UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MAY 29, 2004
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____ TO ______
Commission File No. 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
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes No X
Number of shares of Common Stock outstanding at July 6, 2004: 4,903,062
GRIFFIN LAND & NURSERIES, INC.
Form 10-Q
PART I - FINANCIAL INFORMATION
ITEM 1 - Financial Statements
Consolidated Statements of Operations 13 and 26 Weeks Ended May 29, 2004 and
May 31, 2003, respectively 3 Consolidated Balance Sheets May 29, 2004 and November 29, 2003 4 Consolidated Statements of Changes in Stockholders' Equity 26 Weeks Ended May 29, 2004 and May 31, 2003 5 Consolidated Statements of Cash Flows 26 Weeks Ended May 29, 2004 and May 31, 2003 6 |
Notes to Consolidated Financial Statements 7-17
ITEM 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 18-26
ITEM 3 - Quantitative and Qualitative Disclosures About Market Risk 26
ITEM 4 - Controls and Procedures 26-27
PART II - OTHER INFORMATION
ITEM 1 - Legal Proceedings 28 ITEM 6 - Exhibits and Reports on Form 8-K 28-29 SIGNATURES 30 ================================================================================ PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS |
Griffin Land & Nurseries, Inc. Consolidated Statements of Operations
(dollars in thousands, except per share data)
(unaudited)
For the 13 Weeks Ended, For the 26 Weeks Ended,
----------------------- -----------------------
May 29, May 31, May 29, May 31,
2004 2003 2004 2003
---------- ---------- ----------- ----------
Net sales and other revenue. . . . . . . . . . . . $ 22,265 $ 21,863 $ 25,360 $ 24,964
Cost of goods sold . . . . . . . . . . . . . . . . . 18,813 17,812 21,336 20,074
Selling, general and administrative expenses . . . . 3,149 2,216 5,118 4,545
---------- ---------- ----------- ----------
Operating profit (loss). . . . . . . . . . . . . . . 303 1,835 (1,094) 345
Gain on sale of Centaur Communications, Ltd. . . . . 51,107 - 51,107 -
Foreign currency exchange gain . . . . . . . . . . . 1,070 - 1,070 -
Interest expense . . . . . . . . . . . . . . . . . . (624) (687) (1,331) (1,311)
Interest income. . . . . . . . . . . . . . . . . . . 99 9 105 17
--------- ---------- ----------- ----------
Income (loss) before income tax provision
(benefit) and equity investment . . . . . . . . . 51,955 1,157 $ 49,857 (949)
Income tax provision (benefit) . . . . . . . . . . . 17,565 403 16,782 (341)
--------- ---------- ----------- ----------
Income (loss) before equity investment . . . . . . . 34,390 754 33,075 (608)
Income (loss) from equity investment . . . . . . . . 417 (268) 328 (558)
--------- ------------- ----------- ----------
Net income (loss). . . . . . . . . . . . . . . . . .$ 34,807 $ 486 $ 33,403 $ (1,166)
========== ========== =========== ==========
Basic net income (loss) per common share . . . . . .$ 7.10 $ 0.10 $ 6.83 $ (0.24)
========== ========== =========== ==========
Diluted net income (loss) per common share . . . . .$ 6.79 $ 0.10 6.58 $ (0.24)
========== ========== =========== ==========
|
Griffin Land & Nurseries, Inc Consolidated Balance Sheets
(dollars in thousands, except per share data)
(unaudited)
May 29, 2004 November 29, 2003
------------------ -------------------
ASSETS
Current Assets:
Cash and cash equivalents . . . . . . . . . . . . . . . $ 40,379 $ 18
Accounts receivable, less allowance of $194 and $149. . 13,057 1,948
Inventories . . . . . . . . . . . . . . . . . . . . . . 29,852 32,396
Deferred income taxes . . . . . . . . . . . . . . . . . 2,770 1,812
Other current assets. . . . . . . . . . . . . . . . . . 2,522 3,161
------------------ -------------------
Total current assets . . . . . . . . . . . . . . . . . . . 88,580 39,335
Real estate held for sale or lease, net. . . . . . . . . . 65,490 64,653
Property and equipment, net. . . . . . . . . . . . . . . . 11,704 11,919
Investment in Centaur Holdings, PLC. . . . . . . . . . . . 9,439 -
Investment in Centaur Communications, Ltd. . . . . . . . . - 20,895
Other assets . . . . . . . . . . . . . . . . . . . . . . . 8,747 8,919
------------------ -------------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . $ 183,960 $ 145,721
================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Income taxes payable. . . . . . . . . . . . . . . . . . $ 9,709 $ -
Accounts payable and accrued liabilities. . . . . . . . 5,036 4,573
Current portion of long-term debt . . . . . . . . . . . 819 11,428
------------------ -------------------
Total current liabilities. . . . . . . . . . . . . . . . . 15,564 16,001
Long-term debt . . . . . . . . . . . . . . . . . . . . . . 31,832 30,737
Other noncurrent liabilities . . . . . . . . . . . . . . . 1,751 1,659
------------------ -------------------
Total liabilities. . . . . . . . . . . . . . . . . . . . . 49,147 48,397
------------------ -------------------
Commitments and contingencies
Stockholders' Equity:
Common stock, par value $0.01 per share, 10,000,000 shares
authorized, 4,903,062 and 4,876,916 shares issued and
outstanding, respectively . . . . . . . . . . . . . . . 49 49
Additional paid-in capital . . . . . . . . . . . . . . . . 93,699 93,392
Retained earnings. . . . . . . . . . . . . . . . . . . . . 37,015 3,612
Accumulated other comprehensive income . . . . . . . . . . 4,050 271
------------------ -------------------
Total stockholders' equity . . . . . . . . . . . . . . . . 134,813 97,324
------------------ -------------------
Total liabilities and stockholders' equity . . . . . . . . $ 183,960 $ 145,721
================== ===================
|
See Notes to Consolidated Financial Statements.
Griffin Land & Nurseries, Inc. Consolidated Statements of Changes in Stockholders' Equity
(dollars in thousands)
(unaudited)
Shares Of Additional
Common Common Paid-In Retained
Stock Stock Capital Earnings
--------- ------- ------------ --------
Balance at
November 30, 2002 . . . 4,864,916 $ 49 $ 93,372 $ 5,961
Exercise of stock options 12,000 - 20 -
Net loss . . . . . . . . . - - - (1,166)
Other comprehensive
income . . . . . . . . - - - -
---------- -------- ----------- ------
Balance at
May 31, 2003 . . . . . 4,876,916 $ 49 $ 93,392 $ 4,795
========= ======= =========== =======
Accumulated
Other Total
Comprehensive Comprehensive
Income Total Income (Loss)
------------- -------- -------------
Balance at
November 30, 2002 . . . $ (128) $ 99,254 $ -
Exercise of stock options - 20 -
Net loss . . . . . . . . . - (1,166) $ (1,166)
Other comprehensive
income . . . . . . . . . 240 240 240
------------- --------- -----------
Balance at
May 31, 2003 . . . . . . $ 112 $ 98,348 $ (926)
=============== ========= ============
--------------------------------------------------------------------------------
Shares Of Additional
Common Common Paid-In Retained
Stock Stock Capital Earnings
--------- ------- ------------ --------
Balance at
November 29, 2003 . . . . 4,876,916 $ 49 $ 93,392 $ 3,612
Exercise of stock options
including tax benefit
of $115 . . . . . . . . . 26,146 - 307 -
Net income . . . . . . . . . - - - 33,403
Other comprehensive
income . . . . . . . . . - - - -
--------- ------- ---------- -------
Balance at
May 29, 2004 . . . . . . 4,903,062 $ 49 $ 93,699 $37,015
========= ======= ========== =======
Accumulated
Other Total
Comprehensive Comprehensive
Income Total Income (Loss)
------------- ---------- -------------
Balance at
November 29, 2003 . . . . . $ 271 $ 97,324 $ -
Exercise of stock options
Including tax benefit
of $115 . . . . . . . . . . - 307 -
Net income . . . . . . . . . . - 33,403 $ 33,403
Other comprehensive
income . . . . . . . . . . 3,779 3,779 3,779
----------- ----------- ------------
Balance at
May 29, 2004 . . . . . . . $ 4,050 $ 134,813 $ 37,182
=========== =========== ============
|
See Notes to Consolidated Financial Statements.
Griffin Land & Nurseries, Inc. Consolidated Statements of Cash Flows
(dollars in thousands)
(unaudited)
For the 26 Weeks Ended,
-------------------------
May 29, 2004 May 31, 2003
--------------------- ---------------------
Operating activities:
Net income (loss). . . . . . . . . . . . . . . . . . . . . $ 33,403 $ (1,166)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Gain on sale of Centaur Communications, Ltd.. . . . . . (51,107) -
Tax payment included in other comprehensive income. . . (2,959) -
Depreciation and amortization . . . . . . . . . . . . . 2,387 2,052
Gain on foreign exchange contract . . . . . . . . . . . (1,070) -
(Income) loss from equity investment. . . . . . . . . . (328) 558
Deferred income taxes . . . . . . . . . . . . . . . . . (340) (426)
Write-off of unamortized financing costs. . . . . . . . 280 -
Changes in assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . (11,154) (11,834)
Inventories . . . . . . . . . . . . . . . . . . . . . . 2,544 1,820
Other current assets. . . . . . . . . . . . . . . . . . 639 197
Accounts payable and accrued liabilities. . . . . . . . 463 975
Income taxes payable. . . . . . . . . . . . . . . . . . 9,824 -
Other, net. . . . . . . . . . . . . . . . . . . . . . . 397 277
--------------------- ---------------------
Net cash used in operating activities. . . . . . . . . . . (17,021) (7,547)
--------------------- ---------------------
Investing activities:
Proceeds from the sale of Centaur Communications, Ltd. . . 68,852 -
Acquisition of 70% interest in real estate joint venture,
net of cash acquired of $16 . . . . . . . . . . . . . . - (7,419)
Additions to real estate held for sale or lease. . . . . . (2,381) (1,976)
Proceeds from foreign exchange contract. . . . . . . . . . 1,070 -
Additions to property and equipment. . . . . . . . . . . . (427) (444)
Investment in Shemin Acquisition Corporation . . . . . . . (143) -
--------------------- ---------------------
Net cash provided by (used in) investing activities. . . . 66,971 (9,839)
--------------------- ---------------------
Financing activities:
Payments of debt . . . . . . . . . . . . . . . . . . . . . (11,122) (340)
Increase in debt . . . . . . . . . . . . . . . . . . . . . 1,500 17,750
Exercise of stock options. . . . . . . . . . . . . . . . . 192 20
Other, net . . . . . . . . . . . . . . . . . . . . . . . . (159) (47)
--------------------- ---------------------
Net cash (used in) provided by financing activities. . . . (9,589) 17,383
--------------------- ---------------------
Net increase (decrease) in cash and cash equivalents . . . 40,361 (3)
Cash and cash equivalents at beginning of period . . . . . 18 24
--------------------- ---------------------
Cash and cash equivalents at end of period . . . . . . . . $ 40,379 $ 21
===================== =====================
|
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 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 financial statements for the year ended November 29, 2003 included in the Report on Form 10-K as filed with the Securities and Exchange Commission, 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. The year end consolidated balance sheet data as of November 29, 2003 was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America.
The results of operations for the thirteen and twenty-six weeks ended May 29, 2004 are not necessarily indicative of the results to be expected for the full year.
Griffin accounts for stock options under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and has adopted SFAS No. 123 which requires disclosure of the pro forma effect on earnings and earnings per share of the fair value method of accounting for stock-based compensation and SFAS No. 148 which prescribes a method of disclosure. Griffin's results would have been the following pro forma amounts under the method prescribed by SFAS No. 123:
For the 13 Weeks Ended, For the 26 Weeks Ended,
----------------------- -----------------------
May 29, 2004 May 31, 2003 May 29, 2004 May 31, 2003
------------ ------------ ------------ ------------
Net income (loss), as reported. . . . . . . $ 34,807 $ 486 $ 33,403 $ (1,166)
Total stock based employee compensation
expense determined under fair value
method for all awards, net of tax effects . (28) (67) (55) (132)
------------ ------------ ---------- -----------
Net income (loss), pro forma (under SFAS
No. 123). . . . . . . . . . . . . . . . . $ 34,779 $ 419 $ 33,348 $ (1,298)
============ ============ =========== ===========
Adjusted net income (loss) for computation
of diluted per share results,
pro forma (under SFAS No. 123). . . . . . $ 34,741 $ 419 $ 33,310 $ (1,298)
============ ============ =========== ===========
Basic net income (loss) per common
share, as reported. . . . . . . . . . . . $ 7.10 $ 0.10 $ 6.83 $ (0.24)
============ ============ =========== ==========
Basic net income (loss) per common
share, pro forma (under SFAS No. 123) . . $ 7.10 $ 0.09 $ 6.82 $ (0.27)
============ ============ =========== ===========
Diluted net income (loss) per common
share, as reported. . . . . . . . . . . . $ 6.79 $ 0.10 $ 6.58 $ (0.24)
============ ============ =========== ===========
Diluted net income (loss) per common
share, pro forma (under SFAS No. 123) . . $ 6.78 $ 0.09 $ 6.57 $ (0.27)
============ ============ =========== ===========
|
There were no stock options granted during the twenty-six weeks ended May 29, 2004. The weighted average fair values of each option granted during the twenty-six weeks ended May 31, 2003 were $5.79, estimated as of the dates of grant using the Black-Scholes option-pricing model. The following weighted average assumptions were used in the model to calculate the fair values of each option: expected volatility of approximately 47%; risk free interest rates ranging from 2.43% to 3.03%; expected option term of 5 years and no dividend yield.
