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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [FEE REQUIRED]
For the fiscal year ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
Commission file number 0-19292
BLUEGREEN CORPORATION
(Exact name of registrant as specified in its charter)
Massachusetts 03-0300793
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5295 Town Center Road, Boca Raton, Florida 33486
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (561) 361-2700
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, $.01 par value New York Stock Exchange, Pacific Stock Exchange
8.25% Convertible Subordinated Debentures due 2012 New York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act: None.
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No __
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained in the
definitive proxy statement incorporated by reference into Part III of this Form
10-K. [ ]
State the aggregate market value of the voting stock held by non-affiliates
of the registrant: $71,744,730 based upon the closing sale price of the
Company's Common Stock on the New York Stock Exchange on June 3, 1996 ($4.125
per share). The market value of voting stock held by non-affiliates excludes any
shares issuable upon conversion of any 8.25% Convertible Subordinated Debentures
which are convertible at $8.24 per share and includes 1,192,947 shares of Common
Stock held by Franklin Resources, Inc. or its wholly-owned subsidiaries
("Franklin"). Shares held by Franklin are based on the most recent Form 13G
filed with the Securities and Exchange Commission.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date: 20,541,089 shares of
Common Stock, $.01 par value, outstanding as of June 3, 1996.
DOCUMENTS INCORPORATED BY REFERENCE
Specifically identified portions of the Company's 1996 Annual Report to
Shareholders are incorporated by reference into Part II hereof and specifically
identified portions of the Company's definitive proxy statement to be filed for
its Annual Meeting of Shareholders to be held on July 25, 1996 are incorporated
by reference into Part III hereof.
BLUEGREEN CORPORATION
INDEX TO ANNUAL REPORT ON FORM 10-K
PART I PAGE
Item 1. BUSINESS
Summary..................................................... 1
Acquisition of Inventory ................................... 3
Marketing and Sale of Inventory............................. 5
Customer Financing.......................................... 9
Loan Underwriting...........................................10
Collection Policies.........................................11
Sales of Receivables/Pledging of Receivables................12
Receivables Servicing.......................................13
Customer Service............................................13
Regulation..................................................13
Competition.................................................14
Personnel...................................................14
Executive Officers of the Company...........................14
Item 2. PROPERTIES............................................................16
Item 3. LEGAL PROCEEDINGS.....................................................16
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..................16
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER........16
MATTERS
Item 6. SELECTED FINANCIAL DATA..............................................17
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS............................................18
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..........................18
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.............................................18
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT..................18
Item 11. EXECUTIVE COMPENSATION
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT......18
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS......................19
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.....19
Signatures....................................................................21
Exhibit Index.................................................................22
<PAGE>
PART I
Item 1. BUSINESS.
Summary
Bluegreen Corporation, together with its subsidiaries (the "Company"), is the
successor to a real estate business that was formed as a sole proprietorship in
1966 and incorporated in 1976. As approved at a special meeting of the Company's
shareholders held in February, 1996, the Company changed its name from Patten
Corporation to Bluegreen Corporation in March, 1996. The Company's real estate
operations are currently managed under three divisions. The Land Division
acquires large acreage tracts of real estate which are subdivided, improved and
sold, typically on a retail basis. The Resorts Division acquires and develops
timeshare property to be sold in vacation ownership intervals, whereby fixed
week intervals or undivided fee simple interests are sold in fully-furnished
vacation units. The Communities Division is engaged in the sale of manufactured
homes on residential land parcels at a North Carolina project as well as the
sale of residential lots primarily in three additional southeastern projects.
The Land Division is segregated into two broad property types offered for sale
to prospective customers: (i) land intended for near-term residential use and
(ii) land intended for general recreational use. Land intended for near-term
residential use is fully improved which generally includes the provision for
water, electricity and telephone as well as the construction of access roads
leading to the subdivided lots. About half of the Company's residential
properties are situated in locations that lend to their use as primary homesites
while the remaining properties are proposed as vacation or secondary homesite
subdivisions. General recreational property is typically used for hunting,
fishing and camping or as a potential homesite in the longer-term.
The Company's Resorts Division, introduced in 1994, is responsible for the
development, marketing and sale of three timeshare properties located in
Gatlinburg, Tennessee; Pigeon Forge, Tennessee; and Myrtle Beach, South
Carolina. These resorts are the first in an intended series of timeshare
properties to be located in regional family vacation destinations.
Under the Company's Communities Division, factory-built manufactured home and
lot packages are marketed in a North Carolina development. In addition,
residential lots from two other projects in North Carolina and a project in
Orlando, Florida are being developed and sold. The North Carolina land
inventories were acquired prior to the formation of the Investment Committee.
See below. Sales of the North Carolina inventories are expected to yield gross
margins lower than those historically experienced under the Land Division.
Furthermore, the Company does not intend to expand its Communities related
activities beyond the projects currently being marketed.
The Company's Land, Resorts and Communities divisions accounted for 75% ($84.9
million), 12% ($13.8 million) and 13% ($14.7 million), respectively, of
consolidated sales of real estate for fiscal 1996. See Management's Discussion
and Analysis of Financial Condition and Results of Operations which is
incorporated by reference into Item 7, Part II herein from the Company's 1996
Annual Report.
Since 1989, all inventory acquisitions have required the prior approval of the
Company's investment committee, which consists of certain executive officers of
the Company (the "Investment Committee"). The Company seeks to reduce its cash
outlay and risks by making small downpayments when contracting to acquire
properties and by completing as many preparations for resale as possible before
actually completing the purchase. The Company has historically acquired
substantially all of the inventory it has placed under contract. Its downpayment
and any preliminary development costs are the only amounts at risk if it fails
to complete a purchase. See "Acquisition of Inventory" for additional
information.
The Company seeks external sources of capital to fund its property acquisitions.
Such sources generally consist of seller, bank or similar financial institution
term financing. In addition, the Company has several secured lines-of-credit for
the acquisition and development of its inventories. See Management's Discussion
and Analysis of Financial Condition and Results of Operations which is
incorporated by reference into Item 7, Part II herein from the Company's 1996
Annual Report. The aggregate amount of inventory acquisition and development
funded through term financing and lines-of-credit during fiscal 1996, fiscal
1995 and fiscal 1994 totaled $12.4 million or 18%, $23.1 million or 32% and
$12.8 million or 33%, respectively.
The Company's continued growth depends upon obtaining outside sources of
capital to finance new property purchases, fund operations, satisfy debt
obligations and provide loans to purchasers of land parcels and timeshare
vacation ownership intervals. In the past, the Company has funded its activities
through various sources, including borrowings under secured and unsecured lines
of credit, sales of notes receivables and the sale of debt and equity
securities. These arrangements require the Company to comply with certain
covenants and retain certain contingent liabilities. As of March 31, 1996, the
Company had outstanding $34.7 million of 8.25% convertible subordinated
debentures, $19.7 million in receivable-backed notes payable and $17.3 million
in lines-of-credit and notes payable, with an aggregate weighted average
interest rate on all such indebtedness of 9.2%. The Company anticipates that it
will continue to require external sources of capital. See Management's
Discussion and Analysis of Financial Condition and Results of Operations which
is incorporated by reference into Item 7, Part II herein from the Company's 1996
Annual Report.
The Company begins to market parcels under its Land Division as soon as
practicable, with the sale of acquired properties typically being completed
within nine to 24 months from closing of the acquisition. The holding period may
be extended in areas where the subdivision approval process is more complex or
in certain larger projects. Land Division sales were $84.9 million, $72.6
million and $60.3 million for fiscal 1996, 1995 and 1994, respectively.
To minimize the risk associated with holding its timeshare inventory, the
Resorts Division sells vacation ownership intervals during construction. Resorts
Division sales were $13.8 million and $5.9 million for fiscal 1996 and 1995,
respectively. Marketing of the first timeshare resort commenced in fiscal 1995
and, accordingly, no sales occurred during fiscal 1994.
The Company seeks to minimize market exposure for inventory held by the
Communities Division by limiting the number of factory-built homes that are
purchased on a speculative basis. The Company attempts to obtain contracts for
sales of homes prior to development. Communities Division sales were $14.7
million, $13.4 million and $3.1 million for fiscal 1996, 1995 and 1994,
respectively.
For information on the Company's revenue recognition policy, see Note 1 to the
Consolidated Financial Statements which are incorporated by reference into Item
8, Part II herein from the Company's 1996 Annual Report to Shareholders.
The Company offers financing of up to 90% of the purchase price of land real
estate sold to all purchasers who qualify for such financing. The Company also
offers financing of up to 90% of the purchase price to timeshare purchasers.
Sales of factory-built manufactured homes under the Communities Division are
financed by third party lenders and, accordingly, the proceeds of such sales are
received entirely in cash. The Company structures its sales and financing
activities so that the purchase money mortgage arising from land sales and the
contracts for deed from timeshare sales loans (the "Receivables") may be pledged
or sold in separate financing transactions to provide liquidity for the Company.
This liquidity allows the Company to continue to provide financing to its
customers for the sale of land and vacation ownership intervals. During fiscal
1996, 1995 and 1994, the Company financed 26%, 24% and 34%, respectively, of its
aggregate sales of real estate which closed during the period and received cash
for the remaining amounts. See further discussion under "Customer Financing" and
Management's Discussion and Analysis of Financial Condition and Results of
Operations which is incorporated by reference into Item 7, Part II herein from
the Company's 1996 Annual Report.
The Receivables originated by the Company are typically pledged to financial
institutions or sold in private placement transactions. In recent years, private
placement Real Estate Mortgage Investment Conduit ("REMIC") financings have
provided substantial capital resources to the Company. In these transactions,
(i) the Company sells or otherwise absolutely transfers a pool of mortgage loans
to a newly-formed special purpose subsidiary, (ii) the subsidiary sells the
mortgage loans to a trust in exchange for certificates representing the entire
beneficial ownership in the trust and (iii) the subsidiary sells one or more
senior classes of the certificates to an institutional investor in a private
placement and retains the remaining certificates, which remaining certificates
are subordinated to the senior classes. See Management's Discussion and Analysis
of Financial Condition and Results of Operations which is incorporated by
reference into Item 7, Part II herein from the Company's 1996 Annual Report.
At March 31, 1996, the Company had 413 full-time and 36 part-time employees. The
Company's executive offices are located at 5295 Town Center Road, Boca Raton,
Florida 33486. Its telephone number at such address is (561) 361-2700.
The Company's common stock is listed on the New York Stock Exchange and on
the Pacific Stock Exchange under the symbol "BXG." The Company's 8.25%
convertible subordinated debentures due 2012 are also listed on the NYSE.
Acquisition of Inventory
In order to provide centralized and uniform controls on the type, location and
amount of inventory that the Company acquires, all inventory acquisitions have
required the approval of the Investment Committee since 1989. The Investment
Committee is comprised of George F. Donovan, President and Chief Executive
Officer, Alan L. Murray, Treasurer and Chief Financial Officer, Daniel C.
Koscher, Vice President, Director of Planning/Budgeting and Assistant Secretary
and Patrick E. Rondeau, Vice President, Director of Legal Affairs and
Clerk/Secretary (all of whom served as members of the Investment Committee
during fiscal 1995 and fiscal 1996). The Investment Committee reviews each
proposed acquisition to determine whether the property meets certain criteria.
The Investment Committee considers such established criteria as the economic
conditions in the area in which the parcel is located, environmental
sensitivity, availability of financing, whether the property is consistent with
the Company's general policies and the anticipated ability of that property to
produce acceptable profit margins and cash flow. Since May 1990, sales of
property approved by the Investment Committee have resulted in average gross
margins in excess of 55%. No assurances can be given that future sales of
property approved by the Investment Committee will yield comparable gross
margins. Prior to the formation of the Investment Committee, the determination
of whether to buy most properties was typically made by the Company's regional
managers, together with one or more members of the Company's senior management.
Land Division
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The Land Division, through the Company's regional offices, and subject to
Investment Committee review and approval, typically acquires inventory that (i)
is located within one to three hours of a major city, (ii) is suitable for
subdivision, (iii) maintains attractive topographical features and (iv) will
result in an acceptable profit margin and cash flow to the Company based upon
anticipated resale value. Properties are generally subdivided for resale into
parcels ranging in size from one to 35 acres. In fiscal 1996, the Company
acquired over 16,000 acres in 13 separate transactions for a total purchase
price of $14.9 million, or $929 per acre. These properties ranged in size from
46 to 6,200 acres. The 6,200 acres represented a property acquisition in
Arizona. Seller, bank or similar financial institution financing of $9.6
million, or 64% of the $14.9 million total purchase price, was obtained.
The Land Division has several specialists who assist regional management in
locating inventory for acquisition. The Company has established contacts with
numerous land owners and real estate brokers in many of its market areas, and
because of such contacts and its long history of acquiring properties, the
Company is generally in a favorable position to learn of available inventory.
The Company's objective is to develop strong relationships with major property
owners and brokers. Regional offices regularly contact property owners, such as
timber companies, financial institutions and real estate brokers, by a
combination of telephone, mail and personal visits. In addition, the Company
occasionally places advertisements in local and national newspapers indicating
an interest in acquiring land. To date, the Company's regional offices have been
able to locate and acquire adequate quantities of inventory which meet the
criteria established by the Investment Committee to support their operational
activities.
Once an appropriate property is located, the Company begins performing due
diligence procedures and enters into a purchase agreement with the seller. It is
generally the Company's policy to advance only a small downpayment of 1% - 3% of
the purchase price when signing a contract to acquire inventory and to limit the
liquidated damages associated with such contracts to the amount of its
downpayment and any preliminary development costs. In most cases, the Company is
not required to advance the full purchase price or enter into a note payable
obligation until regulatory approvals for the subdivision and sale of at least
the initial phase of the project have been obtained. While local approvals are
being sought, the Company will, in certain instances, engage in test marketing
of the subdivided parcels and, with the consent of the seller and the knowledge
of prospective purchasers, occasionally attempt to pre-sell parcels, subject to
closing its purchase of the property. When the necessary regulatory approvals
have been received, the closing on the property occurs and the Company obtains
title. The time between execution of a purchase agreement and closing on a
property has generally been six to 12 months. Although the Company generally
retains the right to cancel purchase agreements without any loss beyond
forfeiture of the downpayment and preliminary development costs, few purchase
agreements have been canceled.
By requiring, in most cases, that regulatory approvals be obtained prior to
closing and by making small downpayments upon signing purchase agreements, the
Company is typically able to place a number of properties under contract without
expending significant amounts of cash. This strategy enables the Company's Land
Division to reduce (i) the time during which it actually owns specific
properties, (ii) the market risk associated with holding real estate and (iii)
the risk of acquiring property that may not be suitable for sale. It also
provides a source of available properties to meet customer demand. In certain
instances, however, the Company has acquired properties and then held such
properties until their prime marketing seasons.
As of March 31, 1996, the Land Division had aggregate downpayments of $233,000
associated with nine properties under contract for purchase. Such properties
represent 7,982 acres with an aggregate purchase price of $8.9 million, or
$1,114 per acre.
Prior to closing on a purchase of inventory, the Company's policy is to complete
its own environmental assessment of the property. The purpose of the Company's
assessment is to evaluate the impact the proposed subdivision will have on such
items as flora and fauna, wetlands, endangered species, open space, scenic
vistas, recreation, transportation and community growth and character. To obtain
this information, the Company's acquisition specialists typically consult with
various groups and agencies including the appropriate county and state planning
agencies, environmental groups, state heritage programs, soil conservation
agencies and forestry groups. If the Company's environmental assessment
indicates that the proposed subdivision meets environmental criteria and
complies with zoning, building, health and other laws, the Company develops a
formal land use plan, which forms a basis for determining an appropriate
acquisition price. The Company attempts, where possible, to accommodate the
existing topographical features of the land, such as streams, hills, wooded
areas, stone walls, farm buildings and roads. Prior to closing on an
acquisition, the Company will typically have the property surveyed by a
professional surveyor and have soil analyses conducted to determine the
suitability of the site for septic systems. At closing, the Company obtains
title insurance on the property.
Resorts Division
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The Company's Resorts Division employs due diligence procedures similar to those
used by the Land Division in locating property for future timeshare resorts. A
full property review, including an environmental assessment, is presented to the
Investment Committee for approval prior to purchase. During the review process,
acquisition specialists analyze market, tourism and demographic data as well as
the quality and diversity of the location's existing attractions to determine
the availability of a variety of recreational opportunities for prospective
purchasers. While the Company's Land Division inventory is expected to turn
frequently, the Company anticipates that each of its timeshare resorts will
generally have a sell-out term in excess of five years. During fiscal 1996, the
Company purchased land in Myrtle Beach, South Carolina for the development of a
timeshare resort. The total purchase price was $3.5 million. In each of fiscal
1994 and fiscal 1995, the Company acquired a property in eastern Tennessee for
development of timeshare resorts.
Communities Division
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During fiscal 1996, the Company purchased one parcel for $507,000 located in
Orlando, Florida. To date, the lots from this project have been sold to a home
builder (versus sold on a retail basis which is typical to the Company's Land
Division). The balance of the land supporting the other residential subdivisions
managed under the Communities Division was acquired by the Company in the late
1980's and is primarily comprised of three properties in North Carolina. The
Company entered into the housing industry during fiscal 1994, primarily as a
means to accelerate lot sales of these older projects. The Company does not
intend to expand its communities related activities beyond the projects
currently being marketed.
The Company's net inventory as of March 31, 1996 and April 2, 1995 summarized by
division and classified by major geographic region is set forth in the tables to
follow.
<TABLE>
<CAPTION>
March 31, 1996
------------------------------------------------------------------------
Geographic Region Land Resorts(1) Communities(2) Total
- ----------------- ---- ---------- --------------- -----
<S> <C> <C> <C> <C>
Southwest........... $15,118,191 $ --- $ 142,790 $15,260,981
Rocky Mountains ..... 9,299,344 --- 50,800 9,350,144
West ................ 5,923,972 --- --- 5,923,972
Midwest.............. 6,293,008 10,839,389 --- 17,132,397
Southeast............ 2,252,239 5,189,815 13,983,521 21,425,575
Northeast............ 1,982,895 --- --- 1,982,895
Mid-Atlantic......... 2,490,025 --- --- 2,490,025
Canada............... 29,025 --- --- 29,025
Totals............... $43,388,699 $16,029,204 $ 14,177,111 $73,595,014
April 2, 1995
------------------------------------------------------------------------
Geographic Region Land Resorts(1) Communities(2) Total
- ----------------- ---- ---------- --------------- -----
Southwest............ $16,643,459 $ --- $ 1,115,914 $17,759,373
Rocky Mountains ..... 9,308,069 --- 433,933 9,742,002
West ................ --- --- --- ---
Midwest.............. 7,671,471 5,240,911 --- 12,912,382
Southeast............ 2,755,756 --- 11,575,971 14,331,727
Northeast............ 3,044,966 --- --- 3,044,966
Mid-Atlantic......... 4,280,951 --- --- 4,280,951
Canada............... 273,349 --- --- 273,349
Totals............... $43,978,021 $5,240,911 $13,125,818 $62,344,750
</TABLE>
(1) Resorts Division inventory as of March 31, 1996, includes land inventory of
$6.1 million and $9.9 million of unit construction-in-progress. Resorts Division
inventory as of April 2, 1995, includes land inventory of $2.3 million and $2.9
million of unit construction-in-progress.
(2) Communities Division inventory as of March 31, 1996, includes land inventory
of $10.5 million and $3.7 million of housing unit construction-in-progress.
Communities Division inventory as of April 2, 1995, includes land inventory of
$9.9 million and $3.2 million of housing unit construction-in-progress.
The increase in the Company's net inventory creates certain risks associated
with the holding of real estate. In the event that the market for real estate or
the economy in general experiences a downturn in the Company's markets of
operations, the Company's ability to sell inventory at current rates of sales
could be materially adversely affected. If inventory is not sold as planned, the
Company will incur additional carrying costs. For further information on the
Company's inventory holdings, see "Uses of Capital" under Management's
Discussion and Analysis of Financial Condition which is incorporated by
reference into Item 7, Part II herein from the Company's 1996 Annual Report.
Marketing and Sale of Inventory
Land Division
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In general, as soon as a property has been acquired and during the time period
that appropriate improvements are being completed, the Company establishes
selling prices for the individual parcels taking into account such matters as
regional economic conditions, quality as a building site, scenic views, road
frontage and natural features such as lakes, mountains, streams, ponds and
wooded areas. The Company also considers recent sales of comparable parcels in
the area. Initial decisions on pricing of parcels in a given area are made by
the Company's regional managers and, in all cases, are subject to approval by
the Investment Committee.
The most widely used marketing technique is advertising in major newspapers in
metropolitan areas located within a one to three hour drive from the property.
The Company also advertises its land properties in local newspapers. A sales
representative who is knowledgeable about the property answers each inquiry,
discusses the property with the prospective purchaser, attempts to ascertain the
purchaser's needs and determine whether the parcel would be suitable for that
person, and arranges an appointment for the purchaser to visit the property.
Substantially all prospective customers inspect a property before purchasing.
The Land Division also conducts direct mail campaigns to market property through
the use of brochures describing available parcels, as well as television and
radio advertising. During fiscal 1996, the Land Division incurred $6.0 million
in advertising expense, or 7% of its sales of real estate.
The success of the Company's marketing efforts depends heavily on the knowledge
and experience of its sales personnel (substantially all of whom are employees
of the Company). The Company requires that, prior to initiating the marketing
effort for a property, every sales representative walk the property and become
knowledgeable about each parcel and applicable zoning, subdivision and building
code requirements. Continued training programs are conducted, including training
with regional office sales managers, weekly sales meetings and frequent site
visits by an executive officer of the Company. Additionally, the sales staff is
evaluated against performance standards established by the executive officers of
the Company. Substantially all of a sales representative's compensation is
commission-based.
The Company requires its sales staff to provide each customer with a written
disclosure statement regarding the real estate to be sold prior to the time the
customer signs a purchase agreement. Either a U.S. Department of Housing and
Urban Development ("HUD") lot information statement, where required, or a
Company generated "Vital Information Statement" sets forth relevant information
with respect to, and risks associated with, the property and is signed by every
purchaser. The Company believes that each information statement contains all
material and relevant information a customer requires to make an informed
decision as to whether or not to purchase, such as availability and estimated
cost of utilities, restrictions regarding property usage, status of access roads
and information regarding rescission rights.
After deciding to purchase a parcel, the buyer enters into a contract and pays
the Company a deposit of at least 10% of the purchase price. It is the Company's
policy to give purchasers the right to cancel purchase agreements within
specified periods after execution in accordance with statutory requirements. The
closing of a land sale usually occurs two to eight weeks after payment of the
deposit. Upon closing of a land sale, the Company typically delivers a warranty
deed and a recent survey of the property to the buyer. Title insurance is
available at the purchaser's expense.
The table to follow sets forth certain information regarding sales of parcels by
the Land Division for the periods indicated.
<TABLE>
<CAPTION>
Years Ended
------------------------------------------------
March 31, April 2, March 27,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Number of parcels sold................................ 2,347 2,397 2,489
Average sales price per parcel........................ $34,856 $30,969 $25,511
Average sales price per parcel excluding a large
acreage bulk sale in each of the Rocky Mountains
and Southeast regions in the most recent year......... $33,628 $30,969 $25,511
Gross margin.......................................... 51% 57% 52%
</TABLE>
Certain sales have been deferred under percentage of completion accounting. See
Contracts Receivable and Revenue Recognition under Note 1 to the Consolidated
Financial Statements which is incorporated by reference into Item 7, Part II
herein from the Company's 1996 Annual Report.
The table to follow sets forth the number of parcels sold and the average sales
price per parcel for the Company's Land Division by geographic region for the
fiscal years indicated.
<TABLE>
<CAPTION>
Years Ended
------------------------------ -------------------------------- -------------------------------
March 31, 1996 April 2, 1995 March 27, 1994
-------------- - ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Average Average Average
Number of Sales Price Number of Sales Price Number of Sales Price
Geographic Region Parcels Sold Per Parcel Parcels Sold Per Parcel Parcels Sold Per Parcel
Southwest......... 1,117 $ 37,489 1,107 $ 34,999 940 $ 27,140
West.............. 19 $ 138,347 --- $ --- --- $ ---
Rocky Mountains. 297 $ 44,524 339 $ 32,033 242 $ 34,180
Midwest........... 334 $ 27,451 317 $ 28,740 437 $ 22,767
Southeast......... 223 $ 36,925 289 $ 28,311 376 $ 26,537
Northeast......... 106 $ 12,472 113 $ 19,382 115 $ 17,687
Mid-Atlantic...... 236 $ 21,951 215 $ 23,136 367 $ 20,700
Canada............ 15 $ 11,674 17 $ 10,160 12 $ 13,037
Totals............ 2,347 $ 34,856 2,397 $ 30,969 2,489 $ 25,511
</TABLE>
For further information on sales attributable to the Company's Land Division,
see "Results of Operations" under Management's Discussion and Analysis of
Financial Condition and Results of Operations which is incorporated by reference
into Item 7, Part II herein from the Company's 1996 Annual Report.
Resorts Division
- ----------------
The Company requires its sales staff to provide each timeshare customer with a
written disclosure statement regarding the real estate to be sold prior to the
time the customer signs a purchase agreement. A public disclosure statement sets
forth relevant information with respect to vacation ownership at the resort and
is signed by every purchaser. The Company believes that the information
statement contains all material and relevant information a customer requires to
make an informed decision as to whether or not to purchase.
After deciding to purchase a vacation ownership interval, the buyer enters
into a contract and pays the Company a deposit of at least 10% of the purchase
price. It is the Company's policy to give all purchasers the right to cancel
purchase agreements within specified periods after execution in accordance with
statutory requirements. Substantially all timeshare purchasers visit the resort
prior to purchasing.
In the marketing and sale of timeshare intervals, the Company generally targets
family households in the middle income bracket who prefer outdoor recreational
activities at destination locations. The division employs various programs to
reach its target market. The primary means of marketing existing timeshare
property is through direct mail mini-vacation invitations. The division provides
hotel accommodations to prospective purchasers at reduced prices in exchange for
them touring the timeshare resort. Timeshare resorts are staffed with, among
others, sales representatives, sales managers and an on-site manager who
oversees the day-to-day operations, all of whom are employees of the Company.
Sales personnel are generally experienced in resort sales and undergo ongoing
Company sponsored training. During fiscal 1996, total advertising expense for
the Resorts Division was $3.4 million or 25% of the division's $13.8 million in
sales.
The following table sets forth certain information for sales of intervals
associated with the Company's Resorts Division for the periods indicated.
Certain sales have been deferred under percentage of completion accounting. See
Contracts Receivable and Revenue Recognition under Note 1 to the Consolidated
Financial Statements which is incorporated by reference into Item 7, Part II
herein from the Company's 1996 Annual Report.
Years Ended
----------------------------------------
March 31, April 2, March 27,
1996 1995 1994
---- ---- ----
Number of intervals sold................. 1,865 952 ---
Average sales price per interval
interval................................ $7,325 $7,119 $ ---
Gross margin............................ 67% 62% ---
The number of timeshare intervals sold increased to 1,865 during fiscal
1996 compared to 952 for fiscal 1995. During fiscal 1995, all interval sales
were generated from the Company's first resort in Gatlinburg, Tennessee.
During fiscal 1996, 1,374 intervals were sold from the Gatlinburg resort,
484 intervals were sold from the Company's second resort in neighboring
Pigeon Forge, Tennessee and seven intervals were sold from the Company's
resort in Myrtle Beach, South Carolina.
The Company's resort in Gatlinburg, Tennessee consists of a combination of
single-family detached chalet units and apartment-like villa units. The
Company's resort in Pigeon Forge, Tennessee is expected to include sixteen
buildings containing apartment-like villa units. The Myrtle Beach resort, which
is the newest of the Company's resorts, is expected to consist of three
buildings containing apartment-like villa units. The first building of the
Myrtle Beach resort is currently under construction. The oceanfront building is
planned to include 114 units. Each of the Company's three resorts is expected to
be marketed over at least the next four years.
Communities Division
- --------------------
The Company entered into the housing industry during fiscal 1994, primarily as a
means to accelerate lot sales of certain older projects in certain markets.
Marketing of home and lot packages is accomplished primarily through a
combination of print media, supplemented by television advertising. During
fiscal 1996, total advertising expense for the division was $532,000 or 4% of
the division's $14.7 million in sales. The Company works with its home
purchasers in obtaining conventional bank financing through local institutions,
and accordingly, all such sales are received in cash. The closing on a home sale
typically occurs two to six months after payment of the deposit. Upon closing of
a sale, the Company delivers a warranty deed and a recent survey of the property
to the buyer. Title insurance is available at the purchaser's expense.
The following table sets forth certain information for sales associated with the
Company's Communities Division for the periods indicated.
Years Ended
----------------------------------------
March 31, April 2, March 27,
1996 1995 1994
--------- -------- --------
Number of homes/lots sold............... 206 133 44
Average sales price..................... $71,546 $100,866 $70,044
Gross margin............................ 10% 12% 12%
The $14.7 million in fiscal 1996 sales was comprised of 114 manufactured homes
with an average sales price of $75,232, 20 site-built homes with an average
sales price of $198,592, 71 sales of lots-only at an average sales price of
$23,279 and one larger acreage Southwestern bulk lot sale for $530,320. The
$13.4 million in fiscal 1995 sales was comprised of 110 manufactured homes with
an average sales price of $77,243 and 23 site-built homes with an average sales
price of $213,640. Substantially all of the $3.1 million in fiscal 1994 sales
was comprised of manufactured homes. The Company does not intend to expand its
communities related activities beyond the projects currently being marketed.
Total Sales
- -----------
During fiscal 1996, sales attributable to the Company's Land, Resorts and
Communities divisions comprised $84.9 million or 75%, $13.8 million or 12% and
$14.7 million or 13%, respectively, of total consolidated revenues from sales of
real estate.
The tables to follow set forth sales by geographic region and division for the
years indicated.
<TABLE>
<CAPTION>
Year Ended March 31, 1996
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Geographic Region Land Resorts Communities Total %
Southwest............ $43,457,483 $ --- $ 2,734,570 $ 46,192,053 40.7%
West................. 2,628,600 --- --- 2,628,600 2.3%
Rocky Mountains ..... 13,223,744 --- 409,817 13,633,561 12.0%
Midwest.............. 9,981,574 13,825,162 --- 23,806,736 21.0%
Southeast............ 8,569,869 --- 11,594,167 20,164,036 17.8%
Northeast............ 1,321,982 --- --- 1,321,982 1.2%
Mid-Atlantic......... 5,500,146 --- --- 5,500,146 4.8%
Canada............... 175,114 --- --- 175,114 .2%
Totals............... $84,858,512 $13,825,162 $14,738,554 $113,422,228 100.0%
=========== =========== =========== ============ ======
Year Ended April 2, 1995
--------------------------------------------------------------------------------
Geographic Region Land Resorts Communities Total %
Southwest............ $38,600,075 $ --- $ 2,012,112 $ 40,612,187 44.2%
Rocky Mountains ..... 10,859,280 --- 3,521,637 14,380,917 15.6%
Midwest.............. 8,297,375 5,886,427 --- 14,183,802 15.4%
Southeast............ 7,846,343 --- 7,881,426 15,727,769 17.1%
Northeast............ 2,190,110 --- --- 2,190,110 2.4%
Mid-Atlantic......... 4,654,483 --- --- 4,654,483 5.1%
Canada............... 172,722 --- --- 172,722 .2%
Totals............... $72,620,388 $5,886,427 $13,415,175 $ 91,921,990 100.0%
=========== ========== =========== ============ ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended March 27, 1994
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Geographic Region Land Resorts Communities Total %
Southwest............ $23,855,291 $ --- $ 388,890 $24,244,181 38.2%
Rocky Mountains ..... 8,069,444 --- 362,356 8,431,800 13.3%
Midwest.............. 10,520,147 --- 125,716 10,645,863 16.8%
Southeast............ 8,196,901 --- 1,780,995 9,977,896 15.7%
Northeast............ 2,034,000 --- --- 2,034,000 3.2%
Mid-Atlantic......... 7,474,934 --- 424,000 7,898,934 12.5%
Canada............... 156,438 --- --- 156,438 .3%
Totals............... $60,307,155 $ --- $3,081,957 $63,389,112 100.0%
=========== ========== ========== =========== ======
</TABLE>
Customer Financing
During fiscal 1996, 1995 and 1994, the Company financed 26%, 24% and 34%,
respectively, of the aggregate purchase price of its sales of real estate to
customers that closed during these periods and received cash for the remaining
amounts. The increase in the percentage of sales financed by the Company from
fiscal 1995 to fiscal 1996 is primarily attributable to an increase in timeshare
sales over the same period; approximately 85% of timeshare sales have
historically been internally financed by the Company as compared to 25% - 35% of
land sales. Timeshare sales accounted for 12% of consolidated sales of real
estate during fiscal 1996, compared to 6% of consolidated sales during fiscal
1995. The lower percentage of sales financed during fiscal 1995 compared to
fiscal 1994 was primarily attributable to (i) an increased willingness on the
part of certain local banks to extend more direct customer lot financing during
fiscal 1995 and (ii) an increased amount of home sales in the revenue mix during
fiscal 1995, the proceeds of which were received entirely in cash. Because of
the increased willingness on the part of certain local banks to extend more
direct customer lot financing since fiscal 1994, the Company recently introduced
a fixed interest rate program directed at obtaining more land sales which are
internally financed with the Company. The program has not materially increased
internally financed land sales to date.
The Company believes its financing is attractive to purchasers who find it
convenient to handle all facets of the purchase of land and vacation ownership
intervals through a single source and because downpayments required by the
Company are similar to those required by banks and mortgage companies which
offer this type of credit.
Land Division
- -------------
The Company offers financing of up to 90% of the purchase price to all
purchasers of its properties who qualify for such financing. The term of
repayment on the financing has historically ranged from five to 15 years
although the Company, by offering reduced interest rates, has been successful in
encouraging customers during recent years to finance their purchases over
shorter terms and provide increased downpayments. Management believes such
strategy has improved the quality of its notes receivable in recent years. A
typical note receivable currently underwritten by the Company has a term of ten
years, bears interest at a fixed interest rate or variable rate tied to the
prime lending rate and is secured by a first lien on the land. During fiscal
1996, 29% of land purchasers qualified for, and received, Company financing.
Such purchasers made an average downpayment of 22% of the purchase price.
Resorts Division
- ----------------
The Company also offers financing of up to 90% of the purchase price to its
timeshare purchasers. During fiscal 1996, almost all timeshare purchasers
elected to receive the Company's financing and provided an average downpayment
of 16%. The typical financing extended by the Company on a timeshare interval
provides for a term of seven years and a fixed interest rate. At the closing,
the Company and the purchaser execute a contract for deed agreement. After the
obligation is paid in full, the Company delivers a deed to the purchaser.
Total Loans
- -----------
The weighted average interest rate on notes receivable was 12.4% at each March
31, 1996 and April 2, 1995. The table below sets forth additional information
relating to the Company's notes receivable.
<TABLE>
<CAPTION>
<S> <C> <C>
March 31, 1996 April 2, 1995
Notes receivable secured by land ...................... $ 26,243,222 $ 37,089,481
Notes receivable secured by timeshare intervals........ 11,667,049 4,311,362
-------------- --------------
Notes receivable, gross ............................... 37,910,271 41,400,843
Reserve for loan losses................................ ( 896,469) ( 1,089,652)
-------------- --------------
Notes receivable, net.................................. $ 37,013,802 $40,311,191
============ ==============
</TABLE>
Approximately 55% of the Company's notes receivable secured by land bear
interest at variable rates, while approximately 45% bear interest at fixed
rates. The average interest rate charged on loans secured by land was 11.6% at
March 31, 1996. All of the Company's timeshare loans bear interest at fixed
rates. The average interest rate charged on loans secured by timeshare intervals
was 14.2% at March 31, 1996.
Loan Underwriting
Land Division
- -------------
The Company has established loan underwriting criteria and procedures designed
to reduce credit losses on its loan portfolio. The loan underwriting process
includes reviewing the applicant's credit history, verifying employment and
income as well as calculating certain debt-to-income ratios. The primary focus
of the Company's underwriting is to determine the applicant's ability to repay
the loan in accordance with its terms. This assessment is based on a number of
factors, including the relationship of the applicant's required monthly payment
to disposable income. The Company also examines the applicant's credit history
through various credit reporting agencies. In order to verify an applicant's
employment status, the Company generally contacts the applicant's employer. The
Company also obtains current pay stubs, recent tax returns and other tax forms
from the applicant. Loans by the Company are made solely to finance land sold by
the Company.
Customer financing on Land Division sales requires the submission of a completed
and signed credit application, purchase and sale agreement and pre-authorized
checking agreement accompanied by a voided check, if applicable, to the credit
department. All credit decisions are made at the Company's corporate
headquarters. Loan amounts under $50,000 are approved by designated personnel
located in the Company's corporate headquarters, while loan amounts of $50,000
or more require approval from a senior executive officer. In addition, rejected
applications and any material exceptions to the underwriting policy are also
reviewed by senior management. Customers are notified of the reasons for credit
denial by mail.
The Company encourages customers to increase their downpayment and reduce the
loan term through the structure of its loan programs. Customers receive a lower
rate of interest as their downpayment increases and the loan term shortens.
Additionally, the Company encourages its customers to make timely payments
through a pre-authorized payment arrangement. Customers who do not choose a
pre-authorized payment plan are charged interest at a rate which is one percent
greater than the prevailing rate. Approximately 90% of purchasers using the
Company's financing have historically participated in the pre-authorized payment
plan.
After the credit decision has been made, the credit department categorizes the
file as either approved, pending or declined. Upon receipt of a credit approval,
the regional office schedules the closing with the customer. Closings are
typically conducted at the office of the Company's local attorney or settlement
agent, although in some cases the closing may take place at the sales site or by
mail.
When the original closing documents are received from the closing agent, the
Company verifies that the loan closed under terms approved by the Company's
credit department. A quality control audit is performed to verify that required
documents have been received and that they have been prepared and executed
correctly. If any revisions are required, notification is sent to the regional
office.
A loan file typically includes a copy of the signed security instrument, the
mortgage note, a copy of the deed, Truth-in-Lending disclosure, purchase and
sale agreement, credit application, local counsel opinion, Vital Information
Statement or purchaser's acknowledgment of receipt of HUD lot information
statement, HUD settlement statement and a copy of the assignment of mortgage and
an original note endorsement from the Company's subsidiary originating the sale
and the loan to the Company (if applicable). After the initial closing documents
are received, the recorded mortgage and assignment and original title insurance
policy are obtained in order to complete the loan file.
Resorts Division
- ----------------
The Company also extends financing for timeshare sales. Timeshare financing is
not subject to the same loan underwriting criteria established for Land Division
loans. Customer financing on timeshare sales requires (i) receipt of a minimum
downpayment of 10% of the purchase price and (ii) a contract for deed and other
closing documents between the Company and the customer. The Company encourages
customers to make increased downpayments by offering a lower interest rate. In
addition, customers who do not elect to participate in the Company's
preauthorized payment plan are charged interest at a rate which is one
percent greater than the prevailing rate. See "Collection Policies" below.
Collection Policies
Land Division
- -------------
Collection efforts and delinquency information are managed at the Company's
corporate headquarters. Servicing of the Receivables is handled by a staff of
experienced collectors, assisted by an on-line mortgage collection computer
system. Unless circumstances otherwise dictate, collection efforts are generally
made by mail and telephone. Collection efforts begin when an account is ten days
past due, at which time the Company mails a reminder letter. Attempts are then
made to contact the borrower via telephone to determine the reason for the
delinquency and to bring the account current. The determination of how to work a
delinquent loan is based upon many factors, including the borrower's payment
history and the reason for the current inability to make timely payments. If no
agreement is made or the borrower does not abide by the agreement, collection
efforts continue until the account is either brought current or legal action is
commenced. If not accelerated sooner, the Company declares the loan in default
when the loan becomes 60 days delinquent. When the loan is 90 days past due, the
accrual of interest is stopped (unless the loan is considered an in-substance
foreclosure loan, in which case all accrued interest is reversed since the
Company's means of recovery is determined to be through resale of the underlying
collateral and not through collection on the note) and the Credit/Collection
Manager determines the action to be taken.
Resorts Division
- ----------------
Consistent with industry practice in the areas where the Company has operations,
timeshare Receivables are documented by contracts for deed and the Company
retains title to the unit until the obligation is paid in full. Accordingly, no
foreclosure process is required in the event of a default. In the event that a
contract for deed becomes delinquent 10 days, a reminder letter is mailed to the
customer. If the customer fails to bring the account current, a late notice is
mailed when the account is 15 days delinquent (and telephone contact commences).
After an account is 45 days delinquent, the Company typically sends a third
letter advising the customer that they have 15 days within which to bring the
account current. Under the terms of the contract for deed, the borrower is in
default when the account becomes 60 days delinquent. At this time a default
letter is sent advising the borrower that they have 30 days to bring the account
current or lose their contractual interest in the timeshare unit. When the
account becomes 90 days delinquent, the Company forwards a final letter
informing the purchaser that the contract for deed has been terminated. At such
time, the timeshare interval can be resold to a new purchaser.
Total Receivables
- -----------------
At March 31, 1996, approximately 7% or $2.8 million of the aggregate $39.2
million principal amount of Receivables which were held by the Company or by
third parties under financings for which the Company had a recourse liability,
were more than 30 days past due. At April 2, 1995, approximately 5% or $2.1
million of the aggregate $43.2 million principal amount of Receivables which
were held by the Company or by third parties under financings for which the
Company had a recourse liability, were more than 30 days past due. In cases of
default on lot sales, the Company may take title to the parcel in lieu of
foreclosure. If the Company is unable to obtain a deed in lieu of foreclosure,
the Company forecloses on the mortgage securing such note. As indicated above,
timeshare Receivables represent contracts for deed and, accordingly, no
foreclosure process is required. Following a default on a timeshare note, the
contract for deed can be terminated. The Company recorded loan loss provisions
of $345,000, $792,000 and $795,000 for fiscal 1996, 1995 and 1994, respectively.
In fiscal 1996, the Company charged $538,000 against its reserve for loan losses
to reflect the difference between the unpaid balance of non-performing
Receivables and the estimated net realizable value of the reacquired inventory,
compared to $672,000 charged in fiscal 1995 and $797,000 in fiscal 1994.
Sales of Receivables/Pledging of Receivables
Since 1986, the Company has sold or pledged substantially all of its Receivables
originations, generally retaining the right and obligation to service the
Receivables. Typically, the Company transfers the Receivables to its special
purpose finance subsidiaries, which in turn enter into institutional financing
transactions or securitizations. The Receivables are typically sold with limited
or no recourse. In the case of Receivables pledged, the Company generally must
maintain a debt to eligible collateral rate (based on outstanding principal
balance of the collateral) of 90%. The Company is obligated to pledge additional
eligible Receivables or make additional principal payments in order to maintain
this collateralization rate. Repurchases and additional principal payments have
not been material to date. At March 31, 1996, the Company was subject to limited
recourse requirements on approximately $1.3 million of Receivables sold. The
delinquency on such Receivables was immaterial at March 31, 1996. See "Sources
of Capital" under Management's Discussion and Analysis of Financial Condition
which is incorporated by reference into Item 7, Part II herein from the
Company's 1996 Annual Report.
As discussed above, private placement REMIC financings have provided substantial
capital resources to the Company. Under the terms of these transactions, the
Receivables are sold to a REMIC trust and the Company has no obligation to
repurchase the Receivables due to default by the borrowers. The Company does,
however, have the obligation to repurchase the Receivables in the event that
there is any material defect in the loan documentation and related
representations and warranties as of the time of sale. See Notes 8 and 14 to the
Consolidated Financial Statements which are incorporated by reference into Item
8, Part II herein from the Company's 1996 Annual Report to Shareholders.
Receivables Servicing
Receivables servicing includes collecting payments from borrowers and remitting
such funds to the owners, lenders or investors in such Receivables, accounting
for Receivables principal and interest, making advances when required,
contacting delinquent borrowers, foreclosing in the event that defaults are not
remedied and performing other administrative duties. The Company's obligation to
provide Receivables servicing and its rights to collect fees are set forth in a
servicing agreement. The Company has the obligation and right to service all of
the Receivables it originates and retains the obligation and right with respect
to substantially all of the Receivables it sells. The Company typically receives
an annual servicing fee of approximately .5% of the outstanding scheduled
principal balance, which is deducted from payments received on substantially all
of the Company's servicing portfolio. At March 31, 1996, the Receivables
servicing portfolio, representing Receivables originated and sold, totaled $70.9
million.
Customer Service
The Company emphasizes customer satisfaction and maintains two full-time
customer service representatives in its Boca Raton headquarters to respond to
customer inquiries. At closing, all purchasers are provided with a toll-free
customer service phone number to facilitate any additional information requests.
Customer service surveys are sent to each purchaser to measure customer
satisfaction and to alert the Company to problems, if any.
Regulation
The real estate industry is subject to extensive regulation. The Company is
subject to compliance with various federal, state and local environmental,
zoning and other statutes and regulations regarding the acquisition, subdivision
and sale of real estate and timeshare interests and various aspects of its
financing operations. The Company believes that it is in compliance in all
material respects with such regulations.
The Company's Land and Communities divisions are subject to the Interstate Land
Sales Full Disclosure Act which establishes strict guidelines with respect to
the marketing and sale of land in interstate commerce. HUD has enforcement
powers with respect to this statute. In some instances, the Company has been
exempt from HUD registration requirements because of the size or number of the
subdivided parcels and the limited nature of its offerings. The Company, at its
discretion, may formally request an exemption advisory opinion from HUD to
confirm the exempt status of any particular offering. Several such exemption
requests have been submitted to, and approved by, HUD. In those cases where the
Company and its legal counsel determine parcels must be registered to be sold,
the Company files registration materials disclosing financial information
concerning the property, evidence of title and a description of the intended
manner of offering and advertising such property. The Company bears the cost of
such registration, which includes legal and filing fees. Many states also have
statutes and regulations governing the sale of real estate. Consequently, the
Company regularly consults with counsel for assistance in complying with
federal, state and local law. The Company must obtain the approval of numerous
governmental authorities for its acquisition and marketing activities and
changes in local circumstances or applicable laws may necessitate the
application for, or the modification of, existing approvals.
The Company's Resorts Division sells vacation ownership interests to customers
through weekly intervals in fully furnished vacation units. Many state and local
authorities have imposed restrictions and additional regulations on developers
of vacation ownership properties. The Company's resorts in Gatlinburg,
Tennessee; Pigeon Forge, Tennessee; and Myrtle Beach, South Carolina are subject
to various regulatory requirements including state and local approvals. Although
these restrictions have generally increased the cost of selling vacation
ownership intervals, the Company has not experienced material difficulties in
complying with such regulations or operating within such restrictions. In
compliance with state laws, the Company provides its timeshare purchasers with a
public disclosure statement which contains, among other items, detailed
information about the surrounding vicinity, the resort and the purchaser's
rights and obligations as an interval owner.
The Company's customer financing activities are also subject to
extensive regulation, which may include, Truth-in-Lending-Reg. Z, Fair Debt
Collection Practices Act, Equal Credit Opportunity Act-Reg. B, Electronic
Funds Transfer Act-Reg. E, Home Mortgage Disclosure Act-Reg. C, Unfair or
Deceptive Acts or Practices-Reg. AA and Right to Financial Privacy Act. The
Company believes that it is in compliance in all material respects with such
regulations.
In fiscal 1988, the Company established regional operations in Ontario, Canada.
The Company's operations in Canada are subject to compliance with all applicable
Canadian federal and provincial environmental, zoning, financing and other
statutes regarding the acquisition, subdivision, financing and sale of real
estate. During fiscal 1996, 1995 and 1994, the Company's operations in Canada
accounted for .2%, .2% and .3%, respectively, of the Company's total sales
during those periods.
Management is not aware of any pending regulatory contingencies that are
expected to have a materially adverse impact on the Company.
Competition
The real estate industry is highly competitive. In each of its markets, the
Company competes against numerous developers and others in the real estate
business, some of which are larger and have greater financial resources than the
Company. Competition may be generally smaller with respect to the Company's lot
sales in the more rural markets in which it operates. The Company believes that
it can compete on the basis of its reputation and the price, location and
quality of the products it offers for sale, as well as on the basis of its
experience in land acquisition, development and sale. Although the Resorts
Division competes with various high profile and well-established operators, the
Company believes that it can compete on the basis of its general reputation and
the price, location and quality of its timeshare resorts. In its customer
financing activities, the Company competes with banks, mortgage companies, other
financial institutions and governmental agencies offering financing of real
estate. In recent years, the Company has experienced increased competition with
respect to the financing of land sales as evidenced by the reduction in the
percentage of land sales internally financed during fiscal 1995 and fiscal 1996.
The Company believes that, based on its interest rates and repayment schedules,
the financing packages it offers are convenient for customers and competitive
with those of other institutions which offer such financing.
Personnel
As of March 31, 1996, the Company had 413 full-time and 36 part-time employees.
Of the 449 employees, 80 are located at the Company's headquarters in Boca
Raton, Florida and 369 are located in regional offices throughout the United
States and Canada (the 369 field personnel include 6 divisional presidents, 9
regional and district managers, 206 sales personnel, 26 project managers, 9
acquisition specialists and 113 administrative and other support personnel).
None of the Company's employees are represented by a collective bargaining unit,
and the Company believes that relations with its employees generally are
excellent.
<TABLE>
<CAPTION>
<S> <C> <C>
Executive Officers of the Company
The following table sets forth certain information regarding the executive
officers of the Company.
Name Age Position
George F. Donovan 57 President and Chief Executive Officer
Alan L. Murray 49 Treasurer and Chief Financial Officer
Daniel C. Koscher 38 Vice President, Director of Planning/Budgeting and Assistant Secretary
Patrick E. Rondeau 49 Vice President, Director of Corporate Legal Affairs and Clerk/Secretary
Allan J. Herz 36 Vice President and Director of Mortgage Operations
Joan A. McCormick 53 Vice President and Director of Management Information Systems and
Administration
Susan J. Milanese 37 Vice President and Director of Human Resources
Mary Jo Wiegand 32 Vice President, Director of Investor Relations and Controller
</TABLE>
George F. Donovan joined the Company as a Director in 1991 and was
appointed President and Chief Operating Officer in October, 1993 and Chief
Executive Officer in December, 1993. Mr. Donovan was President of Leisure
Management International from 1991 to 1993. From 1989 to 1991, Mr. Donovan
served as President and Chief Executive Officer of Thousand Trails. Prior to
that time, Mr. Donovan served as an officer of a number of other recreational
real estate corporations. Mr. Donovan holds a B.S. in Electrical Engineering.
Alan L. Murray joined the Company in July, 1990 and was elected Treasurer in
September, 1990. Mr. Murray was elected Chief Financial Officer in May, 1991.
Prior to joining the Company, Mr. Murray had held the position of President of
Mount Holly, Inc. and Northeast Country Properties, Inc. Mr. Murray has also
practiced as a certified public accountant in southern Vermont and western
Massachusetts, held the position of corporate controller of Felters Company and
practiced as a certified public accountant in the audit department of Coopers &
Lybrand. Mr. Murray holds a B.A. in Economics and a M.S. in Accounting.
Daniel C. Koscher joined the Company in 1986. During his tenure, he has served
in various financial management positions including Divisional Controller,
Director of Accounting and Chief Accounting Officer. In June, 1990, Mr. Koscher
was elected Vice President and in August, 1995, he became Director of
Planning/Budgeting. Prior to his employment with the Company, Mr. Koscher was
employed by the William Carter Company, a manufacturing company located in
Needham, Massachusetts. He has also been employed by Cipher Data Products, Inc.,
a computer peripheral manufacturer located in San Diego, California as well as
the State of Nevada as an audit agent. Mr. Koscher holds a B.B.A. in Accounting
along with a M.B.A.
Patrick E. Rondeau joined the Company in July, 1990 and was elected Vice
President and Director of Corporate Legal Affairs in September, 1990 and
Clerk/Secretary in February, 1993. For more than five years prior to his
employment with the Company, Mr. Rondeau was a senior partner of Freedmen,
DeRosa & Rondeau, located in North Adams, Massachusetts, which firm serves as
legal counsel to the Company on various matters. Mr. Rondeau holds a B.A. in
Political Science along with a J.D.
Allan J. Herz joined the Company in April, 1992 as a senior financial
analyst and was named Director of Mortgage Operations in September, 1992. Mr.
Herz was elected Vice President in 1993. From 1982 to 1992, Mr. Herz worked for
AmeriFirst Federal Savings Bank based in Miami, Florida. During his 10 year
tenure with the bank, he held various lending positions, the most recent being
Division Vice President in Consumer Lending. Mr. Herz holds a B.B.A. and a
M.B.A.
Joan A. McCormick joined the Company in November, 1993 as its Director of
Management Information Systems and Administration and was elected Vice President
in February, 1995. Ms. McCormick has over 20 years of experience in information
systems management in the real estate, hotel, banking and manufacturing fields.
Prior to joining the Company, Ms. McCormick was Assistant Vice President MIS for
Atlantic Gulf Communities. She has also held management positions with
Arvida/JMB Partners Ltd., Southeast Banking Corporation and General Motors
Corporation. She holds a B.A. in Business Administration.
Susan J. Milanese joined the Company in January, 1988. During her tenure, she
has held various management positions in the Company including Assistant to the
Chief Financial Officer, Divisional Controller and Director of Accounting. In
April, 1995, she was elected Vice President and Director of Human Resources.
From 1983 to 1988, Ms. Milanese was employed by General Electric Company in
various financial management positions including the corporate audit staff. Ms.
Milanese holds her B.B.A in Accounting.
Mary Jo Wiegand joined the Company in August, 1988. During her tenure, she
has held various management positions within the accounting, finance and
treasury departments, including managing external financial reporting. In
February, 1995, she was elected Vice President and Director of Investor
Relations and in August, 1995 she was named Controller. From 1985 to 1988, Ms.
Wiegand was employed by Price Waterhouse. Ms. Wiegand holds a B.S. in
Accounting.
The Company's By-Laws provide that, except as otherwise provided by law or the
charter and by-laws of the Company, the President, Treasurer and the Clerk hold
office until the first meeting of the Board of Directors following the next
annual meeting of shareholders and until their respective successors are chosen
and qualified and that all other officers hold office for the same period unless
a shorter time is specified in the vote appointing such officer or officers.
Item 2. PROPERTIES.
The Company's principal executive office is located in Boca Raton, Florida in
approximately 14,000 square feet of leased space. On March 31, 1996, the Company
also maintained regional sales offices in the Northeastern, Mid-Atlantic,
Southeastern, Midwestern, Southwestern, Rocky Mountain and Western regions of
the United States as well as the Province of Ontario, Canada.
Item 3. LEGAL PROCEEDINGS.
In the ordinary course of its business, the Company from time to time becomes
subject to claims or proceedings relating to the purchase, subdivision, sale
and/or financing of real estate. Additionally, from time to time, the Company
becomes involved in disputes with existing and former employees. The Company
believes that substantially all of the above are incidental to its business. See
Note 10 to the Consolidated Financial Statements which is incorporated by
reference into Item 8, Part II herein from the Company's 1996 Annual Report to
Shareholders.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On February 15, 1996, the Company's shareholders approved an amendment to the
Company's restated articles of organization changing the name of the Company
from Patten Corporation to Bluegreen Corporation. The results of voting are set
forth below.
For.......................................... 15,101,509
Against...................................... 453,794
Abstain...................................... 179,089
Non-votes.................................... 3,807,080
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The Company's Common Stock is listed on the New York Stock Exchange and on the
Pacific Stock Exchange under the symbol "BXG." The Company's 8.25% Convertible
Subordinated Debentures due 2012 are also listed on the NYSE. The following
table sets forth, for the periods indicated, the high and low sales price per
share of Common Stock as reported on the NYSE.
Fiscal 1996 (1): High Low
----- ---
First Quarter.......................... 3 3/4 3 1/8
Second Quarter......................... 5 3/4 3 1/4
Third Quarter.......................... 5 4
Fourth Quarter......................... 5 3 7/8
Fiscal 1995 (1): High Low
----- ---
First Quarter.......................... 3 7/8 3
Second Quarter......................... 3 7/8 2 7/8
Third Quarter.......................... 3 5/8 3
Fourth Quarter......................... 3 3/4 2 7/8
(1) Because the Common Stock dividends declared in March, 1996 and March, 1995
were not material in terms of the number of shares or their impact on the
prevailing market price, the high and low sales prices have not been adjusted.
As of May 1, 1996, there were approximately 2,200 registered holders of record
of Common Stock and 5,000 holders of Common Stock in "street name." No cash
dividends have been declared on the Company's Common Stock since the third
quarter of fiscal 1990. The registrar and transfer agent for the Company's
Common Stock is Chemical Mellon Shareholders Services, Ridgefield Park, New
Jersey 07660.
<PAGE>
Item 6. SELECTED FINANCIAL DATA.
The selected financial data set forth below was derived from the respective
year's audited financial statements and should be read in conjunction with the
Consolidated Financial Statements, including the notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" which are incorporated by reference into Items 7 and 8, Part II
herein from the Company's 1996 Annual Report to Shareholders.
<TABLE>
(Dollars in Thousands Except Average Sales Price Data and Per Share Data)
<CAPTION>
March 31, April 2, March 27, March 28, March 29,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Sales of real estate..................... $113,422 $ 91,922 $ 63,389 $ 53,349 $ 45,100
Interest income and other (1)........... 7,388 7,264 7,952 10,191 16,515
-------- -------- -------- -------- --------
Total revenues......................... 120,810 99,186 71,341 63,540 61,615
Income from operations................... 10,794 10,029 6,778 3,604 1,089
Net income............................... 6,467 6,137 4,931 3,457 1,368
Net income per common share.............. .30 .29 .23 .16 .06
OPERATING DATA
Gross margin on sales of real estate (2). 47.6% 50.9% 51.5% 46.7% 36.3%
Average sales price of land parcels sold (3) $ 34,856 $ 30,296 $ 25,468 $ 20,839 $ 20,967
Number of land parcels sold (3).......... 2,347 2,397 2,489 2,560 2,151
Average sales price of timeshare intervals $ 7,325 $ 7,119 $ --- $ --- $ ---
sold (3).................................
Number of timeshare intervals sold (3)... 1,865 952 --- --- ---
Average sales price of homes/lots sold... $ 71,546 $100,866 $ 70,044 $ --- $ ---
Number of homes/lots sold................ 206 133 44 --- ---
Average yield earned on notes receivable at
period end............................ 12.4% 12.4% 10.9% 11.0% 12.1%
BALANCE SHEET DATA
- ------------------
Notes receivable, net (4)................ $ 37,014 $ 40,311 $ 44,203 $ 35,653 $118,836
Inventory, net (4)....................... 73,595 62,345 38,793 28,245 28,345
Total assets............................. 154,963 152,222 139,617 122,853 182,193
Short-term debt.......................... --- --- --- 6,500 ---
Current portion of lines-of-credit, notes
payable and receivable-backed notes 8,938 10,856 5,741 5,684 13,503
payable..................................
Long-term portion of lines-of-credit, notes
payable and receivable-backed notes 28,073 29,090 31,556 14,418 76,209
payable..................................
8.25% convertible subordinated debentures 34,739 34,739 34,739 34,739 34,739
Shareholders' equity..................... 64,698 58,040 51,854 46,868 43,378
Book value per common share.............. $ 3.15 $ 2.98 $ 2.91 $ 2.74 $ 2.54
Shares outstanding at end of year (000's) 20,533 19,471 17,796 17,083 17,061
(5)......................................
ASSET QUALITY RATIOS
Charge-offs, net of recoveries, to average
Receivables 1.4% 1.6% 3.6% 3.0% .7%
(4)......................................................
Reserve for loan losses to period end
Receivables 2.4% 2.6% 2.2% 4.3% 3.6%
(4).....................................................
</TABLE>
1) Interest income for fiscal 1996, 1995, 1994 and 1993 includes a $1.1
million gain, a $411,000 loss, a $238,000 loss and a $695,000 gain,
respectively, from sales of notes receivable in connection with private
placement REMIC transactions.
2) Gross margin is computed as the difference between the sales price and
the related cost of inventory, including the cost of improvements and amenities,
divided by the sales price.
3) Average sales price and unit sales data exclude the effect of deferring
recognition of revenue under percentage of completion accounting.
4) The Company adopted Statement of Financial Accounting Standard No. 114,
"Accounting by Creditors for Impairment of a Loan" (FAS No. 114) on April 3,
1995. FAS No. 114 amends the guidance for insubstance foreclosures contained in
Financial Accounting Release No. 28. Under FAS No. 114, a collateral dependent
loan shall be reported as real estate only if the lender has taken possession of
the inventory. Accordingly, reclassifications have been made between notes
receivable, reserve for loan losses and inventory for fiscal 1992 through 1995
to conform to the current year presentation. Furthermore, asset quality ratios
have been restated for these same periods.
5) Fiscal 1994 shares outstanding reflect the payment of a 4% common stock
dividend. Fiscal 1995 shares outstanding reflect the payments of
two additional common stock dividends of 4% and 5%. Fiscal 1996 shares
outstanding reflect the payment of a fourth common stock dividend of 5%.
Earnings per share data have been restated for all periods presented to give
affect to all common stock dividends paid. Book value per share has not been
restated to give affect to cumulative dividends paid through March 31, 1996, and
rather, reflects the shares outstanding as of the respective fiscal period end.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The information provided under the heading "Management's Discussion and Analysis
of Financial Condition and Results of Operations" on pages 18 - 27 of the
Company's 1996 Annual Report to Shareholders is incorporated herein by
reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Consolidated Financial Statements of the Company and its subsidiaries and
the related Notes thereto and report of independent certified public accountants
on pages 28 - 40 of the Company's 1996 Annual Report to Shareholders are
incorporated herein by reference.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
For information with respect to the Company's Directors, see the information
provided under the headings "Proposals 1 and 2 - Fixing of Number of Directors
at Six and Election of Named Directors" and "Certain Transactions and Other
Information" in the Company's definitive proxy statement to be filed for Annual
Meeting of Shareholders to be held on July 25, 1996 ("Proxy Statement"), which
sections are incorporated herein by reference. Information concerning the
executive officers of the Company appears in Part I of this Annual Report on
Form 10-K.
The present members of the Board of Directors of the Company are:
Joseph C. Abeles, Trustee, Abel Associates Trust
George F. Donovan, President and Chief Executive Officer, Bluegreen
Corporation
Ralph A. Foote, Esq., Senior Partner, Conley & Foote
Frederick M. Myers, Esq., Senior Partner, Cain, Hibbard, Myers & Cook
Stuart A. Shikiar, President, Shikiar Asset Management
Bradford T. Whitmore, General Partner, Grace Brothers, Ltd.
Section 16 Compliance
The information provided under the heading "Section 16 Compliance" in the
Company's Proxy Statement is incorporated herein by reference.
Item 11. EXECUTIVE COMPENSATION.
The information provided under the headings "Proposals 1 and 2 - Fixing of
Number of Directors at Six and Election of Named Directors," "Board of Directors
and its Committees," "Executive Compensation" and "Certain Transactions and
Other Information" in the Company's Proxy Statement is incorporated herein by
reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
(a) Security ownership of certain beneficial owners: The information
provided under the heading "Proposals 1 and 2 - Fixing of Number of
Directors at Six and Election of Named Directors" in the Company's
Proxy Statement is incorporated herein by reference.
