UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarter ended June 30, 1994
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File Number: 1-8096
FAIRFIELD COMMUNITIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 71-0390438
(State of Incorporation) (I.R.S. Employer Identification No.)
2800 Cantrell Road, Little Rock, Arkansas 72202
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (501) 664-6000
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
------ ------
APPLICABLE ONLY TO ISSUER INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under
a plan confirmed by a court. Yes X No
------ ------
The number of shares of the registrant's Common Stock, $.01 par value,
outstanding as of August 1, 1994 totaled 10,079,695, of which 160,001 shares
were held by wholly owned subsidiaries of the registrant.
1
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
FAIRFIELD COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
June 30, December 31,
1994 1993
---- ----
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 2,638 $ 4,475
Loans receivable, net 148,574 165,575
Real estate inventories 35,063 34,607
Restricted cash accounts 12,533 11,846
Property and equipment, net 5,610 7,527
Investments in unconsolidated affiliates 5,790 5,790
Net assets of discontinued operations 7,897 8,471
Other assets 15,998 16,292
-------- --------
$234,103 $254,583
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Financing arrangements $119,514 $127,351
Deferred revenue 19,305 20,599
Accounts payable 6,694 7,158
Accrued interest 6,021 6,890
Income taxes payable 2,775 2,589
Other liabilities 15,045 19,555
Net liabilities held for sale 12,427 23,293
-------- --------
181,781 207,435
-------- --------
Stockholders' equity:
Common stock 120 120
Paid-in capital 40,031 38,609
Retained earnings 12,171 8,419
-------- --------
52,322 47,148
-------- --------
$234,103 $254,583
======== ========
</TABLE>
Note: The consolidated balance sheet at December 31, 1993 has been derived from
the audited consolidated financial statements at that date.
See notes to consolidated financial statements.
2
FAIRFIELD COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in thousands, except per share amounts)
(Unaudited)
<TABLE>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES
Vacation ownership, net $16,135 $ 9,451 $22,533 $13,646
Homes and lots, net 4,457 3,153 6,252 4,952
Property management 2,956 3,185 5,696 5,375
Interest 4,905 6,174 10,229 12,554
Savings and loan operations - 5,023 - 9,839
Other 2,512 3,908 5,715 5,705
------- ------- ------- -------
30,965 30,894 50,425 52,071
EXPENSES
Vacation ownership 4,949 2,574 6,982 3,967
Homes and lots 1,791 1,235 2,764 2,039
Provision for loan losses 1,396 935 1,976 1,371
Selling 9,009 5,655 13,315 9,007
Property management 2,460 2,863 4,845 5,225
General and administrative 2,539 2,482 5,074 5,038
Interest, net 2,820 3,886 5,539 8,151
Savings and loan operations - 5,003 - 9,914
Other 2,181 1,300 4,570 2,166
------- ------- ------- -------
27,145 25,933 45,065 46,878
------- ------- ------- -------
Earnings before provision
for income taxes 3,820 4,961 5,360 5,193
Provision for income taxes 1,146 1,639 1,608 1,785
------- ------- ------- -------
Net earnings $ 2,674 $ 3,322 $ 3,752 $ 3,408
======= ======= ======= =======
EARNINGS PER SHARE
Primary $.24 $.30 $.34 $.31
==== ==== ==== ====
Fully diluted $.23 $.28 $.32 $.29
==== ==== ==== ====
WEIGHTED AVERAGE SHARES OUTSTANDING
Primary 11,047,737 11,134,117 11,071,780 11,134,117
========== ========== ========== ==========
Fully diluted 11,670,802 11,722,352 11,707,953 11,722,352
========== ========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
3
FAIRFIELD COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 1994 and 1993
(In thousands)
(Unaudited)
<TABLE>
1994 1993
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 3,752 $ 3,408
Adjustments to reconcile
net earnings to net cash
provided by operating activities:
Depreciation 444 740
Amortization of premiums and
valuation discounts, net 257 (2,057)
Provision for loan losses 1,976 1,545
Earnings from unconsolidated affiliates (707) (1,465)
Changes in operating assets and liabilities, net:
Restricted cash accounts (687) 1
Other (1,055) 1,316
------- -------
Net cash provided by operating activities 3,980 3,488
------- -------
INVESTING ACTIVITIES
Net purchases of property and equipment (178) (828)
Principal collections on loans 35,199 60,726
Loans originated or acquired (22,992) (47,596)
Proceeds from sales of loans to third parties - 17,300
Purchases of investment and
mortgage-backed securities - (34,949)
Payments from maturing investment and
mortgage-backed securities - 17,894
Net cash received from unconsolidated
affiliates 707 1,885
Net investment activities of
discontinued operations (92) 35
Net investment activities of
net liabilities held for sale (10,624) -
-------- --------
Net cash provided by investing activities 2,020 14,467
-------- --------
FINANCING ACTIVITIES
Proceeds from financing arrangements 75,923 8,500
Repayments of financing arrangements (83,760) (35,335)
Net increase in demand, savings and
money market accounts - 2,750
Proceeds from sales of certificates
of deposit - 7,649
Payments for maturing certificates
of deposit - (20,955)
-------- --------
Net cash used in financing activities (7,837) (37,391)
-------- --------
Net decrease in cash and cash equivalents (1,837) (19,436)
Cash and cash equivalents,
beginning of period 4,475 60,921
-------- --------
Cash and cash equivalents, end of period $ 2,638 $ 41,485
======== ========
</TABLE>
See notes to consolidated financial statements.
4
FAIRFIELD COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1994
(Unaudited)
The accompanying unaudited financial statements of Fairfield Communities,
Inc. ("Fairfield") and its wholly owned subsidiaries (collectively, the
"Company") have been prepared in accordance with generally accepted accounting
principles for interim financial statements and with the instructions to Form
10Q and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
the statements for the unaudited interim periods include all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation of the financial position and the results of operations of
the Company for such periods. Results of operations for the periods ended
June 30, 1994 are not necessarily indicative of the results of operations that
may be expected for a full year or any interim period. Certain previously
reported amounts have been reclassified to conform to the presentation used for
the current period. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Annual Report on
Form 10-K, as amended, of the Company for the year ended December 31, 1993.
The accompanying consolidated financial statements, and related notes thereto,
include the accounts of the Company with all significant intercompany
transactions eliminated.
NOTE 1 - FIRST FEDERAL
- - ------ -------------
On April 6, 1994, Fairfield entered into a Stock Purchase Agreement to
sell the stock (the "Sale") of its wholly owned subsidiary, First Federal
Savings and Loan Association of Charlotte ("First Federal"), to Security
Capital Bancorp ("SCBC").
The Stock Purchase Agreement provides for a sales price of $40.4
million, which will be increased (subject to the limitation hereafter
described) to reflect the consolidated pretax net earnings of First Federal
and its subsidiaries for the period from October 1, 1993 through the closing
of the Sale, or decreased by the consolidated pretax net losses of First
Federal and its subsidiaries during this time period, whichever is the case
(the "Sales Price"). The increase for pretax earnings of First Federal and its
subsidiaries cannot exceed $1.8 million plus, if the closing of the Sale
occurs after August 1, 1994, in general, the pretax earnings or losses of
First Federal and its subsidiaries from August 1, 1994 through the closing,
provided that the foregoing amounts may be reduced under certain circumstances
for reserves taken or losses (in excess of gains) on Excluded Assets (as defined
below) after September 30, 1993. Up to approximately $1.4 million of the
Sales Price is to be retained by SCBC to securitize Fairfield's obligation
to indemnify SCBC against three existing lawsuits/claims which have been
asserted against First Federal (the "Litigation Indemnity").
As part of the proposed transaction, Fairfield is to purchase for cash
(a) at book value, net of reserves, up to approximately $17.3 million, as of
June 30, 1994, certain real estate, classified loans, joint venture
interests and other assets owned by First Federal (the "Excluded Association
Assets"), subject to the right of SCBC to elect for First Federal to retain all
or part of such assets, and (b) lot and timeshare contracts receivable and
related assets which First Federal previously acquired from Fairfield (the
"Contracts Receivable"), having a book value less certain reserves and a
weighted average yield, at June 30, 1994, of approximately $45.3 million and
11.6%, respectively. The Excluded Assocation Assets and Contracts Receivable
are collectively referred to as the "Excluded Assets". Fairfield expects to
5
dispose of certain of the Excluded Association Assets in one or more
transactions and otherwise to monetize the remaining Excluded Association
Assets, following the closing of the Sale. Management intends to dispose of a
substantial portion of the Excluded Association Assets by December 31, 1994.
Approximately $2.9 million of the Excluded Association Assets are to be
pledged to SCBC, to provide additional security with respect to both the
Litigation Indemnity and the general indemnities under the Stock Purchase
Agreement. Fairfield has certain rights to substitute collateral in connection
with such pledge, including the right to substitute $0.60 to $0.70 of cash for
every $1.00 of net book value of Excluded Association Assets so pledged.
