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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the 13 Weeks Ended Commission File No.
August 31, 2002 0-29288
GRIFFIN LAND & NURSERIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 06-0868496
(state or other jurisdiction of incorporation (IRS Employer
or organization) Identification Number)
One Rockefeller Plaza, New York, New York 10020
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number including Area Code (212) 218-7910
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 X No
--- ---
Number of shares of Common Stock outstanding at October 1, 2002: 4,864,916
GRIFFIN LAND & NURSERIES, INC.
Form 10-Q
PART I FINANCIAL INFORMATION Page
Consolidated Statement of Operations
13 and 39 Weeks Ended August 31, 2002 and September 1, 2001 3
Consolidated Balance Sheet
August 31, 2002 and December 1, 2001 4
Consolidated Statement of Stockholders' Equity
39 Weeks Ended August 31, 2002 and September 1, 2001 5
Consolidated Statement of Cash Flows
39 Weeks Ended August 31, 2002 and September 1, 2001 6
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis of
Financial Condition and Results of Operations 16
Quantitative and Qualitative Disclosures About Market Risk 21
PART II OTHER INFORMATION 22
SIGNATURES 23
CERTIFICATIONS 24
PART I
Item 1. Financial Statements
Griffin Land & Nurseries, Inc.
Consolidated Statement of Operations
(dollars in thousands, except per share data)
(unaudited)
For the 13 Weeks Ended, For the 39 Weeks Ended,
------------------------ -----------------------
Aug. 31, Sept. 1, Aug. 31, Sept. 1,
2002 2001 2002 2001
---------- ---------- ---------- ----------
Net sales and other revenue $ 5,973 $ 6,453 $ 28,475 $ 27,208
Cost of goods sold 5,719 4,895 23,396 21,126
Selling, general and administrative expenses 2,048 2,308 6,208 8,274
---------- ---------- ---------- ----------
Operating loss (1,794) (750) (1,129) (2,192)
Gain on sale of Sales and Service Centers - - - 9,469
Interest expense (405) (311) (1,189) (643)
Interest income 6 37 19 138
---------- ---------- ---------- ----------
(Loss) income before income tax (benefit) provision (2,193) (1,024) (2,299) 6,772
Income tax (benefit) provision (795) (404) (828) 2,675
---------- ---------- ---------- ----------
(Loss) income before equity investment (1,398) (620) (1,471) 4,097
Income (loss) from equity investment 2,897 (669) 3,134 (598)
---------- ---------- ---------- ----------
Net income (loss) $ 1,499 $ (1,289) $ 1,663 $ 3,499
========== ========== ========== ==========
Basic net income (loss) per common share $ 0.31 $ (0.27) $ 0.34 $ 0.72
========== ========== ========== ==========
Diluted net income (loss) per common share $ 0.26 $ (0.27) $ 0.29 $ 0.70
========== ========== ========== ==========
See Notes to Consolidated Financial Statements.
Griffin Land & Nurseries, Inc
Consolidated Balance Sheet
(dollars in thousands, except per share data)
(unaudited)
Aug. 31, Dec. 1,
2002 2001
----------- --------
ASSETS
Current Assets
Cash and cash equivalents $ 24 $ 23
Accounts receivable, less allowance of $188 and $132 4,506 2,437
Inventories 29,955 30,449
Deferred income taxes 1,778 1,788
Other current assets 4,128 2,667
----------- ---------
Total current assets 40,391 37,364
Real estate held for sale or lease, net 49,606 49,242
Investment in Centaur Communications, Ltd. 19,660 17,012
Property and equipment, net 12,017 11,418
Other assets 9,928 9,139
----------- ---------
Total assets $ 131,602 $ 124,175
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities $ 4,949 $ 5,761
Long-term debt due within one year 425 508
----------- ---------
Total current liabilities 5,374 6,269
Long-term debt 23,027 15,940
Deferred income taxes 1,426 1,457
Other noncurrent liabilities 3,678 3,593
----------- ---------
Total liabilities 33,505 27,259
----------- ---------
Commitments and contingencies
Common stock, par value $0.01 per share, 10,000,000 shares
authorized, 4,864,916 shares issued and outstanding 49 49
Additional paid-in capital 93,588 93,584
Retained earnings 4,699 3,036
Accumulated other comprehensive (loss) income (239) 247
----------- ---------
Total stockholders' equity 98,097 96,916
----------- ---------
Total liabilities and stockholders' equity $ 131,602 $ 124,175
=========== =========
See Notes to Consolidated Financial Statements.
Griffin Land & Nurseries, Inc.
Consolidated Statement of Stockholders' Equity
(dollars in thousands)
(unaudited)
Accumulated
Shares of Additional Other
Common Common Paid-in Retained Comprehensive
Stock Stock Capital Earnings Income (Loss) Total
--------- ------- ----------- --------- --------------- --------
Balance at December 2, 2000 4,862,704 $ 49 $ 93,584 $ 1,899 $ 186 $ 95,718
Net income - - - 3,499 - 3,499
Other comprehensive income - - - - 61 61
--------- ------- ----------- --------- --------------- --------
Balance at September 1, 2001 4,862,704 $ 49 $ 93,584 $ 5,398 $ 247 $ 99,278
========= ======= =========== ========= =============== ========
Balance at December 1, 2001 4,862,704 $ 49 $ 93,584 $ 3,036 $ 247 $ 96,916
Exercise of employee stock
options 2,212 - 4 - - 4
Net income - - - 1,663 - 1,663
Other comprehensive loss - - - - (486) (486)
--------- ------- ----------- --------- --------------- --------
Balance at August 31, 2002 4,864,916 $ 49 $ 93,588 $ 4,699 $ (239) $ 98,097
========= ======= =========== ========= =============== ========
See Notes to Consolidated Financial Statements.
Griffin Land & Nurseries, Inc.
Consolidated Statement of Cash Flows
(dollars in thousands)
(unaudited)
For the 39 Weeks Ended,
-----------------------
Aug. 31, Sept. 1,
Operating activities: 2002 2001
---------- ----------
Net income $ 1,663 $ 3,499
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization 2,434 2,026
Gain on sale of Sales and Service Centers - (9,469)
(Income) loss from equity investment (3,134) 598
Changes in assets and liabilities:
Accounts receivable (2,189) (77)
Inventories 494 (919)
Other current assets (1,794) (669)
Accounts payable and accrued liabilities (812) (3,523)
Income taxes payable - 626
Other, net 49 819
---------- ----------
Net cash used in operating activities (3,289) (7,089)
---------- ----------
Investing activities:
Additions to real estate held for sale or lease (1,842) (8,362)
Additions to property and equipment (1,660) (2,017)
Proceeds from sale of Sales and Service Centers - 18,390
Additional investment in Linguaphone (145) -
---------- ----------
Net cash (used in) provided by investing activities (3,647) 8,011
---------- ----------
Financing activities:
Increase in debt 7,700 11,075
Payments of debt (763) (12,328)
---------- ----------
Net cash provided by (used in) financing activities 6,937 (1,253)
---------- ----------
Net increase (decrease) in cash and cash equivalents 1 (331)
Cash and cash equivalents at beginning of period 23 1,126
---------- ----------
Cash and cash equivalents at end of period $ 24 $ 795
========== ==========
See Notes to Consolidated Financial Statements.
Griffin Land & Nurseries, Inc.
Notes to Consolidated Financial Statements
(dollars in thousands, except per share data)
(unaudited)
1. Basis of Presentation
The unaudited consolidated financial statements of Griffin Land &
Nurseries, Inc. ("Griffin") include the accounts of Griffin's real estate
division ("Griffin Land") and Griffin's wholly-owned subsidiary, Imperial
Nurseries, Inc. ("Imperial"), and have been prepared in conformity with the
standards of accounting measurement set forth in Accounting Principles Board
Opinion No. 28 and any amendments thereto adopted by the Financial Accounting
Standards Board ("FASB"). Also, the accompanying financial statements have been
prepared in accordance with the accounting policies stated in Griffin's audited
2001 Financial Statements included in the Report on Form 10-K as filed with the
Securities and Exchange Commission on March 1, 2002, and should be read in
conjunction with the Notes to Financial Statements appearing in that report. All
adjustments, comprising only normal recurring adjustments, which are, in the
opinion of management, necessary for a fair presentation of results for the
interim periods have been reflected.
In Griffin's Form 10-K for the fiscal year ended December 1, 2001, Griffin
reported that it had restated its equity share in the results of Centaur
Communications, Ltd. ("Centaur") for the thirteen and thirty-nine weeks ended
September 1, 2001. The effect of the restatement for the thirteen weeks ended
September 1, 2001 was to increase Griffin's equity loss from Centaur and
increase Griffin's net loss by $946 and increase Griffin's basic and diluted net
loss per share by $0.20 each. The effect of the restatement for the thirty-nine
weeks ended September 1, 2001 was to decrease Griffin's equity results of
Centaur and decrease Griffin's net income by $1,276 and decrease Griffin's basic
and diluted net income per common share by $0.26 each. The restated results for
the thirteen and thirty-nine weeks ended September 1, 2001 are reflected herein.
The results of operations for the thirty-nine weeks ended August 31, 2002,
are not necessarily indicative of the results to be expected for the full year.
Certain amounts from the prior year have been reclassified to conform to
the current presentation.
2. Recent Accounting Pronouncements
In June 2001, the FASB issued SFAS No. 142 "Goodwill and Other Intangible
Assets." Under the provisions of SFAS No. 142, goodwill will no longer be
amortized, but will be subject to a periodic test for impairment based upon fair
values. Griffin's results from its equity investment in Centaur for the
thirty-nine weeks ended August 31, 2002 and the thirty-nine weeks ended
September 1, 2001 would have increased approximately $0.4 million due to the
elimination of goodwill amortization. SFAS No. 142 will be effective for Griffin
in fiscal 2003. At this time, management does not expect to incur a charge for
the impairment of intangible assets upon adoption of SFAS No. 142, however
Centaur recorded a goodwill impairment charge in the thirteen and thirty-nine
weeks ended August 31, 2002 (see Note 5).
