in a Letter of Credit or any transferee
of any Letter of Credit (or any Person for whom any such transferee may be acting), the
Letter of Credit Issuer, the Administrative Agent, any Lender or
any other Person,
whether in connection with this Agreement, any Letter of Credit, the transactions
contemplated herein or any unrelated transactions;
(iii) any draft, certificate or any other document presented under the Letter of
Credit proves to be forged, fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect;
(iv) the surrender or impairment of any security for the performance or observance
of any of the terms of any of the Loan Documents;
(v) payment by the Letter of Credit Issuer under any Letter of Credit proving to be
forged, fraudulent, invalid or insufficient in any respect or any statement therein
being untrue or inaccurate in any respect;
(vi) payment by the Letter of Credit Issuer under any Letter of Credit against
presentation of any draft or certificate that does not comply with the terms of such
Letter of Credit, except payment resulting from the gross negligence or willful
misconduct of the Letter of Credit Issuer; or
(vii) any other circumstances or happenings whatsoever, whether or not similar to
any of the foregoing, except circumstances or happenings resulting from the gross
negligence or willful misconduct of the Letter of Credit Issuer.
SECTION 11.07. Payment of Reimbursement Obligations.
(a) Payments to Issuing Lender. The Borrower agrees to pay to the Letter of
Credit Issuer the amount of all Reimbursement Obligations, interest and other amounts payable
to the Letter of Credit Issuer under or in connection with any Letter of Credit issued for
such Borrowers account immediately when due, irrespective of:
(i) any lack of validity or enforceability of this Agreement or any of the other
Loan Documents;
(ii) the existence of any claim, set-off, defense or other right which the Borrower
may have at any time against a beneficiary named in a Letter of Credit or any transferee
of any Letter of Credit (or any Person for whom any such transferee may be acting), the
Letter of Credit Issuer, the Administrative Agent, any Lender or any other Person,
whether in connection with this Agreement, any Letter of Credit, the transactions
contemplated herein or any unrelated transactions;
(iii) any draft, certificate or any other document presented under the Letter of
Credit proves to be forged, fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect;
(iv) the surrender or impairment of any security for the performance or observance
of any of the terms of any of the Loan Documents;
(v) payment by the Letter of Credit Issuer under any Letter of Credit proving to be
forged, fraudulent, invalid or insufficient in any respect or any statement therein
being untrue or inaccurate in any respect;
(vi) payment by the Letter of Credit Issuer under any Letter of Credit against
presentation of any draft or certificate that does not comply with the terms of such
Letter of Credit, except payment resulting from the gross negligence or willful
misconduct of the Letter of Credit Issuer; or
(vii) any other circumstances or happenings whatsoever, whether or not similar to
any of the foregoing, except circumstances or happenings resulting from the gross
negligence or willful misconduct of the Letter of Credit Issuer.
(b) Recovery or Avoidance of Payments. In the event any payment by or on behalf
of the Borrower received by the Letter of Credit Issuer with respect to a Letter of Credit and
distributed by the Letter of Credit Issuer to the Lenders on account of their participations
is thereafter set aside, avoided or recovered from the Letter of Credit Issuer
in connection
with any receivership, liquidation or bankruptcy proceeding, each Lender that received such
distribution shall, upon demand by the Letter of Credit Issuer, contribute such Lenders
ratable share of the amount set aside, avoided or recovered together with interest at the rate
required to be paid by the Letter of Credit Issuer upon the amount required to be repaid by
it.
SECTION 11.08. Compensation for Letters of Credit. The compensation for Letters of
Credit shall be as set forth in Section 2.07.
SECTION 11.09. Indemnification; Exoneration.
(a) Indemnification. In addition to amounts payable as elsewhere provided in this
Article XI, the Borrower shall protect, indemnify, pay and save the Letter of Credit Issuer,
the Administrative Agent and each Lender harmless from and against any and all claims,
demands, liabilities, damages, losses, costs, charges and expenses (including reasonable
attorneys fees) which the Letter of Credit Issuer, the Administrative Agent, or any Lender
may incur or be subject to as a consequence of the issuance of any Letter of Credit for the
Borrowers account other than as a result of such Lenders gross negligence or willful
misconduct, as determined by a court of competent jurisdiction.
(b) Assumption of Risk by Borrower. As between the Borrower, the Letter of Credit
Issuer, the Administrative Agent and Lenders, the Borrower assumes all risks of the acts and
omissions of, or misuse of the Letters of Credit issued for such Borrowers account by, the
respective beneficiaries of such Letters of Credit. In furtherance and not in limitation of
the foregoing, the Letter of Credit Issuer, the Administrative Agent and the Lenders shall not
be responsible for (i) the form, validity, sufficiency, accuracy, genuineness or legal effect
of any document submitted by any party in connection with the application for and issuance of
the Letters of Credit, even if it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged, (ii) the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or
the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to
be invalid or ineffective for any reason, (iii) failure of the beneficiary of a Letter of
Credit to comply duly with conditions required in order to draw upon such Letter of Credit,
(iv) errors, omissions, interruptions or delays in transmission or delivery of any messages,
by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher, for errors in
interpretation of technical terms, (vi) any loss or delay in the transmission or otherwise of
any document required in order to make a drawing under any Letter of Credit or of the proceeds
thereof, (vii) the misapplication by the beneficiary of a Letter of Credit of the proceeds of
any drawing under such Letter of Credit; and (viii) any consequences arising from causes
beyond the control of the Letter of Credit Issuer, the Administrative Agent and the Lenders.