Fairfield expects to utilize (a) the cash portion of the Sales Price to
fund the purchase of the Excluded Association Assets and (b) the remaining
cash portion of the Sales Price, plus proceeds from borrowings under the
Company's revolving credit agreements with The First National Bank of Boston
("FNBB"), to fund the purchase of the Contracts Receivable. Under the
Company's revolving credit agreements, in general, within applicable loan
limits, $0.75 of additional borrowing availability is created for each $1.00
in outstanding principal balance of qualifying Contracts Receivable pledged
to FNBB.
Management estimates that the Sale will result in a net gain of
approximately $5.5 million after taking into account (i) writedowns related to
the Excluded Assets estimated at approximately $4.0 million based upon
Fairfield's accelerated method of disposal of these assets subsequent to the
consummation of the Sale, and (ii) anticipated selling expenses, including
professional fees and other direct expenses of approximately $3.3 million.
The Sale is subject to numerous conditions, including obtaining
the necessary approval from Fairfield's stockholders. There is no assurance
that the conditions to closing will be satisfied. Assuming such conditions
to closing are satisfied and the approvals are obtained, the sale is expected
to close by September 30, 1994.
The operations related to the assets to be sold and the liabilities to
be assumed by the purchaser for periods prior to January 1, 1994 have been
reflected in the Consolidated Statements of Earnings as "Savings and loan
operations". Effective January 1, 1994, the net savings and loan operations
have been deferred as the Company estimates that the Sale will result in a net
gain. Additionally, the assets to be sold and the liabilities to be assumed
by the purchaser are included in "Net liabilities held for sale" in the
Consolidated Balance Sheets as of June 30, 1994 and December 31, 1993.
A summary of net liabilities held for sale is as follows (In thousands):
<TABLE>
June 30, December 31,
1994 1993
---- ----
<S> <C> <C>
Cash $ 10,089 $ 14,205
Loans receivable, net 145,257 157,178
Real estate owned 13,725 15,322
Investment and mortgage-
backed securities 75,279 76,708
Other 14,560 15,476
-------- --------
258,910 278,889
Savings deposits (253,889) (276,672)
Advances from Federal Home Loan Bank (12,858) (20,907)
Other liabilities (4,590) (4,603)
--------- ---------
$ (12,427) $ (23,293)
========= =========
</TABLE>
6
Pro forma financial information for the six months ended June 30, 1994 as
if the Sale had occurred as of January 1, 1994 is as follows: revenues - $50.4
million; earnings from continuing operations before gain on the Sale - $3.0
million; earnings per share from continuing operations before gain on the Sale
(primary) - $.27; earnings per share from continuing operations before gain on
Sale (fully diluted) - $.26.
NOTE 2 - VACATION OWNERSHIP SALES
- - ------ ------------------------
Vacation ownership sales are summarized as follows (In thousands):
<TABLE>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Vacation ownership sales $15,731 $ 9,571 $21,486 $13,425
Less: Deferred revenue on
current year sales, net (325) (889) (1,054) (947)
Add: Deferred revenue on
prior year sales 729 769 2,101 1,168
------- ------ ------- ------
$16,135 $9,451 $22,533 $13,646
======= ====== ======= =======
</TABLE>
NOTE 3 - LOANS RECEIVABLE
- - ------ ----------------
Loans receivable consisted of the following (In thousands):
<TABLE>
June 30, December 31,
1994 1993
---- ----
<S> <C> <C>
Contracts $147,574 $159,874
Mortgages 12,815 17,366
-------- --------
160,389 177,240
Less: Allowance for loan losses (11,284) (10,992)
Unamortized valuation discount (531) (673)
-------- --------
$148,574 $165,575
======== ========
</TABLE>
Contracts receivable at June 30, 1994 and December 31, 1993 includes $43.6
million and $52.5 million, respectively, of contracts receivable owned by
First Federal which are to be purchased by Fairfield (see Note 1).
NOTE 4 - REAL ESTATE INVENTORIES
- - ------ -----------------------
Real estate inventories are summarized as follows (In thousands):
<TABLE>
June 30, December 31,
1994 1993
---- ----
<S> <C> <C>
Land:
Under development $ 8,850 $ 9,490
Undeveloped 15,050 14,771
------- -------
23,900 24,261
------- -------
Residential housing:
Vacation ownership 9,314 8,759
Homes 1,849 1,587
------- -------
11,163 10,346
------- -------
$35,063 $34,607
======= =======
</TABLE>
7
NOTE 5 - FINANCING ARRANGEMENTS
Financing arrangements are summarized as follows (In thousands):
<TABLE>
June 30, December 31,
1994 1993
---- ----
<S> <C> <C>
Revolving credit agreements $ 11,321 $ 12,223
Notes payable 93,423 100,358
Senior Subordinated Notes 14,770 14,770
-------- --------
$119,514 $127,351
======== ========
</TABLE>
Notes payable include $76.3 million and $81.6 million at June 30,
1994 and December 31, 1993, respectively, of 7.6% Notes (the "FFC Notes")
secured by a pool of contracts receivable totaling $85.4 million and
$91.8 million, respectively.
NOTE 6 - SUPPLEMENTAL INFORMATION
- - ------ ------------------------
Other revenues for the six months ended June 30, 1994 and 1993 include
cash distributions totaling $.7 million and $1.4 million, respectively,
related to the Company's 35% partnership interest in Harbour Ridge, Ltd., a
limited partnership engaged in the development of a tract of land in St. Lucie,
Florida. Also included in other revenues for the six months ended June 30,
1993 is (i) $.5 million related to the recovery on a previously written off
note receivable and (ii) $.5 million related to the recovery of certain
professional fees. There were no similar revenues for the six months ended
June 30, 1994.
Other revenues and expenses for the six months ended June 30, 1994 also
include $3.3 million and $3.0 million, respectively, relating to bulk
asset sales and related cost of sales. During the six months ended
June 30, 1993, bulk asset sales and related costs of sales totaled
$1.1 million and $.8 million, respectively.
For each of the six month periods ended June 30, 1994 and 1993,
benefits realized from the utilization of pre-confirmation net operating loss
carryforwards and recognition of pre-confirmation deductible temporary
differences of $1.4 million were recorded as reductions of the Company's
valuation allowance for deferred tax assets and as additions to paid-in capital.
The effective tax rate for the three and six months ended June 30, 1994 varies
with the statutory rate due to adjustments to reduce tax accruals to reflect
current estimates of liabilities as well as adjustments to reduce other
expense accruals which were considered nondeductible in prior periods.
Reorganization expenses paid totaled $.5 million and $4.2 million for
the six months ended June 30, 1994 and 1993, respectively. Interest paid
totaled $12.1 million and $14.9 million for the six months ended June 30, 1994
and 1993, respectively. Of these amounts, $6.3 million and $6.7 million,
respectively, were related to First Federal.
8
NOTE 7 - FAIRFIELD ACCEPTANCE CORPORATION ("FAC")
Condensed consolidated financial information for FAC is summarized as
follows (In thousands):
Condensed Consolidated Balance Sheets
<TABLE>
June 30, December 31,
1994 1993
---- ----
<S> <C> <C>
ASSETS
Cash $ 648 $ 711
Loans receivable, net 91,358 94,668
Restricted cash and escrow accounts 10,397 10,602
Due from parent 11,370 7,392
Other assets 2,424 3,113
-------- --------
$116,197 $116,486
======== ========
LIABILITIES AND EQUITY
Notes payable $ 76,280 $ 81,559
Revolving credit agreement 7,235 4,283
Accrued interest and other liabilities 613 745
Equity 32,069 29,899
-------- --------
$116,197 $116,486
======== ========
</TABLE>
Condensed Consolidated Statements of Operations
<TABLE>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $3,117 $3,941 $6,306 $7,519
Expenses 1,979 2,123 3,985 4,435
------ ------ ------ ------
Earnings before provision
for income taxes 1,138 1,818 2,321 3,084
Provision for income taxes 436 696 889 1,181
------ ------ ------ ------
Net earnings $ 702 $1,122 $1,432 $1,903
====== ====== ====== ======
</TABLE>
NOTE 8 - DISCONTINUED OPERATIONS
- - ------ -----------------------
A summary of net assets of discontinued operations is as follows (In
thousands):
<TABLE>
June 30, December 31,
1994 1993
---- ----
<S> <C> <C>
Property and equipment $ 9,936 $21,429
Real estate inventories - 15,652
------- -------
9,936 37,081
Revolving credit agreement - (19,933)
Notes payable (1,447) (2,458)
Accrual for losses (592) (6,219)
------- -------
$ 7,897 $ 8,471
======= ========
</TABLE>
9
In March 1994, Fairfield sold the stock of its wholly owned subsidiaries,
Fairfield Green Valley, Inc. and Fairfield Sunrise Village, Inc. (collectively,
the "Arizona Subsidiaries") at approximate book value. The consideration
received by Fairfield included (i)release of a lien on and transfer to Fairfield
of 2,235,294 shares of Fairfield's Common Stock owned by the Arizona
Subsidiaries and pledged to their primary lender,an affiliate of Bank of America
Arizona (the "Bank"),(ii) release of a mortgage in favor of the Bank on a tract
of unimproved property owned by Fairfield, and (iii) release from any further
liability to the Bank. Subsequent to the closing, Fairfield recorded the shares
of its Common Stock previously owned by the Arizona Subsidiaries as treasury
stock.
