First Modification and Waiver



 



Exhibit 10(r)



FIRST MODIFICATION AND WAIVER AGREEMENT

TO THE AMENDED AND RESTATED MASTER CREDIT AGREEMENT



               THIS FIRST MODIFICATION AND WAIVER AGREEMENT (this “Agreement”) is made as
of the 31st day of July, 2003, by and among WACHOVIA BANK, NATIONAL ASSOCIATION
(the “Bank”), SEA PINES ASSOCIATES, INC. and SEA PINES COMPANY, INC. (if more
than one, collectively, the “Borrower”).



WITNESSETH:



               WHEREAS, the Borrower has made and issued to the Bank: (1) a Second
Amended and Restated Revolving Line of Credit Note, dated the 31st day of
October, 2002, evidencing an original indebtedness of EIGHTEEN MILLION THREE
HUNDRED THOUSAND AND NO/100 DOLLARS ($18,300,000.00); (2) a Second Amended and
Restated Term Note, dated the 31st day of October, 2002, evidencing an original
indebtedness of FIFTEEN MILLION NINE HUNDRED THIRTY-NINE THOUSAND SEVEN HUNDRED
FIFTY-EIGHT AND NO/100 DOLLARS ($15,939,758.00); and (3) a Second Amended and
Restated Seasonal Line of Credit Note, dated the 31st day of October, 2002,
evidencing an original indebtedness of FOUR MILLION FIVE HUNDRED THOUSAND AND
NO/100 DOLLARS ($4,500,000.00) (such documents, as same may have been
heretofore amended, being herein referred to as the “Notes”); and



               WHEREAS, the Borrower and the Bank have executed and delivered an Amended
and Restated Master Credit Agreement dated October 31, 2002, made a part hereof
by this reference as fully as if set out herein verbatim (such document, as
same may have been heretofore amended, being herein referenced to as the
“Master Credit Agreement”), which establishes uniform agreements, obligations,
and covenants and other matters concerning the Notes and other Obligations (as
defined in the Master Credit Agreement) of the Borrower to the Bank; and



               WHEREAS, to secure the Notes and other Obligations, the Borrower has
executed and delivered certain Mortgages, Mortgage Modifications, Assignments
and Assignment Modifications (as those terms are defined in the Master Credit
Agreement) made a part hereof by this reference as fully as if set out herein
verbatim (such documents as same may have been heretofore amended, being herein
referred to as the “Security Instruments”); and



               WHEREAS, the Borrower has requested the Bank make certain modifications to
the Master Credit Agreement and to waive certain Events of Default under the
Master Credit Agreement, a portion of such Events of Default having already
been waived pursuant to that certain Waiver dated June 16, 2003 by the Bank,
the terms of which are incorporated herein by reference; and



               WHEREAS, the Bank, as party to the Master Credit Agreement, and the
Borrower mutually desire to modify and amend the provisions of the same in the
manner hereinafter set out, it being specifically understood that except as
herein modified and amended, the terms and provisions of the Master Credit
Agreement shall remain unchanged and continue in full force and effect as
therein written.



               NOW, THEREFORE, the Bank and the Borrower in consideration of One Dollar
($1.00) and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged by each, and each does hereby agree that the
Master Credit Agreement should be, and the same hereby is, modified and amended
as follows:



          1. Section 1.01 of the Master Credit Agreement is hereby amended by adding
to such Section the following definitions, in each case in alphabetical order:




		
	 	     “Deposit” means the deposit, if any, made by Sea Pines
Company, Inc. pursuant to a court order or an agreement between
the parties in an amount sufficient to stop the accrual of
post-judgment interest during the pendency of any appeal of the
Judgment.



 






 







		
	 	     “Judgment” means the judgment rendered in the Lawsuit,
including interest thereon.
	 
	 	     “Judgment Loan Facility” shall have the meaning assigned
thereto in Section 5A.01.
	 
	 	     “Judgment Loan Margin” means (a) in the event the Advances
under the Judgment Loan Facility are less than $4,000,000, 2.10%,
or (b) in the event the Advances under the Judgment Loan Facility
are greater than or equal to $4,000,000 but less than or equal to
$8,000,000, 2.35%.
	 
	 	     “Judgment Note Maturity Date” means July 30, 2005 or as
extended pursuant to any future commitment letter or modification
hereof executed by the Borrower and the Bank.
	 
	 	     “Lawsuit” means that certain lawsuit styled Thomas DiVinere,
Pete Pomranz and Grey Point Associates, Inc. v. Sea Pines Company,
Inc., Civil Action No. 95-CP-07-1893.
	 