In June 2001, the FASB issued SFAS No. 143 "Accounting for Asset Retirement
Obligations." This new pronouncement addresses accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. SFAS No. 143 will be effective for Griffin in
fiscal 2003. At this time, management believes that this new standard will not
have an impact on Griffin's financial statements.
In August 2001, the FASB issued SFAS No. 144 "Accounting for the Impairment
or Disposal of Long-Lived Assets." This new pronouncement retains the
requirements of SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of" to recognize an impairment loss
only if the carrying amount of a long-lived asset is not recoverable from its
undiscounted cash flow and measures an impairment loss as the difference between
the carrying amount and fair value of the asset. This pronouncement also
addresses the accounting for long-lived assets to be disposed of other than by
sale and long-lived assets to be disposed of by sale. SFAS No. 144 will be
effective for Griffin in fiscal 2003. Management is currently assessing the
impact, if any, of this new standard.
3. Sale of Sales and Service Centers
On January 26, 2001, Imperial completed the sale of all of the assets of
its seven wholesale sales and service centers (the "SSCs") to Shemin Nurseries,
Inc. ("Shemin"). Shemin also assumed certain liabilities related to the SSCs.
The SSCs sold a wide variety of plant material and horticultural tools and
products to the landscape trade. A portion of the products sold by the SSCs were
grown by Imperial's farming operations. Imperial's only continuing involvement
in Shemin is an approximately 13.8% ownership interest in Shemin's parent
company (see below) and a three year supply agreement pursuant to which Shemin
is obligated to purchase Imperial grown product for the SSCs. The net book value
of the assets sold and liabilities assumed by Shemin was $13.5 million. Prior to
the sale of the SSCs in fiscal 2001, the net sales of the SSCs were $1.9 million
and the SSCs incurred an operating loss, before Imperial's central overhead
expenses, of $0.8 million through the date of the sale. Imperial continues in
the landscape nursery business with its container growing operations in
Connecticut and northern Florida.
The consideration received by Imperial on the sale of the SSCs included
cash of approximately $18.4 million after expenses. Cash of $11.2 million from
the sale was used to repay all of the amount then outstanding under Griffin's
revolving credit agreement. The remaining cash was used for general corporate
purposes. In addition to the cash payment, Griffin received 20,570 shares of
common stock (representing approximately 13.8% of the outstanding common stock)
of Shemin Acquisition Corporation ("Acquisition"), the parent company of Shemin.
The common stock of Acquisition is valued at $6.1 million and is included in
other assets on the accompanying balance sheet. As a result of Griffin retaining
a common equity ownership interest in Acquisition, $1.5 million of the gain from
the sale of the SSCs has been deferred, and is offset against the investment in
Acquisition on Griffin's balance sheet. Imperial accounts for its investment in
Acquisition under the cost method of accounting for investments.
The sale of the SSCs reflected the disposition of the following assets and
liabilities by Imperial:
Accounts receivable $ 1,407
Inventories 4,453
Other current assets 1,037
Fixed assets, net 7,393
Other assets 161
-----------
14,451
Accounts payable and
accrued liabilities (719)
Capital leases (271)
----------
Net assets disposed $ 13,461
=========
The following unaudited Pro Forma Condensed Consolidated Statement of
Operations for the thirty-nine weeks ended September 1, 2001 includes pro forma
adjustments to reflect the sale of the SSCs as if it had taken place at the
beginning of fiscal year 2001. Such adjustments include the elimination of
sales, cost of sales and direct operating expenses of the SSCs, the elimination
of salaries and benefits of employees terminated as a result of the sale of the
SSCs, the inclusion of sales from Imperial's growing operations to the SSCs
acquired by Shemin, the effect of the net cash proceeds on Griffin's interest
expense and interest income, and adjustment to Griffin's income tax provision.
In the opinion of management, all adjustments necessary to fairly present
this pro forma information have been made. The pro forma information does not
purport to be indicative of the results that would have been reported had this
transaction actually occurred on the date specified, nor is it indicative of
Griffin's future results.
Pro Forma Condensed Consolidated Statement of Operations (Unaudited)
For the 39
Weeks Ended
Sept. 1, 2001
-------------
Net sales and other revenue $ 25,325
Cost of goods sold 19,695
Selling, general and administrative expenses 6,960
----------
Operating loss (1,330)
Gain on sale of Sales and Service Centers 9,469
Interest expense, net (345)
----------
Income before income tax provision 7,794
Income tax provision 3,079
----------
Income before equity investment 4,715
Income from equity investment (598)
----------
Net income $ 4,117
==========
Basic net income per common share $ 0.85
==========
Diluted net income per common share $ 0.82
==========
4. Industry Segment Information
Griffin's reportable segments are defined by their products and services,
and are comprised of the landscape nursery and real estate segments. Management
operates and receives reporting based upon these segments. Griffin has no
operations outside the United States. Griffin's export sales and transactions
between segments are not material.
For the 13 Weeks Ended, For the 39 Weeks Ended,
----------------------- -----------------------
Aug. 31, Sept. 1, Aug. 31, Sept. 1,
Net sales and other revenue 2002 2001 2002 2001
---------- ---------- ---------- ----------
Landscape nursery product sales $ 3,842 $ 3,689 $ 22,035 $ 20,753
Real estate sales and rental revenue 2,131 2,764 6,440 6,455
---------- ---------- ---------- ----------
$ 5,973 $ 6,453 $ 28,475 $ 27,208
========== ========== ========== ==========
Operating profit (loss)
Landscape nursery $ (1,616) $ (1,331) $ (789) $ (2,073)
Real estate 181 972 833 1,020
---------- ---------- ---------- ----------
Industry segment totals (1,435) (359) 44 (1,053)
Gain on sale of Sales and Service Centers - - - 9,469
General corporate expense (359) (391) (1,173) (1,139)
Interest expense, net (399) (274) (1,170) (505)
---------- ---------- ---------- ----------
(Loss) income before income taxes $ (2,193) $ (1,024) $ (2,299) $ 6,772
========== ========== ========== ==========
Aug. 31, Dec. 1,
Identifiable assets 2002 2001
---------- ----------
Landscape nursery $ 50,567 $ 48,908
Real estate 57,745 55,746
---------- ----------
Industry segment totals 108,312 104,654
General corporate (consists primarily of investments) 23,290 19,521
---------- ----------
$ 131,602 $ 124,175
========== ==========
5. Equity Investment in Centaur
Griffin accounts for its approximately 35% ownership of the outstanding
common stock of Centaur under the equity method of accounting for investments.
Centaur reports on a June 30 fiscal year. The unaudited summarized financial
data of Centaur presented below was derived from consolidated financial
information of Centaur for the nine month periods ended August 31, 2002 and
August 31, 2001. Griffin's equity income from Centaur for each of the
thirty-nine weeks ended August 31, 2002 and September 1, 2001 includes $432 for
amortization of the excess cost of Griffin's investment over the book value of
its equity in Centaur (representing publishing rights and goodwill). Griffin's
equity income from Centaur also reflects adjustments necessary to present
Centaur's results for the nine month periods in accordance with generally
accepted accounting principles in the United States of America.
In Griffin's Form 10-K for the fiscal year ended December 1, 2001, Griffin
reported that it had restated its equity share in Centaur's results. The effect
of the restatement for the thirteen weeks ended September 1, 2001 was to
increase Griffin's equity loss from Centaur and increase Griffin's net loss by
$946. The effect of the restatement for the thirty-nine weeks ended September 1,
2001 was to decrease Griffin's equity results from Centaur and decrease
Griffin's net income by $1,276. The restated results are reflected herein.
Nine Months Ended,
------------------
Aug. 31, Aug. 31,
2002 2001
--------- --------
Net sales $ 68,061 $74,118
Costs and expenses 81,457 71,257
--------- --------
Operating (loss) profit (13,396) 2,861
Nonoperating expenses (2,082) (1,269)
--------- --------
Pretax (loss) income (15,478) 1,592
Income tax (benefit) provision (1,833) 1,765
--------- --------
Loss from continuing operations (13,645) (173)
--------- --------
Discontinued operations:
Income (loss) from discontinued operations, net of tax 45 (292)
Gain on sale of discontinued operation, net of tax 23,736 -
--------- --------
Total income (loss) from discontinued operations 23,781 (292)
--------- --------
Net income (loss) $ 10,136 $ (465)
========= ========
As of,
--------------------
Aug. 31, Nov. 30,
2002 2001
--------- ---------
Current assets $ 21,112 $23,701
Intangible assets 5,278 19,157
Other noncurrent assets 11,327 11,691
--------- ---------
Total assets $ 37,717 $ 54,549
========= =========
Current liabilities $ 23,905 $ 31,594
Debt 2,310 20,803
Other noncurrent liabilities 2,935 3,135
--------- ---------
Total liabilities 29,150 55,532
Retained earnings (deficit) 8,567 (983)
--------- ---------
Total liabilities and retained earnings (deficit) $ 37,717 $ 54,549
========= =========
In August, Centaur completed the sale of its Lawtel operation that provides
on-line legal information. Griffin did not receive any cash from the sale as
Centaur used the proceeds to pay down debt. Griffin's allocable portion of the
gain was $8.4 million, and is included in Griffin's equity income from Centaur
in the thirteen and thirty-nine weeks ended August 31, 2002. Lawtel is
accounted for as a discontinued operation in Centaur's summarized operating
results presented above.
Also included in Griffin's equity results from Centaur in the thirteen and
thirty-nine weeks ended August 31, 2002 was a charge for goodwill impairment at
Centaur of which Griffin's allocable share of this charge was $5.0 million.
Centaur's income tax benefit from continuing operations in the thirteen and
thirty-nine weeks ended August 31, 2002 includes the effect of a reduction of a
valuation allowance on certain deferred tax assets related to prior years
operating losses of a subsidiary of Centaur. Griffin's allocable share of this
item was $0.7 million. The income tax (benefit) provision of Centaur reflects
the nondeductability of certain expenses under tax laws in the United Kingdom.