NOTE 9 - CONTINGENCIES
- - ------ -------------
In June 1992, the Pagosa Lakes Property Owners Association ("PLPOA") filed
an adversary proceeding in the Bankruptcy Court for the Eastern District of
Arkansas, Western Division (the"Bankruptcy Court") asserting equitable ownership
or lien interests in certain recreational amenities, including golf courses. In
March 1994, the Bankruptcy Court issued its decision upholding Fairfield's
ownership of the Pagosa recreational amenities,subject to a restrictive covenant
allowing Pagosa property owners and their guests to use the recreational
amenities. The PLPOA has filed an appeal of the Bankruptcy Court's decision with
the United States District Court,Eastern District of Arkansas, Western Division.
The issues on appeal have been briefed and the parties are awaiting a decision.
In August 1992, the PLPOA filed an appeal of the Bankruptcy Court's final
order confirming Fairfield's plan of reorganization. This appeal is pending
before the United States District Court, Eastern District of Arkansas, Western
Division. The basis for the appeal is the PLPOA's position that Fairfield should
have been required to resolicit the plan of reorganization due to its amendment
in accordance with the Bankruptcy Court's conditional confirmation order to
eliminate any recovery for Fairfield's previous stockholders. The Bankruptcy
Court rejected this argument, finding that the property owner group lacked
standing to raise this issue, and in management's opinion, the appeal is without
merit and moot, since the plan of reorganization has been substantially
implemented. The issues on appeal have been briefed, but no decision has been
rendered.
The PLPOA and Archuleta County have filed claims, which are largely
duplicative, in the Bankruptcy Court for approximately $10.4 million and $9.7
million, respectively,for promised improvements to be constructed at the Pagosa,
Colorado resort site and other matters. Any claim allowed by the Bankruptcy
Court would be limited in recovery under the Plan of Reorganization to Fairfield
Common Stock. Trial was held in May, 1994, and the parties are in the process of
briefing the issues associated with these claims. No decision has been rendered.
On or about July 21, 1993 and September 9, 1993, two lawsuits (the
"Recreation Fee Litigation") were filed by 29 individuals and a company against
Fairfield in the District Court of Archuleta County, Colorado. The Recreation
Fee Litigation, which seeks certification as class actions, alleges that
Fairfield and its predecessors in interest wrongfully imposed an annual
recreation fee on owners of lots, condominiums, townhouses, VOIs and single
family residences in Fairfield's Pagosa, Colorado development. The amount of the
recreation fee, which was adopted in August, 1983, is $180 per lot, condominium,
townhouse and single family residence subject to the fee and $360 per unit for
VOIs. The Recreation Fee Litigation in general seeks (a) a declaratory judgment
that the recreation fee is invalid; (b) the refund, with interest, of the
recreation fees which were allegedly improperly collected by Fairfield; (c)
damages arising from Fairfield's allegedly improper attempts to collect the
recreation fee (i) in an amount of not less than $1,000 per lot in one case and
(ii) in an unstated amount in the other case; (d) punitive damages; and (e)
recovery of costs and expenses, including attorneys' fees. The court has not yet
ruled on whether or not the Recreation Fee Litigation will be allowed to proceed
10
as class actions or on whether the cases will be consolidated. Because of the
preliminary nature of the litigation and uncertainty concerning the time period
covered by the suits' allegations, Fairfield is unable to determine with any
certainty the dollar amount sought by plaintiffs, but believes it to be
material.
On November 3, 1993, Fairfield filed an adversary proceeding in the
Bankruptcy Court, alleging that the Recreation Fee Litigation violates the
discharge granted to Fairfield in its Chapter 11 bankruptcy reorganization and
the injunction issued by the Bankruptcy Court against prosecution of any claims
discharged in the bankruptcy proceedings. The Colorado State Court separately
has stayed further proceedings in the Recreation Fee Litigation pending decision
by the Bankruptcy Court.
Fairfield intends to defend vigorously the Recreation Fee Litigation.
Fairfield has previously implemented recreation fee charges at certain other of
its resort sites which are not subject to the pending action.
On December 10, 1993, Charlotte T. Curry, who, with her husband, purchased
a lot from Fairfield under an installment sale contract subsequently sold to
First Federal, filed suit against First Federal, currently pending in Superior
Court in Mecklenburg County, North Carolina, alleging breach of contract, breach
of fiduciary duty and unfair trade practices. On April 8, 1994, the complaint
was amended, (a) adding Fairfield as a party, (b) adding an additional count
against both Fairfield and First Federal alleging violation of the North
Carolina's Racketeer Influenced and Corrupt Organizations ("RICO") Statute and
(c) adding a count against Fairfield alleging fraud. The litigation, which seeks
class action certification, contests the method by which Fairfield calculated
refunds for lot purchasers whose installment sale contracts were canceled due to
failure to complete payment of the deferred sales price for the lot. Most
installment lot sale contracts require Fairfield to refund to a defaulting
purchaser the amount paid in principal, after deducting the greater of (a)15% of
the purchase price of the lot or (b) Fairfield's actual damages. The plaintiff
disputes Fairfield's method of calculating damages, which has historically
included certain sales, marketing and other expenses. In the case of Ms. Curry's
lot, the amount of refund claimed as having been improperly retained is
approximately $3,600. The Curry lawsuit seeks damages, punitive damages, treble
damages under North Carolina law for unfair trade practices and RICO,prejudgment
interest and attorney's fees and costs. By order dated July 6, 1994, the court
dismissed Ms. Curry's claims for (a) breach of contract, due to the statute of
limitations, (b) breach of fiduciary duty, due to the lack of a fiduciary duty
and the statute of limitations,(c) fraud, due to the statute of limitations, and
d) RICO, due to failure to state a claim. The court, following a hearing on
August 9,1994, verbally dismissed Ms. Curry's claim against Fairfield for unfair
trade practices and required that Ms. Curry add her husband as an additional
plaintiff and indispensable party to the action within 30 days, failing which,
the action would be dismissed. The court has not yet addressed whether Ms. Curry
is an appropriate class representative and has not certified the case as a class
action.
Fairfield and First Federal intend to defend the Curry litigation
vigorously. Fairfield also cancels defaulted lot installment sales contracts
owned by it and its subsidiaries (other than First Federal), using the same
method of calculating refunds as is at issue in the Curry litigation.
11
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- - ------ -----------------------------------------------------------------------
OF OPERATIONS
--------------
RESULTS OF CONTINUING OPERATIONS
SIX MONTHS ENDED JUNE 30, 1994 COMPARE TO SIX MONTHS ENDED JUNE 30, 1993
Vacation Ownership
------------------
Gross vacation ownership interval ("VOI") revenues totaled $21.5 million
and $13.4 million for the six months ended June 30, 1994 and 1993, respectively.
This improvement is reflective of (i) increased sales volumes at several of the
Company's sites and (ii) additional sales at the Company's newest destination
site at Branson, Missouri, which began sales efforts in June 1993.
Net VOI revenues increased to $22.5 million for the six months ended June
30, 1994 from $13.6 million for the six months ended June 30, 1993. The increase
in net VOI revenues is attributable to the same factors as noted above, plus the
recognition of an additional $.8 million in 1994 of previously deferred revenue
related to the percentage of completion method of accounting. Under this method,
the portion of revenues attributable to costs incurred as compared to total
estimated construction costs and selling expenses,is recognized in the period of
sale. The remaining revenue is deferred and recognized as the remaining costs
are incurred.
VOI cost of sales, as a percentage of revenues, was 31% for the six months
ended June 30, 1994 as compared to 29.1% from the comparable period in 1993. The
fluctuation in the percentage is primarily attributable to the mix of the
products sold and the varying acquisition and development costs at certain sites
Selling expenses, including commissions, for both VOI and lot sales, as a
percentage of related revenues, were 48.4% and 50.1%, for the six months ended
June 30, 1994 and 1993, respectively. The decrease in selling expenses, as a
percentage of related revenues, is primarily attributable to efficiencies in
sales overhead resulting from increases in sales volumes.
Homes and Lots
--------------
In 1994 and 1993, sales of homes and lots were concentrated primarily with
the Company's development located at Fairfield Glade, Tennessee. Home and lot
revenues at Fairfield Glade totaled $5.3 million and $4.2 million for the six
months ended June 30, 1994 and 1993, respectively. The Company anticipates that
future sales of homes and lots will continue to be concentrated at Fairfield
Glade.
Property Management
-------------------
Net property management income totaled $.9 million for the six months ended
June 30, 1994 as compared to $.2 million for the six months ended June 30, 1993.
This improvement reflects increased property management revenues coupled with
more effective cost controls.
Interest
--------
Interest income totaled $10.2 million for the six months ended June 30,
1994 as compared to $12.6 million for the six months ended June 30, 1993. The
decrease in 1994 is primarily attributable to a lower average balance of
outstanding contracts receivable (1994 - $149.7 million; 1993 - $186.5
million), resulting primarily from principal collections exceeding originations.