2. Recent Accounting Pronouncements
In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of Variable Interest Entities (an interpretation of Accounting Research Bulletin No. 51, Consolidated Financial Statements)," ("Fin No. 46"). Fin No. 46 requires existing unconsolidated variable interest entities to be included in the consolidated financial statements of a business enterprise if the primary beneficiaries of the variable interest entities do not effectively disperse risk among all parties involved. The requirements of Fin No. 46 were effective for Griffin in the first quarter of fiscal 2004. The adoption of Fin No. 46 did not have an impact on Griffin's financial statements.
3. 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 26 Weeks Ended,
----------------------- -----------------------
May 29, May 31, May 29, May 31,
Net sales and other revenue: 2004 2003 2004 2003
-------- ------- -------- --------
Landscape nursery product sales . . . . . . . $ 19,125 $19,042 $ 19,547 $19,316
Real estate sales and rental revenue. . . . . 3,140 2,821 5,813 5,648
-------- ------- -------- --------
$ 22,265 $21,863 $ 25,360 $24,964
======== ======= ======== ========
Operating profit (loss):
Landscape nursery . . . . . . . . . . . . . . $ 899 $ 1,792 $ 26 $ 556
Real estate . . . . . . . . . . . . . . . . . 335 442 354 641
-------- ------- -------- --------
Industry segment totals . . . . . . . . . . . 1,234 2,234 380 1,197
General corporate expense . . . . . . . . . . (931) (399) (1,474) (852)
-------- ------- -------- --------
Operating profit (loss) . . . . . . . . . . . 303 1,835 (1,094) 345
Gain on sale of Centaur Communications, Ltd.. 51,107 - 51,107 -
Foreign currency exchange gain. . . . . . . . 1,070 - 1,070 -
Interest expense, net . . . . . . . . . . . . (525) (678) (1,226) (1,294)
-------- ------- -------- --------
Income (loss) before income taxes
and equity investment. . . . . . . . . . . $ 51,955 $ 1,157 $ 49,857 $ (949)
======== ======= ======== ========
|
May 29, Nov. 29,
Identifiable assets: 2004 2003
-------- --------
Landscape nursery. . . . . . . . . . . . . . $ 59,559 $ 50,904
Real estate. . . . . . . . . . . . . . . . . 71,199 71,124
-------- --------
Industry segment totals. . . . . . . . . . . 130,758 122,028
General corporate. . . . . . . . . . . . . . 53,202 23,693
------- --------
Total assets . . . . . . . . . . . . . . . . $183,960 $145,721
======== ========
|
See Note 4 for information on Griffin's equity investment in Centaur.
4. Equity Investment
On March 10, 2004, Griffin completed the sale of its equity investment in Centaur Communications, Ltd. ("Centaur") to a newly formed company, Centaur Holdings, PLC ("Centaur Holdings"). At the time of the sale, Griffin held 5,428,194 B Ordinary shares of Centaur common stock, approximately 32% of Centaur's outstanding common stock. The sale agreement between Griffin, holders of A Ordinary shares of Centaur and the holder of C Ordinary shares of Centaur (collectively, the "Sellers") and Centaur Holdings contains certain warranties. Warranty claims by Centaur Holdings must first exceed 1 million British Sterling (approximately $1.8 million based on the foreign currency exchange rate in effect at the time of the sale) in the aggregate before the Sellers are required to make any payments. The warranty period expires on September 30, 2005, except for warranties related to income taxes and pension liabilities, which expire on September 30, 2010. In conjunction with this transaction, Centaur Holdings completed an initial public offering of its common stock, and is currently trading on the Alternative Investment Market of the London Stock Exchange.
The consideration received by Griffin included cash proceeds of approximately $68.9 million after transaction expenses of approximately $1.5 million but before income tax payments. In addition to the cash proceeds, Griffin received 6,477,150 shares of Centaur Holdings common stock (representing approximately 4.4% of its newly issued outstanding common stock), which was valued at approximately $11.7 million based on the 1.00 British Sterling per share price of the initial public offering of shares by Centaur Holdings and the foreign currency exchange rate in effect at that time. Griffin is prohibited from selling its ownership in Centaur Holdings for six months from the date the transaction was completed. A portion of the cash proceeds from the sale were used to repay all of the amount outstanding ($18.4 million) under Griffin's Credit Agreement with Fleet National Bank.
Included in Griffin's pretax income for the thirteen weeks ended May 29, 2004 is a gain on the sale of Centaur of $51.1 million and a foreign currency exchange gain of $1.1 million related to the sale (see Note 8). In connection with the Centaur transaction, substantially all of the stock options of Centaur were exercised immediately prior to the closing of the transaction, which resulted in Griffin's ownership being reduced from 35% to 32%. The gain of approximately $2.3 million that resulted from the dilution of Griffin's ownership is included in the gain on the sale of that investment. Griffin's remaining investment in Centaur Holdings is recorded based on the fair market value of that investment. At the time of the sale, approximately $5.4 million was reported as other comprehensive income, reflecting the difference, net of tax, between the estimated fair market value of Griffin's investment in Centaur Holdings and the book value of the pro rata portion of the investment in Centaur that remained as a result of receiving Centaur Holdings common stock as part of the sale proceeds. Griffin is accounting for its investment in Centaur Holdings as an available for sale security under SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," whereby increases or decreases in the value of that investment, net of income taxes, along with the effect of changes in the foreign currency exchange rate, are included in other comprehensive income (loss). From the date of the transaction through May 29, 2004, Griffin recorded an other comprehensive loss of $1.4 million reflecting the reduction, net of tax, of the fair market value of Centaur Holdings (see Note 8) from the transaction date through the end of the period.
Prior to the sale, Griffin accounted for its investment in Centaur under
the equity method of accounting for investments. The unaudited summarized
financial data of Centaur presented below were derived from consolidated
financial information of Centaur for the 100 day period from December 1, 2003
through March 9, 2004 and the six months ended May 31, 2003. Griffin's equity
income (loss) for the 100 day period from December 1, 2003 through March 9, 2004
and the six months ended May 31, 2003 included $101 and $184, respectively, in
each period for amortization of publishing rights. Griffin's equity income
(loss) from Centaur also reflects adjustments necessary to present Centaur's
results for the respective periods in accordance with generally accepted
accounting principles in the United States of America.
From December 1, 2003 Six Months Ended
through March 9, 2004 May 31, 2003
--------------------- ----------------
Net sales. . . . . . . . . . . $ 31,972 $ 47,055
Costs and expenses . . . . . . 29,753 47,953
--------------- --------------
Operating profit (loss). . . . 2,219 (898)
Nonoperating expenses. . . . . (319) (373)
--------------- --------------
Pretax income (loss) . . . . . 1,900 (1,271)
Income tax provision (benefit) 670 (204)
--------------- --------------
Net income (loss). . . . . . . $ 1,230 $ (1,067)
=============== ==============
|
As of
Nov. 30, 2003
--------------
Current assets . . . . . . . . . . . . . . $ 25,275
Intangible assets. . . . . . . . . . . . . 9,732
Other noncurrent assets. . . . . . . . . . 10,975
--------------
Total assets . . . . . . . . . . . . . . . $ 45,982
==============
Current liabilities. . . . . . . . . . . . $ 30,047
Other noncurrent liabilities . . . . . . . 2,581
--------------
Total liabilities. . . . . . . . . . . . . 32,628
Stockholders' equity . . . . . . . . . . . 13,354
--------------
Total liabilities and stockholders' equity $ 45,982
==============
|
5. Long-Term Debt
Long-term debt includes:
May 29, 2004 November 29, 2003
------------------- -----------------
Nonrecourse mortgages:
8.54% due July 1, 2009. . $ 7,879 $ 7,914
6.08% due January 1, 2013 9,521 9,610
6.30% due May 1, 2014 . . 1,491 -
8.13% due April 1, 2016 . 5,938 6,019
7.0% due October 1, 2017. 7,475 7,537
------------------- -----------------
Total nonrecourse mortgages . 32,304 31,080
Credit Agreement. . . . . . . - 10,725
Capital leases. . . . . . . . 347 360
------------------- -----------------
Total . . . . . . . . . . . . 32,651 42,165
Less: current portion . . . . (819) (11,428)
------------------- -----------------
Total long-term debt. . . . . $ 31,832 $ 30,737
=================== =================
|
As a result of the proceeds received from the sale of Centaur (see Note 4), Griffin repaid the entire amount then outstanding ($18.4 million) under its Credit Agreement (the "Credit Agreement") with Fleet National Bank and subsequently terminated the Credit Agreement, which was scheduled to expire in February 2005. Accordingly, unamortized debt issuance costs of approximately $0.3 million are included in general and administrative expense in the thirteen weeks ended May 29, 2004. The Credit Agreement balance was included in the current portion of long-term debt at November 29, 2003.
On December 17, 2002 Griffin completed a $9.75 million nonrecourse mortgage of two office buildings. Proceeds of the mortgage were used to finance Griffin's acquisition, completed on December 6, 2002, of a 70% interest in those buildings. Griffin previously held the remaining 30% interest in those buildings. The mortgage has a 6.08% rate and a term of ten years, with payments based on a twenty-five year amortization period.
On April 16, 2004, Griffin completed an Amendment to its mortgage (the "Mortgage Amendment") on two industrial buildings in Windsor, Connecticut. The Mortgage Amendment provided for an additional borrowing of $1.5 million for a term of ten years at an interest rate of 6.3%. Proceeds from the additional borrowing under the Mortgage Amendment were used for capital improvements made for a major tenant in one of the buildings. The capital improvements were related to a ten year lease extension by that tenant.
At May 29, 2004 and November 29, 2003, the fair values of Griffin's Mortgages were $32.6 million and $32.3 million, respectively. Fair value is 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 its variable interest rate, the amount included on Griffin's balance sheet for the Credit Agreement at November 29, 2003 reflects its fair value.
6. Stock Options
Activity under the Griffin Land & Nurseries, Inc. 1997 Stock Option Plan (the "Griffin Stock Option Plan") is summarized as follows:
Number Weighted Avg.
of Shares Exercise Price
------------ --------------
Outstanding at November 29, 2003 659,542 $ 12.57
Exercised. . . . . . . . . . . . (26,146) 7.36
----------- --------------
Outstanding at May 29, 2004. . . 633,396 $ 12.78
============ ==============
|
Number of option holders at May 29, 2004 26
==
|
Weighted Ave.
Remaining
Outstanding at Weighted Ave. Contractual Life
Range of Exercise Prices May 29, 2004 Exercise Price (in years)
------------------------ --------------- --------------- ----------------
Under $3.00. . . . . . . . 8,011 $ 1.88 0.9
3.00-$11.00 . . . . . . . 98,172 7.53 1.7
Over $11.00. . . . . . . . 527,213 13.93 4.5
---------------
633,396
===============
|
At May 29, 2004, 564,768 options outstanding under the Griffin Stock Option Plan were exerciseable with a weighted average exercise price of $12.68 per share.
7. Per Share Results
Basic and diluted per share results were based on the following:
For the 13 Weeks Ended, For the 26 Weeks Ended,
----------------------- -----------------------
May 29, May 31, May 29, May 31,
2004 2003 2004 2003
--------- ---------- ---------- ----------
Net income (loss) as reported for computation
of basic per share results. . . . . . . . . $ 34,807 $ 486 $ 33,403 $ (1,166)
Adjustment to net income (loss) for exercise
of options of equity investee . . . . . . . (38) - (38) -
--------- ---------- ---------- ----------
Net income (loss) for computation
of diluted per share results. . . . . . . . $ 34,769 $ 486 $ 33,365 $ (1,166)
========= ========== ========== ==========
Weighted average shares outstanding for
computation of basic per share results . . 4,899,000 4,874,000 4,889,000 4,869,000
Incremental shares from assumed exercise of
Griffin stock options . . . . . . . . . . . 223,000 55,000 179,000 -
--------- ---------- ---------- ---------
Weighted average shares outstanding for
computation of diluted per share results . 5,122,000 4,929,000 5,068,000 4,869,000
========= ========= ========= =========
|
8. Supplemental Financial Statement Information
Other Comprehensive Income (Loss)
Changes in accumulated other comprehensive income (loss) for the twenty-six weeks ended May 29, 2004 and May 31, 2003 consist of the following:
For the 26 Weeks Ended,
-----------------------
May 29, 2004 May 31, 2003
------------ ------------
Balance at beginning of period . . . . . . . . . . . . . $ 271 $ (128)
Effect of foreign currency exchange rate changes related
to investment in Centaur Communications, Ltd. . . . . 302 240
Transfer to pretax income as a result of the sale of
Centaur Communications, Ltd.. . . . . . . . . . . . . (494) -
Increase to record the investment in Centaur Holdings,
PLC at fair market value, net of tax of $2,958. . . . 5,414 -
Reduction in fair market value of Centaur Holdings,
PLC, net of tax benefit of $777 . . . . . . . . . . . (1,443) -
------------- ------------
Balance at end of period . . . . . . . . . . . . . . . . $ 4,050 $ 112
============== ============
|
Foreign Currency Exchange Contract
In connection with the sale of Centaur (see Note 4), Griffin entered into a foreign currency exchange forward contract with Fleet National Bank on February 27, 2004. The contract hedged the currency fluctuation of British Sterling between the time the agreement on the sale of Centaur was executed (February 27, 2004) and the date the transaction was closed (March 10, 2004). Griffin's obligation under the contract was fulfilled with the proceeds from the sale of Centaur. As a result of the contract, the exchange rate of the proceeds was higher than the prevailing exchange rate at the time the transaction was completed. Accordingly, in the thirteen weeks ended May 29, 2004, Griffin reported a foreign currency exchange gain of $1.1 million related to the sale of its investment in Centaur.