(c) Exoneration. In furtherance and extension and not in limitation of the
specific provisions hereinabove set forth, any action taken or omitted by the Letter of Credit
Issuer under or in connection with the Letters of Credit or any related certificates if taken
or omitted in good faith and with reasonable care, shall not put the Letter of Credit Issuer,
the Administrative Agent or any Lender under any resulting liability to the Borrower or
relieve the Borrower of any of its obligations hereunder to any such Person.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, under
seal, by their respective authorized officers as of the day and year first above written.
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THE ST. JOE COMPANY |
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By:
Name:
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/s/ Stephen W. Solomon
Stephen W. Solomon
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Title:
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Senior Vice President Treasurer |
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[CORPORATE SEAL]
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INITIAL GUARANTORS |
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ST. JOE TIMBERLAND COMPANY OF DELAWARE, L.L.C. |
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By: |
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/s/ Stephen W. Solomon
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Name: Stephen W. Solomon |
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Title: Senior Vice President Treasurer |
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[CORPORATE SEAL]
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ST. JOE FINANCE COMPANY |
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By: |
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/s/ Stephen W. Solomon
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Name: Stephen W. Solomon |
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Title: Vice President Treasurer |
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[CORPORATE SEAL]
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ST. JOE RESIDENTIAL ACQUISITIONS, INC. |
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By: |
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/s/ Stephen W. Solomon
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Name: Stephen W. Solomon |
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Title: Senior Vice President Treasurer |
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[CORPORATE SEAL]
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COMMITMENTS |
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BRANCH BANKING AND TRUST COMPANY, |
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as Administrative Agent and as a Lender |
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By: /s/ |
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Michael F. Skorich |
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(SEAL) |
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Revolver |
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Michael F. Skorich |
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Commitment: |
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Senior Vice President |
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$100,000,000 |
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Lending Office |
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Branch Banking and Trust Company |
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200 West Second Street, 16th Floor |
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Winston-Salem, NC 27101
Attention: Michael F. Skorich, Senior Vice President
Telecopy number: (336) 733-2740
Telephone number: (336) 733-2709
And a copy to:
Christopher E. Leon, Esq.
Womble Carlyle Sandridge & Rice, PLLC
One West Fourth Street
Winston-Salem, NC 27101
Telecopy number: (336) 726-6932
Telephone number: (336) 721-3518
EXHIBIT A
NOTICE OF BORROWING
, 20__
To: Branch Banking and Trust Company, as Administrative Agent
Re: Credit Agreement (as amended and modified from time to time, the Credit
Agreement) dated as of September 19, 2008 among The St. Joe Company, the
Initial Guarantors listed on the signature pages thereof, Branch Banking and
Trust Company, as a Lender and Administrative Agent, and the Lenders listed on
the signature pages thereof
Ladies and Gentlemen:
Unless otherwise defined herein, capitalized terms used herein shall have the meanings
attributable thereto in the Credit Agreement.
This Notice of Borrowing is delivered to you pursuant to Section 2.02 of the Credit Agreement.
The Borrower hereby requests a [Euro-Dollar Borrowing] [Base Rate Borrowing] in the aggregate
principal amount of $ to be made on , 20 and for interest to
accrue thereon at the rate established by the Credit Agreement for [Index Euro-Dollar
Advances] [Tranche Euro-Dollar Advances] [Base Rate Advances]. [The duration of the Interest
Period with respect to such Tranche Euro-Dollar Advances shall be [1 month] [2 months] [3 months]].
The Borrower has caused this Notice of Borrowing to be executed and delivered by their duly
authorized officers this day of , 20 .
All of the conditions applicable to the Borrowing requested herein as set forth in the Credit
Agreement have been satisfied as of the date hereof and will remain satisfied on the date of such
Borrowing, including, without limitation, those set forth in Section 3.02 of the Credit Agreement.
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THE ST. JOE COMPANY
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By: |
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Name: |
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[CORPORATE SEAL] |
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EXHIBIT B
REVOLVER NOTE
$ Winston-Salem, North Carolina
September 19, 2008
For value received, THE ST. JOE COMPANY(the Borrower) promises to pay to the order of
(the Lender), for the account of its Lending Office, the principal sum of
and No/100 Dollars ($ ), or such lesser amount as shall equal the unpaid
principal amount of each Revolver Advance made by the Lender to the Borrower pursuant to the Credit
Agreement referred to below, on the dates and in the amounts provided in the Credit Agreement. The
Borrower promises to pay interest on the unpaid principal amount of this Revolver Note on the dates
and at the rate or rates provided for in the Credit Agreement. Interest on any overdue principal of
and, to the extent permitted by law, overdue interest on the principal amount hereof shall bear
interest at the Default Rate, as provided for in the Credit Agreement. All such payments of
principal and interest shall be made in lawful money of the United States in federal or other
immediately available funds at the office of Branch Banking and Trust Company, 200 West Second
Street, 16th Floor, Winston-Salem, NC 27101, or at such other address as may be
specified from time to time pursuant to the Credit Agreement.
All Revolver Advances made by the Lender, the interest rates from time to time applicable
thereto and all repayments of the principal thereof shall be recorded by the Lender and, prior to
any transfer hereof, endorsed by the Lender on the schedule attached