	 	     “Loan-to-Value Ratio” shall mean the ratio of aggregate of
all funded and unfunded Obligations to the value of all
Collateral, as determined by Bank in its reasonable discretion
based on appraisals and Financial Statements as required by the
Credit Agreement.
	 
	 	     “Monthly LIBOR Index” means, with respect to each Interest
Period, the rate for U.S. dollar deposits with a maturity equal to
one (1) month, as reported on page 3750 of the Telerate Service
(or such other page as may replace page 3750 of that service or
such other service or services as may be designated by the British
Bankers’ Association for the purpose of displaying London
Interbank offered rates for U.S. dollar deposits) as of 11:00
a.m., London time, on the second London business day before such
Interest Period begins, or, in the case of the first Interest
Period, the second London business day before the first day of the
calendar month during which such Interest Period begins (or if not
so reported, then as determined by the Bank from another
recognized source or interbank quotation).
	 
	 	     “Non-Core Assets” shall have the meaning assigned thereto in
Schedule II.
	 
	 	     “Settlement” means any amount paid by Sea Pines Company, Inc.
in settlement of the Lawsuit.



          2. Section 1.01 of the Master Credit Agreement is hereby further amended
by deleting in their entirety the definitions of “Facilities”, “Notes”, and
“Permitted Encumbrances” and inserting in lieu thereof the following:




		
	 	     “Facilities” means the Term Loan Facility, the Revolving Line
of Credit Facility, the Seasonal Line of Credit Facility and the
Judgment Loan Facility.
	 
	 	     “Notes” mean all promissory notes of the Borrower or any
Subsidiary, whether now existing or hereafter arising, evidencing
the Obligations as appropriately completed, duly authorized and
issued to the Bank, including without limitation the following:




		
	 	     (i) $18,300,000 Second Amended and Restated Revolving
Line of Credit Note of the Borrower dated as of October 31,
2002 (the “Revolving Line of Credit Note”);
	 
	 	     (ii) $4,500,000 Second Amended and Restated Seasonal
Line of Credit Note of the Borrower dated as of October 31,
2002 (the “Seasonal Line of Credit Note”);



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	 	     (iii) $15,939,758 Second Amended and Restated Term Note
of the Borrower dated as of October 31, 2002 (the “Term
Note”); and




		
	 	     (iv) $8,000,000 Judgment Note of the Borrower dated as
of July 31, 2003 (the “Judgment Note”).




		
	 	     “Permitted Encumbrances” means the Judgment and any other
third-party lien, security interest, charge or encumbrance upon
the Collateral created or existing with the express written
consent of the Bank and any purchase money debt for equipment, and
any operating leases, entered into in the ordinary course of
business.



          3. Section 1.01 of the Master Credit Agreement is hereby further amended
by amending the definition of “Applicable Margin” by adding the following
language after the table in the first paragraph of such definition:




		
	 	; provided, further, the Applicable Margin for the Revolving Line
of Credit Note and the Term Note for fiscal periods Fourth Quarter
2003 and First Quarter 2004 (being August 1, 2003 to February 29,
2004) shall be adjusted to the percentage indicated below based on
the Borrower’s DSC Ratio:




	 	 	 	 	 	 
	DSC Ratio	 	Applicable Margin
	
	 	

	< 1.25
	 	1.85% (185 basis points)
	≥ 1.25 but < 1.50
	 	1.65% (165 basis points)
	≥ 1.50 but < 1.75
	 	1.50% (150 basis points)
	≥ 1.75
	 	1.40% (140 basis points)



          4. The Master Credit Agreement is hereby amended by adding the following
new Article V(A) following Article V:




		
	 	     ARTICLE V(A). THE JUDGMENT LOAN FACILITY




		
	 	     5A.01 Subject to the terms and conditions of this Agreement,
the Bank agrees to lend to the Borrower and the Borrower agrees to
borrow from the Bank an amount up to but not exceeding Eight
Million Dollars ($8,000,000), the proceeds of which shall be used
to pay the Judgment, the Deposit or the Settlement, as applicable
(the “Judgment Loan Facility”); provided, that in the event the
Judgment, the Deposit or the Settlement, as applicable, is less
than $8,000,000, the maximum amount permitted to be borrowed under
the Judgment Loan Facility shall be an amount equal to the
Judgment, the Deposit, or the Settlement, as applicable.
	 
	 	     5A.02 The Judgment Note shall bear interest from the date of
the Judgment Note at a rate per annum equal to the Monthly LIBOR
Index plus the Judgment Loan Margin.
	 
	 	     5A.03 All amounts due and owing on the Judgment Loan Facility
shall be paid on the Judgment Note Maturity Date.
	 
	 	     5A.04 The Judgment Loan Facility and all Advances thereunder
shall be repaid by the Borrower to the Bank in strict accordance
with the terms and provisions as set forth in this Agreement and
the Judgment Note.
	 