(b) Security ownership of management: The information concerning
beneficial ownership of the Company's common stock by its Directors and
executive officers provided under the heading "Proposals 1 and 2 -
Fixing of Number of Directors at Six and Election of Named Directors"
in the Company's Proxy Statement is incorporated herein by reference.
(c) Changes in control: None.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
(a) Transactions with management and others: The information provided
under the headings "Proposals 1 and 2 - Fixing of Number of Directors
at Six and Election of Named Directors," "Executive Compensation" and
"Certain Transactions and Other Information" in the Company's Proxy
Statement is incorporated herein by reference.
(b) Certain business relationships: The information concerning
relationships regarding Directors, or nominees for Director, that exist
or have existed during the Company's fiscal year ended March 31, 1996
provided under the headings "Proposals 1 and 2 - Fixing of Number of
Directors at Six and Election of Named Directors" and "Certain
Transactions and Other Information" in the Company's Proxy Statement is
incorporated herein by reference.
(c) Indebtedness of management: The information provided under the
heading "Certain Transactions and Other Information" in the Company's
Proxy Statement is incorporated herein by reference.
(d) Transactions with promoters: None.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)(1) and (a)(2) List of Financial Statements and Schedules.
1. The following Consolidated Financial Statements and Notes thereof of the
Company and its subsidiaries and the report of independent certified public
accountants relating thereto, included in the Company's 1996 Annual Report
to Shareholders on pages 28 - 40 are incorporated by reference into Item 8
hereof.
Page
Report of Independent Certified Public Accountants 28
Consolidated Balance Sheets as of March 31, 1996 and April 2, 1995 29
Consolidated Statements of Income for each of the three years in the
period ended March 31, 1996 30
Consolidated Statements of Shareholders' Equity for each of the three
years in the period ended March 31, 1996 30
Consolidated Statements of Cash Flows for each of the three years in
the period ended March 31, 1996 31 - 32
Notes to Consolidated Financial Statements 33 - 40
2. All financial statement schedules are omitted because they are not
applicable or is not present in amounts sufficient to require submission of
the schedules or the required information is presented in the Consolidated
Financial Statements or related notes.
(a)(3) List of Exhibits.
The exhibits which are filed with this Annual Report on Form 10-K or which are
incorporated herein by reference are set forth in the Exhibit Index which
appears at pages 22 - 24 hereof, which Exhibit Index is incorporated herein by
reference.
(b) Reports on Form 8-K.
The Company filed a report on Form 8-K on March 8, 1996 under item 5 which
reported a change in the Company's name from Patten Corporation to Bluegreen
Corporation.
The Company also filed a report on Form 8-K on May 31, 1996 under item 5 which
reported a private placement sale transaction. See Note 14 to the Consolidated
Financial Statements which are incorporated by reference into Item 8, Part II
herein from the Company's 1996 Annual Report to Shareholders.
(c) Exhibits.
See (a)(3) above.
(d) Financial Statement Schedules.
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
BLUEGREEN CORPORATION
(Registrant)
Date: June 21, 1996 By: /s/ GEORGE F. DONOVAN
George F. Donovan, President and Chief Executive
Officer
Date: June 21, 1996 By: /s/ ALAN L. MURRAY
Alan L. Murray, Treasurer and Chief Financial
Officer
(Principal Financial Officer)
Date: June 21, 1996 By: /s/ MARY JO WIEGAND
Mary Jo Wiegand,
Vice President, Director of Investor Relations and
Controller
(Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on the 21st day of June, 1996.
Signature Title
/s/ GEORGE F. DONOVAN President, Chief Executive Officer and
George F. Donovan Director
/s/ ALAN L. MURRAY Treasurer and Chief Financial Officer
Alan L. Murray (Principal Financial Officer)
/s/ MARY JO WIEGAND Vice President, Director of Investor
Mary Jo Wiegand Relations and Controller
(Principal Accounting Officer)
/s/ JOSEPH C. ABELES Director
Joseph C. Abeles
/s/ RALPH A. FOOTE Director
Ralph A. Foote
/s/ FREDERICK M. MYERS Director
Frederick M. Myers
/s/ STUART A. SHIKIAR Director
Stuart A. Shikiar
/s/ BRADFORD T. WHITMORE Director
Bradford T. Whitmore
<PAGE>
Number Description
3.1 Restated Articles of Organization, as amended.
3.2 Restated and amended By-laws of the Registrant(incorporated by
reference to exhibit 3.3 to Annual Report on Form 10-K for the
fiscal year ended April 2, 1995).
4.4 Specimen of Common Stock Certificate (incorporated by
reference to exhibit of same designation to Registration
Statement on Form S-1, File No. 33-13076).
4.6 Form of Indenture dated as of May 15, 1987 relating to the
Company's 8.25% Convertible Subordinated Debentures due 2012,
including Form of Debenture (incorporated by reference to
exhibit of same designation to Registration Statement on Form
S-1, File No. 33-13753).
10.24 Form of Agreement dated June 27, 1989 between the Registrant and
Peoples Heritage Savings Bank relating to sale of mortgage notes
receivable (incorporated by reference to exhibit of same
designation to Annual Report on Form 10-K for the fiscal year
ended April 2, 1989).
10.47 Amended and Restated Loan and Security Agreement entered into
as of January 9, 1990 by Patten Receivables Finance Corporation
VI, Finova Capital Corporation (fka Greyhound Real Estate Finance
Corporation) and the Registrant as guarantor (incorporated by
reference to exhibit of same designation to Annual Report on
Form 10-K for the fiscal year ended April 1, 1990).
10.53 Modification dated July 16, 1990 of Amended and Restated Loan and
Security Agreement entered into as of January 9, 1990, by Patten
Receivables Finance Corporation VI, Finova Capital Corporation
(fka Greyhound Real Estate Finance Corporation) and the
Registrant as Guarantor (incorporated by reference to exhibit of
same designation to Annual Report on Form 10-K for the fiscal
year ended April 1, 1990).
10.58 Amendment No. 2 dated March 23, 1991 to the Amended and Restated
Loan and Security Agreement entered into as of January 9, 1990,
by Patten Receivables Finance Corporation VI, Finova Capital
Corporation (fka Greyhound Real Estate Finance Corporation) and
the Registrant as Guarantor (incorporated by reference to exhibit
of same designation to Annual Report on Form 10-K for the fiscal
year ended March 31, 1991).
10.77 Registrant's Amended 1988 Outside Directors Stock Option
Plan (incorporated by reference to exhibit of same designation
to Annual Report on Form 10-K for the fiscal year ended March 29,
1992).
10.79 Registrant's Retirement Savings Plan (incorporated by reference
to Registration Statement on Form S-8, File No. 33-48075).
10.82 Employment Agreement dated as of December 20, 1993 by and
between the Registrant and George F. Donovan (incorporated by
reference to exhibit of same designation to Quarterly Report on
Form 10-Q for the period ended December 26, 1993).
10.84 Pooling and Servicing Agreement dated as of April 15, 1994, among
Patten Receivables Finance Corporation IX, the Registrant, Patten
Corporation REMIC Trust, Series 1994-1 and First Trust National
Association, as Trustee (incorporated by reference to exhibit of
same designation to Annual Report on Form 10-K for the fiscal
year ended March 27, 1994).
10.85 Loan and Security Agreement by and between the Registrant
and Foothill Capital Corporation dated as of October 29, 1993
(incorporated by reference to exhibit of same designation to
Annual Report on Form 10-K for the fiscal year
ended March 27, 1994).
10.86 First Amendment dated December 23, 1993 to Loan and Security
Agreement entered into on October 29, 1993 by and between the
Registrant and Foothill Capital Corporation (incorporated by
reference to exhibit of same designation to Annual Report on Form
10-K for the fiscal year ended March 27, 1994).
10.88 Amendment No. 6 dated May 12, 1993 to Amended and Restated Loan
and Security Agreement entered into as of January 9, 1990 by
Patten Receivables Finance Corporation VI, Finova Capital
Corporation (fka Greyhound Real Estate Finance Corporation) and
the Registrant as Guarantor (incorporated by reference to exhibit
of same designation to Annual Report on Form 10-K for the fiscal
year ended March 27, 1994).
10.89 Amendment No. 7 dated February 18, 1994 to Amended and Restated
Loan and Security Agreement entered into as of January 9, 1990 by
Patten Receivables Finance Corporation VI, Finova Capital
Corporation (fka Greyhound Real Estate Finance Corporation) and
the Registrant as Guarantor (incorporated by reference to exhibit
of same designation to Annual Report on Form 10-K for the fiscal
year ended March 27, 1994).
10.90 Loan Agreement dated as of August 12, 1994 by and among
Patten Homes, Inc., the Registrant and Branch Banking and
Trust Company (incorporated by reference to exhibit of
same designation to Quarterly Report on Form 10-Q for
the period ended September 25, 1994).
10.91 Amendment No. 9 dated June 29, 1994 to Amended and Restated Loan
and Security Agreement entered into as of January 9, 1990 by
Patten Receivables Finance Corporation VI, Finova Capital
Corporation (fka Greyhound Real Estate Finance Corporation) and
the Registrant as Guarantor (incorporated by reference to exhibit
of same designation to Quarterly Report on Form 10-Q for the
period ended September 25, 1994).
10.93 Stock Purchase Agreement dated as of November 22, 1994 by and
among Harry S. Patten and the Purchasers named therein
(incorporated by reference to exhibit of same designation to
Current Report on Form 8-K dated November 22, 1994).
10.94 Amendment No. 10 dated December 14, 1994 to Amended and Restated
Loan and Security Agreement entered into as of January 9, 1990 by
Patten Receivables Finance Corporation VI, Finova Capital
Corporation (fka Greyhound Real Estate Finance Corporation) and
the Registrant as Guarantor (incorporated by reference to exhibit
of same designation to Annual Report on Form 10-K for the fiscal
year ended April 2, 1995).
10.95 Amended and Restated Loan and Security Agreement dated as of
December 14, 1994 by and between Finova Capital Corporation (fka
Greyhound Real Estate Finance Corporation) and the Registrant
(incorporated by reference to exhibit of same designation to
Annual Report on Form 10-K for the fiscal year ended April 2,
1995).
10.96 Registrant's 1995 Stock Incentive Plan (incorporated by
reference to exhibit to Registration Statement on Form S-1,
File No. 33-61687 ).
10.97 Registrant's 1988 Amended Outside Director's Stock Option Plan
(incorporated by reference to exhibit to Registration Statement
on Form S-1, File No. 33-61687 ).
10.98 Pooling and Servicing Agreement dated as of June 15, 1995, among
Patten Receivables Finance Corporation X, the Registrant, Patten
Corporation REMIC Trust, Series 1995-1 and First Trust National
Association, as Trustee (incorporated by reference to exhibit to
Current Report on Form 8-K dated July 12, 1995).
10.99 Pooling and Servicing Agreement dated as of April 15, 1996, among
Bluegreen Receivables Finance Corporation I, the Registrant,
Bluegreen Corporation REMIC Trust, Series 1996-1 and First Trust
National Association, as Trustee (incorporated by reference to
exhibit to Current Report on Form 8-K dated May 15, 1996).
10.100 Amendment No.3 dated November 21, 1991 to Amended and Restated
Loan and Security Agreement entered into as of January 9, 1990
by Patten Receivables Finance Corporation VI, Finova Capital
Corporation (fka Greyhound Real Estate Finance Corporation) and
the Registrant as Guarantor.
10.101 Amendment No. 4 dated January 30, 1992 to Amended and Restated
Loan and Security Agreement entered into as of January 9, 1990
by Patten Receivables Finance Corporation VI, Finova Capital
Corporation (fka Greyhound Real Estate Finance Corporation) and
the Registrant as Guarantor.
10.102 Amendment No. 5 dated October, 1992 to Amended and Restated Loan
and Security Agreement entered into as of January 9, 1990 by
Patten Receivables Finance Corporation VI, Finova Capital
Corporation (fka Greyhound Real Estate Finance Corporation) and
the Registrant as Guarantor.
10.103 Amendment No. 8 dated March 25, 1994 to Amended and Restated Loan
and Security Agreement entered into as of January 9, 1990 by
Patten Receivables Finance Corporation VI, Finova Capital
Corporation (fka Greyhound Real Estate Finance Corporation) and
the Registrant as Guarantor.
10.104 Amendment No. 11 dated October 31, 1995 to Amended and Restated
Loan and Security Agreement entered into as of January 9, 1990
by Patten Receivables Finance Corporation VI, Finova Capital
Corporation (fka Greyhound Real Estate Finance Corporation) and
the Registrant as Guarantor.
10.105 Amendment No. 12 dated May 1, 1996 to Amended and Restated Loan
and Security Agreement entered into as of January 9, 1990 by
Patten Receivables Finance Corporation VI, Finova Capital
Corporation (fka Greyhound Real Estate Finance Corporation) and
the Registrant as Guarantor.
10.106 Construction Loan Agreement by and between the National Bank
of South Carolina and Bluegreen Resorts, Inc.(fka Patten Resorts,
Inc.) dated February 28, 1996.
10.107 Loan and Security Agreement by and between Heller Financial, Inc.
and Bluegreen Resorts, Inc.(fka Patten Resorts, Inc.) dated
February 28, 1996.
10.108 Acquisition, Construction and Receivables Loan and Security
Agreement by and between Finova Capital Corporation and the
Registrant dated June 9, 1995.
10.109 Amendment No. 1 dated April 12, 1995 to the Amended and Restated
Loan and Security Agreement entered into on December 14, 1994
between Finova Capital Corporation and the Registrant.
10.110 Amendment No. 2 dated November 21, 1995 to the Amended and
Restated Loan and Security Agreement entered into on December 14,
1994 between Finova Capital Corporation and the Registrant.
10.111 Amendment No. 2 dated February 16, 1995 to Amended Loan and
Security Agreement entered into on October 29, 1993 by and
between the Registrant and Foothill Capital Corporation.
10.112 Amendment No. 3 dated March 28, 1995 to Amended Loan and Security
Agreement entered into on October 29, 1993 by and between the
Registrant and Foothill Capital Corporation.
10.113 Amendment No. 4 dated June 15, 1995 to Amended Loan and Security
Agreement entered into on October 29, 1993 by and between the
Registrant and Foothill Capital Corporation.
10.114 Amendment No. 5 dated June 26, 1995 to Amended Loan and Security
Agreement entered into on October 29, 1993 by and between the
Registrant and Foothill Capital Corporation.
10.115 Amendment No. 6 dated March 8, 1996 to Amended Loan and Security
Agreement entered into on October 29, 1993 by and between the
Registrant and Foothill Capital Corporation.
11.1 Statement re: Computation of Earnings Per Share (such information
is incorporated by reference to the Statement of Income of the
Consolidated Financial Statements appearing on page 30 of the
Company's 1996 Annual Report to Shareholders, which is an
exhibit hereto).
13.1 1996 Annual Report to Shareholders (with the exception of the
information incorporated by reference included in Items 7 and 8,
the 1996 Annual Report to Shareholders is not deemed filed as
part of this Annual Report on Form 10-K).
23.1 Consent of Ernst & Young LLP.
27 Financial Data Schedule.
<TABLE>
<CAPTION>
<S> <C> <C>
COMMONWEALTH OF MASSACHUSETTS
William Francis Galvin
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
We, Mary Jo Wiegand /'Vice President,
and Patrick E. Rondeau /Clerk of Patten Corporation
located at /c/o Choate, Hall & Stewart, Exchange Place, 53 State St., Boston,
MA 02109
(Street address of corporation in Massachusetts)
certify that these Articles of Amendment affecting articles number:
1
(Number those. articles 1, 2, 3, 4, 5 and/or 6 being amended).
of the Articles of Organization were duly adopted at a meeting held a. February
15, 1996 by vote of:
15,01,509 shares of Common Stock of 19,541,472 shares outstanding,
(type, class & series, if any)
"'being at least a majority of each type, class or series outstanding and entitled to vote thereon
Article I of the Restated Articles of Organization is amended to change
the name of the corporation to:
Bluegreen Corporation
*Delete the inapplicable words. **Delete the ib4f inapplicable clause.
, For amendments adopted pursuant.- to Chapter 156a, Section 70.
To change the number of shares and the par value (if 2ny) of any type, class or series of stock which the
corporation is authorized to issue, fill in the following:
The total presently Authorized is:
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
TYPE NUMBER OF SHARES -TYPE NUMBER OF SHARES PAR VALUE
Common: Common:
Preferred: Preferred:
Common the total authorized to:
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS -
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
COMMON: Common:
Preferred:
I
The foregoing amendments) will become effective when these Articles of Amendment are filed in accordance with
General laws, Chapter 156B, Section 6 unless these articles specify, in accordance with the vote adopting the
amendment, a later effective date not more than thirty days after such filing, in which event the amendments will
become effective on such later date.
Later Active date:
SIGNED UNDER THE PENALTIES OF PERJURY, this 27th day of February .19 96
'Vice President,
Clerk /
</TABLE>
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
I hereby approve the within Articles of Amendment and, the filing fee in
the amount of $______ having been paid, said articles arc deemed
to have been filed with me this
19 -
day of
Effective date.,
William Francis Galvin
Secretary of of the Commonwealth
TO BE FILLED IN BY CORPORATION ,
Photocopy of document to be sent to-.
James W. Hackett, Jr.., Esq.
c/o Choate, Hall & Stewart
Exchange Place
53 State Street
Boston, MA 02109-2891
AMENDMENT NO. 3 TO THE
AMENDED RESTATED LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NO.3 TO THE AMENDED AND RESTATED LOAN AND
SECURITY AGREEMENT (the "Third Amendment") is entered into this 21st day of
November, 1991 between GREYHOUND REAL ESTATE FINANCE COMPANY, an Arizona
corporation ("Lender") , and PATTEN RECEIVABLES FINANCE CORPORATION VI, a
Delaware corporation ("Borrower").
RECITALS
A. Lender and Borrower entered into a September 8, 1988 Loan and
security Agreement that was amended by a January 9, 1990 Amended and Restated
Loan and Security Agreement, a July 18, 1990 letter amendment, an August 31,
1990 Amendment No. 1 to the Amended and Restated Loan and Security Agreement and
a March 23, 1991 Amendment No. 2 to the Amended and Restated Loan and Security
Agreement (collectively, the "Loan Agreement").
B. Lender and Borrower desire to amend the Loan Agreement in accordance
with the terms of, and subject to the conditions contained in this Third
Amendment.
AGREEMENT
NOW, THEREFORE,, in consideration of these recitals, the covenants contained in
this Third Amendment and for other good and valuable consideration, the receipt
and sufficiency of which consideration is acknowledged, Lender and Borrower
agree as follows:
1. Conditions Precedent. Provided each of the following conditions
precedent is met to the satisfaction of Lender, which satisfaction (unless
otherwise indicated) will be indicated by Lender's execution of this Third
Amendment, the Loan Agreement is amended as provided in paragraph 2:
a. Borrower is to deliver to Lender this Third Amendment fully executed by
Borrower and Guarantor (as defined in the Loan Agreement); and
b. Lender must obtain and be satisfied with, in its sole discretion,
tax lien, litigation and judgment searches on Patten Corporation, a
Massachusetts corporation, ("Patten") and Harry S. Patten;
c. Lender must obtain and be satisfied with its sole
discretion the revised fiscal 1992 operating projections of Patten;
d. Lender must obtain and be satisfied with, in its sole discretion
credit references from the lending consortium which holds a note from Patten
originating from the reclassification of Patten's former commercial paper
obligation;
e. Borrower is to pay Lender a $10,000.00
documentation fee.
f . Borrower is to pay Lender a non-refundable renewal fee equal to
1/2% of the difference between $15,000,000.00 and the outstanding balance of the
Loan on the date of this Third Amendment (this fee may he paid in three equal
monthly installments, with the entire fee to be paid in full by February la,
1992).
g. A site inspection of the Lake Carroll, Sleepy Hollow, North Carolina
Lakes and Trace, and Points Aquarius and Pelican Bay Projects will be performed
by Lender on or before December 20, 1991, and the results of the inspections
must be satisfactory to Lender, in its sole discretion.
h. Lender must be provided an or before December 13, 1991, and be
satisfied with, a reaffirmation of the legal opinion dated December 6, 1990 from
the law firm of Choate, Hall & Stewart.
i. Lender must obtain and be satisfied with a disclosure statement
describing the litigation matters in which Borrower and/or Guarantor are parties
("Litigation Disclosure'().
j Borrower is to deliver to Lender such, other items as Lender
reasonably requests.
2. Loan Agreement. Provided the conditions precedent set forth
above are satisfied, the Loan Agreement is modified as follows:
a. Paragraph 1.19 of the Loan Agreement is deleted in its entirety and the
following is added in lieu
thereof:
1.19 "Maximum Loan Amount"- Fifteen Million and No/100 Dollars ($15,000,000).
b. Paragraph 1.7 of the Loan Agreement is deleted in its entirety and
the following is added in lieu
thereof:
1.7 "Borrowing Term": the period commencing an the date hereof and
ending on the close of Lender's business twelve (12) months from the date of
of the first Advance after the date of the Third Amendment to
the Agreement, not later than December 18, 1992.
C. The following is added to the Loan Agreement as paragraph 9.4:
9.4 Notwithstanding paragraph 1.6 of the Loan Agreement, until the following
conditions precedent are met to the satisfaction of Lender: (1) Lender receives
Patten's audited March 31, 1992 fiscal year end financial statements (with an
unqualified opinion from a CPA accounting firm acceptable to Lender), and (2)
Lender reasonably determines that such audited statements verify that Patten has
met or exceeded all profitability measures projected within Lender's approved
fiscal 1992 operating projections for Borrower and (3) No events of default have
occurred; the Borrowing Base will be equal to the lesser of:
(a) 80% of the then unpaid principal balance of the Eligible Instruments; or
(b) 80% of the present value of the then unmatured installments of principal
and interest under -.he Eligible Instruments, discounted at a higher of (i) the
then applicable interest rate under the terms of the Note or (ii) fourteen
percent (14%), in the case of instruments which bear interest at a fixed rate;
When the conditions set forth in this paragraph 9.4 have been satisfied, as
determined by Lender in its sole discretion, the definition of "Borrowing Base"
will return to the definition contained in paragraph 1.6 of the Loan Agreement.
d. The second paragraph of Section 6.10(c) is deleted in
its entirety and the following is added in lieu thereof-
Notwithstanding anything herein to the contrary, so long as there
exists no Event of Default, the quarterly financial statements of Patten and
Borrower need only be prepared in accordance with the standards of the financial
statements previously submitted to and accepted by Lender. The fiscal year end
financial statements of Patten and Borrower shall be audited as set forth above.
e. Paragraph 1. 30 of the Loan Agreement is deleted in its
entirety and the following is added in lieu thereof:
1.30 "Project"-. a lot or parcel of land located in the
following vacation communities:
a. Lake Carroll, Illinois
b. Sleepy Hollow, New York
C. North Carolina Lakes,- North Carolina
d. North Carolina Trace, North Carolina
e. Eagle Creek , Texas
f. Part Aquarius, Texas
9. Pelican Bay, Texas
h. Reedpoint, Sweetgrass County, Montana
i. Livinston, Park County, Montana
i. Tom Mlner, Park CotLnty, Montana
k. Townsend, Broadwater County, Montana
1. Wineglass, Park County, Montana
M. Basin Lake Meadows, Wheatland Countyl Montana
n. Black Butte Lake, Meagher County, Montana
M. Rocky Mountain Meadows, Park County, Montana
n. Flat Willow, Fergus County, Montana
0. Pipestone, Jefferson County, Montana
P. Hidden Springs, Musselshell, Montana
q. Big Timber, Sweet Grass, Montana
r. Bear Paw Stillwater County, Montana
S. Wild Horse, Montana
t. Madison -River, Madison County, Montana
f . The following is added to the Loan Agreement as paragraph 9.6:
9.6 Availability Advance Fee. Borrower is to pay to Lender a loan
availability fee equal to 1/2% of the amount of each Advance Borrower r @ ests
Lender to make without Borrower's assignment to Lender of additional Eligible
Installments as additional security for the Loan.
9- The following is added to the Loan Agreement as paragraph 9.7:
9.7 Title Endorsement. Borrower must supply GREFCO with title insurance for
the real property underlying GREFCO selected samples of Eligible Instruments
against which GREFCO is requested to make Advances after December 3, 1990. This
title insurance must (i) include a title search through the date of the
assigment to GREFCO of the subject Eligible Instruments, and (ii) be issued by
title insurers acceptable to GREFCO, in its sole discretion. The sampling list
will be based upon a random selection of one of every seven of such Eligible
Instruments. The list of selected Eligible Instruments will be provided to
Patten on or before the date of funding against such Eligible Instruments; such
insurance for each selected Eligible Instrument must be provided to GREFCO on or
before that date which is thirty (30) days from the date of the request. if the
required insurance is not so provided or the insurance provided is not
acceptable to GREFCO, in its sole discretion, then (i) such sampling list will
be expanded by GREFCO to include as many as all Eligible Instruments -involved
in the subject Advance, and (ii) Eligible Instruments without such insurance
will not be considered Eligible Instruments.
3. Ratification of Terms and Conditions. All terms, conditions
and provisions of the Loan Agreement and each of the other Documents will
continue iri full force and effect and remain unaffected and unchanged except as
specifically amended by this Third Amendment. The provisions of this Third
Amendment are to be controlling in the event of any conflict between the terms
and provisions of this Third Amendment and any of the other Documents.
4. Indebtedness Acknowledged. Borrower acknowledges that the indebtedness
evidenced by the Documents is @outstanding and owing and agrees to pay this
indebtedness in accordance with the terms of the Documents. Borrower further
acknowledges and represents that no event has occurred and no condition
presently exists that would constitute a default or event of default under the
Loan Agreement or any of the other Documents, with or without notice or lapse of
time, by Lender.
5. Litigation --Disclosure Warranty. Borrower acknowledges that tender is
relying on the Litigation Disclosure in agreeing to the modification evidenced
by this Third Amendment, and hereby warrants the completeness and accuracy of
the information contained in the Litigation Disclosure. Borrower agrees that a
breach of this warranty will be a material breach of the Loan Agreement and will
constitute an Event of Default thereunder.
IN WITNESS WHEREAS Lender and Borrower have executed this Third
Amendment on the date set forth above.
PATTEN RECEIVABLES FINANCE GREYHOUND REAL ESTATE FINANCE
CORPORATION VI, a Delaware COMPANY, an Arizona
By:
ATTEST: ATTEST:
By,. By:
Its:
CONSENTED TO this day of November, 1991-
PATTEN CORPORATION, a Massachusetts
corporation, "Guarantor"
BY:
ATTEST:
BY:
Its.,
6
AMENDMENT NO. 4 TO THE
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NO. 4 TO THE AMENDED AND RESTATED LOAN AND
SECURITY AGREEMENT (the "Fourth Amendment") is entered into this 30th day of
January, 1992 between GREYHOUND REAL ESTATE FINANCE COMPANY, an Arizona
corporation ("Lender"), and PATTEN RECEIVABLES FINANCE CORPORATION VI, a
Delaware corporation (Borrower") .
RECITALS
A. Lender and Borrower entered into a September 8, 1988 Loan
and Security Agreement that was amended by a January 9, 1990 Amended and
Restated Loan and Security Agreement, a July 18, 1990 letter amendment, an
August 31, 1990 Amendment No. 1 to the Amended and Restated Loan and Security
Agreement, a March 23, 1991 Amendment No. 2 to the Amended and Restated Loan
and Security Agreement, and a November 21, 1991 Amendment No. 3 to the Amended
and Restated Loan and Security Agreement (collectively, the "Loan Agreement").
B. Lender and Borrower desire to amend the Loan Agreement in
accordance with the terms of, and subject
to the conditions contained in this Fourth Amendment.
AGREEMENT
NOW, THEREFORE, in consideration of these recitals, the covenants contained
in this Fourth Amendment and for other good and valuable consideration, the
receipt and sufficiency of which consideration is acknowledged, Lender and
Borrower follows:
2. Loan Agreement.
The Loan Agreement is modified
The following is added to the end of Paragraph
b. paragraph 9.8:
[GRAPHIC OMITTED]
. Holiday Shores at Lake Sinclair, Hancock
County, Georgia
v. The Springs at Rebecca Creek, Comal County,
Texas
The following is added to the Loan Agreement as
"9.8 Custodial Fee. Borrower is to pay Lender a one time custodial fee of
$10.00 for each new Eligible Instrument held by Lender exclusive of Eligible
Instruments assigned as replacements for Eligible Instruments that cease to be
Eligible Instruments. Borrower shall be allowed to select an independent agent
to act as Lender's custodian, at Borrower's
<PAGE>
GREYHOUND REAL ESTATE FINANCE COMPANY
November 7, 1991
Mr. Allen Murray Chief Financial Officer Patten Corporation 5295 Town
Center Road, Suite 400 Boca Raton, FL 33486 [GRAPHIC OMITTED] Dear Allen: Loan
and Security Agreement dated September 8, 1988, and subsequently amended,
between Patten Receivables Finance Corporation VI and Greyhound Real Estate
Finance Company ("GREFCO"). This will confirm the agreement between the parties
to allow for a one time availability Advance, not to exceed S1,000,00O, against
the existing contracts securing GREFCO's loan. Notwithstanding, all terms and
conditions of the Loan and Security Agreement will remain in full force and
effect. A one percent (l/2%) availability fee, will be withheld from the
Advance. Please have the bottom portion of the enclosed copy off this letter
signed acknowledging the agreement to allow for a onetime availability Advance.
Jack Fields III
Senior Vice President
Accepted By: Patten Receivable Finance Corporation VI
Accepted By:
Date
Patten Corporation
AMENDMENT NO. 5 TO THE
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NO. 5 TO THE AMENDED AND RESTATED LOAN AND SECURITY
AGREEMENT (the "Fifth Amendment') is entered into this day of October, 1992
between GREYHOUND REAL ESTATE FINANCE COMPANY, an Arizona corporation
("Lender"), and PATTEN RECEIVABLES FINANCE CORPORATION VI, a Delaware
corporation ("Borrower").
RECITALS
A. Lender and Borrower entered into a September 8, 1988 Loan and Security
Agreement that was amended by a January 9, 1990 Amended and Restated Loan and
Security Agreement, a July 18, 1990 letter amendment, an August 31, 1990
Amendment No. 1 to the Amended and Restated Loan and Security Agreement, a March
23, 1991 Amendment No. 2 to the Amended and Restated Loan and Security
Agreement, a November 21, 1991 Amendment No. 3 to the Amended and Restated Loan
and Security Agreement, and a January 30, 1992 Amendment No. 4 to the Amended
and Restated Loan and Security Agreement (collectively, the "Loan Agreement").
B. Lender and Borrower desire to amend the Loan Agreement in accordance
with the terms of, and subject to the conditions contained in this Fifth
Amendment,
AGREEMENT
NOW, THEREFORE, in consideration of these recitals, the covenants
contained in this Fifth Amendment and for other good and valuable consideration,
the receipt and sufficiency of which consideration is acknowledged, Lender and
Borrower agree as follows,
1 . Conditions Precedent. Provided each of the following conditions
precedent is met to the satisfaction of Lender, which satisfaction (unless
otherwise indicated will be indicated) by Lender's execution of this Fifth
Amendment, the Loan Agreement is amended as provided in paragraph 2:
a. Borrower is to deliver to Lender this Fifth Amendment fully executed by
Borrower and Guarantor (as defined in the Loan Agreement)-,
b. Lender must be provided and be satisfied in its sole discretion with a
local legal opinion regarding the Eligible Instruments for Cedar Hills, Montana
and Sendera Lake, Texas; and
C. Lender must be provided and be satisfied in its sole discretion with an
environmental assessment of the Sendera Lake, Texas Project.
d. Lender must be provided and be satisfied, in its sole discretion, with a
current recorded subdivision plat and project documents for each phase of the
Sendera Lake, Texas project.
e. Lender must be provided and be satisfied, in its sole discretion, with
endorsements to title policies as required in paragraph 9.7 of Amendment No. 3
to the Loan Agreement.
f. Borrower is to deliver to Lender 1991 financial statements for the
Sendera Lake, Texas property owners' association, said association's budget for
1992 with a comparison of 1992's budget to actual revenues and expenses to date,
and a proforma budget for said association through 1993.
2. Loan Agreement. The Loan Agreement is modified as follows-.
a. Paragraph 1.30 of the Loan Agreement is deleted in its entirety and the
following is added in lieu thereof.
1.30 "Project": a lot or parcel of land located in the following
vacation communities'.
ILLINOIS
a. Lake Carroll, Illinois
NEW YORK
b. Sleepy Hollow, New York
NORTH CAROLINA
c. North Carolina Lakes, North Carolina
d. North Carolina Trace, North Carolina
TEXAS
e. Eagle Creek Ridge, Texas
f. Pelican Bay, TX
g. Port Aquarius, Texas
h. Sendera Lake, Montgomery County, Texas
i. The Springs at Rebecca Creek, Comal County, Texas
MONTANA
j. Basin Lake Meadows, Wheatland County, Montana
k. Bear Paw, Stillwater County, Montana
1. Big Timber, Sweet Grass County, Montana
m. Black Butte Lake, Meagher County, Montana
n. Cedar Hills, Jefferson County, Montana
0. Flat Willow, Fergus County, Montana
p. Hidden Springs, Musselshell County, Montana
q. Livingston, Park County, Montana
r. Madison River, Madison Country, Montana
s. Townsend, Broadwater County, Montana
t. Wild Horse, Montana
u. Wineglass, Park County, Montana
GEORGIA
V. Holiday Shores at Lake Sinclair, Hancock County, Georgia
b. The following sentence is added to paragraph (c) of Exhibit I to the
Loan Agreement-.
If an Eligible Instrument pertains to a purchase of property at the
Sendera Lake, Texas project, then,
(i) if the unpaid principal balance of such Instrument exceeds
$28,000.00, then Borrower must have received from the Purchaser a
minimum cash down payment of not less than 20% of the total sales
price, no part which down payment was advanced or loaned to such
Purchaser by Borrower, directly or indirectly; and
(ii) the Instrument must pertain to property that Lender determines,
in its sole discretion, either has reasonable access to water,
sewer, electrical, gas and garbage utilities, and is directly
accessible by fully completed county maintained paved roads, or
has the availability and completion of such amenities and roads
guaranteed, by bond or other surety arrangement.
3. Ratification of Terms and Conditions. All terms, conditions and
provisions of the Loan Agreement and each of the other Documents will
continue in full force and effect and remain unaffected and unchanged
except as specifically amended by this Fifth Amendment. The provisions
of this Fifth Amendment are to be controlling in the event of any
conflict between the terms and provisions of this Fifth Amendment and
any of the other Documents.
4. Indebtedness Acknowledged. Borrower acknowledges that the indebtedness
evidenced by the Documents is just and owing and agrees to pay this
indebtedness in accordance with the terms of the Documents. Borrower
further acknowledges and represents that no event has occurred and no
condition presently exists that would constitute a default or event of
default under the Loan Agreement or any of the other Documents, with or
without notice or lapse of time, by Lender.
IN WITNESS WHEREOF Lender and Borrower have executed this Fifth Amendment on the
date set forth above.
PATTEN RECEIVABLES FINANCE
CORPORATION VI, a Delaware corporation,
"Borrower"
Its:
ATTEST:
By..
Its'
GREYHOUND REAL ESTATE FINANCE
COMPANY, an Arizona corporation, "Lender"
ATTEST:
By
Its:
day of October, 1992.
CONSENTED TO this
PATTEN CORPORATION, a Massachusetts
corporation
By:
its:
AMENDMENT NO. 8 TO
AMRNDED AWD RESTATED LOAN AND SECURITY AGREEMENT
BY THIS AMENDMENT NO. 8 TO AMENDFD AND RESTATED LOAN AND SECURITY
AGREEMENT (t'Amendment No. all) ci;tted as of 74arch 25, 1994f PATTEN
RECEIVABLES FINANCE CORPORAT@LON VT, a Delaware corporation ("Borrower") , and
GREYHOUND FTNANCIAL CORPORATION, a Delawarc corporation ("Lender") , for good
and valuable consideration, the receipt of which is hereby acknowledged, hereby
confirm and agrce as follows:
ARTICLE 1
INTRODUCTION
1.1 Lender [as successor-in-interest to Greyhoijnri Rf.-al Estate
Finance Conpany, an Arizona corporation ("GREFCO'l) j and Borrower are parties
to that Amended and Restated Loan and Spcurity Agreement dated as of January 9,
1990, as amended by a June 13, 1990 letter amendment, a July 18, 1990 letter
amendment, an August 31, 1990 Amendinent No. 1 to the Amended and Restated Loan
and Security Agreement, a March 23, 1991 Amendment No. 2 to the Amended and
Restated Loan and Security Agreement, a November 21, 1991 Amendment No. 3 to the
Amended and Restated Loan and Security Agreement, a January 30, 1992 Amendment
No. 4 to the Amended and Restated Loan and Security Agreement, an October _,
1992 Amendment No. 5 to the Amended and Restated Loan and security Agreement,
and a May 12, 1993 Amendment No. 6 to the Amended and Restated Loan and Security
Agreement and a February 18, 1994, Amendment No. 7 to Amended and Restated Loan
and Security Agreement (collectively, the "Agreement").
1.2 Borrower and Lender wish to amend the Agreemcnt, among other ways,
to give BorrowAr the right to obtain an Advance in an amount equal to Four
Million Three Hundred Five Thousand Dollars ($4,305,000), which will result in
the unpaid principal halance of the Loan, after qiving effect to such Advance,
being less than the Maximum Loan Amount but more than the Borrowing Base.
ARTICLE 2
AGREEMENT
2.1 EXcept as otherwise defined herein or unless the context otherwise requires,
capitalized terras used in this Amendmezit No. 8 shall have the meaning given to
them in the Loan Agreement.
2.2 The Loan Agreement is amended as follows:
(a) Paragraph 5.2 is deleted in its entirety and the
following substituted in its place:
5.2 Subject to Borrower's rights pursuant to paragraph 3.2 and the
provisions of paragraph 9.15, if for anY reason the aggregate principal amount
of the Loan outstanding at any tima shall emcqed the than Borrowing Base,
Borrower, without notice or demand, will immediately make to Lender a principal
payment in an amount equal to such excess plus accrued and unpaid interest
thereon.
(b) the first sentence of paragraph 5.3 is deleted in its entirety and the
following i..-, substituted in its place-.
"Except as provided in this Agreement (including, without limitation, paragraph
9.15 (d) ] and in the Note, Borrower will,not be entitled to prepay in whole or
in part, the Loan tintil the Opp-ning Prepayment Date."
(c) the following paragraphs are amended by replacing the defined term
"Receivables Collatpral" where it'. is found therein with the word
I'Collateral": 5.5, 5.6, 6.10(b), 7.3 and 7.5.
(d) the following is added a,- a new paragraph 9.15;
"9.15 (a) As used in this paragraph and el Aewhere in this Agreement,
the following capitalized termr, shall have the meaning given to them below:
(i) "Additi6nal Collateral": the PRFCVII
Stock and the REMIC Class B-1 Certificate.
(ii) "Collatoralll- the Receivablcs Collateral
and the Additional Collateral.
(iii) 11 PMTI 11 - . Patten Mort-gage Trust 1.
(iv) "POO]ing Agraoirenter: the Puoling atid Servicing Agreement dated
as of Septomber 13, 1989, among PMTI, as issuer, CUarantor, as servioer, PRVCVII
' as depositor, And Bankers Trust Company as trustee.
(v) "PRVCVIIII: Patten Receivablos Finance
Corporation VII, a Delaware corporation.
(vi) "PRVCVIT Stock,,- all tlle issued and outstanding capital Stock of PRVCVII.
(vii) "REMIC Advance---: the meaning given to
it in.paragraph 9.15(b).
(viii) "REMIC Certificatesoo-. collectively, th,e REMIC Class A
Certifinates, the REMIC Class B-1 Certificate and the PMTT, Adjustable Rate
REMIC Mortgage Pass-Through Certificate, Serie-- 1,989-1, Class 5-2.
(ix) "REMIC Class A Clariif icatan": PMTI , Adjustable Rate REMTC MortgaVe
Pass-Through Certificate, Series 1989-1, Class A.
(X) "REMIC Class B-1 Certif icatell: PMTI, Adjustable Rate REMIC 94ortgage
Pass-Through Certificate, Series 1989, Class B-1.
(b) Notwithstanding anything in thic Agreement or in any other Document
to the contrary, Borrower shall have the right to obtain an AdvAnce under this
Agraoment in an ainount equal to Four Mi.llion Three Hundrad Forty Thousand
Dollars ($4,340,000) ("REMIC Advance"), which RF-MIC Advance will result in the
unpa'id principal balance of the Loan, after giving effect to thA REMIC Advance,
being less than the Maximuin Loan Anotint but more than the Borrowing Base. The
REMIC Advanco will be mado simultaneously with the execution hereof (or, if
later, promptly after the conditions in paragraph (c) below have been
Eatisfied),
(c) Borrower shall have satisfic-ri the following conditions precedent at
the time of the making of the REMIC Advance:
(i) Lender shall have receivad the original REMIC class B-1 Certificate
and the stock ccrtificate(s) evidencing the PRFCVII Stonk, with all required
endorsements; and shall have an exclusive Security Interest in the Additional
Collateral;
(ii) Borrower has delivered to Lendar tha following documents, all of
which shall hava been properly completed and executed and shall otherwise be
satisfactory inform and substance to Lender in its sole and absolute discretion:
(A) a Consent of Guarantor and Amendinent to Cuarantee c!xeculed @y Guarantor;
(B) a Stock Pledge and SecQrity Agreement (with Irrevocable Proxy) and blank
stock power executed by Guarantor and covering the PRVCVII Stock; (C) a Pledge
and Security Agreement covering the REMIC Class B-1 Certificate executed by
Guarantor; (D) UCC-1 Financing Statements with respect to the Additional
Collateral for filing in Florida and Massachusetts; (E) an opinion from counsel
to Borrower and Guarantator as to such matters as Lender may require, which
counsel shall be reasonably
satisfactory to Lender; (P) such amendments to recorded and filed Dnc-UMO,'Its
as Lend-r may doo-m necessary; (G) such third party consents and
acknowledgements as Lender may reasonably requirq with respect to the Additional
('nllAteral; (H) a writ*-en request for the AdvancA; and (I) such nther
documents as Lender ray reasonably require;
(iii) Lender shal1 have received evidence satisfactoryto it of the unpaid
principal balance of the REMIC Certificates and the aggregate Scheduled
Principal Balancon of tha Mortgages (as that term in defined in the Pooling
Agreemant), all as of the last Remittance Date (a-- def ined in the Poolinq
Agreement) , and such items as Lender may reaso.-iably require in connection
with the REMIC Class B-1 Certificate;
(iv) Lender shall have received copies of the Certificate- of Incorporation
of PRFCVII; and
(v) the general conditions to Advances as set forth in paragraphs
4.1(d)-(g) have been satisfied.
(d) Except as provided below, Borrower shall at all times maintain or
cause to be maintained for the benefit of Lender an exclusive Security Interest
in the Collateral. until March 31, li.996, BorrowL=r shall havo no obligation to
make any principal payment under paragraph 5.2 so long as Lender has an
exclvsive Security Interest 46n 'the Collateral and no Event of Default thpn
exists; provided, however, that Borrower shall not in any way be relieved of its
pay,-nent and substitution obligations under paragraph 3.2. Not later than March
31'.1996,, Borrower will make a principal payment ("In Balance Payment") on the
Loan in an amount equal to the difference between (i) the then principal balance
of the Loan and (ii) the then Borrowing Base. No prepayment premium shall be
requirfd in connection with the In Balance Payment. Notwithstandi.ng anything
contained herein to the contrary, thA REMIC Advancc and all interest therein may
be prepaid without penalty or premium at any time,
(e) If no Event of Default exists, Lender shall release the Additional
Collateral PromPtly after receipt of the in Balance Payment (i.e. Lender shall
release the Additional Collateral promptly after such time as the outstanding
pr;-ncipal balance of the Loan is less than or equal to the then Borrowing Base.
(f) An "Event of Default" (as defined in thQ Poolinq Agreement) or a
defaul-l- in tho- payment of dirtributions to which the holder of the REM-LC
Class B-1 certificate is entitled shall each constitllt.P. An EvL%nt of Default
under this Agreencnt.
2.3 Borrower will pay on demand or, at Lender's election, reimburse Lender
for all Lenderfs out-of-pocket expenses for the documentation and closing of the
transaction contemplated by this Amendroent No. 8 and the making of the REMIC
Advance.
2.4 Borrower confirms and restates to Lender as of the date hereof all
4Lts representations and warrantion set forth in the Agreement, as amended
hereby, and the other documents executed by Borrower evidencing, securing or
otherwise pertaining to the Loan ("Documents"). Borrower agrees that all liens
and security interests granted by it in the Documents are reaffirmed for the
benefit of Lender and shall secure the Loan and the Other Loan Obligations (as
defined in the Agreement) - Borrower further acknowledges that Lender has
performed and is not in default of its Obligations @nder the Documents and that
there are no offsets, defenses or counterclaims with respect to any of its
Obligations under the Documents.
2.5 Borrower will execute and deliver such further instruments and do
such things as in the sole and absolute judgment of Lender are necessary or
desirable to effect the intent of this Amendment and to secure to Lender the
benefits of all rights and remedies conferred upon Lender by the terms of this
Amendment and any other documents executed in connection herewith, including,
without limitation, amendments to security I.nan documents and financing
statements.
2.6 This Amendment shall not be binding upon Lender unless and until
Borrower has delivered to Lender the following documents and other items, all of
which shall be properly completed and executed and shall otherwise be
satisfactory in form and substance to Lender in its sole and absolute
discretion:
(a) resolution(s) or cartificate(s) from Borrower and Guarantor
authorizing (i) the Axecution and delivery of this amendment and the other
documents called for in thi:3 Amendment or requested by Lender pursuant %alslo
this paragraph to be provided by such entity and (ii) the transaction
contemplated hereby; and
(b) the documents required to he delivered to Lender
pursuant to paragraph 9.15(c).
Waiver by Lender of any of the foregoing as a condition to the effectiveness of
this Amendnent shall not relieve Borrower of the obligation to satisfy such
condition as promptly as possible thereafter. if, for any reason, the REMIC
Advance is not made on or before March 28, 1994, Lender shall promptly return
the Additional Collateral to the Guarantor and release all liens and security
interests thereon.
2.7 This Amendment ray not be amended or otherwise modified except in a writing
daily Axecuted by the partiq& hereto.
2.8 If any one or more of the prnviq.ions of this Amendment jo held to be
invalid, illegal or unamforceablo in any . respect or for any reason (all of
which invalidating laws are waivqd to tha fullest extent possible), the
validity, legality and enforceability of any remaining portions of such
provision(s) in every other respect and of the remaining provision(s) of thiq
A-mendmant shall nQt be in any respect impaired. Tn lieu of each such
unenforceable provision, there shall be added automatically as a part of this
Amendmant a provision that is legal, valid and enforreable and is siynilar in
terms to such unenforceablp- provisions as may be possible.
2.9 This Amendment constitutes the entire agreemant and understanding of the
parties with respect to the subject matter hereof and this Amendment and the
Documents, As amended hereby, supersedes all prior written or oral
undnrstandings and agreements between the parties in connection with its subject
matter..
2.10 All Schedules and Exhibits referred to herein are herein incorporated by
this reference.
2.11 This Amendment may be exactated in one or more counterrparts, and any
number of which having be-en signed by all the parties hereto nhall be taken as
one original.
2.12 Borrower and Lander hareby ratify And confirnl the Loan Agreement, as
amended hereby, in all respects; and, except as expressly amended hereby, the
Loan Agreement shall remain in full force and effect. Tn t-.hp event of any
Conflict between the provisions of the Agreement_ (as in effect prior tn the
execution hereof) , the terms of this Amendment shall control and in the event
of any conflict between the provisions of the Agreement (as amended hereby) and
of any other Document, the terms of the Agreement shall control.
IN WITNESS WHEREOF this instrument is executed as of the date set forth above.
" BOPROW'ER 11
"LENDER"
PATTEN RECEIVABLES FINANCE
CORPORATION VI, a
Delaware corporation
By:
GREYHOUND FINANCIAL CORPOP-ATIONL a
Delaware corporation
By:
Type/Print Nane:
Title:
AMENDMENT NO. 11 TO
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
BY THIS AMENDMENT NO. 11 TO AMENDED AND RESTATED LOAN AND SECURITY
AGREEMENT ("Amendment") dated as of October 31, 1995, PATTEN RECEIVABLES FINANCE
CORPORATION VI, a Delaware corporation ("Borrower"), and FINOVA CAPITAL
CORPORATION (fka Greyhound Financial Corporation) , a Delaware corporation
("Lender") , for good and valuable consideration, the receipt of which is hereby
acknowledged, hereby confirm and agree as follows:
ARTICLE 1
INTRODUCTION
1.I Lender, as successor-in-interest to Greyhound Real Estate Finance
Company, an Arizona corporation, and Borrower are parties to that Amended and
Restated Loan and Security Agreement dated as of January 9, 1990, as amended by
a June 12, 1990 letter amendment, a July 18, 1990 letter amendment, an August
31, 1990 Amendment No. 1 to the Amended and Restated Loan and Security
Agreement, a November 19, 1990 letter agreement, a March 23, 1991 Amendment No.
2 to the Amended and Restated Loan and Security Agreement, a November 21, 1991
Amendment No. 3 to the Amended and Restated Loan and Security Agreement, a
January 30, 1992 Amendment No. 4 to the Amended and Restated Loan and Security
Agreement, a May 11, 1992 letter agreement, an October, 1992 Amendment No. 5 to
the Amended and Restated Loan and Security Agreement, a December 14, 1992 letter
agreement, a May 12, 1993 Amendment No. 6 to the Amended and Restated Loan and
Security Agreement, a February 18, 1994 Amendment No. 7 to the Amended and
Restated Loan Agreement, a March 25, 1994 Amendment No. 8 to Amended and
Restated Loan and Security Agreement, a June 29, 1994, Amendment No. 9 to
Amended and Restated Loan and Security Agreement, and a December 14, 1994
Amendment No. 10 to Amended and Restated Loan and Security Agreement
(collectively, the "Loan Agreement").
1.2 Borrower and Lender wish to amend the Loan Agreement to delete the
limitations imposed by paragraph 9.14 (which was added to the Loan Agreement by
the December 14, 1994 Amendment No. 7 to Amended and Restated Loan and Security
Agreement) of the Loan Agreement on the amount which Borrower may borrow under
the Loan Agreement.
ARTICLE 2
AGREEMENT
2.1 Except as otherwise defined herein or unless the context otherwise
requires, capitalized terms used in this Amendment shall have the meaning given
to them in the Loan Agreement. -
2.2 The Loan Agreement is amended by deleting paragraph 9.14 thereof.
2.3 Borrower confirms and restates to Lender as of the date hereof all its
representations and warranties set forth in the Agreement, as amended hereby,
and the other documents executed by Borrower evidencing, securing or otherwise
pertaining to the Loan ("Documents") . Borrower further acknowledges that Lender
has performed and is not in default of its Obligations under the Documents and
that there are no offsets, defenses or counter-claims with respect to any of its
Obligations under the -Documents.
2.4 This Amendment constitutes the entire agreement and understanding of the
parties with respect to the subject matter hereof and this Amendment and the
Documents, as amended hereby, supersedes all prior written or oral
understandings and agreements between the parties in connection with its subject
matter.
2.5 This Amendment may be executed in one or more counterparts, and any number
of which having been signed by all the parties hereto shall be taken as one
original.
2.6 Borrower and Lender hereby ratify and confirm the Loan Agreement, as amended
hereby, in all respects; and, except as expressly amended hereby, the Loan
Agreement shall remain in full force and effect.
2.7 This Amendment constitutes Lender's notice to Borrower that Lender's address
for notice purposes is changed to the following:
FINOVA CAPITAL CORPORATION
Scottsdale Financial Center
7272 E. Indian School Road, Suite 410
Scotsdale, Arizona 85251
A copy of all notices to be sent to Lender shall be addressed to each of the
following at the above address:
(a) Vice President - Portfolio Management, Real Estate Group; and
(b) Vice President - Group Counsel.
IN WITNESS WHEREOF this instrument is executed as of the date set forth above.
"BORROWER" PATTEN RECEIVABLES FINANCE
CORPORATION VI, a Delaware corp
By:
Borrower
"LENDER"
FINOVA CAPITAL CORPORATION,
Delaware corporation
By:
Type/Print Name:
Title:
AMENDMENT NO. 12 TO
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
BY THIS AMENDMENT NO. 12 TO AMENDED AND RESTATED LOAN AND SECURITY
AGREEMENT ("Amendment") dated as of May 1 ,1996, PATTEN RECEIVABLES FINANCE
CORPORATION VI, a Delaware corporation ("Borrower"), and FINOVA CAPITAL
CORPORATION (fka Greyhound Financial Corporation), a Delaware corporation
("Lender"), for good and valuable consideration, the receipt of which is hereby
acknowledged, hereby confirm and agree as follows:
ARTICLE
1
INTRODUCTION
1.1 Lender, as successor-in-interest to Greyhound Real Estate Finance
Company, an Arizona corporation, and Borrower are parties to that Amended and
Restated Loan and Security Agreement dated as of January 9, 1990, as amended by
a June 12,1990 letter amendment, a July 18, 1990 letter amendment, an August 31,
1990 Amendment No. 1 to the Amended and Restated Loan and Security Agreement, a
November 19, 1990 letter agreement, a March 23, 1991 Amendment No. 2 to the
Amended and Restated Loan and Security Agreement, a November 21, 1991 Amendment
No.3 to the Amended and Restated Loan and Security Agreement, a January 30, 1992
Amendment No.4 to the Amended and Restated Loan and Security Agreement, a May
11, 1992 letter agreement. an October, 1992 Amendment No. 5 to the Amended and
Restated Loan and Security Agreement. a December 14, 1992 letter agreement, a
May 12, 1993 Amendment No. 6 to the Amended and Restated Loan and Security
Agreement, a February 18, 1994 Amendment No. 7 to the Amended and Restated Loan
Agreement, a March 25,1994 Amendment No. 8 to Amended and Restated Loan and
Security Agreement, a June 29, 1994, Amendment No. 9 to Amended and Restated
Loan and Security Agreement, a December 14, 1994 Amendment No. 10 to Amended and
Restated Loan and Security Agreement, and an October 31, 1995 Amendment No. 11
to Amended and Restated Loan and Security Agreement (collectively, the
"Agreement").
1.2 Borrower and Lender wish to amend the Agreement, among other
ways, to provide an aggregate funding limitation with respect to this and other
credit facilities from Lender to Borrower and its affiliates, as more fully
provided below.
ARTICLE
2
AGREEMENT
2.1 Except as otherwise defined herein or unless the context
otherwise requires, capitalized terms used in this Amendment shall have the
meaning given to them in the Loan Agreement.
960430\1350.dgrieme,193101
<PAGE>
its place:
2.2 The Loan Agreement is amended as follows:
(a) Paragraph 9.12(e) is deleted in its entirety
and the following is substituted in
"(e) Notwithstanding anything in this Agreement to the contrary, in no
event shall Lender have any obligation to make any Advance if, after giving
effect to such Advance, the sum of the then outstanding principal balances of
(i) the Loan, (ii) the Land Inventory Credit Facility (as defined below) and
(iii) the PSI Loan (as defined below) would exceed Twenty Million Dollars
($20,000,000). For the purposes of this paragraph, the term "Land Inventory
Credit Facility" shall mean the credit facility under that Credit Facility
Agreement dated as of December 14, 1994, between Bluegreen Corporation (fka
Patten Corporation) ("Bluegreen") and Lender, pursuant to which Lender has
agreed to extend to Bluegreen and/or its wholly-owned subsidiaries a revolving
line of credit in an aggregate amount not to exceed Five Million Dollars
($5,000,000), as it may be from time to time renewed, amended, restated or
replaced; and the term "PSI Loan" shall mean the credit facility under that Loan
Agreement dated as of , 1996, between Properties of the Southwest Inc. ("PSI"),
a wholly-owned subsidiary of Bluegreen, and Lender, pursuant to which Lender has
agreed to extend to PSI an acquisition loan in an aggregate amount not to exceed
Three Million Eight Hundred Thousand Dollars ($3,800,000), as it may be from
time to time renewed, amended, restated or replaced.
2.3 Borrower confirms and restates to Lender as of the date hereof all its
representations
and warranties set forth in the Agreement, as amended hereby, and the
other documents executed by Borrower evidencing, securing or
otherwise pertaining to the Loan ("Documents"). Borrower represents
and warrants to Lender that since June 29, l994, except for such
changes shown in the documents delivered to Lender pursuant to
paragraph 2.6(e) and any changes to advertising materials in
conformance with applicable law, there have been no material changes
to the documents used in connection with the sale of Parcels or the
governance of the Projects. Borrower agrees that all liens and
security interests granted by it in the Documents are reaffirmed for
the benefit of Lender. Borrower further acknowledges that Lender has
performed and is not in default of its Obligations under the
Documents and that there are no offsets, defenses or counter-claims
with respect to any of its Obligations under the Documents.
2.4 Borrower will execute and deliver such further
instruments and do such things as in the sole and absolute
judgment of Lender are necessary or desirable to effect the
intent of this Amendment and to secure to Lender the
benefits of all rights and remedies conferred upon Lender by
the terms of this Amendment and any other documents executed
in connection herewith, including, without limitation,
amendments to security loan documents and financing
statements.
2.5 This Amendment may not be amended or otherwise modified
except in a writing duly executed by the parties hereto.
960430\1350.dgrieme.193101
2
<PAGE>
2.6 If any one or more of the provisions of this Amendment
is held to be invalid, illegal or unenforceable in any
respect or for any reason (all of which invalidating laws
are waived to the fullest extent possible), the validity,
legality and enforceability of any remaining portions of
such provision(s) in every other respect and of the
remaining provision(s) of this Amendment shall not be in
any respect impaired. In lieu of each such unenforceable
provision, there shall be added automatically as a part of
this Amendment a provision that is legal, valid and
enforceable and is similar in terms to such unenforceable
provisions as may be possible.
2.7 This Amendment constitutes the entire agreement and
understanding of the parties with respect to the subject
matter hereof and this Amendment and the Documents, as
amended hereby, supersedes all prior written or oral
understandings and agreements between the parties in
connection with its subject matter.
reference.
2.8 All Schedules and Exhibits referred to herein are
herein incorporated by this
2.9 This Amendment may be executed in one or more
counterparts, and any number of which having been signed by
all the parties hereto shall be taken as one original.
2.10 Borrower and Lender hereby ratify and confirm the Loan
Agreement, as amended hereby, in all respects; and, except
as expressly amended hereby, the Loan Agreement shall
remain in full force and effect.
2.11 Lender's address for notice purposes is changed to
the following:
FINOVA CAPITAL CORPORATION
Scottsdale Financial Center
7272 E. Indian School Road, Suite 410
Scottsdale,Arizona 85251
A copy of all notices to be sent to Lender shall be addressed to
each of the following at the above address:
(a) Vice President - Portfolio Management, Real Estate
Group; and
(b) Vice President - Group Counsel.
960430\1350.dgrieme.193101
CONSTRUCTION LOAN AGREEMENT
THIS AGREEMENT, made this 28th day of February, 1996, between THE
NATIONAL BANK OF SOUTH CAROLINA, whose address is Post Office Box 1457,
Columbia, South Carolina 29202, Attention: Real Estate Administration
(hereinafter referred to as the "Lender"), and PATTEN RESORTS, INC., a Delaware
corporation, whose address 5295 Town Center Road, Suite 400, Boca Raton, Florida
33486, Attention: Patrick E. Rondeau (hereinafter referred to as the
"Borrower");
~W I ~T ~N ~E ~S ~S ~E ~T ~H:
ARTICLE-I
LOAN
1.1 In accordance with the terms and conditions of the loan commitment
from Lender to Borrower (the "Commitment"), Lender does hereby agree to lend to
Borrower, and Borrower does hereby agree to borrow from Lender, the sum of up to
THIRTEEN MILLION FIVE HUNDRED THOUSAND ($13,500,000.00) DOLLARS (the "Loan"),
said sum to be advanced from time to time and repaid together with interest
thereon and with certain costs and charges as may be incurred by Borrower, all
as hereinafter more particularly set forth. The Loan shall be evidenced by a
promissory note of Borrower, in form and content satisfactory to Lender, to be
dated the date hereof and drawn to the order of Lender in the principal amount
of the Loan (the "Note"), the terms of which are incorporated herein by
reference, and the Note shall be secured by:
A. A mortgage and security agreement (the Mortgage), in form and content
satisfactory to Lender, granting to Lender a first lien on a parcel or parcels
of land described in Exhibit A attached hereto and made a part hereof (the
"Property") , together with all improvements constructed and to be constructed
thereon and a security interest in all personal property located, or to be
located, on the Property, together with sufficient financing statements (the
"Financing Statements"), in form and content satisfactory to Lender, to perfect
such security interest in accordance with South Carolina laws and the laws of
Borrower's principal place of business.
B. An assignment of leases, rents and profits (the "Assignment of Leases"),
in form and content
satisfactory to Lender.
C. An assignment of the construction contract between Borrower and the
general contractor (the "General Contractor") for the Project (the "Construction
Contract"), the plans and specifications for the Project previously delivered to
Lender (the "Plans") , the contract between Borrower and the architect for the
Project (the "Architect") , and other developer`s rights (all of such
assignments being referred to as the "Assigrment of Developer's Rights") , such
assignments to be in form and content satisfactory to Lender.
D. A guaranty agreement (the "Guaranty") executed by Patten Corporation
(the "Guarantor"), in form and content satisfactory to Lender.
E. An assignment of contract receivables, whereby all contract receivables
on sales of Intervals (as hereinafter defined)-shall be assigned on a second
lien basis to Lender (the "Receivables Assignment"), in form and content
satisfactory to Lender.
F. The Tri Party Agreement (as hereinafter defined).
Said Note, Mortgage, Guaranty, Assignment of Leases, Assignment of
Developer's Rights, Financing Statements, Receivables Assignment, Tri-Party
Agreement and all other documents and instruments which may be reasonably
required by Lender, are hereinafter sometimes referred to collectively as the
"Loan Documents."
1.2 In the event of any conflict between the terms and provisions
contained in the Commitment and in any of the Loan Documents, the terms and
provisions of the Loan Documents shall control.
1.3 Lender agrees to allow Borrower to engage in the limited sale of
interval ownership time share interests in the Project ("Intervals") prior to
completion of the Project and repayment of the Loan, subject to the following
terms and conditions:
A. Sales of Intervals must be limited to unit numbers 1101,1102, 1103,
1104, 1105, 1106, 1308, 1309, 1310, 1311, 1312, 1314, 1501, 1502, 1503, 1504,
1505, 1506, 1708, 1709, 1710, 1711, 1712, 1714, 1901, 1903, 1904 and 1905.
Borrower shall not engage in the sale of Intervals in more than 5 units at any
one time; provided, however, that once Seller has sold at least 75% of the
Intervals in a unit, such unit shall not be counted with respect to the
foregoing limitation and therefore Borrower, may begin selling Intervals in
another unit.
