e10vq
Table of Contents

 
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
     
þ   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2010
     
o   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)
     
Florida
(State or other jurisdiction of
incorporation or organization)
  59-0432511
(I.R.S. Employer
Identification No.)
     
133 South WaterSound Parkway
WaterSound, Florida

(Address of principal executive offices)
  32413
(Zip Code)
(850) 231-6482
(Registrant’s 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):
             
Large accelerated filer þ    Accelerated filer o    Non-accelerated filer   o
(Do not check if a smaller reporting company)
  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
     
    Page No.
   
 
   
   
 
   
  3
 
   
  4
 
   
  5
 
   
  6
 
   
  7
 
   
  20
 
   
  34
 
   
  34
 
   
PART II Other Information
   
 
   
  35
 
   
  35
 
   
  36
 
   
  36
 
   
  36
 
   
  36
 
   
  37
 
   
  38
 EX-10.1
 EX-31.1
 EX-31.2
 EX-32.1
 EX-32.2
 EX-99.1
 EX-101 INSTANCE DOCUMENT
 EX-101 SCHEMA DOCUMENT
 EX-101 CALCULATION LINKBASE DOCUMENT
 EX-101 LABELS LINKBASE DOCUMENT
 EX-101 PRESENTATION LINKBASE DOCUMENT
 EX-101 DEFINITION LINKBASE DOCUMENT

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PART I — FINANCIAL INFORMATION
     Item 1. Financial Statements
THE ST. JOE COMPANY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
                 
    September 30,     December 31,  
    2010     2009  
    (Unaudited)          
ASSETS
Investment in real estate
  $ 746,791     $ 749,500  
Cash and cash equivalents
    196,402       163,807  
Notes receivable
    11,365       11,503  
Pledged treasury securities
    25,757       27,105  
Prepaid pension asset
    39,756       42,274  
Property, plant and equipment, net
    13,695       15,269  
Income taxes receivable
          63,690  
Other assets
    25,138       26,290  
 
           
 
  $ 1,058,904     $ 1,099,438  
 
           
LIABILITIES AND EQUITY
LIABILITIES:
               
Debt
  $ 38,323     $ 39,508  
Accounts payable
    12,377       13,781  
Accrued liabilities and deferred credits
    96,719       92,548  
Deferred income taxes, net
    38,232       57,281  
 
           
Total liabilities
    185,651       203,118  
EQUITY:
               
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
    934,553       924,267  
Retained earnings
    881,211       914,362  
Accumulated other comprehensive (loss)
    (11,678 )     (12,558 )
Treasury stock at cost, 30,307,714 and 30,275,716 shares held at September 30, 2010 and December 31, 2009, respectively
    (931,166 )     (930,124 )
 
           
Total stockholders’ equity
    872,920       895,947  
 
           
Noncontrolling interest
    333       373  
 
           
Total equity
    873,253       896,320  
 
           
Total liabilities and equity
  $ 1,058,904     $ 1,099,438  
 
           
The accompanying notes are an integral part of these consolidated financial statements.

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THE ST. JOE COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands except per share amounts)
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2010     2009     2010     2009  
Revenues:
                               
Real estate sales
  $ 10,866     $ 24,271     $ 15,536     $ 53,008  
Resort and club revenues
    8,755       9,685       24,144       24,796  
Timber sales
    6,817       7,053       21,036       20,392  
Other revenues
    667       913       1,724       2,952  
 
                       
Total revenues
    27,105       41,922       62,440       101,148  
 
                       
 
                               
Expenses:
                               
Cost of real estate sales
    3,335       22,452       5,066       38,168  
Cost of resort and club revenues
    8,786       9,605       24,920       26,009  
Cost of timber sales
    5,289       5,139       14,810       14,765  
Cost of other revenues
    515       701       1,597       1,849  
Other operating expenses
    12,300       8,751       27,838       32,091  
Corporate expense, net
    9,821       6,008       23,287       20,144  
Depreciation and amortization
    3,356       3,730       10,295       11,546  
Pension settlement charge
                      44,678  
Impairment losses
          11,063       555       32,561  
Restructuring charges
    1,654       1,834       4,352       1,845  
 
                       
Total expenses
    45,056       69,283       112,720       223,656  
 
                       
Operating loss
    (17,951 )     (27,361 )     (50,280 )     (122,508 )
 
                       
Other (expense) income:
                               
Investment income, net
    392       764       1,227       2,160  
Interest expense
    (5,171 )     (65 )     (7,401 )     (332 )
Other, net
    1,081       533       2,450       1,457  
 
                       
Total other (expense) income
    (3,698 )     1,232       (3,724 )     3,285  
 
                       
Loss from continuing operations before equity in (loss) of unconsolidated affiliates and income taxes
    (21,649 )     (26,129 )     (54,004 )     (119,223 )
Equity in (loss) of unconsolidated affiliates
    (50 )     (66 )     (479 )     (81 )
Income tax (benefit)
    (8,573 )     (11,827 )     (21,302 )     (47,525 )
 
                       
Loss from continuing operations
    (13,126 )     (14,368 )     (33,181 )     (71,779 )
Loss from discontinued operations, net of tax
          (187 )           (409 )
 
                       
Net loss
    (13,126 )     (14,555 )     (33,181 )     (72,188 )
Less: Net loss attributable to noncontrolling interest
    (10 )     (60 )     (30 )     (817 )
 
                       
Net loss attributable to the Company
  $ (13,116 )   $ (14,495 )   $ (33,151 )   $ (71,371 )
 
                       
 
                               
LOSS PER SHARE
                               
Basic
                               
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 )
 
                       
 
                               
Diluted
                               
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 )
 
                       
The accompanying notes are an integral part of these consolidated financial statements.