	 	     5A.05 Interest on the funds drawn by the Borrower under this
Judgment Loan Facility shall be calculated on the basis of actual
days elapsed in a 360-day year based on the Interest Rate set
forth in the Judgment Note.



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          5. Section 7.01(d) of the Master Credit Agreement is hereby amended by
adding “and except for the Lawsuit, the Judgment and the Settlement, if
applicable” following the clause “Except as set forth in the Financial
Statements”.



          6. Section 7.01(f) of the Master Credit Agreement is hereby amended by
deleting the first word of such paragraph and by adding at the beginning of
such paragraph the clause “Except for the Judgment, the”.



          7. Section 8.02(a)(i) of the Master Credit Agreement is hereby amended by
adding the following language following the first sentence of such subsection:



		
	 	; provided, that for the fiscal year ended October 31, 2004, the
Borrower shall not permit the Net Worth Ratio to be greater than
3.5 to 1.0.




          8. The Bank hereby waives the requirement that the Borrower maintain the
Net Worth Ratio specified by Section 8.02(a)(i) for the fiscal year ended
October 31, 2003.



          9. Section 8.02(b) of the Master Credit Agreement is hereby amended by
deleting the period at the end of the first sentence and inserting in lieu
thereof the following proviso:



          ; provided, that with respect to the fiscal quarters identified below, the
Borrower shall maintain a minimum DSC Ratio as identified below, such DSC Ratio
to be measured as of the end of each such fiscal quarter on a rolling
four-quarter basis:




	 	 	 	 	 
	Fiscal Quarter	 	DSC Ratio
	
	 	

	4th Quarter 2003
	 	 	1.10	 
	1st Quarter 2004
	 	 	0.70	 



          10. Section 8.02(b) of the Master Credit Agreement is hereby further
amended by adding the following proviso at the end of the definition of “Debt
Service”:




		
	 	; provided, that beginning with the fiscal quarter ended April 30,
2003, (i) any one-time loss, including Bank-approved related
professional fees, associated with the Lawsuit or the Judgment,
including any Settlement or Deposit and (ii) any gain from the
sale of Non-Core Assets shall be excluded from the calculation of
the DSC Ratio.



          11. Section 8.02 of the Master Credit Agreement is hereby further amended
by adding the following new subsection:




		
	 	     (d) The maximum Loan to Value Ratio under the aggregate of
all funded and unfunded Obligations shall be seventy-five percent
(75%). [



          12. Section 9.01(l) of the Master Credit Agreement is hereby amended by
adding the following language at the end of such subjection:




		
	 	Notwithstanding the foregoing: (i) in the event the total amount
advanced on the Judgment Note, is less than $4,000,000, Sea Pines
Associates, Inc. shall not be subject to any limitations on the
payment of dividends on its preferred stock or interest on any
junior subordinated debentures issued by it in connection with its
trust preferred securities; or (ii) in the event the total amount
advanced on the Judgment Note is greater than or equal to
$4,000,000, Sea Pines Associates, Inc. shall cease payment of (A)
all dividends on its preferred stock other than those previously
declared dividends that are scheduled to be paid on July 15, 2003
and October 15, 2003 and (B) all interest on its junior
subordinated debentures issued in



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	 	connection with its trust preferred securities. The resumption of
such interest and dividend payments shall be subject to Bank’s
sole discretion.



          13. Section 9.01 of the Master Credit Agreement is hereby further amended
by adding the following new subsection:




		
	 	     (m) The Borrower shall not use any Advances made under the
Revolving Line of Credit Note, the Term Note, or the Seasonal Line
of Credit Note to make any payment of the Judgment, the Deposit or
the Settlement, as applicable, and the Borrower shall not use any
Advance made under the Judgment Loan Note for any purpose other
than the payment of the Judgment, the Deposit or the Settlement,
as applicable.



          14. Section 10.01(j) of the Master Credit Agreement is hereby amended by
deleting the first word of such subsection and inserting in lieu thereof
“Except for the Judgment, the Settlement or the Deposit, in”.



          15. Schedule II attached to the Master Credit Agreement is hereby amended
by adding the following language at the end of Section V:




		
	 	All assets other than those addressed in Sections I through V shall
be referred to as the “Non-Core Assets”. Upon release of any
Non-Core Asset, the Bank shall receive a Release Price equal to the
greater of (i) 100% of the net proceeds or (ii) 90% of the Gross
Proceeds. All minimum Release Prices are subject to the Bank’s
review and approval at the Bank’s sole discretion. The Bank agrees
to take into consideration the sale of any assets jointly owned.
More specifically, Release Prices for density units whose sales
proceeds may be shared with other parties shall be calculated based
on the Borrower’s pro rata share of proceeds.