B. The rights of Borrower under all contracts for the sale of Intervals
must be assigned to Lender as security for the Loan pursuant to the Receivables
Assignment. The Receivable Assignment shall be subordinate in priority only to a
first lien assignment of such receivables to be granted to Heller Financial,
Inc. ("Heller") in accordance with the provisions of Section 5.1 0 hereof (the
"Heller Receivables Assignment"). Borrower shall take such further action as
Lender may request in order to create and perfect Lender's security interest
(other than giving Lender possession of the original receivables contracts,
which shall be held by Heller).
C. The sales contracts shall not bind the remainder of the Project to time
share use.
D. Heller must approve the terms and conditions upon which sales of
Intervals may occur.
E. No event shall exist which with the passage of time or the giving of
Notice or both would constitute an Event of Default hereunder.
F. Before marketing of Intervals commences, Lender must receive an
opinion of Borrower's counsel, in form and content satisfactory to Lender, as to
the compliance by Borrower with laws and regulations applicable to the sale of
the Intervals.
G. The Loan shall be paid in full on or before the date of recording of
any declaration creating the Intervals, and therefore Lender shall not be
required to release any Intervals from the lien of the Mortgage and other Loan
Documents.
1. 4 Lender agrees upon the request of Borrower to issue up to ten
letters of credits under the Loan to secure payment to suppliers of furnishings
for the Project. The terms of the contracts with the suppliers and the terms of
the letters of credit must be acceptable to Lender. The amounts payable to
suppliers must conform to the approved construction budget for the Project.
Borrower shall pay Lender a fee of one-half of one (0.5~%) percent of the letter
of credit amount prior to issuance of a letter of credit. The amounts of all
outstanding letter of credits shall be reserved by Lender under the Loan and
shall not be available for advance. Any amounts funded under a letter of credit
shall be deemed advanced under the Note as part of the Loan and shall be secured
by the Mortgage and other Loan Documents. In the event Borrower pays a supplier
and a letter of credit is returned to Lender and cancelled, the amount reserved
to fund the letter of credit shall thereafter be available for draw for Project
expenses in accordance with this Agreement.
ARTICLE II
CONSTRUCTION AND CERTAIN COVENANTS RELATED THERETO
2.1 Borrower shall cause to be constructed upon the Property a 114 unit
condominium project and related amenities (the "Project") as described in the
Plans. The Project shall be constructed and completed no later than March 1,
1997 (the "Construction Completion Date") and shall be fully furnished and
available for occupancy no later than May 1, 1997 (the "Occupancy Date").
2.2 The Project shall be constructed in good and workmanlike manner
pursuant to the Construction Contract and shall be constructed substantially in
accordance with the Plans. The Construction Contract and the General Contractor
shall be subject to Lender's approval. Borrower will not cause, suffer or permit
any modification or amendment of, or deviation from, the terms and provisions of
the Construction Contract without the prior written consent of Lender. Borrower
will not cause, suffer or permit any change or amendment to, or construction of
the Project other than in substantial conformity with the Plans without the
prior written consent- of Lender and any other persons as may be required by the
terms of any bond, lease or agreement, except that Borrower may make change
orders to the extent permitted in Section 7.1. L hereof.
2.3 As a condition precedent to the advance of any funds under the
Loan, Borrower shall furnish Lender with a proposed completion and draw schedule
and a satisfactory cost breakdown of construction clearly identifying
development, construction, financing and all other direct and indirect costs
which shall be subject to the approval of Lender and Lender's project inspector
(the "Project Inspector"). If at any time, in the judgment of Lender, there is
not enough money available under the Loan to complete the Project, Borrower will
be required to contribute the additional equity at that time. Borrower will not
cause, suffer or permit the proceeds of the Loan to be expended or allocated
other than as shown on the said cost breakdown without the prior written consent
of Lender.
2.4 The Project shall be constructed and operated in accordance with
all applicable ordinances and statutes and the requirements of all regulatory
authorities having jurisdiction and in compliance with the requirements of any
lessee, and of any rating or inspection office having jurisdiction; the Project
shall be constructed entirely on the Property and will not unlawfully encroach
upon any easement, right-of-way or land of others; and the Project when
completed will not violate any setback lines, applicable use restrictions or
other restrictions or regulations.
2.5 In the event Lender shall have given Borrower written notification
of a structural defect in the Project or departure from the Plans, not approved
by Lender, Borrower shall, within thirty (30) days of receipt of such notice,
take all necessary steps to cure such structural defect or departure from the
Plans, and Lender may, at its option, withhold subsequent advances until such
time as such structural defect or departure from the Plans has been cured to the
satisfaction of Lender and Project Inspector (as hereinafter defined).
2.6 The Project Inspector's review of the Plans, construction cost
breakdown and other matters and periodic review of progress of construction of
the Project shall be solely for the benefit of Lender. It shall be Borrower's
obligation to insure that the Project is properly designed and is completed in
accordance with the Plans. Borrower acknowledges that it is not relying on the
Project Inspector or the Lender in connection with the adequacy of the Plans,
the proper construction of the Project or any other aspects of the Project.
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BORROWER
3.1 In order to induce Lender to enter into and execute this Agreement
and to make the Loan to Borrower, Borrower represents and warrants to Lender as
follows:
A. Borrower has full power to enter into and execute this Agreement and the
Loan Documents and to consummate the transaction contemplated thereby.
B. Borrower has heretofore delivered to Lender a true, accurate and
complete copy of the articles of incorporation or partnership agreement and/or
certificate, as applicable, of Borrower.
C. Borrower has heretofore delivered to Lender the financial statements of
Borrower and Guarantor (collectively the "Borrower's Financial Statements").
Borrower's Financial Statements have been prepared in accordance with generally
accepted accounting principles and are true, accurate and complete. Borrower and
Guarantor do not have any obligations or liabilities (whether accrued, absolute,
contingent or otherwise) other than as set forth in Borrower's Financial
Statements.
D. Borrower has heretofore delivered to Lender true, complete and accurate
copies of all leases of the Property or any portion thereof, if any, executed by
Borrower to date. Each such lease is the valid and continuing obligation of the
parties thereto and is enforceable in accordance with its terms. Borrower is not
in default under the terms of any such lease, and no event has occurred which by
notice, the passage of time or otherwise would constitute a default by Borrower
under any such lease.
E. There are no actions, suits or proceedings pending, or to the knowledge
of Borrower, threatened: (i) involving the validity or enforceability of this
Agreement or any of the Loan Documents; or (ii) involving the priority of any
lien created by, or granted pursuant to, any of the Loan Documents; or (iii)
against or affecting the Property or against and materially affecting Borrower
or Guarantor.
F. Borrower has obtained all licenses, permits, authorizations, consents or
approvals ~f from all appropriate public or private boards and bodies necessary
for the construction of the Project, and all such licenses, permits,
authorizations, consents or approvals are in full force and effect.
G. Borrower is not in default under any of the Loan Documents, and no event
has occurred which by notice, the passage of time or otherwise would constitute
an event of default under any of the Loan Documents.
H. The Property has adequate rights of access to public ways and all water,
sanitary sewer and storm drain facilities. All public utilities necessary or
convenient to the full use and enjoyment of the Project are available to the
Property, and if not now installed the same shall be constructed and installed
to service the Project prior to the Construction Completion Date.
I. Borrower and Guarantor are not in default in the payment of any
indebtedness or borrowed money for repayment of which they are personally liable
or under the terms and provisions of any agreement or instrument evidencing any
such indebtedness or under any guarantee of indebtedness of others.
J. The Plans are in compliance with the South Carolina Beachfront
Management Act.
K. No representation or. warranty of Borrower or Guarantor contained in
this Agreement or in any of the Loan Documents, and no statement contained in
any certificate, schedule, list, financial statement or other instrument
furnished to Lender by or on behalf of Borrower or Guarantor contains, or will
contain, any untrue statement of a material fact, or omits, or will omit, to
state a material fact necessary to make the statements contained herein or
therein not misleading.
3.2 All warranties and representations of Borrower contained herein shall
survive the execution of this Agreement and anyadvances made in accordance with
this Agreement. All such representations and warranties shall be deemed to be
remade as of the date of each request ~f or an advance under the Loan and shall
be true and correct as of such date.
ARTICLE IV
COVENANTS OF Borrower
4.1 Borrower covenants with Lender as follows:
A. It shall maintain, preserve and keep the Project and the grounds and
structure, improvements and equipment appurtenant thereto or used therewith, and
each and every part and parcel thereof, in good repair and working order and in
safe condition at all times.
B. It shall permit Lender and its duly authorized agents free access to
the Project and shall make available for audit and inspection, at any reasonable
time by Lender or its duly authorized agents, all property, equipment, books,
contracts, records and other papers relating to the Project. It shall keep the
books and accounts of all operations relating to the Project in accordance with
generally accepted accounting procedures acceptable to Lender. Such books and
accounts shall be maintained at the site of the Project or the office of
Borrower.
C. It shall promptly respond to any inquiry from Lender for information
with respect to the Project which information may be verified by Lender;
provided, however, that Lender shall at all times be entitled to rely upon any
statements or representations made by Borrower or any employee or agent of
Borrower.
D. It shall indemnify Lender from claims or process arising by reason of
the execution hereof or the consummation of the transactions contemplated hereby
and caused by the acts or omissions of Borrower.
E. It shall pay, when due, all costs, fees and expenses as required by the
Loan Documents and all fees, costs and expenses concerning the consummation of
the transaction contemplated hereby. Such fees and expenses shall include,
without being limited to, all fees and expenses of Lender's counsel in
connection with the closing of the Loan and for such further advice and counsel
as Lender may require during the term of the Loan with respect to the Loan. If
Borrower fails to pay all such fees and expenses, Lender may at its option
advance funds under the Note to pay such fees and expenses.
F. Within thirty (30) days of written notification by Lender to Borrower,
Borrower shall contribute to the Project such funds which when added to the
remaining portion of the Loan to be disbursed hereunder shall, in the reasonable
judgment of Lender, be sufficient to pay in full the remaining total Project
costs.
G. It shall pay promptly at maturity the principal of the Loan, together
with interest thereon, and all other charges and amounts due Lender, the said
payment to be made without any deduction for taxes, assessments or governmental
charges in the nature thereof upon said Loan, or the interest evidenced thereby,
or any part thereof, which Borrower may be required or permitted to deduct,
retain or pay therefrom or thereon, under or by reason of' any present or future
law of the United States or of any state, municipality or taxing authority
thereof.
H. It shall purchase and continually maintain-and keep in full force and
effect, at its sole expense, those policies of insurance and endorsements
thereto described in Sections 5.1 and 5.3 herein. Borrower shall deliver the
original policies of insurance to Lender and shall deliver to Lender all
renewals thereof not less than thirty (30) days in advance of the expiration
date of the existing policy or policies.
I. It shall notify Lender of any loss insured against under any policy of
insurance required hereby within ten (10) days of the occurrence of said loss.
J. It shall faithfully pay and discharge promptly when due all taxes,
assessments, forced contributions, local assessments and governmental charges of
every description which shall from time to time be imposed or assessed or levied
upon the Project, or any part thereof, and/or upon or against any personal
property situated therein, including all state and municipal taxes affecting the
Property and the Project and/or personal property located therein.
K. It shall keep valid and unimpaired the Mortgage and the other Loan
Documents described hereinabove, and to that end shall execute at any future
time and As often as may be deemed necessary, on demand of Lender, all further
instruments, assignments and other acts in due form and effect as may be deemed
proper by Lender to the better carrying out of the true intent and meaning of
this Agreement, and especially at Borrower's sole cost, shall do all other
things that may be required by Lender to make and keep valid the liens on, and
security interest in, the property described in the various Loan Documents and
to maintain the priority of the said liens and security interests.
L. It shall notify Lender in writing within ten (10~) days thereof in the
event of any default by Borrower of any obligation undertaken by it herein
and/or any of the Loan Documents.
M. It shall notify Lender in writing within ten (10) days thereof should
any mortgage or lien or any other security instrument whatsoever be filed
against the Property described in the Mortgage.
N. It shall bond off under the provisions of applicable law any lien or
claim of lien filed for record, within thirty (30) days of date of notice to
Borrower of filing of said claim.
0. It shall keep and maintain at all times complete, true and accurate
books of accounts and records reflecting the results of the operation of the
Project. Borrower shall permit Lender to inspect said books and records upon
request. In addition, Borrower will deliver or cause to be delivered to Lender:
(i) As soon as practicable, and in any event within ninety (90) days after
the end of each ~f fiscal year of Borrower, a balance sheet of Borrower, and a
statement of income and expense of Borrower related to the Project, in each case
setting forth, in comparative form, the figures for the previous fiscal year,
all in reasonable detail, prepared by an independent certified public accountant
of recognized standing;
(ii) Together with each financial statement of Borrower delivered under
(i) above, a certificate signed by the Chief Financial Officer of Borrower,
dated the date of such financial statement stating that (i) he has reviewed the
activities of Borrower with a view to determining whether all obligations of
Borrower under the Note and this Agreement have been duly performed and complied
with and (ii) stating that, to the best of his knowledge, there did not exist as
of the date of such certificate any condition or event which would constitute a
breach of any covenant or condition hereunder, or under the Note, this Agreement
or any other document securing the Note or relevant to the Project or which,
after notice or lapse of time, or both, would constitute such a breach, or
specifying the nature or extent of each breach and the action Borrower has taken
or proposes to take with respect thereto; and
(iii) within ninety (90) days after the end of each fiscal year and within
thirty (30) days after demand by Lender, a signed financial statements of
Guarantor, together with copies of the most recent tax returns of Guarantor.
P. It shall maintain with Lender the construction account for the Project until
the Loan is paid in full. Borrower acknowledges that the maintenance of such
account with Lender is for the dual purposes of further securing the Loan and
enabling Lender to monitor activity concerning the Project.
Q. It shall comply with all laws and regulations applicable to the sale of
time share units in the Project, including all registration requirements.
R. It shall comply with terms of the Heller Loan (as hereinafter defined)
such that the Heller Loan will fund and pay the Loan in full upon completion of
the Project.
4.2 Borrower shall not do any of the following without the prior written
approval of Lender:
A. Except for (i) limited sales of Intervals provided herein, (ii) the
Heller Receivables Assignment and (iii) the Subordinate Mortgage (as hereinafter
defined), convey, transfer, lease or further- encumber any of the properties
described in the Mortgage and/or the other Loan Documents, or any right to
manage or receive any of the rents and profits and insurance thereof.
B. Convey, assign, transfer, dispose of or encumber any personal property
of Borrower used or useful in the operation of the Project.
C. Remodel, add to, reconstruct, improve or demolish any part of the
properties described in the Mortgage, except as required so to do by the
foregoing provisions of this Agreement.
D. Permit the use of the Project for any purpose except the use which was
originally intended.
E. Purchase or acquire any materials, fixtures or equipment of or the
Project upon leases, conditional sale or other type of title retention or
security agreement.
F. Incur any additional debts with respect to the Project or secured by the
Property not provided for in this Agreement or in the Loan Documents.
G. Undertake or suffer any work to be done upon the Property, other than
the construction of the Project provided for herein.
ARTICLE V
REQUIREMENTS FOR ADVANCES
5.1 The obligation of Lender to make the first advance of the Loan to Borrower
is subject to the receipt of Lender, on or prior to the date of execution of
this Agreement, of the following, all in form and content satisfactory to
Lender:
A. Executed originals of all Loan Documents.
B. Copies of the Plans, together with written approval thereof by Borrower,
Project Inspector and all municipal and governmental agencies that so require.
C. Evidence of compliance with all laws, zoning and other ordinances,
rules, regulations and restrictions affecting the construction and use of the
Project (including without limitation the Beachfront Management Act and South
Carolina Coastal Council laws and regulations), and evidence of approval of the
Project by all local environmental and ecology boards, zoning and planning
commissions and any other land use regulatory bodies.
D. All required building permits and all other authorizations, if any,
which are required for the construction and use of the Project.
E. A current survey, certified to Lender and to the title insurer,
showing all easements (existing and proposed labeled accordingly) , rights of
way, utilities, means of ingress and egress, setback lines and encroachments, if
any. In addition, Lender shall be furnished a copy of soil tests, acceptable to
the Project Inspector, indicating the subsoil and geological conditions of the
Property.
F. A paid policy of mortgage title insurance on an American Land Title
Association Loan Policy form, without exceptions which are unacceptable to
Lender, in the full amount of the Loan, issued by a title company approved by
Lender and insuring title to the Property, free and clear of all other liens,
claims and encumbrances except such as Lender and its counsel shall approve.
Such title insurance shall contain a pending mortgage disbursement clause
insuring the priority of the Mortgage as provided therein for the full amount of
the Loan advanced by Lender over any and all mechanics', materialmen's and
laborers' liens, whether recorded or unrecorded and regardless of the priority
of such liens under applicable law. Such policy must also contain such other
terms as may be required by Lender as specified in the Commitment.
G. original Paid policies Of workers'. compensation insurance, public
liability insurance with limits of not less than $1,000,000.00, insurance
against flood, fire, lightning, windstorm, earthquake, and such other hazards
(including builders' all-risk extended coverage on a completed value
nonreporting form during the construction phase of the Loan) as Lender may
require, with limits of not less than the full replacement value of the
improvements, including (if the Loan is not immediately paid in full 'upon
completion of the Project) insurance against loss of rental income or business
interruption coverages, as applicable, and containing provisions therein to
prevent the occupancy of any part of the buildings constructed on the Property
from terminating said coverage. All of the above described hazard insurance
policies shall each contain a replacement cost endorsement and a standard
mortgage endorsement (if available on that particular type policy) providing for
loss proceeds being payable to Lender or its assigns as mortgagee. All insurance
policies and all endorsements thereto hereinabove and hereinafter required must
be issued by insurers authorized to do business in South Carolina on an approved
South Carolina form and through insuring companies -rated by the Best Insurance
Guide as A+, or otherwise approved in writing by Lender. Borrower shall furnish
Lender with certificates of such insurance policies containing a provision
agreeing to give Lender thirty (30) days notice prior to cancellation.
H. A detailed cost breakdown, as described in paragraph 2.3 herein,
together with invoices for costs other than for in-place improvements.
I. The written undertaking of the General Contractor to continue
performance on Lender's behalf without additional cost in the event of a default
by Borrower under any of the Loan Documents.
J. Evidence that all utilities, including water, sanitary sewer, storm
sewer and drainage, gas, electricity and telephone, are or will be available in
sufficient size and quantity and at the proper time for the successful operation
of the Project, and that requirements, if any, of the Federal Flood Insurance
Program have been satisfied.
K. An opinion of Borrower's counsel, dated as of the date of execution of
this Agreement.
L. Payment and performance bonds on the General Contractor and such major
subcontractors as Lender may require, for the benefit of Lender.
M. A full written narrative appraisal from an MAI appraiser acceptable to
Lender indicating a Project value of at least $17,780,000.
N. An environmental audit of the Property conducted by a qualified
environmental inspection company acceptable to Lender.
0. Copies of a Loan and Security Agreement (the "Heller Loan Agreement"),
promissory notes and other documents evidencing loan(s) from Heller to Borrower
in the aggregate amount of $23,500, 000 (collectively, the "Heller Loan"). The
Heller Loan Agreement must provide for funding sufficient to repay the Loan in
full upon completion of the Project in accordance with the plans. Such funding
shall not be contingent upon financial feasibility, the status of pre-sales of
time shares, the filing of a time share declaration or any other condition
except completion of the Project in accordance with the Plans. During
construction of the Project, Borrower shall be entitled to borrow from Heller
under the Heller Loan Agreement advances up to sixty percent (60~%) of the value
of outstanding receivables from the pre-sale of Intervals, which receivables may
be assigned to Heller on a first lien basis. Lender shall hold a second lien
'Security interest in such receivables pursuant to the Receivables Assignment.
Borrower may also grant a second mortgage on the Property to Heller (the
"Subordinate Mortgage") , provided that the same is expressly subordinated to
the Mortgage and all of Lender's other security documents by subordination
agreement in form and content satisfactory to Lender. Borrower shall not grant
to Heller any other lien against the assets of Borrower, excepting only the
Heller Receivables Assignment, until the Loan has been paid in full. Borrower
must provide a tri-party agreement between Lender, Borrower and Heller (the
"Tri-Party Agreement") containing such terms as shall be required by Lender.
Borrower acknowledges that it shall be liable for payment of the Loan in full
regardless of whether Heller funds the Heller Loan.
P. Evidence that Borrower has invested at least $4,046,614 in cash equity
for Project costs approved by Lender.
5.2 The obligation of Lender to make any advance of the Loan to Borrower is
subject to the satisfaction of the following conditions at the time of making
such advance, all in form and content satisfactory to Lender:
A. All representations and warranties of Borrower contained in this
Agreement shall be true and correct as of the date of the advance.
B. Borrower shall not be in default under the terms of this Agreement or of
any of the Loan Documents.
C. Borrower shall have complied with all agreements and satisfied all
conditions on its part to be
performed or satisfied at or prior to the date of such advance.
D. The Project shall not have been materially injured or damaged by f ire
or other casualty; or if so damaged, provisions satisfactory to Lender have been
made to effect necessary restoration or repair in accordance with this
Agreement. If requested by Lender, Borrower shall furnish to Lender a
certificate, dated the date of such advance and executed by Borrower and in such
detail as Lender may require, as to the satisfaction of any one or more of
conditions of Sections 5.2 A - D above.
E. Lender shall have received evidence that all work and improvements
requiring inspection by governmental authorities having jurisdiction have been
inspected and approved by such authorities, by the rating or inspection offices
having jurisdiction and by any other persons or entities (including any lessees
of the Project) having the right to inspect and approve construction; that such
governmental authorities have accepted dedication of roads, sewers and other
facilities where necessary and all required certificates and other approvals
have been duly issued; and that the requirements of all environmental agencies
have been satisfied.
F. Once the foundations and footings for the Project are in place,
Lender shall have received and approved an updated survey showing the location
of such foundations and footings, along with certification by the surveyor that
such foundations and footings -are located wholly within the boundaries of the
Property and do not interfere with or violate any easement, right-of-way,
building and use restriction or setback lines.
G. Borrower shall obtain. and deliver to Lender, concurrently with any
advance made hereunder, including the final advance, an endorsement to the title
insurance policy issued to Lender insuring the priority of the Mortgage,
bringing forward the date of the policy to the date of the advance, increasing
the coverage of said policy to an amount equal to all advances made under the
Loan and affirmatively insuring against any mechanics' or materialmen's liens,
recorded or unrecorded.
H. Lender shall have received a request for advance, in form and
content acceptable to Lender, certified by Borrower and the General Contractor
and approved by the Project Inspector, stating that the Project is being
completed in substantial accordance with the approved plans and specifications
and in compliance with all applicable building codes, zoning ordinances, and
other applicable regulations of any governmental entity or agency exercising
jurisdiction over the Property. Upon completion of the Project, a Certificate of
Completion issued by the General Contractor and approved by the Project
Inspector will be required. All. fees of the Project Inspector shall be paid by
Borrower.
I. Heller shall have approved all draw requests to the extent required in
the Heller Loan Agreement.
5.3 In addition to the requirements set forth in Sections 5.1 and 5.2
above, the obligation of Lender to make the final advance of the Loan is subject
to the receipt by Lender of the following, all in form and content satisfactory
to Lender:
A. Evidence of the issuance of a certificate of use and occupancy for all
portions of the Project issued by all appropriate governmental authorities.
B. A final survey in the form required under Sections 5.1 and 5.2 above
showing the completed Project, together with at least three photographs of
different views of the completed Project.
C. Evidence that the Project has been completed lien free in accordance
with the Plans. Such evidence shall include, but not be limited to, final
approval by the Project Inspector and a final certificate from the General
Contractor and Architect that the Project has been completed in accordance with
the Plans, that the completed Project is in compliance with all applicable laws
and regulations applicable thereto, and that all bills and expenses in
connection with construction of the Project have been paid or provided for by
arrangements satisfactory to Lender.
D. A fully-paid policy of permanent all-risk hazard insurance for the full
insurable value of the Project, with replacement cost endorsement and providing
limits of liability sufficient to avoid the application of any coinsurance
clause contained in such policy or required by law. Such policy or policies must
be issued through an insuring company or companies qualified to do business in
the State of South Carolina and rated by the Best Insurance Guide as A+; and
such policy or policies shall contain a standard mortgage endorsement providing
for loss proceeds being payable to Lender,, and an endorsement providing that
the insurance carrier will give Lender thirty (30) days written notice of
cancellation of such policy or policies. Such policy shall also include
earthquake insurance and rental value insurance for a period of at least twelve
(12) months in amounts acceptable to Lender.
E. All provisions of Sections 5.1 and 5.2 shall have been satisfied.
F. All provisions of the Commitment, as may have been amended, shall have
been satisfied.
5.4 In the event during the term of the Loan Lender determines in its
reasonable discretion that Lender is required under any applicable banking law
or regulation to obtain new or additional documentation to support the Loan such
as, for example, a new appraisal or a new environmental report, Borrower shall
pay all costs of obtaining such new or additional documentation.
5.5 Lender shall advance funds only for Borrower's approved actual
costs. Lender shall not be required to fund up to the full amount of the Loan if
Borrower's actual approved costs for the Project do not require such funding.
ARTICLE VI
PROCEDURE FOR ADVANCES
6.1 Provided all applicable requirements for advances set forth in
Article ~V hereof have been satisfied, and subject to the provisions of this
Article VI set forth below, Borrower shall be entitled to not more than one
advance of the Loan each month as provided in the request for advance meeting
the requirements of this Agreement delivered to Lender not later than the
tenth (10th) .day of the month and not less than five (5) working days prior
to the date of the requested advance. Borrower shall be entitled to receive
90% of the actual costs of in-place improvements as certified by Borrower and
the General Contractor and approved by -the Project Inspector, less amounts
previously advanced. After draws for 50% of construction have been funded
(less the 10% retainage), draws on the remaining 50% of construction shall be
funded at 95% with 5% retainage. Additionally, Borrower shall be entitled to
receive one hundred (100%) percent of other construction related costs based
upon invoices delivered to Lender and approved by Lender, in its sole
discretion. Notwithstanding anything herein to the contrary, Lender shall at
all times retain sufficient funds which it reasonably determines are adequate
to complete construction of the Project. Lender shall make no advances for
materials stored on site unless such materials are fully insured against loss
by theft and other perils.
6.2 Upon completion of all the work to be performed on the Project in accordance
with the Plans, so certified by the General Contractor (and by the Project
Inspector to Lender if Lender so requires), and upon inspection and approval by
the Project Inspector and by others who have reserved the right to approve
construction and upon satisfaction of all the conditions set forth in Section
5.3 of this Agreement the retainage held back by Lender pursuant to Section 6.1
of this Agreement shall be advanced to Borrower. The foregoing notwithstanding,
Lender may withhold advances for the payment of retainage to any subcontractor
if in Lender's opinion a dispute exists as to the proper completion by such
subcontractor of his work on the Project or as to the amount due him.
6.3 Anything contained in this Agreement to the contrary notwithstanding:
A. Lender shall, be authorized and empowered to establish reserves from
the undisbursed portion of the Loan of such sums which, in the opinion of
Lender, are sufficient to pay or satisfy, in whole or in part, any lien or claim
prejudicial to the liens or security interests of Lender and/or any expenditure
or allocation of funds shown on the cost breakdown described in Section 2.3 of
this Agreement. The aggregate amount of any such reserves shall be deducted from
the proceeds of the Loan otherwise available for advance in accordance with this
Agreement, and any such reserved funds, when advanced by Lender, shall be deemed
to be proceeds of the Loan advanced under this Agreement,- whether or not
advanced to Borrower.
B. Lender shall not be under any obligation to make any advance of the
Loan if Lender shall determine that the remaining total Project costs are in
excess of the remaining undisbursed portion of the Loan, unless a cash deposit
in the amount of such excess is made by Borrower to Lender.
ARTICLE VII
EVENTS OF DEFAULT; REMEDIES
7.1 The following shall constitute Events of Default hereunder:
A. If Borrower shall fail to pay the Note in full on its maturity date.
B. If Borrower shall fail to pay any other payment of principal or interest
on the Loan when due, and such failure is not cured within ten (10) days after
written notice from Lender.
C. If at any time any representation or warranty made by Borrower herein or
in any other Loan Document or by Guarantor in the Guaranty shall be or become
materially incorrect, and such is not cured, if subject to cure, within thirty
(30) days after written notice from Lender.
D. If Borrower shall breach or fail to comply with any other covenant, term
or condition of, or any of its obligations under, this Agreement, the Mortgage
or any other Loan Document, all of which are cumulative to this Agreement and to
each other, and such breach is not cured, if subject to cure, within thirty (30)
days after written notice from Lender.
E. If the construction of the Project, except for strikes and other delays
beyond the reasonable control of Borrower, be not commenced within fifteen (15)
days after the date hereof and carried on with reasonable dispatch or if
construction at any time be discontinued for a period of five (5) business days
and such failure shall continue for a period of ten (10) business days after
written notice from Lender.
F. If the Project, in the exclusive judgment of Lender, will not be
completed on or before the Construction Completion Date or fully furnished and
ready for occupancy on or before the Occupancy Date, and such breach is not
cured, if subject to cure, within thirty (30) days after written notice from
Lender.
G. If a lien for the performance of architectural or engineering services,
or other work, or labor, or the supply of materials, be filed against the
Property and remain unpaid or unbounded at the time of any request for advance,
or for a period of thirty (30) days after the date of filing thereof.
H. If Borrower shall agree to, or execute, any assignment of this Agreement
or any advance hereunder without Lender's prior written consent.
I. If either (A) Borrower or Guarantor (i) files a voluntary petition
in bankruptcy, or (ii) is adjudicated as a bankrupt or insolvent, or (iii) files
any petition or answer seeking or acquiescing in any reorganization, management,
composition, readjustment, liquidation, dissolution or similar relief for itself
under any law relating to bankruptcy, insolvency or other relief of or debtors,
or (iv) seeks or consents to or acquiesces in the appointment of any trustee,
receiver, master or liquidator of itself or of all or any substantial part of
the Project or of any or all of the rents, revenues, issues, earnings, profits
or income thereof, or (v) makes any general assignment for the benefit of
creditors, or (vi) makes an admission in writing of its inability to pay its
debts generally as they become due; or (B) a court of competent jurisdiction
enters an order, judgment or decree approving a petition filed against Borrower
or Guarantor seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future federal,
state, or other statute, law or regulation relating to bankruptcy, insolvency or
other relief for debtors, which order, judgment or decree remains unvacated and
unstayed for an aggregate of thirty (30) days (whether or not consecutive) from
the date of entry thereof; or (C) any trustee, receiver or liquidator of
Borrower or of all or any substantial part of the Project or of any or all of
the rents, revenues, issues, earnings, profits or income thereof, is appointed
without the prior written consent of Lender, which appointment shall remain
unvacated and unstayed for an aggregate of thirty (30) days-(.whether or not
consecutive).
J. If default be made in the repayment by Borrower to Lender, together
with interest, of any amount Lender may pay as insurance premiums, taxes,
assessments, forced contributions, local assessments and governmental charges of
every description, or other charges as herein provided, and such default is not
cured within ten (10) days after written notice from Lender.
K. If the property described in the Mortgage, or any part or parcel
thereof, be seized in the execution of a writ of seizure and sale, attachment,
sequestration, fieri facias or any other legal process or an order for the sale
of such property, or any part or parcel thereof, be issued in any judicial
proceeding, and such writ, or other legal process or order, be not released,
revoked, stayed or set aside within ten (10) days from issuance thereof, or if
any sale be' made pursuant to any of the above.
L. If Borrower should, without previously obtaining written consent of
Lender or its assigns, make any repairs, additions or alterations. to the
buildings or improvements located on the property described in the Mortgage not
contemplated by the Plans and such default is not cured, if subject to cure,
within thirty (30) days after written notice from Lender; provided, however,
Borrower may without obtaining such written consent of Lender, make repairs,
additions or alterations which increase the cost of construction of the Project,
which do not materially change the design of the Project, and which, in the
aggregate, do not exceed Twenty Five Thousand ($25,000.00) Dollars.
M. If Borrower should ever be required or permitted to deduct from the payments
to be made on the Loan, or any part thereof, any amount whatsoever -as taxes,
assessments or governmental charges in the nature thereof by reason of any
present or future law of the United States or of any state, municipality or
taxing authority thereof, and Borrower fails to pay to Lender, within ten (10)
days after written notice from Lender, an amount sufficient so that all payments
due Lender pursuant to the terms hereof or any Loan Document shall be absolutely
net of such tax, assessment or governmental charge.
N. If there should be passed after the date hereof any law of the State of
South Carolina providing or changing in any way the laws now enforced with
respect to the taxation of deeds of trust or debts secured thereby, or the
manner of the collection of any such taxes,-so as to affect the interest of
Lender adversely, and Borrower fails to pay to Lender within ten (10) days
notice from Lender any costs to be borne by Lender attributable to the
composition of, and/or change in, such law or laws.
0. If Guarantor suffers a material adverse change in financial position or
there shall occur some other default under the Guaranty, and-such default is not
cured, if subject to cure, within thirty (30) days after written notice from
Lender.
P. If Borrower suffers a material adverse change in financial position.
Q. If Borrower or Guarantor defaults on any other obligation to Lender
under any promissory note, guaranty or other agreement executed by Borrower or
Guarantor in favor of Lender, and such default is not cured within the time (if
any) provided in such note, guaranty or other agreement.
R. If Borrower defaults under the Heller Loan or if for any reason it
appears that Heller will not fund the Heller Loan sufficiently to pay off the
Loan upon completion of the Project.
7.2. If an Event of Default shall occur, Lender may at its option without
further notice:
A. Enter onto the Property and perform any and all work and labor necessary
to complete the Project substantially according to the Plans and take all
appropriate steps to secure and protect the project. All sums expended by Lender
for such purpose shall be deemed to have been paid to or on behalf of Borrower
and shall be secured by the security devices set forth in the various Loan
Documents and other agreements. Borrower consents to have Lender complete the
Project in the name of Borrower, and hereby empowers Lender to use any funds of
Borrower, including any funds which may remain unadvanced under the Loan, for
the purpose of completing the Project in the manner called for by the Plans, and
to employ the existing contractors, subcontractors, and agents, architects and
inspectors so long as the same are not in default, and execute all applications
and certificates on behalf of Borrower which may be required by any contract
documents relating to the Project, and to do any and every act which Borrower
could be required by Lender to do in its own behalf. Lender shall also have
power to prosecute and defend all actions or proceedings in connection with the
construction and security of the Project or in any other respect relating to the
property described in the Mortgage, and to take such action and require such
performance as it deems necessary under any bonds. Borrower hereby assigns to
Lender all sums unadvanced under the Loan, conditioned upon the use of said sums
in the completion of improvements upon said land and payment of all costs
directly related to such completion and security thereof, such assignment to
become effective only in case of Borrower's default. In the event of such
default and Lender entering upon said Property for the purpose of completing
said construction, all materials purchased by Borrower shall be used in the
construction if appropriate, and if inappropriate, Lender shall be free to
dispose of the balance of such materials as it deems fit, and no liability shall
accrue in favor of Borrower against Lender as a result thereof except to credit
any consideration received by Lender therefor as a payment as set forth above.
In addition, Borrower agrees at the request of Lender to assign, transfer and
set over to Lender, by appropriate instrument in writing, all of Borrower's
right, title and interest in and to any construction contract, bond or other
contract relating to the construction and operation of the Project; Provided,
however, that Borrower shall assign any license, permit or authorization issued
by the federal, state or local government or any agency thereof only to the
extent permitted by law.
B. Terminate any obligation to make any advances of the Loan and/or
declare the entire outstanding principal balance of the Loan, together with all
interest thereon, to be due and payable immediately, anything contained in this
Agreement, the Note or any other Loan Document to the contrary notwithstanding.
C. With or without accelerating the Loan, advance funds under the Note
directly to third parties to cure any default by Borrower, including without
limitation payments to the General Contractor, payments for property taxes,
insurance premiums, maintenance and repair, and management fees, payment of
other expenses concerning the Project, and payment of Lender's attorney's fees
and other fees and expenses. All of said advances shall be deemed made under the
Note and shall be payable immediately with interest at the Default Rate (as such
term is defined in the Note). 1
D. Enforce any and/or all of the Loan Documents, and, by way of
illustration but not by way of limitation, cause all and singular the property
described in the Mortgage and/or any of the other Loan Documents to be seized
and sold under executory process without appraisement, appraisement being hereby
expressly waived, as an entirety or in parcels, as Lender may determine, in
accordance with law.
7.3 All powers and remedies given by this Article VII to Lender shall
be cumulative and not exclusive of any other right or remedy or of any other
powers and remedies available to Lender under the Loan Documents, by judicial
proceedings or otherwise, to enforce the performance or observance of the
covenants and agreements of Borrower contained in this Agreement, and no delay
or omission of Lender to exercise any right or power accruing upon any default
occurring shall impair any such right or power, or shall be construed to be a
waiver of any such default or an acquiescence therein. Every power and remedy
given by this Article VII or by law to Lender may be exercised from time to
time, and as often as may be deemed expedient, by Lender. No waiver of. any
default hereunder shall extend to or affect any other or subsequent default or
impair any rights or remedies consequent thereon.
7.4 Should Lender, at its sole option, elect to employ the services of
any attorney at law to represent it in the enforcement of any obligation
undertaken by Borrower in favor of Lender, or undertaken by any third person in
favor of Borrower in connection herewith, or to participate in any legal
proceedings in any way connected herewith, as plaintiff or intervenor, Borrower
does hereby agree to pay to Lender the reasonable fees and expenses of said
attorneys.
7.5 Borrower does hereby expressly waive in favor of Lender and its
assigns, to the fullest extent allowed by law, any and all exemptions from
seizure provided by any law, rule or regulation of the State of South Carolina,
the United States, or any other state.
7.6 Except as otherwise expressly provided herein, Borrower does hereby
expressly waive any notice by Lender of-any Event of Default or any notice or
demand by Lender of any breach of any obligation undertaken by Borrower in favor
of Lender.
ARTICLE VIII
MISCELLANEOUS
8.1 No waiver at any time of the provisions or conditions of this Loan
Agreement or of any of the other Loan Documents shall be construed as a waiver
of any of the other provisions or conditions hereof or thereof nor shall a
waiver of any provision or condition be construed as a right to subsequent
waiver of the same provision or condition.
8.2 Unenforceability for any reason of any provision of this Agreement,
or of any of the Loan Documents or other agreements between Borrower and Lender,
shall not limit or impair the operation or validity of any other provisions of
this Agreement, any of the Loan Documents or any other such agreement.
8.3 In the event of any loss or damage to the Project resulting in a
right accruing in favor of any party or the parties hereto ~f or any payment of
insurance proceeds occasioned by such loss or damage, all such payments of
insurance proceeds shall be made payable and paid to Lender only, and all
policies of insurance shall be appropriately endorsed to require payment in such
a manner. Regardless of whether such endorsements are issued or not, Borrower
hereby names, designates and appoints Lender as its agent and attorney in ~f act
to make claim for all such insurance proceeds, to execute any instrument
reasonable or necessary thereto in the name of Borrower, to receive and endorse
in the name of Borrower any check, draft or other such instrument issued in
payment and collect the proceeds thereof , and grant release and discharge
therefor unto the paying company. After an Event of Default occurs and continues
uncured, said agency shall likewise extend to Lender to negotiate with the
insurance company or companies in the event of any contest or dispute, to file
any suit for collection of a disputed claim, intervene in any suit brought by
Borrower for the collection of same, and to compromise without Borrower's
approval any such disputed claims. Should Borrower receive any cash, draft,
check or other such instrument in payment of any insurance proceeds which should
have been paid to Lender as set forth above, Borrower shall immediately, and
without need for notice or demand, forward any such payment to Lender, endorsed
by Borrower to Lender's order.
Lender shall be authorized to endorse same in the name of Borrower as set forth
above in the absence of such endorsement. The application of insurance proceeds
and the effect of casualty on the Loan shall be as set forth in the Mortgage.
8.4 In the event that by, or pursuant to, proper authority there is taken or
condemned the entire Property, or any part thereof, under power of eminent
domain exercised by any actual or quasi governmental authority or public
utility, Borrower hereby assigns to Lender any and all awards that may be given,
made or due Borrower in any proceedings in connection therewith, and the amounts
of such awards shall be applied by Lender to the reduction of any indebtedness
owed to it by Borrower, and Borrower agrees to execute any and all such further
instruments of assignment of any and all such condemnation awards as may be
required by Lender to carry out the purposes of this Section 8.4. Borrower shall
give ,written notice of such condemnation proceeding within ten (10) days of
receipt of any service or process in connection therewith. In any condemnation
proceedings against the Property, Lender hereby reserves, and Borrower hereby
acknowledges, Lender's right to institute or intervene in any such condemnation
proceedings to assert said interest. The application of condemnation proceeds
and the effect of the condemnation on the Loan shall be as set forth in the
Mortgage.
8.5 Any notice, demand, request or other instrument which may be or is
required to be given under this Agreement shall be given to the parties at their
addresses respectively set forth on page one (1) of this Agreement, by certified
mail, - return receipt requested, and shall be deemed to be received upon the
date of execution of the return receipt or the date upon which the postal
authorities first attempted delivery of such notice and same is undelivered or
refused.
8.6 The Loan is made and accepted, and all instruments related thereto
are executed and delivered, at Columbia, 'South Carolina, and this Agreement and
all the Loan Documents shall be governed by, and construed in accordance with,
the laws of the State of South Carolina, regardless of whether South Carolina
choice-of-law rules might otherwise apply the laws of another jurisdiction.
8.7 The Loan shall be made without cost whatsoever to Lender. All
brokerage and real estate commissions shall be payable solely by Borrower, and
all other costs, including but not limited to attorneys' fees of Lender and
Borrower, or other interested party, other professional fees, intangible taxes
and all expenses of all kinds incurred in connection with the Loan, shall be
borne by Borrower, and Borrower agrees to indemnify Lender and save it harmless
from the payment, defense and/or expense of any claim or demand for such
commissions, fees, costs, taxes and expenses, -whether valid or not.
8.8 The parties hereto agree that time is of the essence to this
Agreement.
8.9 Borrower hereby specifically grants unto Lender the right and
privilege, at Lender's option, to transfer and assign to any third person all or
any part of Lender's rights to receive funds or payments hereunder.
8.10 In the event that Borrower should, for any reason whatsoever, fail to
provide, keep and maintain the insurance coverages and the policies described in
Sections 5.1 and 5.3 hereinabove, in the manner indicated therein, then Lender,
if it so elects, may itself have such insurance coverage and policies effected
in such an amount and in such companies as it may deem proper and may pay the
premiums therefor, and any premiums so paid shall be added to the principal sum
due and owed by Borrower to Lender, and Borrower covenants and agrees that, any
clause to the contrary contained herein notwithstanding, in the event of such
payment by Lender, Borrower shall, within ten ~(10) days after payment and
demand therefor by Lender, repay Lender the amount so paid as premiums, together
with interest thereon at the rate provided for in the Note, calculated from date
of such payment until said amount is repaid, but in no case shall Lender be
required to purchase, maintain and/or keep any such policies or coverages.
8.11 Lender shall not be responsible for the solvency of any company
issuing any policy of insurance in connection with this Agreement, whether or
not approved by it, or for the collection,of any amount due under any such
policy, and shall be responsible and accountable only for such money as may be
actually received by it, and then only in accordance with the terms hereof.
Nothing herein contained shall be construed as making Lender liable in any way
for any loss, damage, or injury resulting from the non-insurance of any
buildings, improvements and/or personal property located on the Property.
8.12 In the event that Borrower should, for any reason, fail to pay and
discharge properly any taxes, assessments, forced contributions, local
assessments or governmental charges when due, or any other charges or expenses
payable by Borrower, then Lender shall be authorized to pay the same with full
subrogation to all rights of the taxing authority or other recipient by reason
of such payment, and the amount so paid shall be added to the principal of the
Loan and, any clause to the contrary herein notwithstanding, in the event of
payment by Lender, Borrower covenants and agrees that within ten (10) days after
payment and demand therefor by Lender, Borrower shall repay the amount so paid
by Lender, together with interest thereon at the rate provided for in the Note,
calculated from date of such payment until said amount is repaid. Nothing
.herein shall be construed, however, as making the payment of said taxes,
assessments, forced contributions, local assessments, governmental charges or
other expenses obligatory upon Lender or its assigns, and none and neither of
them shall be liable for any loss, damage or injury resulting from the
nonpayment of such taxes, assessments, forced contributions, local assessments,
governmental charges or other expenses.
8.13 It is expressly agreed that any and all terms of this Agreement,
the Loan Documents and all other agreements made or executed by Borrower or
others in favor of Lender, and all rights, powers, privileges, options and
remedies conferred to Lender herein, shall inure to and be for the benefit of
and may be exercised by Lender, its successors and assigns; and the word
"Lender," unless the context otherwise requires, shall also mean and include the
successor or successors and the assign or assigns of the said Lender.
8.14 All obligations contained in this Agreement, the Loan Documents
and all other agreements to be observed, complied with or performed by Borrower
shall be binding upon Borrower, and upon its successors and assigns, as well as
upon any person, firm or corporation hereinafter acquiring title to the
Property, or any part thereof, or any personal property located thereon, by,
through or under Borrower, and the word "Borrower," unless the context clearly
requires otherwise, shall also mean and include the successors and assigns of
Borrower, and any other person, firm or corporation, acquiring title to any of
the Property, or any part thereof, or personal property located thereon, by,
through, or under Borrower.
8.15 WAIVER OF JURY TRIAL. BY THE EXECUTION HEREOF, BORROWER AND LENDER
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY HEREBY AGREE, THAT:
(A) NEITHER BORROWER NOR LENDER, NOR ANY ASSIGNEE, SUCCESSOR, HEIR, OR
LEGAL REPRESENTATIVE OF BORROWER OR LENDER, SHALL SEEK A JURY TRIAL IN ANY
LAWSUIT, PROCEEDING, COUNTERCLAIM, OR ANY OTHER LITIGATION PROCEDURE ARISING
FROM OR BASED UPON THIS AGREEMENT, THE NOTE, THE MORTGAGE OR ANY OF THE LOAN
DOCUMENTS EVIDENCING, SECURING, OR RELATING TO THE LOAN, OR TO THE DEALINGS OR
RELATIONSHIP BETWEEN OR AMONG THE PARTIES THERETO;
(B) NEITHER BORROWER NOR LENDER WILL SEEK TO CONSOLIDATE ANY SUCH ACTION IN
WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL
HAS NOT BEEN OR CANNOT BE WAIVED;
(C) THE PROVISIONS OF THIS SECTION HAVE BEEN FULLY NEGOTIATED BY THE
PARTIES HERETO, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS;
(D) NEITHER BORROWER NOR LENDER HAS IN ANY WAY AGREED WITH OR REPRESENTED
TO ANY OTHER PARTY THAT THE PROVISIONS OF THIS SECTION WILL NOT BE FULLY
ENFORCED IN ALL INSTANCES; AND
(E) THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER TO MAKE THE LOAN.
IN WITNESS WHEREOF, the parties hereto have executed this
Construction/Term Loan Agreement as of the date first above written.
THE NATIONAL BANK OF SOUTH CAROLINA
Anna Marie D'Angelo
Senior Vice President
PATTEN RESORTS, INC.
Alan L. Murray
Treasurer
(CORPORATE SEAL)
<PAGE>
EXHIBIT"A"
LEGAL DESCRIPTION
ALL AND SINGULAR, that certain piece, parcel or tract of land located in Little
River Township, Horry County, South Carolina being shown and designated as
PARCEL "A" on that certain map or plat entitled "SHORE CREST MOTEL PATTEN
RESORTS, INC. A DELAWARE CORPORATION, OWNER" prepared by Powell Associates of
NMB, Inc. dated August 14, 1995 and recorded in Plat Book 137 at Page 54,
records of Horry County, South Carolina. Said property is also more particularly
described by metes and bounds as follows:
Commencing from a point marked by S.C. Coastal Council Control Mon. No.
5700 1987 N. 720,259.10' E. 2,688,786.55' then proceeding from said point South
54*02'40" West a distance of a 167.95' to a point marked by a wood fence post
located at the southeastern edge of the right-of-way of South Ocean Boulevard,
which point also marks the northern most corner of the within described PARCEL
"All and which point marks the POINT OF BEGINNING; thence proceeding from said
POINT OF BEGINNING South 32*45'40" East a distance of 150.04 feet to a one half
inch rebar pin; thence turning and running South 57*14'29" West a distance of
239.94' to a one-half inch rebar pin; thence turning and running North 32*45'40"
West a distance of 150.03' to a one-half inch rebar pin; thence turning and
running North 57*14'20" East a distance of 239.94' to a point which point marks
the POINT OF BEGINNING all as more particularly shown on the above-referenced
Plat which is incorporated herein by this reference.
ALL AND SINGULAR, that certain piece, parcel or tract of land located in Little
River Township, Horry County, South Carolina being shown and designated as
PARCEL ~"B" on that certain map or plat entitled "SHORE CREST MOTEL PATTEN
RESORTS, INC. A DELAWARE CORPORATION,, OWNER" prepared by Powell Associates of
NMB, Inc. dated August 14, 1995 and recorded in Plat Book 137 at Page 54,
records of Horry County, South Carolina. Said property is also more particularly
described by metes and bounds as follows:
Commencing from a point which is marked by S.C. Coastal Council Control
Mon. No. 5700 1987 N. 720,259.10' E. 2,688,786.55' and proceeding from said
point South 81*00'16" West a distance of 150.39' to a one-half inch rebar pin
located at the northwestern edge of the rightof-way of South Ocean Boulevard and
the southeastern corner of Lot 10 Block B; thence turning and running South
57*14'20" West a distance of 60.14' to a one-half inch rebar pin located at the
northwestern edge of the right-of-way of South Ocean Boulevard and the eastern
corner of the within described PARCEL "B" , which iron marks the POINT OF
BEGINNING; thence proceeding from said POINT OF BEGINNING South 57'141'20" West
a distance 360.26' to a one-half inch rebar pin; thence turning and running
North 32*45'40" West a distance of 130.00' to a one-half inch iron pipe; thence
turning and running North 57*14'20" East a distance of 360.26' to a one-half
inch iron pipe; thence turning and running South 32*45'40" East a distance of
130.00' to a one-half inch rebar pin which pin marks the POINT OF BEGINNING all
of which is more particularly shown on the above-referenced Plat which is
incorporated herein by this reference.
AND
ALL AND SINGULAR, that certain piece, parcel or tract of land located in Little
River Township, Horry County, South Carolina being shown and designated as LOT
11 OF BLOCK "B" on that certain map or plat entitled "SHORE CREST MOTEL PATTEN
RESORTS, INC. A DELAWARE CORPORATION, OWNER" prepared by Powell Associates of
NMB, Inc. dated August 14, 1995 and recorded in Plat Book 137 at Page 54,
records of Horry County, South Carolina. Said property is also more particularly
described by metes and bounds as follows:
Commencing from a point which is marked by S.C. Coastal Council Control
Mon. No. 5700 1987 N. 720,259.10' E. 2,688,786.55' and proceeding from said
point South 81*00'16" West a distance of 150.39' to a one-half inch rebar pin
located at the Northwestern edge of the right-of-way of South ocean Boulevard
and the Southern corner of the within described LOT 11 BLOCK ~"B", which pin
marks the POINT OF BEGINNING; thence proceeding from said POINT OF BEGIMING
North 32*45'40" West a distance of 130.00' to a one-half inch rebar pin; thence
turning and running North 57*14'20" East a distance of 60.00' to a one-half inch
rebar pin; turning and running South 32*45'40" East a distance of 130.00' to a
point marked by a fence post; thence turning and running South 57*14'20" West a
distance of 60.00' to a one-half rebar pin which pin marks the POINT OF
BEGINNING all of which is more particularly shown on the above-referenced Plat
which is incorporated herein by this reference.
This being the identical property conveyed unto the Mortgagor by deed of JHJ
Enterprises, Inc., dated September 25, 1995 and recorded September 25, 1995 in
Deed Book 1822 at Page 1410, records of Horry County, South Carolina.
TMS No. 156-06-35-004 and
TMS No. 156-06-34-002
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement") dated February 28, 1996, is
made by and between Patten Resorts, Inc., a Delaware corporation ("Borrower"),
whose address is 5295 Town Center Road, Suite 400, Boca Raton, Florida 33486,
and Heller Financial, Inc., a Delaware corporation ("Lender"), whose address is
500 West Monroe Street, 15th Floor, Chicago, Illinois 60661.
RECITALS
A. Borrower desires Lender to extend a secured credit facility to Borrower
in accordance with the terms of this Agreement.
B. Borrower's obligations under the Loan Documents will be secured
by, a first mortgage on the Resort and a security interest in certain
Contracts Receivable.
C. Patten Corporation a Massachusetts corporation ("Guarantor") shall
guaranty all of the obligations of Borrower to Lender under the Loan Documents.
D. All capitalized terms used herein shall have the meanings ascribed
thereto in the appendix attached hereto and made a part hereof by this
reference.
NOW, THEREFORE, in consideration of the foregoing premises and the
agreements, provisions and covenants herein contained, Borrower and Lender agree
as follows:
SECTION 1. THE LOAN
1.1 Loan. The Loan shall consist of an inventory component and a contract
receivable component as described below: (a) Inventory Component. An inventory
loan in the original principal amount equal to the lesser of (i) 80% of the cost
to construct the Resort or (ii) $13,500,000, but in no event more than the
outstanding principal balance of the construction loan at the Funding Date. The
inventory component of the Loan shall be secured by a Mortgage on the Resort
delivered by Borrower to Lender on or before the Closing Date which Mortgage
shall be recorded by Lender as of the Closing Date. (b) Contract Receivable
Component. Upon the terms and subject to the conditions set forth in this
Agreement, Lender shall advance to Borrower and Borrower may borrow, repay and
reborrow, principal under the contract receivable component of the Loan an
amount not to exceed Availability. 1
<PAGE>
1.2 Term.
(a) Inventory Component. The entire outstanding principal amount of the
inventory component of the Loan together with all interest and other
Indebtedness of Borrower shall be paid in full on the Inventory Note
Maturity Date. (b) Contract Receivable Component. The entire outstanding
principal balance of the contract receivable component of the Loan,
together with all Borrower's Indebtedness, shall be paid in full by not
later than the Receivable Note Maturity Date. 1.3 Interest Rate. The
outstanding principal balance of the Loan together with all other
Indebtedness shall bear interest at the Interest Rate; provided, however,
that after the occurrence of an Event of Default the Loan will bear
interest at the Default Rate. 1.4 Payments. (a) Inventory Component. (i)
The Borrower agrees to pay or cause to be paid to the Lender on a monthly
basis in arrears all interest due under the inventory component of the
Loan at the Interest Rate. (ii) On the Funding Date, Borrower shall pay or
cause to be paid to Lender an amount equal to $2,905 for each Interval
sold during the Pre-Sale Credit Period (the Interval Sale Fee")
accompanied by a listing of all Intervals sold during the Pre-Sale Credit
Period as well as the sale price of each Interval. The Interval Sale Fee
shall be paid until the inventory component of the Loan, including all
principal, interest and other amounts due with respect thereto, has been
paid in full. (iii) During the Revolving Period and thereafter, within
twenty-five (25) days after the end of each calendar month, Borrower shall
pay or cause to be paid to Lender the Interval Sale Fee for each Interval
sold during such calendar month. Lender agrees at Borrower's request to
pay the aggregate Interval Sale Fee for the preceding calendar month from
the proceeds of the first Advance payable to Borrower in the next
succeeding calendar month. The payment of such aggregate Interval Sale Fee
shall be accompanied by a list of Intervals sold in the calendar month as
well as the sale price of each Interval. The Interval Sale Fee shall be
paid until the inventory component of the Loan, including all principal,
interest, and other amounts due with respect thereto, has been paid in
full. Notwithstanding the Interval Sale Fee payable per Interval sale,
Borrower must satisfy the minimum Interval Sale Fee requirements as set
forth in Schedule 1 .4(a)(ii) hereto. The Interval Sale Fee proceeds shall
be applied to reduce the outstanding principal balance of the inventory
component of the Loan. Upon receipt of the Interval Sale Fee, Lender shall
retain the lien of the Mortgage on the subject Interval. In the event of
the cash sale of an Interval or when the Financed Pre-Sale Contract
2
<PAGE>
Receivable or the Financed Contract Receivable related to the subject Interval
is paid in full, Borrower shall promptly request in writing and Lender shall
authorize the release of the subject Interval from the lien of the Mortgage. At
such time Lender shall execute and Borrower shall cause to be recorded a partial
release of such Mortgage with respect to the subject Interval. All partial
releases from the lien of the Mortgage executed by Lender shall be in form and
substance and upon terms and conditions satisfactory to Lender.
(b) Contract Receivable Component.
(i) Monthly Payments. All funds collected by the Lockbox Agent from the Financed
Pre-Sale Contracts Receivable and Financed Contracts Receivable shall be paid to
Lender at least weekly pursuant to the Lockbox Agreement, and applied in the
following order: first to the payment of costs or expenses incurred by Lender in
collecting any amounts due in connection with the Loan; second, to the payment
of accrued and unpaid interest; and thereafter to the reduction of the principal
balance of the Loan. If the funds received by Lender from the Lockbox Agent with
respect to any month are insufficient to pay interest in full, Borrower shall
pay the difference to Lender within five (5) Business Days of written notice
from Lender. Payments received by Borrower directly from any Purchaser shall be
delivered to the Lockbox Agent within two (2) Business Days. 1.5 Prepayments (a)
Voluntary Prepayments. The inventory component of the Loan may be prepaid at any
time without any Prepayment Premium. Prepayments of the contract receivable
component of the Loan (i) shall not be permitted during the Pre-Sale Credit
Period or the Revolving Period, and (ii) may be made in whole, but not in part,
upon five (5) days prior written notice to Lender at any time after the end of
the Revolving Period upon payment of the applicable Prepayment Premium (whether
such prepayment results from voluntary payments by Borrower, acceleration, or
otherwise); provided, however, that payments or prepayments of Financed Pre-Sale
Contracts Receivable and Financed Contracts Receivable made by Purchasers shall
not violate this Section 1.5(a), and no Prepayment Premium shall be payable as a
result of any such payment. Notwithstanding the above, Borrower shall be
permitted to prepay the contract receivable component of the Loan without a
Prepayment Premium in the event the Borrower sells or pledges the Financed
Pre-Sale Contracts Receivable and/or the Financed Contracts Receivable as part
of an asset-backed securitization thereof. In such event, the full amount of the
Loan outstanding at that time including the contract receivable component and
inventory component thereof must be paid off in full by Borrower. (b) Mandatory
Prepayments (i) Excess Outstandings. If at any time the outstanding principal
balance of the Loan exceeds the Maximum Exposure, Borrower shall, within five
(5)
<PAGE>
Business Days after notice, either (A) prepay the Loan in an amount necessary
to reduce the principal balance of the Loan, or (B) deliver to Lender (i)
during the Pre-Sale Credit Period such additional or replacement Eligible
Pre-Sale Contracts Receivable or (ii) during or after the Revolving Period
such additional or replacement Eligible Contracts Receivable, so that pursuant
to (A) or (B) hereunder the remaining outstanding principal balance of the
Loan is equal to or less than the Maximum Exposure.
(ii) Ineligible Financed Contract Receivable. If at any time after the
expiration of the Revolving Period, a Financed Contract Receivable ceases to
be an Eligible Contract Receivable, Borrower shall, within five (5) Business
Days after notice, either (A) prepay the Loan in an amount equal to the
balance due under such Financed Contract Receivable, or (B) deliver to Lender
one (1) or more Eligible Contracts Receivable having an outstanding aggregate
principal balance equal to, or no more than $1,000 in excess of, the
outstanding principal balance of such ineligible Financed Contract Receivable.
Thereafter, Lender shall return such ineligible Financed Contract Receivable
to Borrower and, within five (5) days of Lender's receipt from Borrower of a
completed Assignment of Contract relating to such Contract
Receivable, in forms acceptable to Lender, Lender shall execute such
instruments and return them to Borrower. (iii) Deficit Amount. On the Funding
Date, if the amount of the aggregate Interval Sale Fees payable by Borrower to
Lender for Intervals sold during the Pre-Sale Credit Period is less than the
amount of the Excess Availability payable to Borrower as a result of the
increase in Availability which occurs at the time the Revolving Period
commences ("Deficit Amount"), Borrower shall concurrently therewith, either
(A) prepay the Loan in an amount equal to the Deficit Amount or (B) deliver to
Lender one (1) or more Eligible Contracts Receivable, so that pursuant to (A)
or (B) hereunder, the Deficit Amount is eliminated. (iv) No Prepayment
Premium. No Prepayment Premium shall be due in connection with any mandatory
prepayment made in accordance with Sections 1.5(b)(i), (ii) or (iii) above, in
connection with the inventory component of the Loan generally or in connection
with the payment of any Interval Sales Fee described in Section 1.4(a)(ii)
above. 1.6 Commitment Fee. The entire Commitment Fee shall be deemed to have
been fully earned by Lender as of the date hereof, and Borrower shall pay the
unpaid portion of the Commitment Fee to Lender by the earlier to occur of the
Closing Date or February 29, 1996.
<PAGE>
1.7 Funding Requirements.
(a) Inventory component.
(i) The Funding Date shall occur no later than twelve (12) months from
the Closing Date. Lender shall not be obligated to fund the inventory
component of the Loan until all of the following occur: a. A final
certificate of occupancy for the entire Resort has been issued by the
appropriate governmental authorities and all inspections, licenses and
certificates required to be made or issued with respect to any buildings,
improvements or amenities at the Resort and with respect to the use and
occupancy thereof or utilities necessary to service have been made or
issued by the appropriate authorities and the use or occupancy of all
such buildings, improvements and amenities for their respective intended
purposes are lawful under all applicable statutes, ordinances, rules and
regulations. b. The Resort has been completed by Borrower in accordance
with the plans and specifications approved by Lender, Lender's
consultant, the Resort architect and general contractor and all Units are
fully furnished. c. The completion of the Resort has been certified to in
writing by Lender's consultant who shall initially be the same consultant
as the construction lender has engaged. The consultant shall verify the
status of completion on a monthly basis during the construction period in
connection with draw requests under the Construction Loan. The consultant
shall provide the same reports to Lender as it provides to the
construction lender. d. A Timeshare Registration has been approved by the
appropriate South Carolina governmental authorities authorizing the sale
of all Intervals at the Resort and continues to remain in effect during
the term of the Loan. e. The Declaration has been recorded, as approved
by Lender, in compliance with the Timeshare Act and Interval sales at the
Resort have commenced. f. All Loan Documents required by Lender in the
Closing Checklist and herein have been fully executed and all supporting
documents set forth in the Closing Checklist, including without
limitation an as-built survey certified to Lender showing the as-built
improvements located entirely within the real property of the Resort and
an ALTA title insurance policy, have been provided to Lender and are
satisfactory to Lender in its reasonable discretion. The Closing
Checklist is attached hereto as Schedule 1.7(a)(i)f.
5
<PAGE>
9. Recordation of a notice of completion which shall cause the expiration upon a
date certain of any statutory period within which mechanics' and similar liens
may be filed.
i. Receipt by Lender of all required documents and information needed by
Construction Lender under the Construction Loan Documents to make the final
advance of the Construction Loan.
Final Lien-Waivers shall have been delivered to Lender.