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THE ST. JOE COMPANY
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(Unaudited)
(Dollars in thousands)
                                                         
                            Accumulated                    
    Common Stock             Other                    
    Outstanding             Retained     Comprehensive     Treasury     Noncontrolling        
    Shares     Amount     Earnings     Income (Loss)     Stock     Interest     Total  
Balance at December 31, 2009
    92,281,451     $ 924,267 (1)   $ 914,362 (1)   $ (12,558 )   $ (930,124 )   $ 373     $ 896,320  
 
                                         
 
                                                       
Comprehensive (loss):
                                                       
 
                                                       
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 )
 
                                                     
 
                                                       
Issuances of restricted stock
    337,967                                        
 
                                                       
Forfeitures of restricted stock
    (126,080 )                                    
 
                                                       
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.

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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.

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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 Company’s 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 Company’s 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 period’s 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

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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 Company’s 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 entity’s purpose and design and the reporting entity’s ability to direct the activities of the other entity that most significantly impact the other entity’s 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 entity’s 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 entity’s financial statements. The updates to the Codification are effective at the start of a reporting entity’s 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 Company’s 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 Company’s 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 Company’s 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  
 
               

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     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 Company’s 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 Company’s 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  
 
                       

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     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.

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     The QSPE’s financial position and results are not consolidated in the Company’s 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 Company’s 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 management’s 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 Company’s 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 Company’s 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 management’s 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 Company’s 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

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existing project and using management’s 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 Company’s intent and ability to hold the projects through the development period, could result in changes to these estimates. The Company’s 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 Company’s agreement with Southwest Airlines includes variable cost components which could have a significant impact on the Company’s 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.

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     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 )
 
           

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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 Company’s 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 Company’s 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

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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 Company’s 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  
 
           

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     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 Company’s 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 Company’s 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 Company’s 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

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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 Company’s 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 Company’s 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 Company’s 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 segment’s 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 Company’s 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.

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     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 Company’s 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 Company’s 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 Company’s consolidated financial position, results of operations or liquidity, it is possible that actual amounts of liabilities resulting from such matters could be material.

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     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 Company’s 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 Company’s 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 Company’s 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.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
     We make forward-looking statements in this Report, particularly in this Management’s 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;

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    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;

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    the sale of parcels of entitled, undeveloped land;
    the sale of housing units built by us;
    resort and club operations;
    rental income; and
    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. Management’s 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. Management’s 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 management’s 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 asset’s 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 management’s 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.

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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.

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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.
                                                                 
    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

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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 management’s 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.

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     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.

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     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  
 
                                   

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     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.

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  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.

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     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.

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     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.

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     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.

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     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 Southwest’s 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 Southwest’s 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.

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  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 Company’s 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 Company’s 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.

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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 management’s attention and resources.

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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.
                                 
                            (d)
                    (c)   Maximum Dollar
                    Total Number of   Amount that
    (a)   (b)   Shares Purchased   May Yet Be
    Total Number   Average   as Part of Publicly   Purchased Under
    of Shares   Price Paid   Announced Plans   the Plans or
Period   Purchased(1)   per Share   or Programs   Programs
                          (In thousands)
Month Ended July 31, 2010
        $           $ 103,793  
Month Ended August 31, 2010
        $           $ 103,793  
Month Ended September 30, 2010
        $           $ 103,793  
 
(1)   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.

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Item 6. Exhibits
         
Exhibit    
Number   Description
  3.1    
Amended and Restated Articles of Incorporation of the Company, as amended (incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010).
       
 
  3.2    
Amended and Restated Bylaws of the Company, as amended (incorporated by reference to Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010).
       
 
  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.
       
 
  31.1    
Certification by Chief Executive Officer.
       
 
  31.2    
Certification by Chief Financial Officer.
       
 
  32.1    
Certification by Chief Executive Officer.
       
 
  32.2    
Certification by Chief Financial Officer.
       
 
  99.1    
Supplemental Information regarding Land-Use Entitlements, Sales by Community and other quarterly information.
       
 
  101 *    
The following information from the Company’s 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.
 
+   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”.

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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.
         