Supplemental Cash Flow Information
In the twenty-six weeks ended May 29, 2004 and May 31, 2003, Griffin made income tax payments of $10.0 million and $0.1 million, respectively. In the twenty-six weeks ended May 29, 2004 and May 31, 2003, Griffin made interest payments of $1.3 million in each period.
Inventories
Inventories consist of:
May 29, 2004 Nov. 29, 2003
------------- -------------
Nursery stock. . . . . $ 27,767 $ 31,076
Materials and supplies 2,085 1,320
------------- -------------
$ 29,852 $ 32,396
============= =============
|
Property and Equipment
Property and equipment consist of:
Estimated May 29, 2004 Nov. 29, 2003
Useful Lives
------------ ------------ -------------
Land and improvements $ 4,892 $ 5,003
Buildings. . . . . . . . 10 to 40 years 3,033 3,028
Machinery and equipment. 3 to 20 years 15,813 15,309
------------- -------------
23,738 23,340
Accumulated depreciation (12,034) (11,421)
------------- -------------
$ 11,704 $ 11,919
============= =============
|
Griffin incurred capital lease obligations of $108 and $76, respectively, in the twenty-six weeks ended May 29, 2004 and May 31, 2003.
Real Estate Held for Sale or Lease
Real estate held for sale or lease consists of:
May 29, 2004
--------------
Estimated
Useful Lives Held for Sale Held for Lease Total
------------- ------------- -------------- ---------
Land $ 1,316 $ 4,101 $ 5,417
Land improvements. . . . 15 years 9 4,527 4,536
Buildings. . . . . . . . 40 years - 60,320 60,320
Development costs 7,191 4,121 11,312
------------- -------------- ---------
8,516 73,069 81,585
Accumulated depreciation - (16,095) (16,095)
------------- -------------- --------
$ 8,516 $ 56,974 $ 65,490
============= ================ =========
|
November 29, 2003
-----------------
Estimated
Useful Lives Held for Sale Held for Lease Total
------------- ------------- -------------- ----------
Land $ 1,330 $ 4,101 $ 5,431
Land improvements. . . . 15 years 9 4,522 4,531
Buildings. . . . . . . . 40 years - 57,481 57,481
Development costs 6,880 5,073 11,953
------------- ------------- ---------
8,219 71,177 79,396
Accumulated depreciation - (14,743) (14,743)
------------- ------------- ---------
$ 8,219 $ 56,434 $ 64,653
============= ============= =========
|
Real Estate Joint Venture
On December 6, 2002, Griffin acquired the remaining 70% interest in a joint venture that owned two office buildings of approximately 80,000 square feet each in Griffin Center in Windsor, Connecticut. Griffin previously held the remaining 30% interest in the joint venture. Subsequent to the acquisition, Griffin's investment in the joint venture was terminated. The book value of Griffin's investment in the joint venture was $3.1 million at the time of the acquisition and was reclassified, principally into real estate held for lease. Griffin accounted for its acquisition of the remaining 70% interest in the real estate joint venture in accordance with SFAS No. 141 "Business Combinations", which required the purchase price to be allocated to the assets acquired and liabilities assumed. Accordingly, the purchase price was allocated to real estate held for lease, intangible assets related to the leases in place, lease commissions and tenant relationships based upon their fair values. Approximately $1.0 million of the purchase price was allocated to intangible assets and is being amortized over periods ranging from five to fifteen years. At May 29, 2004, intangible assets of $828, net of accumulated amortization, are included in other assets on Griffin's balance sheet.
Postretirement Benefits
Griffin maintains a postretirement benefits program which provides principally health and life insurance benefits to certain of its retirees. The liability for postretirement benefits is included in other noncurrent liabilities on the consolidated balance sheet. Because Griffin's obligation for retiree medical benefits is fixed under the terms of Griffin's postretirement benefits program, any increase in the medical cost trend would have no effect on the accumulated postretirement benefit obligation, service cost or interest cost. Griffin's postretirement benefits are unfunded, with benefits to be paid from Griffin's general assets. Griffin's contributions for the twenty-six weeks ended May 29, 2004 were $6, with an expected contribution of $12 for the full fiscal year. The components of Griffin's postretirement benefits expense are as follows:
For the 13 Weeks Ended, For the 26 Weeks Ended,
----------------------- -----------------------
May 29, May 31, May 29, May 31,
2004 2003 2004 2003
------- ------- ------ --------
Service cost . . . . $ 5 $ 4 $ 11 $ 10
Interest . . . . . . 14 15 28 29
------- ------- ------ --------
$ 19 $ 19 $ 39 $ 39
======= ======= ====== ========
|
9. Commitments and Contingencies
As of May 29, 2004, Griffin had committed purchase obligations of $1.2 million.
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 consolidated financial position, results of operations or cash flows.
In the 2004 second quarter, Griffin Land agreed to an amended lease for its 165,000 square foot building in Griffin Center. The amended lease reflects the replacement of the current tenant with a new tenant and extends the term of the lease from 2016 to 2024. Rental revenue under the amended lease is the same as the original lease through the original lease term. The amended lease also provides the new tenant an option to purchase this facility, at fair market value, in 2021. The amended lease will become effective if certain contingencies are resolved prior to November 30, 2004. If these contingencies are not resolved, the original lease remains in effect.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
The consolidated financial statements of Griffin Land & Nurseries, Inc. ("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"). Through March 9, 2004, Griffin had an equity investment in Centaur Communications, Ltd. ("Centaur"), a privately held magazine publishing business based in the United Kingdom. On March 10, 2004, Griffin completed the sale of its investment in Centaur (see Note 4 to Griffin's consolidated financial statements included in Item 1 of this report).
The significant accounting policies and methods used in the preparation of Griffin's consolidated financial statements included in Item 1 are consistent with those used in the preparation of Griffin's audited financial statements for the year ended November 29, 2003 included in the Report on Form 10-K as filed with the Securities and Exchange Commission. The preparation of Griffin's financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and revenue and expenses during the periods reported. Actual results could differ from those estimates. The significant accounting estimates used by Griffin in preparation of its financial statements for the thirteen and twenty-six weeks ended May 29, 2004 are consistent with those used by Griffin in preparation of its fiscal 2003 financial statements.
Summary
Results of Griffin's operating businesses for the thirteen weeks ended May 29, 2004 (the "2004 second quarter") were lower than the results for the thirteen weeks ended May 31, 2003 (the "2003 second quarter"). The 2004 second quarter operating profit at Imperial was lower than the operating profit in the 2003 second quarter due principally to cost of goods sold being a higher percentage of net sales in the 2004 second quarter as compared to the 2003 second quarter and higher selling expenses. Operating results at Griffin Land were slightly lower in the 2004 second quarter as compared to the 2003 second quarter. The 2004 second quarter includes a substantial gain on Griffin's sale of its investment in Centaur and a related foreign currency exchange gain.
Results of Griffin's operating businesses for the twenty-six weeks ended May 29, 2004 (the "2004 six month period") were lower than the results of Griffin's operating businesses for the twenty-six weeks ended May 31, 2003 (the "2003 six month period"). Lower operating results at Imperial were due to cost of goods sold being a higher percentage of net sales in the 2004 six month period as compared to the 2003 six month period. Operating profit at Griffin Land was lower in the 2004 six month period, as compared to the 2003 six month period, due to higher building operating expenses, higher general and administrative expenses and higher depreciation and amortization expense. The 2004 six month period includes the substantial gain on the sale of Centaur and the related foreign currency exchange gain.
Results of Operations
Thirteen Weeks Ended May 29, 2004 Compared to the Thirteen Weeks Ended May 31, 2003
Net sales and other revenue increased from $21.9 million in the 2003 second quarter to $22.3 million in the 2004 second quarter. The increase of $0.4 million reflects a $0.3 million increase at Griffin Land and a $0.1 million increase at Imperial.
Net sales and other revenue at Griffin Land increased from $2.8 million in the 2003 second quarter to $3.1 million in the 2004 second quarter, reflecting $0.2 million of revenue from land sales in the 2004 second quarter and a $0.1 million increase in revenue from its leasing operations. There were no land sales in the 2003 second quarter. The land sale revenue related to the sale of undeveloped land intended for residential development. The increase in revenue from leasing operations principally reflected increased tenant reimbursement of operating expenses and revenue from new leases. At May 29, 2004, Griffin Land owned 1,130,000 square feet of industrial, flex and office space, with 921,000 square feet (81%) leased. At the end of the 2003 second quarter, Griffin Land had 1,013,000 square feet of industrial, flex and office space, with 885,000 square feet (87%) leased. The lower percentage of space leased at the end of the 2004 second quarter and the increase in total square feet available in Griffin Land's portfolio versus the comparable time last year principally reflects the completion in the 2003 fourth quarter of the shell of a 117,000 square foot industrial building that was built on speculation, of which 54,000 square feet was leased and occupied as of May 29, 2004. Activity of prospective tenants has increased in fiscal 2004 as compared to the prior year. In addition to the 54,000 square feet leased in the new industrial building in the New England Tradeport, Griffin Land also leased 15,000 square feet in one of its older industrial buildings in the New England Tradeport. Subsequent to the end of the 2004 second quarter, Griffin Land leased 16,000 square feet in the shell of a new 50,000 square foot office building that was built on speculation at the end of fiscal 2002.
Net sales and other revenue at Imperial increased from $19.0 million in the 2003 second quarter to $19.1 million in the 2004 second quarter, as unit sales volume in the 2004 second quarter was essentially flat as compared to the 2003 second quarter.
Griffin's consolidated operating profit decreased from $1.8 million in the 2003 second quarter to $0.3 million in the 2004 second quarter. The lower consolidated operating profit reflects operating profit decreases of $0.9 million and $0.1 million at Imperial and Griffin Land, respectively, and an increase of $0.5 million in general corporate expense.
Operating profit at Griffin Land decreased from $0.4 million in the 2003 second quarter to $0.3 million in the 2004 second quarter, reflecting the following:
2004 2003
Second Qtr. Second Qtr.
------------- ------------
(amounts in millions)
Profit from leasing activities before general and
administrative expenses and before depreciation
and amortization expense . . . . . . . . . . . . $ 1.7 $ 1.6
Profit from land sales. . . . . . . . . . . . . . . - -
General and administrative expenses . . . . . . . . (0.6) (0.5)
-------------- -------------
Profit before depreciation and amortization expense 1.1 1.1
Depreciation and amortization expense . . . . . . . (0.8) (0.7)
-------------- -------------
Operating profit. . . . . . . . . . . . . . . . . . $ 0.3 $ 0.4
============== =============
|
The increase of $0.1 million in Griffin Land's profit from leasing Activities before general and administrative expenses and before depreciation and amortization expense was due to the increase in revenue from leasing. Results from land sales reflect a profit of $0.2 million from the sale of Undeveloped residential land, substantially offset by a writeoff of costs on a Potential land sale transaction that will not proceed. Griffin Land's 2004 second quarter general and administrative expenses increased by $0.1 million over the 2003 second quarter, due principally to higher employee compensation expense. Griffin Land's 2004 second quarter depreciation and amortization expense increased by $0.1 million over the 2003 second quarter, due to several factors, including depreciation on the new 117,000 square foot industrial building completed at the end of the 2003 fiscal year and depreciation on building improvements completed in the current year.
Operating profit at Imperial decreased from $1.8 million in the 2003 second quarter to $0.9 million in the 2004 second quarter, as follows:
2004 2003
Second Qtr. Second Qtr.
------------- ------------
(amounts in millions)
Net sales and other revenue. . . . . . . . . $ 19.1 $ 19.0
Cost of goods sold . . . . . . . . . . . . . 16.6 15.9
------------- ------------
Gross profit . . . . . . . . . . . . . . . . 2.5 3.1
Selling, general and administrative expenses 1.6 1.3
------------- ------------
Operating profit . . . . . . . . . . . . . . $ 0.9 $ 1.8
============= ============
|
The $0.9 decrease in operating profit was due principally to higher cost of goods sold as a percentage of net sales in the 2004 second quarter as compared to the 2003 second quarter, which resulted in a decrease in gross profit of $0.6 million. Imperial's gross margins decreased from 16.2% in the 2003 second quarter to 13.1% in the 2004 second quarter. Approximately 60% of the increase in cost of goods sold was due to higher shipping and delivery costs, caused by higher labor and shipping supplies costs and higher trucking costs, which management believes was caused, in part, by higher fuel costs and new trucking regulations that became effective in early 2004. The balance of the increase in cost of goods sold was due principally to higher inventory costs.
Imperial's selling, general and administrative expenses increased by $0.3 million in the 2004 second quarter as compared to the 2003 second quarter. As a percentage of net sales, selling, general and administrative expenses increased from 6.8% in the 2003 second quarter to 8.4% in the 2004 second quarter. The increase in selling, general and administrative expenses principally reflects higher selling expenses as a result of increased headcount of salespersons and the timing of when selling expenses are incurred. Imperial changed its salesperson compensation program in fiscal 2004, whereby a greater portion of salesperson compensation expense is based on sales commission, in which the expenses are incurred when the sales are made. Previously, a greater portion of salesperson compensation was based on salaries, which are incurred evenly throughout the year. The increased headcount of salespersons in 2004 was intended to expand Imperial's distribution of product to parts of the southeast and provide additional sales coverage in Imperial's New England market.
Griffin's general corporate expense increased from $0.4 million in the 2003 second quarter to $0.9 million in the 2004 second quarter. The increase reflects approximately $0.3 million for the write off of unamortized debt issuance costs related to Griffin's Credit Agreement with Fleet National Bank (the "Credit Agreement"), which was scheduled to terminate in February 2005, but was terminated early by Griffin as a result of the paydown of all amounts outstanding under the Credit Agreement with a portion of the proceeds received from the sale of Griffin's investment in Centaur (see below). In addition, Griffin's 2004 second quarter general corporate expense included $0.1 million in connection with a proposed additional financing that would have been required under the terms of an amendment to the Credit Agreement had the Centaur sale not been completed.