(ii) In the event all of these conditions are not satisfied in full by twelve
(12) months from the Closing Date, Borrower shall have the option of extending
the Funding Date for an additional four (4) month period by paying Lender an
extension fee in the amount of $67,500 and executing extension documents
reasonably required by Lender. (b) Contract Receivable Component. During the
Pre-Sale Credit Period and the Revolving Period, Lender shall make Advances to
Borrower not in excess of Availability provided that Borrower satisfies all
conditions set forth in Section 3 hereof. Advances shall be (a) in minimum
amounts of $100,000 each, and (b) made no more frequently than three (3) times
each month nor more than one (1) time each week. Except in connection with a
prepayment mandated under Section 1.5(b)(i) above, any amounts repaid during the
Revolving Period may be reborrowed during the Revolving Period. (c) Excess
Availability. During the Revolving Period, Lender shall make Advances of Excess
Availability to Borrower not more often than once per month and within fifteen
(15) days of Borrower's delivery to Lender of written request therefor
accompanied by Monthly Reports evidencing such Excess Availability to Lender's
satisfaction. SECTION 2. COLLATERAL
2.1 Grant of Security Interest. To secure the payment and performance of the
Indebtedness, Borrower does hereby unconditionally and irrevocably assign,
pledge and grant to Lender a first priority continuing security interest and
lien in and to all right, title and interest of Borrower in the following
property of Borrower, whether now owned or existing or hereafter acquired
regardless of where located (collectively, the "Collateral"); provided, however,
that the Collateral-lnventory Component set forth in Section 2.1(a) below
consists of a second lien subordinate to the Construction Loan from the Closing
Date until the Funding Date, after which date such Collateral-lnventory
Component shall be a first priority lien and security interest as set forth
above; the Collateral-Contract Receivable Component consists of a first priority
lien and security interest in all items set forth in Section 2.1 (b) below as of
the Closing Date.
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(a) Collateral - Inventory Component.
(i)
(ii) A lien in and to all equipment, furnishings inventory, supplies, accounts,
chattel paper and general intangibles at any time located at, arising out of the
use of, and/or used in connection with the operation of the Resort; A Mortgage
on the Resort. (iii) An absolute and unconditional assignment of any and all
leases, subleases, licenses, concessions, entry fees, or other agreements which
grant an interest in and to, or the right to use the unsold Intervals,
or any portion of the Resort (collectively, the "Tenant Leases"); (iv) An
absolute and unconditional assignment of all of the rents, revenues, income,
proceeds, royalties, profits and other benefits payable for using, leasing,
licensing, possessing, operating from or in, or otherwise enjoying the unsold
Intervals or any portion of the Resort pursuant to the Tenant Leases, including,
without limitation, damages received upon the occurrence of a default under any
of the Tenant Leases and all proceeds payable under any policy of insurance
which covers the unsold Intervals or any portion of the Resort; (v) An absolute
and unconditional assignment of all other agreements to which Borrower is or
becomes a party or holds any interest therein and which in any way relate to the
use, occupancy, maintenance or enjoyment of the Resort, including, but not
limited to, payment and performance bonds for completion of the Resort, utility
contracts, maintenance agreements, management agreements, equipment leases,
service or operating contracts, licenses and permits necessary or desirable for
the operation of the Resort and any agreement guaranteeing the performance of
the obligations contained in any of the foregoing agreements; (vi) An assignment
of the construction contract between Borrower and the general contractor for the
Resort, the plans and specifications for the Resort previously delivered to
Lender, the contract between Borrower and the architect for the Resort, and
other developer's rights, such assignments to be in form and content
satisfactory to Lender; and (vi) The Collateral for the receivable component of
the Loan as set forth in Section 2.1(b)(i) - (ix) of the Agreement. (b)
Collateral - Contract Receivable Component. (i) The Financed Pre-Sale Contract
Receivable (Lender's collateral during the Pre-Sale Credit Period only);
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SECTION 3. CONDITIONS PRECEDENT TO ADVANCES
The obligation of Lender to make Advances is subject to satisfaction of all
of-the conditions set forth below.
3.1 Closing Deliveries. Lender shall have received, in form and substance
satisfactory to Lender, all documents, instruments and information identified on
the Closing Checklist heretofore delivered by Lender to Borrower.
3.2 Deliveries Prior to Each Advance. Prior to each Advance, Lender shall
have received all documents, instruments and information identified on Schedule
3.2. Requests for Advance shall be made at least five (5) Business Days prior to
the requested date of disbursement and shall be in the form of Exhibit C hereto.
3.3 Security Interests. Lender shall have received satisfactory evidence
that all security interests and liens granted to Lender pursuant to this
Agreement or the other Loan Documents have been duly perfected and constitute
liens on the Collateral with the priority as set forth in Section 2.1 above.
3.4 Representations and Warranties. The representations and warranties
contained herein and in the Loan Documents shall be true, correct and complete
in all material respects on and as of the date of funding of the Advance except
for any representation or warranty limited by its terms to a specific date and
taking into account any amendments to the Schedules or Exhibits as a result of
any disclosures made by Borrower to Lender after the date hereof and approved by
Lender.
3.5 No Default. No Event of Default shall have occurred and be uncured at
the time of the Advance.
3.6 Performance of Agreements. Borrower shall have performed in all
material respects all agreements and satisfied all conditions which any Loan
Document provides shall be performed by it.
SECTION 4. GENERAL REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender as follows, which
representations and warranties shall remain true throughout the term of the
Loan:
4.1 Existence. Borrower is a corporation duly formed, validly existing
and in good standing under the laws of the State of Delaware with its principal
place of business at 5295 Town Center Road, Suite 400, Boca Raton, Florida
33486. Borrower is in good standing under the laws of the State of South
Carolina and is authorized to transact business in the State of South Carolina.
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4.2 Authorization and Enforceability.
(a) Execution. The Loan Documents have been duly authorized, executed and
delivered and constitute the duly authorized, valid and legally binding
obligations of Borrower, enforceable against Borrower and the other parties
signatory thereto (other than Lender) in accordance with their respective terms.
(b) Other Agreements. The execution, delivery and compliance with the terms and
provisions of the Loan Documents will not (i) to the best of Borrower's
knowledge, violate any provisions of law or any applicable regulation, order or
other decree of any court or governmental entity, or (ii) conflict or be
inconsistent with, or result in any default under, any contract, agreement or
commitment to which Borrower is bound. 4.3 Financial Statements and Business
Condition. Borrower and Guarantor's financial statements fairly present the
respective financial conditions and (if applicable) results of operations of
Borrower, and Guarantor as of the date or dates thereof and for the periods
covered thereby. All such financial statements, other than those prepared on
behalf of a natural person, if any, were prepared in accordance with GAAP.
Except for any such changes heretofore expressly disclosed in writing to Lender,
there has been no material adverse change in the respective financial conditions
of Borrower or Guarantor from the financial conditions shown in their respective
financial statements. Borrower is able to pay all of its debts as they become
due, and Borrower shall maintain such solvent financial condition, giving effect
to all obligations, absolute and contingent, of Borrower. Borrower's obligations
under this Agreement and under the Loan Documents will not render Borrower
unable to pay its debts as they become due. The present fair market value of
Borrower's assets is greater than the amount required to pay its total
liabilities. 4.4 Taxes. All ad valorem taxes and other taxes and assessments
against the Resort and the Collateral have been paid and Borrower knows of no
basis for any additional taxes or assessments against the Resort or the
Collateral. Borrower has filed all required tax returns and has paid all taxes
shown to be due and payable on such returns, including interest and penalties,
and all other taxes which are payable by it, to the extent the same have become
due and payable. Borrower shall or shall cause the Timeshare Association to
collect and pay any applicable sales or rental tax respecting the sale or rental
of any Intervals. 4.5 Litigation and Proceedings. There are no actions, suits,
proceedings, orders or injunctions pending or, to the best of Borrower's
knowledge, threatened against or affecting Borrower, Guarantor, or the Timeshare
Association, at law or in equity, or before or by any governmental authority,
which could have a material adverse effect on Borrower or Guarantor or relate to
the Loan or the Resort. Borrower has received no notice from any court or
governmental authority alleging that Borrower has violated the Timeshare Act,
any of the rules or regulations thereunder, or any other applicable laws.
Borrower
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shall provide Lender prompt written notice of any such action or proceeding
commenced against Borrower, Guarantor, the Resort or the Timeshare Association.
4.6 Licenses and Permits. Borrower possesses all requisite franchises,
certificates of convenience and necessity, operating rights, licenses, permits,
consents, authorizations, exemptions and orders as are necessary to carry on its
business as now being conducted. All such licenses and permits shall be in full
force and effect as of the Funding Date and no action shall be pending or
threatened to revoke or modify any such license or permit. 4.7 Full Disclosure.
No information, exhibit or written report furnished by or on behalf of Borrower
to Lender in connection with the Loan contains any material misstatement of fact
or omits any material fact necessary to make the statement contained herein or
therein not misleading. Borrower knows of no legal or contractual restriction
which will prevent it from offering or selling Intervals to Purchasers in any
state where it is selling Intervals. 4.8 Employee Benefit Plans. Borrower is in
compliance in all material respects with all applicable provisions of ERISA, the
IRC and all other applicable laws and the regulations and interpretations
thereof with respect to all Employee Benefit Plans. No material liability has
been incurred by Borrower which remains unsatisfied for any funding obligation,
taxes or penalties with respect to any Employee Benefit Plan. 4.9
Representations as to the Resort. (a) Title: Prior Liens. Borrower has good and
marketable title to the Resort and all Intervals unless and until a Purchaser
has paid off his or her Contract Receivable in full at which time a deed to the
Interval is conveyed to the Purchaser, pursuant to the terms of the Contract
Receivable. Borrower is not in default under any of the documents evidencing or
securing any indebtedness which is secured, wholly or in part, by the Resort,
and no event has occurred which with the giving of notice, the passage of time
or both, would constitute a default under any of the documents evidencing or
securing any such indebtedness. There are no liens or encumbrances against the
Collateral or the Resort other than the Permitted Exceptions and Borrower may
not further encumber the Resort without the prior written consent of Lender. (b)
Access. Prior to the Funding Date, and at all times thereafter, the Resort will
have direct access to a publicly dedicated road over a recorded easement and all
roadways, if any, inside the Resort are common areas under the Declaration. (c)
Utilities. Prior to the Funding Date and at all times thereafter, electric, gas,
sewer, water facilities and other necessary utilities will be lawfully available
in sufficient capacity to service the Resort and any easements necessary to the
furnishing of such utility service will have been obtained and duly recorded. o
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(b) No Modification. There have been no modifications or amendments to the
Pledged Documents. Borrower shall not grant extensions of time for the payment
of, compromise for less than the full face value, release in whole or in part
any Purchaser liable for the payment of, or allow any credit whatsoever except
for the amount of cash to be paid upon, any Collateral or any instrument or
document representing the Collateral.
(c) Binding Obligations. On the date of the assignment and delivery to
Lender, each Financed Pre-Sale Contract Receivable constitutes an Eligible
Pre-Sale Contract Receivable, each Financed Contract Receivable and Upgraded
Contract Receivable constitutes an Eligible Contract Receivable and Borrower is
not aware of any facts or information which would cause such Financed Pre-Sale
Contract Receivable or Financed Contract Receivable to be ineligible hereunder.
(d) Community Property The Pledged Documents were executed by Purchasers in
connection with the purchase of Intervals and, as to individuals, bind the
marital community of married individual partners, to the extent community
property statutes are applicable.
SECTION 5. AFFIRMATIVE COVENANTS
So long as any portion of the Indebtedness remains unpaid, Borrower covenants
as follows:
5.1 Payment and Performance of Indebtedness. Borrower shall pay and
promptly perform all of the obligations hereunder and under the Loan Documents.
5.2 Maintenance of Insurance. (a) Policies. The Resort shall at all times
and for so long as any Indebtedness remains outstanding be kept insured with
such general liability coverage and such other coverages acceptable to Lender,
by carrier(s), in amounts and in form at all times satisfactory to Lender, which
carrier(s), amounts and form shall not be changed without the prior written
consent of Lender. All required insurance may be maintained by the Timeshare
Association as required by the Declaration, provided that in the event such
Timeshare Association fails to maintain any insurance required under this
Section 5.2(a), then Borrower shall be required to obtain and maintain such
insurance. (b) Proofs of Claim. In case of loss or damage or other casualty,
Borrower shall give immediate written notice thereof to the insurance carrier(s)
and to Lender. Lender is authorized and empowered, and Borrower hereby
irrevocably appoints Lender as its attorney-in-fact (such appointment is coupled
with an interest), at Lender's option, to make or file proofs of loss or damage
and to settle and adjust any claim under insurance policies which insure against
such risks, or to direct
<PAGE>
Borrower, in writing, to agree with the insurance carrier(s) on the amount to be
paid in regard to such loss.
(c) Loss or Casualty. Provided no Event of Default then exists and Borrower
certifies as to same, the net insurance proceeds shall be made available for the
restoration or repair of the Resort if (i) in Lender's reasonable judgment: (A)
restoration or repair and the continued operation of the Resort is economically
feasible; (B) the value of Lender's security is not reduced; and (C) the
casualty loss is $100,000 or less; and (ii) the loss does not occur in the six
(6) month period preceding the Inventory Note Maturity Date or the Receivable
Note Maturity Date and Lender's independent consultant certifies that the
restoration of the Property can be completed at least ninety (90) days prior to
the Inventory Note Maturity Date or the Receivable Note Maturity Date. Borrower
shall pay all amounts, in addition to the net insurance proceeds, necessary to
pay in full the cost of the restoration or repair. Notwithstanding the
foregoing, it shall be a condition precedent to any disbursement of insurance
proceeds held by Lender hereunder that Lender shall have approved (x) all plans
and specifications for any proposed repair or restoration; (y) the construction
schedule; and (z) the architect's and general contractors contracts for
restoration exceeding $100,000. Lender may establish other conditions it deems
reasonably necessary to assure the work is fully completed in a good and
workmanlike manner free of all liens or claims by reason thereof, and in
compliance with all applicable laws, rules and regulations. At Lender's option,
the net insurance proceeds shall be disbursed pursuant to a construction escrow
acceptable to Lender. If an Event of Default then exists, or any of the
conditions set forth in this subsection have not been met or satisfied, the net
insurance proceeds shall be applied to the Loan in such order and manner as
Lender may elect, whether or not due and payable, with any excess paid to
Borrower. 5.3 Condemnation. The proceeds of any award, payment or claim for
damages, direct or consequential, in connection with any condemnation or other
taking of any Unit or Interval which is the subject of a Financed Pre-Sale
Contract Receivable, Financed Contract Receivable or part thereof, or for
conveyances in lieu of condemnation, are hereby assigned to and shall be paid to
Lender. Lender is authorized (but is under no obligation) to collect any such
proceeds. Lender may, in its sole discretion, elect to apply the net proceeds of
any such condemnation award (after deduction of Lender's reasonable costs and
expenses, if any, in collecting the same) in reduction of the Indebtedness in
such order and manner as Lender may elect, whether due or not. 5.4 Inspections
and Audits. Borrower shall, at such reasonable times during normal business
hours and as often as may be reasonably requested, permit any agents or
representatives of Lender to inspect the Resort and any of Borrower's assets
(including financial and accounting books and records), to examine and make
copies of and abstracts from the records and books of account of Borrower or the
Timeshare Association or servicer under the Servicing Agreement and to discuss
its affairs, finances
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(ii) The Financed Contract Receivable;
(iii) The Collateral for the inventory component of the Loan as set forth in
Section 2.1(a)(i)-(v) of the Agreement; (iv) To the extent permitted by state
law, all deposits, accounts, accounts receivable, general intangibles and other
receivables arising under or in connection with the Pledged Documents, together
with all payments, privileges and benefits arising out of the enforcement
thereof, and all funds held in any deposit accounts related to any of the
Financed Pre-Sale Contracts Receivable and Financed Contracts Receivable; (v)
All documents, instruments, pledged assets and chattel paper relating to the
Pledged Documents and the other properties and rights described as Collateral
herein; (vi) All cash and other monies and property of Borrower in the
possession or under the control of Lender; (vii) All books, records, ledger
cards, files, correspondence, computer tapes, disks and software relating to the
Pledged Documents or any other Collateral described herein; (viii) All
management, marketing, servicing, maintenance or other similar contracts for the
Resort; and (ix) All proceeds, extensions, amendments, additions, improvements,
betterments, renewals, substitutions and replacements of the foregoing. 2.2
Upgraded Contracts Receivable. Notwithstanding anything to the contrary set
forth in this Agreement, Borrower may supplement or replace Financed Contracts
Receivable with Upgraded Contracts Receivable without Lender's prior consent so
long as no Event of Default exists and is continuing. 2.3 Security Agreement.
This Agreement shall be deemed a security agreement as defined in the Code, and
the remedies for any violation of the covenants, terms and conditions of the
agreements herein contained shall be cumulative and be as prescribed (a) herein,
or (b) by general law, or (c) as to such part of the Collateral which is also
reflected in any filed financing statement, by the specific provisions of the
Code now or hereafter enacted, all at Lender's sole election.
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(d) Amenities. Prior to the Funding Date and at all times thereafter, all
amenities for Phase 1 of the Resort as described in the sales prospectus and the
Public Reports for the Resort will be completed, or a bond insuring their
completion will have been posted. Such amenities include those listed in Exhibit
D attached hereto. Prior to the Funding Date, each Purchaser of an Interval will
have access to and the use of all of the amenities and public utilities of the
Resort as and to the extent provided in the Declaration and the Public Reports.
(e) Construction. Prior to the Funding Date and at all times
thereafter, all costs arising from the construction of any improvements and the
purchase of any equipment, inventory, or furnishings located in or on the
Resort will have been paid.
(f) Assessments. Prior to the Funding Date and at all times
thereafter, each Purchaser will be a member of the Timeshare Association which
has authority to levy annual assessments to cover the costs of maintaining and
operating the Resort. The Timeshare Association is solvent. Borrower
acknowledges that in the first several years of sales of Intervals that
Borrower shall subsidize the Timeshare Association by paying amounts of common
expenses not collected from owners of Intervals to meet the expenses of the
Resort as such expenses are incurred on an annual basis. Thereafter, it is
anticipated assessments upon Purchasers will be adequate to cover the costs of
maintaining and operating the Resort and to establish and maintain a reasonable
reserve for capital improvements and furniture fixtures and equipment. Borrower
will use its best efforts to cause the Timeshare Association to maintain the
reserves described above.
4.10 Timeshare Interval Exchange Network. Borrower is a member of the
Interval International exchange network pursuant to a validly executed and
enforceable written affiliation agreement with internal international and
Purchasers who are members of Interval international are entitled to exchange
privileges within the Interval international exchange network. Borrower has
paid all fees and other amounts due and owing under such agreement and is not
otherwise in default thereunder. 4.11 Collateral.
(a) Title. Borrower has good and marketable title to the Collateral, free and
clear of any lien, security interest, charge or encumbrance except for (I) the
security interest created by this Agreement or otherwise created in favor of
Lender, and (11) the Permitted Exceptions. No financing statement or other
instrument similar in effect covering all or any part of the Collateral is on
file in any recording office, except such as may have been filed in favor of
Lender. Borrower shall defend Lender against and save it harmless from all
claims of any Persons other than Lender with respect to the Collateral, and this
indemnity shall include all attorney's fees and legal expenses.
<PAGE>
and accounts with any of its officers, employees or independent public
accountants. Borrower acknowledges that Lender intends to conduct such audits
and inspections on at least an annual basis. Borrower shall make available to
Lender all credit information in Borrower's possession or under Borrower's
control with respect to Purchasers as Lender may request. Property inspections
shall be at Lender's expense, but all audits and credit investigations shall be
at Borrower's expense; provided, however, that except with respect to any audits
conducted after an Event of Default hereunder, Borrower shall not be required to
pay in excess of $3,000 in any calendar year for audits performed during such
year.
5.5 Reporting Requirements. So long as the Indebtedness remains unpaid, Borrower
shall furnish the following to Lender (a) Monthly Reports. Within ten (10) days
after the end of each calendar month, reports showing through the end of the
preceding month, (I) the following information with respect to each Financed
Pre-Sale Contract Receivable and each Financed Contract Receivable: (A) the
opening and closing balances, (B) all payments received allocated to interest,
principal, late charges, taxes or the like, (C) the rate of interest, (D) an
itemization of delinquencies, extensions, refinances, prepayments, upgrades,
payoffs, cancellations and other adjustments, (E) the remaining term, and (i )
the nature and status of any claims asserted or legal action pending with
respect thereto; and (II) the weighted average interest rate and the average
remaining term of all Financed Pre-Sale Contracts Receivable and Financed
Contracts Receivable. (b) Sales and Inventory Reports. Within ten (10) days
after the end of each quarter, a quarterly report showing all sales and
cancellations of sales of Intervals (including Pre-Sale Contracts Receivable
during the Pre-Sale Credit Period), in form and content satisfactory to Lender;
and within thirty (30) days after the end of each Fiscal Year, an annual sales
and inventory report for the Resort detailing the sales of all intervals during
such Fiscal Year and the available inventory of Units and Intervals, certified
by Borrower to be true, correct and complete and otherwise in the form approved
by Lender. (c) Quarterly Financial Reports. Within forty-five (45) days after
the end of each fiscal quarterly period, unaudited financial statements of
Borrower, Guarantor and the Timeshare Association, certified by the chief
financial officer of the subject thereof. (d) Year-End Financial Reports. As
soon as available and in any event within one hundred and twenty (120) days
after the end of each Fiscal Year: (I) the balance sheet of Borrower and
Guarantor as of the end of such year and the related statements of income and
cash flow for such Fiscal Year; (II) a schedule of all outstanding indebtedness
of Borrower and Guarantor describing in reasonable detail each such debt or loan
outstanding and the principal amount and amount of accrued and unpaid interest
with respect to each such debt or loan; (iii) Borrower's annual financial
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statement may be unaudited and certified by Borrower's chief financial officer
as of the dates indicated and the results of its operations and cash flow for
the periods indicated in conformity with GAAP; and (iv) Guarantor's annual
financial statements must be audited and include a copy of a report from a firm
of independent certified public accountants selected by Guarantor, which report
shall be unqualified as to going concern and scope of audit and shall state that
such financial statements present fairly the financial position of Guarantor as
of the dates indicated and the results of its operations and cash flow for the
periods indicated in conformity with GAAP.
(e) Audit Reports. Promptly upon receipt thereof, one (1 ) copy of each other
report submitted to Borrower or Guarantor by independent public accountants in
connection with any annual, interim or special audit made by them of the books
of Borrower or Guarantor; (f) Other Reports. Such other reports, statements,
notices or written communications relating to the Borrower, Guarantor or the
Resort as Lender may require, in its reasonably discretion. (g) SEC Reports.
Promptly upon their becoming available one (1 ) copy of each financial
statement, report, notice or proxy statement sent by Borrower or Guarantor to
security holders generally, and of each regular or periodic report and any
registration statement, prospectus or written communication (other than
transmittal letters) in respect thereof filed by Borrower or Guarantor with, or
received by Borrower or Guarantor in connection therewith from, any securities
exchange or the Securities and Exchange Commission or any successor agency. 5.6
Records. Borrower shall keep adequate records and books of account reflecting
all financial transactions of Borrower, including sales of Intervals, in which
complete entries will be made in accordance with GAAP. 5.7 Management. The
manager and the management contracts for the Resort shall at all times be
satisfactory to Lender. For so long as Borrower controls the Timeshare
Association for the Resort, Borrower shall not change the Resort manager or
amend, modify or waive any provision of or terminate the management contract for
the Resort without the prior written consent of Lender, which consent shall not
be unreasonably withheld. Alan Murray and Patrick Rondeau shall remain the
principal officers of Borrower and Alan Murray shall have authority to make all
material business decisions during the term of the Loan. 5.8 Net Worth.
Guarantor agrees to maintain a minimum net worth, determined in accordance with
GAAP, of Forty Two Million Dollars ($42,000,000) at all times.
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5.9 Maintenance. Borrower shall maintain the Resort in good repair, working
order and condition and shall make or cause to be made all necessary
replacements to the Resort.
5.10 Proceeds. Immediately upon Borrower's receipt of proceeds from
the sale of any of the Collateral, Borrower shall deliver such proceeds to
Lender in their original form and, pending delivery to Lender, Borrower will
hold such proceeds as agent for Lender and in trust for Lender.
5.11 Release and Bonding of Liens. In the event any lien (other than a
Permitted Exception) attaches to any Collateral, Borrower shall, within ten
(10) days after such attachment, either (a) cause such lien to be released of
record or (b) provide Lender with a bond in accordance with the applicable laws
of the state in which the Resort is located, issued by a corporate surety
acceptable to Lender, in an amount acceptable to Lender and in form acceptable
to Lender.
5.12 Claims. Borrower shall promptly notify Lender of any claim,
action or proceeding affecting the Collateral, or any part thereof, or any of
the security interests granted hereunder, and, at the request of Lender, appear
in and defend, at Borrower's expense, any such claim, action or proceeding.
5.13 Use of Lender Name. Borrower will not, and will not permit any
Affiliate to, without the prior written consent of Lender, use the name of
Lender or the name of any affiliates of Lender in connection with any of their
respective businesses or activities, except in connection with internal
business matters, administration of the Loan and as required in dealings with
governmental agencies.
5.14 Other Documents. Borrower will maintain accurate and complete
files relating to the Financed Pre-Sale Contracts Receivable, Financed
Contracts Receivable and other Collateral to the satisfaction of Lender, and
such files will contain copies of each Financed Pre-Sale Contract Receivable
and Financed Contract Receivable together with the purchase contracts,
truth-in-lending statements, all relevant credit memoranda and all collection
information and correspondence relating to such Financed Pre-Sale Contracts
Receivable or Financed Contracts Receivable.
5.15 Subordinated Obligations. Borrower will not, directly or
indirectly, (a) permit any payment to be made in respect of any indebtedness,
liabilities or obligations, direct or contingent, to any Affiliates (excluding
trade payables incurred in the ordinary course of business), which payments
shall be and are hereby made subordinate to the payment of principal of, and
interest on, the Inventory Note and Receivable Note, or (b) permit the
amendment, rescission or other modification of any of Borrower's subordinated
obligations in such a manner as to affect adversely the lien priority of the
Collateral.
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5.16 Loan Servicing. The servicing company and Servicing Agreement, if
any, shall be satisfactory to Lender in its sole discretion. Borrower may not
amend or terminate the Servicing Agreement without Lender's prior approval, and
Borrower agrees not to interfere with the servicing agent's performance of its
duties under the Servicing Agreement or to take any action that would be
inconsistent in any way with the terms of the Servicing Agreement. The Servicing
Agreement shall be cancelable by Lender upon the occurrence of any default under
the Loan Documents. If the Servicer is an Affiliate, no servicing fees shall be
paid if a default under any Loan Document has occurred and is continuing. All
servicing fees, and the costs and expenses of the servicing agent, shall be paid
by Borrower.
5.17 Custodian. Lender shall have the right at any time to utilize
Custodian to maintain custody of the Collateral. Borrower agrees not to
interfere with Custodian's performance of its duties under the Custodial
Agreement or to take any action that would be inconsistent in any way with the
terms of the Custodial Agreement. All custodial fees, and the costs and
expenses of the Custodian, shall be paid by Borrower.
5.18 Surety Bond. Borrower shall provide Lender with a copy of a
$4,000,000 surety bond in accordance with the applicable laws of the state of
South Carolina, issued by National Union Fire Insurance Co. of Pittsburgh, a
corporate surety acceptable to Lender, in an amount and in a form acceptable to
Lender with respect to consumer down payments and monthly payments made during
the Pre-Sale Credit Period by Purchasers of Pre-Sale Contracts Receivable in
the event proper and timely completion of the Resort does not occur and one or
more of such Purchasers seeks a refund from Borrower of monies paid pursuant to
the terms of Pre-Sale Contracts Receivable.
5.19 Commencement and Completion of Construction. Borrower will commence
construction of the Resort on or before March 1, 1996 and construction of the
Resort shall be completed by Borrower by February 28, 1997; provided, however,
if Borrower exercises its extension rights pursuant to Section 1 .7(a)(ii) of
this Agreement, construction of the Resort shall be fully completed by Borrower
by June 30, 1997.
SECTION 6. NEGATIVE COVENANTS
So long as any portion of the Indebtedness remains unpaid or Lender is committed
to lend hereunder, unless Lender otherwise consents in writing, Borrower hereby
covenants and agrees with Lender as follows:
6.1 Consolidation and Merger. Borrower will not consolidate with or
merge into any other Person or permit any other Person to consolidate with or
merge into it.
6.2 Restrictions on Transfers. Borrower shall not, without obtaining
the prior written consent of Lender, which may be granted or withheld in
Lender's sole discretion, (a) transfer, sell, pledge, convey, assign or
encumber all or any portion of the Resort or
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<PAGE>
the Collateral (or contract to do any of the foregoing, including options to
purchase and so called "installment sales contracts") except sales of Intervals
to Purchasers in arms-length transactions; (b) permit any sale, assignment,
encumbrance, dilution or other disposition of any ownership interests in
Borrower (including any right to receive profits, losses or cash flow related to
the Resort) now held by the Guarantor that would cause Guarantor to either (i)
own less than less than a one hundred percent (100%) interest in Borrower or
(ii) cease to have a controlling interest in Borrower; or (d) permit the
creation of any new ownership interests in Borrower.
6.3 Timeshare Regime. Prior to the Funding Date, Borrower, without Lender's
prior written consent, shall not amend, modify or terminate the Declaration or
the covenants, conditions, easements or restrictions against the Resort (or any
portion thereof) in any material respects, except that if any amendment or
modification is required either (a) to cause additional Units and Intervals to
be annexed into the timeshare regime of the Resort, or (b) by law, Borrower
shall implement the same and give prompt written notice thereof to Lender.
Subsequent to the Funding Date, Borrower, without Lender's prior written
consent, shall not amend, modify or terminate the Declaration or the covenants,
conditions, easements or restrictions against the Resort (or any portion
thereof), except that if any amendment or modification is required either (a) to
cause additional Units and Intervals to be annexed into the timeshare regime of
the Resort, or (b) by law, Borrower shall implement the same and give prompt
written notice thereof to Lender. 6.4 Collateral. Borrower shall not take any
action (nor permit or consent to the taking of any action) which might
reasonably be anticipated to impair the value of the Collateral or any of the
rights of Lender in the Collateral. 6.5 No Sales Outside of Certain States.
Borrower shall not market, attempt to sell or sell any Intervals outside of the
State of South Carolina, unless, prior to taking any such actions, Borrower
delivers to Lender any applicable Compliance Documents. 6.6 Contracts. Borrower
shall not materially amend, modify or assign to any other party any management,
marketing, servicing, maintenance or other similar contract for the Resort. 6.7
Contracts Receivable. Borrower shall not pledge, sell, assign any Pre-Sale
Contracts Receivable or Contracts Receivable to any person other than Lender for
so long as any amount remains outstanding pursuant to the inventory component of
the Loan. Except for the sale of a Unit or Interval to a Purchaser, and the
encumbrance of such Unit or Interval as security for the Loan, Borrower shall
not otherwise assign, convey, transfer or cause to be encumbered any interest in
any Unit or Interval. All easements, declarations of covenants, conditions and
restrictions and private and public dedications affecting such unsold Units and
Intervals shall be submitted to Lender for its
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<PAGE>
approval and such approval must be obtained prior to the execution or granting
of any thereof by Borrower.
SECTION 7. EVENTS OF DEFAULT
An "Event of Default" shall exist if any of the following shall occur:
7.1 Payments. Borrower shall fail to make any payment of the Indebtedness within
five (5) days of the date such payment is due. 7.2 Failure to Permit Inspections
and Commence and Complete Construction. Borrower shall fail to strictly comply
with the provisions of Section 5.4 and 5.19 of this Agreement. 7.3 Covenant
Defaults. Borrower shall fail to perform or observe any covenant, agreement or
obligation contained in this Agreement or in any of the Loan Documents (other
than any covenant or agreement obligating Borrower to pay the Indebtedness), and
such failure shall continue for thirty (30) days after Lender delivers written
notice thereof to Borrower, provided, however, if the failure is incapable of
cure within such thirty (30) day period and Borrower shall be diligently
pursuing a cure, such thirty (30) day cure period shall be extended by an
additional period not to exceed sixty (60) additional days or a total of ninety
(90) days. 7.4 Warranties or Representations. Any representation or other
statement made by or on behalf of Borrower in this Agreement, in any of the Loan
Documents or in any instrument furnished in compliance with or in reference to
the Loan Documents, shall be false, misleading or incorrect in any material
respect as of the date made. 7.5 Bankruptcy. A petition under any Chapter of
Title 11 of the United States Code or any similar law or regulation is filed by
or against Borrower, or Guarantor (and in the case of an involuntary petition in
bankruptcy, such petition is not discharged within sixty (60) days of its
filing), or a custodian, receiver or trustee for any of the Resort is appointed,
or Borrower, or Guarantor makes an assignment for the benefit of creditors, or
any of them are adjudged insolvent by any state or federal court of competent
jurisdiction, or any of them admit their insolvency or inability to pay their
debts as they become due or an attachment or execution is levied against any of
the Resort. 7.6 Attachment, Judgment, Tax Liens. The issuance, filing or levy
against Borrower or Guarantor of one or more attachments, injunctions,
executions, tax liens or judgments for the payment of money cumulatively in
excess of $50,000, which is not discharged in full or stayed within thirty (30)
days after issuance or filing. 7.7 Default by Borrower in Other Agreements. Any
default by Borrower in the payment of indebtedness for borrowed money after the
expiration of any applicable grace
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<PAGE>
or cure period including, without limitation, a default by Borrower under the
Construction Loan Documents; any other default under such indebtedness which
accelerates or permits the acceleration (after the giving of notice or passage
of time, or both) of the maturity of such indebtedness; or any default which
permits the holders of such indebtedness to elect a majority of the Board of
Directors of Borrower.
7.8 Suspension of Sales. The issuance of any stay order, cease and desist
order or similar judicial or nonjudicial sanction that materially adversely
limits or otherwise affects any Interval sales activities, and, with respect to
any such sanction only, such sanction is not dismissed, terminated or rescinded
within thirty (30) days after issuance.
SECTION 8. REMEDIES
8.1 Remedies upon Default. Upon the occurrence of an Event of Default, Lender
may take any one or more of the following actions, all without notice to
Borrower: (a) Acceleration. Declare the unpaid balance of the Indebtedness, or
any part thereof, immediately due and payable, whereupon the same shall be due
and payable. (b) Termination of Obligation to Advance. Terminate any commitment
of Lender to lend under this Agreement in its entirety, or any portion of any
such commitment, to the extent Lender shall deem appropriate. (c) Judgment.
Reduce Lender's claim to judgment, foreclose or otherwise enforce Lender's
security interest in all or any part of the Collateral by any available judicial
procedure, including, without limitation, the foreclosure of the Mortgage. (d)
Sale of Collateral. Exercise all the rights and remedies of a secured party on
default under the UCC (whether or not the UCC applies to the affected
Collateral) including (i) require Borrower to, and Borrower hereby agrees that
it will, at its expense and upon request of Lender forthwith, assemble all or
part of the Collateral as directed by Lender and make it available to Lender at
a place to be designated by Lender which is reasonably convenient to both
parties; (II) enter upon any premises of Borrower and take possession of the
Collateral; and (111) sell the Collateral or any part thereof in one or more
parcels at public or private sale, at any of the Lender's offices or elsewhere,
at such time or times, for cash, on credit or for future delivery, and at such
price or prices and upon such other terms as Lender may deem commercially
reasonable. Borrower agrees that, to the extent notice of sale shall be required
by law, ten (10) days notice of the time and place of any sale shall constitute
reasonable notification. At any sale of the Collateral, if permitted by law,
Lender may bid (which bid may be, in whole or in part, in the form of
cancellation of indebtedness) for the purchase of the Collateral or any portion
thereof for the account of Lender. Borrower shall remain liable for any
deficiency. Lender shall not be required to proceed against any Collateral but
may proceed against Borrower [GRAPHIC OMITTED]
<PAGE>
directly. To the extent permitted by law, Borrower hereby specifically waives
all rights of redemption, stay or appraisal which it has or may have under any
law now existing or hereafter enacted.
(e) Receiver. Apply by appropriate judicial proceedings for appointment of a
receiver for the Collateral, or any part thereof, and Borrower hereby consents
to any such appointment. (f) Exercise of Other Rights. Exercise any and all
other rights or remedies afforded by any applicable laws or by the Loan
Documents as Lender shall deem appropriate, at law, in equity or otherwise,
including the right to bring suit or other proceeding, either for specific
performance of any covenant or condition contained in the Loan Documents or in
aid of the exercise of any right or remedy granted to Lender in the Loan
Documents. 8.2 Application of Collateral; Termination of Agreements. Upon the
occurrence of an Event of Default, Lender may apply against the Indebtedness any
and all Collateral in its possession, any and all balances, credits, deposits,
accounts, reserves, indebtedness or other moneys due or owing to Borrower held
by Lender hereunder or under any other financing agreement or otherwise, whether
accrued or not. 8.3 Waivers. No waiver by Lender of any Event of Default shall
be deemed to be a waiver of any other or subsequent Event of Default. No delay
or omission by Lender in exercising any right or remedy under the Loan Documents
shall impair such right or remedy or be construed as a waiver thereof or an
acquiescence therein, nor shall any single or partial exercise of any such right
or remedy preclude other or further exercise thereof, or the exercise of any
other right or remedy under the Loan Documents or otherwise. Further, Borrower
and Guarantor severally waive notice of the occurrence of any Event of Default,
presentment and demand for payment, protest, and notice of protest, notice of
intention to accelerate, acceleration and nonpayment, and agree that their
liability shall not be affected by any renewal or extension in the time of
payment of the Indebtedness, or by any release or change in any security for the
payment or performance of the Indebtedness, regardless of the number of such
renewals, extensions, releases or changes. Borrower also hereby waives the right
to assert any statute of limitations as a bar to the enforcement of the lien
created by any of the Loan Documents or to any action brought to enforce the
Note or any other obligation secured by the Loan Documents. 8.4 Cumulative
Rights. All rights and remedies available to Lender under the Loan Documents
shall be cumulative and in addition to all other rights and remedies granted to
Lender at law or in equity, whether or not the Indebtedness is due and payable
and whether or not Lender shall have instituted any suit for collection or other
action in connection with the Loan Documents.
<PAGE>
SECTION 9. CERTAIN RIGHTS OF LENDER
I
9.1 Protection of Collateral. Lender may at any time and from time to time take
such actions as Lender deems necessary or appropriate to protect Lender's liens
and security interests in and to preserve the Collateral. Borrower agrees to
cooperate fully with all of Lender's efforts to preserve the Collateral and
Lender's liens and security interests therein. 9.2 Performance by Lender. If
Borrower fails to perform any agreement contained herein, Lender may, but shall
not be obligated to, cause the performance of, such agreement, and the expenses
of Lender incurred in connection therewith shall be payable by Borrower pursuant
to Section 10.3 below. 9.3 Fees and Expenses. Borrower agrees to promptly pay
all reasonable Costs and all such Costs shall be included as additional
Indebtedness bearing interest at the Default Rate until paid. 9.4 Assignment of
Lender's Interest. Lender shall have the right to assign all or any portion of
its rights in this Agreement to any subsequent holder or holders of the
Indebtedness. 9.5 Notice to Purchaser. Borrower authorizes both Lender and the
Custodian (but neither Lender nor the Custodian shall be obligated) to
communicate at any time and from time to time, whether prior to or after a sale
of an Interval, with any Purchaser or any other Person primarily or secondarily
liable under a Financed Pre-Sale Contract Receivable or Financed Contract
Receivable with regard to the lien of Lender thereon and any other matter
relating thereto. Lender may perform, at Borrowers expense, any and all credit
investigations as Lender may deem necessary to determine whether any such
Purchaser's purchase contract meets the requirements to be an Eligible Pre-Sale
Contract Receivable or Eligible Contract Receivable. 9.6 Collection of
Contracts. Borrower shall direct and authorize each party liable for the payment
of the Financed Pre-Sale Contracts Receivable or Financed Contracts Receivable
to pay each installment thereon to Lockbox Agent pursuant to the Lockbox
Agreement, after which such parties are directed upon the occurrence of an Event
of Default to make all further payments on the Financed Pre-Sale Contracts
Receivable or Financed Contracts Receivable in accordance with the directions of
Lender. Following the occurrence of an Event of Default, Lender shall have the
right to (a) require that all payments due under the Financed Pre-Sale Contracts
Receivable or Financed Contracts Receivable be paid directly to Lender, and to
receive, collect, hold and apply the same in accordance with the provisions of
this Agreement, and (b) take such remedial action available to it for the
enforcement of any defaulted Financed Pre-Sale Contract Receivable or Financed
Contract Receivable including, without limitation, filing a certificate of
default in Horry County, South Carolina which terminates Purchaser's interest in
the
<PAGE>
Interval. Borrower hereby further irrevocably authorizes, directs and empowers
Lender to collect and receive all checks and drafts evidencing such payments and
to endorse such checks or drafts in the name of Borrower and upon such
endorsements, to collect and receive the money therefor.
Upon payment and satisfaction in full of all Indebtedness, Lender will, at
Borrower's request and sole expense, give written notice as necessary to
redirect payment of the Financed Pre-Sale Contract Receivable or Financed
Contract Receivable as requested by Borrower. 9.7 Power of Attorney. Borrower
does hereby irrevocably constitute and appoint Lender as Borrower's true and
lawful agent and attorney-in-fact, with full power of substitution, for Borrower
and in Borrower's name, place and stead, or otherwise, to (a) endorse any checks
or drafts payable to Borrower in the name of Borrower and in favor of Lender as
provided in Section 9.6 above; (b) to demand and receive from time to time any
and all property, rights, titles, interests and liens hereby sold, assigned and
transferred, or intended so to be, and to give receipts for same; and (c) upon
the occurrence and during the continuance of any Event of Default hereunder, (i)
to institute and prosecute in the name of Borrower or otherwise, but for the
benefit of Lender, any and all proceedings at law, in equity, or otherwise, that
Lender may deem proper in order to collect, assert or enforce any claim, right
or title, of any kind, in and to the property, rights, titles, interests and
liens hereby sold, assigned or transferred, or intended so to be, and to defend
and compromise any and all actions, suits or proceedings in respect of any of
the said property, rights, titles, interests and liens, and (11) generally to do
all and any such acts and things in relation to the Collateral as Lender shall
in good faith deem advisable. Borrower hereby declares that the appointment made
and the powers granted pursuant to this Section are coupled with an interest and
are and shall be irrevocable by Borrower in any manner, or for any reason,
unless and until all obligations of Borrower to Lender have been satisfied. 9.8
Indemnification of Lender. Borrower shall indemnify Lender and hold Lender
harmless from and against any and all liabilities, indebtedness, losses,
damages, penalties, actions, judgments, suits, claims, costs, expenses, and
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by or asserted against Lender, in any way relating to or arising out of (a) this
Agreement and the Loan Documents and/or (b) any of the transactions contemplated
therein or thereby (including those in any way relating to or arising out of the
violation by Borrower of any federal or state laws including the Interstate Land
Sales Full Disclosure Act or the Timeshare Act). Upon receiving knowledge of any
suit, claim or demand asserted by a third party that Lender believes is covered
by this indemnity, and subject to the condition that no Event of Default under
this Agreement shall then exist, Lender shall give Borrower notice of the matter
and an opportunity to defend it, at Borrower's sole cost and expense, with legal
counsel satisfactory to Lender. Notwithstanding any defense by Borrower of any
such suit, claim or demand, Lender shall have the right to participate in any
material decision
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<PAGE>
affecting the conduct or settlement of any dispute or proceeding for which
indemnification may be claimed.
SECTION 10. MISCELLANEOUS
10.1 Notice. Any notice or other communication required or permitted to be given
shall be in writing addressed to the respective party as set forth below and may
be personally served, telecopied or sent by overnight courier or U.S. Mail and
shall be deemed given: (a) if served in person, when served; (b) if telecopied,
on the date of transmission if before 3:00 p.m. (Chicago time) on a business
day; Provided that a hard copy of such notice is also sent pursuant to (c) or
(d) below; (c) if by overnight courier, on the first business day after delivery
to the courier; or (d) if by U.S. Mail, certified or registered mail, return
receipt requested on the fourth (4th) day after deposit in the mail postage
prepaid. Notices to Borrower: Notices to Lender: With a copy to: Patten Resorts,
Inc.
Attn: Patrick E. Rondeau, Esquire
5295 Town Center Road, Suite 400
Boca Raton, Florida 33486
Telephone: (407) 361-2705
Telecopy: (407) 361-2800
Heller Financial, Inc.
Real Estate Financial Services
Attn: Portfolio Manager, Sales Finance
Division
R.E. Loan No. 95-203
500 West Monroe St. 15th Fl.
Chicago, Illinois 60661
Telecopy: (312) 441-7119
Heller Financial, Inc.
Real Estate Financial
Services
Attn: Group General Counsel
R.E. Loan No. 95-203
500 West Monroe St. 15th Fl.
Chicago, Illinois 60661
Telecopy: (312) 441-7872
10.2 Survival. All representations, warranties, covenants and agreements made by
Borrower herein, in the other Loan Documents or in any other agreement,
document, instrument or certificate delivered by or on behalf of Borrower under
or pursuant to the Loan Documents shall be considered to have been relied upon
by Lender and shall survive the delivery to Lender of such Loan Documents and
the extension of the
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<PAGE>
Indebtedness (and each part thereof), regardless of any investigation made by or
on behalf of Lender.
10.3 Governing Law. This Agreement and the other Loan Documents (except as may
be expressly provided therein to the contrary) shall be governed by and
construed in accordance with the laws of the State of Illinois and applicable
laws of the United States. 10.4 Invalid Provisions. If any provision of this
Agreement or any of the other Loan Documents is held to be illegal, invalid or
unenforceable under present or future laws effective during the term thereof,
such provision shall be fully severable, this Agreement and the other Loan
Documents shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part hereof or thereof, and the
remaining provisions hereof or thereof shall remain in full force and effect.
10.5 Counterparts: Effectiveness. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signature thereto and hereto were on the same instrument. This Agreement shall
become effective upon Lender's receipt of one or more counterparts hereof signed
by Borrower and Lender. 10.6 Lender Not Fiduciary. The relationship between
Borrower and Lender is solely that of debtor and creditor, and Lender has no
fiduciary or other special relationship with Borrower, and no term or provision
of any of the Loan Documents shall be construed so as to deem the relationship
between Borrower and Lender to be other than that of debtor and creditor. 10.7
Entire Agreement. This Agreement, including the Exhibits, Schedules and other
Loan Documents and agreements referred to herein embody the entire agreement
between the parties hereto, supersedes all prior agreements and understandings
between the parties whether written or oral relating to the subject matter
hereof and may not be contradicted by evidence of prior, contemporaneous or
subsequent oral agreements of the parties. There are no oral agreements among
Lender, Borrower or Guarantor or between any two or more of them. This Agreement
may be modified or changed only in a writing executed by both Lender and
Borrower and/or the other affected parties. 10.8 Venue. BORROWER AGREES THAT ALL
ACTIONS OR PROCEEDINGS ARISING DIRECTLY, INDIRECTLY OR OTHERWISE IN CONNECTION
WITH, OUT OF, RELATED TO OR FROM THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS
SHALL BE LITIGATED, AT LENDER'S SOLE DISCRETION AND ELECTION, ONLY IN COURTS
HAVING A SITUS WITHIN THE COUNTY OF COOK, STATE OF ILLINOIS. BORROWER HEREBY
CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT
LOCATED WITHIN SAID COUNTY AND STATE. Borrower HEREBY IRREVOCABLY APPOINTS AND
DESIGNATES CT CORPORATION SYSTEM
<PAGE>
WHOSE ADDRESS IS BORROWER, C/O CT CORPORATION SYSTEM, 208 S.
LASALLE STREET, CHICAGO, ILLINOIS 60604, AS ITS DULY AUTHORIZED AGENT FOR
SERVICE OF LEGAL PROCESS AND AGREES THAT SERVICE OF SUCH PROCESS UPON SUCH PARTY
SHALL CONSTITUTE PERSONAL SERVICE OF PROCESS UPON SUCH PARTY. IN THE EVENT
SERVICE IS UNDELIVERABLE BECAUSE SUCH AGENT MOVES OR CEASES TO DO BUSINESS IN
CHICAGO, ILLINOIS, BORROWER SHALL, WITHIN TEN (10) DAYS AFTER LENDER'S REQUEST,
APPOINT A SUBSTITUTE AGENT (IN CHICAGO, ILLINOIS) ON ITS BEHALF AND WITHIN SUCH
PERIOD NOTIFY LENDER OF SUCH APPOINTMENT. IF SUCH SUBSTITUTE AGENT IS NOT TIMELY
APPOINTED, LENDER SHALL, IN ITS SOLE DISCRETION, HAVE THE RIGHT TO DESIGNATE A
SUBSTITUTE AGENT UPON FIVE (5) DAYS NOTICE TO BORROWER. BORROWER HEREBY WAIVES
ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT
AGAINST IT BY LENDER ON THE LOAN DOCUMENTS IN ACCORDANCE WITH THIS PARAGRAPH.
10.9 Jury Trial Waiver. BORROWER, GUARANTOR AND LENDER HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR
RELATED TO, THE SUBJECT MATTER OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
AND THE BUSINESS RELATIONSHIP THAT IS BEING ESTABLISHED. THIS WAIVER IS
KNOWINGLY, INTENTIONALLY AND VOLUNTARILY MADE BY BORROWER, GUARANTOR AND LENDER,
AND BORROWER AND GUARANTOR ACKNOWLEDGE THAT NEITHER LENDER NOR ANY PERSON ACTING
ON BEHALF OF LENDER HAS MADE ANY REPRESENTATIONS OF FACT TO INCLUDE THIS WAIVER
OF TRIAL BY JURY OR HAS TAKEN ANY ACTIONS WHICH IN ANY WAY MODIFY OR NULLIFY ITS
EFFECT. BORROWER, GUARANTOR AND LENDER ACKNOWLEDGE THAT THIS WAIVER IS A
MATERIAL INDUCEMENT-TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH OF THEM HAS
ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS AND THAT EACH OF THEM WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR
RELATED FUTURE DEALINGS. BORROWER, GUARANTOR AND LENDER FURTHER ACKNOWLEDGE THAT
THEY HAVE BEEN REPRESENTED (OR HAVE HAD THE OPPORTUNITY TO BE REPRESENTED) IN
THE SIGNING OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND IN THE MAKING OF
THIS WAIVER BY INDEPENDENT LEGAL COUNSEL. 10.10 Consent to Advertising and
Publicity. Borrower hereby consents that Lender may issue and disseminate to the
public information describing the credit accommodation entered into pursuant to
this Agreement. 10.11 Headings. Section headings have been inserted in the
Agreement as a matter of convenience of reference only; such section headings
are not a part of the Agreement and shall not be used in the interpretation of
this Agreement.
27
<PAGE>
10.12 Broker's Fees. There are no brokers. finders' or other similar fees or
commitments due with respect to the transactions described in the Agreement.
Borrower shall defend Lender and save and hold it harmless from all claims of
any Persons for any such fees which indemnity shall include reasonable
attorneys' fees and legal expenses.
10.13 Non-Disturbance. Lender agrees that so long as a Purchaser of an Interval
is not in default according to the terms of his or her purchase contract and any
of the Project Instruments described therein that Lender shall not disturb or
impair any rights of such Purchaser to have access to and use the Resort in
accordance with the terms of his or her purchase contract or the Project
Instruments. The parties hereto have executed this Agreement or have caused the
same to be executed by their duly authorized representatives as of the date
first above written. BORROWER: WITNESSES:
-
PATTEN RESORTS, INC.
By: Alan L. Murray
Name: Alan L. Murray
Its: Treasurer
(CORPORATE SEAL)
LENDER:
HELLER FiNANCIAL, INC.
8y:
Name: Dawn Graton
Its: Assistant Vice President
(CORPORATE SEAL)
<PAGE>
GUARANTOR:
WITNESSES:
PATTEN CORPORATION
By: Alan C. Murray
(CORPORATE SEAL)
CWP.349.FINOVA.PIGEON.LNAG.004
ACQUISITION,
CONSTRUCTION AND RECEIVABLES
LOAN AND SECURITY AGREEMENT
This ACQUISITION, CONSTRUCTION AND RECEIVABLES LOAN AND SECURITY
AGREEMENT is entered into as of June@, 1995, by and between FINOVA CAPITAL
CORPORATION, a Delaware corporation, and PATTEN CORPORATION, a Massachusetts
corporation.
1. DEFINITIONS
As used in this Agreement and the other Documents (as defined below) unless
otherwise expressly indicated in this Agreement or the other Documents, the
following terms shall have the following meanings (such meanings to be
applicable equally both to the singular and plural terms defined).
1.1 "Acquisition Loan": the Loan made pursuant to paragraph 2.1(a).
1.2 "Acquisition Loan Advance": the Advance of the proceeds of the .
Acquisition Loan by Lender on
behalf of Borrower in accordance with the terms of this Agreement.
1.3 "Acquisition Loan Borrowing Term": the period commencing on the date
of this agreement and ending on the close of the Business Day (or if
not a Business Day, the first Business Day thereafter) which is
ninety (90) days from April 21, 1995 (the date of Lender approval of
the Loans].
1. 4 "Acquisition Loan Maturity Date": the date (or if not a
Business Day, the first Business Day thereafter) thirty-six (36)
months from (i) the date the Acquisition Loan is fully funded, or (ii)
the last day of the Acquisition Loan Borrowing Term, whichever is
earlier.
1.5 "Acquisition Loan Note": the "Acquisition Loan Promissory Note"
in form and substance identical to Exhibit D-1 to be made and delivered by
Borrower to Lender pursuant to paragraph 4.IA(a)(i), as it may be from time to
time renewed, amended, restated or replaced.
1.6 "Acquisition/Receivables Loan Fee: Sixty-Two Thousand Dollars ($62,000).
1.7 "Advances": the Acquisition Loan Advance, the Construction Loan
Advances and the Receivables Loan
Advances; and "Advance": one of the Advances.
I
<PAGE>
CWP.349.FINOVA.PIGEON.LNAG.004
1.8 "Affidavit of Borrower': a sworn Affidavit of Borrower (and such other
parties as Lender may require) in the form of Exhibit J-ID, to accompany a
Construction Loan Advance Request.
1.9 'Affiliate': with respect to any individual or entity, any other
individual or entity that directly or indirectly, through one or more
intermediaries, controls, or is controlled by, or is under common control with,
such individual or entity.
1.10 "Agents": the Servicing Agent, the Lockbox Agent, and the Contracts
Escrow Agent.
1.11 'Agreement': this Acquisition, Construction and Receivables Loan and
Security Agreement, as it may be from time to time renewed, amended, restated or
replaced.
1.12 "Applicable Usury Law": the usury law chosen by the parties pursuant
to the terms of paragraph 9.10 or such other usury law which is applicable if
such usury law is not.
1. 13 "Architect/Engineer": an architect, design professional or engineer
employed by Borrower to perform architectural, design or engineering services.
1.14 Architect/Engineer Agreement": a contract (written or oral, now or
hereafter in effect) between Borrower and an Architect/Engineer for the
performance of architectural or engineering services, as approved by Lender in
writing and modified from time to time with Lender's prior written consent.
1.15 "Articles of Organization': the charter, articles, operating
agreement, partnership agreement, by-laws and any other written documents
evidencing the formation, organization and continuing existence of an entity.
1.16 "Borrower": Patten Corporation, a Massachusetts corporation; and,
subject to the restrictions on assignment and transfer contained in this
Agreement, its successors and assigns.
1.17 "Borrower's Assignment(s)": a written assignment or assignments,
including, without limitation, the Contracts Escrow Assignment, the Time-Share
Program Governing Documents Assignment and the Time-Share Management Agreement
Assignment, which may be separate from and/or included within the Borrower's
Mortgage, executed by Borrower and creating in favor of Lender, as security for
the Performance of the Obligations, a perfected, direct, first and exclusive
assignment of the following (subject only to the Permitted Encumbrances): all
leases, sales contracts, rents and sales and other proceeds pertaining to or
arising from the Real Property or any business of Borrower conducted thereon;
the
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CWP.349.FINOVA.PIGEON.LNAG.004
- -Architect/Engineer Agreement(s), the Construction Contract(s), and the other
Contracts, Intangibles, Licenses and Permits; and all rights which Borrower has
with respect to the Real Property or Time-Share Program under the Time-Share
Declaration or any other covenants, declarations or restrictions affecting any
portion of the Real Property; as such assignments may be from time to time
renewed, amended, restated or replaced.
1.18 "Borrower's Mortgage': a deed of trust executed by Borrower and under
the terms of which Borrower has conveyed or granted in favor of
Lender, as security for the Performance of the Obligations, a
perfected, direct, first and exclusive priority lien- subject only to
the Permitted Encumbrances, upon the Real Property, as it may be from
time to time renewed, amended, restated or replaced.
1.19 "Borrower's Security Agreement": a written security agreement
which may be separate from and/or included within the Borrower's
Mortgage or this Agreement, executed by Borrower and creating in
favor of Lender, as security for the Performance of the
Obligations, a perfected, direct, first and exclusive priority
security interest, subject only to the Permitted Encumbrances, in
the Personal Property, as it may be from time to time renewed,
amended, restated or replaced.
1.20 "Borrower's Security Documents": the Borrower's Mortgage, the
Borrower's Security Agreement, the Borrower's Assignments, this Agreement and
all other documents now or hereafter securing the Obligations, as they may from
time to time renewed, amended, restated or replaced.
1.21 "Borrowing Base': with respect to an Eligible Instrument an amount
equal to the lesser of:
(a) ninety percent (90%) of the unpaid principal balance of such Eligible
Instrument; or
(b) ninety percent (90%) of the present value of the.unmatured installments
of principal and interest under such Eligible Instrument, discounted at the
higher of (i) the applicable interest rate under the terms of the Note or (ii)
the Discount Rate.
1.22 "Business Day": any day other than a Saturday, Sunday or a day on
which banks in Phoenix, Arizona are required to close.
1.23 "Collateral": the Real Property, Personal Property,Receivables Col1-
ateral , Insurance Policies and any and al1 other property now or hereafter
serving as security for the Performance of the Obligations, and all products and
proceeds thereof.
<PAGE>
CWP.349.FiNOVA.PIGEON.LNAG.004
1.24 -"Completion": for each Phase of Construction,
(a) completion of the Work, in accordance with the Plans and
Specifications, the Construction Contract(s), all applicable laws, regulations
and private restrictions, the Documents, sound construction, engineering and
architectural principles and commonly accepted safety- standards, free of liens
and free of defective materials and workmanship;
(b) expiration of the statutory period in which mechanics' liens and
similar liens can be filed; and
(c) receipt by Lender of the following in form and substance satisfactory
to it: (i) a certificate of completion from Borrower and Architect and, if
Lender elects, from Lender's Inspector to the effect that the Work has been so
completed, all utilities necessary to serve the Real Property have been
connected and are operating, the Improvements are ready for occupancy for the
intended timeshare purposes, and final payment is due under all Construction
Contract(s) between Borrower and a Contractor;
(ii) a certificate of occupancy (or its equivalent) from the appropriate
governmental authority having jurisdiction over the Work which has the
effect of allowing the use of Improvements for the intended time-share
purposes; (iii) if applicable laws provide that the recording of a
notice of completion will cause the expiration upon a date certain of
the statutory period within which mechanics' and similar liens can be
filed, verification of the recording of such notice in the manner
prescribed by such laws; (iv)final lien waivers; and (v) the re-issued
title policy required pursuant to paragraph 6.4(h).
1.25 "Construction Budget': the detailed budget cost itemization prepared
by Borrower and approved in writing by Lender which specifies by item the cost
and source of payment of: (a) all labor, materials and services necessary for
Completion of the Work in accordance with the Plans and Specifications, the
Construction Contract(s), the Documents, all applicable laws, regulations and
private restrictions, sound construction, engineering and architectural
principles, and commonly accepted safety standards; (b) interest on the
Construction Loan; and (c) all other expenses incidental to the Construction
Loan and the Completion of the Work. The Construction Budget shall include an
interest reserve .and contingency reserve determined to be adequate by Lender.
The Construction Budget approved by Lender as of the date of this Agreement is
attached as Exhibit H.
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CWP.349.FINOVA.PIGEON.LNAG.004
1.26 ."Construction Contract": a contract (written or oral, now or
hereafter in effect) between Borrower and a Contractor, between a
Contractor and any other person or entity relating in any way to the
construction of the Improvements, including the performing of labor
and the furnishing of equipment, materials or services (other than
architectural or engineering services), as approved by Lender in
writing and modified from time to time with Lender's prior written
consent.
1.27 "Construction Loan*: the loan made pursuant to paragraph 2.1(b).
1.28 "Construction Loan Advance": an advance of the proceeds of the
Construction Loan by Lender on behalf of Borrower in accordance with the terms
and conditions of this Agreement.
1.29 "Construction Loan Advance Request": the written application of Borrower on
Lender's standard forms made by Borrower and such other parties as Lender may
require specifying by name and amount all parties to whom Borrower is obligated
for labor, materials, equipment or services supplied for the perfomance of the
Work and all other expenses incidental to the Construction Loan, the Real
Property and the Completion of the Work, and requesting a Construction Loan
Advance for payment of such items, accompanied by an Affidavit of Borrower and
such schedules, affidavits, releases, waivers, statements, invoices, bills and
other documents as Lender may reasonably request.
1.30 "Construction Loan Borrowing Term": the period commencing on the date
of this Agreement and ending on the close of the Business Day (or if
not a Business Day, the first Business Day thereafter) which is the
earlier of (a) the date twelve (12) months from the date of the first
Construction Loan Advance or (b) June 28, 1996.
1.31 "Construction Loan Fee": One percent (1.0%) of the amount of any
Construction Loan Advance, payable at the time of any such Advance.
1.32 "Construction Loan Maturity Date": the date (or if not a Business Day,
the first Business Day thereafter) thirty-six (36) months from the date of the
final Construction Loan Advance.
1.33 "Construction Loan Note": the "Construction Loan Promissory Note" in
form and substance identical to Exhibit D-2 to be made and delivered by
Borrower to Lender pursuant to paragraph 4. 1A (a) (i i ) , as it may be from
time to time renewed, amended, restated or replaced.
1.34 "Contract for Deed": a contract for deed pursuant to which Borrower
has agreed to sell and a third party has agreed to purchase a Time-Share
Interest.
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CWP.349.FINOVA.PIGEON.LNAG.004
1.35 -"Contractor": a contractor employed by Borrower to provide labor
and/or to furnish equipment, materials or services for any portion of the Work.
1.36 "Contracts Escrow': the escrow established with Contracts Escrow Agent
pursuant to paragraph 5.4.
1.37 "Contracts Escrow Agent': a licensed escrow agent reasonably
acceptable to Lender and Borrower, to be identified prior to execution of the
Contracts Escrow Assignment, or its successor under the Contracts Escrow
Assignment.
1.38 "Contracts Escrow Assignment": a written assignment to be made among
Borrower, Lender and Contracts Escrow Agent, which grants to Lender a perfected,
direct, first and exclusive assignment of and security interest, subject only to
the Permitted Encumbrances, in all of Borrower's right, title and interest in,
to and under the Contracts Escrow, as it may be from time to time renewed,
amended, restated or replaced.
1.39 "Contracts, Intangibles, Licenses and Permits": the property so
described in Exhibit M.