6. Long-Term Debt
Long-term debt includes:
Aug. 31, Dec. 1,
2002 2001
-------- --------
Mortgages $ 14,208 $ 14,779
Credit Agreement 8,700 -
Bridge Loan - 1,000
Capital leases 544 669
-------- --------
Total 23,452 16,448
Less: due within one year 425 508
-------- --------
Total long-term debt $ 23,027 $ 15,940
======== ========
On February 8, 2002, Griffin entered into a $19.4 million revolving credit
agreement, as amended (the "2002 Credit Agreement"), with Fleet National Bank
("Fleet"). The amount available for borrowing under the 2002 Credit Agreement
has been reduced to $14.1 million as described below. The initial borrowings
under the 2002 Credit Agreement were used to repay the amount then outstanding
($4.5 million) under Griffin's bridge loan, to repay a mortgage of $0.4 million
on one of Griffin's commercial buildings and for certain expenses related to the
2002 Credit Agreement. The 2002 Credit Agreement is being used to finance
working capital requirements at Griffin's landscape nursery and real estate
businesses and for investment in Griffin's real estate assets. Borrowings under
the 2002 Credit Agreement may be, at Griffin's option, on an overnight basis or
for periods of one, two, three or six months. Overnight borrowings bear
interest at Fleet's prime rate plus a margin of 0.5% per annum. Borrowings of
one month and longer bear interest at the London Interbank Offered Rate
("LIBOR") plus a margin of 2.5% per annum. The margins can be reduced if
Griffin achieves certain debt service coverage ratios (as defined). At August
31, 2002, the amount outstanding under the 2002 Credit Agreement had a weighted
average interest rate of 4.35%. There are no compensating balance requirements
and Griffin pays a commitment fee of 0.25% per annum on unused borrowing
capacity. The 2002 Credit Agreement is secured by certain of Griffin's real
estate assets and includes financial covenants with respect to Griffin's fixed
charge coverage (as defined), net worth and leverage. As of August 31, 2002,
Griffin was in default under the fixed charge coverage ratio of the 2002 Credit
Agreement. The 2002 Credit Agreement was amended to adjust the fixed charge
coverage ratio, and after giving effect to the amendment, Griffin is no longer
in default.
On September 17, 2002, a subsidiary of Griffin completed a $7.7 million
nonrecourse mortgage of two commercial properties. Proceeds of the mortgage were
used to reduce the amount outstanding under the 2002 Credit Agreement. The
mortgage has an interest rate of 7.0% and a term of fifteen years, with payments
based on a twenty-five year amortization period. The total book value at August
31, 2002 of the properties under this new mortgage was $7.8 million. One of the
properties included in this mortgage was previously included as collateral under
the 2002 Credit Agreement. As a result of removing that property from the
collateral of the 2002 Credit Agreement, the commitment under the 2002 Credit
Agreement was reduced to $14.1 million.
At August 31, 2002, and December 1, 2001, the fair value of Griffin's
mortgages was $15.8 million. Fair value was based on the present value of
future cash flows discounted at estimated borrowing rates for comparable risks,
maturities and collateral. Management believes that because of variable
interest rates, the amount included on Griffin's balance sheet at August 31,
2002 for the 2002 Credit Agreement reflects its fair value.
7. Stock Options
Activity under the Griffin Land & Nurseries, Inc. 1997 Stock Option Plan
(the "Griffin Stock Option Plan") is summarized as follows:
Number of Weighted Avg.
Shares Exercise Price
--------------- ---------------
Outstanding at December 1, 2001 629,307 $ 12.18
Exercised after December 1, 2001 (2,212) 1.79
Issued after December 1, 2001 32,983 15.26
--------------- ---------------
Outstanding at August 31, 2002 660,078 $ 12.37
=============== ===============
Number of option holders at August 31, 2002 29
====
Weighted Avg.
Remaining
Outstanding at Weighted Avg. Contractual Life
Range of Exercise Prices Aug. 31, 2002 Exercise Price (in years)
------------------------- --------------- --------------- -----------------
Under $3.00 32,223 $ 1.75 1.7
$3.00-$11.00 100,172 7.52 3.5
Over $11.00 527,683 13.94 6.2
---------------
660,078
===============
At August 31, 2002, there were outstanding vested options exercisable for
413,230 shares under the Griffin Stock Option Plan with a weighted average
exercise price of $11.64 per share. Subsequent to August 31, 2002, the
termination of employment of one option holder resulted in the cancellation of
4,000 options, 500 of which were vested.
8. Per Share Results
Basic and diluted per share results were based on the following:
For the 13 Weeks Ended, For the 39 Weeks Ended,
----------------------- -----------------------
Aug. 31, Sept. 1, Aug. 31, Sept. 1,
2002 2001 2002 2001
----------- ----------- ----------- ----------
Net income (loss) as reported for computation of basic $ 1,499 $ (1,289) $ 1,663 $ 3,499
per share results
Adjustment to net income (loss) for assumed exercise
of options of equity investee (Centaur) (195) - (232) -
----------- ----------- ----------- ----------
Net income (loss) as reported for computation of
diluted per share results $ 1,304 $ (1,289) $ 1,431 $ 3,499
=========== =========== =========== ==========
Weighted average shares outstanding for computation
of basic per share results 4,865,000 4,863,000 4,864,000 4,863,000
Incremental shares from assumed exercise of Griffin
stock options 101,000 - 107,000 132,000
----------- ----------- ----------- ----------
Adjusted weighted average shares for computation of
diluted per share results 4,966,000 4,863,000 4,971,000 4,995,000
=========== =========== =========== ==========
9. Supplemental Financial Statement Information
Other Comprehensive (Loss) Income
The Statement of Stockholders' Equity for the thirty-nine weeks ended
August 31, 2002 and the thirty-nine weeks ended September 1, 2001 includes other
comprehensive (loss) income of ($486) and $61, respectively. The other
comprehensive (loss) income reported in these periods reflects translation
adjustments related to Griffin's equity investment in Centaur.
Inventories
Inventories consist of:
Aug. 31, Dec. 1,
2002 2001
------- -------
Nursery stock $ 28,695 $ 29,514
Materials and supplies 1,260 935
-------- --------
$ 29,955 $ 30,449
======== ========
Property and Equipment
Property and equipment consist of:
Estimated Aug. 31, Dec. 1,
Useful Lives 2002 2001
-------------- --------- ---------
Land and improvements $ 4,508 $ 4,175
Buildings 10 to 40 years 2,952 2,960
Machinery and equipment 3 to 20 years 14,645 15,093
--------- ---------
22,105 22,228
Accumulated depreciation (10,088) (10,810)
--------- ---------
$ 12,017 $ 11,418
========= =========
Griffin incurred capital lease obligations of $67 and $377, respectively,
in the thirty-nine weeks ended August 31, 2002 and September 1, 2001.
Real Estate Held for Sale or Lease
Real estate held for sale or lease consists of:
August 31, 2002
--------------------------------
Estimated Held for Held for
Useful Lives Sale Lease Total
------------ --------- ---------- ---------
Land $ 1,332 $ 3,097 $ 4,429
Land improvements 15 years - 3,978 3,978
Buildings 40 years - 41,324 41,324
Development costs 6,037 5,662 11,699
--------- ---------- ---------
7,369 54,061 61,430
Accumulated depreciation - (11,824) (11,824)
--------- ---------- ---------
$ 7,369 $ 42,237 $ 49,606
========= ========== =========
December 1, 2001
--------------------------------
Estimated Held for Held for
Useful Lives Sale Lease Total
------------ --------- ---------- ---------
Land $ 1,342 $ 3,097 $ 4,439
Land improvements 15 years - 3,948 3,948
Buildings 40 years - 40,613 40,613
Development costs 5,991 4,744 10,735
--------- ---------- ---------
7,333 52,402 59,735
Accumulated depreciation - (10,493) (10,493)
--------- ---------- ---------
$ 7,333 $ 41,909 $ 49,242
========= ========== =========
Related Party Transaction
In the second quarter ended June 1, 2002, Griffin Land completed a land
sale to an officer of Imperial. Management believes that the sale price of
approximately $90 was at fair market value. Proceeds to Griffin Land were in
the form of a note which bears interest at 6% and matures in 2009. The note
receivable is included in other assets. The gain on the sale is being
recognized under the installment method.
10. Contingencies
Griffin is involved, as a defendant, in various litigation matters arising
in the ordinary course of business. In the opinion of management, based on the
advice of counsel, the ultimate liability, if any, with respect to these matters
will not be material to Griffin's financial position, results of operations or
cash flows.
ITEM 2
Griffin Land & Nurseries, Inc.
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Overview
The consolidated financial statements of Griffin include the accounts of
Griffin's subsidiary in the landscape nursery business, Imperial Nurseries, Inc.
("Imperial"), and Griffin's Connecticut and Massachusetts based real estate
business ("Griffin Land"). Griffin also has an equity investment in Centaur
Communications, Ltd. ("Centaur"), a magazine publishing business based in the
United Kingdom. On January 26, 2001, Imperial completed the sale of its
wholesale sales and service centers (the "SSCs") to Shemin Nurseries, Inc. and
its parent company, Shemin Acquisition Corporation. Imperial has continued in
the landscape nursery business with its container growing operations in
Connecticut and northern Florida. Griffin's statement of operations for the
thirty-nine weeks ended September 1, 2001 includes the results of the SSCs
through the date of sale.
In Griffin's Form 10-K for the fiscal year ended December 1, 2001, Griffin
reported that it had restated its equity share in Centaur's results for the
thirteen and thirty-nine weeks ended September 1, 2001. The effect of the
restatement for the thirteen weeks ended September 1, 2001 was to increase
Griffin's equity loss from Centaur and increase Griffin's net loss by $946,000,
and increase Griffin's basic and diluted net loss per common share by $0.20
each. The effect of the restatement for the thirty-nine weeks ended September
1, 2001 was to decrease Griffin's equity results from Centaur and decrease
Griffin's net income by $1,276,000, and decrease Griffin's basic and diluted net
income per common share by $0.26 each. The restated results for the thirteen
and thirty-nine weeks ended September 1, 2001 are reflected herein.