Interest expense, net of capitalized interest, totaled $5.5 million and
$8.2 million for the six months ended June 30, 1994 and 1993, respectively. The
decrease in 1994 is primarily attributable to the restructuring of the Company's
12
debt in September 1993 which contributed to (i) reductions in the average
outstanding balance of interest-bearing debt (1994 - $122.8 million; 1993 -
$132.9 million) and (ii) a decrease in the weighted average interest rates
between the respective periods.
Other
----
Other revenues for the six months ended June 30, 1994 and 1993 include cash
distributions totaling $.7 million and $1.4 million,respectively, related to the
Company's 35% partnership interest in Harbour Ridge, Ltd., a limited partnership
engaged in the development of a tract of land in St. Lucie, Florida. Also
included in other revenues for the six months ended June 30, 1993 is (i) $.5
million related to the recovery on a previously written off note receivable and
(ii) $.5 million related to the recovery of certain professional fees. There
were no similar revenues for the six months ended June 30, 1994.
Other revenues and expenses for the six months ended June 30, 1994 also
include $3.3 million and $3.0 million,respectively, relating to bulk asset sales
and related cost of sales. During the six months ended June 30, 1993, bulk asset
sales and related costs of sales totaled $1.1 million and $.8 million,
respectively.
THREE MONTHS ENDED JUNE 30, 1994 COMPARED TO THREE MONTHS ENDED JUNE 30, 1993
Revenue and expense trends for the three months ended June 30, 1994 were
generally consistent with those of the related six month period as described
above with (i) an increase in gross and net VOI sales, (ii) a slight decrease in
selling expenses as a percentage of related revenues, and (iii) decreases in
interest income and interest expense.
Other revenues for the three months ended June 30, 1994 and 1993 include
cash distributions totaling $.3 million and $1.1 million, respectively, related
to the Company's 35% partnership interest in Harbour Ridge, Ltd. Also included
in other revenues for the three months ended June 30, 1993 is (i) $.5 million
related to the recovery on a previously written off note receivable and (ii) $.5
million related to the recovery of certain professional fees. There were no
similar revenues for the three months ended June 30, 1994.
Other revenues and expenses for the three months ended June 30, 1994
include $1 million and $.9 million, respectively, relating to bulk asset sales
and related cost of sales. During the three months ended June 30, 1993, bulk
asset sales and related costs of sales totaled $.7 million and $.4 million,
respectively.
PROVISION FOR INCOME TAXES
For each of the six month periods ended June 30, 1994 and 1993, benefits
realized from the utilization of pre-confirmation net operating loss
carryforwards and recognition of pre-confirmation deductible temporary
differences of $1.4 million were recorded as reductions of the Company's
valuation allowance for deferred tax assets and as additions to paid-in capital.
The effective tax rate for the three and six months ended June 30, 1994 varies
with the statutory rate due to adjustments to reduce tax accruals to reflect
current estimates of liabilities as well as adjustments to reduce other expense
accruals which were considered nondeductible in prior periods.
FINANCIAL CONDITION
Total consolidated assets of the Company decreased $20.5 million from
December 31, 1993 to June 30, 1994. The decrease in assets is primarily
attributable to a $17 million decrease in loans receivable resulting primarily
from principal collections exceeding origination of receivables. Total
consolidated liabilities of the Company decreased $25.7 million from December 31
13
1993 to June 30, 1994 and is primarily attributable to (i) a $10.9 million
decrease in net liabilities held for sale and (ii)a $7.8 million net decrease in
financing arrangements. The reduction in net liabilities held for sale was
primarily attributable to a decrease in the liabilities of First Federal of$30.9
million, which was partially offset by a $20 million decrease in the assets of
First Federal (see Note 1 of "Notes to Consolidated Financial Statements").
Other variations in the Company's assets and liabilities generally reflect
the revenue and expense activities the Company experienced during the six months
ended June 30, 1994.
LIQUIDITY AND CAPITAL RESOURES
Cash and cash equivalents of the Company decreased $1.8 million from
December 31, 1993 to June 30, 1994. During the six months ended June 30, 1994,
the Company generated $35.2 million of cash from principal collections on loans
receivable (including $9.1 million related to contracts receivable held by First
Federal) which was partially offset by $23 million of loan originations. Using
available cash, the Company reduced the outstanding balances of its financing
arrangements by $7.8 million.
The Company has sources of funds from two revolving credit agreements.
Fairfield and certain of its subsidiaries are borrowers under the Amended and
Restated Revolving Credit Agreement (the "FCI Agreement") with FNBB. The FCI
Agreement provides for revolving loans of up to $25 million (including up to $7
million for letters of credit), bearing interest at FNBB's base rate plus 1.5%.
The FCI Agreement also provides for an annual facility fee of 1% of the total
commitment. The revolving loans mature on September 28, 1996, if not extended in
accordance with the terms of the agreement. The FCI Agreement is collateralized
by substantially all of the borrowers' loans receivable and real estate
inventories with FAC being a guarantor pursuant to the FCI Agreement. At June
30, 1994, Fairfield had outstanding borrowings under the FCI Agreement totaling
$4.1 million, additional borrowing availability of $15.9 million, and
outstanding letters of credit totaling $.4 million.
FAC is the borrower under the Third Amended and Restated Revolving Credit
Agreement (the "FAC Agreement") with FNBB. The FAC Agreement provides for
revolving loans of up to $35 million (including up to $1 million for letters of
credit), bearing interest at FNBB's base rate plus .75%. The FAC Agreement also
provides for an annual facility fee of 1% of the total commitment amount. The
revolving loans mature on September 28, 1996, if not extended in accordance with
the terms of the agreement. The FAC Agreement is collateralized by certain loans
receivable with Fairfield being a guarantor pursuant to the FAC Agreement. At
June 30, 1994, FAC had outstanding borrowings under the FAC Agreement totaling
$7.2 million and no additional borrowing availability.
An additional source of funds is the Company's ability to securitize
contracts receivable pursuant to a receivable purchase agreement (the
"Agreement") related to the Company's FFC Notes. The Agreement provides for the
principal amounts collected from the contracts receivable pool to be reinvested
into additional contracts receivable limited monthly to (i) the availability of
eligible contracts as defined in the Agreement and (ii) the amounts accumulated
in the reinvestment account. During the six months ended June 30, 1994, the
Company securitized $9.6 million of contracts receivable. The excess of funds
held in the reinvestment account over $6 million, determined on a monthly basis,
is to be used to reduce the FFC Notes. During the six months ended June 30,
1994, the outstanding balance of the FFC Notes was reduced by $5.3 million. The
reinvestment period expires March 31, 1995.
The Company expects to finance its future operating cash needs from (i)
principal collections from its loans receivable, (ii) borrowings under the
revolving credit facilities and, in the short-term, the securitization of
14
additional eligible contracts receivable during the reinvestment period provided
by the Agreement, (iii) operating cash flows, (iv) proceeds from asset sales and
(v) other financings that it may obtain in the future.
On April 6, 1994, Fairfield entered into a Stock Purchase Agreement to sell
the stock (the "Sale") of its wholly owned subsidiary, First Federal Savings and
Loan Association of Charlotte ("First Federal"), to Security Capital Bancorp
("SCBC"). Fairfield expects to utilize (a) the cash portion of the Sales Price
to fund the purchase of the Excluded Association Assets and (b) the remaining
cash portion of the Sales Price, plus proceeds from borrowings under the
Company's revolving credit agreements with FNBB, to fund the purchase of the
Contracts Receivable. Under the Company's revolving credit agreements, in
general, within applicable loan limits, $0.75 of additional borrowing
availability is created for each $1.00 in outstanding principal balance of
qualifying Contracts Receivable pledged to FNBB (see Note 1 of "Notes to
Consolidated Financial Statements").
FIRST FEDERAL
Cash flows from First Federal are currently restricted as to use by First
Federal and are generally not available to fund any of the Company's other
operations. In 1994, principal collections from the contracts receivable
included in assets of continuing operations totaled $9.1 million. Once these
assets are acquired by Fairfield, the cash flow therefrom will be that of the
Company. The following cash flow data reflects the cash flow from First
Federal's total operations.
For the six months ended June 30, 1994, cash from operations for First
Federal totaled $4.8 million. During the same period, cash provided from First
Federal's investing activities totaled $21.3 million resulting primarily from
(i)$18.8 million in proceeds from the sale of loans to third parties, (ii) net
increases in investment and mortgage-backed securities of $1.4 million and (iii)
loan collections exceeding loan originations by $1.1 million. Cash used in First
Federal's financing activities for the six months ended June 30, 1994 totaled
$30.2 million, resulting from repayments of Advances from the Federal Home Loan
Bank of $8 million and a $22.2 million net decrease in savings deposits. Except
for previously approved agreements,First Federal may not enter into transactions
with or make cash distributions to Fairfield without prior written approval of
the Office of Thrift Supervision.
15
Part II - Other Information
- - ------- -----------------
Item 1 - Legal Proceedings
- - ------ -----------------
Incorporated by reference. See Note 9 of "Notes to Consolidated
Financial Statements".