1.40 "Default Rate ": the "Default Rate' as defined in and determined under
the Notes.
1.41 "Discount Rate": thirteen percent (13.0%).
1.42 'Documents': the Notes, the Lockbox Agreement, the Servicing
Agreement, the Services and Fees Agreement, the Environmental Certificate, this
Agreement, the Borrower's Security Documents and all other documents now or
hereafter executed in connection with the Loans, as they may be from time to
time renewed, amended, restated or replaced.
1.43 "Eligible Instrument": an Instrument which confoms to the standards
set forth in Exhibit B. An Instrument that has qualified as an Eligible
Instrument shall cease to be an Eligible Instrument upon the date of the first
occurrence of any of the fol1owing:
(a) any installment due with respect to that Instrument becomes more
than 59 days past due unless cured to Lender's satisfaction or (b)
that Instrument otherwise fails to continue to conform to the
standards set forth in Exhibit B.
1.44 "Environmental Certificate": an environmental certificate executed by
Borrower and such other persons or parties as required by Lender in form and
substance identical to Exhibit C, as it may be from time to time renewed,
amended, restated or replaced.
1.45 "Event of Default": the meaning set forth in paragraph 7.1. -6-
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CWP.349.FINOVA.PIGEON.LNAG.004
1.46 "Force Majeure Event": an act of God", a fire, a strike, a
governmental order and/or injunction which is issued by a Court of competent
jurisdiction for reasons other than for Borrower's acts or omissions which would
constitute a default under this Agreement, or a similar event beyond Borrower's
reasonable control.
1.47 "improvements': the improvements comprising Phase One of the
Time-Share Project to be constructed upon, added to or made to the Real Property
as part of the Work, consisting of (i) 25 two bedroom, two bathroom
pre-fabricated Units (approximately 1,100 square feet), (ii) a clubhouse,
maintenance building and entryway, and (iii) necessary infrastructure, all as
set forth in the Plans and Specifications and the Construction Contract(s) and
as described in the Construction Budget.
1.48 "Incipient Default": an event which after notice and/or lapse of time
would constitute an Event of Default.
1.49 "Instrument": a Contract for Deed which has arisen out of the sale of
a Time-Share Interest by Borrower to a Purchaser.
1.50 "Insurance Policies": the insurance policies that Borrower is required
to maintain and deliver pursuant to paragraph 6.10.
1.51 "Interest Reserve Component": that portion of the Construction Loan
not exceeding Three Hundred Thousand Dollars ($300,000) designated solely for
the financing of interest payments under the Construction Loan in accordance
with paragraph 4.4 hereof.
1.52 " Lender": FINOVA Capital Corporation and its successors and
assigns.
1.53 'Lender's Inspector": the meaning given to it in paragraph 8.1.
1.54 'Loans': the Construction Loan and the Receivables Loan
1.55 "Lockbox Agent": Shawmut Bank, N.A., or its successor as lockbox agent
under the Lockbox Agreement.
1.56 "Lockbox Agreement": an agreement to be made among Lender, Borrower
and Lockbox Agent, which provides for Lockbox Agent to collect through a lockbox
payments under Instruments constituting part of the Receivables Collateral and
to remit them to Lender, as it may be from time to time renewed, amended,
restated or replaced.
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CWP.349.FINOVA.PIGEON.LNAG.004
1.57 ."Maximum Acquisition Loan Amount": One Million Two Hundred Thousand
Dollars ($1,200,000); provided, however, that at closing Borrower
may, at Borrower's election, add to such amount the fees and costs
associated with closing the loans by an amount not to exceed Ten
Thousand Dollars ($10,000).
1.58 "Maximum Construction Loan Amount': the positive remainder, if any,
obtained by subtracting (a) the product of (i) the Partial Release
Fee (Acquisition Loan) (as defined in the Borrower's Mortgage) times
(ii) the number of Time-Share Interests released from the Borrower's
Mortgage when payment of Partial Release Fee (Acquisition Loan) is
required from (b) the lesser of (i) Four Million Two Hundred Fifty
Thousand Dollars ($4,250,000), or (ii) seventy-five percent (75%) of
the cost of completion of the Improvements as set forth in the
Construction Budget initially approved by Lender.
1.59 "Maximum Receivables Loan Amount': Five Million Dollars ($5,000,000).
1.60 "Minimum Equity': a cash expenditure to be made by Borrower for the
purpose of paying a portion of the Construction Costs, which expenditure shall
be equal to the difference between the unpaid cost of Completion of the Work and
the Maximum Construction Loan Amount.
1.61 "Minimum Required Time-Share Approvals": all approvals required from
governmental agencies in order to sell Time-Share Interests and offer them for
sale at the Time-Share Project.
1.62 "Notes": the Acquisition Loan Note, the Construction Loan Note and the
Receivables Loan Note; and "Note": one of the Notes.
1.63 "Obligations": all obligations, agreements, duties, covenants and
conditions of Borrower to Lender which Borrower is now or hereafter required to
Perform under the Documents.
1.64 "Opening Prepayment Date": the date (or if not a Business Day, the
first Business Day thereafter) two (2) years after the date of the last
Receivables Loan Advance.
1.65 "Oversight Agreement": the agreement to be made among Lender,
Borrower, Service Agent and Oversight Agent, which provides for Oversight Agent
to perform for the benefit of Lender contain oversight functions with respect to
the servicing of the Receivables Collateral, as it may be from time to time
renewed. amended, restated or replaced.
1.66 "Partial Release Fee (Construction Loan"): with respect to a timeshare
the Borrower's Mortgage, an Share Interest to be released from
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CWP.349.FINOVA.PIGE-ON.LNAG.004
amount to be paid at the time of each release and to be determined as
provided in the Borrower's Mortgage.
1.67 "Perfomance" or "Perform": full, timely and faithful perfomance -
1.68 "Permitted Encumbrances': the rights, restrictions, reservations,
encumbrances, easements and liens of record which Lender has agreed to accept as
set forth in Exhibit E.
1.69 "Personal Property": the property described in Exhibit M.
1.70 'Phase of Construction": each phase of the Time-Share Project covered
by a separate Construction Contract approved by Lender.
1.71 'Phase One': Phase One of the Time-Share Project as set forth in the
Plans and Specifications and the Construction Contract and as described in the
Construction Budget for the Improvements.
1.72 "Plans and Specifications": the architectural, structural, mechanical,
electrical and other plans and specifications for the construction of the
Improvements and the completion of the rest of the Work prepared by
Architect(s)/Engineer(s), as approved by Lender as modified from time to time
with Lender's prior written consent.
1.73 "Prepayment Premium": an amount equal to (a) five percent (5%) of the
outstanding principal balance of the Receivables Loan in the event of a
prepayment of the Receivables Loan occurring prior to the Date or (b)a %,
determined in to the Opening Prepayment in accordance with Schedule 1, of the
outstanding principal balance of the Receivables Loan in the event of a
prepayment of the Receivables Loan occurring subsequent to the Opening
Prepayment Date.
1.74 "Principal Work-Related Items": the Plans and Specifications and all
agreements between Borrower and third parties pertaining to the Work, including,
without limitation, Construction Contract(s) and Architect/ Engineer
Agreement(s), as approved by Lender in writing and modified from time to time
with Lender's prior written consent.
1.75 "Property": the Real Property and Personal Property.
1.76 "Purchaser": a purchaser who has executed a Contract for Deed.
1.77 . "Real Property": the real property described in Exhibit L.
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[email protected]
1.78 "Receivables Assignment": a written assignment of specific Instruments
and the proceeds thereof, delivered by Borrower to Lender in the form of Exhibit
A.
1.79 "Receivables Collateral': (a) the Instruments which are now or
hereafter assigned, endorsed or delivered to Lender pursuant to this Agreement
or against which an Advance has been made; (b) all rights under all documents
evidencing, securing or otherwise pertaining to such Instruments; (c) the
Insurance Policies; (d) all Borrower's rights under any escrow agreements and
accounts pertaining to the foregoing; (e) all files, books and records of
Borrower pertaining to the foregoing; and (f) the -proceeds from the foregoing.
1.80 "Receivables Loan': the loan made pursuant to paragraph 2.1(b).
1.81 "Receivables Loan Advance": an advance of the proceeds of the
Receivables Loan by Lender on behalf of Borrower in accordance with the terms
and conditions of this Agreement.
1.82 'Receivables Loan Borrowing Term": the period commencing on the date
of this Agreement and ending on the close of the Business Day (or if not a
Business Day, the first Business Day thereafter) on the earlier of (a) the date
eighteen (18) months from the date of the first Receivables Loan Advance or (b)
April 28, 1997.
1.83 "Receivables Loan Maturity Date": the date (or if not a Business Day,
the first Business Day thereafter) which is eighty-four (84) months from the
date of the last Receivables Loan Advance.
1.84 "Receivables Loan Note": the "Receivables Loan Promissory Note" in
form and substance identical to Exhibit D-3 to be made and delivered by
Borrower to Lender pursuant to paragraph 4. 1 (a) (i i i ) , as it may be from
time to time renewed, amended, restated or replaced.
1.85 "Required Completion Assurance Deposit': the definition given to it in
paragraph 6.4(k).
1.86 'Required Completion Date': March 31, 1995, plus such additional time
which is necessary to achieve Completion of the Work and is due solely to the
occurrence of one or more Force Majeure Events.
1.87 "Resolution": a resolution of a corporation certified as true and
correct by an authorized officer of such corporation, a certificate
signed by the manager of a limited liability company and such members
whose approval is required, or a partnership certificate signed by
all of the general partners of such partner- ship and such other
partners whose approval is required.
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CWP.349.FINOVA.PIGEON.LNAG.004
1.88 ."Security Interest": a perfected, direct, first and exclusive
security interest in and charge upon the property intended to be covered by it,
subject only to the Permitted Encumbrances.
1.89 "Servicing Agent': Borrower, or its successor as Servicing Agent under
the Servicing Agreement.
1.90 "Servicing Agreement": an agreement to be made between, Lender and
Servicing Agent, which provides for Servicing Agent to perform for the benefit
of Lender accounting, reporting and other servicing functions with respect to
the Instruments constituting part of the Receivables Collateral, as it may be
from time to time renewed, amended, restated or replaced.
1.91 "Term': the duration of this Agreement, commencing on the date as of
which this Agreement is entered into and ending when all of the Obligations
shall have been Performed.
1.92 "Third Party Consents": those consents which Lender requires Borrower
to obtain, or which Borrower is contractually or legally obligated to obtain,
from others in connection with the transaction contemplated by the Documents.
1.93 "Time-Share Association": the association which will be provided for
in the Time-Share Declaration to manage the Time-Share Program and in which all
owners of Time-Share Interests will be members.
1.94 "Time-Share Declaration": the declaration to be recorded in the real
estate records where the Real Property is located for the purpose of creating
the Time-Share Program.
1.95 "Time-Share Interest": the estate described in Exhibit F in the
Time-Share Project.
I. 96 "Time-Share Management Agreement": the management agreement from time
to time entered into between the Time-Share Association and the Time-Share
Manager for the management of the Time-Share Program.
1.97 "Time-Share Management Agreement Assignment": a written assignment to
be delivered to Lender (and thereafter redelivered as appropriate)
from each Time-Share Manager which is an Affi1iate of Borrower
and granting to Lender, as security for the performance of the
Obligations, a perfected, direct, first and exclusive assignment of
and security interest in the Time-Share Management Agreement, subject
only to the Permitted Encumbrances, as it may be from time to time
renewed, amended, replaced or restated.
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CVW.349.FINOVA.PIGEON.LNAG.004
1.98 'Time-Share Manager': the person from time to time employed by
Time-Share Association to manage the Time-Share Program.
1.99 "Time-Share Program": the program by which Purchasers may own
Time-Share Interests in fee simple, enjoy their respective TimeShare Interests
on a recurring basis, and share the expenses associated with the operation and
management of such program.
1.100 'Time-Share Program Consumer Documents: the Instrument, deed of
conveyance, credit application, credit disclosures, rescission right notices,
final subdivision public reports/prospectuses/ public offering statements,
exchange affiliation agreement and other documents used or to be used by
Borrower in connection with the sale of Time-Share Interests.
1.101 "Time-Share Program Governing Documents": the Time-Share Declaration,
the Articles of Organization for the Time-Share Association, any and all rules
and regulations from time to time adopted by the Time-Share Association, the
Time-Share Management Agreement and any subsidy agreement by which Borrower is
obligated to subsidize shortfalls in the budget of the Time-Share Program in
lieu of paying assessments.
1. 102 "Time-Share Program Governing Documents Assignment": a written
assignment to be delivered to Lender from Borrower, which grants to Lender a
perfected, direct, first and exclusive assignment of and security interest of,
subject only to the Permitted Encumbrances, Borrower's rights in, to and under
the Time-Share Program Governing Documents, as it may be from time to time
renewed, amended, restated or replaced.
1.103 "Time-Share Project': the time share resort or part of the resort
described in Exhibit F and such other time share resorts or part thereof as
Borrower may request and Lender may from time to time approve in writing.
1. 104 "Title Insurer (Borrower's Mortgage)": a title company which is
acceptable to Lender and issues the Title Policy (Borrower's Mortgage).
1.105 "Title Insurer (Purchaser)": a title company which is acceptable to
Lender and issues a Title Policy (Purchaser).
1.106 "Title Policy (Borrower's Mortgage)': an LP-10/ALTA lender's policy
of title insurance in an amount not less than One Million Two Hundred Ten
Thousand Dollars ($1,210,000), insuring Lender's interest in the Borrower's
Mortgage as a perfected, direct, first and exclusive lien on the Real Property,
subject only to the Permitted Encumbrances, issued by Title Insurer (Borrower's
Mortgage) and in form and substance acceptable to Lender.
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CWP.349.FINOVA.PIGEON.LNAG.004
1.107 "Title Policy (Purchaser)": an ALTA lender's policy of title
insurance in an amount not less than the Borrowing Base of an Instrument,
insuring Lender's interest in the Instrument as a perfected, direct, first and
exclusive lien on the Time-Share Interest encumbered thereby, subject only to
the Permitted Encumbrances, issued by Title Insurer (Purchaser) and in form and
substance acceptable to Lender.
1. 108 *Uncovered Cost of the Work': the amount equal to the excess (if
any) of (a) the remaining unpaid cost of Completion of the Work over (b) the
committed and undisbursed portion of the Construction Loan and the remaining
balance of any Required Completion Assurance Deposits held by Lender.
1.109 "Unit": a dwelling unit in the Time-Share Project.
1.110 -Work": the construction of the Improvements and the acquisition and
installation of any and all furniture, furnishings, fixtures and/or equipment
required for the time-share use of the Time-Share Project or by the terms of
this Agreement or shown on or described in the Plans and Specifications or the
Construction Contract(s) or as costs on the Construction Budget.
1. 111 "Work Progress Schedule': the schedule for the Completion of the
Work and parts thereof, as approved by Lender in writing. The Work Progress
Schedule approved by Lender on the date hereof is attached as Exhibit 0.
2. LOAN COMMITMENT; USE OF PROCEEDS; RIGHT OF FIRST REFUSAL
2.1 (a) Acquisition Loan Commitment; Determination of Acquisition Loan
Advance Amount. Lender hereby agrees, if Borrower has performed
all Obligations then due, to make an Acquisition Loan Advance. The
amount of the Acquisition Loan Advance shall be equal to the
Maximum Acquisition Loan Amount. The Acquisition Loan shall be
used for the purposes of refinancing Borrower's purchase of the
Real Property and, if Borrower so elects at or prior to closing,
to finance the costs and fees associated with the closing of the
Loans.
(b) Construction Loan Commitment; Determination of Construction
Loan Advance Amounts; Retainaqe. Lender hereby agrees. if Borrower
has Performed all the Obligations then due, to make Construction
Loan Advances.Lender shall have the obligation to make the initial
Construction Loan Advance until the Uncovered Cost of the Work is
less than or equal to the Maximum Construction Loan Amount. The
amount of each Construction Loan Advance, other than an Advance
under . the Interest Reserve Component, will be an amount equal to
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CWP.349.FINOVA-PIGEON.LNAG.004
the costs of the Work covered by the applicable Construction Loan Advance
Request and allocated within the Construction Loan Budget for payment out of the
Construction Loan less an amount equal to the sum of (a) ten percent (10%) of
the costs of such Work ('Basic Retainage") and (b) any additional retainage
('Additional Retainage") required under the Construction Contract(s); provided,
however, that Construction Loan Advances will not be made for stored or ordered
materials not yet incorporated into the Improvements. The Basic Retainage shall
apply to all 'hard" costs of the Work and to certain "soft costs of the Work
described in Exhibit M. The Additional Retainage will be disbursed as part of
the next Advance occurring after Lender has reasonably determined that a
Contractor is entitled to it under the applicable Construction Contract. The
Basic Retainage will be disbursed at the time of Substantial Completion (as that
term is defined in AIA Document A201, 1987 edition) of each Phase of
Construction of the Work to the extent Contractor(s) are then entitled to it
under the Construction Contract(s) between Borrower and such Contractor(s) prior
to final payment, subject to Lender's right to keep such portion of the Basic
Retainage as it may determine to be necessary to ensure Completion of the Work,
with such retained portion to be disbursed promptly after Completion of the
Work. Lender shall have no obligation to make any Construction Loan Advance if
after giving effect to such Advance the sum of (i) the unpaid principal balance
of the Construction Loan, (ii) the committed and undisbursed portion of the
Construction Loan and (iii) the Uncovered Cost of the Work exceeds the Maximum
Construction Loan Amount. Lender shall have no obligation to make any
Construction Loan Advance if after giving effect to such advance, the sum of all
Construction Loan Advances, exclusive of Advances under the Interest Reserve
Component would exceed Three Million Nine Hundred Fifty Thousand Dollars
($3,950,000). At no time shall the unpaid principal balance of the Construction
Loan exceed the Maximum Construction Loan Amount.
(c) Receivables Loan Commitment; Determination of Receivables Loan
Advance . Lender hereby agrees, it borrower has Performed all of the
Obligations then due$ to make Receivables Loan Advances to Borrower for
the purposes specified in paragraph 2.3( ). The amount of a Receivables
Loan Advance shall be equal to (i) the Borrowing Base of the Eligible
Instruments less (ii) the then unpaid principal balance of the
Receivables Loan;provided, however, at no time shall the unpaid
principal balance of
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CVR.349.FINOVA.PIGEON.LNAG.004
the Receivables Loan exceed the Maximum Receivables Loan
Amount.
2.2 (a) Construction Loan Non-Revolvinq. The Construction Loan shall be
non-revolving. All Construction Loan Advances shall be viewed as a single loan.
Borrower shall not be entitled to obtain Construction Loan Advances after the
expiration of the Construction Loan Borrowing Term unless Lender, in its
discretion, agrees in writing with Borrower to make the Construction Loan
Advances thereafter on terms and conditions satisfactory to Lender. Upon
completion of the Improvements, Lender may consider extending additional
financing for subsequent Phases of Construction not part of the original Work.
Lender is not and has not committed to provide any construction financing in
addition to the Construction Loan.
(b) Receivables Loan Revolver. The Receivables Loan is a revolving line of
credit; however, all of the Receivables Loan Advances shall be viewed as a
single loan. Borrower shall be entitled to availability advances subject to the
limitations of paragraph 2.1(c). Borrower shall not be entitled to obtain
Receivables Loan Advances after the expiration of the Receivables Loan Borrowing
Term unless Lender, in its discretion, agrees in writing with Borrower to make
Receivables Loan Advances thereafter on terms and conditions satisfactory to
Lender. (c) Continuation of Obligations Throughout Term. Whether or not
Borrower's right to obtain Advances has terminated, this Agreement and
Borrower's liability for Performance of the Obligations shall continue until the
end of the Term.
2.3 (a) Borrower will use the Acquisition Loan Advance only to (i)
refinance the amount previously paid for the acquisition of the Real Property,
and (ii) at Borrower's election, finance the amount of the fees and costs of the
closing of the Loans.
(b) Use of Construction Loan Advances. Borrower will use Construction Loan
Advances only to pay or reimburse for the line-item expenses shown in
the Construction Budget. If the amount needed by Borrower for any line
item expense set forth in the Construction Budget is less than the
budgeted amount of the line item expense, such excess may be reallocated
to other line items as approved by Lender in writing, such approval not
to be unreasonably withheld.
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CWP.349.FINOVA-PIGEON.LNAG.004
I(c) Use of Receivables Loan Advances. Borrower will use the proceeds of the
Receivables Loan only for working capital and other business purposes.
2.4 Lender's Right of First Refusal and Option For Time-Share Project
financing.
(a) Subject to the terms and conditions of this paragraph and the
restrictions of paragraph 6.9(a), Lender shall have the right of first refusal
with respect to all additional construction financings for the Time-Share
Project. If Borrower wishes to have a third party- process an application from
Borrower for such financing or Borrower wishes to accept a third party's
financing proposal or a third party's commitment for such financing, Borrower
must give Lender notice of its intent to do so, together with (a) a written copy
of Borrower's application for the subject financing and the prospective third
party investor's agreement to process the application, a copy of the financing
proposal for the subject financing from the third party investor, or a copy of
the commitment for the subject financing from the third party investor, as the
case may be, and (b) all information and other materials delivered to such
prospective investor in connection with the proposed financing. As used above,
the term "application" means a written loan application for financing made by
Borrower which an investor has expressed a willingness to consider and for which
a financing proposal will not be issued as an intermediate step between the
application and the commitment; the term "financing proposal" means a proposal
made by an investor to provide financing to Borrower, which proposal is an
expression of intent by an investor to further consider providing financing and
must be accepted by Borrower as a condition precedent to the investor's further
consideration to providing the financing, but does not constitute a firm and
binding- offer to provide financing; and the term "commitment" means a firm and
binding offer by an investor to provide financing, subject only to approval by
Borrower and the completion of due diligence and closing conditions which do not
involve further approval of the type or amount of investment or the type or
quantity of collateral or credit enhancement by the investor's credit approval
authorities. Lender shall have twenty (20) days from receipt of Borrower's
required notice with regard to the subject financing and the items required to
be given to it with such notice (a) to issue a financing proposal, to extend
financing to Borrower upon terms financially equivalent to or better than those
contained in the application, financing proposal or commitment as the case
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C%W.349.FiNOVA.PIGEON.LNAG.004
may be, from the third party investor or (b) to refuse to do so. Issuance of
such a conditional financing proposal in a timely manner shall constitute
adequate exercise (albeit conditional) of Lender's right of first refusal.
Failure to issue such a conditional financing proposal in a timely manner shall
be deemed to be an election by Lender to refuse to make the newly requested
financing to Borrower. Furthermore, failure of Lender to issue a commitment for
financing described in a timely issued financing proposal, within sixty (60)
days after Borrower's acceptance of such proposal, shall be deemed an election
by Lender not to make the subject financing. Lender's election not to make any
newly requested financing shall not be deemed a waiver of any of the terms and
conditions of the Documents; and, except with respect to a specific financing
which Lender has elected not to make shall not affect Lender's right of first
refusal with respect to any future financing.
(b) Subject to the terms and conditions of this paragraph and paragraph
6.9(a), Lender shall have an option to provide all additional
receivables financings for the Time-Share Project ('Future Receivables
Financing') upon the terms and conditions of this Agreement from time in
effect. Before soliciting or accepting any Future Receivables Financings
from a third party, Borrower will give Lender a notice ("Future
Receivables Financing Notice") of its intent to solicit or accept an
offer to provide such future financing and the amount thereof, together
with such items as may be reasonably necessary for a prudent lender to
evaluate such Future Receivables Financing. Lender shall have twenty
(20) days from receipt of Borrower's Future Receivables Financing Notice
with regard. to the subject Future Receivables Financing and the items
required to be given to it with such Future Receivables Financing Notice
(a) to issue a financing proposal or a commitment to extend financing to
Borrower upon terms and conditions identical to those contained in this
Agreement as then in effect or (b) to refuse to do so. Failure of Lender
to issue a commitment for financing described in a timely issued
financing proposal, within sixty (60) days after Borrower's acceptance
of such proposal, shall be deemed an election by Lender not to make the
subject Future Receivables Financing. However, Lender's election not to
make any Future Receivables Financing requested in a Future Receivables
Financing Notice shall not be deemed a waiver of any of the terms and/or
conditions of the Documents; and, except as provided for in the
preceding sentence, shall not terminate or otherwise adversely affect
Lender's
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CWP.349.FINOVA-PIGEON.LNAG.004
option with respect to any Future Receivables Financing not described in the
Future Receivables Financing Notice.
3. SECURITY.
3.1 Grant of Security Interest in Receivables Collateral. To
secure the Performance of all of the Obligations, Borrower
hereby grants to Lender a Security Interest in and assigns to
Lender the Receivables Collateral. Such Security Interest
shall be absolute, continuing and applicable to all existing
and future Advances and to all of the Obligations. All of the
Receivables Collateral shall secure repayment of the Loans and
the Performance of the other Obligations. Borrower will
unconditionally assign and deliver to Lender, with full
recourse, all Instruments which are part of the Receivables
Collateral. Lender is hereby appointed Borrower's
attorney-in-fact to take any and all actions in Borrower's
name and/or on Borrower's behalf deemed necessary or
appropriate by Lender with respect to the collection and
remittance of payments (including the endorsement of payment
items) received on account of the Receivables Collateral;
provided, however, that Lender shall not take any action which
is described in paragraph 7.2(c) unless an Event of Default
exists.
3.2 Ineligible Instruments. If a previously Eligible Instrument which is part of
the Receivables Collateral ceases to be an Eligible Instrument, then within
thirty (30) days thereafter Borrower will either (i) pay to Lender an amount
equal to the Borrowing Base of the ineligible Instrument (calculated
immediately before its ineligibility), together with interest, costs and
expenses, attributable thereto, or (ii) replace such ineligible Instrument with
an Eligible Instrument or Eligible Instruments having a Borrowing Base in the
aggregate not less than the Borrowing Base of the ineligible Instrument being
replaced. Simultaneously with the delivery of the replacement Eligible
Instrument to Lender for an ineligible Instrument, Borrower will deliver to
Lender all of the items (except for a 'Request for Advance and Certification")
required to be delivered by Borrower to Lender pursuant to paragraph 4.1,
together with a "Borrower's Certificate" in form and substance identical to
Exhibit G. If no Event of Default or an Incipient Default has occurred and is
continuing, then within a reasonable time after such payment or the delivery of
a replacement Eligible Instrument to Lender for an ineligible Instrument, Lender
will reassign and/or endorse to Borrower. without recourse or warranty of any
kind, the ineligible Instrument. Borrower will prepare the reassignment
instrument, which shall be in form and substance identical to Exhibit G-1, and
shall deliver it to Lender for execution.
3.3 Maintenance of Security Borrower will deliver or cause to be delivered
to Lender and will maintain or cause to be maintained
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CWP.349.FINOVA.PIGEON.LNAG.004
i in full force and effect throughout the Term (except as otherwise expressly
provided in such Document), the Borrower's Security Documents and all other
security required to be given to Lender pursuant to the terms of this Agreement.
3.4 Partial Releases from Borrower's Mortgage. Borrower shall be entitled
to the release of Time-Share Interests from the Borrower's Mortgage according to
the terms and conditions of Borrower's Mortgage.
4. ADVANCES
4.IA General Conditions Precedent to Initial Advance. Lender's
obligation to make the initial Acquisition Loan Advance shall
be subject to and conditioned upon the terms and conditions
set forth in the following subparagraphs and elsewhere in this
Agreement having been satisfied:
(a) Documents. Borrower shall have delivered to Lender the following
Documents, duly executed, delivered and in form and substance satisfactory to
Lender:
(i) the Acquisition Loan Note;
(ii) the Construction Loan Note;
(iii) the Receivables Loan Note;
(iv) the Borrower's Mortgage;
(v) the Borrower's Security Agreement;
(vi) Intentionally Omitted;
(vii) the Time-Share Management Agreement Assignment;
(viii) the Contracts Escrow Assignment;
(ix) the Time-Share Program Governing Documents Assignment;
(x) the other Borrower's Assignments;
(xi) the Environmental Certificate;
(Xii) UCC financing statements for filing and/or recording, as appropriate,
where necessary to perfect the Security Interest in the Collateral;
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CWP.349.FINOVA.PIGECIN.LNAG.004
(xi i i) a favorable opinion or opinions from independent counsel for
Borrower in form and substance substantially identical to Exhibit H;
(xiv) the Lockbox Agreement;
(xv) the Servicing Agreement;
(xvi) the Oversight Agreement;
(xvii) the Title Policy (Borrower's Mortgage);
(xviii) the Third Party Consents;
(xix) this Agreement; and
(xx) such other documents as Lender may reasonably require.
(b) 0rganizational; Time-Share Project and other Due Diligence Documents.
Borrower shall have delivered to Lender a! least ten (10) Business Days (unless
a longer period is expressly specified) prior to the date of the Advance:
(i) the Articles of Organization of Borrower;
(ii) the Resolutions of Borrower;
(iii) a Level I environmental assessment of the Real Property; -
(iv) evidence that all taxes and assessments on the Property have been
paid;
(v) a title commitment or preliminary title report for the issuance of the
Title Policy (Borrower's Mortgage), together with copies of all documents
referred to therein;
(vi )unless waived in writing by Lender, a 1988 ALTA/ACSM survey map of the
Real Property prepared by a licensed land surveyor acceptable to Lender, showing
the Real Property, evidence of access to the Real Property, all easements
necessary to the operation and use of the Real Property, and such other details
as Lender may reasonably require;
(vii) all licenses and certificates for the use and operation of the Real
Property for time-share and
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CWP.349.FINOVA.PIGEON.LNAG.004
other intended uses, including certificates of
occupancy and environmental permits;
(viii ) evidence the Real Property is zoned for timeshare and other
intended uses;
(ix) the Minimum Required Time-Share Approvals for Phase One;
(x) a copy of the Time-Share Program Consumer Documents and the Time-Share
Program Governing Documents;
(xi ) the Insurance Policies;
(Xii) evidence that the Real Property is not located within a flood prone
area and drainage information;
(xiii) Intentionally Omitted;
(xiv) evidence of the availability of utilities necessary to serve the Real
Property for timeshare and other intended uses;
(xv) evidence of parking for the Real Property adequate for time-share and
other intended uses;
(xvi) a copy of the currently available portion of the as-built plans and
specifications for the Real Property;
(xvi i) a soils test report with respect to the suitability of the soils on
the Real Property for purposes of constructing the Improvements;
(xviii) a detailed draw schedule for the Work;
(xix) all leases of space or any interest therein to third parties within
the Real Property;
(xx) the items described in Exhibit J-1 at least fifteen (15) Business Days
prior to the date of the Advance;
(xxi ) the items described in paragraph 4.lB if the Advance includes a
Construction Loan Advance and the items described in paragraph 4.lF if the
Advance includes a Receivables Loan Advance;
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CWP.349.FINOVA. LNAG.004
(xxii) evidence that Borrower has carried out soil testing for
environmental contamination as described in paragraph 1 of Exhibit I, attached
hereto;
(xxiii) evidence that Borrower continues to have invested in the Property
an amount equal to the Minimum Equity; and
(xxiv) such other items as Lender requests which are reasonably necessary
to evaluate the request for the Advance and the satisfaction of the conditions
precedent to the Advance.
(c) Lender shall have received the following in form and substance
satisfactory to Lender:
(i) seven-year debt maturity schedule for Borrower;
(ii) current lien, litigation and judgment searches for Borrower conducted
in such jurisdictions as Lender deems appropriate;
(iii) a Dun and Bradstreet report with respect to Borrower;
(iv) the results of a site inspection to be made by Lender's employees;
(v) the report of Lender's Inspector with respect to the Budget, Plans and
Specifications, Contracts, Work Progress Schedule, and other construction-
related items; and
(vi) the pro-forma operating budget of the Time-Share Association.
4. Conditions Precedent for Initial Construction Loan Advance. For
the initial Construction Loan Advance, Lender's obligation to make
such Advance shall be subject to the additional terms and conditions
set forth in the following subparagraphs and elsewhere in this
Agreement:
(a) Borrower shall have satisfied all conditions set forth in paragraph
4.lA and the Acquisition Loan shall have been fully funded;
(b) Borrower shall have satisfied the terms and conditions set forth in
Exhibit J-1, including delivery to Lender of the items called for therein at
least ten (10) Business Days
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CWP.349.FINOVA.PIGEON.LNAG.004
prior to the date of such Construction Loan Advance or such longer period
as may be described in Exhibit J-1; and
(c) Lender shall have received an endorsement to the Title Policy
(Borrower's Mortgage) increasing the amount thereof by an amount equal
to the Construction Loan Advance then contemplated.
4. IC Additional Conditions Precedent for Subsequent Construction Loan
Advance. For each Construction Loan Advance after the initial
Construction Loan Advance, Lender's obligation to make such Advance
shall be subject to the terms and conditions set forth in Exhibit
J-lA, including delivery to Lender of the items called for therein at
least ten (10) Business Days prior to the date of such Construction
Loan Advance. In addition, prior to the first Construction Loan
Advance for a subsequent Phase of Construction not part of the
original Work, Borrower shall have delivered to Lender the items
required in Exhibit J-1. Further, Lender shall have received an
endorsement to the Title Policy (Borrower's Mortgage) increasing the
face amount thereof by an amount equal to the Construction Loan
Advance then contemplated.
4. ID Additional Conditions Precedent for Initial Receivables Loan
advances. For the initial Receivables Loan Advance, Lender's
obligation to make such Receivables Loan Advance shall be subject to
the additional terms and conditions set forth in the following
subparagraphs and elsewhere in this Agreement:
(a) Borrower shall have satisfied all conditions set forth in paragraph 4.IA;
(b) Borrower shall have satisfied the terms and conditions set forth in
Exhibit J-2, including delivery to Lender of the items called for
therein at least five (5) Business Days prior to the date of such
Receivables Loan Advance; and
(c) such legal opinions as Lender may require in its discretion from
Borrower's and Lender's counsel.
4. Additional Conditions Precedent for Subsequent Receivables Loan
advances. For each Receivables Loan Advance after the initial
Receivables Loan Advance, Lender's obligation to make such
Receivables Loan Advance shall be subject to the terms and conditions
set forth in Exhibit J-2, including delivery of the items called for
therein at least five (5) Business Days prior to the date of such
Receivables Loan Advance.
4. 1F General Conditions Precedent to All Advances. Lender's obligation To
fund any Advance is subject to and conditioned upon the
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CWP.349.FINOVA.PIGEON.LNAG.004
- -additional terms and conditions set forth in the following subparagraphs
remaining satisfied at the time of such Advance:
(a) No material adverse change shall I have occurred in the TimeShare
Project or in Borrower's business or financial condition since the date
of the latest financial and operating statements given to Lender by or
on behalf of Borrower.
(b) There shall have been no material, adverse change in the warranties and
representations made in the Documents by Borrower and/or any surety for
the performance of the Obligations.
(c) Neither an Event of Default nor Incipient Default shall have occurred
and be continuing.
(d) The interest rate applicable to the Advance (before giving effect to any
savings clause) will not exceed the maximum rate permitted by the
Applicable Usury Law.
(e) Borrower shall have paid to Lender the Commitment Fees and all other
fees required to be paid at the time of the Advance.
(f) Borrower shall not be entitled to any Advance unless on or before July 20,
1995, all Documents have been executed by persons required to do so and the
initial Acquisition Loan Advance has been made.
4. 1 I Conditions Satisfied at Borrower's Expense. The conditions to
Advances shall be satisfied by Borrower at its expense.
4.2 Advance Requests and Administration Fees. Receivables Loan Advances
shall not be made in amounts less than One Hundred Thousand Dollars ($100,000)
or, if less, the amount which would cause the outstanding principal balance of
the Receivables Loan to equal the Maximum Receivables Loan Amount. Construction
Loan Advances shall not be made in amounts less than Two Hundred Fifty Thousand
Dollars ($250,000) or if less, the remaining undisbursed amount of the
Construction Loan. Construction Advances shall not be made more frequently than
monthly; provided that two Construction Loan Advances may be made in any month
so long as one such Advance is an Advance under the Interest Reserve Component.
Receivables Loan Advances shall not be made more frequently than monthly;
provided, however, that Borrower will pay to Lender at the time of the second
Receivables Loan Advance made during a month an administrative fee equal to the
greater of (a) twentyfive.one-hundredths percent (.25%) of such Advance or (b)
Five Hundred Dollars ($500).
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CWP.349.FINOVA.PIGEON.LNAG.004
4.3 Disbursement of Advances. Advances may be payable to Borrower; or if
requested by Borrower and approved in writing by Lender, to others, either
severally or jointly with Borrower, for the credit or benefit of Borrower.
Borrower will pay Lender's reasonable charge in connection with any wire
transfer, which is currently Twenty-five Dollars ($25). Lender may, at its
option, withhold from any Advance any sum (including costs and expenses) then
due to it under the terms of the Documents or which Borrower would be obligated
to reimburse Lender pursuant to the Documents if first paid directly by Lender.
4.4 Interest Reserve Advances. If Borrower has not made a scheduled
interest payment on the Construction Loan during the Construction Loan Borrowing
Term in accordance with the terms of the Construction Loan Note, Lender, in its
discretion, may make an advance of the Construction Loan to make such interest
payment, whether or not Loan proceeds have been allocated within the
Construction Budget for the payment of such interest. Borrower hereby authorizes
Lender to make such advances without notice to Borrower.
4.5 No Waiver. Although Lender shall have no obligation to make an advance
unless and until all of the conditions precedent to the Advance have been
satisfied, Lender may, at its discretion, make Advances prior to that time
without waiving or releasing any of the Obligations.
5. NOTES; MAINTENANCE OF BORROWING BASE; PREPAYMENTS; SERVICING AND
COLLECTION
5.1 Repayment of Loans. The Acquisition Loan, the Construction Loan and the
Receivables Loan shall be evidenced by the Acquisition Loan Note, the
Construction Loan Note and the Receivables Loan Note, respectively, and shall be
repaid in immediately available funds according to the terms of such Notes and
the Documents.
5. 2 (a) Construction Loan Partial Release Principal Payments. Until
principal, interest and other sums due under the Documents have been paid,
exclusive of principal, interest and other charges on the Acquisition Loan Note
and the Receivables Loan Note, Borrower will make to Lender at the time of each
partial release of a Time-Share Interest from the Borrower's Mortgage a
principal payment equal to the Partial Release Fee required to be paid in
connection with such partial release.
(b) Acquisition Loan Partial Release Principal Payments. Until principal,
interest and other charges on the Acquisition Loan Note have been paid, Borrower
will make to Lender at . the time of each partial release of a Time-Share
Interest
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CWP.349.FINOVA.PIGEON.LNAG.004
<PAGE>
from the Borrower's Mortgage, in addition to the Partial Release Fee
(Construction Loan) described in paragraph 5.2(a), a fee of $500 per Unit sold.
(c) Acquisition Loan Minimum Principal Payments. Borrower will make to
Lender, on each anniversary of the last Acquisition Loan Advance, a
principal payment in an amount equal to the positive remainder
obtained by subtracting the aggregate principal payments made on the
Acquisition Loan prior to such anniversary date from the Minimum
Aggregate Principal Payment for such anniversary date set forth
below:
Anniversary Minimum Aggregate Principal Payment
1 $400,000
2 $800,000
(d) Construction Loan Minimum Principal Payment. Borrower will make to
Lender on each anniversary of the date of the last Construction Loan
Advance, a principal payment in the amount, if any, necessary to reduce
the then outstanding principal balance of the Construction Loan to an
amount equal to the percentage set forth below for each such anniversary
date multiplied by the principal balance of the Construction Loan
immediately after the last Construction Loan Advance:
Anniversary Maximum Percentage
1 30% of Balance at Last Advance
65% of Balance at Last Advance
(e) Receivables Loan Minimum Required Principal Payments. If for any reason
the aggregate principal amount of the Receivables Loan outstanding at
any time shall exceed the then Borrowing Base of all Eligible
Instruments, Borrower, without notice or demand, will immediately make
to Lender a principal payment in an amount equal to such excess plus
accrued and unpaid interest on such principal payment unless Borrower
has provided sufficient replacement Eligible Instruments as provided in
paragraph 3.2.
5.3 (a) Prohibitions on Prepayment; Prepayment Premium.
Borrower will not be entitled to prepay, in whole or in part, the Receivables
Loan until the Opening Prepayment Date. Thereafter, if neither an Event of
Default nor an Incipient Default has occurred and is continuing, then Borrower
shall have the option to prepay the Receivables Loan in full, but not in part,
upon 60 days prior irrevocable written notice . and the simultaneous payment of
the Prepayment Premium on
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CWP.349.FINOVA.PIGEON.LNAG.004
any date an installment is due on the Receivables Loan Note. Except as otherwise
expressly provided herein, Borrower will not be entitled to prepay, in whole or
in part, the Acquisition Loan or the Construction Loan, without the prior
written consent of Lender.
(b) Exceptions to Prepayment Prohibitions. Notwithstanding anything in
paragraph 5.3(a) to the contrary, the following shall not be deemed to be
prepayments prohibited pursuant to paragraph 5.2(a), 5.2(b), 5.2(c) or 5.2(d) or
to require the payment of any Prepayment Premium: (i) principal payments
scheduled under the Receivables Loan Note [including, without limitation, those
payments required pursuant to paragraphs 5.2(e)]; (ii) prepayments as a result
of casualty to or condemnation of the Property; and (iii) prepayments of the
Receivables Loan resulting from prepayments of the Receivables Collateral by
Purchasers which have not been solicited by Borrower in breach of its
Obligations under this Agreement or from Performance by Borrower of its
Obligations.
(c) Prepayment Premium Payable for Involuntary Prepayment. The application
of a Prepayment Premium determined in accordance with Schedule A shall be
payable regardless of whether the prepayment of the Receivables Loan is required
because repayment of such Loan has been accelerated pursuant to any of Lender's
rights under the Documents.
5. 4 (a) Contracts Escrow. To the extent required by Tennessee Code Section
66-32-113, or other Tennessee law, and not satisfied by other financial
assurances acceptable to the Commission under 66-32-113, Borrower shall
establish the Contracts Escrow. Contracts Escrow Agent shall hold all Contracts
and the monies deposited thereunder in escrow according to the terms of the
Contracts Escrow Assignment. Contracts Escrow Agent shall furnish to Lender at
Borrower's sole cost and expense, no later than the tenth (10th) day of each
month following the date of this Agreement, a report which shows as of the end
of the prior month with respect to each Contract for Deed held in escrow at any
time during the preceding month (i) all deposits received under the Contracts
for Deed, (ii) any closing or cancellation, and (iii) all disbursements of funds
held by Contracts Escrow Agent with respect to the Contracts for Deed.
(b) Lockbox Collections and Servicing. Lockbox Agent shall collect payments
on the Instruments constituting part of the Receivables Collateral and and remit
collected payments to Lender on the last Business Day of each and every month
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CWP.349.FINOVA.PIGEON.LNAG.004
after the date of first Receivables Loan Advance, according to the terms of the
Lockbox Agreement. Payments shall not be deemed received by Lender until Lender
actually receives such payments from Lockbox Agent; provided, however, that so
long as no Event of Default exists, Borrower shall be entitled to any interest
accrued on funds held by Lockbox Agent and any other benefit available from
Lockbox Agent because it is holding such funds. Servicing Agent shall furnish to
Lender at Borrower's sole cost and expense, no later than the tenth (10th) day
of each month commencing with the first full calendar month following the date
of this Agreement, a report, substantially in the format of Exhibit K, which:
(i) shows as of the end of the prior month with respect to each Instrument which
constitutes part of the Receivables Collateral (A) all payments received,
allocated between principal, interest, late charges and taxes, (B) the opening
and closing balances, (C) present value, (D) average consumer interest rate, and
(E) extensions, refinances, prepayments, and other similar adjustments; and (ii)
indicates delinquencies of thirty (30), sixty (60), ninety (90) days and in
excess of ninety (90) days. Borrower will pay without notice or demand any
amount which was due and payable by Borrower on the last Business Day of the
preceding month covered by such reports within three (3) Business Days of
Borrower's knowledge of such amounts. If such reports are not timely received,
Lender may estimate the amount which was due and payable. Borrower will pay upon
demand the amount determined by Lender in good faith to be due and payable. If
payment is made on the basis of Lender's estimate and thereafter reports
required by this paragraph are received by Lender, the estimated payment amount
shall be adjusted by an additional payment or a refund to the correct amount, as
the reports may indicate; such additional amount to be paid by Borrower upon
demand and such refund to be made by Lender within 5 Business Days after receipt
of written request therefor by Borrower. At the end of each calendar quarter,
Borrower will deliver or cause the Servicing Agent to deliver to Lender a
current list of the names, addresses and phone numbers of the obligors on each
of the Instruments constituting part of the Receivables Collateral . Borrower
will also deliver or cause Servicing Agent to deliver to Lender, promptly after
receipt of a written request for them, such other reports with respect to
Instruments constituting part of the Receivables Collateral as Lender may from
time to time require.
(c) Oversight Agreement. Borrower will enter into and perform and cause
Servicing Agent to enter into and perform their respective obligations under the
Oversight Agreement.
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CVVP.349.FINOVA.PIGEON.LNAG.004
5.5 Borrower will pay to Oversight Agent all reasonable out-of-pocket
expenses of Oversight Agent and a monthly fee equal to the lesser of (a) One
Thousand Dollars ($1,000) per month or (b) One Dollar ($1.00) per each
Instrument which is as part of the Receivables Collateral.
(d) Replacement of agents. Lender, subject to any additional restriction
thereon contained in the Contracts Escrow Assignment or in the following
sentence, Lockbox Agreement, or the Servicing Agreements may at any time and
from time to time substitute a successor or successors to any Agent acting under
the Contracts Escrow Assignment, Lockbox Agreement or the Servicing Agreement.
Lender will not replace any such Agent unless an Event of Default exists, such
Agent is in default of its obligations under the relevant agreement beyond any
applicable cure period, has defaulted in its obligations under the relevant
agreement on a repeated basis or, in Lender's sole and absolute judgment, fails
to perform its duties in accordance with standards normally employed by persons
performing similar services for financial institutions on a compensated basis.
If any such Agent is so removed by Lender or is otherwise removed in accordance
with the terms of the relevant agreement, so long as no Event of Default exists,
Borrower may appoint any successor Agent, subject to the prior written consent
of Lender not to be unreasonably withheld.
Application of Proceeds. Any and all payments received by Borrower with respect
to the Obligations (including, without limitation, payments made with proceeds
of the Collateral but excluding funds set aside/held in escrow prior to the
expiration of a Purchaser's statutory rescission rights) shall be first applied
to the payment of all late charges, costs , fees and expenses required by the
Documents to be paid by Borrower ('First Priority Application"); then to accrued
and unpaid interest on the loans in such order and manner as Lender may
determine; then to principal of the Loans in such order and manner as Lender may
determine. Notwithstanding anything in the preceding sentence to the contrary,
after the First Priority Application: (a) remaining proceeds of the payments
made pursuant to paragraph 5.2(a) shall be applied first to the principal
balance of the Construction Loan Note, next to accrued and unpaid interest due
under the Construction Loan Note; and (c) the remaining proceeds of the
Receivables Collateral shall be applied to accrued and unpaid interest due on
the Receivables Loan Note and then to the unpaid principal balance of the
Receivables Loan Note. The provisions of this paragraph are subject to Lender's
rights under Article VII and the other Documents as to the application of
proceeds of the Collateral following an Event of Default.
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CWP.349.FINOVA.PIGEON.LNAG.004
5.6 Borrower is Unconditional Obligation to Make Payments. Whether or not
the proceeds from the Collateral shall be sufficient for that purpose, Borrower
will pay when due all payments required to be made pursuant to any of the
Documents, Borrower's Obligation to make such payments being absolute and
unconditional.
6. BORROWER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
6.1 (a) Good Standing. Borrower is, and will remain at all times, duly
organized, validly existing and in good standing under the laws of
Massachusetts and is authorized and will remain at all times authorized, to do
business in Tennessee, Florida and in each jurisdiction in which it is at any
time selling Time-Share Interests or where at any time the location or nature of
its properties or its business makes such qualification necessary. Borrower has
and will maintain full authority to Perform the Obligations and to carry on its
business and own its property.
(b) Power and Authority; Enforceabi1ity. Borrower has and will
maintain full power and authority to execute and deliver the Documents and to
Perform the Obligations. All action necessary and required by Borrower's
Articles of Organization and all applicable laws for Borrower to obtain the
Loans, to execute and deliver the Documents which have been or will be executed
and delivered in connection with the Loans and to perform the Obligations has
been duly and effectively taken. The Documents are and shall be, legal, valid,
binding and enforceable against Borrower; and do not violate the Applicable
Usury Law or constitute a default or result in the imposition of a lien under
the terms or provisions of any agreement to which Borrower is a party. No
consent of any governmental agency or any other person not a party to this
Agreement is or will be required as a condition to the execution, delivery, or
enforceability of the Documents. (c) Borrower's Princii)al Place of Business.
Borrower's principal place of business is located in the State of Florida, and
Borrower will not move its principal place of business except upon not less than
sixty (60) days prior written notice to Lender.
6.2 No Litigation. There is no action, 1itigation or other proceeding
pending or, to Borrower's knowledge, threatened before any arbitration
tribunal , court, governmental agency or administrative body against Borrower,
which might materially adversely affect the Performance of the Obligations, the
Time-Share Project, the business or financial condition of Borrower, or the
ability of Borrower to Perform the Obligations. Borrower will promptly
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CWP.349.FINOVA.PIGEON.LNAG.004
- -notify Lender if any such action, litigation or proceeding is
commenced or threatened.
6.3 (a) Adequacy of Principal Work-Related Items. The Principal
Work-Related Items delivered to Lender are adequate [or will be adequate at the
initial Advance or such later time as may be permitted pursuant to paragraph
4.lA(d) for the delivery of such items] and will continue at all times to be
adequate for Completion of the Work. The Principal Work-Related Items delivered
to Lender are in full force and effect; no third party bound thereby is in
default of its obligations thereunder or has threatened to terminate Borrower's
rights thereunder; Borrower has paid all sums and performed all other
obligations it has under them; and no third party bound thereby has any defense
to the enforcement of Borrower's rights thereunder. No moratorium or other legal
impediment exists or, to the knowledge of Borrower, is threatened with respect
to the issuance of any permit or approval necessary to use the Time-Share
Project for intended time-share purposes upon Completion of the Work.
(b) Adequacy of Construction Budget. Borrower will cause the Construction
Budget to accurately and completely set forth the types and estimated maximum
amounts of all costs which must be incurred for Completion of the Work to occur.
(c) Adequacy of Streets and Utilities. All streets, easements, and
utilities (including potable water, storm and sanitary sewer, gas, electric,
telephone and cable television facilities and garbage removal) necessary for the
Completion of the Work and use of the Real Property for intended time-share
purposes have been completed, paid for in full and are available at the
boundaries of the Real Property. All water and sewer treatment plants and power
generation facilities intended to serve the Real Property have been constructed
and are operational; and upon Completion of the Work, will have adequate
capacity and size to serve the intended time-share use of the Real Property.
(d) No Commencement of Work. No work, equipment, materials, services or
work of any kind that may give rise to any mechanics or similar statutory lien
(whether for work performed prior to or after recordation of the Borrower's
Mortgage) which will have priority, including, without limitation, the
destruction or removal of existing Improvements, site work, clearing, grubbing,
draining or fencing of the Real Property, has been or will be performed or
commenced on the Real Property prior to recordation of the Borrower's Mortgage.
Lender may waive such condition in
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CWP.349.FINOVA.PIGEON.LNAG.004
its discretion; and as a condition precedent to such waiver, Lender may require
that such work, equipment, materials and services have been fully disclosed in
writing to Lender and Title Insurer (Borrower's Mortgage) prior to recordation
of the Borrower's Mortgage, that such work, equipment, materials and services
must be satisfactory to Lender and Lender's Inspector, and that Title Insurer
(Borrower's Mortgage) insure the priority of the Borrower's Mortgage over all
such liens.
6.4 Work-Related Covenants. Borrower will:
(a) commence construction of the Work prior to June 15, 1995;
cause the progress of the Work to occur in substantial
compliance with the Work Progress Schedule, subject to Force
Majeure Events, all in accordance with the Plans and
Specifications, Construction Contract(s), applicable laws,
regulations and private restrictions, the Documents, sound
construction engineering and architectural principles and
commonly accepted safety standards, lien free and free from
defective materials and workmanship; and cause Completion of
the Work to occur on or before the Required Completion Date.
(b) pay when due all costs, expenses and claims pertaining to the Work; and
deliver to Lender during the course of the Work in order to monitor and/or
provide assurance that the Work is proceeding lien free in accordance with the
Plans and Specifications, the Construction Contract(s), applicable laws,
regulations and private restrictions, the Documents, sound construction,
engineering and architectural principles and commonly accepted safety
standards bills of sale, conveyances and paid invoices pertaining to the Work;
all waivers and releases of lien or claims on the Real Property and/or the
Improvements which Lender may determine to be necessary or may otherwise
reasonably request for its protection; from sureties acceptable to Lender,
payment and performance bonds as Lender may reasonably determine to be
necessary; from persons acceptable to Lender, additional engineering or
architectural studies and reports as Lender or Lender's Inspector may reasonably
require; and record all notices of commencement/ completion and similar notices
permitted by applicable laws and regulations which have the effect of shortening
periods within which mechanics and similar liens may be filed;
(c) allow Lender, Lender's Inspector and/or its agents and employees to
inspect the Real Property and Work at all
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CVVP.349.FINOVA.PIGEON.LNAG.004
reasonable times, with the reasonable costs of such inspections to be borne
by Borrower;
(d) not enter into any Architect/Engineer Agreement or Construction
Contract except upon terms and with such parties as Lender may approve in
writing, such approval not to be unreasonably withheld;
(e) deliver all Principal Work-Related Items to Lender promptly after
obtaining them (or at such earlier time as may be required pursuant to paragraph
4.1);
(f) not amend any of the Principal Work-Related Items except for change
orders which (i) do not change the cost of Completion of the Work by more than
Five Thousand Dollars ($5,000) individually or Twenty-Five Thousand Dollars
($25,000) in the aggregate beyond that shown in the Construction Budget as
originally approved by Lender and (ii) do not affect the design, structural
integrity or quality of the Improvements;
(g) perform all its obligations and preserve its rights under the Principal
Work-Related Items and secure the performance of the other parties to the
Principal Work-Related Items;
(h) deliver to Lender: prior to each Construction Loan Advance, at Lender's
option, an endorsement ('date down endorsement") issued by the Title Insurer
(Borrower's Mortgage) insuring Lender against any loss by reason of defects in,
mechanic's or similar statutory liens upon or unmarketability of the title to
the Real Property, as well as insuring that the Borrower's-Mortgage, at the time
of each Construction Loan Advance, constitutes a valid first lien upon the Real
Property, subject only to the Permitted Encumbrances; and promptly after
Completion of the Work has otherwise occurred, a new Title Policy (Borrower's
Mortgage) re-issued pursuant to an LP-10 re-issue package, with an endorsement
insuring that the Improvements are located upon the Real Property;
(i) after obtaining knowledge or receiving notice thereof, correct or cause
to be corrected (i) any material defect in the Work, (ii) any material departure
in the completion of the Work from the Plans and Specifications or the
Construction Contract(s) (unless expressly permitted in this Agreement or
consented to in writing by Lender), any applicable laws, regulations or private
restrictions sound, construction, engineering or architectural principles or
commonly accepted safety standards or (iii) any encroachment of any part of the
Improvements on any
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CWP.349.FINOVA.PIGEON.LNAG.004
building line, easement line or restricted area, or any adjacent
landowner's property;
(j) promptly deliver to Lender any and all notices received by Borrower that
it is not complying with applicable laws, regulations and private
restrictions pertaining to the Work or that the Work is not being
completed in accordance with the Plans and Specifications, the
Construction Contract(s), sound construction, engineering and
architectural principles and commonly accepted safety standards;
(k) if at any time there exists or appears likely to exist any Uncovered
Cost of the Work, Borrower will notify Lender within ten (10) Business
Days (and in any event prior to the next Advance) after obtaining
knowledge thereof; within the earlier of such ten (10) Business Day
period or ten
(10) Business Days after Lender's demand that it do so, Borrower will
deliver to Lender a cash deposit ("Required Completion Assurance
Deposit") equal to the Uncovered Cost of the Work; in the event of any
dispute, the necessity for and amount of the Required Completion
Assurance Deposit by Lender; the Required Completion shall be
determine Assurance Deposit may be deposited in a non-interest bearing
account and need not be segregated from any of Lender's other funds,
provided that Lender will disburse the Required Completion Assurance
Deposit to pay and/or reimburse Borrower for the costs of the Work
prior to any further disbursement of the Construction Loan for such
purpose, but subject to the terms and conditions of this Agreement
pertaining to the disbursement of Construction Loan Advances; and
Lender is hereby granted a security interest in all Required Completion
Assurance Deposits from time to time held by Lender.
(i ) cause . all materials supplied for or intended to be utilized in the
Completion of the Work, but previously not affixed to or incorporated into the
Improvements, to be stored on the Real Property with adequate safeguards, as
reasonably required by Lender, to prevent loss, theft, damage or commingling
with other materials; and
(m) promptly after receipt by Borrower (but in no event later than the
Required Completion Date), deliver to Lender copies of all certificates
of acceptance and/or occupancy relating to the Work.
6.5 (a) Compliance with Laws. Borrower has complied, and will comply, with
all applicable laws and regulations, including, without limitation, all laws
and regulations of the state in which the Time-Share Project is located and
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CWP.349.FINOVA.PIGEON.LNAG.004
all other governmental jurisdictions in which the TimeShare Project is located
or in which Time-Share Interests will be sold or offered for sale.
(b) Sales Activities. As of the date of this Agreement, Borrower has not
sold any Time-Share Interest or offered any Time-Share Interest for sale.
Borrower will not sell any Time-Share Interest or offer any Time-Share Interest
for sale in any jurisdiction, unless: (i) Borrower has delivered to Lender true
and complete copies of the Minimum Required Time-Share Approvals, all other
approvals required to be obtained by Borrower in such jurisdiction prior to
engaging in its proposed conduct, and all other evidence required by Lender that
Borrower has complied with all laws of such jurisdiction governing its proposed
conduct; with respect to its proposed conduct, and other evidence received by
Lender; and (ii) Borrower has delivered to Lender the Time-Share Program
Consumer Documents and the Time-Share Program Governing Documents which Borrower
will be using in connection with the Time-Share Project and the sale or offering
for sale of Time-Share Interests and such documents have been approved by
Lender, which approval shall not be unreasonably withheld. Borrower has already
submitted an application for the issuance of the Minimum Required Time-Share
Approvals, which complies with applicable laws and regulations and Borrower will
diligently pursue approval of such application and the issuance of the Minimum
Required Time-Share Approvals. Not later than June 15, 1995, Borrower will
deliver to Lender the Minimum Required Time-Share Approvals, the Time-Share
Program Governing Documents and Time-Share Program Consumer Documents (which
have, to the extent required, been approved for use in the State of Tennessee)
and will take all steps necessary to commence the sale of Time-Share Interests
in Tennessee; and from and after such date, Borrower will maintain an active
marketing program for the sale of Time-Share Interests in conformance with all
applicable laws and regulations and consistent with the provisions of this
paragraph and the terms and conditions of Borrower's Mortgage pertaining to the
sale of Time-Share Interests.
(c) Time-Share Interest Not a Security. Borrower has not sold or offered
for sale any Time-Share Interest as an investment. Neither the sale nor the
offering for sale of any Time-Share Interest would constitute the sale or the
offering of a security for sale under any applicable law.
(d) Zoning Compliance. Neither time-share use nor other transient use and
occupancy of the Real Property violates
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CWP.349.FINOVA.PIGEON.LNAG.004
or will violate or constitute a non-confoming use or require a variance under
any private covenant or restriction or any zoning, use or similar law, ordinance
or regulation affecting the use or occupancy of the Real Property.
6.6 (a) Eligible Instruments. Each Instrument which is assigned to Lender
pursuant to this Agreement and against which an Advance is requested or which is
assigned in satisfaction of Borrower's obligations under paragraph 3.2 shall be
an Eligible Instrument at the time of assignment. Borrower further warrants and
guarantees the enforceability of the Receivables Collateral.
(b) No Modification of Receivables Collateral or Payments by Borrower.
Without the prior written consent of Lender, Borrower will not cancel or
materially modify, or consent to or acquiesce in any material modification
(including, without limitation, any change in the interest rate or amount,
frequency or number of payments) to, or solicit the prepayment of, any
Instrument which constitutes part of the Receivables Collateral; or waive the
timely perfomance of the obligations of the Purchaser under any such Instrument
or its security; or release the security for any such Instrument. Borrower will
not pay or advance directly or indirectly for the account of any Purchaser any
sum required to be deposited or owing by the Purchaser either under any Contract
for Deed or under any Instrument which constitutes part of the Receivables
Collateral.
(c) Fulfillment of Obligations to Purchasers. Borrower at all times will
fulfill and will cause its Affiliates, agents and independent contractors at all
times to fulfill all obligations to Purchasers. Borrower will perform all of its
obligations under the Time-Share Program Consumer Documents and the Time-Share
Program Governing Documents.
(d) No Modification of Time-Share Documents. Borrower, without the prior
written consent of Lender, will not cancel or materially modify any of the
Time-Share Program Consumer Documents or the Time-Share Program Governing
Documents.
(e) Associations; Assessments and Reserves. Each Purchaser will be and,
subject only to its retaining its interest under a Contract for Deed, will
remain a member of the Time-Share Association upon Borrower's acceptance of such
Contract for Deed. The Time-Share Association has authority to levy annual
assessments to cover the costs of maintaining and operating the Time-Share
Project. To Borrower's knowledge, at all times after the first
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CWP.349.FINOVA.PIGEON.LNAG.004
conveyance of a Time-Share Interest, the Time-Share Association will be solvent;
assessments levied from time to time will be adequate to cover then current
costs of maintaining and operating the Time-Share Project and to establish and
maintain a reasonable reserve for capital improvements. Borrower will promptly
notify Lender in writing if it has knowledge or has reason to believe that
events (other than general changes in the economy) have occurred or could occur
which could give rise to a material increase in such costs. Borrower will use
its best efforts to: (i) cause the Time-Share Association to (A) discharge its
obligations under the Time-Share Program Governing Documents and (B) maintain
the reserve described above; and (ii) so long as Borrower controls the
Time-Share Association, pay to such association not less often than every twelve
(12) months after such conveyance the difference between (A) the cumulative
total amount of the maintenance and operating expenses incurred by such
association, together with a reasonable reserve for capital improvements and the
amount of any installment of real property taxes currently due and payable with
respect to the Time-Share Project and related amenities, through the end of the
calendar month preceding the month in which such payment is made and (B) the
cumulative total amount of assessments payable to the Time-Share Association by
owners or holders of Contracts for Deed other than Borrower through the end of
the calendar month preceding the month in which such payment is made.
(f) Title and Condition of Amenities. Except as otherwise permitted and
disclosed by the Time-Share Program Governing Documents, at all times after the
first conveyance of a Time-Share Interest the Time-Share Association or the
owners of Time-Share Interests in common will own all the common areas in the
Real Property and other amenities which have been promised or represented as
being available to Purchasers, free and clear of liens and security interests
except for the Permitted Encumbrances. Borrower will maintain or cause to be
maintained in good condition and repair all amenities and common areas which
have been promised or represented as being available to Purchasers and all roads
and off-site improvements which are not the responsibility of the Time-Share
Association to maintain and repair and have not been dedicated to or accepted by
the responsible governmental authority or utility. Borrower will maintain a
reasonable reserve to assure compliance with the terms of the foregoing
sentence.