Results of Operations
Thirteen Weeks Ended August 31, 2002 Compared to the Thirteen Weeks Ended
September 1, 2001
Griffin's net sales and other revenue decreased by $0.5 million from $6.5
million in the thirteen weeks ended September 1, 2001 (the "2001 third quarter")
to $6.0 million in the thirteen weeks ended August 31, 2002 (the "2002 third
quarter"). The lower net sales and other revenue reflects lower net sales and
other revenue at Griffin Land, which had net sales and other revenue of $2.8
million in the 2001 third quarter as compared to net sales and other revenue of
$2.1 million in the 2002 third quarter. The lower net sales and other revenue
at Griffin Land in the 2002 third quarter principally reflects certain items,
included in the 2001 third quarter, that did not take place in the current year.
These items include $0.5 million received in connection with an agreement with a
tenant to terminate early a lease on a 57,000 square foot building, $0.2 million
from construction management fees and $0.1 million from sales of residential
land. Partially offsetting the effect of these items was an increase of $0.1
million of lease revenue from Griffin Land's properties.
Net sales and other revenue at Imperial increased from $3.7 million in the
2001 third quarter to $3.8 million in the 2002 third quarter. The increase in
net sales reflects the sale of larger sized plants, which have a higher per unit
sales price. The sales of larger sized plants more than offset the 15% decrease
in unit sales volume for the 2002 third quarter as compared to the 2001 third
quarter. The shift towards larger size plants reflects changes in Imperial's
product mix made over the past several years.
Griffin incurred an operating loss of $1.8 million in the 2002 third
quarter as compared to an operating loss of $0.8 million in the 2001 third
quarter. Griffin Land had an operating profit of $0.2 million in the 2002 third
quarter as compared to an operating profit of $1.0 million in the 2001 third
quarter. The decrease of $0.8 million in operating profit principally reflects
the effect of the income of $0.5 million from the early lease termination and
$0.2 million in construction management fees in the 2001 third quarter.
Excluding those items, operating results at Griffin Land were substantially
unchanged in the 2002 third quarter as compared to the 2001 third quarter.
Operating profit, before depreciation, from Griffin Land's leasing activities
was $1.3 million in the 2002 third quarter as compared to $1.4 million in the
2001 third quarter. The lower profit from leasing activities principally
reflects slightly higher operating expenses for the properties. Griffin Land's
selling, general and administrative expenses and depreciation expense were
slightly lower in the 2002 third quarter as compared to the 2001 third quarter.
Imperial incurred an operating loss of $1.6 million in the 2002 third
quarter as compared to an operating loss of $1.3 million in the 2001 third
quarter. The higher operating loss in the 2002 third quarter principally
reflects an increase in the charge to cost of goods sold for unsaleable
inventory, which was $0.9 million in the 2002 third quarter as compared to $0.6
million in the 2001 third quarter. The higher charge for unsaleable inventory
reflects disease and other horticultural issues which resulted in certain plant
varieties not maturing into saleable plants. Excluding the effect of the
inventory charges in both the 2002 and 2001 third quarters, operating results at
Imperial slightly increased in the 2002 third quarter as compared to the 2001
third quarter. Gross profit, excluding the charges for unsaleable inventory,
decreased from $0.5 million in the 2001 third quarter to $0.4 million in the
2002 third quarter. Gross margin on sales, excluding the charges for
unsaleable inventories, decreased from 12.8% in the 2001 third quarter to 11.4%
in the 2002 third quarter. The lower gross profit was offset by lower selling,
general and administrative expenses, which decreased from $1.2 million in the
2001 third quarter to $1.1 million in the 2002 third quarter. As a percentage
of net sales, selling, general and administrative expenses were 32.8% of net
sales in the 2001 third quarter as compared to 29.3% in the 2002 third quarter.
Griffin's interest expense increased from $0.3 million in the 2001 third
quarter to $0.4 million in the 2002 third quarter. The higher interest expense
reflects interest on the borrowings under Griffin's Credit Agreement in the 2002
third quarter. There were no amounts outstanding under a revolving credit
agreement in the 2001 third quarter because operations in that quarter were
financed principally with cash generated from the sale of Imperial's SSCs in
early 2001.
Griffin's equity income from Centaur was $2.9 million in the 2002 third
quarter as compared to an equity loss of $0.7 million in the 2001 third quarter.
Equity income from Centaur in the 2002 third quarter includes a gain on the sale
by Centaur of its Lawtel operation that provides on-line legal information
services. Griffin's allocable share of that gain was $8.4 million. Partially
offsetting that gain was a goodwill impairment charge at Centaur, of which
Griffin's allocable share was $5.0 million. The 2002 third quarter results
at Centaur also reflected the reversal of a valuation allowance on certain
deferred tax assets, of which Griffin's allocable share was $0.7 million.
Excluding these items, Centaur's operating results were slightly lower in the
2002 third quarter as compared to the 2001 third quarter due to lower
advertising revenue of Centaur, principally attributed to a weaker economy in
the United Kingdom.
Thirty-Nine Weeks Ended August 31, 2002 Compared to the Thirty-Nine Weeks
Ended September 1, 2001
Griffin's net sales and other revenue increased by $1.3 million from $27.2
million in the thirty-nine weeks ended September 1, 2001 (the "2001 nine month
period") to $28.5 million in the thirty-nine weeks ended August 31, 2002 (the
"2002 nine month period"). The higher net sales and other revenue principally
reflects an increase in net sales and other revenue at Imperial from $20.8
million in the 2001 nine month period to $22.0 million in the 2002 nine month
period. The 2001 nine month period included net sales of $1.9 million from the
SSCs prior to their sale by Imperial in January 2001. Excluding the SSC net
sales, Imperial's net sales and other revenue increased $3.2 million, or 16.9%.
The higher net sales and other revenue at Imperial is due principally to the
sale of larger plants as a result of changes in Imperial's product mix that have
been made over the past several years. Imperial's unit sales volume declined
approximately 2.5% in the 2002 nine month period as compared to the 2001 nine
month period. Management believes that Imperial's net sales in the 2002 nine
month period were hampered by unfavorable weather conditions in Imperial's
markets this past Spring, Imperial's peak selling season. Drought conditions in
the Mid-Atlantic area and excessive rain and cold in the Midwest negatively
affected Spring sales.
Net sales and other revenue at Griffin Land was $6.4 million in the 2002
nine month period as compared to $6.5 million in the 2001 nine month period.
The net sales and other revenue of Griffin Land in the 2001 nine month period
included $0.7 million from land sales, $0.5 million from the early termination
of a lease and $0.3 million from construction management fees. In the 2002 nine
month period, revenue from land sales was $0.4 million, and lease termination
and construction management fees were less than $0.1 million combined.
Offsetting the lower amount of other revenue in the 2002 nine month period was
higher lease revenue from Griffin Land's properties, which increased from $5.0
million in the 2001 nine month period to $6.0 million in the 2002 nine month
period. The increase reflects the effect of leases that came on line during the
2001 nine month period which were in place for the entire 2002 nine month
period, and the net effect of new leases put in place in the 2002 nine month
period, partially offset by leases that terminated. Currently, including as
wholly owned the 160,000 square feet of the buildings held by a joint venture in
which Griffin Land has a 30% interest, Griffin Land has approximately 963,000
square feet available for lease with an occupancy rate of 92%.
Griffin's operating results improved from an operating loss of $2.2 million
in the 2001 nine month period, which included an operating loss of $0.8 million
from Imperial's SSCs prior to their sale, to an operating loss of $1.1 million
in the 2002 nine month period. Excluding the effect of the SSC operating loss
in the 2001 nine month period, Griffin's operating results increased by $0.3
million in the 2002 nine month period as compared to the 2001 nine month period.
Operating results at Imperial improved from an operating loss of $1.3
million in the 2001 nine month period (excluding the SSC operating loss of $0.8
million) to an operating loss of $0.8 million in the 2002 nine month period.
The increase in Imperial's operating results reflects an increase in gross
profit from $2.4 million in the 2001 nine month period (excluding gross profit
from the SSCs) to $2.7 million in the 2002 nine month period. The gross profit
in the 2002 nine month period includes a charge of $1.3 million for unsaleable
inventory, as compared to a charge of $0.6 million for unsaleable inventory in
the 2001 nine month period. Despite an increase in the charge for unsaleable
inventory, the higher gross profit reflects the increase in net sales and the
effect of a higher gross margin on sales, which increased from 15.7% in the 2001
nine month period to 18.2% in the 2002 nine month period. Selling, general and
administrative expenses at Imperial were $3.5 million in the 2002 nine month
period as compared to $3.6 million in the 2001 nine month period (excluding
expenses of the SSCs), but as a percentage of net sales they were 15.8% in the
2002 nine month period as compared to 19.4% in the 2001 nine month period.
Operating profit at Griffin Land decreased from $1.0 million in the 2001
nine month period to $0.8 million in the 2002 nine month period. The lower
operating profit reflects the effect of the $0.5 million of income from the
early lease termination in the 2001 nine month period, substantially offset by
higher profit from leasing operations in the 2002 nine month period. Operating
profit, before depreciation, from Griffin Land's leasing activities increased
from $3.1 million in the 2001 nine month period to $3.7 million in the 2002 nine
month period, reflecting the increase in rental revenue in the 2002 nine month
period. Profit from land sales increased by $0.1 million in the 2002 nine month
period as compared to the 2001 nine month period. Although revenue from
property sales was lower in the 2002 nine month period as compared to the 2001
nine month period, the land sold in the current year had a lower cost basis and
therefore generated higher profit. Griffin Land's selling, general and
administrative expenses in the 2002 nine month period were $1.5 million as
compared to $1.6 million in the 2001 nine month period. The lower expenses
reflected inclusion of severance expenses in the 2001 nine month period and
temporary lower headcount for part of the 2002 nine month period. The lower
selling, general and administrative expenses were more than offset by an
increase of $0.3 million in depreciation expense in the 2002 nine month period
due to depreciation on buildings in service for part of the 2001 nine month
period being in service for the entire 2002 nine month period.