Item 2 - Changes in Securities
- - ------ ---------------------
None
Item 3 - Defaults Upon Senior Securities
- - ------ -------------------------------
None
Item 4 - Submission of Matters to a Vote of Security Holders
- - ------ ---------------------------------------------------
None
Item 5 - Other Information
- - ------ -----------------
None
Item 6 - Exhibits and Reports on Form 8-K
- - ------ --------------------------------
(a) Exhibits
--------
Reference is made to the Exhibit Index.
(b) Reports on Form 8-K
-------------------
On April 14, 1994, a Current Report on Form 8-K was filed in which
the Registrant announced it had entered into a Stock Purchase
Agreement for the possible sale of First Federal Savings and Loan
Association of Charlotte, North Carolina.
16
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.
FAIRFIELD COMMUNITIES, INC.
Date: August 15, 1994 /s/Robert W. Howeth
--------------------- --------------------------------------
Robert W. Howeth, Senior Vice President,
Chief Financial Officer and Treasurer
Date: August 15, 1994 /s/William G. Sell
---------------------- --------------------------------------
William G. Sell, Vice President/
Controller (Chief Accounting
Officer)
17
FAIRFIELD COMMUNITIES, INC.
EXHIBIT INDEX
Exhibit
Number
- - ------
4.1 Supplemented and Restated Indenture between the Registrant, Fairfield
River Ridge, Inc., Fairfield St. Croix, Inc. and IBJ Schroder Bank &
Trust Company, as Trustee, and Houlihan Lokey Howard & Zukin, as
Ombudsman, related to the Senior Subordinated Secured Notes, dated
September 1, 1992 (previously filed with the Registrant's Current
Report on Form 8-K dated September 1, 1992 and incorporated herein by
reference)
4.2 First Supplemental Indenture to the Supplemental and Restated
Indenture referenced in 4.1 above, dated September 1, 1992
(previously filed with the Registrant's Current Report on Form 8-K
dated September 1, 1992 and incorporated herein by reference)
4.3 Second Supplemental Indenture to the Supplemental and Restated
Indenture referenced in 4.1 above, effective September 1, 1992
(previously filed with the Registrant's Annual Report on Form 10-K
dated December 31, 1992 and incorporated herein by reference)
4.4 Third Supplemental Indenture to the Supplemental and Restated
Indenture referenced in 4.1 above, effective March 18, 1993
(previously filed with the Registrant's Quarterly Report on Form 10-Q
dated March 31, 1993 and incorporated herein by reference)
4.5 Certificate of Designation, Preferences, and Rights of Series A
Junior Participating Preferred Stock, dated September 1, 1992
(previously filed with the Registrant's Current Report on Form 8-K
dated September 1, 1992 and incorporated herein by reference)
10.1 Stock Purchase Agreement dated as of April 5, 1994, between the
Registrant and Security Capital Bancorp (previously filed with the
Registrant's Current Report on Form 8-K dated April 14, 1994 and
incorporated herein by reference)
10.2 Key Employee Retirement Plan (attached)
11 Computation of earnings per share (attached)
28 Ombudsman Report for the period ending June 30, 1994 related to the
Registrant's Senior Subordinated Notes. Fairfield Communities, Inc.
(the "Company") has issued its 10% Senior Subordinated Secured Notes
(the "FCI Notes") pursuant to the Supplemented and Restated
Indenture, dated as of September 1, 1992, as amended (the "Restated
Indenture"), among the Company, as issuer, Fairfield St. Croix, Inc.
and Fairfield River Ridge, Inc., as guarantors, IBJ Schroder Bank &
Trust Company, as trustee (the "Trustee"), and Houlihan Lokey Howard
& Zukin, as ombudsman (the "Ombudsman"). The Ombudsman, which was
designated by the committee representing the holders of the notes for
which the FCI Notes were exchanged in the Company's bankruptcy
proceedings, as part of its duties under the Restated Indenture, is
to report periodically concerning the collateral securing the FCI
Notes and other matters (the "Ombudsman's Reports"). The Ombudsman's
18
Reports are not prepared at the direction of, or in concert with, the
Company and are delivered by the Ombudsman to the Trustee for
distribution to each holder of record of the FCI Notes. However,
because the Ombudsman's Reports are being distributed to the record
holders of the FCI Notes and the contents of the Ombudsman's Reports
may be of interest to other persons, including potential purchasers
of the FCI Notes, the Company is filing herewith, as Exhibit 28, a
copy of the Ombudsman's Report dated August 11, 1994, for the period
ending June 30, 1994. The Company is not obligated to file such
reports and may discontinue filing such reports in the future without
notice to any person. (attached)
19
FAIRFIELD COMMUNITIES, INC.
KEY EMPLOYEE RETIREMENT PLAN
ARTICLE I
Establishment of Plan
---------------------
Section 1.01. Establishment. The Fairfield Communities, Inc. Key
Employee Retirement Plan is hereby established effective as of January 1,
1994.
Section 1.02. Purpose. The purpose of this Plan is solely to provide
benefits to a select group of management or highly compensated employees
upon whose efforts the continued successful operation of the Company is
largely dependent, and to ensure the continued availability of their
services to the Company.
Section 1.03. Funding. The Plan is unfunded and the rights, if any,
of any person to any benefits hereunder shall be the same as any unsecured
general creditor of the Company. The benefits payable under this Plan shall
be paid by the Company each year out of its general assets.
ARTICLE II
Definitions and Interpretation
------------------------------
Section 2.01. Definitions. When the initial letter of a word or
phrase is capitalized herein, such word or phrase shall have the meaning
hereinafter set forth:
(a) "Account" means the book reserve established for each
Participant to which shall be credited his benefit under this Plan.
(b) "Average Return on Stockholders' Equity" for a particular
year means the three year moving average of that year's Return on
Stockholders' Equity and the Return on Stockholders' Equity for each of the
two immediately preceding years; provided, however, that for 1994 only, the
Average Return on Stockholders' Equity shall mean the average of the Return
on Stockholders' Equity for 1993 and 1994.
(c) "Board" means the Board of Directors of the Company which
shall interpret the Plan in its reasonable discretion.
(d) "Cash Compensation" means gross income (W-2), plus any
amounts not therein included which have been deducted for 401(k) plans,
salary reduction deferral agreements or Section 125 cafeteria style plans,
et al.
(e) "Change in Control" means the happening of any of the
following:
(i) During any period of 24 consecutive months, commencing
not earlier than October 1, 1992, but ending after the date hereof:
(A) individuals who, at the beginning of such 24-month
period, were directors of the Company and
(B) any new director whose election or nomination for
election by the Board was approved by a vote of the greater of (I) at least
two-thirds (2/3) or (II) four affirmative votes, in each case, of the
directors then still in office who were either directors at the beginning of
such 24-month period or whose election or nomination for election was
previously so approved,
cease for any reason to constitute at least a majority of the
Board.
(ii) Any person or entity (other than the Company or its
subsidiary employee benefit plan or plans or any trustee of or fiduciary
with respect to such plan or plans when acting in such capacity), or any
group acting in concert, shall beneficially own, directly or indirectly,
thirty percent (30%) or more of the total voting power represented by the
then outstanding Voting Securities of the Company.
(iii) Upon a merger, combination, consolidation or
reorganization of the Company, other than a merger, combination,
consolidation or reorganization which would result in (A) the Voting
Securities of the Company outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being converted into
Voting Securities of the surviving entity) at least 60% of the voting power
represented by the Voting Securities of the Company or such surviving entity
outstanding immediately after such transaction and (B) at least such 60% of
voting power continuing to be held in the aggregate by the holders of the
Voting Securities of the Company immediately prior to such transaction
(conditions (A) and (B) are referred to as the "Continuance Conditions").
(iv) All or substantially all of the assets of the Company
are sold or otherwise disposed of, whether in one transaction or a series of
transactions, unless the Continuance Conditions shall have been satisfied
with respect to the purchaser of such assets and such purchaser assumes the
Company's obligations under the Plan.
As used in this subsection 2.01(e), the term "Voting Securities"
shall mean any securities which vote generally in the election of directors.
(f) "Company" means Fairfield Communities, Inc.
(g) "Participant" means an employee of the Company (i) who is
designated by the Board as being eligible to participate in this Plan,
effective as of such date as may be specified by the Board, (ii) who agrees
to be bound by the provisions of this Plan on a form provided by the Company
and (iii) who is, or whose beneficiaries are, entitled to benefits under the
Plan.
(h) "Plan" means the "Fairfield Communities, Inc. Key Employee
Retirement Plan" as set forth herein and as it may be amended from time to
time hereafter in accordance with the provisions of Section 6.01 hereof.
(i) "Return on Stockholders' Equity" for a particular year means
the net earnings, after taxes, of the Company for such year divided by the
average of the Company's stockholders' equity as of the beginning and end of
such year. All calculations of net earnings, taxes, stockholders' equity or
similar amounts shall be based upon the Company's audited financial
statements for the years in question.
Section 2.02. Construction and Governing Law.
(a) This Plan shall be construed, enforced and administered and
the validity thereof determined in accordance with the laws of the State of
Arkansas.
(b) Words used herein in the masculine gender shall be construed
to include the feminine gender where appropriate and the words used herein
in the singular or plural shall be construed as being in the plural or
singular where appropriate.