  The St. Joe Company
 
 
Date: November 2, 2010  /s/ Wm. Britton Greene    
  Wm. Britton Greene   
  President and Chief Executive Officer   
 
     
Date: November 2, 2010  /s/ Janna L. Connolly    
  Janna L. Connolly   
  Senior Vice President and Chief Accounting Officer   
 

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 Agent’s 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 Agent’s 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 Lender’s 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 Person’s 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 & Poor’s Rating Services or at least P-1 or the equivalent by Moody’s 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, Stockholder’s Equity less the sum of the value, (to the extent reflected in determining Stockholder’s 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 banker’s 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 Person’s 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 Person’s 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 Borrower’s 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 Subsidiary’s organizational documents which provision was included in such Subsidiary’s 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 Lender’s 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.
          “Officer’s 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 & Poor’s Rating Services or Moody’s 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 Person’s Affiliates and the partners, directors, officers, employees, agents and advisors of such Person and of such Person’s 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 Borrower’s 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 Borrower’s 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 Borrower’s 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 Lender’s 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.
          “Stockholder’s 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 Borrower’s 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 Borrower’s 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 Borrower’s 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 Borrower’s 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 Person’s 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 Lender’s 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 Lender’s 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 Lender’s 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 Lender’s 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 Lender’s 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 Lender’s 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 Lender’s 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 Agent’s 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 Banker’s 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 Lender’s 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 Agent’s 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 Agent’s 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 Day’s 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 Lender’s 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 Borrower’s 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 Lender’s 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 Lender’s 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 Lender’s 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 party’s 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 Lender’s pro rata percentage (calculated after giving effect to the Commitment Increase) of the Subsequent Borrowings and (z) such Lender’s 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 Lender’s pro rata percentage (calculated without giving effect to the Commitment Increase) of the Initial Advances and (z) such Lender’s 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 Lender’s 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 Lender’s 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 Lender’s curing of its default.
     (b) Purchase or Cancellation of Defaulting Lender’s 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 Lender’s 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 Lender’s 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 Lender’s 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 “Officer’s 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 Party’s Organizational Documents; (ii) the Loan Party’s Operating Documents; (iii) if applicable, a certificate of the Secretary of State of such Loan Party’s 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 Party’s 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 Agent’s 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 Borrower’s 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 Lender’s 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 Party’s 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 Subsidiary’s 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 Party’s, and each of their respective Subsidiary’s, 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 Party’s 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 Subsidiary’s 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 worker’s 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 Borrower’s 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. Broker’s Fees. Except as set forth in the Administrative Agent’s Letter Agreement, no broker’s or finder’s fee, commission or similar compensation will be payable with respect to the transactions contemplated hereby. Except as set forth in the Administrative Agent’s 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 Property’s 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 Agent’s 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 Borrower’s 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 Borrower’s 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 & Poor’s Corporation or P-1 or the equivalent thereof by Moody’s 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 & Poor’s Corporation or AA or the equivalent thereof by Moody’s 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 Subsidiary’s 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 arm’s 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 Borrower’s 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 successor’s 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 Agent’s 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 Lender’s holding company, if any, regarding capital requirements has or would have the effect of reducing the rate of return on such Lender’s capital or on the capital of such Lender’s 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 Lender’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s policies and the policies of such Lender’s 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 Lender’s 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 Lender’s 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 Lender’s 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 Lender’s portion of any Advance resulting from the Borrower’s 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 sender’s 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 Indemnitee’s 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 Lender’s 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 Lender’s 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 Agent’s 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 Lender’s 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 Lender’s 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 Lender’s 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 Borrower’s Affiliates or Subsidiaries) (each, a “Participant”) in all or a portion of such Lender’s 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 Lender’s 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 Lender’s 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 Borrower’s 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 Party’s 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 Agent’s 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 Guarantor’s 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 Guarantor’s 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 Lender’s 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 Issuer’s 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 Lender’s 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 Lender’s 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 Borrower’s 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 Lender’s 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 Borrower’s account other than as a result of such Lender’s 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 Borrower’s 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.
             
    THE ST. JOE COMPANY    
 
           
 
  By:
Name:
  /s/ Stephen W. Solomon
 
Stephen W. Solomon
   
 
  Title:   Senior Vice President — Treasurer    
[CORPORATE SEAL]

 


 

             
    INITIAL GUARANTORS    
 
           
    ST. JOE TIMBERLAND COMPANY OF DELAWARE, L.L.C.    
 
           
 
  By:   /s/ Stephen W. Solomon
 
   
    Name: Stephen W. Solomon    
    Title: Senior Vice President — Treasurer    
[CORPORATE SEAL]
             
    ST. JOE FINANCE COMPANY    
 
           
 
  By:   /s/ Stephen W. Solomon
 
   
    Name: Stephen W. Solomon    
    Title: Vice President — Treasurer    
[CORPORATE SEAL]
             
    ST. JOE RESIDENTIAL ACQUISITIONS, INC.    
 
           
 
  By:   /s/ Stephen W. Solomon
 
   
    Name: Stephen W. Solomon    
    Title: Senior Vice President — Treasurer    
[CORPORATE SEAL]
                 
COMMITMENTS   BRANCH BANKING AND TRUST COMPANY,        
    as Administrative Agent and as a Lender        
 
               
 
  By: /s/   Michael F. Skorich       (SEAL)
 
               
Revolver   Michael F. Skorich        
Commitment:   Senior Vice President        
 
               
$100,000,000
               
    Lending Office        
    Branch Banking and Trust Company        
    200 West Second Street, 16th Floor        
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   &nb