In the 2004 second quarter Griffin completed the sale of its investment in Centaur to Centaur Holdings, PLC ("Centaur Holdings"), a newly formed company. Griffin received cash proceeds of $68.9 million after transaction expenses of $1.5 million. In addition to the cash proceeds, Griffin received 6,477,150 shares of common stock of Centaur Holdings, which was valued at approximately $11.7 million based on the 1.00 British Sterling per share price of the initial public offering of shares by Centaur Holdings and the foreign currency exchange rate in effect at that time. Griffin is prohibited from selling its Centaur Holdings common stock for six months from the transaction date. Griffin recorded a pretax gain of $51.1 million on the sale and a foreign currency exchange gain of $1.1 million related to the sale. In connection with the Centaur transaction, substantially all of the stock options of Centaur were exercised immediately prior to the closing of the Centaur transaction, which resulted in Griffin's ownership being reduced from 35% to 32%. The gain of approximately $2.3 million that resulted from the dilution of Griffin's ownership is included in the gain on the sale of that investment. In addition, Griffin recorded other comprehensive income of $4.0 million in the 2004 second quarter, reflecting the difference, net of tax, between the value of Griffin's investment in Centaur Holdings and the book value of the pro rata portion of the investment in Centaur that remained as a result of receiving the Centaur Holdings common stock as a part of the sale proceeds, adjusted to reflect market pricing of Centaur Holdings as of the balance sheet date.
Griffin's consolidated interest expense decreased by $0.1 million from $0.7 million in the 2003 second quarter to $0.6 million in the 2004 second quarter. The decrease in interest expense reflects the lower amount of borrowings outstanding in the 2004 second quarter as compared to the 2003 second quarter. Griffin's average outstanding debt in the 2004 second quarter was $36.2 million as compared to average outstanding debt of $42.5 million in the 2003 second quarter. The lower outstanding debt reflects the paydown of the entire amount outstanding under Griffin's Credit Agreement with Fleet National Bank from a portion of the proceeds from the sale of Centaur. Griffin reported interest income of $0.1 million in the 2004 second quarter, reflecting interest earned on investment of the remaining proceeds from the sale of Centaur.
Griffin's effective income tax rate was 33.8% in the 2004 second quarter as compared to 34.8% in the 2003 second quarter. The 2004 second quarter effective tax rate reflects a 35% rate for a federal income taxes adjusted for state income taxes and certain tax credits related to foreign income taxes paid by Centaur. The effective tax rate for the 2003 second quarter reflects a 34% rate for federal income taxes adjusted for state income taxes.
Griffin's 2004 second quarter equity income from Centaur through the date of sale was $0.4 million as compared to an equity loss of $0.3 million in the 2003 second quarter. The 2003 second quarter equity loss included a charge, of which Griffin's allocable share was $0.5 million, to accrue future costs (less expected sublease income) for an operating lease of office space that was no longer used by Centaur.
Twenty-Six Weeks Ended May 29, 2004 Compared to the Twenty-Six Weeks Ended May 31, 2003
Net sales and other revenue increased from $25.0 million in the 2003 six month period to $25.4 million in the 2004 six month period, reflecting increases of $0.2 million each at Griffin Land and Imperial.
Net sales and other revenue at Griffin Land increased from $5.6 million in the 2003 six month period to $5.8 million in the 2004 six month period. The increase of $0.2 million reflects revenue from a sale of undeveloped residential land in the 2004 six month period as compared to no land sales revenue in the 2003 six month period. Revenue from leasing operations was $5.6 million in both the 2003 and 2004 six month periods, as increased rental revenue from new leases and an increase in expense reimbursement by tenants during the 2004 six month period was offset by lower billings for services provided to tenants, particularly snow removal.
Net sales and other revenue at Imperial increased from $19.3 million in the 2003 six month period to $19.5 million in the 2004 six month period. Unit sales volume in the 2004 six month period was essentially flat as compared to the 2003 six month period.
Griffin incurred a consolidated operating loss of $1.1 million in the 2004 six month period as compared to consolidated operating profit of $0.3 million in the 2003 six month period. The lower operating results reflect decreases of $0.5 million and $0.3 million in operating results at Imperial and Griffin Land, respectively, and an increase of $0.6 million in general corporate expense.
Operating profit at Griffin Land decreased from $0.6 million in the 2003 six month period to $0.3 million in the 2004 six month period, reflecting the following:
2004 2003
Six Months Six Months
---------- ----------
(amounts in millions)
Profit from leasing activities before general and
administrative expenses and before depreciation
and amortization expense . . . . . . . . . . . . $ 3.1 $ 3.2
Profit from land sales. . . . . . . . . . . . . . . - -
General and administrative expenses . . . . . . . . (1.2) (1.1)
---------- ----------
Profit before depreciation and amortization expense 1.9 2.1
Depreciation and amortization expense . . . . . . . (1.6) (1.5)
---------- ----------
Operating profit. . . . . . . . . . . . . . . . . . $ 0.3 $ 0.6
========== ==========
|
The decrease of $0.1 million in Griffin Land's profit from leasing Activities before general and administrative expenses and before depreciation and amortization expense was due to higher building operating expenses, reflecting higher utility expenses, real estate taxes and repair and maintenance expenses, partially offset by lower snow removal costs. Results from land sales reflect a profit of $0.2 million from the sale of undeveloped residential land offset by the writeoff of $0.2 million of costs on two potential land sale transactions that will not proceed. The increase of $0.1 million in general and administrative expenses reflects higher salary and benefit expenses. The increase of $0.1 million in depreciation and amortization expense principally reflects depreciation on the new 117,000 square foot industrial building completed at the end of fiscal 2003.
Imperial's operating profit decreased from $0.5 million in the 2003 six month period to break even results in the 2004 six month period, as follows:
2004 2003
Six Month Period Six Month Period
---------------- -----------------
(amounts in millions)
Net sales and other revenue. . . . . . . . . $ 19.5 $ 19.3
Cost of goods sold . . . . . . . . . . . . . 17.0 16.2
---------------- -----------------
Gross profit . . . . . . . . . . . . . . . . 2.5 3.1
Selling, general and administrative expenses 2.5 2.6
---------------- -----------------
Operating profit . . . . . . . . . . . . . . $ - $ 0.5
================ =================
|
The $0.5 million decrease in operating profit was due to higher cost of goods sold as a percentage of net sales in the 2004 six month period as compared to the 2003 six month period, which resulted in a decrease in gross profit of $0.6 million. Imperial's gross margin on sales decreased from 16.0% in the 2003 six month period to 12.7% in the 2004 six month period. The higher cost of goods sold reflects increased shipping and delivery costs (as discussed in the 2004 second quarter results) and higher inventory costs. Imperial's selling, general and administrative expenses decreased by $0.1 million in the 2004 six month period as compared to the 2003 six month period. As a percentage of net sales, selling, general and administrative expenses decreased from 13.0% in the 2003 six month period to 12.6% in the 2004 six month period. Decreases of $0.1 million in general and administrative expenses and $0.1 million in marketing expenses in the 2004 six month period were partially offset by higher selling expenses. The lower marketing expenses principally reflect the inclusion in the 2003 six month period of expenses related to the introduction of plants to be sold under the new "Novalis" trade name. The lower general and administrative expenses in the 2004 six month period as compared to the 2003 six month period reflects lower donation and contribution expenses. The increase in selling expenses in the 2004 six month period as compared to the 2003 six month period principally reflects a change in the compensation program for salespersons and an increase in salesperson headcount (as discussed in the 2004 second quarter results).
Griffin's general corporate expense increased from $0.9 million in the 2003 six month period to $1.5 million in the 2004 six month period. The increase principally reflects the 2004 second quarter expenses of $0.3 million for the write off of unamortized debt issuance costs related to the Credit Agreement, which was terminated by Griffin in May 2004, and the write off of $0.1 million of costs associated with a proposed financing that did not take place.
In the 2004 six month period, Griffin completed the sale of its investment in Centaur, recording a pretax gain on the sale of $51.1 million. Griffin also recorded a foreign currency exchange gain of $1.1 million in the 2004 six month period related to a foreign currency exchange contract entered into as a result of the sale of Centaur (see discussion of these transactions in the 2004 second quarter results).
Griffin's consolidated interest expense was $1.3 million in both the 2003 and 2004 six month periods. Higher interest expense in the 2004 first quarter as compared to the 2003 first quarter offset the lower interest expense in the 2004 second quarter as a result of the paydown of the entire amount outstanding under the Credit Agreement with a portion of the proceeds from the sale of Centaur. Griffin had $0.1 million of interest income in the 2004 six month period from investment of the remaining proceeds from the sale of Centaur after repaying the Credit Agreement debt.
Griffin's effective income tax rate was 33.7% for the 2004 six month period, as compared to 35.9% for the 2003 six month period. The 2004 six month period effective tax rate reflects a 35% rate for federal income taxes adjusted for state income taxes and certain tax credits related to foreign income taxes paid by Centaur. The effective tax rate for the 2003 six month period reflects a 34% rate for federal taxes adjusted for state income taxes.
Griffin's 2004 six month period included equity income of $0.3 million through the date of Griffin's sale of its investment in Centaur, as compared to an equity loss of $0.6 million in the 2003 six month period. The 2003 six month period included a charge, of which Griffin's allocable share was $0.5 million, to accrue future costs (less expected sublease income) for an operating lease of office space that was no longer used by Centaur.
Liquidity and Capital Resources
Cash used in operating activities increased from $7.5 million in the 2003 six month period to $17.0 million in the 2004 six month period. The $9.5 million increase in cash used in operating activities principally reflects Griffin's second quarter income tax payments of $10.0 million related to the gain on the sale of Centaur.
Cash provided by investing activities was $67.0 million in the 2004 six month period as compared to cash used in investing activities of $9.8 million in the 2003 six month period. The cash provided by investing activities in the 2004 six month period reflects the proceeds from the sale of Centaur and the foreign currency exchange contract. The net cash used in investing activities in the 2003 six month period reflects $7.4 million used for the acquisition of a 70% interest in a real estate joint venture that owned two office buildings of approximately 80,000 square feet each located in Griffin Center in Windsor, Connecticut. Griffin had previously held the remaining 30% interest. Additions to real estate in 2004 principally reflect tenant improvements, completed in the second quarter, on space in which Griffin Land recently entered into a ten year lease extension with a major tenant. The new lease rates consider these expenditures, including an interest factor, to provide Griffin Land an appropriate return over the lease term on its investment of these initial costs.
Additions to property and equipment, principally for Imperial, were approximately $0.4 million in both the 2003 and 2004 six month periods. The additions in the 2003 six month period were generally for the completion of the expansion of Imperial's northern Florida growing operation that had been ongoing over the prior four years. Additions to property and equipment in the 2004 six month period were to construct facilities needed for a portion of the product to be sold under the new "Novalis" trade name, to increase shipping capacity to meet its needs during its peak spring demand period and for general improvements.
Net cash used in financing activities was $9.6 million in the 2004 six month period as compared to net cash of $17.4 million provided by financing activities in the 2003 six month period. The net cash used in financing activities in the 2004 six month period reflects the paydown of all of the outstanding amounts under the Credit Agreement using a portion of the proceeds from the sale of Centaur. The 2004 six month period also includes $1.5 million of proceeds of an additional mortgage on two industrial buildings. The proceeds were used to finance tenant improvements related to a ten year lease extension by a major tenant in one of those buildings. The net cash generated from financing activities in the 2003 six month period includes the proceeds from a $9.75 million nonrecourse mortgage placed on the two office buildings of the joint venture acquired in December 2002 and borrowings under the Credit Agreement to finance Griffin's operations.
For the balance of fiscal 2004, Griffin is planning to continue to invest in its real estate business. Additional amounts will be required to complete the remainder of the interiors of the shells of an office building and an industrial building that were built on speculation. Currently, each building is partially leased. The buildout of the unleased parts of these buildings will be started when leases are obtained. Griffin Land will also continue to invest in infrastructure improvements required for present and future development in its office and industrial parks. In the second half of fiscal 2004, Griffin Land expects to start construction, on speculation, of the shell of a new approximately 130,000 square foot industrial building in the New England Tradeport. Griffin Land will also continue to seek approval for its proposed residential developments, including a 50 lot subdivision in Suffield, Connecticut, the proposed development in Simsbury, Connecticut that is currently in litigation, and the sale of the remaining development rights of Griffin Land's Walden Woods development in Windsor, Connecticut. Griffin Land has an agreement for the sale of those development rights, and subsequent to the end of the 2004 second quarter, the purchaser received approval of its development plans from the Windsor Town Planning & Zoning Commission. Based on the sale terms, proceeds to Griffin are expected to be approximately $3.0 million, and the transaction is expected to be completed in the 2004 third quarter. Griffin Land recently completed an agreement to sell undeveloped residential land for $0.8 million. The completion of this transaction is contingent on the buyer obtaining approvals from the town's land use commissions. This transaction is not expected to be completed this year. Griffin Land intends to proceed with residential development plans on other of its lands that are also appropriate for that use.
Griffin's payments (including principal and interest) under contractual obligations as of May 29, 2004 are as follows:
Due Due Due Due in
Within From From More Than
Total One Year 1-3 Years 3-5 Years 5 Years
------- -------- --------- --------- ---------
(in millions)
Mortgages. . . . . . . . . . $ 51.0 $ 3.0 $ 6.0 $ 6.1 $ 35.9
Capital Lease Obligations. . 0.4 0.2 0.2 - -
Operating Lease Obligations. 0.7 0.2 0.3 0.2 -
Purchase Obligations. . . . 1.2 1.2 - - -
Other (1). . . . . . . . . . 1.2 - - - 1.2
------- -------- --------- --------- ---------
$ 54.5 $ 4.6 $ 6.5 $ 6.3 $ 37.1
======= ======== ========= ========= =========
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(1) Includes Griffin's deferred compensation plan and other postretirement benefit liabilities.