ARTICLE III
Amount of Benefit
-----------------
Section 3.01. Allocations. The allocation made to the Account of a
Participant under the Plan for a particular year shall equal the product of
the Participant's total Cash Compensation for such year multiplied by the
Benefit Percentage. For 1993, the Benefit Percentage shall be twelve
percent (12%), with the allocation to the Participant's Account to have been
deemed effective on January 1, 1994. For 1994 and years following, the
Benefit Percentage shall be determined based upon Average Return on
Stockholders' Equity for such year, as follows:
Average Return on
Stockholders' Equity Benefit Percentage
-------------------- ------------------
Less than 5% 0%
5% or greater, but
less than 8% 4%
8% or greater, but
less than 10% 8%
10% or greater, but
less than 14% 12%
14% or greater, but
less than 18% 16%
18% or greater 20%
Allocations made to the Account of a Participant for a particular year
shall be credited to the Participant's Account as of January 1st of the next
succeeding year.
Should a Participant die, terminate his employment due to total
disability, be involuntarily terminated or retire from the Company on or
after age 55, his Cash Compensation, for purposes of calculating his
allocation for the year in which such event occurs, shall include any
incentive compensation awards or other Cash Compensation paid to him or his
estate after such event, even if such amount is paid after the year end.
Section 3.02. Credited Interest. The balance of a Participant's
Account shall be credited monthly with an amount equal to the sum such
Account would have earned during such month had it been invested and earned
a return (based upon a 30-day month and a 360-day year) equal to the base
(prime) interest rate of The First National Bank of Boston, as in effect on
the close of business on the first banking day of the year in which such
month falls.
Section 3.03. Vesting. A Participant under this Plan shall be vested
in his Account (including any interest credited or accrued under Section
3.02 with respect to such Account) in a percentage equal to the
Participant's "Percentage Vested", as specified in the schedule below, based
upon his number of years of employment with the Company and its wholly-owned
subsidiaries as of the date of termination of his service.
Years of Service Percentage Vested
---------------- -----------------
Less than 3 years 0%
3 years 20%
4 years 40%
5 years 60%
6 years 80%
7 years 100%
Notwithstanding the above, a Participant shall become 100% vested in
his Account (including any interest credited or accrued under Section 3.02
with respect to such Account) in the event of a Change in Control occurring
while such Participant is employed by the Company, or upon his death while
employed by the Company, termination of employment from the Company due to
total disability or retirement from the Company on or after age 55.
ARTICLE IV
Payment of Benefits
-------------------
Benefits payable under this Plan shall be payable to a Participant, or
to the beneficiary of such Participant in the event of the Participant's
death before the receipt of all benefits to which the Participant is
entitled to under the Plan, as follows:
(a) Upon the Participant's termination of employment from the
Company due to death or disability, or upon termination of employment from
the Company on or after age 55, such benefits shall be payable in equal
annual installments over a ten year period, the first installment to be paid
within 30 days following the date of termination.
(b) Upon the Participant's termination of employment from the
Company prior to age 55 for any reason other than death or disability, such
benefits (to the extent vested) shall be payable in equal annual
installments over a ten year period, the first installment to be paid on the
first day of the month following the date the Participant turns age 55 or,
if occurring earlier, within 30 days from the date of such Participant's
death or termination of employment from his then employer due to total
disability.
(c) Notwithstanding the foregoing, all benefits shall be
immediately paid in a lump sum to a Participant within five days following a
Change of Control, regardless of whether or not such Participant is then
employed by the Company.
During any installment period, the Participant's Account shall continue
to be credited with interest under Section 3.02 as long as benefits remain
payable under the Plan. The amount of each installment shall be determined
by multiplying the vested amount then credited to the Account and subject to
distribution by a fraction, the numerator of which is one and the
denominator of which is the total number of installments remaining to be
paid in the ten year period. The Board shall have the right, at any time,
in its discretion, to terminate any installment payments and to pay any
remaining benefits in a single lump sum.
ARTICLE V
Administration
--------------
The Board shall perform the administrative functions necessary for the
operation of this Plan, except that no person shall vote or take action with
respect to his own Plan benefit.
ARTICLE VI
Miscellaneous
-------------
Section 6.01. Amendments. The Board may, from time to time, amend,
suspend or terminate, in whole or in part, any or all of the provisions of
this Plan; provided, however, that any such amendment, suspension or
termination shall (a) only apply prospectively, with respect to allocations
which may or may not, at the discretion of the Board, be earned on Cash
Compensation paid to a Participant subsequent to the date of adoption of any
such amendment, suspension or termination, and the administration of such
allocations in a Participant's Account (including benefit payment), but (b)
unless consented to in writing by a Participant, not apply to or effect
allocations previously earned or accrued on Cash Compensation paid to a
Participant prior to the date of any such amendment, suspension or
termination, nor to the administration thereafter of such previously earned
allocations in a Participant's Account (which shall be governed by the Plan
provisions and definitions applicable thereto prior to such amendment,
suspension or termination, including, without limitation, the Credited
Interest provisions of Section 3.02, the Vesting provisions of Section 3.03,
the definitions and provisions concerning a "Change in Control" and the
benefit payment provisions of Article IV). A Participant shall receive an
allocation for the year the Board acts to amend, suspend or terminate
allocations of no less than the Benefit Percentage subsequently determined
to have been earned for such year according to the table in Section 3.01
(without regard to any such amendment, suspension or termination),
multiplied by the Cash Compensation paid to such Participant during such
year prior to the time of any such amendment, suspension or termination.
Section 6.02. No Employment Rights. Neither the establishment of this
Plan nor the status of an employee as a Participant shall give any
Participant any right to be retained in the employ of the Company; and no
Participant and no person claiming under or through such Participant shall
have any right or interest in any benefit under this Plan unless and until
the terms, conditions and provisions of this Plan affecting such Participant
shall have been satisfied.
Section 6.03. Nonalienation. The right of any Participant or any
person claiming under or through such Participant to any benefit or any
payment hereunder shall not be subject in any manner to attachment or other
legal process for the debts of such Participant or person; and the same
shall not be subject to anticipation, alienation, sale, transfer, assignment
or encumbrance.
Section 6.04. Limitation of Liability. No member of the Board and no
officer or employee of the Company shall be liable to any person for any
action taken or omitted in connection with the administration of this Plan,
nor shall the Company be liable to any person for any such action or
omission. No person shall, because of the Plan, acquire any right to an
accounting or to examine the books or the affairs of the Company. Nothing
in this Plan shall be construed to create any trust or fiduciary
relationship between the Company and any Participant or any other person.
Section 6.05. Acceleration of Payment. The Board in its sole
discretion may accelerate the time of payment of any benefit to any
Participant or beneficiary to the extent that it deems it equitable or
desirable under the circumstances.
Section 6.06. Representative of Board. The Board may from time to
time designate an individual or committee to carry out any duties or
responsibilities of the Board hereunder.
Section 6.07. Designation of Beneficiary. Each Participant may
designate a beneficiary in writing to receive any and all payments to which
he may be entitled under this Plan upon his death. If a Participant fails
to designate a beneficiary in writing, benefits remaining unpaid at his
death shall be paid to his surviving spouse and if there is no surviving
spouse to the executor or other personal representative of the Participant
to be distributed in accordance with the Participant's will or applicable
law.
IN WITNESS WHEREOF, the undersigned has caused this Plan to be executed
as of this 4th day of August, 1994.
FAIRFIELD COMMUNITIES, INC.
By: /s/ J. W. McConnell
J. W. McConnell
Its: President and Chief Executive Officer
<PAGE>
FAIRFIELD COMMUNITIES, INC.
KEY EMPLOYEE RETIREMENT PLAN
ELECTION FORM
-------------
As an employee entitled to become a Participant under the above Plan, I
hereby make the following certifications, agreements, and elections:
A. I certify that I have received and read a copy of the Plan,
and agree to be bound by all of the provisions thereof.
B. I understand that I will become a Participant in the Plan as
of the date below subject to all the terms and conditions of the Plan.
C. I hereby designate ___________________________________
[NAME], my ____________________________________ [RELATIONSHIP], residing at
______________________________ [ADDRESS], as the beneficiary of any benefits
under this Plan to which I may be entitled at the time of my death.
Date:_________________________ ____________________________
Signature
____________________________
Printed Name
On behalf of the Company, I hereby acknowledge receipt of the above.