Griffin's interest expense increased from $0.6 million in the 2001 nine
month period to $1.2 million in the 2002 nine month period. The higher interest
expense reflects Griffin's higher debt in the 2002 nine month period as compared
to the prior year's nine month period and $0.3 million of construction period
interest capitalized in the 2001 nine month period as compared to a minimal
amount of interest capitalized in the 2002 nine month period. The higher debt
in the current year reflects borrowing by Griffin to fund development of its
real estate assets and capital expenditures to expand Imperial's operations.
Griffin's equity income from Centaur was $3.1 million in the 2002 nine
month period as compared to an equity loss of $0.6 million in the 2001 nine
month period. Equity income in the 2002 nine month period includes the gain at
Centaur from the sale of Lawtel, of which Griffin's allocable share was $8.4
million. There was no cash received by Griffin from the sale as the proceeds
were used by Centaur to pay down its debt. The gain from that sale was
partially offset by a goodwill impairment charge at Centaur, of which Griffin's
allocable share was $5.0 million. Equity income in the 2002 nine month
period also includes the reversal of a valuation allowance on certain deferred
tax assets at Centaur, of which Griffin's allocable share was $0.7 million. The
equity loss reported in the 2001 nine month period included a charge, of which
Griffin's allocable share was $0.6 million, for expenses related to a
proposed stock offering or sale that did not take place. Excluding the effect
of these items, Griffin's equity results from Centaur were lower in the 2002
nine month period due to lower revenue at Centaur.
Liquidity and Capital Resources
In the 2002 nine month period, cash used in operating activities was $3.3
million as compared to $7.1 million of cash used in operating activities in the
2001 nine month period. The lower use of cash in the current year principally
reflects favorable changes in working capital items and improved operating
results at Griffin's businesses in the current year.
In the 2002 nine month period, cash used in investing activities was $3.6
million as compared to cash of $8.0 million provided by investing activities in
the 2001 nine month period, which included net proceeds of $18.4 million from
the sale of Imperial's SSCs in that period. Additions to Griffin Land's real
estate assets were $1.8 million in the 2002 nine month period as compared to
$8.4 million in the 2001 nine month period. The higher amount of additions to
real estate assets in the 2001 nine month period reflects construction of a
165,000 square foot building in Griffin Center in Windsor, Connecticut and a
40,000 square foot building in Griffin Center South in Bloomfield, Connecticut,
in that period. Both of these buildings were completed in the 2001 nine month
period and are now leased. In the 2002 nine month period, cash used for
additions to Griffin Land's real estate assets included the start of work on the
shell of a 50,000 square foot office building in Griffin Center and the build
out of the interior of its new 57,000 square foot building in the New England
Tradeport in Windsor, Connecticut. The shell of the new 50,000 square foot
office building is expected to be completed and ready for tenant work in the
2002 fourth quarter, although none of this building has been leased yet. The
shell of the 57,000 square foot building was built on speculation in the second
half of last year. The tenant work for that building, started as a result of
entering into a lease for the entirety of that building, was completed in the
2002 third quarter. Griffin Land anticipates that some preliminary site work for
a new building in the New England Tradeport will start in the fourth quarter of
this year, with the major portion of the construction to take place during the
first half of next year. This new construction will also be done on speculation.
Capital expenditures of $1.7 million in the 2002 nine month period and $2.0
million in the 2001 nine month period were principally for the ongoing expansion
of Imperial's farming operation in northern Florida. Capital expenditures in
the 2002 nine month period were financed from borrowings under the 2002 Credit
Agreement. Over the past three years, Imperial has expanded and updated its
facilities in Connecticut and northern Florida. Total costs of these projects
is approximately $7.5 million, with most of the expansion expected to be
completed by the end of the 2003 first quarter.
In the 2002 nine month period, cash provided by financing activities was
$6.9 million as compared to cash of $1.3 million used in financing activities in
the 2001 nine month period. The cash used in financing activities in the 2001
nine month period reflected the repayment of debt from the proceeds generated
from the sale of the SSCs in that period. Cash provided by financing activities
in the 2002 nine month period principally reflects borrowings made under
Griffin's $19.4 million revolving credit agreement, as amended (the "2002 Credit
Agreement"), with Fleet National Bank ("Fleet") which was completed on February
8, 2002. The 2002 Credit Agreement has a three year term and is collateralized
by certain of Griffin Land's real estate assets. The initial borrowing under
the 2002 Credit Agreement was used to repay the amount then outstanding under
Griffin's bridge loan, to repay a mortgage on one of Griffin's commercial
buildings and for certain expenses related to the 2002 Credit Agreement.
Subsequent borrowings were used to finance Griffin's seasonal working capital
requirements, particularly those at Imperial. There was $8.7 million
outstanding on the 2002 Credit Agreement at August 31, 2002.
On September 17, 2002, a subsidiary of Griffin completed a $7.7 million
nonrecourse mortgage of two commercial buildings. The mortgage has an interest
rate of 7% and a fifteen year term with payments based on a twenty-five year
amortization period. One of the properties included in this mortgage was
previously included in the collateral for the 2002 Credit Agreement. As a result
of removing that property from the collateral of the 2002 Credit Agreement, the
commitment under the 2002 Credit Agreement was reduced to $14.1 million.
Proceeds of the mortgage were used to reduce amounts outstanding under the 2002
Credit Agreement.
On October 3, 2002, Griffin Land entered into a letter of intent to
acquire, from USAA Real Estate Company ("USAA"), the 70% interest owned by USAA
in two 80,000 square foot Class A office buildings in Griffin Center. Griffin
Land currently holds the remaining 30% interest in those buildings. The purchase
price for the 70% interest is approximately $8.7 million. Griffin Land is
seeking to obtain mortgage financing on these buildings.
Earlier this year, Griffin Land received an unfavorable court ruling on one
of its suits related to its proposed residential development in Simsbury,
Connecticut. The ruling upheld the denial by one of Simsbury's land use
commissions of Griffin Land's application for a wetlands activity permit in
connection with its proposed residential development. Griffin Land is appealing
that decision and is proceeding with the other litigation related to its
development plans in Simsbury. Griffin Land also has an agreement for the sale
of the remaining development rights at its Walden Woods residential development
in Windsor, Connecticut. The completion of that sale is subject to the purchaser
receiving approval from the town's commissions for their development plans and,
based on such plans, proceeds from that sale are expected to be approximately
$3.0 million. Approvals from the town's commission on wetlands were obtained
earlier in the year, but a suit was filed challenging that approval. Completion
of this transaction will not take place this year. Griffin Land intends to
proceed with its other residential development plans on other of its lands that
are also appropriate for that use.
Management believes that in the near term, based on the current level of
operations and anticipated growth, borrowings under the 2002 Credit Agreement,
mortgage financing and cash generated from operations will be sufficient to
finance Griffin's working capital requirements, expected capital expenditures of
the landscape nursery business and development of its real estate assets. Over
the intermediate and long term, additional mortgage placements or additional
bank credit facilities are expected to be required to fund capital projects.
Forward-Looking Information
The above information in Management's Discussion and Analysis of Financial
Condition and Results of Operations includes "forward-looking statements" within
the meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. Although Griffin believes that its plans, intentions and expectations
reflected in such forward-looking statements are reasonable, it can give no
assurance that such plans, intentions or expectations will be achieved,
particularly with respect to the expansion and improved return on assets of
Imperial's operations, construction of additional facilities in the real estate
business, obtaining mortgage financing for the purchase of the remaining 70%
interest in two office buildings from USAA, completion of the sale of the
development rights of Walden Woods and approval of other proposed residential
subdivisions. The projected information disclosed herein is based on
assumptions and estimates that, while considered reasonable by Griffin as of the
date hereof, are inherently subject to significant business, economic,
competitive and regulatory uncertainties and contingencies, many of which are
beyond the control of Griffin.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk represents the risk of changes in value of a financial
instrument, derivative or non-derivative, caused by fluctuations in interest
rates, foreign exchange rates and equity prices. Changes in these factors could
cause fluctuations in earnings and cash flows.
For fixed rate debt, changes in interest rates generally affect the fair
market value of the debt instrument, but not earnings or cash flows. Griffin
does not have an obligation to prepay any fixed rate debt prior to maturity, and
therefore, interest rate risk and changes in the fair market value of fixed rate
debt should not have a significant impact on earnings or cash flows until such
debt is refinanced, if necessary. For variable rate debt, changes in interest
rates generally do not impact the fair market value of the debt instrument, but
do affect future earnings and cash flows. Griffin had $8.7 million of variable
rate debt outstanding at August 31, 2002.
Griffin is exposed to market risks from fluctuations in interest rates and
the effects of those fluctuations on market values of Griffin's cash equivalent
short-term investments. These investments generally consist of overnight
investments that are not significantly exposed to interest rate risk, except to
the extent that changes in interest rates will ultimately affect the amount of
interest income earned and cash flow from these investments.
Griffin does not currently have any derivative financial instruments in
place to manage interest costs, but that does not mean that Griffin will not use
them as a means to manage interest rate risk in the future.
Griffin does not use foreign currency exchange forward contracts or
commodity contracts and does not have foreign currency exposure in operations.
Griffin does have investments in companies based in the United Kingdom, and
changes in foreign currency exchange rates could affect the results of an equity
investment in Griffin's financial statements, and the ultimate liquidation of
those investments and conversion of proceeds into United States currency is
subject to future foreign currency exchange rates.