As a result of the Centaur transaction, Griffin prepaid the entire amount outstanding under its Credit Agreement and subsequently terminated the Credit Agreement. Management believes that the significant amount of cash proceeds, after payment of income taxes, generated from the completion of the Centaur transaction and cash flow generated from its operations will be sufficient to finance the working capital requirements of Griffin's businesses and fund continued investment in Griffin's real estate assets for the foreseeable future. Griffin expects to use the balance of the proceeds from the Centaur sale for additional real estate investment; however, there are no specific real estate investments planned at this time. Such investment may or may not occur based on many factors, including real estate pricing. Griffin Land may also continue to seek nonrecourse mortgage placements on selected properties.
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 improved return on assets of Imperial's operations, successful completion of negotiations for leasing currently vacant space, construction of additional facilities in the real estate business, 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.
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 mortgage 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 repay 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 no variable rate debt outstanding at May 29, 2004. An increase in interest rates of 1% would have increased Griffin's interest expense by approximately $38,000 in the twenty-six weeks ended May 29, 2004.
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.
In connection with the sale of its investment in Centaur, Griffin entered into a foreign currency exchange forward contract with Fleet National Bank to hedge Griffin's exposure to the short-term fluctuation in the foreign currency exchange rate between the time the definitive agreement on the sale of Centaur was completed and the closing of the transaction and receipt of the sale proceeds. Griffin fulfilled its obligation under the contract with the proceeds from the sale of Centaur.
Griffin does not have foreign currency exposure in its operations. Griffin retains an investment in Centaur Holdings PLC, a newly formed public company traded on the Alternative Investment Market of the London Stock Exchange. The ultimate liquidation of this investment and conversion of proceeds into United States currency is subject to future foreign currency exchange rates.
Griffin maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in Griffin's Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to Griffin's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Also, we have investments in certain unconsolidated entities. As we do not control or manage these entities, our disclosure controls and procedures with respect to such entities are necessarily substantially more limited than those we maintain with respect to our consolidated subsidiaries.
As required by SEC Rule 13a-15(b), Griffin carried out an evaluation, under the supervision and with the participation of Griffin's management, including Griffin's Chief Executive Officer and Griffin's Chief Financial Officer, of the effectiveness of the design and operation of Griffin's disclosure controls and procedures as of the end of the quarter covered by this report. Based on the foregoing, Griffin's Chief Executive Officer and Chief Financial Officer concluded that Griffin's disclosure controls and procedures were effective at the reasonable assurance level.
There has been no change in Griffin's internal controls over financial reporting during Griffin's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, Griffin's internal controls over financial reporting.
ITEM 1 Legal Proceedings
As a result of the denials in 2000 by the land use commissions of the town of Simsbury, Connecticut, of Griffin Land's proposed residential development called Meadowood, Griffin Land brought several separate but related suits appealing those decisions. In a ruling released on May 18, 2004, the Supreme Court of the State of Connecticut reversed a lower court ruling which upheld a denial of Griffin's wetlands application related to its proposed residential development by Simsbury's Inland Wetlands Commission (the "Commission"). The Connecticut Supreme Court concluded that the trial court improperly applied the substantial evidence test when it relied on speculative evidence to support the Commission's denial of Griffin's application. The case was remanded to the lower court for further proceedings. There remains outstanding two appeals by Simsbury of lower court decisions favorable to Griffin in separate but related cases involving Griffin's proposed residential development.
ITEMS 2 - 5. Not Applicable
ITEM 6. Exhibits And Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
----------- -----------
10.28 Secured Installment Note and First Amendment of Mortgage and Loan
Documents dated April 16, 2004 among Tradeport Development I, LLC,
Griffin Land & Nurseries, Inc. and Farm Bureau Life Insurance Company
31.1 Certifications of Chief Executive Officer Pursuant to Rule 13a-14(a),
as Adopted Pursuant to Section 301 of the Sarbanes-Oxley Act of 2002
31.2 Certifications of Chief Financial Officer Pursuant to Rule 13a-14(a),
as Adopted Pursuant to Section 301 of the Sarbanes Oxley Act of 2002
32.1 Certifications of Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
32.2 Certifications of Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
(b) Reports on Form 8-K
(1) On March 9, 2004, Griffin filed a Form 8-K which included the Share
Acquisition Agreement and Tax Deed Agreement with respect to the
Sale by Griffin of all of its B Ordinary Shares of Centaur
Communications, Ltd.
(2) On March 10, 2004, Griffin filed a Form 8-K announcing the
completion of the sale of all of its B Ordinary Shares in Centaur
Communications, Ltd.
(3) On March 25, 2004, Griffin filed a Form 8-K on the sale of its
investment in Centaur Communications, Ltd., including pro forma
financial information.
(4) On April 8, 2004, Griffin filed a Form 8-K to announce its 2004
first quarter results of operations.
(5) On May 11, 2004, Griffin filed a Form 8-K regarding the decision
by the Connecticut State Supreme Court on litigation related to
Griffin's proposed residential development in Simsbury, CT.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
GRIFFIN LAND & NURSERIES, INC.
/s/ FREDERICK M. DANZIGER
-------------------------
Date: July 12, 2004
Frederick M. Danziger
President and Chief Executive Officer
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/s/ ANTHONY J. GALICI
----------------------
Date: July 12, 2004
Anthony J. Galici
Vice President, Chief Financial Officer
and Secretary
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Exhibit 10.28
20-25 International Drive
Windsor, CT
SECURED INSTALLMENT NOTE
$1,500,000.00 April 16, 2004
FOR VALUE RECEIVED, the undersigned, TRADEPORT DEVELOPMENT I, LLC, a Connecticut limited liability company having its chief executive office at 204 West Newberry Road, Bloomfield, Connecticut 06002 ("MAKER"), promises to pay to the order of FARM BUREAU LIFE INSURANCE COMPANY, an Iowa corporation or its assigns ("HOLDER") at its principal office located at 5400 University Avenue, West Des Moines, Iowa 50266, or at such other place as Holder may designate in writing, the principal sum of ONE MILLION FIVE HUNDRED THOUSAND AND 00/100 DOLLARS ($1,500,000.00) together with interest from the date advanced on the balance of the principal sum remaining from time to time unpaid at the rate of SIX AND THIRTY HUNDREDTHS PERCENT (6.30%) per annum (the "BASE INTEREST RATE") subject, however, to the provisions of PARAGRAPHS F AND O below. Interest only upon the principal amount outstanding and unpaid shall be computed at the aforesaid rate and shall be paid on the first day of the month following the date hereof or, at Holder's option, on the date hereof. Thereafter, interest shall be computed as aforesaid and such principal and interest shall be payable in monthly installments of Sixteen Thousand Eight Hundred Seventy-Nine and 95/100 Dollars ($16,879.95) the first of which shall be due and payable on the first (1st) day of June, 2004 (the "FIRST MONTHLY PAYMENT DATE"), and the succeeding installments of which shall be due and payable on the first day of each and every month thereafter, except that the entire unpaid balance of said principal and all accrued interest shall be due and payable in full on the first (1st) day of May, 2014 (the "MATURITY DATE"). All terms not otherwise defined herein shall have the same meanings as set forth in the Mortgage (as defined in PARAGRAPH C below). The following terms and provisions shall apply to this Note:
A. All interest referred to and payable pursuant to this Note shall be
calculated on the basis of a three hundred sixty (360) day year consisting of
twelve (12) thirty (30) day months. So long as no Event of Default occurs or
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exists all monthly payments on account of the indebtedness evidenced by this
Note, or otherwise pursuant to this Note, shall be applied in the following
order: (i) first to late charges; (ii) second to the repayment of monies as may
be advanced by Holder under the Mortgage, defined below, with interest thereon,
until such monies are fully repaid, (iii) third to the payment of any costs
(including attorneys' fees) incurred by Holder in enforcing collection hereof;
(iv) fourth to interest on the unpaid principal balance of this Note; and (v)
fifth to the unpaid principal balance of this Note. In the event an Event of
Default occurs or exists Holder shall have the absolute right to apply any and
all monthly payments on account of the indebtedness evidenced by this Note, or
otherwise pursuant to this Note may be applied in any order that Holder deems
appropriate, in its sole and absolute discretion. The obligations of this Note
and the Original Note, as defined in Paragraph C, are intended to be pari passu
obligations.
B. Unless and until Maker is otherwise notified in writing by Holder, all monthly payments due on account of the indebtedness evidenced by this Note shall be made by electronic funds transfer debit transactions utilizing the Automated Clearing House ("ACH") network of the U.S. Federal Reserve System and shall be initiated by Holder from Maker's account (as shall have been previously established by Maker and approved by Holder) at an ACH member bank (the "ACH ACCOUNT") for settlement on the first day of each month as provided hereinabove; provided, however, that if the first day of any such month is a Saturday, Sunday or holiday, then settlement shall be made on the immediately following day which is not a Saturday, Sunday or holiday. Maker hereby authorizes Holder to electronically initiate the transfer of all monthly payments required on this Note by Automated Clearing House transfer of funds from the following ACH member bank:
Attn: Randy Gudawkas
---------------
ABA No: XXXXXXXXX
---------
ACH Account No: XXXXX-XXXXX
-----------
ACH Account Name: Griffin Land & Nurseries, Inc.
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Maker shall, prior to each payment due date, deposit and/or maintain sufficient funds in the ACH Account to cover all debit transactions initiated or to be initiated hereunder by or for Holder.
Concurrently with the delivery of this Note, Maker has executed and delivered written authorization to Holder to effect the foregoing and will from time to time execute and deliver further authorization to effect payment through Automated Clearing House transfer. Maker has delivered to Holder, concurrently with or prior to Maker's execution and delivery of this Note, a voided blank check or a pre-printed deposit form for such ACH Account showing Maker's ACH Account number with the ACH member bank and showing the ACH member bank routing number.
Notwithstanding the foregoing regarding the ACH member bank and the ACH network system, any failure, for any reason (other than a reason completely outside the control of Maker), of the ACH network system or any electronic funds transfer debit transaction to be timely or fully completed shall not in any manner relieve Maker from its obligations to promptly, fully and timely pay and make all payments or installments provided for under this Note when due, and to comply with all other of Maker's obligations under this Note or any other documents evidencing or securing the Note; or relieve Maker from any of its obligations to pay any late charges due or payable under the terms of this Note. Any failure of the ACH network system or of any electronic funds transfer debit transaction to timely or fully complete any payment due hereunder which is completely outside the control of Maker shall not cause Maker to be in default hereunder nor allow for the imposition of any late charges or default interest unless Maker does not cause such payment to be made within two (2) business days after being notified of such failure. Maker shall provide Holder with at least ten (10) days prior written notice of any change in the ACH information provided above and Maker shall not change ACH member banks without first obtaining Holder's written approval.
C. This Note is secured by, among other things, that certain Mortgage, Security Agreement, Financing Statement and Fixture Filing with Absolute Assignment of Rents and Leases dated September 17, 2002 (the "ORIGINAL MORTGAGE") executed by Maker, as grantor, to secure Maker's Secured Installment Note dated September 17, 2002 in the original principal amount of $7,675,000.00 (the "ORIGINAL NOTE") and encumbering certain real and personal property and other rights and improvements, as more particularly described therein (the "MORTGAGED PROPERTY"), as amended by First Amendment of Mortgage and Loan Documents dated as of April __, 2004 (the "FIRST MORTGAGE MODIFICATION"; and such Original Mortgage, as so modified, the "MORTGAGE"). In the event Maker fails to pay any payment of principal or interest or both under this Note or the Original Note on the date the same is due, or if any other or further default occurs or exists under this Note, the Original Note, the Mortgage, or under any other agreement, document or instrument executed, delivered or given to evidence or secure this Note or the Original Note or any sums advanced in connection herewith or therewith (the Mortgage, this Note, the Original Note, and all other such agreements, documents, and instruments are herein collectively called the "LOAN DOCUMENTS"), or if any Event of Default occurs or exists, or upon the filing by Maker of any petition for bankruptcy, reorganization or arrangement pursuant to federal or state law, or the consent to or acquiescence in such filing by or with respect to Maker, then this Note shall be in default and Holder may, without notice to Maker, accelerate the maturity of this Note and the Original Note; provided, however, in the event of the filing of any involuntary petition for bankruptcy, reorganization or arrangement pursuant to federal or state law with respect to Maker to which Maker does not consent to or acquiesce, Maker shall have a sixty (60) day period in which to cure such default and in the event Maker does not cure within said sixty (60) day period then Holder may, without notice to Maker, accelerate the maturity of this Note. Upon acceleration, the entire unpaid principal balance plus all accrued interest thereon, and any Prepayment Premium (defined below) and/or late charges provided for in this Note and in the Original Note, shall, regardless of the Maturity Date specified hereinabove or the maturity date specified in the Original Note, at the option of Holder, be and become immediately due and payable, without any further notice or demand, such notice and demand being expressly waived, anything contained herein, in the Mortgage, in any other of the Loan Documents, or in any other instrument now or hereafter securing this Note or the Original Note to the contrary notwithstanding. Said option shall continue until all such defaults have been cured.
D. The principal of the indebtedness evidenced by this Note may not be prepaid in whole or in any part except as specifically provided in this paragraph.
(2) A "LOAN YEAR" shall be a period of twelve consecutive months, the first of which shall commence on the due date of the first installment of principal and interest hereunder (and the first Loan Year also shall include the period from the date hereof until such date), and each succeeding Loan Year shall commence on the anniversary of such date.
(3) Once Maker notifies Holder of Maker's intention to make any
prepayment permitted under the foregoing provisions of this PARAGRAPH D, Maker
agrees to and shall be required to make the prepayment in accordance with such
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provisions. Maker's failure to do so shall constitute a default under this Note.