Date: ________________________ ____________________________
Signature
EXHIBIT 11
FAIRFIELD COMMUNITIES, INC. AND SUBSIDIARIES
Computation of Earnings Per Share
<TABLE>
Primary
--------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------------------
1994 1993 1994 1993
---- ---- ---- -----
<S> <C> <C> <C> <C>
Weighted average shares:
Shares outstanding 12,125,533 11,861,559 12,076,714 11,861,559
Shares issued to wholly
owned subsidiaries (160,001) (2,395,295) (160,001)(2,395,295)
Treasury stock (2,235,294) - (2,235,294) -
Estimated increase in
shares outstanding due to
allowed claims exceeding
$85 million (1) 944,166 1,667,853 1,030,136 1,667,853
Net effect of dilutive
warrants based on the
treasury stock method 373,333 - 360,225 -
Contingent issuance -
Holders of FCI Notes (2) - - - -
---------- ---------- ---------- ----------
Total weighted average
shares outstanding 11,047,737 11,134,117 11,071,780 11,134,117
========== ========== ========== ==========
Net earnings $2,674,000 $3,322,000 $3,752,000 $3,408,000
========== ========== ========== ==========
Earnings per share $0.24 $0.30 $0.34 $0.31
===== ===== ===== =====
</TABLE>
<TABLE>
Fully Diluted
-----------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average shares:
Shares outstanding 12,125,533 11,861,559 12,076,714 11,861,559
Shares issued to wholly
owned subisidiaries (160,001) (2,395,295) (160,001) (2,395,295)
Treasury stock (2,235,294) - (2,235,294) -
Estimated increase in
shares outstanding due
to allowed claims
exceeding $85 million (1) 944,166 1,667,853 1,030,136 1,667,853
Net effect of dilutive
warrants based on the
treasury stock method 408,163 - 408,163 -
Contingent issuance -
Holders of FCI Notes (2) 588,235 588,235 588,235 588,235
---------- ---------- ---------- ----------
Totaled weighted average
shares outstanding 11,670,802 11,722,352 11,707,953 11,722,352
========== ========== ========== ==========
Net earnings $2,674,000 $3,322,000 $3,752,000 $3,408,000
========== ========== ========== ==========
Earnings per share $0.23 $0.28 $0.32 $0.29
===== ===== ===== =====
</TABLE>
(1) In accordance with the terms of the Seventh Amended and Restated Joint
Plans of Reorganization (the "Plans"), the number of shares to be issued
to unsecured claim holders will increase if the amount of the allowed
unsecured claims exceeds $85 million. The number of shares issued will
be increased to a number equal to 10,000,000 multiplied by the quotient
of the total amount of the allowed unsecured claims divided by $85
million. For purposes of the earnings per share computation, the
estimated amount of allowed claims, exclusive of the contingent issuance
for the holders of the FCI Notes, totals $111.1 million as of June 30,
1994.
(2) In accordance with the terms of the Plans, Fairfield has reserved, but not
issued, 588,235 shares of Common Stock for the benefit of the holders of
the FCI Notes in the event the proceeds from the sale of the collateral
securing the FCI Notes, or the value of any such collateral not sold, is
not sufficient to repay the FCI Notes.
Fairfield Communities, Inc.
10% Senior Subordinated Secured Notes
Revised
Ombudsman Report
For the Period Ending
June 30, 1994
Prepared by
Houlihan Lokey Howard & Zukin
------------------------
Date Prepared:
August 11, 1994
Introduction
- - --------------------------------------------------------
In connection with Houlihan Lokey Howard & Zukin's role ("Houlihan Lokey") as
the official ombudsman ("Ombudsman") to the Fairfield Communities, Inc.
("Fairfield" or the "Company") Senior Subordinated Secured Noteholders
("Noteholders"), Houlihan Lokey issued its Ombudsman Report for the quarter
ended June 30, 1994 on August 3, 1994 (the "Original Report"). Fairfield
subsequently informed Houlihan Lokey that certain of the information prepared
by the Company in connection with the Original Report required revision.
Houlihan Lokey has reviewed the revision and concurs with the new figures
which are outlined in this report. The net impact to Noteholders was a
reduction in the reported release price on the lots held as Collateral at
Fairfield's Pointe Alexis Development of $168,175 (see additional detail in
the Pointe Alexis Section of this report). The other sections of this report
are unchanged from the Original Report.
The Noteholders' collateral (the "Collateral") consists of all of Fairfield's
interest in its (i) Fairfield Pointe Alexis development (excluding certain
lots pledged as Collateral to the First National Bank of Boston) located in
Tarpon Springs, Florida ("Pointe Alexis"); (ii) Harbour Ridge joint venture
in Stuart, Florida ("Harbour Ridge"); and (iii) Sugar Island joint venture in
St. Croix, U.S. Virgin Islands ("Sugar Island"). Noteholders previously had
Collateral interests in the Bald Mountain Golf Course at the Fairfield
Mountain Development ("Bald Mountain Golf Course") until it was sold on
February 9, 1993 and the Harbour Golf Course at the Fairfield Harbour
development in New Bern, North Carolina ("Harbour Golf Course") until it was
sold on October 8, 1993.
In addition, Fairfield has reserved, but not issued, 588,235 shares of its
common stock (approximately five percent of the outstanding Fairfield common
stock on a fully-diluted basis) on behalf of the Noteholders to be issued in
the event that the Collateral sale proceeds are insufficient to repay the
Senior Subordinated Secured Notes ("Notes"). As of July 29, 1994, the trading
price of Fairfield's common stock was 6 7/8.
Pursuant to Fairfield's plan of reorganization, efforts are underway to
liquidate all of the Fairfield controlled Collateral (Pointe Alexis) and to
continue receipt of cash flow distributions from Collateral consisting of
Fairfield general and limited partnership interests (Sugar Island and Harbour
Ridge). Fairfield also must maintain the Collateral it controls until the
liquidation process is complete.
Collateral proceeds during the quarter ended June 30, 1994 totaled
approximately $828,953 (approximately $123,499 of which funded the
Noteholders' Operating Account which will be used to fund operating expenses
at Point Alexis). The balances in the Noteholders' Interest Payment Account
and Operating Account, were $178,449 and $126,590, respectively, as of June
30, 1994.
The balance in the Noteholders' Development Account (which is earmarked for
lot development at Point Alexis) was $500,588 (after payment of approximately
$138,579 of development expenses).
Since the effective date of Fairfield's chapter 11 plan of reorganization,
Noteholders have received distributions totaling $11,274,360, of which
$3,265,082 was interest and $8,009,279 was principal. The remaining principal
balance outstanding as of June 30, 1994 was $14,805,665 which amount is
secured by all of the Collateral outlined in this report (including the cash
balances outlined above).
This report will serve to more fully describe the Collateral as well as to
update the Noteholders with respect the both the condition and expected cash
flow of all of the remaining Collateral.
Pointe Alexis
- - ------------------------------------------------------------------------
Fairfield Pointe Alexis is divided into two separate developments, Pointe
Alexis South and Pointe Alexis North (Harbour Watch), both located in Tarpon
Springs, Florida.
Pointe Alexis South is a Fairfield community master planned for 271 units. As
of June 30, 1994, 160 had been sold, 1 was built and waiting for sale, 52 were
vacant lots (revised upward by 7 from the Original Report) with roads and
improvements installed, and 57 were raw land with no improvements (revised
downward by 8 from the Original Report) . The aggregate release price (the
amount which must be paid to Noteholders upon sale of each unit) for all the
remaining lots and developed units is $1,339,125 (revised downward by $69,375
from the Original Report) although some of the interior lots may never yield
any appreciable value. Originally developed as a retirement community, Pointe
Alexis has both single- and multi-family product. As a result of Fairfield's
Chapter 11 filing and limited sales at Pointe Alexis, however, the Company
limited construction activity to projects in progress and began marketing
tracts of land in bulk to other developers. This strategy will continue going
forward. Lot prices range from $12,000 to $20,000 but may be discounted if
large tracts of land are sold in bulk.
The community surrounding the development consists mostly of lower income
housing and access from the Tampa airport is poor; however, some of the lots
(especially the waterfront lots) do have appeal. In addition, Pointe Alexis
is one of the few remaining sites in Florida where gulf-front properties can
be purchased at relatively inexpensive prices, and the Tarpon Springs area
does have a strong retirement community. A market does exist for Pointe
Alexis lots, albeit at significantly discounted prices from historical levels.
At the current sales and release prices, the remaining land inventory will
likely liquidate over approximately three years as undeveloped lots are sold
in small to medium sized tracts to developers.
As an alternative, the entire project could be sold in a single bulk sale,
although this would likely require an aggregate sales price well below the
aforementioned release price. Fairfield and Houlihan Lokey are currently
reviewing one such proposal from a national real estate developer. In
determining the appropriate strategy to take, Houlihan Lokey will consider,
among other things, the net present value of the offer (which will likely
require seller financing) against the projected individual lot sale proceeds
over an extended period of time.
During the quarter ended June 30, 1994, at Pointe Alexis South, Fairfield
recorded 5 lot sales and 8 lot closings (revised upward by 2 from the Original
Report) compared to 0 lot sales and 1 lot closing during the quarter ended
June 30, 1993. Total revenues at Pointe Alexis South during the second
quarter ended June 30, 1994 totaled $207,956 (revised upward by $40,000 from
the Original Report) compared to $20,000 during the second quarter ended June
30, 1993.
Harbour Watch shares the same location and access problems as Pointe Alexis
South, but has superior marketing characteristics and Collateral value.
Harbour Watch is a gated community with card-controlled access. From
inception, it has been operated as a lot sale development with
no home building operations conducted by Fairfield (in contrast to Pointe
Alexis South). Lot prices generally range from $50,000 for interior lots to
$170,000 or more for waterfront lots with docks. The master plan calls for
sales of 180 lots. As of June 30, 1994, 109 lots had been sold, 44 more were
developed with roads and available for sale (revised upward by 2 from the
Original Report) and 27 more lots were held as raw land (revised downward by 1
from the Original Report) . Of the 71 remaining lots, the First National Bank
of Boston has a first lien on 14 lots (revised downward by 1 from the Original
Report). The aggregate release price on the lots pledged as Collateral to the
Noteholders is $2,458,300 (revised downward by $98,800 from the Original
Report).