6.7 col1ection of Receivables Col1ateral . Borrower wi11 undertake the
diligent and timely collection of amounts delinquent under each
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CWP.349.FINOVA.PIGEON.LNAG.004
Instrument which constitutes part of the Receivables Collateral and will bear
the entire expense of such collection. Lender shall have no obligation to
undertake any action to collect under any Instrument.
6.8 Notice of Lender's Interest. Lender may notify persons bound thereby of
the existence of Lender's interest as assignee in the Receivables Collateral and
request from any person bound by them any information relating to them. Borrower
will deliver such notice under its letterhead if requested.
6.9 (a) Restrictions on Time-Share Project Financing. Without the prior
written consent of Lender not to be unreasonably withheld, Borrower will not
incur any additional debt (including without limitation any contingent or
guarantor liability) with respect to, or in connection with its ownership and
operation of the Property, except for short term accounts payable incurred in
connection with the operation of the Property which are not secured by any of
the Collateral ("Permitted Debt"). Without limiting the generality of the
foregoing, Borrower will not obtain additional receivables financing during the
Receivables Loan Borrowing term without Lender's prior written consent, and
the availability of Advances under the Receivables Loan shall be deemed
reasonable grounds to withhold such consent. Before Borrower's acceptance of any
such third party loan or financing other than the Permitted Debt, its terms must
be presented to Lender for approval. Borrower agrees that Lender may require as
a condition to its approval that any third parties providing financing (other
than Permitted Debt) to Borrower deliver to Lender written certificates
containing notice and cure rights and full subordinations and otherwise in form
and substance satisfactory to Lender.
(b) Restrictions on Liens or Transfers. Borrower, without the
prior written consent of Lender, will not: ' ( ' i) sell, convey,
pledge, hypothecate, encumber or otherwise transfer any security for the
Performance of the obligations; (ii) permit or suffer to exist any
liens, security interests or other encumbrances on any security for the
Performance of the Obligations, except for the Permitted Encumbrances
and liens and security interests expressly granted to Lender; or (iii)
sell, lease, transfer or dispose of all or substantially all of its
assets to another entity.
6.10 Insurance. Borrower will pay the cost of and will maintain and
deliver evidence to Lender of insurance policies required by Lender
which are written by insurers and in amounts and on forms
satisfactory to Lender.
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CWP,349.FINOVA.PIGEON.LNA@:cO4
6.11 (a) No Misrepresentations. The Documents and all certificates, financial
statements and written materials furnished to Lender by or on behalf of
Borrower in connection with the Loans do not contain any untrue
statement of a material fact or omit to state a fact which materially
adversely affects or in the future may materially adversely affect the
Collateral, the Time-Share Project, the business or financial condition
of Borrower, or the ability of Borrower to Perform the Obligations.
(b) Reliance. Lender's examination, inspection, or receipt of information
pertaining to the Collateral or the Time-Share Project and its proposed
operation shall not in any way be deemed to reduce the full scope and
protection of the warranties, representations and Obligations contained
in this Agreement.
6.12 (a) Sales Reports. On or before the tenth (10th) day of each month,
Borrower will cause to be furnished to Lender (i) the reports required
pursuant to paragraph 5.4(a) and (ii) if requested by Lender, a sales
report for the prior month showing the number' of sales and closings of
Time-Share Interests and the aggregate dollar amount thereof, including
down payments.
(b) Financial Information. Borrower will furnish or cause to be
furnished to Lender within ninety (90) days after each fiscal year of
the subject, a copy of the current annual financial statements of
Borrower, and, subject to the best efforts of Borrower, the Time-Share
Association; and shall furnish or cause to be furnished to Lender within
forty five (45) days after each interim quarterly fiscal period of
Borrower a copy of the current financial statements of Borrower for the
period commencing with the first day of the fiscal year and concluding
with such quarter end. Such financial statements shall contain a balance
sheet as of the end of the relevant fiscal period and statements of
income and of cash flow for such fiscal period (together, in each case,
with the comparable figures for the corresponding period of the previous
fiscal year), all in reasonable detail. All financial statements shall
be prepared in accordance with generally accepted accounting principles,
consistently applied. All financial statements of Borrower shall be
certified by the chief financial officer of Borrower. Annual statements
of Borrower shall be audited and certified by a recognized firm of
certified public accountants reasonably satisfactory to Lender. Lender
acknowledges that, as of the date hereof, the firm of Arthur Andersen &
Co. is acceptable to it. Together with such financial statements,
Borrower will deliver to
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CWP.349.FINOVA.PIGEON.LNAG.vv4
Lender a certificate signed by Borrower's chief financial officer stating that
there exists no Event of Default or Incipient Default or, if any such Event of
Default or Incipient Default exists, specifying the nature and period of its
existence and what action Borrower proposes to take with respect to it.
(c) Time-Share Project and Sales Information. Borrower will deliver to
Lender from time to time, as available, and promptly upon amendment or
effective date: current price lists, sales literature,
registrations/consents to sell, and final subdivision public
reports/public offering statements/prospectuses. Borrower will deliver
to Lender any changes which Borrower proposes or any other person
having the power to do so proposes be made to the TimeShare Program
Consumer Documents and/or the Time-Share Program Governing Documents
last delivered. to Lender, together with a description and explanation
of the changes; and other items requested by Lender which relate to the
Time-Share Interests.
(d) Riqht to Inspect. Borrower will at its expense permit Lender and its
representatives at all reasonable times to inspect the Time-Share
Project and to inspect, audit and copy Borrower's books and records.
(e) Association Budgets. Borrower will submit to Lender annually within ten
(10) days after each is available, proposed annual maintenance and
operating budgets of the Time-Share Association, certified to be
adequate by the Time-Share Manager and a statement of the annual
assessment to be levied upon the owners of Time-Share Interests; and
will use its best efforts to cause to be made available to Lender for
inspection, auditing and copying, upon Lender's request, the books and
records of the Time-Share Association.
(f) Additional Information. Borrower will make available such further
information as Lender may from time to time reasonably request.
6.13 Subordination of Indebtedness.
(a) Indenture. All obligations of the Borrower to Lender under this
Agreement and the Notes are intended to, and do, constitute "Senior
Indebtedness' as such term is defined in and for purposes of, the Indenture
dated as of May 15, 1987 ("Indenture") between the Borrower and Shawmut Bank,
N.A., as trustee, pursuant to which the Borrower's eight and one quarter percent
(81%) Convertible Subordinated Debentures
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CVv?.349.FINOVA.PIGEON.LNAG.004
due 2012 ("Debentures') were issued, and will be entitled to all the benefits
associated with being 'Senior Indebtedness" under the Indenture, including,
without limitation, ranking senior to the Debentures.
(b) Subordination of Indebtedness Owing to Affiliates. Borrower wi11
cause any and all indebtedness owing by it to its shareholders, directors,
officers, partners, members or Affiliates, or any relatives of any of the
foregoing, and all liens, security interests and other charges on the assets of
Borrower, including, without limitation, the Collateral, to be fully
subordinated in all aspects to the Obligations pursuant to written agreements
satisfactory to Lender; provided, however, that if neither an Event of Default
nor an Incipient Default then exists, such subordination shall not extend to (i)
reasonable salaries and fees at normal and customary rates for services actually
rendered and other distributions expressly permitted pursuant to the terms of
this Agreement or (ii) regularly scheduled payments in accordance with the
written agreements described in this paragraph. Any such creditor shall execute
a written subordination agreement in form and substance satisfactory to Lender.
6.14 No Default for Third Party Obligations. Borrower is not in default
under any other agreement evidencing, guaranteeing or securing borrowed money or
a receivables purchase financing involving an obligation in excess of Two
Hundred Fifty Thousand Dollars ($250,000) to make a payment of principal or
interest or to repurchase receivables or any other material default by Borrower
permitting the acceleration of the payment or repurchase obligations of
Borrower, which payment or repurchase obligations entitled to be accelerated are
in excess of Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate.
Borrower is not in violation of or in default under any material term in any
other material agreement, instrument, order, decree or judgment of any court,
arbitration or governmental authority to which it is a party or by which it is
bound.
6.15 Payment of Taxes. Borrower has filed and will file tax returns and @as
paid and will pay all taxes, assessments, levies and penalties, if any, required
to be filed by it or paid by it to any governmental or quasi-governmental
authority or subdivision, including real estate taxes and assessments relating
to the Property, unless and only to the extent the item shall be contested in
good faith and by appropriate proceedings by Borrower, Borrower shall set aside
and cause on its books adequate reserves with respect to the contested item and,
in connection with any tax assessment, levy or penalty levied against the
Collateral encumbered by the Borrower's Mortgage, Borrower shall comply with the
terms of the
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CWP.349.FINOVA.PIGEON.LNAG.004
Borrower's Mortgage pertaining to such contest. Borrower will provide to
Lender not more than -thirty (30) days after such taxes and assessments become
due evidence that all taxes and assessments on the Units and TimeShare Project
common areas and related amenities have been paid in full.
6. 16 Fees, Costs and Expenses.
(a) Loan Fee and Documentation Fee.
Borrower will pay to Lender the Construction Loan Fee and the Acquisition/
Receivables Loan Fee. Lender acknowledges receipt of Ten Thousand Dollars
($10,000) of the Acquisition/Receivables Loan Fee. Borrower will pay to Lender
the balance Acquisition/Receivables Loan Fee at the time the initial Advance is
made, but in no event later than June 15, 1995. Borrower will pay on demand any
and all costs and expenses incurred by Lender in connection with the initiation,
documentation and closing of the Loans, the making of Advances, the protection
of the Collateral , or the enforcement of the Obligations against Borrower,
including, without limitation, all attorneys' and other professionals' fees
(including without limitation normal charges for photocopy, telecopy and
computer services), consumer credit reports, and revenue, documentary stamp,
documentary transaction and intangible taxes. Notwithstanding anything in this
paragraph to the contrary, Borrower will have no obligation to pay or reimburse
Lender for Lender's attorneys' fees which are incurred in connection with the
original preparation, negotiation and execution of the Documents delivered prior
to or in connection with the first Advance ("Original Documents') or are
otherwise incurred in connection with the closing of the first Advance, which
are in excess of $15,000, unless caused by the negligence of Borrower or third
parties, the lack of diligence or cooperation by Borrower or third parties in
the negotiation of the Documents and the closing of the first Advance, or
circumstances which would not reasonably have been foreseen by Lender or its
counsel.
(b) Custodial Fee. In addition to all other fees required to be paid in
connection with the Loan, Borrower shall pay to Lender a fee ("Custodial
Fee") equal to Ten Dollars ($10) per each Instrument which is delivered
to Lender in connection with the Loan and is in the physical custody of
Lender. The Custodial Fee for an Instrument shall be paid by Borrower to
Lender at the time the Instrument is assigned to Lender. After the
Custodial Fee is paid for an Instrument, no fee shall be payable to
Lender for any Instrument which is delivered to Lender pursuant to para-
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CWP.349.FINOVA.PIGEON.LNAG.004
graph 3.2(b) in replacement of an Instrument for which Borrower has paid the
Custodial Fee. Once a Custodial Fee has been paid to Lender, Borrower shall not
be entitled to any reimbursement of any portion hereof.
6.17 Indemnification. Borrower will INDEMNIFY, PROTECT, HOLD HARMLESS, and
defend Lender, its successors, assigns and shareholders (including corporate
shareholders), and the directors, officers, employees, agents and servants of
the foregoing, for, from and against any and all losses, costs, expenses
(including, without limitation, court costs, and attorneys' fees), demands,
claims, suits, proceedings (whether civil or criminal), orders, judgments,
penalties, fines and other sanctions arising from or brought in connection with
(a) the Time-Share Project, the Collateral, Lender's status by virtue of the
Documents, creation of Security Interests, the terms of the Documents or the
transactions related thereto, or any act or omission of Borrower or any Agent,
or their respective employees or agents, whether actual or alleged unless such
act or omission is caused by Lender's gross negligence or willful misconduct,
and (b) any and all brokers' commissions or finders' fees or other costs of
similar type by any party in connection with any of the Loans. On written
request by a person or other entity covered by the above agreement of indemnity,
Borrower will undertake, at its own cost and expense, on behalf of such
indemnitee, using counsel satisfactory to the indemnitee, the defense of any
legal action or proceeding to which such person or entity shall be a party. At
Lender's option, Lender may at Borrower's expense prosecute or defend any action
involving the priority, validity or enforceability of the Security Interests in
the security for the Performance of the Obligations.
6. 18 Restrictions on Expenses. Borrower shall not permit its selling,
general and administrative expenses to exceed fifty percent (50%)of gross sales
revenue generated from the sale of real estate, calculated at the end of each
calendar quarter on a twelve (12) month rolling basis. As used in this
paragraph, selling, general and administrative expenses shall mean selling,
general and administrative expenses properly allocable to real estate calculated
in accordance with generally accepted accounting principles, as previously
reflected in the financial statements of Borrower provided to Lender.
6.19 Net Worth Maintenance. Borrower must maintain a tangible net worth,
determined in accordance with generally accepted accounting principles, in
an amount not less than Forty Two Million Dollars ($42,000,000).
6.20 Perfection of Security Interests. Borrower will execute or cause to be
executed all documents and ao or cause to be done all acts necessary for Lender
to perfect and to continue the perfection of
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CVVP.349.FINOVA.PIGEON.LNAG.w4
the Security Interest of Lender in the Collateral or otherwise to
effect the intent and purposes of the Documents.
6.21 -Environmental Remediation. Within sixty (60) days of the date hereof,
Borrower shall (a) remove (i) all contaminated soils required under paragraph 1
of Exhibit 1, attached hereto, and (ii) the storage tank, drums, buckets and
septic tank required under paragraph 2 of Exhibit 1, and (b) shall delivery to
Lender written evidence satisfactory to Lender that such removal has been
completed in accordance with the requirements set forth in Exhibit I.
6.22 Survival and Additional Representations, Warranties and Covenants.
The representations, warranties and covenants contained in this
Article VI are in addition to, and not in derogation of, the
representations and warranties contained elsewhere in the Documents
and shall be deemed to be made and reaffirmed prior to the making of
each Advance.
7. DEFAULT
7.1 Events of Default. The occurrence of any of the following events or
conditions shall constitute an Event of Default by Borrower under the Documents:
(a) failure of Lender to receive from Borrower within five (5) Business
Days of the date when due and payable (i) any amount payable under any Note or
(ii) any other payment due under the Documents, except for a payment due at the
Maturity Date of a Note for which no grace period is al1owed;
(b) any representation or warranty which is made by a person other than
Lender and is contained in the Documents or in any certificate furnished to
Lender under the Documents by or on behalf of Borrower proves to be, in any
material adverse respect, false or misleading as of the date deemed made;
(c) a default in the Performance of the Obligations set forth in paragraph
3.2, 6.9(a), 6.9(b)(i), 6.9(b)(iii), 6.10, 6.13, 6.18, 6.19 or 6.21;
(d) a default in the Performance of the Obligations or a violation of any term,
covenant or provision of the Documents (other than a default or violation
referred to elsewhere in this paragraph 7.1) which continues unremedied (i) for
a period of five (5) Business Days after notice of such default or violation to
Borrower in the case of a default under or violation of paragraph 6.9(b)(ii) or
any
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WP.349.FINOVA.PIGEON.LNAG..@4
other default or violation which can be cured by the payment of money alone or
(ii) for a period of twenty (20) Business Days after notice to Borrower in the
case of any other default or violation;
(e) an 'Event of Default", as defined elsewhere in any of the Documents; any
default by Borrower under any other agreement evidencing, guaranteeing or
securing borrowed money or a receivables purchase financing involving an
obligation in excess of Two Hundred Fifty Thousand Dollars ($250,000) to make a
payment of principal or interest or to repurchase receivables or any other
material default by Borrower permitting the acceleration of the payment or
repurchase obligations of Borrower, which payment or repurchase obligations
entitled to be accelerated are in excess of Two Hundred Fifty Thousand Dollars
in the aggregate;
(g) any final, non-appealable judgment or decree for money damages or for a
fine or penalty against Borrower which is not paid and discharged or
stayed within thirty (30) days thereafter and when aggregated with all
other judgment(s) or decree(s) that have remained unpaid and
undischarged or stayed for such period is in excess of Two Hundred Fifty
Thousand Dollars ($250,000);
(h) any party holding a lien or security interest in any Collateral (other
than a lien created by Purchaser solely with respect to its Time-Share
Interest) commences foreclosure or similar sale thereof;
Borrower shall (i) generally not be paying its debts as they become due, (ii)
file, or consent by answer or otherwise to the filing against it of a petition
for relief or reorganization, arrangement or liquidation or any other petition
in bankruptcy or insolvency under the laws of any jurisdiction, (iii) make an
assignment for the benefit of its creditors, (iv) consent to the appointment of
a custodian, receiver, trustee or other officer with similar powers for itself
or any substantial part of its property, (v) be adjudicated insolvent, (vi)
dissolve or commence to wind-up its affairs or (vii) take any action for
purposes of the foregoing; or a petition for relief or reorganization,
arrangement or liquidation or any other petition in bankruptcy or insolvency or
the appointment of a custodian under the laws of any jurisdiction is filed
against it or a custodian is appointed for Borrower, the Collateral or any
material part of its properties and such
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VVP.349.FINOVA.PIGEON.LNAG.004
proceeding is not dismissed and appointment vacated within ninety (90) days
thereafter;
(j) a material adverse change in the Collateral , the Time-Share Project
or in the business or financial condition of Borrower, which change is
not enumerated in this paragraph
7.1 as the result of which Lender in good faith deems the prospect of
Performance of the Obligations impaired or the Collateral imperiled;
(k) failure of Lender to receive from Borrower, within twenty (20) days
of the date Borrower knows or should have known of such change, notice
of any material change in any representations or warranties in the
Documents or otherwise made in connection with the Loans;
(1 ) an order or decree has been entered by any court of competent
jurisdiction enjoining the intended use of the Project as a time-share resort
and judgment is not vacated within ninety (90) days after Borrower has obtained
knowledge or notice thereof;
(m) the aggregate principal balance of all Instruments which constitute
part of the Receivables Collateral and have payments more than sixty (60) days
past due exceeds three percent (3%) of the aggregate principal balance of all
Instruments constituting part of the Receivables Collateral as of the last day
of each month, for three (3) consecutive months; or
(n) at any time prior to Completion of the Work, Borrower (i) abandons the
Work or (ii) delays construction or suffers construction to be delayed for any
period of time, for any reason whatsoever not covered by item (i) above so that
Completion of the Work cannot be accomplished in the ordinary course of
construction, in the reasonable judgment of Lender, on or before the Completion
Date.
7. 2 Remedies. At any time after an Event of Default has occurred and while
it is continuing, Lender may but without obligation, in addition to the rights
and powers granted elsewhere in the Documents and not in limitation thereof, do
any one or more of the following:
(a) cease to make further Advances;
(b) declare the Notes (or any one of them), together with prepayment
premiums, and all other sums owing by Borrower to Lender in connection with the
Documents, immediately due
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<PAGE>
CVVP.349.FINOVA.PIGEON.LNAG.004
and payable without notice, presentment, demand or protest,
which are hereby waived by Borrower;
(c) with respect to the Receivables Collateral, (i) institute collection,
foreclosure and other enforcement actions against Purchasers and other persons
obligated on the Receivables Collateral, (ii) enter into modification agreements
and make extension agreements with respect to payments and other performances,
(iii) release persons liable for performance, (iv) settle and compromise
disputes with respect to payments and performances claimed due, all without
notice to Borrower, without being called to account therefor by Borrower and
without relieving Borrower from Performance of the Obligations, and (v) receive,
collect, open and read all mail of Borrower for the purpose of obtaining all
items pertaining to the Receivables Collateral;
(d) apply the then balance of the Required Completion Assurance Deposits to
the satisfaction of the Obligations and the Other Loan Obligations (as defined
in paragraph 10.1(b)) in such order and manner as Lender may determine;
(e) (i) continue and/or cause Completion of the Work; (ii) take exclusive
possession of the Property or any part thereof; (iii) expend such funds as
Lender may deem appropriate, including the Required Completion Assurance
Deposit(s) (if any), any other funds of Borrower held by Lender and any sums
which may remain unadvanced hereunder, to continue and/or cause Completion of
the Work; (iv) demand and receive performances due under the Principal
Work-Related Items and the other Contracts, Intangibles, Licenses and Permits;
(v) make such changes to the scope of the Work and to the Principal Work-Related
Items and other Contracts, Intangibles, Licenses and Permits as may be necessary
or desirable in Lender's judgment; (vi) file claims, institute enforcement
actions and otherwise prosecute and defend all actions or proceedings relating
to the Work, the Principal Work-Related Items and the other Contracts,
Intangibles, Licenses and Permits as Lender may determine to be necessary or
desirable in Lender's judgment; (vii) pay, settle or compromise all existing
bills and claims which are or may be liens against any of the Property or as
Lender may deem to be necessary or desirable in Lender's judgment for the
continuance or Completion of the Work related thereto or the clearance of title,
all without notice to Borrower; (viii) execute in Borrower's name all
applications, certificates, notices and other instruments and give all
instructions and communications which may be required or permitted by the
Principal Work-Related Items
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CWP.349.FINOVA.PIGEON.LNAG.004
and other Contracts, Intangibles, Licenses and Permits, as determined by
Lender;
(ix) cancel or surrender any of the Principal Work-Related Items and the other
Contracts, Intangibles and Deposits and enter into new contracts for the
Completion of the Work and any changes to the scope of the Work; (x) do any and
every act with respect to the Completion of the Work, the Principal Work-Related
Items and the other Contracts, Intangibles, Licenses and Permits which Borrower
may do in its behalf; (xi) employ such contractors, subcontractors, suppliers,
agents, attorneys, architects, accountants, appraisers, security guards and
inspectors as Lender may in its Judgment deem necessary or desirable to
accomplish any of the above purposes; and (xii) receive, collect, open and read
all mail of Borrower for the purpose of obtaining all items pertaining to the
Work, the Principal Work-Related Items and the other Contracts, Intangibles,
Licenses and Permits; and
(f) proceed to protect and enforce its rights and remedies under the
Documents and to foreclose or otherwise realize upon its security for
the Performance of the Obligations, or to exercise any other rights and
remedies available to it at law, in equity or by statute.
7.3 Application of Proceeds During an Event of Default,. Notwithstanding
anything in the Documents to the contrary, while an Event of Default exists, any
Required Completion Assurance Deposits and any cash received and retained by
Lender in connection with the Receivables Collateral may be applied to payment
of the Obligations in the manner provided in paragraph 7.5.
7.4 Uniform Commercial Remedies: Sale; Assembly of Col.1-ateral.
(a) UCC Remedies; Sale of Receivables Collateral. Lender shall have all of the
rights and remedies of a secured party of Arizona under the Uniform Commercial
Code of the State . and all other rights and remedies accorded to a Secured
Party at equity or law. Any notice of sale or other disposition of the
Receivables Collateral given not less than ten (10) Business Days prior to such
proposed action in connection with the exercise of Lender's rights and remedies
shall constitute reasonable and fair notice of such action. Lender may postpone
or adjourn any such sale from time to time by announcement at the time and place
of sale stated on the notice of sale or by announcement of any adjourned sale,
without being required to give a further notice of sale. Any such sale may be
for cash or, unless prohibited by applicable law, upon such credit or
installment as Lender may determine. Borrower shall be
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CWP.349.FINOVA.PIGEON.LNAG.004
credited with the net proceeds of such sale only when such proceeds are actually
received by Lender in good current funds. Despite the consummation of any such
sale, Borrower shall remain liable for any deficiency on the Obligations which
remains outstanding following such sale. All net proceeds recovered pursuant to
a sale shall be applied in accordance with the provisions of paragraph 7.5.
(b) Lender's Right to Execute Conveyances. Lender may.- in the name of
Borrower or in its own name, make and execute all conveyances,
assignments and transfers of the Receivables Collateral sold in
connection with the exercise of Lender's rights and remedies; and Lender
is hereby appointed Borrower's attorney-in-fact for this purpose.
(c) Obligation to Assemble Collateral. Upon request of Lender when an Event
of Default exists, Borrower shall assemble the Personal Property,
Receivables Collateral not already in Lender's possession and make it
available to Lender at a time and place designated by Lender.
7.5 Application of Proceeds. The proceeds of any sale of all or anY part of
the Receivables Collateral made in connection with the exercise of Lender's
rights and remedies shall be applied in the following order of priorities;
first, to the payment of all costs and expenses of such sale, including without
limitation, reasonable compensation to Lender and its agents, attorneys' fees,
and all other expenses, liabilities and advances incurred or made by Lender, its
agents and attorneys, in connection with such sale, and any other unreimbursed
expenses for which Lender may be reimbursed pursuant to the Documents; second,
to the payment of the other Obligations, in such order and manner as Lender
shall in its discretion determine, with no amounts applied to payment of
principal until all interest has been paid; and third, to the payment to
borrower, its successors or assigns, or to whosoever may be lawfully entitled to
receive the same, or as a court of competent jurisdiction may direct, of any
surplus then remaining from such proceeds.
7.6 Lender's Right to Perform. Lender may, at its option, and without any
obligation to do so, pay, perform and discharge any and all obligations
(including, without limitation, the Obligations under paragraph 6.iO) agreed to
be paid or performed in the Documents by Borrower or any surety for the
Performance of the Obligations if (a) such person fails to do so and (b) (i) an
Event of Default exists or (ii) in the opinion of Lender, such action must be
taken because an emergency exists or to preserve any of the Collateral or its
value. For such purposes Lender may use the proceeds of the Receivables
Collateral. All amounts expended by Lender in so doing or in exercising its
remedies under the Documents following
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CWP.349.FINOVA.PIGEON.LNAG.004
an Event of Default shall become part of the Obligations, shall be immediately
due and payable by Borrower to Lender upon demand, -and shall bear interest at
the Default Rate from the dates of such expenditures until paid.
7. 7 Non-Exclusive Remedies. No remedy in any Document conferred on or
reserved to Lender is intended to be exclusive of any other remedy or
remedies, but each and every such remedy shall be cumulative and
shall be in addition to every other remedy given under any Document
or now or hereafter existing at law or in equity. No delay or
omission to exercise any right or power shall be construed to be a
waiver of or acquiescence to any default or a waiver of any right or
power; and every such right and power may be exercised from time to
time and as often as may be deemed expedient.
7.8 Waiver of Marshalling. Borrower, for itself and for all who may claim
through or under it, hereby expressly waives and releases all right
to have the Collateral, or any part of the Collateral, marshalled on
any foreclosure, sale or other enforcement of Lender's rights and
remedies.
7.9 Attorney-in-Fact. For the purpose of exercising its rights and
remedies under paragraphs 7.2(c), 7.2(d) and 7.6, Lender may do so in
Borrower's name or its name and is hereby appointed as Borrower's
attorney-in-fact to take any and all actions in Borrower's name
and/or on Borrower's behalf as Lender may deem necessary or
appropriate in its discretion in the accomplishment of such purposes.
8. LENDER'S INSPECTOR
8.1 Retention of Lender's Inspector. Lender may retain an
architectural/engineering firm ("Lender's Inspector") to review the Principal
Work-Related Items, the other Contracts, Intangibles, Licenses and Permits and
the budget proposed to be the Construction Budget and any changes to such items;
inspect the Real Property prior to commencement of the Work for purposes of
determining the condition of the Real Property and any existing improvements;
make periodic inspections of the Real Property and Work (whether or not
Construction Loan proceeds are to be used to pay or reimburse Borrower for the
costs of such Work) so that Lender may monitor whether Borrower is in compliance
with the terms and conditions of this Agreement, and certifying that each
Construction Loan Advance Request is not in excess of the Work completed and the
amount to which Borrower is entitled under the terms and conditions of this
Agreement; provide evidence satisfactory to Lender prior to the funding of any
Construction Loan Advance that (subject to completion thereof as part of the
Work as contemplated by this Agreement), all necessary street,
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CV4P.349.FINOVA-PIGEON.LNAG.004
easements and utilities are available to the boundary of the Real Property
and that the respective lines and treatment or generator plants are of adequate
capacity and size for the intended timeshare use of the Property. Furthermore,
Lender may require an inspection of the Work by Lender's Inspector (a) prior to
each Construction Loan Advance; (b) at least once each month during the course
of completion of the Work; (c) upon Completion; and (d) at such other time as
Lender may, in its judgment, deem necessary due to actual or suspected
non-compliance with the Plans and Specifications, Construction Contract(s), the
Documents, any law, regulation or private restriction, sound architectural,
engineering or construction principles or commonly accepted safety standards; or
Borrower's failure to satisfy the requirements of the Documents.
8.2 No Duty of Lender to Supervise, Etc.. Lender shall have no duty
to supervise or to review and inspect the Principal Work-Related
Items, the other Contracts, Intangibles, Licenses and Permits, any
budget proposed to be the Construction Budget, any books and records
pertaining thereto or any changes to such items or the construction
of the Work. Any inspection made by Lender shall be for the sole
purpose of determining whether the Obligations are being Performed
and preserving Lender's rights under these Documents. If Lender, or
Lender's Inspector acting on behalf of Lender, should review or
inspect the Principal Work-Related Items, the other Contracts,
Intangibles, Licenses and Permits, the Construction Budget, any books
and records pertaining thereto or any changes to such items or the
construction of the Work, Lender and Lender's Inspector shall have no
liability or obligation to Borrower or any third person arising out
of such inspection; and neither Borrower nor any third person shall
be entitled to rely upon any such inspection or review. Inspection
not followed by notice of an Event of Default shall not constitute
(a) waiver of any Event of Default then existing; (b) an
acknowledgement or representation by Lender or Lender's Inspector
that there has been or will be compliance with the Principal
Work-Related Items, the other Contracts, Intangibles, Licenses and
Permits, Construction Budget, applicable laws, regulations and
private restrictions, sound construction, engineering or
architectural principles or commonly accepted safety standards, or
that the construction is lien free or free from defective materials
or workmanship; or (c) a waiver of Lender's right thereafter to
insist that Completion of the Work occur in accordance with the
Principal Work-Related Items, the other Contracts, Intangibles,
Licenses and Permits, Construction Budget, the Documents, applicable
laws, regulations and restrictions, sound construction, engineering
or architectural principles or commonly safety standards and free
from defective materials and workmanship. Lender and Lender's
Inspector owe no duty of care to Borrower or any third person to
protect against, or inform Borrower or any third person of, the
existence of
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CV,/P,349.FINOVA.PIGEON.LNAG.004
negligence, faulty, inadequate or defective design or construction
of the Work.
9. CONSTRUCTION AND GENERAL TERMS
9.1 Payment Location. All monies payable under the Documents shall be paid
to Lender at its address set forth in paragraph 9.5 of this Agreement in lawful
monies of the United States of America, unless otherwise designated in the
Documents or by Lender by notice.
9.2 Entire Agreement. The Documents exclusively and completely state the
rights and obligations of Lender and Borrower with respect to the Loans. No
modification, variation, termination, discharge, abandonment, or waiver of any
of the provisions or conditions of the Documents shall be valid unless in
writing and signed by duly authorized representatives of the party sought to be
bound by such action. The Documents supersede any and all prior representations,
warranties and/or inducements, written or oral, heretofore made by Lender
concerning this transaction, including any commitment for financing.
9.3 Powers Coupled with an Interest. The powers and agency hereby granted
by Borrower are coupled with an interest and are irrevocable until the
Obligations have been paid in full and are granted as cumulative to Lender's
other remedies for collection and enforcement of the Obligations.
9.4 Counterparts. Any Document may be executed simultaneously in any number
of identical copies each of which shall constitute an original for all purposes.
9.5 Notices. All notices, requests or demands required or permitted to be
given under the Documents shall be in writing, and shall be deemed effective (a)
upon hand delivery, if hand delivered; (b) .one (1) Business Day after such are
deposited for delivery via Federal Express or other nationally recognized
overnight courier service; or (c) three (3) Business Days after such are
deposited in the United States mails, certified or registered mail, all with
delivery charges and/or postage prepaid, and addressed as shown below, or to
such other address as either party may, from time to time, designate in writing.
Written notice may be given by telecopy to the telecopier number shown below or
to such other telecopier number as either party may designate, from time to
time, in writing, provided that such notice shall not be deemed effective unless
it is confirmed within twenty-four (24) hours by hand delivery, courier delivery
or mailing of a copy of such notice in accordance with the requirements set
forth above.
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CWP.349.FINOVA.PIGEON.LNAG.UO4
If to Lender:
(two copies)
FINOVA CAPITAL CORPORATION
7272 E. Indian School Road, Suite 410
Scottsdale, Arizona 85251
Telecopy: (602) 874-6444
one copy marked "Attention: Vice President
- - Group Counsel' and the other marked
"Attention: Vice President - Operations
Management"
If to Borrower: PATTEN CORPORATION 5295 Town Center Road, Suite 400 Boca
Raton, Florida 33486 Attention: Patrick Rondeau, Esq.
9.6 Successors and Assigns. All the covenants of Borrower and all the
rights and remedies of the Lender contained in the Documents shall bind
Borrower, and, subject to the restrictions on merger, consolidation and
assignment contained in the Documents, its successors and assigns, and shall
inure to the benefit of Lender, its successors and assigns, whether so expressed
or not. Borrower may not assign its rights in the Documents in whole or in part.
Except as may be expressly provided in a Document, no person or other entity
shall be deemed a third party beneficiary of any provision of the Documents.
9.7 Severability. If any one or more of the provisions contained in any
Document shall be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained in
the Document shall not in any way be affected or impaired thereby
9.8 Time of Essence. Time is of the essence in the Performance of the
Obligations.
9.9 Miscellaneous. All headings are inserted for convenience only and shall
not affect any construction or interpretation of the Documents. Unless otherwise
indicated, all references in a Document to clauses and other subdivisions refer
to the corresponding paragraphs, clauses and other subdivisions of the Document;
the words "herein", "hereof", "hereto", hereunder" and words of similar import
refer to the Document as a whole and not to any particular paragraph, clause or
other subdivision; and reference to a numbered or lettered subdivision of an
Article, or paragraph shall include relevant matter within the Article or
paragraph which is applicable to but not within such numbered or lettered
subdivision. All Schedules and Exhibits referred to in this Agreement are
incorporated in this Agreement by reference.
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CWP.349.FINOVA.PIGEON.LNAG.004
9.10
(a) CHOICE OF LAW. THE DOCUMENTS AND THE RIGHTS, DUTIES AND OBLIGATIONS OF
THE PARTIES THERETO SHALL BE GOVERNED BY AND - CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF ARIZONA AND TO THE EXTENT THEY PREEMPT THE LAWS OF
SUCH STATE, THE LAWS OF THE UNITED STATES.
(b) CHOICE OF JURISDICTION: WAIVER OF VENUE. BORROWER: (A) HEREBY
IRREVOCABLY SUBMITS ITSELF TO THE PROCESS, JURISDICTION AND VENUE OF THE COURTS
OF THE STATE OF ARIZONA, MARICOPA COUNTY, AND TO THE PROCESS, JURISDICTION, AND
VENUE OF THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA, FOR THE
PURPOSES OF SUIT, ACTION OR OTHER PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE SUBJECT MATTER HEREOF (EXCEPT AS MAY BE SPECIFICALLY PROVIDED
TO THE CONTRARY IN BORROWER'S MORTGAGE), OR, IF BORROWER INITIATES SUCH ACTION,
ANY COURT IN WHICH BORROWER SHALL INITIATE SUCH ACTION AND THE CHOICE OF SUCH
VENUE SHALL IN ALL INSTANCES BE AT LENDER'S ELECTION; AND (B) WITHOUT LIMITING
THE GENERALITY OF THE FOREGOING, HEREBY WAIVES AND AGREES NOT TO ASSERT BY WAY
OF MOTION, DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION OR PROCEEDING ANY CLAIM
THAT BORROWER IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF THE ABOVE-NAMED
COURTS, THAT SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM
OR THAT THE VENUE OF SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. BORROWER
HEREBY WAIVES THE RIGHT TO COLLATERALLY ATTACK ANY JUDGMENT OR ACTION IN ANY
OTHER FORUM.
(c) WAIVER OF JURY TRIAL. LENDER AND BORROWER ACKNOWLEDGE AND AGREE THAT
ANY CONTROVERSY WHICH MAY ARISE UNDER ANY OF THE DOCUMENTS WOULD BE BASED UPON
DIFFICULT AND COMPLEX ISSUES AND THEREFORE, THE PARTIES AGREE THAT ANY LAWSUIT
ARISING OUT OF ANY SUCH CONTROVERSY SHALL BE TRIED BY A JUDGE SITTING WITHOUT A
JURY, AND BORROWER HEREBY KNOWINGLY AND VOLUNTARILY WAIVES TRIAL BY JURY IN ANY
SUCH PROCEEDING.
(d) INDUCEMENT TO LENDER. ALL OF THE PROVISIONS SET FORTH IN THIS PARAGRAPH
ARE A MATERIAL INDUCEMENT FOR LENDER'S MAKING THE
LOANS TO BORROWER.
(Borrower initials)
9.11 Compliance With Applicable Usury Law. it is the intent of
the parties hereto to comply with the Applicable Usury Law.
Accordingly, notwithstanding any provisions to the contrary in
the Documents, in no event shall this Agreement or the Documents
require the payment or permit the collection of interest in
excess of the maximum contract rate permitted by the Applicable
Usury Law.
9. 12 NO RELATIONSHIP WITH PURCHASERS. LENDER DOES NOT HEREBY ASSUME AND
SHALL HAVE NO RESPONSIBILITY, OBLIGATION OR LIABILITY TO
- - 54-
CWP,349.FINOVA.PIGEON.LNA(., @i4
PURCHASERS, LENDER'S RELATIONSHIP BEING THAT ONLY OF A CREDITOR WHO HAS TAKEN,
AS SECURITY FOR INDEBTEDNESS OWED TO IT, A COLLATERAL ASSIGNMENT FROM BORROWER
OF THE INSTRUMENTS. EXCEPT -AS REQUIRED BY LAW AND FOR FILINGS MADE WITH THE
SECURITIES & EXCHANGE COMMISSION OR ANY STOCK EXCHANGE ON WHICH BORROWER'S STOCK
IS TRADED, BORROWER WILL NOT, AT ANY TIME, USE THE NAME OF OR MAKE REFERENCE TO
LENDER WITH RESPECT TO THE TIME-SHARE PROJECT, THE SALE OF TIME-SHARE INTERESTS
OR OTHERWISE, WITHOUT THE EXPRESS WRITTEN CONSENT OF LENDER.
9.13 NO JOINT VENTURE. THE RELATIONSHIP OF BORROWER AND LENDER IS THAT OF
DEBTOR AND CREDITOR, AND IT IS NOT THE INTENTION OF EITHER OF SUCH
PARTIES BY THIS OR ANY OTHER INSTRUMENT BEING EXECUTED IN CONNECTION
WITH THE LOANS TO ESTABLISH A PARTNERSHIP, AND THE PARTIES HERETO
SHALL NOT UNDER ANY CIRCUMSTANCES BE CONSTRUED TO BE PARTNERS OR
JOINT VENTURERS.
9. 14 Standards to Lender's Actions. Unless otherwise
specifically stipulated elsewhere in the Documents, if a matter is left in the
Documents to the decision, requirement, request, determination, judgment,
opinion, approval, consent, satisfaction, acceptance, agreement, option or
discretion of Lender, its employees, Lender's counsel or any agent for or
contractor of Lender, such action shall be deemed to be exercisable by Lender or
such other person in its sole and absolute discretion and according to standards
established in its sole and absolute discretion. Without limiting the generality
of the foregoing, "option' and 'discretion' shall be implied by use of the words
"if" or "may".
9.15 Meaning of Subordination. Any subordinations required to be given
under the Documents by third parties to Lender shall include the subordination
of and the deferral of the right to receive payments on the subordinated
obligations except to the extent expressly permitted in this Agreement; the
remittances to Lender of all prohibited payments received by the third party;
the subordination of all liens, security interests, assignments and other
encumbrances and claims held by the third party on or against any of Borrower's
property to Lender's interest (whenever acquired) in such property; and an
agreement on the part of the third party not to exercise any remedies against
Borrower so long as all obligations under the Documents have not been fully
satisfied.
10. SPECIAL PROVISIONS
10. 1 Cross-Collateralization and Cross-Default of Other Loan Obligations.
(a) Lender entered into an Amended and Restated Loan and Security Agreement
("PRFC Loan Agreement') dated as of
- - 55-
<PAGE>
CWP.349.FINOVA.PIGEON.LNAG.004
January 9, 1990, as amended, with Patten Receivables Finance Corporation VI, a
Delaware corporation ("PRFC"), an Affiliate and wholly-owned subsidiary of
Borrower. Pursuant to the PRFC Loan Agreement, Lender has committed to make to
PRFC a loan in an amount not to exceed at any time Twenty Million Dollars
($20,000,000) ("PRFC Loan'), subject to the terms and conditions of the PRFC
Loan Agreement. Lender has entered into a Loan Agreement ("Lake Ridge Loan
Agreement") dated as of June 29, 1994, as amended, with Properties of the
Southwest, Inc., a Delaware corporation ('PSI'), a wholly-owned subsidiary of
Patten, pursuant to which Lender has agreed to make to PSI a loan in an amount
not to exceed Four Million Five Hundred Thousand Dollars ($4,500,000) ('Lake
Ridge Loan'). Lender has entered into a Credit Facility Agreement ('Land
Inventory Credit Facility Agreement") dated as of December 14, 1994, with
Borrower pursuant to which Lender has agreed to extend to Borrower and/or its
wholly owned subsidiaries a revolving line of credit in an amount not to exceed
Five Million Dollars ($5,000,000) ("Land Inventory Credit Facility"). Lender has
entered into an Amended and Restated Loan Agreement ("Mountainloft Loan
Agreement") dated as of December 14, 1994, with Borrower pursuant to which
Lender has agreed to extend to Borrower a construction loan in a principal
amount not to exceed Three Million One Hundred Thousand Dollars ($3,100,000.00)
("Mountainloft Construction Loan') and a revolving receivables line of credit in
an amount not to exceed Five Million Dollars ($5,000,000.00) ("Mountainloft
Receivables Loan"; and the Mountainloft Construction Loan and Mountainloft
Receivables Loan collectively, "Mountainloft Loans"). As used in this Agreement,
the term "Other Credit Facilities" shall mean at any time, all loans and credit
facilities, other than the Loans, then outstanding between Borrower and/or any
Affiliate of Borrower on the one hand, and Lender on the other hand, including,
without limitation, the Lake Ridge Loan, the PRFC Loan, the Mountainloft Loans,
and the Land Inventory Credit Facility; the term "Credit Facility" means any one
of the Other Credit Facilities or this Loan; the term "Lake Ridge Loan
Documents" shall mean the documents now or hereafter executed in connection with
the Lake Ridge Loan, as they may be from time to time renewed, amended, restated
or replaced; the term "PRFC Loan Documents" shall mean the PRFC Loan Agreement
and all other documents now or hereafter executed in connection with the PRFC
Loan, as they may be from time to time renewed, amended, restated or replaced;
the term "Mountainloft Loan Documents" shall mean the Mountainloft Loan
Agreement and all other documents now ,.or hereafter executed in connection with
the Mountainloft
- -56-
<PAGE>
CWP.349.FINOVA.PIGEON.LNAG.004
Loans, as they may be from time to time renewed, amended, restated or replaced;
and the term 'Land Inventory Credit Facility Documents' shall mean the Land
Inventory Credit Facility Documents Agreement in all other documents now or
hereafter executed in connection with the Land Inventory Loan, as they may be
from time to time renewed, amended, restated or replaced. The term "Other Credit
Facilities Documents" shall mean the documents now or hereafter executed in
connection with the Other Credit Facilities, including, without limitation, the
Lake Ridge Loan Documents, the PRFC Loan Documents, Mountainloft Loan Documents,
and the Land Inventory Credit Facility Documents as they may be from time to
time renewed, amended. restated or replaced.
(b) An Event of Default under the Documents shall constitute an 'Event of
Default" as that term is defined in any of the Other Credit Facilities
Documents; or if an 'Event of Default" is not a defined term with respect to any
of the Other Credit Facilities, shall, without further condition or delay,
permit Lender to accelerate the payment of such Other Credit Facility, cease
funding under any Other Credit Facility or foreclose its lien or security
interest on any of the collateral for such Other Credit Facility. An "Event of
Default" as that term is defined in any of the Other Credit Facilities Documents
and/or any act or event which, without further condition or delay, permits
Lender to accelerate the payment of any Other Credit Facility and/or exercise
its remedies to either cease funding under such Other Credit Facility or
foreclose its lien or security interest on any collateral for any Other Credit
Facility shall constitute an Event of Default under the Documents.
(c) Without limiting the generality of any other provision contained
herein, the Security Interest granted by Borrower hereunder and all Collateral
given under the Documents as security for the Loan is intended to and does
secure Performance of all obligations in connection with advances made to it and
all obligations of (i) PRFC and/or Borrower now or hereafter existing under the
PRFC Loan Documents ('PRFC Loan Obligations"), (ii) Borrower now or hereafter
existing under the Mountainloft Loan Documents ("Mountainloft Loan
Obligations"), and (iii) Borrower and/or any subsidiary under the Land Inventory
Credit Facility Documents; and all collateral given by PRFC or Borrower under
the PRFC Loan Documents and by Borrower under the Other Credit Facility
Documents ('Other Credit Facility Obligations"). as security for the PRFC Loan
Obligations and the Mountainloft Loan Obligations,
- - 57-
<PAGE>
CWP.349.FINOVA.PIGEON.LNAG.004
respectively, is intended to and does secure the Obligations. Borrower shall
cause PRFC to execute all amendment documents required by Lender to reflect this
cross-collateralization and other conditions of the Loans.
(d) If an Event of Default exists and Lender is entitled to apply the
proceeds of the Collateral to the Obligations, it may apply such
proceeds to the Obligations and to the obligations under the Other
Credit Facility Documents in such order and manner as Lender may
determine.
(e) If no Event of Default exists, then upon full satisfaction of all
Obligations (other than those relating to crosscollateralization) under
the Documents, Lender shall release the Collateral, together with any
and all endorsements and assignments reasonably requested by Borrower,
in each case without recourse or representation or warranty of any kind.
Neither (i) the exercise or the failure to exercise by Lender of any rights
of remedies conferred on it under the Other Credit Facilities Documents,
hereunder or existing at law or otherwise, or against any security for
performance of the obligations under the Other Credit Facility Documents, (ii)
the commencement of an action at law or the recovery of a judgment at law
against another borrower ("Third Party Borrower') under the Other Credit
Facility Documents or any other obligor ('Third Party Obligor") for the Other
Credit Facilities Obligations and the enforcement thereof through levy or
execution or otherwise, (iii) the taking or institution or any other action or
proceeding against a Third Party Borrower or any other Third Party Obligor nor
(iv) any delay in taking, pursuing or exercising any of the foregoing actions,
rights, powers or remedies (even though requested by Borrower by Lender or
anyone acting for Lender, shall extinguish or affect the Obligations of Borrower
hereunder. Borrower shall be and remain liable hereunder until all the Other
Credit Facilities Obligations are fully paid and performed of all the Other
Credit Facilities Obligations under the Other Credit Facilities Documents (and
without limiting Borrower's obligations under paragraph 10.1(i)ll
notwithstanding the previous discharge (total or partial) from further liability
of any Third Party Borrower or any
Third Party Obligor.
(g) Borrower hereby expressly waives: (i) notice of the existence, creation
or non-payment of all or any of the Other Credit Facilities Obligations except
as otherwise provided in the Other Credit Facilities Documents; (ii)
- - 58-
<PAGE>
CWP.349.FINOVA.PIGEON.LNAG.004
presentment, protest, demand, dishonor, notice of dishonor, protest and all
notices whatsoever with respect to the Other Credit Facilities Obligations;
(iii) all diligence in collection or protection of or realization on the Other
Credit Facilities Obligations or any part thereof, any obligation hereunder, or
any security for or guarantee of any of the foregoing; (iv) any defense based
upon an election of remedies by Lender or marshalling of assets; (v) any defense
arising because of Lender's election under Section 1111(b)(2) of the United
States Bankruptcy Code ('Bankruptcy Code") in any proceeding instituted under
the Bankruptcy Code; (vi) any defense based on post-petition borrowing or the
grant of a security interest by a Third Party Borrower under Section 365 of the
Bankruptcy Code; (vii) any duty on the part of Lender to disclose to Borrower
any facts Lender may now or hereafter know about any Third Party Borrower,
regardless of whether Lender has reason to believe that any such facts
materially increase the risk beyond that which Borrower intends to assume or has
reason to believe that such facts are known to Borrower or has a reasonable
opportunity to communicate such facts to Borrower, because Borrower represents
and warrants that it is fully responsible for being and keeping informed of the
financial condition of any Third Party Borrower and of all circumstances bearing
on the risk of non-payment of any obligation guaranteed hereby; and (viii) any
and all suretyship defenses and defenses in the nature thereof under Arizona
and/or any other applicable law, including, without limitation, the benefits of
the provisions of Sections 12-1641 through 12-1646, of the Arizona Revised
Statutes, Sections 17 and 21, A.R.C.P., and all other laws and procedural rules
of similar import.
(h) Without limiting the generality of the foregoing, Borrower will not
assert against Lender any defense of waiver, release, discharge in
bankruptcy, statute of limitations, res judicata, statute of frauds,
anti-deficiency statute, fraud, usury, illegality or unenforceability
which may be available to any Third Party Borrower with respect to the
Other Credit Facilities Documents, or any set off available to any Third
Party Borrower against Lender, whether or not on account of a related
transaction.
(i) Anything else contained herein to the contrary notwithstanding, Lender,
from time to time, without notice to Borrower, may take all or any of
the following actions without in any manner affecting or impairing the
obligations of Borrower hereunder: (i) accept a consentual lien on or a
security interest in any property to secure any of the Other Credit
Facilities Obligations; (ii) retain
- - 59-
<PAGE>
CWP.349.FINOVA.PIGEON.LNAG.004
or obtain the secondary liability of any party or parties, in addition to
Borrower, with respect to any of the Other Credit Facilities Obligations; (iii)
renew, extend or otherwise change the time for payment or perfomance of any of
the Other Credit Facilities Obligations for any period; (iv) release or
compromise any liability of any Third Party Borrower or any liability of any
nature of any other party or parties with respect to any of the Other Credit
Facilities Obligations; (v) exchange, enforce, waive, release and apply any
security for the performance of any of the Other Credit Facilities Obligations
and direct the order or manner of sale thereof as Lender may in Lender's
discretion determine; (vi) resort to the Collateral for payment of any Other
Credit Facilities Obligations, whether or not Lender shall proceed against any
other party primarily or secondarily liable on any of the Other Credit
Facilities Obligations; (vii) agree to any amendment (including, without
limitation, any amendment which changes the amount of interest to be paid under
the Other Credit Facilities Documents or extends the period of time during which
any Third Party Borrower may obtain advances of the Other Credit Facilities),
any alteration of the Other Credit Facilities Documents or any waiver of any of
the provisions of the Other Credit Facilities Documents and/or exercise Lender's
rights to consent to any action or nonaction of any Third Party Borrower which
may violate the covenants and agreements contained in the Other Credit
Facilities Documents, with or without consideration and on such terms and
conditions as may be acceptable to lender; or (h) exercise any of Lender's
rights conferred by the Other Credit Facilities Documents or by law.
Notwithstanding anything herein to the contrary, if at any time all or any part
of any payment theretofore applied by Lender to any of the Other Credit
Facilities Obligations is or must be rescinded or returned by Lender for any
reason whatsoever (including, without limitation, the insolvency, bankruptcy or
reorganization of any Third Party Borrower), such Other Credit Facilities
Obligations, for purposes of this paragraph 10.1, to the extent that such
payment is or must be rescinded or returned, shall be deemed to have never been
performed; and this paragraph 10.1 shall continue to be effective or be
reinstated, as the case may be, as to such Other Credit Facilities Obligations,
all as though such application by Lender had not been made.
(k) Borrower shall have no right of subrogation with respect to the Other
Credit Facilities Obligations or any right of indemnification,
reimbursement or contribution from any Third Party Borrower or from any
other Third Party Obligor
- -60-
<PAGE>
CWP,349.FINOVA.PIGEON.C.
J04
with respect to the Other Credit Facilities Obligations regardless of any
payment thereon resulting from the provisions of this paragraph 10.1 and
Borrower hereby unconditionally waives any such right of subrogation,
indemnification, reimbursement or arbitration.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their respective name, personally or by their duly authorized
representatives as of the date above written.
LENDER
"BORROWER"
FINOVA CAPITAL CORPORATION, a
Delaware corporation
By:
Type/Print Name
Title
PATTEN CORPORATION, a Massachusetts corporation By:
Type/Print
Type
Title
- -61 -
I
<PAGE>
CWP.349.FINOVA.PIGEON.LNAG.004
LIST OF EXHIBITS
Exhibit A Combination Deed of Trust and Assignment of
Contract
Exhibit B Conditions of Eligible Instrument
Exhibit C Environmental Certificate
Exhibit D-1 Acquisition Loan Promissory Note
Exhibit D-2 Construction Loan Promissory Note
Exhibit D-3 Receivables Loan Promissory Note
Exhibit E Permitted Encumbrances
Exhibit F Description of Time-Share Project and Time-Share Estate
Exhibit G Borrower's Certificate
Exhibit G-1 Partial Release and Reconveyance
Exhibit I Environmental Remediation Letter
Exhibit H Borrower's Opinion of Counsel
Exhibit J-1 Additional Conditions to Construction Loan Advance
Exhibit J-lA FINOVA Capital Corporation ("Lender") Standard
Construction Loan Administrative Procedures:
Initial and Subsequent Loan Disbursement
Requirements and Events
Exhibit J-18 AIA Form G702 and G703 Forms
Exhibit J-IC Request for Advance - Indirect Costs
Exhibit J-lD Borrower's Affidavit for Advance
Exhibit J-lE Check Sheet Form
Exhibit J-IF Waiver of Lien
Exhibit J-lG AIA Form G713
<PAGE>
- - 62 -
<PAGE>
CV,/P.349.FINOVA.PIGEON.LNAG.004
Exhibit J-2 Additional Conditions to Receivables Loan
Advances
Exhibit J-2A Request for Receivables Loan Advance and Certification
Exhibit K Borrower's Monthly Reports (Format)
Exhibit L Personal Property
Exhibit M Real Property
Exhibit N Construction Budget
Exhibit 0 Work Progress Schedule
- -63 -
AMENDMENT NO. 1 TO AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
BY THIS AMENDMENT NO. 1 TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
("Amendment") dated as of April 12, 1995, PATTEN CORPORATION, a Massachusetts
corporation("Borrower"), and FINOVA CAPITAL CORPORATION (fka Greyhound Financial
Corporation), a Delaware corporation ("Lender"), for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
hereby confirm and agree as follows:
ARTICLE 1
INTRODUCTION
1.1 Borrower and Lender previously entered into an Amended and Restated
Loan and Security Agreement dated as of December 14, 1994 ("Loan Agreement")
relating to a construction loan in a maximum aggregate principal amount not to
exceed $3,100,000 and a revolving line of credit loan in a maximum principal
amount not to exceed $5,000,000 at any time.
1.2 Borrower and Lender wish to amend the Loan Agreement, all as more fully
provided below.
ARTICLE 2
AGREEMENT
2.1 Capitalized terms used but not otherwise defined herein shall have the
meaning given them in the Loan Agreement.
2.2 The Loan Agreement is amended by adding the following the sentence at
the end of paragraph (d) of Exhibit B:
" However, an Instrument will not fail to qualify as an Eligible Instrument
solely because it does not bear interest, so long as the down payment is at
least 50% of the total sales price (no part of which has been advanced or paid
to the Purchaser by Borrower, directly or indirectly) and the unpaid principal
balance of all such Instruments hypothecated to Lender does not exceed 15% of
all Eligible Instruments hypothecated to Lender.
2.3 Borrower will on demand pay, or at Lender's election, reimburse Lender
for Lender's reasonable attorneys' fees and other reasonable out-of-pocket
expenses in connection with the documentation of this Amendment.
2.4 Borrower confirms and restates to Lender as of the date hereof all its
representations and warranties set forth in the Loan Agreement. Borrower further
acknowledges that Lender has performed
<PAGE>
and is not in default of its obligations under the Documents and the Other Loan
Documents and that there are no offsets, defenses or counterclaims with respect
to any of Borrower's Obligations under the Documents.
2.5 This Amendment constitutes the entire agreement and understanding of the
parties with respect to the subject matter hereof and this Amendment supersedes
all prior written or oral understandings and agreements between the parties in
connection with its subject matter.
2.6 This Amendment may be executed in one or more counterparts, and any number
of which having been signed by all the parties hereto shall be taken as one
original.
2.7 Borrower and Lender hereby ratify and confirm the Loan Agreement, as
amended hereby, in all respects; and, except as expressly amended hereby, the
Loan Agreement shall remain in full force and effect.
IN WITNESS WHEREOF this instrument is executed as of the date set forth above.
BORROWER:
LENDER:
PATTEN CORPORATION, a Massachusetts
corporation
By:
Type/Print Name:
Title: Chief Financial Officer
FINOVA CAPITAL CORPORATION, a
Delaware corporation
Type/Print Name: Jack Field
Group Vice President
2
[GRAPHIC OMITTED]
<PAGE>
CONSENT
By executing this Consent, PATTEN RECEIVABLES FINANCE CORPORATION VI
acknowledges to FINOVA CAPITAL CORPORATION (fka Greyhound Financial Corporation)
its consent to the foregoing Amendment No. 1 to Amended and Restated Loan and
Security Agreement ("Amendment") and that such Amendment shall not impair any of
its obligations to FINOVA Capital Corporation.
PATTEN RECEIVABLES CORPORATION VI.
FINANCE
By:
Print/Type Name:
Title:
Treasurer
AMENDMENT NO. 2 TO MENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
BY THIS AMENDMENT NO. 2 TO AMENDED AND RESTATED LOAN AND SECURITY
AGREEMENT ('Amendment') dated as of November 21, 1995, PATTEN CORPORATION, a
Massachusetts corporation ('Borrower'), and FINOVA CAPITAL CORPORATION (fka
Greyhound Financial Corporation), a Delaware corporation ('Lender'), for good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, hereby confirm and agree as follows:
ARTICLE 1 INTRODUCTION
1.1 Borrower and Lender previously entered into an Amended and Restated
Loan and Security Agreement dated as of December 14, 1994, as amended by
Amendment No. 1 to Loan and Security Agreement dated as of April 12, 1995 (as so
amended 'Loan Agreement') relating to a construction loan in a maximum aggregate
principal amount not to exceed $3,100,000.00 and a revolving line of credit loan
in a maximum principal amount not to exceed $5,000,000.00 at any time.
1.2 Borrower and Lender wish to amend the Loan Agreement, all as more fully
provided below.
ARTICLE 2
AGREEMENT
2.1 Capitalized terms used but not otherwise defined herein shall have the
meaning given them in the Loan Agreement.
2.2 The Loan Agreement is amended as follows:
(a) Paragraph 1.39 is deleted in its entirety and the
following is inserted in its place:
1.39 "Discount Rate": twelve and nine-tenths percent (12.9%).
(b) Paragraph 1.56 is deleted in its entirety and the following inserted in
its place:
1.56 'Maximum Receivables Loan Amount": subject to the provisions of
paragraph 2.5 pertaining to the increase of the Maximum Receivables Loan Amount,
Twelve Million Dollars ($12,000,000).
(c) Paragraph 1.79 is deleted in its entirety and the following inserted in
its place:
1.79 "Receivables Loan Borrowing Term': subject to the provisions of
paragraph 2.6 pertaining to an extension of the Receivables Loan Borrowing Term,
the period of time commencing on the date of this Agreement and ending on May
30, 1997.
(d) Paragraph 2.1(c) is deleted in its entirety and the following inserted
in its place:
(c) Limitation on Total Amount of Advances. Lender shall have no obligation
to make an Advance if after giving effect to the Advance the sum of (i) the
unpaid principal balances of the Construction Loan and the Receivables Loan,
(ii) the committed and undisbursed portion of the Construction Loan, and (iii)
the Uncovered Cost of the Work for all Phases for which Borrower has requested a
Work-Related Advance exceeds the Maximum Receivables Loan Amount.
(e) The following is added as a new paragraph 2.5:
2.5 Increase to Maximum Receivables Loan Amount. Borrower shall be entitled
an increase ('Increase") of the Maximum Receivables Loan Amount from Twelve
Million Dollars ($12,000,000) to Twenty Million Dollars ($20,000,000) subject to
the following terms and conditions: (a) within a period ('Increase Notice
Period") which is at least forty-five (45), but not more than ninety (90), days
prior to requesting the first Receivables Loan Advance which would cause the
outstanding principal balance of the Receivables Loan to exceed Twelve Mi11ion
Dol1ars ($12,000,000.00), Borrower shall have given Lender notice of its
intention to do so and submitted to Lender a written request for an increase to
the Maximum Receivables Loan Amount from Twelve Million Dollars ($12,000,000) to
Twenty Million Dollars ($20,000,000); (b) within the Increase Notice Period,
Borrower shall have delivered to Lender (or at Lender's option, Lender shall
have obtained) such items as Lender may reasonably require (including, without
limitation, current searches, credit bureau reports and financial statements
with respect to Borrower, PRFC and the Project and opinions in form and from
counsel to Borrower satisfactory to Lender) in order to determine whether the
conditions set forth in paragraphs 4.lF(a) (d), inclusive, continue to be
satisfied; (c) within the Increase Notice Period, Lender shall have received
such documents which have been executed by Borrower, PRFC and/or third parties
as Lender may reasonably require to evidence and secure the Increase, and such
documents shall have been recorded and/or filed as Lender may reasonably
require; (d) within the Increase Notice Period, Lender shall have received
evidence that all intangible taxes required to be paid with respect to the
Receivables Loan, as increased, have been paid; and (e) the Receivables Loan
Borrowing Term shall not have expired. The items required pursuant to the terms
of the preceding sentence will be provided at Borrower's expense. Borrower will
pay to Lender a fee ("Receivables Loan Increase Fee') in connection with the
increase, as follows: Forty Thousand Dollars ($40,000) of the Receivables Loan
Increase Fee shall be due and payable when the first Receivables Loan Advance is
made which causes the unpaid principal balance of the Receivables Loan to exceed
Twelve Million Dollars ($12,000,000); and the balance of the Receivables Loan
Increase Fee shall be due and payable when the first Receivables Loan Advance is
made which causes the unpaid principal balance of the Receivables Loan to exceed
Sixteen Million Dollars ($16,000,000).