ITEM 4. CONTROLS AND PROCEDURES
Within the 90 days prior to the filing date of this quarterly report,
Griffin carried out an evaluation, under the supervision and with the
participation of Griffin management, including Griffin's Chief Executive Officer
and Chief Financial Officer, of the effectiveness of the design and operation of
Griffin's disclosure controls and procedures pursuant to Exchange Act Rule
13a-14. Based on that evaluation, the Chief Executive Officer and the Chief
Financial Officer have concluded that these disclosure controls and procedures
are effective. There were no significant changes in our internal controls or in
other factors that could significantly affect these controls subsequent to the
date of our evaluation in timely alerting them to material information relating
to Griffin required to be included in Griffin's periodic SEC filings.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
On March 27, 2002, the Superior Court of the Judicial District of Hartford
(the "Court") dismissed Griffin's appeal of the decision by the Conservation
Commission/Inland Wetlands and Watercourses Agency of Simsbury, Connecticut (the
"Commission") to deny Griffin's application for a wetlands activity permit in
connection with a proposed residential development in Simsbury. This appeal by
Griffin of the Commission's denial of its application is one of several
separate, but related, actions brought by Griffin to appeal the denials of
Griffin's proposed residential development issued by Simsbury's land use
commissions. The Connecticut Apellate Court has granted Griffin permission to
appeal the Superior Court's ruling, and Griffin intends to continue with its
other suits related to its proposed residential development in Simsbury.
Items 2 is not applicable
Item 3. Defaults Upon Senior Securities
(a) As of August 31, 2002, Griffin was in default under the fixed charge
coverage ratio of its 2002 Credit Agreement with Fleet National Bank.
The 2002 Credit Agreement has been amended and, after giving effect to
the amendment, Griffin is no longer in default.
Items 4 and 5 are not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10.20 - Amendment Agreement dated as of August 31,
2002 by and between Griffin Land & Nurseries, Inc. and Fleet National
Bank amending certain Credit Agreement dated as of February 8, 2002.
Exhibit 10.21 - Mortgage Deed, Security Agreement, Financing Statement
and Fixture Filing with Absolute Assignment of Rents and Leases dated
September 17, 2002 between Tradeport Development I, LLC and Farm
Bureau Life Insurance Company.
Exhibit 10.22 - Letter of Agreement between Griffin Land & Nurseries,
Inc. and USAA Real Estate Company.
(b) (1) On August 2, 2002, Griffin filed Form 8-K to announce
Centaur's sale of its subsidiary that provides legal information
services. See Note 5 to the consolidated financial statements.
(2) On October 3, 2002, Griffin filed Form 8-K to announce the
agreement to purchase the 70% interest in two office buildings in
which Griffin currently holds the other 30% interest.
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.
GRIFFIN LAND & NURSERIES, INC.
/s/ Frederick M. Danziger
-------------------------------------
Date: October 11, 2002 Frederick M. Danziger
PRESIDENT AND CHIEF EXECUTIVE OFFICER
/s/ Anthony J. Galici
-------------------------------------
Date: October 11, 2002 Anthony J. Galici
VICE PRESIDENT, CHIEF FINANCIAL OFFICER
AND SECRETARY
CERTIFICATIONS
Certification requirements set forth in Section 302 (a) of the Sarbanes-Oxley
Act.
I, Frederick M. Danziger, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Griffin Land &
Nurseries, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weakness in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: October 11, 2002
/S/ Frederick M. Danziger
------------------------
Frederick M. Danziger
President and Chief Executive Officer
I, Anthony J. Galici, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Griffin Land &
Nurseries, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date");and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weakness in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: October 11, 2002 /S/ Anthony J. Galici
---------------------
Anthony J. Galici
Vice President, Chief Financial Officer
and Secretary
EXHIBITS
Exhibit 10.20
AMENDMENT AGREEMENT
-------------------
AMENDMENT AGREEMENT (this "Amendment Agreement") dated as of August 31,
2002 by and between Griffin Land & Nurseries, Inc. (the "Borrower") and Fleet
National Bank (the "Bank"), amending a certain Credit Agreement dated as of
February 8, 2002 between the Borrower and the Bank (the "Credit Agreement").
W I T N E S S E T H
WHEREAS, pursuant to the terms of the Credit Agreement, the Bank has made
and continues to make loans to the Borrower; and
WHEREAS, the Borrower has requested, among other things, that the Bank
amend certain terms and conditions of the Credit Agreement; and
WHEREAS, the Bank is willing to amend certain terms and conditions of the
Credit Agreement on the terms and conditions set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Sec. Definitions. Capitalized terms used herein without definition that are
defined in the Credit Agreement shall have the same meanings herein as therein.
Sec. Ratification of Existing Agreements. All of the Borrower's obligations
and liabilities to the Bank as evidenced by or otherwise arising under the
Credit Agreement, the Note and the other Loan Documents, except as otherwise
expressly modified in this Amendment Agreement upon the terms set forth herein,
are, by the Borrower's execution of this Amendment Agreement, ratified and
confirmed in all respects. In addition, by the Borrower's execution of this
Amendment Agreement, the Borrower represents and warrants that no counterclaim,
right of set-off or defense of any kind exists or is outstanding as of the date
hereof with respect to such obligations and liabilities.
Sec. Representations and Warranties. The Borrower hereby represents and
warrants to the Bank that all of the representations and warranties made by the
Borrower and the Guarantors in the Credit Agreement, the Note and the other Loan
Documents are true and correct on the date hereof as if made on and as of the
date hereof, except to the extent that any of such representations and
warranties expressly relate by their terms to a prior date and for matters
previously disclosed to the Bank in writing.
Sec. Conditions Precedent. The effectiveness of the amendments contemplated
hereby shall be subject to the satisfaction on or before the date hereof of each
of the following conditions precedent:
Representations and Warranties. All of the representations and
warranties made by the Borrower herein, whether directly or incorporated by
reference, shall be true and correct on the date hereof, except as provided
in Sec.3 hereof.
Performance; No Event of Default. The Borrower shall have performed
and complied in all material respects with all terms and conditions herein
required to be performed or complied with by it prior to or at the time
hereof, and there shall exist no Event of Default or condition which, with
either or both the giving of notice of the lapse of time, would result in
an Event of Default upon the execution and delivery of this Amendment
Agreement after giving effect to the amendments to the Credit Agreement
contained herein.
Corporate Action. All requisite corporate action necessary for the
valid execution, delivery and performance by the Borrower and the
Guarantors of this Amendment Agreement and all other instruments and
documents delivered by the Borrower and the Guarantors in connection
therewith shall have been duly and effectively taken.
Delivery. The parties hereto shall have executed and delivered this
Amendment Agreement in form and substance satisfactory to the Bank.
-
Fees and Expenses. The Borrower shall have paid to the Bank all fees
and expenses incurred by the Bank in connection with this Amendment
Agreement, the Credit Agreement or the other Loan Documents on or prior to
the date hereof.
Sec. Amendments to the Credit Agreement.
Amendments to Sec.1.
The second sentence of the definition of the term "EBITDA"
appearing in Section 1 of the Credit Agreement is hereby amended in
its entirety to read as follows:
"For the purpose of calculating the Fixed Charge Coverage Ratio
only, (x) any operating income from any Real Estate owned by the
Borrower or any of its Subsidiaries which is encumbered by a
Non-Recourse Mortgage as to which no default exists at the time
that the Fixed Charge Coverage Ratio is being determined and
which is Cash Flow Positive for the fiscal period as to which the
Fixed Charge Coverage Ratio is being determined shall be excluded
from the calculation of "EBITDA" up to and including the amount
necessary to satisfy the corresponding debt service for the
relevant period in respect of the Indebtedness incurred by the
Borrower or such Subsidiary which is secured by such Non-Recourse
Mortgage (including all principal and interest) and (y) any
write-off of inventory up to an amount equal to $400,000 for the
fiscal quarter ending June 1, 2002 and up to an amount equal to
$930,000 for the fiscal quarter ended August 31, 2002 shall be
excluded from the calculation of "EBITDA" so long as the
Occupancy Condition is being met.
The following new definition is hereby added to Section 1 of the
Credit Agreement to appear in the proper alphabetical order:
"Occupancy Condition: The period during which the Real Estate
that serves as the Collateral maintains an aggregate occupancy
rate in respect of leases entered into at market rates with
parties other than Borrower or any of its Subsidiaries (but
including space occupied by the Borrower of not more than 4,548
square feet) of sixty-five percent (65%) or more calculated on
the basis of square footage; provided, that for purposes of
meeting the "Occupancy Condition" the lease with MKS Instruments
shall be deemed to be occupied Real Estate unless such tenant
fails to occupy such Real Estate on or before February 1, 2003."
Sec. Additional Covenants. Without any prejudice or impairment whatsoever
to any of the Bank's rights and remedies contained in the Credit Agreement and
the covenants contained therein, the Note or in any of the other Loan Documents,
the Borrower additionally covenants and agrees with the Bank that the Borrower
shall comply and continue to comply with all of the terms, covenants and
provisions contained in the Credit Agreement, the Note and the other Loan
Documents, except as such terms, covenants and provisions are expressly modified
by this Amendment Agreement upon the terms set forth herein. The Borrower
expressly acknowledges and agrees that any failure by the Borrower to comply
with the terms and conditions of this Sec.6 or any other provisions contained in
this Amendment Agreement shall constitute an Event of Default under the Credit
Agreement.
Sec. Expenses. The Borrower agrees to pay to the Bank upon demand an amount
equal to any and all out-of-pocket costs or expenses (including reasonable legal
fees and disbursements and appraisal expenses) incurred or sustained by the Bank
in connection with the preparation of this Amendment Agreement.
Sec. Miscellaneous.
This Amendment Agreement shall be governed by and construed in
accordance with the laws of the State of Connecticut.
Except as otherwise expressly provided by this Amendment Agreement,
all of the respective terms, conditions and provisions of the Credit
Agreement shall remain the same. It is declared and agreed by each of the
parties hereto that the Credit Agreement, as amended hereby, shall continue
in full force and effect, and that this Amendment Agreement and the Credit
Agreement be read and construed as one instrument, and all references in
the Loan Documents to the Credit Agreement shall hereafter refer to the
Credit Agreement, as amended by this Amendment Agreement.
IN WITNESS WHEREOF, each of the parties hereto have caused this Agreement
to be executed in its name and behalf by its duly authorized officer as of the
date first written above.