          16. The Bank hereby waives any Event of Default arising from (a) the
existence of the Lawsuit, (ii) the entering of the Judgment and the payment
thereof or of the Deposit, or (iii) the Settlement thereof, if and when the
Borrower determines to pay the Settlement. This waiver is limited solely to
Events of Default arising in connection with the Lawsuit, including but not
limited to the entry of the Judgment thereon, and shall not be effective as to
the occurrence of any other events or matters which would result in an Event of
Default.



The effectiveness of this Agreement shall be conditional upon (a) the Bank’s
receipt of Borrower’s executed counterpart to this Agreement, (b) no occurrence
of any material adverse change in the financial condition of Borrower, and (c)
the Bank’s receipt of a non-refundable loan fee equal to 0.50% of the amount of
the Advance made under the Judgment Loan Facility, not to exceed $40,000 less
the previously paid non-refundable loan fee of $30,000.


               IT IS MUTUALLY AGREED by and between the parties hereto that this
Agreement shall become a part of the Master Credit Agreement by reference and
that nothing herein contained shall impair the security now held for said
indebtedness, nor shall waive, annul, vary or affect any provision, condition,
covenant or agreement contained in the Notes or Master Credit Agreement except
as herein amended, nor affect or impair any rights, powers or remedies under
the Notes or Master Credit Agreement as hereby amended. Furthermore, the Bank
does hereby reserve all rights and remedies it may have as against all parties
who may be or may hereafter become primarily or secondarily liable for the
repayment of the indebtedness evidenced by the Notes.



               The Borrower promises and agrees to pay the indebtedness evidenced by the
Notes in accordance with the terms thereof and agrees to perform all of the
requirements, conditions and obligations under the terms of the Notes and
Master Credit Agreement as hereby modified and amended, said documents being
hereby ratified and affirmed. The execution and delivery hereof shall not
constitute a novation or modification of the lien, encumbrance or security
title of the security instruments, which security instruments shall retain
their priority as originally filed for record. Borrower expressly agrees that
the Notes are in full force and effect and that Borrower has no right to
setoff, counterclaim or defense to the payment thereof.


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               Any reference contained in the Notes, security instruments or Master
Credit Agreement, as amended herein, to the Master Credit Agreement shall
hereinafter be deemed to be a reference to such document as amended hereby.



               Borrower acknowledges that Bank may reproduce (by electronic means or
otherwise) any of the documents evidencing and/or securing the Notes and
thereafter may destroy the original documents. Borrower does hereby agree that
any document so reproduced shall be the binding obligation of Borrower,
enforceable and admissible in evidence against it to the same extent as if the
original documents had not been destroyed; provided, however, any original of a
document executed by the parties shall be conclusive evidence as to the terms
of that document.



               This Agreement shall be closed without cost to the Bank and all expenses
incurred in connection with this closing (including, without limitation, all
attorneys’ fees) are to be paid by the Borrower. The Bank is not providing
legal advice or services to the Borrower.



               This Agreement shall be governed by and construed in accordance with the
laws of the State of South Carolina without regard to principles of conflict of
laws.



               This Agreement shall be binding upon and inure to the benefit of any
assignee or the respective heirs, executors, administrators, successors and
assigns of the parties hereto.



               This Agreement may be executed in any number of counterparts, each of
which shall be an original but all of which taken together shall constitute one
and the same instrument, and any of the parties hereto may execute any of such
counterparts.



               All capitalized terms used but not defined herein shall have the meanings
assigned thereto in the Master Credit Agreement.



[Signature Page Follows.]



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               IN WITNESS WHEREOF, this instrument has been executed under seal by the
parties hereto and delivered on the date and year first above written.




	 	 	 	 	 
	 	 	BANK:
	 	 	 	 	 
	 	 	WACHOVIA BANK, NATIONAL ASSOCIATION
	 	 	 	 	 
	[CORPORATE SEAL]	 	
By:
	 	/s/ Timothy S. Blake
	 	 	 	 	

	 	 	 	 	Its:   Vice President




	 	 	 	 	 
	 	 	SEA PINES ASSOCIATES, INC.
	 	 	 	 	 
	[CORPORATE SEAL]	 	
By:
	 	/s/ Michael E. Lawrence
	 	 	 	 	

	 	 	 	 	Its:   Chief Executive Officer
	 	 	 	 	 




	 	 	 	 	 
	 	 	SEA PINES COMPANY, INC.
	 	 	 	 	 
	[CORPORATE SEAL]	 	
By:
	 	/s/ Steven P. Birdwell
	 	 	 	 	

	 	 	 	 	Its:   Chief Financial Officer



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