(4) The Prepayment Premium required to be paid hereunder is to
compensate Holder, and its successors and assigns, for the loss of interest it
would otherwise earn on the principal hereof if such principal were allowed to
remain outstanding, and for the cost incurred in connection with reinvestment of
principal so prepaid at an earlier date than the Maturity Date. Any prepayment
specified in the notice of intention to prepay referred to above shall become
due and payable at the time provided in said notice (provided that such notice
shall be given in accordance with the terms of this Note). Notwithstanding
anything to the contrary above, the Prepayment Premium shall be payable
regardless of whether or not the indebtedness evidenced by this Note is prepaid
voluntarily or involuntarily or as the result of the exercise by Holder of any
one or more of its rights and/or remedies on any Event of Default under this
Note, the Mortgage or any other Loan Documents or during any period when
prepayment is either not permitted, or is conditionally permitted (except that
no Prepayment Premium shall be payable on involuntary prepayments by reason of:
application of the proceeds of any proceedings in eminent domain, or proceedings
in lieu thereof, or of the proceeds of fire or other casualty insurance or by
operation of Section 7.01 of the Mortgage). Holder shall not be required to
accept, negotiate about or consider any prepayment or tendered prepayment unless
and until all terms and conditions of this Note have been strictly complied
with.
(5) If upon default by Maker hereunder or under the Mortgage and/or other Loan Documents and following the acceleration of the maturity hereof, as herein provided, a tender of payment of the amount necessary to satisfy the indebtedness evidenced hereby is made by Maker, or by anyone on its behalf, prior to a foreclosure sale or trustee's sale held under or pursuant to the Mortgage, such tender shall be deemed to constitute an evasion of the payment terms hereof and shall be deemed to be a prepayment hereunder and any such prepayment shall also include the Prepayment Premium required above in this Note in connection with prepayment, or if, at that time, there be no such privilege of prepayment such payment shall also include a premium for such prepayment in an amount which is the greater of (a) five percent (5%) of the then outstanding principal balance of this Note, or (b) the Yield Maintenance Premium determined in accordance with PARAGRAPH D(1)(B) above.
BY INITIALING BELOW, MAKER EXPRESSLY ACKNOWLEDGES, AGREES AND UNDERSTANDS
THAT, PURSUANT TO THE TERMS OF THIS NOTE, MAKER HAS AGREED THAT MAKER HAS NO
RIGHT TO PREPAY THIS NOTE IN WHOLE OR IN PART FOR THE APPLICABLE PERIOD (THE
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"CLOSED PERIOD") SET FORTH ABOVE IN THIS NOTE; THAT AFTER SUCH CLOSED PERIOD MAKER HAS NO RIGHT TO PREPAY THIS NOTE IN WHOLE OR IN PART WITHOUT PREPAYMENT PREMIUM EXCEPT ONLY AS OTHERWISE EXPRESSLY PROVIDED IN THIS NOTE; AND THAT MAKER SHALL BE LIABLE FOR THE PAYMENT OF A PREMIUM FOR PREPAYMENT OF THIS NOTE ON ACCELERATION OF THIS NOTE IN ACCORDANCE WITH ITS TERMS. FURTHERMORE, BY INITIALING BELOW, MAKER EXPRESSLY ACKNOWLEDGES, AGREES AND UNDERSTANDS THAT HOLDER HAS MADE THE LOAN EVIDENCED BY THIS NOTE IN RELIANCE ON SUCH AGREEMENTS OF MAKER AND HOLDER WOULD NOT HAVE MADE SUCH LOAN WITHOUT SUCH AGREEMENTS.
/S/AG
-------------
Maker's Initials
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E. This Note is given for an actual loan in the above amount and is the promissory note or note referred to in and secured by the Mortgage (together with the Original Note which is also secured by the Mortgage). All of the agreements, conditions and covenants contained in the Mortgage which are to be kept and performed by the Maker are hereby made a part of this Note to the same extent and with the same force and effect as if they were fully set forth herein, and the Maker covenants and agrees to keep and perform them, or cause them to be kept and performed, strictly in accordance with their terms.
F. After the Maturity Date, and/or upon and after the occurrence or existence of any Event of Default under this Note, the Mortgage, or any of the other Loan Documents (including, without limitation, any failure to pay any monthly payment of principal, interest or any other sums on the date due), each and every payment of principal, accrued interest and other sums (including the entire unpaid principal balance of the indebtedness evidenced by this Note in the event of an acceleration of this Note), shall bear interest at the rate of fifteen percent (15%) per annum (the "DEFAULT RATE") until paid in full.
G. The Maker recognizes that default by the Maker in making the payments herein agreed to be paid when due will result in the Holder incurring damages, consisting of, among other things, the incurrence of additional expense in servicing the Loan Documents, loss to the Holder of the use of the money due, and frustration to the Holder in meeting its other financial commitments. Therefore, the Maker agrees that, if, for any reason, the Maker fails to pay when due any payment due under this Note or under any of the other Loan Documents, then the Holder shall be entitled to a payment on account of the damages and detriment caused thereby. The parties hereto acknowledge, however, that it is extremely difficult and impractical to ascertain the extent of such damages; accordingly, the Maker agrees that, if the Maker fails to pay when due any payment due under this Note or under any of the other Loan Documents, then the Maker shall pay to the Holder, promptly upon the Holder's demand therefor, an amount equal to five cents ($0.05) for each dollar ($1.00) overdue, which amount the parties hereto agree represents a reasonable estimate of the damages sustained by the Holder.
H. Time is of the essence hereof and of every payment, obligation or duty to be performed or paid on the part of Maker.
I. Maker agrees that if, and as often as, this Note is placed in the hands of an attorney for collection or to defend or enforce Holder's rights hereunder or under any instrument securing payment hereof, whether or not suit be brought, the Maker will pay to Holder its reasonable attorneys' fees and all court costs and other fees and expenses incurred in connection therewith including, without limitation, any professional or expert witness fees.
J. If Holder advances funds as provided under the Loan Documents, including, but not limited to, advances to pay taxes accrued against the Mortgaged Property or advanced funds to protect the Mortgaged Property or any collateral securing this Note, such advances shall be added to the unpaid principal balance of this Note and shall accrue interest at the Default Rate and shall be and become immediately due and payable without notice or demand.
K. Maker, any and all guarantors and endorsers hereof and all other persons who may be or become liable for all or any part of the obligations or debts hereunder severally waive demand, presentment for payment, protest, notice of protest, notice of nonpayment and notices of every kind and also waive any suretyship and guaranty/guarantor defenses generally. Said parties consent to any extension of time (whether one or more) of payment of this Note, or the release of any party liable for payment or partial payment of this obligation. Any extension or release may be made without notice to any party and without discharging said party's liability hereunder.
L. All notices to be given by Holder to Maker or by Maker to Holder pursuant to this Note shall be sufficient if either (a) mailed by postage prepaid, U.S. certified or registered mail, return receipt requested, or (b) delivered to a nationally recognized overnight delivery service, to the following described addresses of the parties hereto, or to such other address as a party may request in writing: (1) If to Maker, then at its address first set forth above in this Note; and (2) if to Holder, then to 5400 University Avenue, West Des Moines, Iowa 50266, Attn: Real Estate and Commercial Mortgage Manager; with a copy to Morain, Burlingame & Pugh, P.L.C., 5400 University Avenue, West Des Moines, Iowa 50266. Any time period provided in the giving of any notice hereunder shall commence upon, and any notice given in accordance herewith shall be effective upon, the date such notice is deposited in the mail or upon the date delivered to said overnight delivery service, as the case may be.
M. Holder shall not be deemed, by any act of omission or commission, to have waived any of its rights or remedies hereunder unless such waiver is in writing and signed by the Holder, and then only to the extent specifically set forth in the writing. A waiver with reference to one event shall not be construed as continuing or as a bar to or waiver of any right or remedy as to a subsequent event.
N. The remedies of Holder, as provided herein, in the Mortgage and in the other Loan Documents are not exclusive and such remedies, and those otherwise available in law or equity, shall be cumulative and concurrent and may be pursued singularly, successively or together, at the sole discretion of Holder, and may be exercised as often as occasion therefor shall occur; and the failure to exercise any such right or remedy shall in no event be construed as a waiver or release thereof.
O. Notwithstanding anything to the contrary contained in this Note, Maker shall not be obligated to pay, and Holder shall not be entitled to charge, collect, receive, reserve, or take, interest (it being understood that "interest" shall be calculated as the aggregate of all charges which constitute interest under applicable law that are contracted for, charged, reserved, received, or paid) in excess of the maximum non-usurious interest rate, as in effect from time to time, which may be charged, contracted for, reserved, received, or collected by Holder in connection with this Note and the other Loan Documents (such rate, the "HIGHEST LAWFUL RATE"). During any period of time in which the interest rates specified herein exceed the Highest Lawful Rate, interest shall accrue and be payable at the Highest Lawful Rate; provided that, if the interest rates decline below the Highest Lawful Rate, interest shall continue to accrue and be payable at the Highest Lawful Rate (so long as there remains any unpaid principal with respect to the loan evidenced hereby) until the interest that has been paid equals the amount of interest that would have been paid if interest had at all times accrued and been payable at the applicable interest rates specified herein. If, for any reason, Holder receives anything of value as interest or anything deemed interest by applicable law under this Note, any of the other Loan Documents, or otherwise that results in Holder receiving interest in an amount in excess of the Highest Lawful Rate, then the amount of such excess shall be applied to the reduction of the principal amount owing hereunder or on account of any other indebtedness of Maker to Holder, and not to the payment of interest. If, however, the amount of such excess exceeds the unpaid principal balance of all indebtedness of Maker to Holder such amount shall be refunded to Maker. In determining whether or not the interest paid or payable with respect to any indebtedness of Maker to Holder exceeds the Highest Lawful Rate, Maker and Holder shall, to the maximum extent permitted by applicable law: (i) characterize any non-principal payment as an expense, fee or premium rather than as interest; (ii) exclude voluntary prepayments and the effects thereof; (iii) amortize, prorate, allocate and spread the total amount of interest throughout the actual term of such indebtedness so that it does not exceed the maximum amount permitted by applicable law; or (iv) allocate interest between portions of such indebtedness so that, to the greatest extent possible, no such portion shall bear interest at a rate greater than the maximum rate permitted by applicable law. For purposes of this Section, the term "APPLICABLE LAW" means the internal laws of the State of Connecticut, but, to the extent, contrary to the express intent of the parties, such choice of law is found to be inapplicable to this Note, then "APPLICABLE LAW" shall mean that law in effect from time to time and applicable to this loan transaction which lawfully permits the charging and collection of the highest permissible, lawful, non-usurious rate of interest on such loan transaction and this Note, and, to the extent controlling, laws of the United States of America.
P. This Note is to be governed by and construed in accordance with the laws of the State of Connecticut (excluding conflict of laws rules).
Q. In case any one or more of the provisions of this Note shall, for any reason, be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provisions of this Note, and this Note shall be construed as if such invalid, illegal, or unenforceable provision had never been contained herein. If any one or more of the provisions contained in this Note shall for any reason be held to be excessive as to amount, time, duration, scope, activity, or subject, such provisions shall be construed by limiting and reducing it so as to make such provision enforceable to the extent compatible with the law applicable to this Note.
R. Whenever used herein, the singular number shall include the plural, the plural the singular and the words "MAKER" and "HOLDER" shall be deemed respectively to include the named payor and payee under this Note and their respective successors and assigns. The term "MAKER" also shall include any other person who at any time owns all or any portion of the Mortgaged Property, but nothing herein shall authorize Maker to sell, transfer or convey all or any portion of the Mortgaged Property excepted as may be expressly permitted under the Mortgage.
S. All amounts due and payable hereunder shall be due and payable as
provided herein but without any offset, deduction, decrease or hold-back of any
kind for any reason.
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(2) Notwithstanding the provisions of subparagraph (1) of this paragraph, the provisions of this paragraph limiting Holder's recourse shall be null and void and of no force and effect and Maker and all Maker's assets shall be fully liable for, and subject to, judgments, money deficiency judgments and decrees arising from and to the extent of any loss or cost, expense or damage suffered by Holder as a result of or in connection with any one or more of the following:
(i) Maker applying any insurance or condemnation proceeds otherwise than as provided under the Mortgage;
(ii) any act of fraud of Maker (or any trustee, beneficiary, shareholder, member or general partner of Maker) or any fraudulent statement contained herein, in the Mortgage or in any of the other Loan Documents or in any other agreement, certificate or instrument delivered pursuant thereto or in connection therewith;
(iii) any material misrepresentation of Maker or any trustee,
beneficiary, shareholder, member or general partner of Maker in connection with
the Mortgaged Property or any material misrepresentation contained herein, in
the Mortgage or in any of the other Loan Documents or in any other agreement,
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certificate or instrument delivered pursuant thereto or in connection therewith;
(iv) Maker collecting Rents (as defined in the Mortgage) more than one
(1) month in advance or failing to apply Rents in the manner and for the
purposes provided for in the Mortgage and in any other Loan Document; subject,
however, to the operation of Section 5.03 of the Mortgage, which may result in
Maker being permitted to retain a portion of monthly Rents for its own account;
(v) Maker misapplying any security deposits made under any Lease (as defined in the Mortgage);
(vi) Maker failing to comply with the Section 3.19 of the Mortgage or any other provision thereof or of any other Loan Document relating to compliance with Applicable Environmental Laws and/or Legal Requirements (as such terms are defined in the Mortgage);
(vii) any diminution in value of the Mortgaged Property arising from the waste (either actual or permissive) of Maker;
(viii) the amount of any deductible amount under a policy of insurance relating to the Mortgaged Property;
(ix) the failure of Maker to maintain in effect any insurance required under the Mortgage (except the failure to maintain earthquake insurance if Maker is otherwise in compliance with its obligations to maintain the other insurance coverages required by the Loan Documents); or the failure of Maker to pay any taxes and/or assessments required to be paid under the Mortgage or under any other Loan Documents (but only with respect to those taxes and assessments which are due prior to the date that Holder acquires fee title to the Property); and further provided that any Rents received by Holder in excess of the scheduled principal and interest payments due under this Note shall be applied first to any unpaid real estate taxes and other municipal assessments which are due and payable with respect to the Property;
(x) the filing by Maker of any petition for bankruptcy, reorganization or arrangement pursuant to federal or state law, or the consent to or acquiescence in such filing by or with respect to Maker, or if Maker shall institute any proceeding for the dissolution or liquidation of Maker, or if Maker shall make an assignment for the benefit of creditors;
(xi) Maker making any payment to any person to the extent such payment shall be deemed to be a fraudulent conveyance under applicable laws;
(xii) Maker making, directly or indirectly, any unauthorized transfers of any interest in the Mortgaged Property as provided in the Mortgage;
(xiii) Maker making any unauthorized amendments to Leases; and
(xiv) any and all costs and expenses, including attorneys' fees and expenses, incurred by Holder in connection with the enforcement of any of the foregoing recourse provisions.