FLEET NATIONAL BANK
By: /S/ Robert R. Willis
Robert R. Willis
Title: Vice President
GRIFFIN LAND & NURSERIES, INC.
By: /S/ Anthony J. Galici
Anthony J. Galici
Title: Vice President
Each of the undersigned Guarantors acknowledges and accepts the foregoing and
ratifies and confirms its obligations under its respective Guaranty:
IMPERIAL NURSERIES, INC.
By: /S/ Anthony J. Galici
Anthony J. Galici
Its Senior Vice President
RIVER BEND ASSOCIATES, INC.
By: /S/ Anthony J. Galici
Anthony J. Galici
Its Vice President
Exhibit 10.21
MORTGAGE DEED, SECURITY AGREEMENT,
FINANCING STATEMENT AND FIXTURE FILING
WITH ABSOLUTE ASSIGNMENT OF RENTS AND LEASES
THIS DOCUMENT ALSO CONTAINS A FINANCING STATEMENT FILED AS A FIXTURE FILING
IN ACCORDANCE WITH C.G.S.A. Sec.49a-9-402 OF THE CONNECTICUT UNIFORM COMMERCIAL
CODE AND IS TO BE RECORDED IN THE OFFICE OF THE TOWN CLERK WHERE A MORTGAGE ON
THE REAL ESTATE ENCUMBERED HEREBY WOULD BE RECORDED.
THIS MORTGAGE DEED, SECURITY AGREEMENT, FINANCING STATEMENT AND FIXTURE
FILING WITH ABSOLUTE ASSIGNMENT OF RENTS AND LEASES ("Mortgage"), is made this
17th day of September, 2002, by TRADEPORT DEVELOPMENT I, LLC ("Mortgagor"),
whose mailing address is c/o Griffin Land & Nurseries, Inc., 204 West Newberry
Road, Bloomfield, Connecticut 06002, to FARM BUREAU LIFE INSURANCE COMPANY, an
Iowa corporation ("Mortgagee"), whose mailing address is 5400 University Avenue,
West Des Moines, Iowa 50266, Attn: Real Estate and Commercial Mortgage Manager.
ARTICLE I
DEFINITIONS
-----------
In addition to any other terms defined herein, within this Mortgage, unless
otherwise required by the context, the following terms shall have the meanings
indicated:
1.01 Building means the existing buildings that comprises a portion of
the Improvements.
1.02 Collateral means, as the context requires, all or any of the
Personalty, the Fixtures, the Leases and the Rents.
1.03 Fixtures means all materials, supplies, equipment, apparatus and
other items now or hereafter attached to, installed in or used in connection
with (temporarily or permanently) any of the Improvements on the Property,
including, but not limited to, any and all partitions; window screens and
shades; drapes, carpeting and other floor coverings; awnings; pumps; motors;
valves; elevators and escalators; engines; wire and wiring; boilers; furnaces;
pipes; plumbing; sprinkler systems; irrigation systems; fire extinguishing
apparatus and equipment; communication equipment; computers and computerized
equipment; security systems and devices; water tanks; heating, ventilating,
incinerating, air conditioning and air cooling equipment and systems; gas and
electric machinery; disposals, dishwashers, refrigerators, ranges and other
appliances; and equipment and facilities of all kinds which constitute fixtures
under the Connecticut Uniform Commercial Code (C.G.S.A. Title 42a) as the same
may be amended or any successor statute and all replacements and substitutions
therefor, excluding personal property and trade fixtures within the space leased
to a tenant which are owned by such tenant.
1.04 Governmental Authority means any and all courts, boards, bureaus,
agencies, commissions, departments, offices or authorities of any nature
whatsoever of any governmental unit (federal, state, county, district,
municipal, city or otherwise) whether now or hereafter in existence.
1.05 Guarantor means (individually or collectively, or both, as the
context may require) those persons or entities, if any, now or hereafter
guaranteeing repayment of the Indebtedness Secured Hereby (as defined herein),
or any portion thereof, and/or satisfaction of, or continued compliance with,
the Obligations or any portion thereof.
1.06 Hazardous Materials has the meaning ascribed thereto in Section
3.19 of this Mortgage below.
1.07 Impositions means all real estate and personal property taxes,
assessments, water, gas, sewer, electricity and other utility rates and charges,
charges for any easement, license or agreement maintained for the benefit of the
Mortgaged Property, and all other taxes, charges and assessments and any
interest, costs or penalties with respect thereto, of any kind and nature
whatsoever which at any time prior to or after the execution hereof may be
assessed, levied or imposed against, or otherwise related to the Mortgaged
Property, the use, occupancy, operation or enjoyment thereof and/or the lien of
this Mortgage on the Mortgaged Property or the debt secured hereby.
1.08 Improvements means any and all buildings, sheds, storage areas,
warehousing areas, open or covered parking areas, parking garages or structures,
other structures, fences, curbs, walls, sidewalks, walkways, paved parking
areas, pavement, recreational facilities, landscaping and all other real
property improvements, and any and all additions, alterations, or appurtenances
thereto, now or at any time hereafter situated, placed, constructed upon or for
the benefit of the Property or any part thereof, and shall include, unless the
context otherwise requires, all Fixtures.
1.09 Indebtedness Secured Hereby means: (a) payment of that certain
Secured Installment Note (the "Note") of even date herewith, executed by
Mortgagor, as Maker or Borrower, to the order of Mortgagee, as Holder, in the
original principal amount of Seven Million Six Hundred Seventy-Five Thousand and
00/100 Dollars ($7,675,000.00), with interest thereon and all other sums payable
thereunder according to the terms and conditions thereof, together with any
replacements, substitutions, modifications, amendments, extensions or renewals
thereof (the "Indebtedness"); and (b) payment to Mortgagee, its successors and
assigns, at the times demanded and with interest at the Default Rate (as defined
in the Note), to accrue from the date of advance, of all sums advanced, if any,
in protecting the interests of Mortgagee under this Mortgage and any and all
other Loan Documents and payment of insurance premiums covering Improvements,
and payment of principal and interest on prior liens, and payment of expenses
and attorneys' fees and professionals' fees herein provided for and payment of
any fees herein provided for and payment of any and all sums advanced under this
Mortgage from time to time.
1.10 Leases means any and all leases, subleases, licenses, concessions,
occupancy, rental and use agreements, or other agreements (written or oral), now
or hereafter in effect which grant a possessory interest in and to, or the right
to use, occupy or generate income from, in or around the Property and/or the
Improvements, or any portion thereof, if any, and all guarantees of, and
security for the performance of any of the obligations and payments thereunder.
1.11 Legal Requirements means: (a) all judicial decisions, ordinances,
orders, decrees, rules, regulations, permits, statutes or requirements of any
court or Governmental Authority, and any requirements, terms or conditions
contained in any restrictions, restrictive covenants, easements, licenses or
leases, zoning stipulations, subdivision plats or other instruments or documents
affecting all or any portion of the Mortgaged Property and/or the construction,
development or use of the Mortgaged Property, including, but not limited to, any
of those relating to fire, safety, environmental protection, conservation,
parking, or building and sign codes; and (b) Mortgagor's or any Guarantors'
presently or subsequently existing articles or certificate of incorporation,
bylaws, partnership agreements, limited partnership certificates, joint venture
agreements, limited liability company articles of organization and/or operating
agreements, trust agreements or other form of business organization or entity
documents.
1.12 Loan Documents means this Mortgage, financing statements, the Note
and any and all other documents and guarantees now or hereafter executed by
Mortgagor, or by any other Person to evidence, secure or guaranty the payment of
the Indebtedness Secured Hereby (or any part thereof) or the performance and
discharge of the Obligations (or any portion thereof).
1.13 Mortgaged Property means, as required by the context, all or any
of the Improvements, Fixtures, Personalty, Property, Leases or Rents.
1.14 Mortgagee means the specific Mortgagee named above and any
subsequent owner and holder of the Note (as defined below) and the beneficial
interest under this Mortgage.
1.15 Mortgagor means the person named as the "Mortgagor" at the outset
of this Mortgage ("Original Mortgagor"), until a successor or assign shall have
become such pursuant to the applicable provisions of this Mortgage, and
thereafter Mortgagor shall mean each such successor or assign and the Original
Mortgagor, jointly and severally unless the Original Mortgagor or any such
successor or assign is released from liability hereunder in writing by the
Mortgagee.
Mortgagor acknowledges that certain of the descriptions of items comprising
the Mortgaged Property in the preceding paragraphs may be duplicative or
overlapping, and that it is the express intent and agreement of Mortgagor that
all of such descriptions (including without limitation any descriptions within a
single section or subsection) shall be construed as being cumulative and not
limiting. The terms "goods", "equipment", "inventory", "accounts",
"instruments", "chattel paper", "general intangibles", "proceeds" and "products"
shall (unless the context clearly indicates otherwise) also have the meanings
provided for those terms in the definitions contained in the Uniform Commercial
Code as enacted from time to time in the State in which the Property is located
(the "UCC").
1.16 Mortgagor's Business means the ownership, management, leasing,
maintenance, repair, replacement and operation of the Mortgaged Property as
office/warehouse buildings.
1.17 Obligations means any and all of the covenants, warranties,
representations and other obligations (other than to repay the Indebtedness
Secured Hereby) made or undertaken by Mortgagor or any other Person to Mortgagee
as set forth in the Loan Documents.
1.18 Person means any individual, corporation, trust, partnership,
joint venture, limited liability company or any other entity, business entity or
form of organization.