2.6 Extension of Receivables Loan Borrowing Term. Borrower shall be
entitled to a single extension of the expiration date of the Receivables Loan
Borrowing Term until November 30, 1998, upon the following terms and conditions:
(a) within a period ("Extension Option Period') which is at least thirty (30),
but not more than ninety (90), days prior to the expiration of the Receivables
Loan Borrowing Term, Borrower shall have given Lender notice of its intention to
do so; (b) Borrower shall have delivered to Lender (or at Lender's option,
Lender shall have obtained) such items as Lender may reasonably require
(including, without limitation, current searches, credit bureau reports and
financial statements with respect to Borrower, PRFC and the Project and opinions
in form and from counsel to Borrower satisfactory to Lender) in order to
determine whether the conditions set forth in paragraphs 4.lF(a) (d), inclusive,
continues to be satisfied; (c) within the Extension Option Period, Lender shall
have documents executed by Borrower, PRFC and/or third parties as Lender may
reasonably require to evidence and secure the extension, and such documents
shall have been recorded and/or filed as Lender may reasonably require; (d)
Lender shall have received certified copies of all documents (other than
advertising materials in compliance with applicable laws) which have been or are
then being used in connection with the sale of Time-Share Interests and all
public reports/offering statements/prospectuses required by law to be utilized
in those jurisdictions where it has sold or is then selling Time-Share Interests
or has offered or is then offering them for sale; (e) Lender has received all
certified copies of all material changes made since January 18, 1994, to the
documents (other than advertising materials in compliance with applicable laws)
used in connection with the sale of Time-Share Interests and/or the governance
of the Project, and copies of all public reports/offering
statements/prospectuses required by law to be utilized in those jurisdictions
where it is currently selling Time-Share Interests or offering them for sale;
and (f) Lender has received evidence that Borrower has been registered and
maintained all necessary licenses and permits as required by applicable law in
all jurisdictions where it has sold or offered Time-Share Interests for sale
since November 1, 1995. All items required pursuant to the terms of the
preceding sentence will be provided at Borrower's expense.
2.3 Borrower will pay to Lender a fee in the amount of Seventy Thousand And
No/100 Dollars ($70,000.00) for the renewal and increase of the Receivables Loan
to Twelve Million Dollars ($12,000,000), which fee shall be due and payable at
the time of the first Receivables Loan Advance on or after the date hereof, but
not later than December 15, 1995.
2.4 Borrower will on demand pay, or at Lender's election, reimburse Lender
for Lender's reasonable attorneys' fees and other reasonable out-of-pocket
expenses in connection with the documentation of this Amendment.
2.5 Borrower confirms and restates to Lender as of the date hereof all its
representations and warranties set forth in the Loan Agreement. Borrower
represents and warrants to Lender that since December 14, 1994, except for any
changes delivered to Lender pursuant to paragraph 2.7(c) and any changes to
advertising materials in conformance with applicable law, there have been no
material changes to the documents used in connection with the sale of
Time-Share Interests or in the governance of the Project. Borrower further
acknowledges that Lender has performed and is not in default of its obligations
under the Documents and the Other Loan Documents and that there are no offsets,
defenses or counterclaims with respect to any of Borrower's Obligations under
the Documents.
2.6 Borrower will execute and deliver such further instruments and do such
things as in the sole and absolute judgment of Lender are necessary or desirable
to effect the intent of this Amendment and to secure to Lender the benefits of
all rights and remedies conferred upon Lender by the terms of this Amendment and
any other documents executed in connection herewith, including, without
limitation, amendments to recorded and filed security documents and financing
statements (collectively, 'Modification Documents').
2.7 This Amendment shall not be binding upon Lender unless and until the
following conditions have been satisfied on or before December 15, 1995:
(a) Borrower has delivered to Lender the following documents and
other items, all of which shall be properly completed and executed and shall
otherwise be satisfactory in form and substance to Lender in its sole and
absolute discretion:
(i) a resolution or certificate from Borrower authorizing (A) the execution
and delivery of this Amendment and the other Modification Documents and (B)
the transaction contemplated hereby;
(ii) a resolution from PRFC authorizing (A) the execution and delivery of
the Modification Documents required by this Amendment to be executed by it and
(B) the performance of its obligations under those documents;
(iii) an Amended and Restated Receivables Loan Promissory Note in form
and substance identical to Exhibit A;
(iv) an 'Amendment to Construction Deed of Trust" in form and substance
identical to Exhibit B;
(v) such amendments to Documents as Lender may deem necessary or
appropriate as a result of the modification of the Loans;
(vi ) an opinion from counsel to Borrower and PRFC as to such matters as
Lender may require, which counsel shall be reasonably satisfactory to Lender;
and
(vii) such other items as Lender may reasonably require.
(b) Lender has received any Fees due upon execution of this Agreement.
(c) Lender has received and approved the following in its sole and absolute
discretion:
(i) results of due diligence searches to be performed with respect to
Borrower, PRFC and the Project, which due diligence shall include, but not be
limited to, Dun and Bradstreet reports on Borrower and PRFC, and updated lien,
litigation, judgment and bankruptcy searches for Borrower and PRFC;
(ii) (A) certified copies of all documents (other than advertising
materials in compliance with applicable laws) which have been or are being used
in connection with the sale of Time-Share Interests and all public reports/of
offering statements/prospectuses required by 1aw to be utilized in those
jurisdictions where it is has sold or is currently selling Time-Share Interests
or has offered or is currently offering them for sale; and (B) certified copies
of all material changes (other than advertising materials in compliance with
applicable laws) made since January 18, 1994, to the documents used in
connection with the sale of Time-Share Interests and/or the governance of the
Project; and
(iii) evidence that Borrower has been registered and maintained all
necessary licenses and permits as required by applicable law in all
jurisdictions where it has sold or offered Time-Share Interests for sale since
February 18, 1994.
(d) PRFC shall have executed the Consent attached hereto;
(e) Lender shall have received non-disturbance agreements from any and all
creditors of Borrower having a lien on Resort common areas and any and all
persons benefitting from an encumbrance on Resort common areas, which agreements
Lender may deem necessary or appropriate to ensure the continued uninterrupted
use of the Resorts common areas by owners of TimeShare Interests.
(f) Lender shall have received such satisfactory evidence, if any, as it
may require, if any, regarding the satisfactory condition of environmental
status of the Resort (it being Lender's intent to require only an updated
records check if the results of that records check are satisfactory).
(g) Lender shall have received satisfactory evidence that all required
Tennessee intangibles taxes have been paid in connection with this Amendment and
the other Modification Documents.
2.8 This Amendment may not be amended or otherwise modified except in a
writing duly executed by the parties hereto.
2.9 If any one or more of the provisions of this Amendment is held to be
invalid, illegal or unenforceable in any respect or for any reason (all of which
invalidating laws are waived to the fullest extent possible), the validity,
legality and enforceability of any remaining portions of such provisions in
every other respect and of the remaining provisions of this Amendment shall not
be in any respect impaired. In lieu of each such unenforceable provision, there
shall be added automatically as a part of this Amendment a provision that is
legal, valid and enforceable and is similar in terms to such unenforceable
provisions as may be possible.
2.10 This Amendment constitutes the entire agreement and understanding of
the parties with respect to the subject matter hereof and this Amendment
supersedes all prior written or oral understandings and agreements between the
parties in connection with its subject matter.
2.11 This Amendment may be executed in one or more counterparts, and any
number of which having been signed by all the parties hereto shall be taken as
one original.
2.12 Borrower and Lender hereby ratify and confirm the Loan Agreement, as
amended hereby, in all respects; and, except as expressly amended hereby, the
Loan Agreement shall remain in full force and effect.
IN WITNESS WHEREOF this instrument is executed as of the date set forth
BORROWER:
LENDER:
PATTEN CORPORATION, a Massachusetts
corporation
By
Federal EIN: O-0300793
FINOVA CAPITAL CORPORATION, a
Delaware corporation
By:
Title
Title:
CONSENT
By executing this Consent, the undersigned PATTEN RECEIVABLES FINANCE
CORPORATION VI acknowledges to FINOVA CAPITAL CORPORATION (fka Greyhound
Financial Corporation) ('Lender') its consent to the foregoing Amendment No. 2
to Amended and Restated Loan and Security Agreement ('Amendment'); that such
Amendment shall not impair any of its obligations to FINOVA Capital Corporation;
that obligations of Patten Corporation ('Patten') to Lender, as modified by the
Amendment or as may be increased in the future, shall remain fully
crossdefaulted with the obligations of the undersigned under that Amended and
Restated Loan and Security Agreement dated as of January 9, 1990, as amended, to
which the undersigned and Lender are parties ("PRFC VI Loan Agreement'): and
that all collateral now or hereafter given as security for the obligations of
the undersigned under the PRFC VI Loan Agreement shall be security for all
obligations of Patten to Lender, as modified by the Amendment.
PATTEN RECEIVABLES FINANCE CORPORATION VI
By:
Print/
Title:
AMENDMENT NO. TWO TO THE LOAN
AND SECURITY AGREEMENT
PATTEN CORPORATION
This Amendment No. Two To The Loan And Security Agreement (the "Amendment")
is entered into as of the 16th day of February, 1995, by and between PATTEN
CORPORATION, a Massachusetts corporation ("Borrower"), whose chief executive
office is located at 5295 Town Center Road, Suite 400, Boca Raton, Florida 33486
and FOOTHILL CAPITAL CORPORATION, a California corporation ("Foothill"), with a
place of business located at 11111 Santa Monica Boulevard, Suite 1500, Los
Angeles, California 90025-3333, in light of the following facts:
FACTS
FACT ONE: Foothill and Borrower have previously entered into that certain
Loan And Security Agreement, dated as of October 29, 1993 (as amended and
supplemented, the "Agreement").
FACT TWO: Foothill and Borrower desire to amend the Agreement as provided
herein. Terms defined in the Agreement which are used herein shall have the same
meanings as set forth in the Agreement, unless otherwise specified. NOW,
THEREFORE, Foothill and Borrower hereby modify and amend the Agreement as
follows:
1. The Definition of "A Line Borrowing Base" in Section 1.1 of the
Agreement is hereby amended in its entirety to read as follows: "A Line
Borrowing Base" means an amount equal to the sum of (i) ninety percent (90%) of
the unpaid principal balance at the time of the advance with respect to variable
rate notes; and (ii) ninety percent (90%) of the present value of the unmatured
installments of principal and interest, discounted to fourteen percent (14%), at
the time of the advance with respect to fixed rate notes."
2. Effective January 11, 1995, the first sentence of Section 2.4(a) is
hereby amended in its entirety to read as follows: "All Obligations (except for
the Obligations evidenced by the Term Note and Land Inventory Advances) shall
bear interest, on the average Daily Balance, at a rate of two (2) percentage
points above the Reference Rate."
<PAGE>
3. Borrower shall pay to Foothill a fee of $250. Said fee shall be
fully-earned non-refundable, and due and payable on the date of signing and
delivery of this Amendment by Borrower to Foothill.
4. In the event of a conflict between the terms and provisions of this
Amendment and the terms and provisions of the Agreement, the terms and
provisions of this Amendment shall govern. In all other respects, the Agreement,
as supplemented, amended and modified, shall remain in full force and effect. IN
WITNESS WHEREOF, Borrower and Foothill have executed this Amendment as of the
day and year first written above.
FOOTHILL CAPITAL CORPORATION PATTEN CORPORATION
/ / Lisa M.
Gonzales
Its Assistant Vice President
AMENDMENT NO. THREE TO THE LOAN
AND SECURITY AGREEMENT
PATTEN CORPORATION
This Amendment No. Three To The Loan And Security Agreement (the
"Amendment") is entered into as of the 28th day of March, 1995, by and between
PATTEN CORPORATION, a Massachusetts corporation ("Borrower"), whose chief
executive office is located at 5295 Town Center Road, SUITE 400, Boca Raton,
Florida 33486 and FOOTHILL CAPITAL CORPORATION, a California corporation
("Foothill"), with a place of business located at I 1 1 1 1 Santa Monica
Boulevard, Suite 1500, Los Angeles, California 90025-3333, in light of the
following facts:
FACT ONE: Foothill and Borrower have previously entered into that certain
Loan And Security Agreement, dated as of October 29, 1993 (as amended and
supplemented, the "Agreement").
FACT TWO: Foothll and Borrower desire to amend the Agreement as provided
herein. Terms defined in the Agreement which are used herein shall have the same
meanings as set forth in the Agreement, unless otherwise specified,
NOW, THEREFORE, Foothill and Borrower hereby modify and amend the Agreement as
follows:
1. Effective January 11, 1995, the first sentence of Section 2.4(a) is
hereby amended in its entirety to read as follows: "All Obligations shall bear
interest, on the average Daily Balance, at a rate of two (2) percentage points
above the Reference Rate."
2. In the event of a conflict between the terms and provisions of this
Amendment and the terms and provisions of the Agreement, the terms and
provisions of this Amendment shall govern. In all other respects, the Agreement,
as supplemented, amended and modified, shall remain in full force and effect.
IN WITNESS WHEREOF, Borrower and Foothill have executed this Amendment as of the
day and year first written above.
FOOTHILL CAPITAL CORPORATION PATTEN CORPORATION
BY BY
Lisa M. Gonzales
Assistant Vice President
AMENDMENT NO. FOUR TO THE LOAN
AND SECURITY AGREEMENT
PATTEN CORPORATION
This Amendment No. Four To The Loan And Security Agreement (the
"Amendment") is entered into as of the 15th day of June, 1995, by and between
PATTEN CORPORATION, a Massachusetts corporation ("Borrower"), whose chief
executive office is located at 5295 Town Center Road, Suite 400, Boca Raton,
Florida 33486 and FOOTHILL CAPITAL CORPORATION, a California corporation
("Foothill"), with a place of business located at 1 1 1 1 1 Santa Monica
Boulevard, Suite 1500, Los Angeles, California 90025-3333, in light of the
following facts:
FACT ONE- Foothill and Borrower have previously entered into that certain
Loan And Security Agreement, dated as of October 29, 1993 (as amended and
supplemented, the "Agreement").
FACT TWO: Foothill and Borrower desire to amend the Agreement as provided
herein. Terms defined in the Agreement which are used herein shall have the same
meanings as set forth in the Agreement, unless otherwise specified.
NOW, THEREFORE, Foothill and Borrower hereby modify and amend the Agreement as
follows:
1. The Definition "Maximum Amount" under Section 1.1 of the Agreement is
hereby amended in its entirety to read as follows: " Amount" means the sum of
(i) Eleven Million Five Hundred Thousand Dollars ($11,500,000) from June 8, 1995
through September 8, 1995 and (ii) Ten Million Dollars ($10,000,000) after
September 8, 1995."
2. Borrower shall pay to Foothill a fee of $15,000. Said fee shall be
fullyearned, non-refundable, and due and payable on the date of signing and
delivery of this Amendment by Borrower to Foothill.
3. In the event of a conflict between the terms and provisions of this
Amendment and the terms and provisions of the Agreement, the terms and
provisions of this Amendment shall govern. In all other respects, the Agreement,
as supplemented, amended and modified, shall remain in full force and effect.
IN WITNESS THEREOF, Borrower and Foothill have executed this Amendment as of
the day and year first written above.
FOOTHILL CAPITAL CORPORATION
By
Kevin M. Coyle
PATTEN CORPORATION
By
FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT ("Amendment") is
made and entered into this 26TH day of June,1995, by and between PATTEN
CORPORATION, a Massachusetts corporation, with its chief executive office
located at 5295 Town Center Road, Suite 400, Boca Raton, Florida 33486
("Patten"), PATTEN CORPORATION WEST, a Delaware corporation, with its chief
executive office located at 5295 Town Center Road, Suite 400, Boca Raton,
Florida 33486 ("Patten/West") and FOOTHILL CAPITAL CORPORATION, a California
corporation, with a place of business located at 11111 Santa Monica Boulevard,
Suits 1500, Los Angeles, California 90025-3333 ("Foothill"), and in made with
reference to the following facts:
W I T N E S S E T H:
WHEREAS, on or about October 29, 1993, Foothill and Patten entered into
that certain Loan and Security Agreement which provided for borrowings from time
to time by Patten and pledges of various security interests to secure the
repayments of such borrowings, all on the terms and conditions set forth
therein; and
WHEREAS, on or about December 23, 1993, Patten and Foothill entered into
that certain First Amendment to Loan Agreement; and WHEREAS, on or about
February 16, 1995, Patten and Borrower entered into that certain Second
Amendment to Loan Agreement; and
WHEREAS, on or about March 28, 1995, Patten and Foothill entered into that
certain Third AmendMent to Loan Agreement (the Loan Agreement, as amended by the
First, Second, and Third Amendments in hereinafter referred to as the "Loan
Agreement); and
WHEREAS, Patten, Patten/West, and Foothill desire to amend the Loan
Agreement to provide, inter alia, that Patten/West will become a co-borrower
under the Loan Agreement, that it will pledge certain real property owned by it
in the County of La Plata, State of Colorado, and certain other terms and
conditions, more specifically set forth herein. NOW, THEREFORE, for good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
hereto agree as follows:
1. The definition of Borrower shall be amended to include Patten
Corporation West, a Delaware Corporation.
2. The definition of Collateral shall be amended to include, after the
phrase "The Shawmut Funds", the phrase "the Water Rights".
3. There shall be added a new definition, as follows:
"Water Rights" means all of Borrower's water rights with respect to its
developments in La Platta County, Colorado, including, without limitation,
appurtenant, riparian, or otherwise, and also including those evidenced by that
certain Water Supply Agreement dated as of December 14, 1994, entered into
between Patten Corporation West and Lake Durango Water Supply, Inc. a Colorado
corporations
4. There shall be added a new Section 5.19, and follows:
"5.19 InterCompany indebtedness. An of June 15, 1995, Patten Corporation
Went is indebted to Patten Corporation in the sum of Three Million Six Hundred
Eighty Seven Thousand One Hundred Dollars ($3,687,100)."
5. Except as expressly modified herein, the Loan Agreement remains in full
force and effect and is reaffirmed by the parties hereto. By execution below,
Patten Corporation West in a co-borrower under the Loan Agreement, and its
execution binds it to all of the terms, conditions, and restrictions set forth
in the Loan Agreement as a Borrower.
Patten
PATTEN CORPORATION
a Massachusetts Corporation
By Patrick Rondeau
"Patten/West"
PATTEN CORPORATION WEST,
a Delaware corporation
by: Patrick Rondeau
"Foothill"
FOOTHILL CAPITAL CORPORATION
a California corporation
by Rhonda Foreman
SIXTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS SIXTH AMENDMENT TO LOAN AND SECURITY AGREEMENT ("Amendment") is made
and entered into this 8th day of March, 1996, by and between BLUEGREEN
CORPORATION, f/k/a PATTEN CORPORATION, a Massachusetts corporation, with its
chief executive office located at 5295 Town Center Road, Suite 400, Boca Raton,
Florida 33486 ("Patten"), PATTEN CORPORATION WEST, a Delaware corporation, with
its chief executive office located at 5295 Town Center Road, Suite 400, Boca
Raton, Florida 33486 ("Patten/West) and FOOTHILL CAPITAL CORPORATION, a
California corporation, with a place of business located at 11111 Santa Monica
Boulevard, Suite 1500, Los Angeles, California 90025-3333 ("Foothill"), and is
made with reference to the following facts:
W I T N E S S E T H:
WHEREAS, on or about October 29, 1993, Foothill and Patten entered into
that certain Loan and Security Agreement which provided for borrowings from time
to time by Patten and pledges of various security interests to secure the
repayments of such borrowings, all on the terms and conditions set forth
therein; and
WHEREAS, on or about December 23, 1993, Patten and Foothill entered into
that certain First Amendment to Loan Agreement; and
WHEREAS, on or about February 16, 1995, Patten and Foothill entered into
that certain Amendment No. Two to the Loan and Security Agreement: Patten
Corporation; and
WHEREAS, on or about March 28, 1995, Patten and Foothill entered into that
certain Amendment No. Three to the Loan and Security Agreement: Patten
Corporation; and
WHEREAS, on or about June 15, 1995, Patten and Foothill entered into that
certain Amendment No. Four to the Loan and Security Agreement: Patten
Corporation ("Fourth Amendment"); and
WHEREAS, on or about June 26, 1995 Patten, Patten/West and Foothill entered
into that certain Fourth Amendment to Loan and Security Agreement ("Fifth
Amendment"; The Loan Agreement, as amended by the First Amendment, the Second
Amendment, the Third Amendment, the Fourth Amendment and the Fifth Amendment is
hereafter referred to as the "Loan Agreement"); and
WHEREAS, Patten, Patten/West, and Foothill desire to amend the Loan
Agreement on the terms and conditions specifically set forth herein. NOW,
THEREFORE, for good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows: 1. The definition of "Maximum
Amount" in Section 1.1 of the Loan Agreement is deleted in its entirety and the
following substituted in its place and stead: "Maximum Amount" means the sum of
Fifteen Million Dollars ($15,000,000.00)."
2. The definition of "Land Inventory Borrowing Base" in Section 1.1 of the
Loan Agreement is deleted in its entirety and the following substituted in its
place and stead: "Land Inventory Borrowing Base" means an amount equal to the
lesser of (a) five million dollars ($5,000,000.00), (b) fifty percent (50%) of
the sum of acquisition cost of real property plus Borrower's actual costs of
improvements thereon for lots which are in a ready-to-sell condition, (c) thirty
percent (30%) of the projected retail sales price (established in good faith and
supported by comparable lots) of the saleable lots, (d) the acquisition cost of
the land to be acquired, or (e) Foothill's in-house appraisal of the Real
Property."
3. Paragraph 5 of Schedule PN-A is deleted in its entirety and the
following substituted in its place and stead:
115. The Pledged Notes must provide for an interest rate of at least eight
percent (8%) per annum, if fixed, or R6ference Rate plus two and one-half
percent (2 1/2%) if variable, provided, however, that the blended rate of
interest for the entire portfolio of Pledged Notes shall not be less than the
Reference Rate plus one point seven five percent (1.75%)."
4. In accordance with Section 7.5 of the Loan Agreement, Foothill consents
for one time only to the name change of Patten Corporation to BLUEGREEN
CORPORATION. 5. Borrower shall pay to Foothill in fee of twenty five thousand
dollars ($25,000.00), which may be charged to Borrower's Obligations. The fee is
fully earned, non-refundable, and due and payable on the date of signing and
delivery of this Amendment by Borrower to Foothill.
6. Except as expressly modified herein, the Loan Agreement remains in full
force and effect and is reaffirmed by the parties hereto.
"patten"
BLUEGREEN CORPORATION,
f/k/a PATTEN CORPORATION,
a Massachusetts corporation
"Patten/West"
PATTEN CORPORATION WEST,
a Delaware corporation
"Foothill"
FOOTHILL CAPITAL CORPORATION,
a California corporation
The selected financial data set forth below should be read in conjunction with
the Consolidated Financial Statements, including the notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in this Annual Report.
<TABLE>
<CAPTION>
(Dollars in Thousands Except Average Sales Price Data and Per Share Data)
March 31, April 2, March 27, March 28, March 29,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Sales of real estate..................... $113,422 $ 91,922 $ 63,389 $ 53,349 $ 45,100
Interest income and other (1)........... 7,388 7,264 7,952 10,191 16,515
-------- -------- -------- -------- --------
Total revenues......................... 120,810 99,186 71,341 63,540 61,615
Income from operations................... 10,794 10,029 6,778 3,604 1,089
Net income............................... 6,467 6,137 4,931 3,457 1,368
Net income per common share.............. .30 .29 .23 .16 .06
OPERATING DATA
Gross margin on sales of real estate (2). 47.6% 50.9% 51.5% 46.7% 36.3%
Average sales price of land parcels sold (3) $ 34,856 $ 30,296 $ 25,468 $ 20,839 $ 20,967
Number of land parcels sold (3).......... 2,347 2,397 2,489 2,560 2,151
Average sales price of timeshare intervals $ 7,325 $ 7,119 $ --- $ --- $ ---
sold (3).................................
Number of timeshare intervals sold (3)... 1,865 952 --- --- ---
Average sales price of homes/lots sold... $ 71,546 $100,866 $ 70,044 $ --- $ ---
Number of homes/lots sold................ 206 133 44 --- ---
Average yield earned on notes receivable at
period end............................ 12.4% 12.4% 10.9% 11.0% 12.1%
BALANCE SHEET DATA
- ------------------
Notes receivable, net (4)................ $ 37,014 $ 40,311 $ 44,203 $ 35,653 $118,836
Inventory, net (4)....................... 73,595 62,345 38,793 28,245 28,345
Total assets............................. 154,963 152,222 139,617 122,853 182,193
Short-term debt.......................... --- --- --- 6,500 ---
Current portion of lines-of-credit, notes
payable and receivable-backed notes 8,938 10,856 5,741 5,684 13,503
payable..................................
Long-term portion of lines-of-credit, notes
payable and receivable-backed notes 28,073 29,090 31,556 14,418 76,209
payable..................................
8.25% convertible subordinated debentures 34,739 34,739 34,739 34,739 34,739
Shareholders' equity..................... 64,698 58,040 51,854 46,868 43,378
Book value per common share.............. $ 3.15 $ 2.98 $ 2.91 $ 2.74 $ 2.54
Shares outstanding at end of year (000's) 20,533 19,471 17,796 17,083 17,061
(5)......................................
ASSET QUALITY RATIOS
Charge-offs, net of recoveries, to average 1.4% 1.6% 3.6% 3.0% .7%
loans (4)................................
Reserve for loan losses to period end loans 2.4% 2.6% 2.2% 4.3% 3.6%
(4)......................................
</TABLE>
1) Interest income for fiscal 1996, 1995, 1994 and 1993 includes a $1.1
million gain, a $411,000 loss, a $238,000 loss and a $695,000 gain,
respectively, from sales of notes receivable in connection with private
placement REMIC transactions.
2) Gross margin is computed as the difference between the sales price and
the related cost of inventory, including the cost of improvements and amenities,
divided by the sales price.
3) Average sales price and unit sales data exclude the effect of deferring
recognition of revenue under percentage of completion accounting.
4) The Company adopted Statement of Financial Accounting Standard No. 114,
"Accounting by Creditors for Impairment of a Loan" (FAS No. 114) on April 3,
1995. FAS No. 114 amends the guidance for insubstance foreclosures contained in
Financial Accounting Release No. 28. Under FAS No. 114, a collateral dependent
loan shall be reported as real estate only if the lender has taken possession of
the inventory. Accordingly, reclassifications have been made between notes
receivable, reserve for loan losses and inventory for fiscal 1992 through 1995
to conform to the current year presentation. Furthermore, asset quality ratios
have been restated for these same periods.
5) Fiscal 1994 shares outstanding reflect the payment of a 4% common stock
dividend. Fiscal 1995 shares outstanding reflect the payments of two additional
common stock dividends of 4% and 5%. Fiscal 1996 shares outstanding reflect the
payment of a fourth common stock dividend of 5%. Earnings per share data have
been restated for all periods presented to give affect to all common stock
dividends paid. Book value per share has not been restated to give affect to
cumulative dividends paid through March 31, 1996, and rather, reflects the
shares outstanding as of the respective fiscal period end.
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
The Company desires to take advantage of the new "safe harbor" provisions of the
Private Securities Reform Act of 1995 (the "Act") and is making the following
statements pursuant to the Act in order to do so. The Act only became law in
late December, 1995 and, except for the Conference Report, no official
interpretations of the Act's provisions have been published. This report
contains forward-looking statements that involve a number of risks and
uncertainties. The Company wishes to caution readers that the following
important factors, among others, in some cases have affected, and in the future
could affect, the Company's actual results and could cause the Company's actual
consolidated results to differ materially from those expressed in any
forward-looking statements made by, or on behalf of, the Company.
a) Changes in national or regional economic conditions that can affect the
real estate market, which is cyclical in nature and highly sensitive to such
changes, including, among other factors, levels of employment and discretionary
disposable income, consumer confidence, available financing and interest rates.
b) The imposition of additional compliance costs on the Company as the
result of changes in any federal, state or local environmental, zoning or other
laws and regulations that govern the acquisition, subdivision and sale of real
estate and various aspects of the Company's financing operation.
c) Risks associated with a large investment in real estate inventory at any
given time.
d) Changes in applicable usury laws or the availability of interest
deductions or other provisions of federal or state tax law.
e) A decreased willingness on the part of banks to extend direct customer
lot financing, which could result in the Company receiving less cash in
connection with the sales of real estate.
f) The inability of the Company to find external sources of liquidity on
favorable terms to support its operations and satisfy its debt and other
obligations.
g) An increase in delinquency rates or defaults with respect to
Company-originated loans or an increase in the costs related to reacquiring,
carrying and disposing of properties reacquired through foreclosure or deeds in
lieu of foreclosure.
h) Costs to develop inventory for sale exceed those anticipated.
Liquidity and Capital Resources
Sources of Capital. The Company's capital resources are provided from both
internal and external sources. The Company's primary capital resources from
internal operations include (i) downpayments on real estate sales which are
financed, (ii) cash sales of real estate, (iii) principal and interest payments
on the purchase money mortgage loans arising from land sales and contracts for
deed arising from sales of timeshare intervals (collectively "Receivables") and
(iv) proceeds from the sale of, or borrowings collateralized by, Receivables.
Historically, external sources of liquidity have included borrowings under
secured and unsecured lines-of-credit, seller and bank financing of inventory
acquisitions and the issuance of debt and equity securities. Currently, the
primary external sources of liquidity include seller and bank financing of
inventory acquisitions and development along with borrowings under secured
lines-of-credit. The Company anticipates that it will continue to require
external sources of liquidity to support its operations and satisfy its debt and
other obligations.
Net cash provided by the Company's operations was $15.3 million, $9.4 million
and $16.5 million for the years ended March 31, 1996, April 2, 1995 and March
27, 1994, respectively. During fiscal 1996, sales of real estate increased over
the prior year and, accordingly, cash received from customers was $16.3 million
higher than during fiscal 1995. In addition, the proceeds from a Real Estate
Mortgage Investment Conduit ("REMIC") transaction completed in fiscal 1996
together with borrowings (net of payments) collateralized by Receivables,
generated $12.4 million more in cash during fiscal 1996 than during the prior
year. Interest received, net of interest paid, increased $1.2 million from
fiscal 1995 to fiscal 1996. However, cash paid for land acquisition and
development increased by $12.9 million from fiscal 1995 to fiscal 1996. During
fiscal 1996, the Company acquired ten land properties along with an oceanfront
property in Myrtle Beach, South Carolina which is being developed and marketed
under the Resorts Division. In the prior year, the Company acquired several
large land properties including approximately 22,000 acres in south-central
Colorado. In addition, during fiscal 1996 a greater percentage of acquisition
and development costs were paid in cash in lieu of borrowing under
lines-of-credit or obtaining seller or similar financial institution financing.
Along with higher acquisition and development spending, cash paid to suppliers
and employees (including sales representatives) increased from fiscal 1995 to
fiscal 1996 by $11.2 million. A significant percentage of selling, general and
administrative expenses ("S,G & A") is variable relative to sales and
profitability levels, and therefore, increases with growth in sales of real
estate.
Fiscal 1994 net cash provided by operations was $7.1 million higher than during
fiscal 1995 due, in part, to $3.7 million received during fiscal 1994 from a
former joint venture partner for the full repayment of a loan. In addition, the
increased cash collections from customers during fiscal 1995 was offset by an
increase in cash paid for acquisition and development of inventories combined
with an increase in cash paid to suppliers, employees and sales representatives.
During fiscal 1996 and fiscal 1995, the Company received in cash $84.7 million
or 74% and $67.9 million or 77%, respectively, of its sales of real estate that
closed during these periods. During fiscal 1994, the Company received in cash
$41.0 million or 66% of its sales of real estate that closed. The decrease in
the percentage of cash received from fiscal 1995 to fiscal 1996 is primarily
attributable to an increase in timeshare sales over the same period;
approximately 85% of the principal balance of such sales has historically been
internally financed by the Company. Timeshare sales accounted for 12% of
consolidated sales of real estate during fiscal 1996, compared to 6% of
consolidated sales during fiscal 1995. Management expects that in fiscal 1997,
the percentage of sales received in cash may decrease further due to the recent
introduction of a fixed interest rate program offered to qualified land
customers along with anticipated increases in timeshare sales as a percentage of
consolidated sales. The increase in the percentage of cash received during
fiscal 1995 over fiscal 1994 was primarily attributable to (i) an increased
willingness on the part of certain local banks to extend more direct customer
lot financing during fiscal 1995 and (ii) an increased amount of home sales in
certain markets in the revenue mix during fiscal 1995, the proceeds of which
were received entirely in cash.
Receivables arising from land and timeshare real estate sales generally are
pledged to institutional lenders or sold in connection with private placement
REMIC financings. The Company currently is advanced 90% of the face amount of
the eligible notes when pledged to lenders. The Company classifies the
indebtedness secured by Receivables as receivable-backed notes payable on the
Consolidated Balance Sheet. During fiscal 1996, fiscal 1995 and fiscal 1994, the
Company borrowed $19.4 million, $8.6 million and $20.7 million, respectively,
through the pledge of Receivables. During fiscal 1996 and fiscal 1995, the
Company raised an additional $28.7 million and $22.7 million, net of transaction
costs and prior to the retirement of debt, from sales of Receivables under
private placement REMIC transactions. During the twelve months ended March 27,
1994, the Company raised $8.4 million from the private sale of Class B
certificates issued under the Company's 1992 REMIC financing. The discussion
below and Note 8 to the Consolidated Financial Statements provide additional
information with respect to credit facilities secured by Receivables and the
sale of Receivables through private placement transactions. The Company has a
revolving credit facility of $20.0 million with a financial institution secured
by land inventory and land Receivables. The interest rate charged on borrowings
secured by such inventory and Receivables is prime plus 2.75% and prime plus
2.0%, respectively. At March 31, 1996, the outstanding principal balance under
the facility was $9.1 million, comprised of $2.8 million secured by inventory
and $6.3 million secured by Receivables. The Company repays loans made under the
inventory portion of the facility through lot release payments as the collateral
is sold. In addition, the Company is required to meet certain minimum debt
amortization on the outstanding inventory secured debt. The indebtedness secured
by land inventory has maturities that range from December, 1996 to June, 1997.
All principal and interest payments received from the pledged Receivables are
applied to the principal and interest due under the Receivables portion of this
facility. Furthermore, at no time may Receivable related indebtedness exceed 90%
of the face amount of eligible pledged Receivables. The Company is obligated to
pledge additional Receivables or make additional principal payments on the
Receivable related indebtedness in order to maintain this collateralization
rate. Repurchases and additional principal payments have not been material to
date. The indebtedness secured by Receivables matures ten years from the date of
the last advance. The ability to receive advances under the facility expires in
October, 1996. The Company is currently engaged in discussions with the lender
about the renewal of the facility. No assurances can be given that the facility
will be renewed on terms satisfactory to the Company, if at all.
The Company also has a $20.0 million credit facility with this same lender which
provides for acquisition, development, construction and Receivables financing
for the first and second phases of a multi-phase timeshare project in
Gatlinburg, Tennessee. The interest rate charged on borrowings secured by
inventory and timeshare Receivables is prime plus 2.0%. At March 31, 1996, the
outstanding principal balance under the facility was $7.5 million, comprised of
$600,000 secured by inventory and $6.9 million secured by Receivables. The
Company is required to repay the portion of the loan secured by inventory
through two equal annual installments of $300,000 each in December, 1996 and
December, 1997. All principal and interest payments received from the pledged
Receivables are applied to the principal and interest due under the Receivables
portion of this facility. Furthermore, at no time may the Receivable related
indebtedness exceed 90% of the face amount of pledged Receivables. The Company
is obligated to pledge additional Receivables or make additional principal
payments on the Receivable related indebtedness in order to maintain this
collateralization rate. Repurchases and additional principal payments have not
been material to date. The indebtedness secured by Receivables matures seven
years from the date of the last advance. The ability to borrow under the
facility expires in November, 1998.
The Company has another credit facility with this same lender which provides for
acquisition, development, construction and Receivables financing on a second
timeshare resort located in Pigeon Forge, Tennessee in the amount of $6.2
million. The interest rate charged on borrowings secured by inventory and
timeshare Receivables is prime plus 2.0%. At March 31, 1996, there was $2.1
million outstanding under the facility, comprised of $1.2 million secured by
inventory and $865,000 secured by Receivables. The Company is required to repay
the portion of the loan secured by inventory through three annual principal
payments of $400,000 in July, 1996, $400,000 in July, 1997 and $410,000 in July,
1998. All principal and interest payments received from the pledged Receivables
are applied to the principal and interest due under the Receivables portion of
this facility. Furthermore, at no time may Receivable related indebtedness
exceed 90% of the face amount of pledged Receivables. The Company is obligated
to pledge additional Receivables or make additional principal payments on the
Receivable related indebtedness in order to maintain this collateralization
rate. Repurchases and additional principal payments have not been material to
date. The indebtedness secured by Receivables matures seven years from the date
of the last advance. The ability to borrow under the facility expires in July,
1998.
The Company has a $13.5 million secured line-of-credit with a South Carolina
financial institution for the construction and development of Phase I of its
Myrtle Beach timeshare resort. The Myrtle Beach oceanfront property was acquired
during the second quarter of fiscal 1996, and Phase I consists of 114
residential units. The interest rate charged under the facility is prime plus
.5%. At March 31, 1996, there was $188,000 outstanding under the facility. The
indebtedness is due in May, 1997.
The Company also has a $23.5 million line-of-credit with a financial
institution. The credit line provides for "take-out" of the construction lender
discussed in the preceding paragraph in the amount of $13.5 million as well as
$10.0 million for the pledge of Myrtle Beach timeshare Receivables. The interest
rate charged under the line-of-credit is the three-month London Interbank
Offered Rate ("LIBOR") plus 4.25%. Management expects the first advance under
the Receivables facility to occur in June, 1996 and the "take-out" advance to
occur in March, 1997.
The Company has a $15.0 million revolving credit facility with another financial
institution secured by land Receivables and land inventory. Under the terms of
this facility, the Company is entitled to advances equal to 90% of the
outstanding principal balance of eligible pledged Receivables and advances of up
to $5.0 million secured by land inventory to finance real estate acquisition and
development costs. The interest rate charged on borrowings secured by
Receivables and inventory is prime plus 2.0%. At March 31, 1996, the outstanding
principal balance under the facility was $6.0 million, comprised of $277,000
secured by inventory and $5.7 million secured by Receivables. The Company is
required to pay the financial institution 55% of the contract price of land
sales associated with pledged inventory when any such inventory is sold until
the land indebtedness is paid in full. The Company repaid the Receivable related
indebtedness in May, 1996 with a portion of the proceeds from a private
placement REMIC transaction. See discussion of subsequent event in Note 14 to
the Consolidated Financial Statements. With respect to future borrowings under
the Receivable related portion of the facility, all principal and interest
payments received on pledged Receivables will be applied to principal and
interest due under the Receivables portion of this facility. The facility
expires in October, 1998.
In addition to the land and resorts financing described above, the Company has
outstanding indebtedness under two lines-of-credit secured by a North Carolina
and a Florida project managed under the Communities Division. At March 31, 1996,
the aggregate outstanding indebtedness under these facilities totaled $1.3
million. The indebtedness secured by the North Carolina property matures in
June, 1996 and the indebtedness secured by the Florida property matures in May,
1998. The ability to borrow under these facilities has expired and the Company
does not intend to renew the facilities.
Along with inventory and Receivables financing under credit arrangements
described above, the Company regularly seeks term financing for the acquisition
of its real estate from sellers, banks or similar financial institutions.
Accordingly, the aggregate amount of inventory acquisition and development costs
obtained through term financing and lines-of-credit during fiscal 1996, fiscal
1995 and fiscal 1994 totaled $12.4 million or 18%, $23.1 million or 32% and
$12.8 million or 33%, respectively. The increase in the percentage of
acquisition and development costs paid in cash during fiscal 1996 reflects
additional internal capital generated from higher real estate sales and proceeds
of a REMIC transaction.
See "Uses of Capital" and "Results of Operations" below for a further discussion
of the Company's Land, Resorts and Communities Divisions.
The Company is required to comply with certain covenants under several of its
debt agreements discussed above, including, without limitation, the following
financial covenants:
I. Maintain net worth of at least $42.0 million.
II. Maintain a leverage ratio of not more than 4.0 to 1.0. The leverage
ratio is defined as consolidated indebtedness of the Company divided by
consolidated net worth.
III. Maintain an adjusted leverage ratio of not more than 2.0 to 1.0. The
adjusted leverage ratio is defined as consolidated indebtedness of the Company
excluding the convertible subordinated debentures divided by consolidated net
worth including the convertible subordinated debentures.
IV. Limit selling, general and administrative expenses to 50% of gross
sales revenue from sales of real estate. The Company was in compliance with each
of such covenants at March 31, 1996 and for each reporting period during fiscal
1996, fiscal 1995 and fiscal 1994.
Debt Obligations. The following table sets forth the minimum contractual
principal payments required on the Company's lines-of-credit and notes payable
as well as the scheduled principal reductions with respect to receivable-backed
indebtedness for years subsequent to fiscal 1996.
Lines-of- Receivable-
Credit and Backed
Notes Notes
Payable Payable Total
Fiscal 1997 $ 4,764,643 $ 4,173,850 $ 8,938,493
Fiscal 1998 6,202,356 3,088,351 9,290,707
Fiscal 1999 2,792,180 3,267,997 6,060,177
Fiscal 2000 1,225,237 3,414,547 4,639,784
Fiscal 2001 954,034 3,431,589 4,385,623
Thereafter 1,349,317 2,347,132 3,696,449
Total $17,287,767 $19,723,466 $37,011,233
Installments due on lines-of-credit and notes payable primarily consist of
payments due on indebtedness secured by property inventory. In most instances,
as inventory is sold, the Company is required to repay the creditor a
predetermined percentage of the selling price or a predetermined price per acre.
The agreements also generally call for certain minimum debt amortization. When
the Company provides financing for its customers, it is required to pay the
creditor with cash from other operating activities, principally with the
proceeds from the pledge or sale of Receivables.
All principal and interest collections on Receivables pledged as collateral for
receivable-backed notes payable are dedicated to the payment of principal and
interest on the related debt. Under the terms of the receivable-backed note
agreements, the Company is not required to advance delinquent customer payments
to the creditor. However, in most cases the Company is obligated to maintain a
receivable-backed notes payable balance of not more than 90% of eligible pledged
Receivables.
In April, 1994, the Board of Directors authorized the repurchase of up to $4.0
million principal amount of the Company's 8.25% convertible subordinated
debentures due 2012 in the open market from time to time subject to the
Company's financial condition and liquidity, the terms of its credit agreements,
market conditions and other factors. The Company has not purchased any of its
convertible subordinated debentures under this program through March 31, 1996.
See Note 7 to the Consolidated Financial Statements.
In recent years, private placement REMIC financings have provided substantial
capital resources to the Company. In these transactions, (i) the Company sells
or otherwise absolutely transfers a pool of mortgage loans to a newly-formed
special purpose subsidiary, (ii) the subsidiary sells the mortgage loans to a
trust in exchange for certificates representing the entire beneficial ownership
in the trust and (iii) the subsidiary sells one or more senior classes of the
certificates to an institutional investor in a private placement and retains the
remaining certificates, which remaining certificates are subordinated to the
senior classes. The certificates are not registered under the Securities Act of
1933, as amended, and may not be offered or sold in the United States absent
registration or an applicable exemption from registrations. The certificates are
issued pursuant to a pooling and servicing agreement (the "Pooling Agreement").
Collections on the mortgage pool, net of certain servicing and trustee fees, are
remitted to the certificateholders on a monthly basis in the order of priority
specified in the applicable Pooling Agreement. The Company acts as servicer
under the Pooling Agreement and is paid an amortized servicing fee of .5% of the
scheduled principal balance of those rates in the mortgage pool on which the
periodic payment of principal and interest is collected in full. Under the terms
of the Pooling Agreement, the Company has the obligation to repurchase or
replace mortgage loans in the pool with respect to which there was a breach of
the Company's representations and warranties contained in the Pooling Agreement
at the date of sale, which breach materially and adversely affects the rights of
certificateholders. In addition, the Company, as servicer, is required to make
advances of delinquent payments to the extent deemed recoverable. However, the
certificates are not obligations of the Company, the subsidiary or any of their
affiliates and the Company has no obligation to repurchase or replace the
mortgage loans solely due to delinquency.
On May 11, 1994, the Company sold, or otherwise absolutely transferred and
assigned, $27.7 million aggregate principal amount of mortgage notes receivable
(the "1994 Mortgage Pool") to a subsidiary of the Company and the subsidiary
sold the 1994 Mortgage Pool to a REMIC Trust (the "1994 REMIC Trust").
Simultaneous with the sale, the 1994 REMIC Trust issued four classes of
Adjustable Rate REMIC Mortgage Pass-Through Certificates. The initial principal
balances of the Class A, Class B and Class C certificates were approximately
$23.3 million, $2.8 million and $1.6 million, respectively. The Class R
Certificates have no initial principal balance and do not bear interest. The
Class A, Class B and Class C Certificates bear interest at the lesser of (i) the
weighted average of the net mortgage interest rates of certain notes in the
Mortgage Pool less the servicing fee rate and trustee fee rate or (ii) LIBOR for
six month United States dollar deposits plus a margin of 2.5%, 3.5% and 4.5%,
respectively.
The 1994 REMIC Trust is comprised primarily of a pool of fixed and adjustable
rate first mortgage loans secured by property sold by the Company. On May 11,
1994, the subsidiary sold the Class A and Class B Certificates issued under the
Pooling Agreement to an institutional investor for aggregate proceeds of
approximately $26.0 million in a private placement transaction and retained the
Class C and Class R Certificates. A portion of the proceeds from the transaction
was used to repay approximately $13.5 million of outstanding debt. An additional
$2.4 million was used to retire securities previously sold pursuant to the
Company's 1989 REMIC transaction. The balance of the proceeds, after payment of
transaction expenses and fees, resulted in an increase of $12.4 million in the
Company's unrestricted cash.
On July 12, 1995, the Company sold, or otherwise absolutely transferred and
assigned, $68.1 million aggregate principal amount of mortgage notes receivable
(the "1995 Mortgage Pool") to a subsidiary of the Company and the subsidiary
sold the 1995 Mortgage Pool to a REMIC Trust (the "1995 REMIC Trust").
Simultaneous with the sale, the 1995 REMIC Trust issued four classes of
Adjustable Rate REMIC Mortgage Pass-Through Certificates. The initial principal
balances of the Class A, Class B and Class C certificates were approximately
$61.3 million, $4.8 million and $2.0 million, respectively. The Class R
Certificates have no initial principal balance and do not bear interest. The
Class A, Class B and Class C Certificates bear interest at the lesser of (i) the
weighted average of the net mortgage interest rates of certain notes in the
Mortgage Pool less the servicing fee rate and trustee fee rate or (ii) LIBOR for
six month United States dollar deposits plus a margin of 1.5%, 3.55% and 4.0%,
respectively.
The 1995 REMIC Trust is comprised primarily of a pool of fixed and adjustable
rate first mortgage loans secured by property sold by the Company. The $68.1
million of loans comprising the Mortgage Pool were previously owned by the REMIC
trust established by the Company in 1992 ($46.8 million) or held by the Company
or pledged to an institutional lender ($21.3 million). The Class C and Class R
Certificates are subordinated to the Class A and Class B Certificates, as
provided in the Pooling Agreement. On July 12, 1995, the subsidiary sold the
Class A and Class B Certificates issued under the Pooling Agreement to two
institutional investors for aggregate proceeds of approximately $66.1 million in
a private placement transaction. The subsidiary retained the Class C and Class R
Certificates. A portion of the proceeds from the transaction was used to repay
approximately $12.9 million of outstanding debt. An additional $36.3 million was
used to retire securities previously sold pursuant to the Company's 1992 REMIC
transaction. The balance of the proceeds, after payment of transaction expenses
and fees, resulted in an increase of more than $15.8 million in the Company's
unrestricted cash. The pre-tax gain from the transaction was approximately $1.1
million and the after-tax gain was approximately $672,000.
On May 15, 1996, the Company sold, or otherwise absolutely transferred and
assigned, $13.2 million aggregate principal amount of mortgage notes receivable
(the "1996 Mortgage Pool") to a subsidiary of the Company and the subsidiary
sold the 1996 Mortgage Pool to a REMIC Trust (the "1996REMIC Trust").
Simultaneous with the sale, the 1996 REMIC Trust issued three classes of Fixed
Rate REMIC Mortgage Pass-Through Certificates. The initial principal balances of
the Class A and Class B certificates were approximately $11.8 million and $1.3
million, respectively. The Class R Certificates have no initial principal
balance and do not bear interest. The Class A and Class B Certificates bear
interest at 8.8% and 9.8%, respectively.
The 1996 REMIC Trust is comprised primarily of a pool of fixed and adjustable
rate first mortgage loans secured by property sold by the Company. On May 15,
1996, the subsidiary sold the Class A and Class B Certificates issued under the
Pooling Agreement to an institutional investor for aggregate proceeds of
approximately $11.8 million in a private placement transaction and retained the
Class B and Class R Certificates. A portion of the proceeds from the transaction
was used to repay approximately $5.6 million of outstanding debt. An additional
$263,000 was used to fund a cash reserve account. The balance of the proceeds,
after payment of transaction expenses and fees, resulted in an increase of $5.8
million in the Company's unrestricted cash.
In addition to the sources of capital available under credit facilities
discussed above, the balance of the Company's unrestricted cash and cash
equivalents was $3.7 million at March 31, 1996. At May 15, 1996, the balance of
the Company's unrestricted cash and cash equivalents was $7.8 million. See
discussion of subsequent event in Note 14 to the Consolidated Financial
Statements and in the preceding paragraph. Based upon existing credit
relationships, the current financial condition of the Company and its operating
plan, management believes the Company has, or can obtain, adequate financial
resources to satisfy its anticipated capital requirements.
Uses of Capital.
The Company's capital resources are used to support the Company's
operations, including (i) acquiring and developing inventory, (ii) providing
financing for customer purchases, (iii) meeting operating expenses and (iv)
satisfying the Company's debt obligations.
The Company's net inventory was $73.6 million at March 31, 1996 and $62.3
million at April 2, 1995. Management recognizes the inherent risk of carrying
increased levels of inventory. Therefore, certain land parcels acquired for the
development and sale on a retail basis have been identified for bulk sale. With
respect to its inventory holdings, the Company requires capital to (i) improve
land intended for recreational, vacation, retirement or primary homesite use by
purchasers, (ii) develop timeshare property and (iii) fund its housing operation
in certain locations.
The Company estimates that the total cash required to complete preparation for
the retail sale of the consolidated inventories owned as of March 31, 1996 is
approximately $99.4 million, exclusive of the cost of any manufactured/modular
homes not yet acquired or under contract for sale, which the Company is unable
to determine at this time. The Company anticipates spending an estimated $49.2
million of the capital development requirements during fiscal 1997. The
allocation of anticipated cash requirements to the Company's operating divisions
is discussed below.
Land Division The Company expects to spend $28.6 million to improve land which
typically includes expenditures for road and utility construction, surveys and
engineering fees, including $17.7 million to be spent during fiscal 1997.
Resorts Division The Company expects to spend $68.7 million for building
materials, amenities and other infrastructure costs such as road and utility
construction, surveys and engineering fees, including $29.4 million to be spent
during fiscal 1997. See earlier discussion of lines-of-credit for the financing
of Resorts Division property under "Sources of Capital".
Communities Division The Company expects to spend $2.1 million for the purchase
of factory built manufactured homes currently under contract for sale, building
materials and other infrastructure costs, including road and utility
construction, surveys and engineering fees. The Company attempts to pre-qualify
prospective home purchasers and secures a purchase contract prior to commencing
unit construction to reduce standing inventory risk. The total cash requirement
of $2.1 million is expected to be spent during the first quarter of fiscal 1997.
The table to follow outlines certain information with respect to the estimated
funds expected to be spent to fully develop property owned as of March 31, 1996.
The real estate market is cyclical in nature and highly sensitive to changes in
national and regional economic conditions, including, among other factors,
levels of employment and discretionary disposable income, consumer confidence,
available financing and interest rates. No assurances can be given that actual
costs will not exceed those reflected in the table or that historical gross
margins which the Company has experienced will not decline in the future as a
result of changing economic conditions and consumer demand or other factors.
Geographic Land Resorts Communities Total
Region
Southwest $23,417,207 $ $ 10,276 $23,427,483
Rocky Mountains 1,180,591 --- 1,560 1,182,151
West 2,233,993 --- --- 2,233,993
Midwest 220,495 41,037,333 --- 41,257,828
Southeast 748,348 27,701,017 2,134,188 30,583,553
Northeast 645,239 --- --- 645,239
Mid-Atlantic 117,957 117,957
Total estimated
spending 28,563,830 68,738,350 2,146,024 99,448,204
Net inventory at
March 31, 1996 43,388,699 16,029,204 14,177,111 73,595,014
Total estimated
cost basis of
fully developed
inventory $84,767,554 $16,323,135 $71,952,529 $173,043,218
The Company's net inventory summarized by division as of March 31, 1996 and
April 2, 1995 is set forth below.
March 31, 1996
Geographic
Region Land Resorts Communities Total
Southwest $15,118,191 $--- $ 142,790 $15,260,981
Rocky Mountains 9,299,344 --- 50,800 9,350,144
West 5,923,972 --- --- 5,923,972
Midwest 6,293,008 10,839,389 --- 17,132,397
Southeast 2,252,239 5,189,815 13,983,521 21,425,575
Northeast 1,982,895 --- --- 1,982,895
Mid-Atlantic 2,490,025 --- --- 2,490,025
Canada 29,025 --- --- 29,025
Totals $43,388,699 $16,029,204 $ 14,177,111 $73,595,014
April 2, 1995
Geographic
Region Land Resorts Communities Total
Southwest $16,643,459 $ --- $ 1,115,914 $17,759,373
Rocky Mountains 9,308,069 --- 9,742,002 433,933
MidWest --- --- --- ---
Midwest 7,671,471 5,240,911 --- 12,912,382
Southeast 2,755,756 --- 11,575,971 14,331,727
Northeast 3,044,966 --- --- 3,044,966
Mid-Atlantic 4,280,951 --- --- 4,280,951
Canada 273,349 --- --- 273,349
Totals $43,978,021 $ 5,240,911 $13,125,818 $62,344,750
The Company attempts to maintain inventory at a level adequate to support
anticipated sales of real estate in its various operating regions. In addition
to product diversification, the Company has sought broader geographic
distribution of its land projects and increased its land holdings in the Western
region of the United States due to anticipated strong consumer demand and
expanded sales efforts. The Company's land acquisition in the West during the
second quarter of fiscal 1996 consisted of approximately 6,200 acres located
near Prescott, Arizona. Sales from the Arizona property commenced in the fourth
quarter of fiscal 1996. Although no assurances can be given, management expects
that its land holdings in the Southwest, Rocky Mountains, West, Midwest and
Southeast will remain relatively level during fiscal 1997. At the same time, the
Company plans to continue to reduce its land holdings in the Northeastern and
certain parts of the Mid-Atlantic regions due to continued overall soft economic
and real estate market conditions.
The increase in inventory under the Resorts Division is attributable to the
acquisition of an oceanfront property in Myrtle Beach, South Carolina for $3.5
million combined with development spending on the Myrtle Beach resort and the
two resorts in Tennessee.
Communities Division inventory as of March 31, 1996, consisted of land inventory
of $10.5 million and $3.7 of housing unit construction-in-progress. As of April
2, 1995, the Communities Division had $9.9 million of land inventory with $3.2
million of housing unit construction-in-progress. The increase in land inventory
which was attributable to infrastructure development and the purchase of acreage
near Orlando, Florida for $507,000 was partially offset by sales of land
inventory. The increase in housing unit construction-in-progress is associated
with the Company's manufactured and modular home developments in North Carolina.
The Company does not intend to acquire any additional communities related
inventories and present operations will be terminated either through sales in
the normal course of business or through the bulk sale of these assets.
The Company offers financing of up to 90% of the purchase price of land real
estate sold to all purchasers of its properties who qualify for such financing.
The Company also offers financing of up to 90% of the purchase price to
timeshare purchasers. During fiscal 1996 and fiscal 1995, the Company received
26% and 24%, respectively, of its consolidated sales of real estate which closed
during the period in the form of Receivables. The increase in the percentage of
sales financed by the Company from fiscal 1995 to fiscal 1996 is primarily
attributable to an increase in timeshare sales over the same period;
approximately 85% of timeshare sales has historically been internally financed
by the Company. Timeshare sales accounted for 12% of consolidated sales of real
estate during fiscal 1996, compared to 6% of consolidated sales during fiscal
1995. Management also expects that in fiscal 1997, the percentage of sales
financed by the Company may further increase due to the recent introduction of a
fixed interest rate program offered to qualified land customers. This program
had an immaterial effect on the relationship between cash versus financed land
sales during fiscal 1996. During fiscal 1994, the Company received 34% of its
consolidated sales of real estate which closed during the period in the form of
Receivables. The lower percentage of sales financed during fiscal 1995 compared
to fiscal 1994 was primarily attributable to (i) an increased willingness on the
part of certain local banks to extend more direct customer lot financing during
fiscal 1995 and (ii) an increased amount of home sales in the revenue mix during
fiscal 1995, the proceeds of which were received entirely in cash.
At March 31, 1996, $27.0 million of Receivables were pledged as collateral to
secure Company indebtedness, while $10.9 million of Receivables were not pledged
or encumbered. At April 2, 1995, $28.2 million of Receivables were pledged as
collateral to secure Company indebtedness while $13.2 million of Receivables
were not pledged or encumbered. The table below provides further information on
the Company's land and timeshare Receivables at March 31, 1996 and April 2,
1995. Proceeds from sales under the Company's Communities Division are received
entirely in cash.
(Dollars In Millions)
March 31, 1996 April 2, 1995
Receivables Land Timeshare Total Land Timeshare Total
Encumbered $ 18.4 $ 8.6 $ 27.0 $ 28.2 $ --- $ 28.2
Unencumbered 7.8 3.1 10.9 8.9 4.3 13.2
Total $26.2 $11.7 $ 37.9 $ 37.1 $ 4.3 $ 41.4
The reduction in encumbered land Receivables from April 2, 1995 to March 31,
1996 was primarily attributable to the repayment of receivable-backed debt and
the sale of notes pursuant to the 1995 REMIC transaction. As discussed above,
the Company completed a REMIC transaction on May 15, 1996. See "Sources of
Capital" and Notes 8 and 14 to the Consolidated Financial Statements.
The table below provides information with respect to the loan-to-value ratio of
land and timeshare Receivables held by the Company at March 31, 1996 and April
2, 1995. Loan-to-value ratio is defined as unpaid balance of the loan divided by
the contract purchase price.
March 31, 1996 April 2, 1995
Receivables Land Timeshare Land Timeshare
Loan-to-Value Ratio 63% 75% 56% 80%
Because the Company sold a substantial portion of its more seasoned land
Receivables in connection with the 1995 REMIC, the related loan-to-value ratio
was higher at March 31, 1996 than at April 2, 1995.
In cases of default by a customer on a land mortgage note, the Company may
forgive the unpaid balance in exchange for title to the parcel securing such
note. Real estate acquired through foreclosure or deed in lieu of foreclosure is
recorded at the lower of estimated net realizable value or the balance of the
loan. Related costs incurred to reacquire, carry and dispose of the property are
capitalized to the extent deemed recoverable. Timeshare loans represent
contracts for deed. Accordingly, no foreclosure process is required. Following a
default on a timeshare note, the purchaser ceases to have any right to use the
applicable unit and the timeshare interval can be resold to a new purchaser.
Reserve for loan losses to period end notes receivable was 2.4% and 2.6% at
March 31, 1996 and April 2, 1995, respectively. The adequacy of the Company's
reserve for loan losses is determined by management and reviewed on a regular
basis considering, among other factors, historical frequency of default, loss
experience, present and expected economic conditions as well as the quality of
Receivables.
At March 31, 1996, approximately 7% or $2.8 million of the aggregate $39.2
million principal amount of loans which were held by the Company or by third
parties under financings for which the Company had a recourse liability, were
more than 30 days past due. Of the $39.2 million principal amount of loans,
$37.9 million were held by the Company, while approximately $1.3 million were
associated with programs under which the Company has a limited recourse
liability. In most cases of limited recourse liability, the recourse to the
Company terminates when the principal balance of the loan becomes 70% or less of
the original selling price of the property underlying the loan. At April 2,
1995, approximately 5% or $2.1 million of the aggregate $43.2 million principal
amount of loans which were held by the Company or by third parties under
financings for which the Company had a recourse liability, were more than 30
days past due. Factors contributing to the increase in delinquency (including
the economy and levels of unemployment in some geographic areas) are believed to
be similar to those experienced by other lenders as evidenced by national
statistics which cite an increase in the national delinquency rate for
residential mortgages and consumer credit. In addition to the dollar amount of
delinquencies increasing, the amount of Receivables decreased. This caused a
further increase in the delinquency rate as a percent of Receivables. The
reduction in Receivables was the result of the sale of notes under the 1995
REMIC. See "Sources of Capital" and Note 8 to the Consolidated Financial
Statements. Results of Operations
The following tables set forth selected financial data for the business units
comprising the consolidated operations of the Company for the years ended March
31, 1996 and April 2, 1995. The Company was not involved in resort operations
and the communities operation was not material during the year ended March 27,
1994. Accordingly, results of operations by business unit for fiscal 1994 are
not presented. The following information should be read in conjunction with the
Consolidated Financial Statement and related Notes.
<TABLE>
<CAPTION>
(Dollars in Thousands)
Year Ended March 31, 1996
Land Resorts Communities Total
<S> <C> <C> <C> <C>
Sales of real estate $84,859 100.0% $13,825 100.0% 14,739 100.0% $113,422 100.0%
Cost of real estate
sold 41,510 48.9% 4,550 32.9% 13,333 90.5% 59,393 52.4%
Gross profit 43,349 51.1% 9,275 67.1% 1,406 9.5% 54,029 47.6%
Field selling,
general and
administrative 24,649 29.0% 8,591 62.1% 2,727 18.5% 35,967 31.7%
expense (1)
Field operating
profit(loss) (2) $18,700 22.1% $ 684 5.0% $(1,321) (9.0)% $18,062 15.9%
(Dollars in Thousands)
Year Ended April 2, 1995
Land Resorts Communities Total
Sales of real sold $72,621 100.0% $5,886 100.0% $13,415 100.0% $91,922 100.0%
Cost of real estate
sold 31,082 42.8% 2,225 37.8% 11,799 88.0% 45,106 49.1%
Gross profit 41,539 57.2% 3,661 62.2% 1,616 12.0% 46,816 50.9%
Field selling,
general and
administrative
expense (1) 22,647 31.2% 3,523 59.9% 1,863 13.9% 28,033 30.5%
Field operating
profit (loss) (2) $18,892 26.0% $ 138 2.3% $ (247)( 1.9)% $18,783 20.4%
</TABLE>
(1) General and administrative expenses attributable to corporate overhead have
been excluded from the tables. Corporate general and administrative expense
totaled $7.8 million and $8.5 million for fiscal 1996 and fiscal 1995,
respectively.
(2) The tables presented above outline selected financial data. Accordingly,
interest income, interest expense, other income and income taxes have been
excluded.