U. This Note (and, to the extent referred to herein, the Mortgage and the other Loan Documents) constitutes the full and complete integrated agreement with respect to the subject matter hereof and supersedes any prior or contemporaneous oral or written agreements, including, but not limited to, that certain commitment letter dated December 9, 2003 from Holder to L.J. Melody & Company as modified and supplemented (collectively the "COMMITMENT LETTER"). Maker acknowledges that the Commitment Letter may contain terms and provisions different than or in addition to those set forth in this Note, the Mortgage or the other Loan Documents and that this Note, the Mortgage or the other Loan Documents may contain provisions not set forth in the Commitment Letter. By signing this Note, Maker agrees that any such different or additional terms or provisions are superseded by the provisions of this Note, the Mortgage and the other Loan Documents (except that nothing in the foregoing shall supersede any provisions of the Commitment Letter obligating Maker to pay or reimburse to Holder any fees, deposits, costs or expenses in connection with the loan made by Holder to Maker that is evidenced by this Note and such provisions shall remain binding on Maker).
V. By signing below, Maker acknowledges receiving a copy of this Note and acknowledges receiving a copy of all documents signed by Maker in connection with this Note.
W. This instrument may be executed in several counterparts, which together shall constitute but one and the same instrument.
X. THE PARTIES HERETO, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED ON OR ARISING OUT OF THIS AGREEMENT OR INSTRUMENT, OR ANY RELATED INSTRUMENT OR AGREEMENT, OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS, WHETHER ORAL OR WRITTEN, OR ACTION OF ANY PARTY HERETO. NO PARTY SHALL SEEK TO CONSOLIDATE BY COUNTERCLAIM OR OTHERWISE, ANY SUCH ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY ANY PARTY HERETO EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY ALL PARTIES.
IMPORTANT: READ BEFORE SIGNING. THE TERMS OF THIS AGREEMENT SHOULD BE READ CAREFULLY BECAUSE ONLY THOSE TERMS IN WRITING ARE ENFORCEABLE. NO OTHER TERMS OR ORAL PROMISES NOT CONTAINED IN THIS WRITTEN CONTRACT MAY BE LEGALLY ENFORCED. BORROWER MAY CHANGE THE TERMS OF THIS AGREEMENT ONLY BY ANOTHER WRITTEN AGREEMENT. THIS NOTICE ALSO APPLIES TO ANY OTHER CREDIT AGREEMENTS (EXCEPT EXEMPT TRANSACTIONS) NOW IN EFFECT BETWEEN YOU AND THIS HOLDER.
Y. MAKER HEREBY REPRESENTS, COVENANTS AND AGREES THAT IT IS ENGAGED PRIMARILY IN COMMERCIAL PURSUITS, THAT THE PROCEEDS OF THIS NOTE SHALL BE USED FOR GENERAL COMMERCIAL PURPOSES (AND NOT FOR ANY PERSONAL, FAMILY OR HOUSEHOLD PURCHASE, ACQUISITION OR USE) AND THAT THE LOAN IS A "COMMERCIAL TRANSACTION" WITHIN THE MEANING OF SECTION 52-278A(A) OF THE CONNECTICUT GENERAL STATUTES (REV. 1958), AS AMENDED.
MAKER AND EACH ENDORSER, GUARANTOR OR SURETY OF THIS NOTE HEREBY WAIVE ALL RIGHTS TO NOTICE, PRIOR JUDICIAL HEARING OR COURT ORDER UNDER SECTION 52-278A ET SEQ. OF THE CONNECTICUT GENERAL STATUTES (REV. 1958) AS AMENDED OR UNDER ANY OTHER STATE OR FEDERAL LAW WITH RESPECT TO ANY AND ALL PREJUDGMENT REMEDIES THE HOLDER MAY EMPLOY TO ENFORCE ITS RIGHTS AND REMEDIES HEREUNDER.
[Remainder of page intentionally left blank, signature page follows]
IN WITNESS WHEREOF, Maker has caused this Note to be signed and delivered
on the day and year first written above.
MAKER:
TRADEPORT DEVELOPMENT I, LLC
By: River Bend Associates, Inc.,
its Sole Member
By:/S/ANTHONY GALICI
------------------
Name: Anthony Galici
Title: Vice President
|
STATE OF CONNECTICUT )
) ss. HARTFORD
COUNTY OF HARTFORD )
|
/S/THOMAS M. DANIELLS
-----------------------
Name: Thomas M. Daniells
--------------------
Commissioner of
Superior Court
|
[SIGNATURE PAGE TO SECURED INSTALLMENT NOTE]
This FIRST AMENDMENT OF MORTGAGE AND LOAN DOCUMENTS (the "MODIFICATION AGREEMENT") is made as of April 16, 2004 among TRADEPORT DEVELOPMENT I, LLC with a place of business at 204 West Newberry Road, Bloomfield, Connecticut 06002 ("MORTGAGOR"), GRIFFIN LAND & NURSERIES, INC., a Connecticut corporation with a place of business at 204 West Newberry Road, Bloomfield, Connecticut 06002 ("GUARANTOR"), and FARM BUREAU LIFE INSURANCE COMPANY with a place of business at 5400 University Avenue, West Des Moines, Iowa ("MORTGAGEE").
RECITALS
B. Mortgagor, as landlord, and Westinghouse Electric Company, as tenant, are parties to a Lease dated December 6, 2000, as amended by First Amendment to Lease dated April 23, 2001 and Second Amendment to Lease dated September 5, 2003 (the "WESTINGHOUSE LEASE"); references herein to the "ORIGINAL WESTINGHOUSE LEASE" shall mean such Lease as amended by the First Amendment of Lease.
C The parties have agreed to (i) increase the amount of the loan secured by the Mortgage by an additional $1,500,000.00 and to advance the additional sum of $1,500,000.00 to the Mortgagor pursuant to that certain loan commitment dated December 9, 2003 and accepted December 17, 2003 (the "COMMITMENT"), (ii) to evidence such additional loan amount by Mortgagor's execution and delivery of a secured installment note in such amount (the "$1,500,000.00 NOTE") (the Original Note and the $1,500,000.00 Note, the "NOTES") and (iii) modify the Loan Documents to reflect the foregoing matters and to address certain related matters;
D. In furtherance of the foregoing, the Mortgagor has agreed to execute and deliver the $1,500,000.00 Note and the parties have agreed to amend the Loan Documents. The term "LOAN" as used herein shall mean the original loan of $7,675,000.00 and the new loan of $1,500,000.00;
NOW, THEREFORE, in consideration of the terms and conditions herein contained and other good and valuable consideration, the receipt and adequacy of which the parties hereby acknowledge, the parties hereto covenant and agree as follows:
2.1 The definition of "INDEBTEDNESS SECURED HEREBY" in Section 1.09 of the Mortgage is hereby amended and restated as follows:
"(a) "INDEBTEDNESS SECURED HEREBY" means the payment of that certain Secured Installment Note (the "Note") dated September 17, 2002, executed by Mortgagor, as Maker or Mortgagor, 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 and payment of that certain Secured Installment Note (the "$1,500,000 NOTE") dated April 16, 2004 in the original principal amount of One Million Five Hundred Thousand and 00/100 Dollars ($1,500,000) with interest thereon and other sums payable thereunder according to the terms and conditions thereof, together with any replacements, substitutions, modifications, amendments, extensions and renewals (collectively, the "INDEBTEDNESS"); and (b) payment to Mortgagee, its successors and assigns, at the times demanded and with interest at the applicable Default Rate (as defined in the Note and the $1,500,000 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 of any and all sums advanced under this Mortgage from time to time."
2.2 The definition of "OBLIGATIONS" in Section 1.17 of the Mortgage is hereby amended and restated as follows:
"'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 or Mortgagee as set forth in the Loan Documents, inclusive of the $1,500,000 Note and the First Amendment of Mortgage and Loan Documents dated as of April 16, 2004 among Mortgagee, Mortgagor and Griffin Land and Nurseries, Inc."
2.3 Article II of the Mortgage is hereby amended as follows in order to extend the lien of this Mortgage to secure the additional obligations and indebtedness of Mortgagor:
"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 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:
(a) Payment of that certain Security Installment Note (the "NOTE") of even date herewith, executed by Mortgagor, as Maker or Mortgagor, 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) 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.
(b) Payment of the $1,500,000 Note of even date herewith, executed by Mortgagor, as Maker or Mortgagor, to the order of Mortgagee, as Holder, in the original principal amount of One Million Five Hundred Thousand and 00/100 Dollars ($1,500,000.00) having a maturity date of May 1, 2014 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.
(c) Payment to Mortgagee, its successors and assigns, at the times demanded and with interest at the Default Rate (as defined in the Note and the $1,500,000 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.
(d) 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 the $1,500,000 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 visit the Mortgage of record (but the provisions of Section 3.19 below shall survive any such release or discharge)."
3.1 Paragraph C of the Note is hereby amended and restated as follows:
"This Note is secured by, among other things, that certain Mortgage, Security Agreement, Financing Statement and Fixture Filing with Absolute Assignment of Rents and Leases dated September 17, 2002 (the "ORIGINAL MORTGAGE") executed by Maker, as grantor, to secure this Note and Maker's Secured Installment Note dated April 16, 2004 in the original principal amount of $1,500,000.00 (the "$1,500,000 NOTE") and encumbering certain real and personal property and other rights and improvements, as more particularly described therein (the "PROPERTY"), as amended by First Amendment of Mortgage and Loan Documents dated as of April 16, 2004 (the "FIRST MORTGAGE MODIFICATION"; and such Original Mortgage, as so modified, the "MORTGAGE"). In the event Maker fails to pay any payment of principal or interest or both under this Note or the $1,500,000 Note on the date the same is due, or if any other or further default occurs or exists under this Note, the $1,500,000 Note, the Mortgage, or under any other agreement, document or instrument executed, delivered or given to evidence or secure this Note or the $1,500,000 or any sums advanced in connection herewith or therewith (the Mortgage, this Note, the $1,500,000 Note, and all other such agreements, documents, and instruments are herein collectively called the "LOAN DOCUMENTS"), or if any Event of Default occurs or exists, or upon the filing by Maker of any petition for bankruptcy, reorganization or arrangement pursuant to federal or state law, or the consent to or acquiescence in such filing by or with respect to Maker, then this Note shall be in default and Holder may, without notice to Maker, accelerate the maturity of this Note and the $1,500,000 Note; provided, however, in the event of the filing of any involuntary petition for bankruptcy, reorganization or arrangement pursuant to federal or state law with respect to Maker to which Maker does not consent to or acquiesce, Maker shall have a sixty (60) day period in which to cure such default and in the event Maker does not cure within said sixty (60) day period then Holder may, without notice to Maker, accelerate the maturity of this Note. Upon acceleration, the entire unpaid principal balance plus all accrued interest thereon, and any Prepayment Premium (defined below) and/or late charges provided for in this Note and in the $1,500,000 Note, shall, regardless of the Maturity Date specified hereinabove or the maturity date specified in the $1,500,000, at the option of Holder, be and become immediately due and payable, without any further notice or demand, such notice and demand being expressly waived, anything contained herein, in the Mortgage, in any other of the Loan Documents, or in any other instrument now or hereafter securing this Note or the $1,500,000 Note to the contrary notwithstanding. Said option shall continue until all such defaults have been cured."
3.2 The first sentence of Paragraph E of the Note is hereby amended and restated as follows:
"This Note is given for the actual loan in the above amount and is the promissory note or note referred to in and secured by the Mortgage (together with the $1,500,000 Note which is also secured by the Mortgage)."