1.19 Personalty means all of the right, title and interest of Mortgagor
now or hereafter existing in and to the following now or hereafter located in,
upon, within or about or used in connection with the construction, use,
operation or occupancy of the Property and/or the Improvements and any business
or activity conducted thereon or therein, together with all accessories,
additions, accessions, renewals, replacements and substitutions thereto or
therefor and the proceeds and products thereof, but excluding personal property
and trade fixtures within the space leased to a tenant which are owned by such
tenant: (a) all materials, supplies, furniture, furnishings, appliances, office
supplies, equipment, construction materials, vehicles, machinery, computer
hardware and software, maintenance equipment, window washing equipment, repair
equipment and other equipment, tools, telephone and other communications
equipment, food service preparation equipment and utensils, chinaware,
glassware, silverware and hollowware, food and beverage service equipment, food
items and food stuffs; (b) all books, ledgers, records, accounting records,
files, tax records and returns, policy manuals, papers, correspondence, and
electronically recorded data; (c) all general intangibles, instruments, money,
accounts, accounts receivable, notes, certificates of deposit, chattel paper,
letters of credit, chooses in action, good will, rights to payment of money,
rents, rental fees, equipment fees and other amounts payable by Persons who
utilize the Property or any of the Improvements or paid by persons in order to
obtain the right to use the Property and any of the Improvements, whether or not
so used; trademarks, service marks, trade dress, tradenames, licenses, sales
contracts, deposits, plans and specifications, drawings, working drawings,
studies, maps, surveys; soils, environmental, engineering or other reports,
architectural and engineering contracts, construction contracts, construction
management contracts, surety bonds, feasibility and market studies, management
and operating agreements, service agreements and contracts, landscape
maintenance agreements, security service and other services agreements and
vendors agreements; (d) all compensation, awards and other payments or relief
(and claims therefor) made for a taking by eminent domain, or by any event in
lieu thereof (including, without limitation, property and rights and interests
in property received in lieu of any such taking), of all or any part of the
Mortgaged Property (including without limitation, awards for severance damages),
together with interest thereon, and any and all proceeds (or claims for
proceeds) of casualty, liability or other insurance pertaining to the Mortgaged
Property, together with interest thereon; (e) any and all claims or demands
against any Person with respect to damage or diminution in value to the
Mortgaged Property or damage or diminution in value to any business or other
activity conducted on the Property; (f) any and all security deposits, deposits
of security or advance payments made to others with respect to: (i) insurance
policies relating to the Mortgaged Property; (ii) taxes or assessments of any
kind or nature affecting the Mortgaged Property; (iii) utility services for the
Property and/or the Improvements; (iv) maintenance, repair or similar services
for the Mortgaged Property or any other services or goods to be used in any
business or other activity conducted on the Property; (g) any and all
authorizations, consents, licenses, permits and approvals of and from all
Persons required from time to time in connection with the construction, use,
occupancy or operation of the Property, the Improvements, or any business or
activity conducted thereon or therein or in connection with the operation,
occupancy or use thereof; (h) all warranties, guaranties, utility or street
improvement bonds, utility contracts, telephone exchange numbers, yellow page or
other directory advertising and the like; (i) all goods, contract rights, and
inventory; (j) all leases and use agreements of machinery, equipment and other
personal property; (k) all insurance policies covering all or any portion of the
Property; (l) all Reserves (as defined herein) and funds held in escrow by
Mortgagee or other Person for Mortgagee's benefit; (m) all names by which the
Property is now or hereafter known; (n) all interests in the security deposits
of tenants; (o) all management agreements, blueprints, plans, maps, documents,
books and records relating to the Property; (p) the proceeds from sale,
assignment, conveyance or transfer of all or, any portion of the Mortgaged
Property or any interest therein, or from the sale of any goods, inventory or
services from, upon or within the Property and/or the Improvements (but nothing
contained herein shall be deemed a consent by Mortgagee to such sale,
assignment, conveyance or transfer except as expressly provided in this
Mortgage); (q) any property listed under the definition of "Fixtures" which are
not fixtures under Connecticut law; (r) all other property (other than Fixtures)
of any kind or character as defined in or subject to the provisions of the
Uniform Commercial Code, Secured Transactions, as amended and; (s) all proceeds
of the conversions, voluntarily or involuntarily, of any of the foregoing into
cash or liquidated claims;
1.20 Property means the real estate or interest therein described on
Exhibit "A"attached hereto and incorporated herein by reference, together with
all appurtenances and all estate and rights of Mortgagor thereto; all right,
title and interest of Mortgagor in and to all streets, roads and public places,
opened or proposed, all easements, rights of way and other appurtenances, public
or private, now or hereafter used in connection therewith; all water stock,
water and water rights, to the extent the same constitutes any interest in real
property; all mineral, oil and gas rights pertaining thereto; all present and
future rights under or with respect to: (a) any declarations or restrictions
governing or imposing rights or responsibilities on or with respect to any
subdivisions, horizontal property regimes, condominiums, planned area
developments, planned unit developments or master plans which are partially or
wholly located on or affect the real property described in Exhibit "A" attached
hereto; (b) any design review or architectural review committee and any property
owners' or similar association described in or created by the documents referred
to in the foregoing clause (a), together with any voting rights therein; and (c)
any and all other documents and instruments and any amendments relating to the
operation, organization, control or development of the Property;
1.21 Rents except to the extent that the same constitute personal
property under Connecticut law, means all of the rents, royalties, revenues,
income, avails, proceeds, profits, fees, charges and other benefits paid or
payable by parties to the Leases other than Mortgagor or otherwise paid by a
Person for using, leasing, licensing, possessing, operating from, residing in,
or otherwise enjoying or generating income from the Mortgaged Property or any
portion thereof, including but not limited to, liquidated or other damages
following a default under any Lease, all proceeds payable under any policy of
insurance covering loss of rents and all of Mortgagor's rights to recover
monetary amounts from any tenant in bankruptcy, including rights of recovery for
use and occupancy and damage claims arising out of lease defaults, and including
those arising from lease rejections under any bankruptcy or debtor relief laws.
Mortgagor further specifically understands and agrees that all right, title
and interest of Mortgagor in and to all extensions, improvements, betterments,
renewals, substitutions and replacements of, and all additions and appurtenances
to, the Mortgaged Property, hereafter acquired by or released to Mortgagor, or
constructed, assembled or placed by Mortgagor on the Property, and all
conversions of the security constituted thereby, immediately upon such
acquisition, release, construction assembly, placement or conversion, as the
case may be, and in each such case, without any further grant, encumbrance,
conveyance, assignment or other act by Mortgagor, shall become subject to the
lien of this Mortgage as fully and completely and with the same effect as though
now owned by Mortgagor and specifically described herein, but at any and all
times Mortgagor will execute and deliver to Mortgagee, upon request, any and all
such further assurances, deeds, conveyances, or assignments thereof or security
interests therein as Mortgagee may reasonably require for the purpose of
expressly and specifically subjecting the same to the lien of this Mortgage.
ARTICLE II
GRANT
-----
Mortgagor hereby does GIVE, GRANT, BARGAIN, SELL AND CONFIRM to Mortgagee,
its successors and assigns forever, WITH MORTGAGE COVENANTS, the Mortgaged
Property (other than the Personalty), and grants to Mortgagee a security
interest in and to the Personalty for the purpose of securing, in such order of
priority as Mortgagee may elect, payment and performance of the obligations set
forth below, which payment and performance shall be THE CONDITION OF THIS DEED:
(i) Payment of that certain Secured Installment Note (the "Note") of
even date herewith, executed by Mortgagor, as Maker or Borrower, to the
order Mortgagee, as Holder, in the original principal amount of Seven
Million Six Hundred Seventy-Five Thousand and 00/100 Dollars
($7,675,000.00) having a maturity date of October 1, 2017 with interest
thereon and all other sums payable thereunder according to the terms and
conditions thereof, together with any replacements, substitutions,
modifications, amendments, extensions or renewals thereof.
(ii) Payment to Mortgagee, its successors and assigns, at the times
demanded and with interest at the Default Rate (as defined in the Note), to
accrue from the date of advance, of all sums advanced, if any, in
protecting the interests of Mortgagee under this Mortgage and any and all
other Loan Documents and payment of insurance premiums covering
Improvements, and payment of principal and interest on prior liens, and
payment of expenses and attorneys fees and professionals' fees herein
provided for, and any and all sums advanced under this Mortgage from time
to time.
(iii) Performance and payment in full when due of all of the
Obligations.
TO HAVE AND TO HOLD the above granted and bargained Mortgaged Property,
with the privileges and appurtenances thereof, unto the said Mortgagee, and its
successors and assigns forever, to its and their own proper use and behoof.
PROVIDED HOWEVER, THE CONDITION OF THIS DEED is such that if Mortgagor
shall pay, or cause to be paid, to Mortgagee the Indebtedness Secured Hereby at
the time and in the manner stipulated herein, and in the Note, and shall pay and
perform all of the Obligations, including, but not limited to payment of all
sums under any of the Loan Documents, and no default or Event of Default
hereunder shall then exist, then the estate, right, title and interest of the
Mortgagee in the Mortgaged Property shall cease, terminate and become void, and
upon proof being given to the satisfaction of Mortgagee that the Indebtedness
Secured Hereby has been paid or satisfied, and all of the Obligations paid and
performed, and upon payment of all other fees, costs, charges, expenses and
liabilities chargeable or incurred or to be incurred by Mortgagee, Mortgagee
shall, upon receipt of the written request of Mortgagee, release and discharge
this Mortgage of record (but the provisions of Section 3.19 below shall survive
any such release or discharge).
ARTICLE Ill
COVENANTS
---------
Mortgagor warrants and represents to, and covenants and agrees with
Mortgagee as follows:
3.01 Title and Property.
(a) Mortgagor warrants that it has title to an indefeasible fee simple
estate in and to the Mortgaged Property, subject to no liens or
encumbrances, except only the lien of ad valorem taxes which may be due but
not yet payable and those matters set forth on Exhibit "B" attached hereto
and incorporated herein by reference. Mortgagor further warrants that it
has good right and lawful authority to convey the Mortgaged Property in the
manner and form herein provided; that Mortgagor has full power and
authority to convey the Mortgaged Property in the manner and form herein
provided or intended hereafter to be done; that Mortgagor fully and
absolutely waives and releases all rights and claims it may have in or to
said lands, tenements and property as a homestead declaration or exemption,
or other exemption, under and by virtue of any statute or other law of the
State of Connecticut now existing or which may hereafter be