During the later stages of Fairfield's Chapter 11 proceedings, the Official
Committee of Noteholders together with the Bankruptcy Court approved a plan to
reinvest certain of the lot sale proceeds being held on behalf of the
Noteholders for the development of additional gulf front lots to spur sales
volume. In total, 14 lots were developed for an aggregate purchase price of
$185,366. During the quarter ended June 30, 1994, Fairfield began developing
all remaining undeveloped lots at Harbour Watch, many of which are waterfront.
The estimated cost to develop all of the remaining lots is $636,621 which,
pursuant to the Indenture, must be funded by Collateral proceeds. In total,
31 additional lots will be developed. The entire cost of the project has been
pre-funded into the Noteholders' Development Account. The development project
was nearing completion as of June 30, 1994.
During the quarter ended June 30, 1994, at Harbour Watch, Fairfield recorded 0
lot sales and 1 lot closing, compared to 0 lot sales and 2 lot closings during
the quarter ended June 30, 1993. Total revenues at Harbour Watch during the
quarter ended June 30, 1994 were $280,000 compared to $199,000 revenue during
the quarter ended June 30, 1993.
Many of the homes which have been built are quite large and expensive,
particularly some of the waterfront homes. There is an ongoing sales effort
in place with a sales trailer at the entrance to the community. During the
quarter ending June 30, 1994, construction of several new homes continued,
maintaining the community's positive ambiance of ongoing activity. The time
estimate to sell the remaining land inventory is approximately 2.0 to 3.0
years.
Pointe Alexis South and Harbour Watch collectively had monthly cash operating
expenses of approximately $70,606 during the quarter ended June 30, 1994,
which, together with closing costs and commissions, may be funded out of
excess sale proceeds (the sale price that is in excess of the release price).
As the Ombudsman, Houlihan Lokey will continue to monitor the spread between
the sales prices and release prices and its relationship with operating
expenses and closing costs. At its discretion, Houlihan Lokey can instruct
Fairfield to increase (up to the levels in the March 31, 1989 Indenture) or
decrease release prices as appropriate. Given the current sales activity,
Houlihan Lokey does not foresee changing prices in the immediate future.
Harbour Ridge
- - ---------------------------------------------------------------------------
Harbour Ridge is a for-sale luxury recreational community located on a
beautiful stretch of land fronting on the St. Lucie River approximately one
hour from the West Palm Beach Airport in Stuart, Florida. The Collateral
interest entitles Noteholders to 35.5 percent of the net partnership cash
flow. The community is a high-end luxury community with a strong seasonal
element, as opposed to year-round residence, with prices ranging from
approximately $175,000 to approximately $1 million. Primary emphasis is on a
golf and clubhouse lifestyle, with a secondary emphasis on boating. There are
also boat slips for sale ranging in price from $20,000 to $40,000.
The managing general partner of Harbour Ridge is Harbour Ridge, Inc., the
principals of which have years of experience and success in the business which
are clearly expressed in the competent and professional look and feel of the
project. The homes are attractively designed and appear well built. The
clubhouse also is attractively designed and is surrounded by two golf courses,
one designed by Joe Lee and the other by Pete Dye.
During our recent trip to the Community we met with the managing general
partner and toured the undeveloped lot sites. The project is proceeding as
planned and, at current sales activity, could be concluded as early as 1996.
During the quarter ending June 30, 1994, 7 units were sold, leaving
approximately 35 more units to be sold. A total of 661 units have been sold
since the inception of the project. Although many of the choicest sites have
been previously sold, there remains an excellent cross section and mix of
single-family/multi-family, waterfront/non-waterfront properties with varying
prices.
The Noteholders received a distribution of $353,000 from Harbor Ridge during
the quarter ending June 30, 1994. Current projections indicate that an
additional $1.5 to $2.0 million of cash flow should be generated for the
Noteholders.
Sugar Island
- - ---------------------------------------------------------------------------
The Sugar Island Partnership (the "Partnership") was formed during 1984 to
purchase approximately 4,091 acres of land located on the island of St. Croix,
Territory of the Virgin Islands of the United States. The managing general
partner is Delray Land, Inc. ("Delray"). The Partnership paid $10 million for
the property. At the time of the purchase, the property was undeveloped
except for the 166-acre Fountain Valley Golf Course (renamed Carambola Golf
Club) designed by Robert Trent Jones. Fairfield's interest in the Partnership
entitles it to 30 percent of the total net cash flow distributed.
To date, the Partnership has sold 883 acres of the property in two separate
transactions. During 1986, the Partnership sold 855 acres of the inland
property to Danested Associates ("Danested") for an aggregate purchase price
of $10.7 million. Danested has developed condominiums and vacant lots
designated for single-family homes on the property. Also during 1986, the
Partnership sold 28.5 acres of waterfront land to the Davis Beach Company for
approximately $2.5 million for use in the development of the 157-unit
Carambola Beach Resort (not included in the Collateral). Danested had entered
into an option to purchase approximately 1,069 additional acres of land for
$12.0 million, but the option expired unexercised on March 31, 1991. The land
that was under option to Danested is located in the central part of the
island. It is mostly flat and easily developed but for the most part has no
direct ocean views. Danested also had an option to purchase the Carambola
Golf Club (the "Golf Club") for $7.5 million which expired unexercised on
March 31, 1993.
The remaining parcel of 2,139 acres is arguably some of the most beautiful
land on St. Croix. The terrain is mountainous and covered with dense foliage.
Most of the property has ocean views. The coastal portions are set in a
series of coves ideal for development but currently there are no significant
natural beaches and very limited road access. Development of the property
will be difficult and expensive, limiting the number of potential buyers. The
Partnership has indicated that it is considering selling small sections of
land or even individual lots, if possible. The cost of holding the property
is relatively low. The Partnership leases the land to local farmers which
results in a 95 percent property tax exemption.
The Carambola Beach Resort (the "Resort") is a five-star development and was
completely rebuilt following hurricane Hugo in 1990. As a result of
decreasing tourism and occupancy rates, however, the senior Resort lenders
decided to foreclose on the hotel property and shut down hotel operations
during June 1991. The Resort remained closed until an investment group,
operating through a Radisson Hotel International franchise agreement,
purchased the property on June 8, 1993. The resort has now resumed full
operations and is operating at an occupancy rate of approximately 40%.
According to resort management, low occupancy rates were expected during the
resorts first year of operations.
Although the buyer of the Resort has indicated that it has no interest in
purchasing the Golf Club at this time, increased play since the Resort opened
has increased cash flow at the Golf Club to approximately $200,000 on an
annualized basis, some of which may be used to make a distribution to the
Sugar Island partners. According to Delray, the Golf Club will likely
reinvest excess cash for near term in new golf carts and course maintenance
and therefore no
- - -----------------------------------
distributions are expected during 1994. During April, 1994, the Golf Club
hosted the Virgin Islands L.P.G.A. Classic which was telecast on the Prime
Sports Network. The tournament was well attended and helped publicize St.
Croix tourism nationally.
From a Collateral value perspective, Sugar Island should generate cash flow
for the Noteholders, although the magnitude and the time frame over which the
cash flow will be realized are difficult to determine. The Golf Club will
likely be sold (or leased on a long-term basis) within the next one or two
years, but the undeveloped land acreage could take several years to sell.
Bald Mountain Golf Course
- - ------------------------------
The Bald Mountain Golf Course is one of two golf courses located at the
Fairfield Mountains development in Rutherford County, North Carolina. The 18-
hole, par 72, 6,689 yard Bald Mountain Golf Course was designed by William B.
Lewis and sits on approximately 115 acres, with Bermuda grass tees and
fairways, bent grass greens, 28 sand traps and 10 water hazards. The Bald
Mountain Golf Course is located behind a gated entrance and attracts almost
exclusively Fairfield residents and timeshare owners.
On February 9, 1993, Fairfield completed the sale of the Bald Mountain Golf
Course to the Fairfield Mountains Development Property Owners Association (the
"Mountain POA") for net cash proceeds of $1,787,519.74.
In addition to the sale proceeds, the Mountains POA withdrew various claims
alleging its rights to golf course ownership.
Harbour Golf Course
- - --------------------
The Harbour Golf Course is one of two golf courses located at the Fairfield
Harbour development in New Bern, North Carolina. The 18-hole, par 72, 6,600-
yard Harbour Golf Course was designed by Dominic Palumbo and is located on
approximately 188 acres with narrow sloping fairways, a site-wide canal
system, 77 sand traps and 3 lakes. The course does not allow access to the
general public .
On October 8, 1993, Fairfield completed the sale of the Harbour Golf Course to
the Fairfield Harbour Property Owners' Association for net cash proceeds of
$1,947,948.26. Subsequently, an additional $22,800 was received in connection
with the release of certain contingent closing costs.