3.3 The last full paragraph of Paragraph T(2) is hereby amended and restated as follows:
"Further, nothing herein contained shall be deemed to limit, vary, modify or amend any obligation owed to Holder under that certain Environmental Certification and Indemnity Agreement dated of even date herewith executed by Maker and Griffin Land & Nurseries, Inc. ("Griffin Land") in favor of Holder as amended by the First Mortgage Modification (the "Environmental Indemnity Agreement"), or that certain Guaranty dated of even date herewith executed by Maker and Griffin Land in favor of Holder, as amended by the First Mortgage Modification (the "Guaranty"). Notwithstanding the foregoing or
subparagraph (vi) above, Holder agrees that if it has actual knowledge of the ------------ -- existence of an "Environmental Condition" (as defined below) at the time that |
4.1 Section 4 (b) and (c) of the Assignment of Leases are hereby amended and restates as follows:
"(b) Notwithstanding anything to the contrary in this Section 4 or in this Assignment, Assignor hereby presently, absolutely and unconditionally assigns, conveys and transfers to Assignee Assignor's right to collect and receive the termination payments which may become due and payable to Assignor pursuant to the following leases by virtue of such tenant's exercise of their respective rights to cancel their leases (the "TERMINATION PAYMENTS"): (a) Lease between Assignor (as assignee of the rights of Griffin Land & Nurseries, Inc., the initial landlord), as landlord, and Westinghouse Electric Company, LLC ("WESTINGHOUSE"), dated December 6, 2000, as amended by First Amendment to Lease dated April 23, 2001 and Second Amendment to Lease dated September 5, 2003, for 74,880 rentable square feet of space at 20 International Drive, Windsor, Connecticut (the "WESTINGHOUSE LEASE") which provides for a termination payment of $3,500,000.00 (the "WESTINGHOUSE TERMINATION PAYMENT"); and (b) Lease between Assignor (as assignee of the rights of River Bend Associates, Inc., the initial landlord), as landlord, and Pitney Bowes Management Services, Inc., dated March 28, 2002 for 57,190 rentable square feet of space at 25 International Drive, Windsor, Connecticut (the "PITNEY BOWES SPACE") which provides for a termination payment of $450,000.00 (the "PITNEY BOWES TERMINATION PAYMENT"). Assignor acknowledges and confirms that the license to collect Rents granted by Assignee to Assignor herein does not apply to the Termination Payments. Assignee agrees that upon receipt of any such Termination Payments, it shall place the Termination Payments in an interest-bearing account at a financial institution selected by Assignee.
(c) Assignee shall have the right to apply the Westinghouse Termination Payment against payment of the Obligations Secured herby. Assignee acknowledges that Westinghouse is also a tenant of Assignor at 16 International Drive, Windsor, Connecticut under a separate lease agreement (the "OTHER WESTINGHOUSE LEASE"). The Other Westinghouse Lease provides that the Westinghouse Termination Payment payable to Assignor shall be decreased to $2,712, 500.00 if Westinghouse also elects to terminate both the Westinghouse Lease and the Other Westinghouse Lease simultaneously. The Other Westinghouse Lease contains a right of cancellation for the benefit of Westinghouse on the same terms, including the notification requirement and effective cancellation date as are contained in the Westinghouse Lease (but with a required termination payment of $787,500.00). In the event that Westinghouse is only required to pay Assignor $2,712,500.00 with respect to the cancellation of the Westinghouse Lease due to the simultaneous cancellation of the Other Westinghouse Lease, Assignor shall provide satisfactory written evidence to Assignee that Westinghouse has cancelled both Westinghouse Lease as provided in Paragraph 21 of the Second Westinghouse Amendment, and, in such case, Assignee agrees to accept $2,712, 500.00 as the Westinghouse Termination Payment."
4.2 Exhibit B to the Assignment is hereby amended to revise the reference in Exhibit B in the Assignment to the Westinghouse Electric Company Lease to mean such Westinghouse Electric Company Lease dated December 6, 2000, as amended by First Amendment to lease dated April 23, 2001 and Second Amendment to Lease dated September 5, 2003.
5.1 The occurrence of an Event of Default under any of the Loan Documents shall constitute a default under this Modification Agreement and the $1,500,000 Note.
5.2. Each of the following shall be deemed included as an Event of Default under the Mortgage: (a) any failure to make any payment of money or to pay, perform of discharge any monetary or financial obligation on the date when the same is due in accordance with the terms of the $1,500,000 Note and this Modification Agreement; and (b) any failure to perform any of the terms, covenants and conditions of the $1,500,000 Note or this Modification Agreement, provided that such default shall have continued for a period of 20 days after written notice of such a default by Mortgagee, or to the extent such performance cannot reasonably be completed within 20 days for a period reasonably necessary to complete such performance not exceeding a period of 90 days.
5.3 Mortgagor's right to prepay the Original Note and the $1,500,000 Note in the event of the discovery of an "ENVIRONMENTAL CONDITION" shall be subject to the condition that Mortgagor also prepay in full the entire indebtedness evidenced by both the Original Note and the $1,500,000 Note.
8.1 Each of the Loan Documents is hereby deemed modified to evidence and secure the $1,500,000 Note, in addition to the Original Note.
8.2 All references to the "LOAN" shall mean the principal sum evidenced by the Original Note of $7,675,000.00 and the principal sum of $1,500,000.00 evidenced by the $1,500,000 Note.
8.3 All references in the Loan Documents to the Note, Mortgage, Assignment, and Loan Documents shall be deemed to be references to the same as amended hereby, and, effective on the date hereof, the term "LOAN DOCUMENTS" shall include the $1,500,000 Note and this Modification Agreement.
IN WITNESS WHEREOF the parties have executed this Modification Agreement as of the date first written above.
WITNESSED BY: MORTGAGOR
/S/SARA A. TAYLOR TRADEPORT DEVELOPMENT I, LLC
-----------------
Signature of Witness By: River Bend Associates, Inc.,
Print Name: Sara A. Taylor its Sole Member
---------------
/S/THOMAS M. DANIELLS By:/S/ANTHONY GALICI
--------------------- -----------------
Signature of Witness Name: Anthony Galici
Print Name: Thomas M. Daniells Title: Vice President
-------------------
MORTGAGEE
-------------------- FARM BUREAU LIFE INSURANCE COMPANY
Signature of Witness
Print Name:
By:/S/LOUANN SANDBURG
-------------------- ------------------
Signature of Witness Name: LouAnn Sandburg
Print Name: Title: Vice President
Investments
GUARANTOR
/S/SARA A. TAYLOR GRIFFIN LAND & NURSERIES, INC.
-----------------
Signature of Witness
Print Name: Sara A. Taylor
--------------
/S/THOMAS M. DANIELLS By:/S/ANTHONY GALICI
--------------------- -----------------
Signature of Witness Name: Anthony Galici
Print Name: Thomas M. Daniells Title: Vice President
------------------
|
STATE OF CONNECTICUT )
) ss. HARTFORD
|
COUNTY OF HARTFORD )
In witness whereof, I hereunto set my hand.
/S/ SARA A. TAYLOR ------------------ Commissioner of the Superior Court |
STATE OF IOWA )
----
) ss. _________________
COUNTY OF POLK )
----
|
In witness whereof, I hereunto set my hand.
/S/ ANGELA D. STEVENS
---------------------
Notary Public
[Affix Notarial Seal] My Commission Expires:
4 10 06
|
STATE OF CONNECTICUT )
) ss. HARTFORD
COUNTY OF HARTFORD )
|
In witness whereof, I hereunto set my hand.
/S/ SARA A. TAYLOR
------------------
Commissioner of the
Superior Court
[Affix Notarial Seal]
|
Parcel I:
known as 20 International Drive
ALL THAT CERTAIN PIECE OR PARCEL OF LAND with buildings and improvements located thereon situated on the westerly side of International Drive in the Town of Windsor, County of Hartford and State of Connecticut, being more particularly bounded and described as follows:
Beginning at a point on the Westerly line of International Drive, at its
approximate intersection with the East Granby/Windsor town line and which point
marks the Northeasterly corner of the herein described parcel, the lines run:
thence, S 14 -10'-51" W along the Westerly line of International Drive, a
distance of 607.30 feet to a point; thence, by a curve to the right having a
radius of 1375.00 feet and delta angle of 32 -35'-38" along the Westerly line of
International Drive an arc distance of 782.20 feet to a point; thence, along a
curve to the right having a radius of 24.12 feet and delta angle of 94 -17'-02"
along the Northerly line of Stone Road an arc distance of 39.70 feet to a point;
thence, N 41 -06'-10" W along the Northerly line of Stone Road, a distance of
345.01 feet to a point; thence, along a curve to the right having a radius of
25.00 feet and delta angle of 90 -00'-00" along the Easterly line of Stone Road
an arc distance of 39.27 feet to a point; thence, along a curve to the left
having a radius of 425.00 feet and delta angle of 34 -13'-33" along the Easterly
line of Stone Road an arc distance of 253.87 feet to a point; thence, N 14
-40'-18" E along the Easterly line of Stone Road, a distance of 200.00 feet to a
point; thence, N 14 -40'-18" E along the Easterly line of Stone Road, a distance
of 639.72 feet to a point; thence, S 81 -34'-52" E along land now or formerly of
Griffin Land and Nurseries, a distance of 460.48 feet to the point or place of
beginning.
Together with the rights and benefits, if any, set forth in a Declaration of Covenants and Restrictions Easements of Use and to Use by Culbro Corporation dated January 31, 1992 and recorded in Volume 867 at Page 4 of the Windsor Land Records and an Ingress and Egress Easement dated May 7, 2002 and recorded in Volume 1326 at Page 138 of the Windsor Land Records.
Said premises are also shown on a map entitled "Plan Prepared for Griffin Land & Nurseries, Inc., 20 International Drive, Windsor, Connecticut, ALTA/ACSM Land Title Survey Scale: 1"=80' Date: 1-7-2002, Design: RED Draft: SLH Project: 01335 ACAD: 01335.DWG Sheet No. 1 of 1" made by Meehan & Goodin Engineers - Surveyors, P.C., on file in the Office of the Town Clerk of the said Town of Windsor.
LEGAL DESCRIPTION CONTINUED
Parcel II:
known as 25 International Drive
ALL THAT CERTAIN PIECE OR PARCEL OF LAND with buildings and improvements located thereon situated on the easterly side of International Drive in the Town of Windsor, County of Hartford and State of Connecticut, being more particularly bounded and described as follows:
Beginning at a point along the Easterly street line of International Drive which
point marks the Northwest corner of the herein described parcel and Southwest of
land now or formerly of Griffin Land and Nurseries, Inc., 15 International
Drive, the lines run: thence, S 45 -38'-23" E, a distance of 91.12 feet to a
point; and thence, S 71 -33'-29" E, a distance of 415.52 feet to a point, the
last two courses run along land now or formally of Griffin Land and Nurseries,
Inc., 15 International Drive; thence, S 14 -53'-38" W a distance of 629.32 feet
to a point along land now or formerly of John F. and Mary Ann Miliski, 18 Larch
Drive, Karen H. Marquis and Patricia Dineen, 20 Larch Drive, Stanley Prot, 24
Larch Drive, Kenneth Cosker, 28 Larch Drive, Edward Bolasevitch and Janice
Johnston, 32 Larch Drive, Clifton C. and Donalda M. Good, 36 Larch Drive, Arthur
R. and Ronald C. Coons, 40 Larch Drive, and Charlotte C. Johnston, 44 Larch
Drive, partly by each; thence, S 85 -27'-13" W, a distance of 152.46 feet to a
point; thence, N 65 -48'-03" W, a distance of 252.60 feet to a point; thence, N
71 -42'-11" W, a distance of 81.43 feet to a point, the last three courses run
along land now or formerly of Griffin Land and Nurseries, Inc., 35 International
Drive; thence, along a curve to the left having a radius of 1475.00 feet and a
delta angle of 05 -34'-24" and a distance of 143.48 feet to a point; thence, N
12 -43'-25" E, a distance of 561.91 feet to a point, the last three courses run
along the Easterly street line of International Drive to the point or place of
beginning.
Together with the rights and benefits, if any, set forth in a Reciprocal Easement Agreement as dated May 6, 1999 and recorded on May 14, 1999 in Volume 1195 at Page 90 of the Windsor Land Records.
Said premises are also described as follows:
A certain piece or parcel of land situated in the Town of Windsor, County of Hartford and State of Connecticut shown and designated as 25 International Drive Parcel Area = 322,904 S.F. = 7.41 Acres on a certain map entitled "RESUBDIVISION PLAN PREPARED FOR GRIFFIN LAND 25 & 35 INTERNATIONAL DRIVE WINDSOR, CONN.", Scale: 1 IN. = 50 FT., Date: 3-22-99, Revised 3-31-99, 4-08-99 and 4-19-99, prepared by Alford Associates, Inc., Civil Engineers, Windsor, Connecticut, which map is on file in the Windsor Town Clerk's Office as Map No 4727.
Exhibit 31.1
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 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 report;
3. Based on my knowledge, the financial statements, and other financial information included in this 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 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-15e and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in the report our conclusions about the effectiveness
of the disclosure controls and procedures as of the end of the period covered by
this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial data information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.
Date: July 12, 2004 /s/FREDERICK M. DANZIGER
------------------------
Frederick M. Danziger
President and Chief Executive Officer
|
Exhibit 31.2
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 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 report;
3. Based on my knowledge, the financial statements, and other financial information included in this 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 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-15e and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures as of the end of the period covered by
this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.
Date: July 12, 2004 /s/ANTHONY J. GALICI
--------------------
Anthony J. Galici
Vice President, Chief Financial Officer
and Secretary
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Exhibit 32.1
CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 UNITED STATES CODE SS. 1350
In connection with the Quarterly Report of Griffin Land & Nurseries, Inc.
(the "Company") on Form 10-Q for the quarter ended May 29, 2004 as filed with
the Securities and Exchange Commission on the date hereof (the "Periodic
Report"), I, Frederick M. Danziger, President and Chief Executive Officer of the
Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Periodic Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ FREDERICK M. DANZIGER ------------------------- Frederick M. Danziger President and Chief Executive Officer July 12, 2004 |
Exhibit 32.2
CERTIFICATIONS OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 UNITED STATES CODE SS. 1350
In connection with the Quarterly Report of Griffin Land & Nurseries, Inc. (the "Company") on Form 10-Q for the quarter ended May 29, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Periodic Report"), I, Anthony J. Galici, Vice President, Chief Financial Officer and Secretary of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Periodic Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ ANTHONY J. GALICI --------------------- Anthony J. Galici Vice President, Chief Financial Officer and Secretary July 12, 2004 |