Consolidated sales of real estate increased 23% to $113.4 million for fiscal
1996 compared to $91.9 million for fiscal 1995 and $63.4 million for fiscal
1994. The increase in sales of real estate during fiscal 1996 was partially
offset by little to no gross profits on the liquidation of older land
inventories, including those managed under the Communities Division. The real
estate market is cyclical in nature and highly sensitive to changes in national
and regional economic conditions, including, among other factors, levels of
employment and discretionary disposable income, consumer confidence, available
financing and interest rates. A downturn in the market for real estate could
have a material adverse affect on the Company. The following discussion and
tables set forth additional information on the business units comprising the
consolidated operating results. The Company's leisure products business is
currently operated through three divisions. The Land Division acquires large
acreage tracts of real estate which are subdivided, improved and sold, typically
on a retail basis. The Resorts Division acquires and develops timeshare property
to be sold in vacation ownership intervals. Vacation ownership is a concept
whereby fixed week intervals or undivided fee simple interests are sold in
fully-furnished vacation units. The Communities Division is engaged in the
development and sale of primary residential homes at selected sites together
with land parcels. The Company does not intend to acquire any additional
communities related inventories and present operations will be terminated either
through sales in the normal course of business or through the bulk sale of these
assets.
Land Division
The following table sets forth certain information for sales of parcels
associated with the Company's Land Division for the periods indicated, before
giving effect to the percentage of completion method of accounting. Accordingly,
the application of multiplying the number of parcels sold by the average sales
price per parcel yields aggregate sales different than that reported on the
earlier table (outlining sales revenue by business unit after applying
percentage of completion accounting to sales transactions). See Contracts
Receivable and Revenue Recognition under Note 1 to the Consolidated Financial
Statements.
Years Ended
March 31, April 2, March 27,
1996 1995 1994
Number of parcels sold 2,347 2,397 2,489
Average sales price per parcel $34,856 $30,969 $25,511
Average sales price per parcel
excluding a large acreage bulk sale
in each of the Rocky Mountains
and Southeast regions in the most
recent year $33,628 $30,969 $25,511
Gross margin 51% 57% 52%
The table set forth below outlines the numbers of parcels sold and the average
sales price per parcel for the Company's Land Division by geographic region for
the fiscal periods indicated.
<TABLE>
<CAPTION>
Years Ended
March 31, 1996 April 2, 1995 March 27, 1994
Average Average Average
Geographic Number of Sales Price Number of Sales Price Number of Sales Price
Region Parcels Sold Per Parcel Parcels Sold Per Parcel Parcels Sold Per Parcel
<S> <C> <C> <C> <C> <C> <C>
Southwest 1,117 $ 37,489 1,107 $ 34,999 940 $ 27,140
West 19 $ 138,347 --- $ --- --- $ ---
Rocky Mountains 297 $ 44,524 339 $ 32,033 242 $ 34,180
Midwest 334 $ 27,451 317 $ 28,740 437 $ 22,767
Southeast 223 $ 36,925 289 $ 28,311 376 $ 26,537
Northeast 106 $ 12,472 113 $ 19,382 115 $ 17,687
Mid-Atlantic 236 $ 21,951 215 $ 23,136 367 $ 20,700
Canada 15 $ 11,674 17 $ 10,160 12 $ 13,037
Totals 2,347 $ 34,856 2,397 $ 30,969 2,489 $ 25,511
</TABLE>
The number of parcels sold in the Southwest, which includes Texas and New
Mexico, increased only slightly during fiscal 1996 due to a shortage of
ready-to-market Texas property during the first quarter. The reduction in the
number of sales from Texas properties was offset by an increase in the number of
sales from the Company's New Mexico project. The average sales price per parcel
in the Southwest increased during fiscal 1996 due to a greater number of parcel
sales from the Company's New Mexico project at a higher average selling price
than during fiscal 1995. There were 139 sales from the New Mexico project at an
average sales price of $44,141 during fiscal 1996 compared to 71 sales at an
average sales price of $41,599 during fiscal 1995.
The number of parcels sold in the West increased due to the Company's entry into
the Arizona market during fiscal 1996. The Arizona property is being marketed in
parcels of at least 35 acres at retail prices from $100,000 to $150,000.
The number of parcels sold in the Rocky Mountains region decreased during fiscal
1996 due to fewer sales from the Company's Montana properties, partially offset
by more sales from Colorado properties. The average sales price per parcel in
the Rocky Mountains region increased during fiscal 1996 due to the sale of
larger acreage tracts in two recently acquired projects located in Colorado. In
addition, during fiscal 1996 the average sales price was affected by a single
bulk sale constituting approximately 8,300 acres in Colorado for $2.5 million.
The average sales price per parcel in the Rocky Mountains region, excluding the
$2.5 million bulk sale, was $36,228.
The number of parcels sold in the Midwest increased during fiscal 1996 from the
Company's Tennessee properties, however, the average sales price per parcel
decreased. During fiscal 1995, certain promotional pricing was offered to
customers in connection with the introduction of two water-front properties
(primarily during the first quarter of last year). However, this was more than
offset by more less-expensive parcel sales during the fourth quarter of fiscal
1996.
The number of parcels sold in the Southeast decreased because of slow sales in a
new project in South Carolina during the first quarter of fiscal 1996. This was
partially offset by higher sales of more expensive parcels from the Company's
North Carolina property.
The Company continues to liquidate its land inventory in the Northeast, Canada
and certain parts of the Mid-Atlantic region. The Company has reduced its
presence in these areas in response to economic conditions and reduced consumer
demand.
The average gross margin for the Land Division was 51%, 57% and 52% for fiscal
1996, fiscal 1995 and fiscal 1994, respectively. The decrease in the gross
margin from fiscal 1995 to fiscal 1996 is attributable to (i) the $2.5 million
Colorado bulk sale which yielded a gross margin of 40%, (ii) an overall
reduction in gross margins in the Rocky Mountains region from 56% for fiscal
1995 to 42% for fiscal 1996, (iii) a reduction in gross margins for certain
parcels in Mid-Atlantic and Southeast regional projects which neared sell-out
and (iv) continued sales from Northeast property where the Company has
experienced little to no gross profits.
The Company's Investment Committee, consisting of executive officers, approves
all property acquisitions. In order to be approved for purchase by the
Committee, properties under contract for sale are expected to achieve certain
minimum economics, including a minimum gross margin. The sale of certain land
inventory acquired prior to the formation of the Investment Committee and sales
of inventory reacquired through foreclosure or deed in lieu of foreclosure will
continue to adversely affect overall gross margins. Specifically, the Company
anticipates little or no gross margin on the sale of the remaining $2.0 million
of net inventory in the Northeast. In addition, the Company has experienced
lower gross margins during fiscal 1996 in the Rocky Mountains region (which
includes Colorado, Idaho and Montana) due to a reduction in sales from Montana
property where gross margins have historically exceeded 55% which was partially
offset by an increased number of larger acreage parcel sales from Colorado
projects. The Company has experienced gross margins generally ranging from 40%
to 50% on its Colorado projects and gross margins are generally not expected to
exceed this range on the remaining Colorado inventories. The Company also owns a
land property in New Mexico (classified under the Southwest region in the
earlier tables). The Company expects the multi-phase project to generate an
average gross margin of 40% over its sellout. No assurances can be given that
the Company can maintain historical or anticipated gross margins in any
geographic area of operation.
Resorts Division
During fiscal 1996 and fiscal 1995, sales of timeshare intervals contributed
$13.8 million or 12% and $5.9 million or 6%, respectively, of the Company's
total consolidated revenues from the sale of real estate. No sales were made
under the Resorts Division during fiscal 1994.
The following table sets forth certain information for sales of intervals
associated with the Company's Resorts Division for the periods indicated, before
giving effect to the percentage of completion method of accounting. Accordingly,
the application of multiplying the number of intervals sold by the average sales
price per interval yields aggregate sales different than that reported on the
earlier table (outlining sales revenue by business unit after applying
percentage of completion accounting to sales transactions).
Years Ended
March 31, April 2, March 27,
1996 1995 1994
Number of intervals sold 1,865 952 ---
Average sales price per interval $7,325 $7,119 $ ---
Gross margin 67% 62% ---
The number of timeshare intervals sold increased to 1,865 during fiscal 1996
compared to 952 for fiscal 1995. During fiscal 1995, all interval sales were
generated from the Company's first resort in Gatlinburg, Tennessee. During
fiscal 1996, 1,374 intervals were sold from the Gatlinburg resort, 484 intervals
were sold from the Company's second resort in neighboring Pigeon Forge,
Tennessee and seven intervals were sold from the Company's resort in Myrtle
Beach, South Carolina. The seven sales from the Myrtle Beach resort totaling
approximately $68,000 have been deferred under percentage of completion
accounting. A portion of the sales revenues from Gatlinburg and Pigeon Forge
have also been deferred.
Gross margins on interval sales increased from 62% for fiscal 1995 to 67% for
fiscal 1996. The increase in gross margins from the Company's Gatlinburg,
Tennessee resort was attributable to sales at higher prices which yielded higher
gross margins, partially offset by additional development costs incurred on unit
construction and certain amenities of the project. In the prior year, certain
introductory pricing had been offered to prospective customers. In addition,
average gross margins were favorably impacted by Pigeon Forge sales which
commenced in the second quarter of fiscal 1996.
Communities Division
During fiscal 1996, the Company's Communities Division contributed $14.7 million
in sales revenue, or approximately 13% of total consolidated revenues from sales
of real estate. During fiscal 1995, the Communities Division generated $13.4
million in sales revenue, or approximately 15% of total consolidated revenues
from the sale of real estate. During fiscal 1994, the Communities Division
generated $3.1 million in sales revenue, or approximately 5% of total
consolidated revenues from the sale of real estate.
The following table sets forth certain information for sales associated with the
Company's Communities Division for the periods indicated.
Years Ended
March 31, April 2, March 27,
1996 1995 1994
Number of homes/lots sold 206 133 44
Average sales price $71,546 $100,866 $70,044
Gross margin 10% 12% 12%
The $14.7 million in fiscal 1996 sales was comprised of 114 manufactured homes
with an average sales price of $75,232, 20 site-built homes with an average
sales price of $198,592, 71 sales of lots-only at an average sales price of
$23,279 and one larger acreage Southwestern bulk lot sale for $530,320. The
$13.4 million in fiscal 1995 sales was comprised of 110 manufactured homes with
an average sales price of $77,243 and 23 site-built homes with an average sales
price of $213,640. Substantially all of the $3.1 million in fiscal 1994 sales
was comprised of manufactured homes.
The decrease in the average gross margin from 12% for fiscal 1994 and fiscal
1995 to 10% for fiscal 1996 reflects a change in the product mix to include a
greater number of manufactured home sales from a project located in the
Southeast. This Southeastern project yielded lower gross margins than the
Company's manufactured home project in the Rocky Mountains region which is now
sold out but was at the height of marketing efforts during fiscal 1995. Lower
gross margins on the Southeastern home project were partially offset by a more
dominant mix of lot-only sales, most heavily affected by one larger acreage bulk
sale. The sale of land inventory being marketed under the Communities Division
was acquired prior to the formation of the Investment Committee. Sales of these
inventories are expected to continue to adversely affect overall gross margins.
Furthermore, management does not intend to expand its Communities related
activities beyond the projects currently being marketed.
The tables set forth below outline sales by geographic region and division for
the years indicated.
Year Ended March 31, 1996
Geographic
Region Land Resorts Communities Total %
Southwest $43,457,483 $ 2,734,570 $ 46,192,053 40.7%
West 2,628,600 --- 2,628,600 2.3%
Rocky Mountains 13,223,744 --- 409,817 13,633,561 12.0%
Midwest 9,981,574 13,825,162 --- 23,806,736 21.0%
Southeast 8,569,869 --- 11,594,167 20,164,036 17.8%
Northeast 1,321,982 --- --- 1,321,982 1.2%
Mid-Atlantic 5,500,146 --- --- 5,500,146 4.8%
Canada 175,114 --- --- 175,114 .2%
Totals $84,858,512 $13,825,162 $14,738,554 $113,422,228 100.0%
Year Ended April 2, 1995
Geographic
Region Land Resorts Communities Total %
Southwest $38,600,075 $ --- $ 2,012,112 $ 40,612,187 44.2%
Rocky Mountains 10,859,280 --- 3,521,637 14,380,917 15.6%
Midwest 8,297,375 5,886,427 --- 14,183,802 15.4%
Southeast 7,846,343 --- 7,881,426 15,727,769 17.1%
Northeast 2,190,110 --- --- 2,190,110 2.4%
Mid-Atlantic 4,654,483 --- --- 4,654,483 5.1%
Canada 172,722 --- --- 172,722 .2%
Totals $72,620,388 $5,886,427 $13,415,175 $ 91,921,990 100.0%
Year Ended March 27, 1994
Geographic
Region Land Resorts Communities Total %
Southwest $23,855,291 $ --- $ 388,890 $ 24,244,181 38.2%
Rocky Mountains 362,356 --- 362,356 8,431,800 13.3%
Midwest 10,520,147 --- 125,716 10,645,863 16.8%
Southeast 8,196,901 --- 1,780,995 9,977,896 15.7%
Northeast 2,034,000 --- --- 2,034,000 3.2%
Mid-Atlantic 7,474,934 --- 424,000 7,898,934 12.5%
Canada 156,438 --- --- 156,438 .3%
---
Totals $60,307,155 $ --- $3,081,957 $ 63,389,112 100.0%
Interest income was $7.4 million for fiscal 1996 compared to $7.3 million and
$8.0 million for fiscal 1995 and fiscal 1994, respectively. The Company's
interest income is earned from its mortgage note receivables, securities
retained pursuant to REMIC financings and cash and cash equivalents. Interest
income for each year was also affected by the sale of receivables in REMIC
transactions. The table set forth below outlines interest income earned from
each category of asset for the periods indicated.
Years Ended
March 31, April 2, March 27,
Interest income and other: 1996 1995 1994
Receivables held and servicing fees
from whole-loan sale $4,232,887 $4,561,825 $4,460,919
Securities retained in connection
with REMIC financings including
REMIC servicing fee 1,602,831 2,556,274 3,017,086
Gain (loss) on REMIC transaction 1,119,572 (411,000) 238,000
Cash and cash equivalents 432,805 556,660 235,518
Totals $7,388,095 $7,263,759 $7,951,523
As discussed under "Sources of Capital", the Company completed a REMIC
transaction in July, 1995. The $68.1 million of loans comprising the Mortgage
Pool were previously owned by the REMIC trust established by the Company in 1992
($46.8 million) or held by the Company or pledged to an institutional lender
($21.3 million). Because of more favorable terms offered under the 1995 REMIC,
the Company retired the securities issued pursuant to the 1992 REMIC and
included substantially all of the Receivables in the 1995 REMIC transaction. The
Company recorded a pre-tax gain of $1.1 million on the 1995 REMIC transaction.
The 1995 REMIC gain was partially offset by reduced interest income due to lower
(i) average securities held for the period (due to the retirement of securities
issued pursuant to the Company's 1992 REMIC), (ii) average Receivables held for
the period and (iii) average cash and cash equivalents. The Company recorded a
loss of $411,300 in connection with the 1994 REMIC transaction completed in May,
1994. See Notes 8 and 14 to the Consolidated Financial Statements.
S,G & A expense totaled $43.7 million, $36.5 million and $26.4 million for
fiscal 1996, fiscal 1995 and fiscal 1994, respectively. A significant percentage
of S,G&A expenses is variable relative to sales and profitability levels, and
therefore, increases with growth in sales of real estate. As a percentage of
sales of real estate, S,G & A expenses decreased from 42% for fiscal 1994 to 40%
for fiscal 1995 to 39% for fiscal 1996. The decrease as a percent of sales was
largely the result of lowering certain corporate general and administrative
expenses and Land Division S,G&A expenses, offset by an increase in S,G&A
expenses for the Communities Division and Resorts Division. The Company's Resort
Division began generating sales during fiscal 1995 from its first resort in
Gatlinburg, Tennessee. Two additional resorts were added in fiscal 1996. Because
of the start-up costs associated with the new resorts, S,G&A is
disproportionately high as a percent of sales.
Interest expense totaled $6.3 million, $6.7 million and $6.6 million for fiscal
1996, fiscal 1995 and fiscal 1994, respectively. As discussed under "Uses of
Capital", the Company paid cash for a greater percentage of its property
acquisition and development during fiscal 1996. Therefore, while the Company's
inventory increased from $38.8 million at March 27, 1994 to $62.3 million at
April 2, 1995 to $73.6 million as of March 31, 1996, the Company's total
indebtedness did not increase at a corresponding rate. Total indebtedness of the
Company was $71.8 million, $74.7 million and $72.0 million at March 31, 1996,
April 2, 1995 and March 27, 1994, respectively. In addition to maintaining
relatively level average outstanding indebtedness from fiscal 1994 through
fiscal 1996, the Company capitalized to inventory approximately $1.5 million
more in interest expense during fiscal 1996 than in fiscal 1995. Interest
capitalization was partially offset by a higher average cost of borrowing during
fiscal 1996. The increase in capitalized interest is the direct result of the
Company acquiring certain inventory which requires significant development over
longer sellout periods. The increase in the cost of borrowings was the direct
result of an increase in the prime lending rate during fiscal 1996
(approximately 50% of the Company's indebtedness provides for variable interest
rates tied to the prime lending rate).
The Company recorded provisions for loan losses (or related advanced real estate
taxes for delinquent customers) totaling $612,000, $792,000 and $795,000 during
fiscal 1996, fiscal 1995 and fiscal 1994, respectively. See related discussion
of notes receivable under "Uses of Capital".
Income from consolidated operations was $10.8 million, $10.0 million and $6.8
million for fiscal 1996, fiscal 1995 and fiscal 1994, respectively. The
improvement from fiscal 1995 to fiscal 1996 was primarily the result of
increased sales of real estate and higher net interest spread (representing the
difference between interest income and interest expense) partially offset by a
lower average consolidated gross margin.
Gains and losses from sources other than normal operating activities of the
Company are reported separately as other income (expense). Other income for
fiscal 1996, fiscal 1995 and fiscal 1994 was not material to the Company's
results of operations.
The Company recorded a tax provision of 41% of pre-tax income for fiscal 1996
and fiscal 1995. The Company recorded a tax provision of 38% for fiscal 1994.
The Company has fully utilized its operating loss carryforwards associated with
certain state income taxes which resulted in a higher effective tax rate for
fiscal 1996 and fiscal 1995.
Net income was $6.5 million, $6.1 million and $4.9 million for fiscal 1996,
fiscal 1995 and fiscal 1994, respectively. The increase in consolidated sales of
real estate over the three year period was partially offset by a lower
consolidated average gross margin.
<PAGE>
Report of Management
We have prepared the consolidated financial statements and other sections of
this annual report and are responsible for all information and representations
contained therein. Such consolidated financial information was prepared in
accordance with generally accepted accounting principles appropriate in the
circumstances, based on our estimates and judgments.
The Company maintains accounting and internal control systems which were
designed to provide reasonable assurance that assets are safeguarded from loss
or unauthorized use and to produce records adequate for preparation of financial
information. The systems are established and monitored in accordance with
written policies which set forth management's responsibility for proper internal
accounting controls.
The consolidated financial statements have been audited by Ernst & Young LLP,
Independent Certified Public Accountants, in accordance with generally accepted
auditing standards. In connection with their audit, Ernst & Young LLP has
developed an understanding of our accounting and financial controls and
conducted such tests and related procedures as they consider necessary to render
their opinion on our consolidated financial statements.
The financial data contained in this annual report was subject to review by the
Audit Committee of the Board of Directors. The Audit Committee, composed of
three directors who are not employees, meets periodically during the year with
Ernst & Young LLP and with management to review accounting, auditing, internal
control and financial reporting matters.
We believe that our policies and procedures provide reasonable assurance that
operations are conducted in conformity with applicable laws and with our
commitment to a high standard of business conduct.
George F. Donovan
President and Chief Executive Officer
Alan L. Murray
Treasurer and Chief Financial Officer
Mary Jo Wiegand
Controller and Vice President
April 26, 1996
<PAGE>
Report of Independent Certified Public Accountants
The Board of Directors and Shareholders
Bluegreen Corporation
We have audited the accompanying consolidated balance sheets of Bluegreen
Corporation (formerly known as Patten Corporation) as of March 31, 1996 and
April 2, 1995, and the related consolidated statements of income, shareholders'
equity and cash flows for each of the three years in the period ended March 31,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Bluegreen
Corporation at March 31, 1996 and April 2, 1995, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended March 31, 1996, in conformity with generally accepted accounting
principles.
Ernst & Young LLP
West Palm Beach, Florida
April 26,1996, except for Note 14 as to which the date is May 15, 1996
<PAGE>
<TABLE>
<CAPTION>
BLUEGREEN CORPORATION
Consolidated Balance Sheets
March 31, April 2,
Assets 1996 1995
<S> <C> <C>
Cash and cash equivalents (including restricted cash of
approximately $7.7 million and $5.2 million at
March 31, 1996 and April 2, 1995, respectively)........ $ 11,389,141 $ 7,588,475
Contracts receivable, net................................. 12,451,207 13,051,254
Notes receivable, net..................................... 37,013,802 40,311,191
Investment in securities.................................. 9,699,435 18,097,917
Inventory, net............................................ 73,595,014 62,344,750
Property and equipment, net............................... 5,239,100 4,801,824
Debt issuance costs....................................... 1,288,933 1,739,555
Other assets.............................................. 4,287,393 4,286,401
Total assets........................................... $154,963,033 $152,222,359
Liabilities and Shareholders' Equity
Accounts payable.......................................... $ 2,557,797 $ 3,134,753
Accrued liabilities and other............................. 9,889,063 11,292,846
Lines-of-credit and notes payable......................... 17,287,767 20,431,346
Deferred income taxes..................................... 6,067,814 5,069,719
Receivable-backed notes payable........................... 19,723,466 19,514,718
8.25% convertible subordinated debentures................. 34,739,000 34,739,000
Total liabilities...................................... 90,264,907 94,182,382
Commitments and contingencies............................. --- ---
Shareholders' Equity
Preferred stock, $.01 par value, 1,000,000 shares
authorized; none issued................................ --- ---
Common stock, $.01 par value, 90,000,000 shares
authorized; 20,533,410 and 19,470,734 shares
outstanding at March 31, 1996 and April 2, 1995,
respectively........................................... 205,334 194,707
Capital-in-excess of par value............................ 71,296,158 66,839,599
Retained earnings (deficit)............................... (6,803,366) (8,994,329)
Total shareholders' equity................................ 64,698,126 58,039,977
Total liabilities and shareholders' equity............. $154,963,033 $152,222,359
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
BLUEGREEN CORPORATION
Consolidated Statements of Income
Years Ended
March 31, April 2, March 27,
1996 1995 1994
<S> <C> <C> <C>
Revenues:
Sales of real estate........................... $113,422,228 $91,921,990 $63,389,112
Interest income and other...................... 7,388,095 7,263,759 7,951,523
120,810,323 99,185,749 71,340,635
Cost and expenses:
Cost of real estate sold....................... 59,393,392 45,105,841 30,773,203
Selling, general and administrative expense.... 43,734,724 36,520,817 26,443,598
Interest expense............................... 6,276,187 6,737,687 6,551,153
Provision for losses........................... 611,979 792,000 795,000
110,016,282 89,156,345 64,562,954
Income from operations............................ 10,794,041 10,029,404 6,777,681
Other income...................................... 121,884 372,443 1,174,770
Income before income taxes........................ 10,915,925 10,401,847 7,952,451
Provision for income taxes........................ 4,449,069 4,264,758 3,021,931
Net income........................................ $ 6,466,856 $6,137,089 $4,930,520
Income per common share:
Net income........................................ $ .30 $ .29 $ .23
Weighted average number of common and
common equivalent shares ....................... 21,775,291 21,476,638 21,496,130
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
BLUEGREEN CORPORATION
Consolidated Statements of Shareholders' Equity
Years Ended March 31, 1996, April 2, 1995 and March 27, 1994
Common Common Stock Capital in Retained
Shares $.01 Par Excess of Earnings
Issued Value Par Value (Deficit) Total
<S> <C> <C> <C> <C> <C>
Balance at March 28, 1993..... 17,083,001 $ 170,830 $59,172,395 $(12,475,206) $46,868,019
4% stock dividend............. 683,005 6,830 1,871,434 ( 1,878,274) ---
Cash payment for dividends in
lieu of fractional shares.. --- --- --- ( 976) ( 976)
Shares issued to employees upon
exercise of qualified stock
options.................... 29,968 300 55,796 --- 56,096
Net income.................... --- --- --- 4,930,520 4,930,520
------------ ---------- ----------- ---------- -----------
Balance at March 27, 1994..... 17,795,974 177,960 61,099,625 ( 9,423,926) 51,853,659
4% stock dividend............. 711,076 7,111 2,570,540 ( 2,577,651) ---
5% stock dividend............. 925,751 9,257 3,115,152 ( 3,124,409) ---
Cash payment for dividends in
lieu of fractional shares.. --- --- --- ( 5,432) ( 5,432)
Shares issued to employees upon
exercise of qualified stock
options.................... 37,933 379 54,282 --- 54,661
Net income.................... --- --- --- 6,137,089 6,137,089
---------- ------- ---------- ---------- ----------
Balance at April 2, 1995...... 19,470,734 194,707 66,839,599 ( 8,994,329) 58,039,977
5% stock dividend............. 976,418 9,764 4,262,236 ( 4,272,000) ---
Cash payment for dividends in
lieu of fractional shares.. --- --- --- ( 3,893) ( 3,893)
Shares issued to employees upon
exercise of qualified stock
options 86,258 863 194,323 --- 195,186
Net income.................... --- --- --- 6,466,856 6,466,856
------------ ---------- ----------- ---------- -----------
Balance at March 31, 1996..... 20,533,410 $ 205,334 $71,296,158 $(6,803,366) $64,698,126
============ ========== =========== ============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
BLUEGREEN CORPORATION
Consolidated Statements of Cash Flows
Years Ended
----------------------------------------------------------------
March 31, April 2, March 27,
1996 1995 1994
<S> <C> <C> <C>
Operating activities:
Cash received from customers including net
cash collected as servicer of notes receivable
to be remitted to investors............................ $ 94,939,565 $ 78,667,484 $ 50,738,479
Interest received....................................... 6,220,829 5,409,259 5,194,172
Cash paid for land acquisitions and real estate
development............................................ ( 61,236,096) ( 48,374,125) ( 25,618,038)
Cash paid to suppliers, employees and sales
representatives........................................ ( 44,567,809) ( 33,337,031) ( 27,635,318)
Interest paid, net of capitalized interest.............. ( 5,918,887) ( 6,287,133) ( 5,811,807)
Income taxes paid, net of refunds ...................... ( 3,316,235) ( 3,097,292) ( 2,292,671)
Proceeds from borrowings collateralized by notes
receivable............................................. 19,438,016 8,587,550 20,693,016
Payments on borrowings collateralized by notes
receivable............................................. ( 19,229,268) ( 14,845,131) ( 7,086,595)
Net proceeds from REMIC transactions.................... 28,688,041 22,706,101 8,352,973
Cash received from investment in securities............ 275,816 --- ---
------------- ------------ -------------
Net cash provided by operating activities.................. 15,293,972 9,429,682 16,534,211
------------- ------------ -------------
Investing activities:
Net cash flow from purchases and sales of
property and equipment................................. ( 1,106,077) ( 1,316,255) ( 719,516)
Additions to other long-term assets..................... ( 410,814) ( 259,109) ( 869,316)
------------- ------------ -------------
Net cash flow used by investing activities................. ( 1,516,891) ( 1,575,364) ( 1,588,832)
------------- ------------ -------------
Financing activities:
Borrowings under line-of-credit facilities.............. 5,795,604 3,916,436 152,342
Payments under line-of-credit facilities................ ( 4,053,615) --- ---
Payments under repurchase agreements.................... --- --- ( 6,500,000)
Borrowings under short-term secured debt facility....... --- --- 6,500,000
Payments under short-term secured debt facility......... --- --- ( 6,500,000)
Payments on other long-term debt........................ ( 11,909,697) ( 13,539,555) ( 9,458,542)
Proceeds from exercise of employee stock options........ 195,186 54,661 56,096
Payment for stock dividends in lieu of fractional shares. ( 3,893) ( 5,432) ( 976)
Net cash flow used by financing activities................. ( 9,976,415) ( 9,573,890) ( 15,751,080)
------------- ------------ -------------
Net increase (decrease) in cash and cash equivalents....... 3,800,666 ( 1,719,572) ( 805,701)
Cash and cash equivalents at beginning of year............. 7,588,475 9,308,047 10,113,748
------------- ------------ -------------
Cash and cash equivalents at end of year................... 11,389,141 7,588,475 9,308,047
Restricted cash and cash equivalents end of year........... ( 7,683,901) ( 5,164,650) ( 5,015,689)
--------------- -------------- --------------
Unrestricted cash and cash equivalents at end of year...... $ 3,705,240 $ 2,423,825 $ 4,292,358
=============== ============== ==============
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BLUEGREEN CORPORATION
Consolidated Statements of Cash Flows
(continued)
Years Ended
--------------------------------------------------------------
March 31, April 2, March 27,
1996 1995 1994
<S> <C> <C> <C>
Reconciliation of net income to net cash flow
provided by operating activities:
Net income........................................... $ 6,466,856 $ 6,137,089 $ 4,930,520
Adjustments to reconcile net income to net
cash flow provided by operating activities:
Depreciation and amortization.................... 1,636,933 1,301,125 1,660,475
(Gain) loss on REMIC transactions................ ( 1,119,572) 411,000 238,000
(Gain) loss on sale of property and equipment.... 48,561 ( 54,519) ( 173,902)
Provision for losses............................. 611,979 792,000 795,000
Interest accretion on investment in securities... ( 1,170,367) ( 2,222,724) ( 3,029,775)
Proceeds from borrowings collateralized
by notes receivable net of principal
repayments...................................... 208,748 ( 6,257,581) 13,606,421
Provision for deferred income taxes.............. 998,095 1,326,791 2,951,748
(Increase) decrease in operating assets:
Contracts receivable............................... 600,047 ( 3,122,652) ( 1,228,633)
Investment in securities........................... 9,568,849 13,268,891 8,591,369
Inventory.......................................... ( 2,003,195) ( 4,452,058) 4,556,303
Other assets....................................... 274,414 1,264,688 ( 2,656,580)
Notes receivable................................... 1,153,363 ( 1,404,790) (11,839,107)
Increase (decrease) in operating liabilities:
Accounts payable, accrued liabilities and other.... ( 1,980,739) 2,442,422 ( 1,867,628)
------------ -------------- -------------
Net cash flow provided by operating activities........... $ 15,293,972 $ 9,429,682 $ 16,534,211
============ ============== =============
Supplemental schedule of non-cash operating
and financing activities
Inventory acquired through financing............... $ 6,595,450 $ 17,680,680 $ 12,806,899
============ ============= =============
Inventory acquired through foreclosure or
deedback in lieu of foreclosure................... $ 1,609,697 $ 1,139,993 $ 737,487
============ ============= =============
Investment in securities retained in
connection with REMIC transactions............... $ 2,044,029 $ 2,674,370 $ ---
============ ============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
BLUEGREEN CORPORATION
Notes to Consolidated Financial Statements
1. Significant Accounting Policies
Organization
Bluegreen Corporation (the "Company") is a national leisure product company
operating in twenty-one states. The Company's primary business is (i) the
acquisition, development and sale of recreational and residential land and (ii)
the acquisition and development of timeshare properties which are sold in weekly
intervals.
The Company offers financing to its land and timeshare purchasers.
Land and timeshare products are typically located in scenic areas or popular
vacation destinations throughout the United States. The Company's products are
primarily sold to middle-class individuals with ages ranging from forty to
fifty-five. The Company changed its name, effective March 8, 1996, from Patten
Corporation.
Principles of Consolidation
The financial statements include the accounts of Bluegreen Corporation and all
wholly owned subsidiaries. All significant intercompany transactions are
eliminated.
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company invests cash in excess of immediate operating requirements in cash
equivalent short-term time deposits and money market instruments generally with
original maturities of three months or less. The Company maintains cash and cash
equivalents with various financial institutions. These financial institutions
are located throughout the country and Company policy is designed to limit
exposure to any one institution. However, a significant portion of the Company's
unrestricted cash is maintained with a single bank and, accordingly, the Company
is subject to credit risk. Periodic evaluations of the relative credit standing
of financial institutions maintaining Company deposits are performed to evaluate
and mitigate, if necessary, credit risk.
Restricted cash is primarily associated with funds restricted under
receivable-backed note agreements and customer deposits on real estate
maintained in escrow accounts.
Investment in Securities
The Company's investment in securities at March 31, 1996, consists of the
subordinated certificates which were retained by the Company in connection with
its 1994 and 1995 REMIC transactions. At April 2, 1995, investment in securities
consists of the subordinated certificates which were retained by the Company in
connection with its 1992 and 1994 REMIC transactions. The certificates are being
carried at their initial allocated basis plus income accreted using the
estimated effective yield rates. The income accreted on the investment in
securities is reported in interest income. The carrying value of investment in
securities approximates fair value.
Inventory
Real estate acquired for sale is carried at the lower of cost, including costs
of improvements and amenities incurred subsequent to acquisition, or estimated
net realizable value. Real estate reacquired through foreclosure or deedback in
lieu of foreclosure is recorded at the lower of estimated net realizable value
or the carrying value of the loan. Costs incurred to reacquire, carry and
dispose of the property are capitalized to the extent deemed recoverable.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed on the
straight-line method based on the estimated useful lives of the related assets.
Contracts Receivable and Revenue Recognition
The Company's leisure products business is currently operated through three
divisions. The Land Division acquires large acreage tracts of real estate which
are subdivided, improved and sold, typically on a retail basis. The Resorts
Division acquires and develops timeshare property to be sold in vacation
ownership intervals. Vacation ownership is a concept whereby fixed week
intervals or undivided fee simple interests are sold in fully-furnished vacation
units. The Communities Division is engaged in the development and sale of
primary residential homes at selected sites together with land parcels. Revenue
recognition for each of the Company's operating divisions is discussed below.
The Company recognizes revenue on retail land sales when a minimum of 10% of the
sales price has been received in cash, collectibility of the receivable
representing the remainder of the sales price is reasonably assured and the
Company has completed substantially all of its obligations with respect to any
development related to the real estate sold.
Other land sales include large-acreage bulk transactions as well as land sales
to investors and developers. The Company recognizes revenue on such other land
sales when the buyer's initial and continuing investment are adequate to
demonstrate a commitment to pay for the property, which requires a minimum of
20% of the sales price to be received in cash, the collectibility of the
receivable representing the remainder of the sales price is reasonably assured
and the Company has completed substantially all of its obligations with respect
to any development related to the real estate sold.
With respect to its Resorts Division sales, the Company recognizes revenue when
a minimum of 10% of the sales price has been received in cash, collectibility of
the receivable representing the remainder of the sales price is reasonably
assured and the Company has completed substantially all of its obligations with
respect to any development related to the unit sold.
The excess of sales price on land and resorts sales over legally binding
deposits received is recorded as contracts receivable. Contracts receivable are
converted into cash and/or notes receivable, generally within sixty days.
Contracts that cancel during the recission period have been excluded from sales
of real estate. In cases where all development has not been completed, the
Company recognizes revenue on land and timeshare sales in accordance with the
percentage of completion method of accounting. All related costs are recorded
prior to, or at the time, a sale is recorded.
The Company recognizes revenue on Communities Division sales when the unit is
complete and title is transferred to the buyer.
Provision for Losses on Notes Receivable
Provisions for losses on notes receivable are charged to operations when it is
determined that the investment in such assets is impaired in management's
judgment. The adequacy of the Company's reserve for loan losses is determined by
management and reviewed on a regular basis considering, among other factors,
historical frequency of default, loss experience, present and expected economic
conditions as well as the quality of Receivables.
Advertising Expense
Advertising costs are generally expensed as incurred. The Company incurred
advertising costs of $10.0 million, $7.1 million and $4.5 million for the years
ended March 31, 1996, April 2, 1995 and March 27, 1994, respectively.
Income Taxes
Income taxes have been provided using the liability method in accordance with
FASB Statement No. 109, "Accounting for Income Taxes".
Stock Based Compensation
The Company grants stock options for a fixed number of shares to employees with
an exercise price equal to the fair value of the shares at the date of grant.
The Company accounts for stock option grants in accordance with APB Opinion No.
25, "Accounting for Stock Issued to Employees", and, accordingly, recognizes no
compensation expense for the stock option grants.
Income Per Common Share
Income per common share is determined by dividing net income by the weighted
average number of common shares outstanding after giving effect to all dilutive
common equivalent shares outstanding during each period. The common equivalent
shares reflect the dilutive impact of shares reserved for outstanding stock
options using the treasury stock method. The weighted average number of common
and common equivalent shares used to calculate primary and fully diluted net
income per common share has been adjusted in the Consolidated Statements of
Income to give effect to stock dividends, including retroactive restatement of
the net income per common share amounts for the fiscal years prior to 1996.
Impact of Recently Issued Accounting Standards
In March, 1995, the FASB issued Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of",
which requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. Statement No. 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The Company will adopt Statement No.
121 in the first quarter of fiscal 1997 and, based on current circumstances,
management does not believe the effect of the adoption will be material to the
Company's financial position or results of operations.
Reclassifications
The Company adopted Statement of Financial Accounting Standard No. 114,
"Accounting by Creditors for Impairment of a Loan" (FAS No. 114) on April 3,
1995. FAS No. 114 amends the guidance for insubstance foreclosures contained in
Financial Accounting Release No. 28. Under FAS No. 114, a collateral dependent
loan shall be reported as real estate only if the lender has taken possession of
the inventory. Accordingly, insubstance foreclosure loans shall not be reported
as inventory and should remain in notes receivable. Therefore, a
reclassification of $1.3 million has been made from inventory to notes
receivable in the April 2, 1995 Consolidated Balance Sheet to conform to the
current year presentation. At March 31, 1996, notes receivable includes $1.4
million of loans for which legal action has commenced.
Fiscal Year End
The By-Laws of the Company provide for its fiscal year to end on the Sunday
closest to the end of March. Accordingly, fiscal 1995, which began on March 28,
1994 and ended on April 2, 1995, resulted in a fifty-three week reporting period
for the Company's Consolidated Statement of Income and Consolidated Statement of
Cash Flows. Each quarterly period for fiscal 1995 included thirteen weeks, with
the exception of the period ended January 1, 1995, which included fourteen
weeks. Fiscal 1996 and 1994 represented fifty-two week reporting periods. 2.
Notes Receivable
The weighted average interest rate on notes receivable was 12.4% at each March
31, 1996 and April 2, 1995. The table below sets forth additional information
relating to the Company's notes receivable.
March 31, 1996 April 2, 1995
Notes receivable secured by land ................. $ 26,243,222 $37,089,481
Notes receivable secured by timeshare intervals... 11,667,049 4,311,362
Notes receivable, gross .......................... 37,910,271 41,400,843
Reserve for loan losses........................... ( 896,469) ( 1,089,652)
Notes receivable, net............................. $ 37,013,802 $40,311,191
Approximately 55% of the Company's notes receivable secured by land bear
interest at variable rates, while approximately 45% bear interest at fixed
rates. The average interest rate charged on loans secured by land was 11.6% at
March 31, 1996. All of the Company's timeshare loans bear interest at fixed
rates. The average interest rate charged on loans secured by timeshare intervals
was 14.2% at March 31, 1996.
At March 31, 1996, approximately 7% or $2.8 million of the aggregate $39.2
million principal amount of loans which were held by the Company, or by third
parties under financings for which the Company has a recourse liability, were
more than 30 days past due. Of the $39.2 million principal amount of loans,
$37.9 million were held by the Company, while approximately $1.3 million were
associated with programs under which the Company has a limited recourse
liability. In most cases of limited recourse liability, the recourse to the
Company terminates when the principal balance of the loan becomes 70% or less of
the original selling price of the property underlying the loan. At April 2,
1995, approximately 5% or $2.1 million of the aggregate $43.2 million principal
amount of loans which were held by the Company, or by third parties under
financings for which the Company has a recourse liability, were more than 30
days past due.
The table below sets forth activity in the reserve for estimated loan losses.
Reserve for loan losses, March 27, 1994................
969,780
Provision for losses................................... 792,000
Charge-offs............................................ (672,128)
---------
Reserve for loan losses, April 2, 1995................. 1,089,652
Provision for losses................................... 344,718
Charge-offs............................................ (537,901)
---------
Reserve for loan losses, March 31, 1996................ $ 896,469
==========
Installments due on notes receivable held by the Company during each of the five
fiscal years subsequent to 1996, and thereafter, are set forth below.
1997 .......................................... $4,968,474
1998 .......................................... 3,984,973
1999 .......................................... 4,196,590
2000 .......................................... 4,566,938
2001 .......................................... 4,866,019
Thereafter .......................................... 15,327,277
-------------
Total .......................................... $ 37,910,271
=============
3. Investment in Securities
The Company's investment in securities at March 31, 1996, includes $3.4 million
and $6.3 million of securities retained by the Company in connection with the
1994 and 1995 REMIC private placement transactions, respectively. See Note 8.
These securities consist of certain subordinated traunches, on which interest is
accreted at effective yield rates which currently range from 7.5% to 12.4%. Such
effective yield rates reflect interest at pass-through rates, the arbitrage
resulting from rate differentials between the notes in the REMIC pool and
pass-through rates, along with the effect of estimated prepayments and
foreclosure losses. At April 2, 1995, the Company's investment in securities
includes $15.1 million and $3.0 million of securities retained by the Company in
connection with the 1992 and 1994 REMIC private placement transactions,
respectively.
4. Inventory and Property Under Contract
The Company's net inventory holdings as of March 31, 1996 and April 2, 1995,
summarized by division, are set forth below. Interest capitalized during fiscal
1996 and fiscal 1995 totaled $1.9 million and $427,000, respectively.
March 31, 1996
Geographic Region Land Resorts(1) Communities(2) Total
Southwest............ $15,118,191 $ --- $ 142,790 $15,260,981
Rocky Mountains ..... 9,299,344 --- 50,800 9,350,144
West ................ 5,923,972 --- --- 5,923,972
Midwest.............. 6,293,008 10,839,389 --- 17,132,397
Southeast............ 2,252,239 5,189,815 13,983,521 21,425,575
Northeast............ 1,982,895 --- --- 1,982,895
Mid-Atlantic......... 2,490,025 --- --- 2,490,025
Canada............... 29,025 --- --- 29,025
Totals............... $43,388,699 $16,029,204 $14,177,111 $73,595,014
April 2, 1995
Geographic Region Land Resorts(1) Communities(2) Total
Southwest............ $16,643,459 $ --- $ 1,115,914 $17,759,373
Rocky Mountains ..... 9,308,069 --- 433,933 9,742,002
West ................ --- --- --- ---
Midwest.............. 7,671,471 5,240,911 --- 12,912,382
Southeast............ 2,755,756 --- 11,575,971 14,331,727
Northeast............ 3,044,966 --- --- 3,044,966
Mid-Atlantic......... 4,280,951 --- --- 4,280,951
Canada............... 273,349 --- --- 273,349
Totals............... $43,978,021 $5,240,911 $13,125,818 $62,344,750
(1) Resorts Division inventory as of March 31, 1996, includes land inventory of
$6.1 million and $9.9 million of unit construction-in-progress. Resorts
Division inventory as of April 2, 1995, includes land inventory of $2.3
million and $2.9 million of unit construction-in-progress.
(2) Communities Division inventory as of March 31, 1996, includes land inventory
of $10.5 million and $3.7 million of housing unit construction-in-progress.
Communities Division inventory as of April 2, 1995, includes land inventory
of $9.9 million and $3.2 million of housing unit construction-in-progress.
5. Property and Equipment
The table below sets forth the property and equipment held by the Company at the
period end indicated.
Useful March 31, April 2,
Life 1996 1995
Land, buildings and building improvements.. 30 years $ 3,837,382 $ 3,589,280
Office equipment, furniture and fixtures.... 3-5 years 4,466,821 3,740,558
Aircraft.................................... 3-5 years 1,375,001 1,192,895
Vehicles and equipment...................... 3-5 years 451,202 419,743
10,130,406 8,942,476
Accumulated depreciation and amortization... (4,891,306) (4,140,652)
Total....................................... $ 5,239,100 $ 4,801,824
6. Lines-of-Credit and Notes Payable
The Company has outstanding borrowings with various financial institutions and
other lenders which have been used to finance the acquisition of inventory and
to fund operations. Significant financial data related to the Company's
borrowing facilities is set forth below.
March 31, April 2,
1996 1995
Lines-of-credit (see Item A).................. $ 6,394,245 $ 4,652,255
Notes and mortgage notes secured by certain
inventory and property and equipment
with interest rates ranging from
6.2% to 11.0% at March 31, 1996 and 6.2% to
12.0% at April 2, 1995.
Maturities range from 1996 to 2005........... 10,700,245 15,779,091
Lease obligations with a weighted
average interest rate of 11% at
March 31, 1996.
Maturities range from 1998 to 2001........... 193,277 ---
Total......................................... $17,287,767 $20,431,346
The table below sets forth the contractual minimum principal payments required
on the Company's lines-of-credit and notes payable for each of the five fiscal
years subsequent to 1996, and thereafter. Such minimum contractual payments may
differ from actual payments due to the effect of principal payments required on
a lot release basis for certain of the above obligations.
1997 .............................................. $ 4,764,643
1998 .............................................. 6,202,356
1999 .............................................. 2,792,180
2000 .............................................. 1,225,237
2001 .............................................. 954,034
Thereafter .............................................. 1,349,317
Total ............................................... $17,287,767
Further information on the Company's inventory lines-of-credit is set forth
below. Lines-of-credit associated with the pledge of notes receivables are
discussed in Note 8.
Item A.
The Company has a $15.0 million revolving credit facility with a financial
institution secured by land notes receivables and land inventory. The borrowings
secured by notes receivable are included in receivable-backed notes payable. See
Note 8. Under the terms of the facility, the Company is entitled to advances of
up to $5.0 million secured by land inventory to finance real estate acquisition
and development costs. Interest is charged at a rate of prime plus 2.0%. At
March 31, 1996 and April 2, 1995, the outstanding indebtedness secured by
inventory was $277,000 and $1.3 million, respectively. The Company is required
to pay the financial institution 55% of the contract price of land sales
associated with pledged inventory when any such inventory is sold until the land
indebtedness is paid in full. The facility expires in October, 1998.
In addition, the Company has a $20.0 million credit facility with another
financial institution secured by land notes receivables and land inventory. See
Note 8 for a discussion of borrowings secured by notes receivable. Interest is
charged at a rate of prime plus 2.75%. At March 31, 1996 and April 2, 1995, the
outstanding indebtedness secured by inventory was $2.8 million and $1.5 million,
respectively. The Company repays loans made under the inventory portion of the
facility through lot release payments as the collateral is sold. In addition,
the Company is required to meet certain minimum debt amortization on the
outstanding inventory secured debt. The indebtedness secured by land inventory
has maturities that range from December, 1996 to June, 1998. The ability to
receive advances under this facility expires in October, 1996.
The Company also has a $20.0 million credit facility with this same lender which
provides for acquisition, development, construction and Receivables financing
for the first and second phases of a multi-phase timeshare project in
Gatlinburg, Tennessee. See Note 8 for a discussion of borrowing secured by notes
receivable. At March 31, 1996 and April 2, 1995, the outstanding indebtedness
secured by land was $600,000 and $925,000, respectively. The interest rate
charged under the facility is prime plus 2.0%. The Company is required to repay
the portion of the loan secured by inventory through two equal annual
installments of $300,000 each in December, 1996 and December, 1997. The ability
to borrow under the facility expires in November, 1998.
The Company has another credit facility with this same lender which provides for
acquisition, development, construction and Receivables financing on a second
timeshare resort located in Pigeon Forge, Tennessee in the amount of $6.2
million. See Note 8 for a discussion of borrowing secured by notes receivable.
At March 31, 1996, the outstanding indebtedness secured by land was $1.2
million. (The land inventory was acquired in July, 1995 and therefore no credit
facility existed at April 2, 1995.) The interest rate charged under the loan
agreement is prime plus 2.0%. The Company is required to repay the portion of
the loan secured by inventory through three annual principal payments of
$400,000 in July, 1996, $400,000 in July, 1997 and $410,000 in July, 1998. The
ability to borrow under the facility expires in July, 1998.
The Company has a $13.5 million secured line-of-credit with a South Carolina
financial institution for the construction and development of Phase I of its
Myrtle Beach timeshare resort. The interest rate charged under the facility is
prime plus .5%. At March 31, 1996, there was $188,000 outstanding under this
facility. The indebtedness is due in May, 1997. See below.
The Company has a $23.5 million line-of-credit with a financial institution. The
credit line provides for "take-out" of the construction lender discussed in the
preceding paragraph in the amount of $13.5 million as well as $10.0 million
secured by timeshare Receivables. The interest rate charged under the
line-of-credit is three-month LIBOR plus 4.25%. Management expects the first
advance under the Receivables facility to occur in June, 1996, and the
"take-out" advance to occur in March, 1997.
In addition to the land and resort financing described above, the Company has
outstanding indebtedness under two lines-of-credit secured by a North Carolina
and a Florida project managed under the Communities Division. At March 31, 1996,
the aggregate outstanding indebtedness under these facilities totaled $1.3
million. The indebtedness secured by the North Carolina property matures in
June, 1996, and the indebtedness secured by the Florida property matures in May,
1998. The ability to borrow under these facilities has expired and the Company
does not intend to renew the facilities. The Company is required to comply with
certain covenants under several of its debt agreements discussed above,
including, without limitation, requirements to (i) maintain net worth of at
least $42.0 million, (ii) maintain certain minimum leverage ratios, (iii) limit
S,G&A expense to 50% of revenues, and (iv) comply with various other restrictive
covenants. The Company was in compliance with such covenants at March 31, 1996,
and for each reporting period during fiscal 1995 and 1996.
7. Convertible Subordinated Debentures
In May, 1987, the Company issued $46.0 million of its 8.25% Convertible
Subordinated Debentures due 2012 (the "Debentures"). The Debentures were issued
at face value. During fiscal 1989 and fiscal 1988, the Company purchased and
retired $3.3 million and $8.0 million, respectively, of its outstanding
Debentures. Accordingly, $34.7 million principal amount of Debentures were
outstanding at March 31, 1996 and April 2, 1995.
The Debentures are convertible at any time prior to maturity, unless previously
redeemed, into common stock of the Company at a current conversion price of
$8.24 per share, subject to adjustment under certain conditions. The Debentures
are redeemable at any time, at the Company's option, in whole or in part. The
redemption price for the 12-month period beginning May 15, 1995, was 101.66% of
the face amount. The redemption premium declines .825% each 12-month period
thereafter until May 15, 1997, at which time the redemption price is 100% of the
face amount. The Company is obligated to redeem annually 10% of the principal
amount of the Debentures originally issued, commencing May 15, 2003. Such
redemptions are calculated to retire 90% of the principal amount of the
Debentures prior to maturity.
Under financial covenants of the Indenture pursuant to which the Debentures were
issued, the Company is required to maintain net worth of not less than $29.0
million. Should net worth fall below $29.0 million for two consecutive quarters,
the Company is required to make an offer to purchase 20% of the outstanding
Debentures at par, plus accrued interest. The Debentures are unsecured and
subordinated to all senior indebtedness of the Company. Interest is payable
semi-annually on May 15 and November 15.
8. Sale/Pledge of Notes Receivable
The information provided below summarizes activities with respect to the sale
and pledge of notes receivable. As of April 2, 1995, note receivables secured by
land had been pledged, while as of March 31, 1996, note receivables secured by
land and timeshare intervals had been pledged. No sales of notes receivables
secured by timeshare intervals have occurred as of March 31, 1996.
Receivable-Backed Notes Payable
The Company has indebtedness under a $20.0 million revolving credit line with a
financial institution secured by land Receivables. The indebtedness matures ten
years from the date of the last advance, or in 2006. At March 31, 1996, the
Receivables had a weighted average interest rate of 12.8%. Payments received on
the Receivables are applied to reduce principal outstanding on the indebtedness
weekly and pay interest monthly. Interest is calculated on the average
indebtedness outstanding for the month at a rate of prime plus 2.0%. The
outstanding indebtedness was $6.3 million and $9.1 million at March 31, 1996 and
April 2, 1995, respectively. The principal balance outstanding on the pledged
Receivables was $8.1 million and $11.4 million at March 31, 1996 and April 2,
1995, respectively. The pledged Receivables are serviced by the Company.
The Company has indebtedness under a $15.0 million revolving credit facility
with a financial institution secured by land Receivables. The indebtedness
matures in October, 1998. At March 31, 1996, the Receivables had a weighted
average interest rate of 10.6%. Payments received on the Receivables are applied
to reduce principal outstanding on the indebtedness weekly and pay interest
monthly. Interest is calculated on the average indebtedness outstanding for the
month at a rate of prime plus 2.0%. The outstanding indebtedness was $5.7
million and $5.0 million at March 31, 1996 and April 2, 1995, respectively. The
principal balance outstanding on the Receivables was $7.2 million and $6.8
million at March 31, 1996 and April 2, 1995, respectively. The pledged
Receivables are serviced by the Company. The Company has indebtedness under a
$20.0 million credit facility secured by timeshare Receivables. The indebtedness
matures seven years from the date of the last advance. At March 31, 1996, the
Receivables had a weighted average interest rate of 13.8%. Payments received on
the Receivables are applied to reduce principal outstanding on the indebtedness
weekly and pay interest monthly. Interest is calculated on the average
indebtedness outstanding for the month at a rate of prime plus 2.0%. The
outstanding indebtedness was $6.9 million at March 31, 1996. There was no
outstanding indebtedness secured by timeshare Receivables at April 2, 1995. The
principal balance outstanding on the Receivables was $7.7 million at March 31,
1996. The pledged Receivables are serviced by the Company.
The Company has indebtedness under a $6.2 million credit facility secured by
timeshare Receivables. The indebtedness matures seven years from the date of the
last advance. At March 31, 1996, the Receivables had a weighted average interest
rate of 13.7%. Payments received on the Receivables are applied to reduce
principal outstanding on the indebtedness weekly and pay interest monthly.
Interest is calculated on the average indebtedness outstanding for the month at
a rate of prime plus 2.0%. The outstanding indebtedness was $865,000 at March
31, 1996. There was no outstanding indebtedness secured by Receivables at April
2, 1995. The principal balance outstanding on the Receivables was $909,000 at
March 31, 1996. The pledged Receivables are serviced by the Company.
In connection with the acquisition of a subsidiary during the year ended April
3, 1988, the Company assumed borrowings of $1.6 million under a $2.0 million
term facility with a financial institution secured by land Receivables. As of
March 31, 1996, the indebtedness was paid and the ability to borrow has expired.
The outstanding indebtedness was $11,000 at April 2, 1995.
Installments due on receivable-backed notes payable based upon principal
payments due on Receivables in each of the five fiscal years subsequent to 1996,
and thereafter, is set forth below.
1997 .................................................. $ 4,173,850
1998 .................................................. 3,088,351
1999 .................................................. 3,267,997
2000 .................................................. 3,414,547
2001 .................................................. 3,431,589
Thereafter .................................................. 2,347,132
-------------
Total .................................................. $ 19,723,466
=============
REMIC Transactions
The Company has completed private placement transactions through limited purpose
subsidiaries which it has elected to treat as Real Estate Mortgage Investment
Conduits. The REMICs involved the securitization of certain mortgage notes
receivable which were sold to trusts. Information with respect to the REMICs
completed in fiscal 1995 and 1996, is set forth below.
On May 11, 1994, the Company sold approximately $27.7 million aggregate
principal amount of its mortgage notes receivable to a limited purpose
subsidiary which then sold the notes receivable to a REMIC trust (the "1994
REMIC Trust"), resulting in aggregate proceeds to the Company of $26.0 million
and a $411,000 pre-tax loss. The 1994 REMIC Trust issued four classes of REMIC
certificates representing ownership interest in the pool of notes comprising
such trust. Collections of principal and interest on the notes in the 1994 REMIC
Trust, net of certain servicing and trustee fees, are remitted to
certificateholders on a monthly basis based on an established order of priority.
In connection with the 1994 REMIC transaction, the Company retained certain
subordinated classes of certificates.
On July 12, 1995, the Company sold approximately $68.1 million aggregate
principal amount of its mortgage notes receivable to a limited purpose
subsidiary which then sold the notes receivable to a REMIC trust (the "1995
REMIC Trust"), resulting in aggregate proceeds to the Company of $66.1 million
and a $1.1 million pre-tax gain. The 1995 REMIC Trust issued four classes of
REMIC certificates representing ownership interest in the pool of notes
comprising such trust. Collections of principal and interest on the notes in the
1995 REMIC Trust, net of certain servicing and trustee fees, are remitted to
certificateholders on a monthly basis based on an established order of priority.
In connection with the 1995 REMIC transaction, the Company retained certain
subordinated classes of certificates.
The subordinated certificates retained by the Company in connection with the two
REMIC transactions discussed above are included in the Consolidated Balance
Sheets as investment in securities. See Note 3.
The Company is paid an annualized servicing fee of .5% of the scheduled
principal balance of those notes in the 1994 and 1995 REMIC trusts on which the
periodic payment of principal and interest is collected in full. Under the terms
of the respective servicing agreements, the Company has the obligation to
repurchase or replace mortgage notes in the trusts which did not materially
conform to the Company's representations and warranties at the date of sale. In
addition, the Company, as servicer, is required to make advances of delinquent
payments to the extent deemed recoverable. The Company has no obligation,
however, to repurchase or replace mortgage notes solely due to delinquency.
Income recognized from servicing the notes in REMIC trusts totaled $434,000,
$401,000 and $464,000 for fiscal 1996, 1995 and 1994, respectively.
9. Income Taxes
The provision for income taxes consists of the following:
Years Ended
March 31, April 2, March 27,
1996 1995 1994
Federal:
Current.................$ 2,590,910 $ 2,307,313 $ 31,582
Deferred................ 1,207,941 380,195 2,443,387
3,798,851 2,687,508 2,474,969
State:
Current................. 860,064 630,654 38,601
Deferred................ ( 209,846) 946,596 508,361
650,218 1,577,250 546,962
Total.....................$ 4,449,069 $ 4,264,758 $ 3,021,931
Income before income taxes (excluding Canadian operations) was $10.9 million in
fiscal 1996, $10.4 million in fiscal 1995 and $7.8 million in fiscal 1994. The
fiscal 1994 current tax provision was offset by refunds and overpayments
resulting from the reduction in amounts originally estimated during fiscal 1993.
The reasons for the difference between the provision for income taxes and the
amount which results from applying the federal statutory tax rate in fiscal
1996, 1995 and 1994, to income before income taxes are as follows:
Years Ended
March 31, April 2, March 27,
1996 1995 1994
Income tax expense at statutory
rate................................. $ 3,720,573 $ 3,536,628 $ 2,703,833
Effect of state taxes, net of federal
tax benefit.......................... 728,496 728,130 318,098
$ 4,449,069 $ 4,264,758 $ 3,021,931
At March 31, 1996 and April 2, 1995, deferred income taxes consist of the
following components:
March 31, April 2,
1996 1995
Deferred federal and state tax liabilities:
Installment sales treatment of notes............... $ 8,473,340 $ 9,289,703
Deferred foreign tax liability due to installment
sale treatment of notes......................... 185,000 185,000
Deferred federal and state loss
carryforwards/AMT credits....................... ( 1,990,365) ( 4,217,559)
Other.............................................. ( 600,161) ( 187,425)
Deferred income taxes.............................. $ 6,067,814 $ 5,069,719
As of March 31, 1996, the Company had $2.0 million of AMT credit carryforwards
which have no expiration period.
10. Contingency
The Company is party to certain ordinary course litigation. Although no
assurances can be given, the potential outcome is not expected to have a
materially adverse effect on the Company's operations.
11. Stock Options and Employee Retirement Savings Plan
Employee Stock Option Plan
Under the Company's Employee Stock Option Plan, options may be granted at prices
not less than the fair market value on the date of grant. A summary of stock
option activity, adjusted for stock dividends, is presented below.
<TABLE>
<CAPTION>
Number Number
of Shares Option Price of Shares
Reserved Options Per Share Exercisable
<S> <C> <C> <C> <C>
Balance at March 27, 1994............... 1,804,937 1,109,470 $1.25 - $12.26 204,737
Granted................................. --- 250,000 $3.21
Forfeited............................... --- (431,428) $1.31 - $12.26
Exercised............................... (37,933) (37,933) $1.31 - $2.41
Stock dividends......................... 72,313 72,313
Balance at April 2, 1995................ 1,839,317 962,422 $1.25 - $12.26 286,529
Granted................................. --- 250,000 $4.51
Forfeited............................... --- (96,550) $1.25 - $12.26
Exercised............................... (82,258) (82,258) $1.25 - $3.28
Expiration of plan...................... (723,445) ---
Stock dividends......................... 52,268 52,268
Balance at March 31, 1996............... 1,085,882 1,085,882 $1.25 - $11.64 381,528
</TABLE>
The Employee's Stock Option Plan expired in September, 1995. The Company
received shareholder approval for a new employee stock option plan (the 1995
Stock Incentive Plan) at a meeting held on July 20, 1995. No awards were granted
under the 1995 Stock Incentive Plan as of March 31, 1996. As of March 31, 1996,
there were 413 individuals eligible to participate in the 1995 Stock Incentive
Plan.
Outside Directors Plan
In fiscal 1988, the Company's shareholders adopted a stock option plan covering
the Company's non-employee Directors (the "Director Plan"). The Director Plan
provided for the grant to the Company's non-employee directors (the "Outside
Directors") of non-qualified stock options to purchase up to an aggregate of
150,000 shares of common stock at a price not less than the fair market value at
the date of grant. The Director Plan was amended and adopted by the Company's
shareholders in September, 1991, to increase the number of issuable shares from
150,000 to 300,000 and again in July, 1995, to increase the number of issuable
shares by an additional 200,000. The number of issuable shares is adjusted to
reflect changes in capitalization and, accordingly, the shares increased to
reflect the 4% stock dividend paid in fiscal 1994, the 4% and 5% stock dividends
paid in fiscal 1995 and the 5% stock dividend paid in fiscal 1996. A summary of
stock option activity, adjusted for stock dividends, related to the Company's
Director Plan is presented below.
<TABLE>
<CAPTION>
Number Number
of Shares Option Price of Shares
Reserved Options Per Share Exercisable
<S> <C> <C> <C> <C>
Balance at March 27, 1994............... 312,000 236,800 $ .83 - $4.78 104,000
Granted................................. --- 75,000 $3.69
Stock dividends......................... 28,704 25,535
Balance at April 2, 1995................ 340,704 337,335 $ .83 - $4.78 186,474
Additional shares issuable.............. 200,000
Granted................................. --- 75,000 $3.80
Stock dividends......................... 17,035 20,617
Balance at March 31, 1996............... 557,739 432,952 $ .83 - $4.78 276,134
</TABLE>
Employee Retirement Savings Plan
The Company's Employee Retirement Plan is a code section 401(k) Retirement
Savings Plan. The plan became effective on April 1, 1992. All employees at least
21 years of age with one year of employment with the Company are eligible to
participate in the plan. Employer contributions to the plan are at the sole
discretion of the Company and were not material to the operations of the Company
for fiscal 1996, 1995 and 1994.
12. Quarterly Financial Information (Unaudited)
Summarized quarterly financial information for the years ended March 31, 1996
and April 2, 1995 is presented below (in 000's except for per share
information).
<TABLE>
<CAPTION>
Three Months Ended
July 2, October 1, December 31, March 31,
1995 1995 1995 1996
<S> <C> <C> <C> <C>
Sales of real estate................ $ 24,641 $ 33,258 $ 23,935 $ 31,588
Interest income and other........... 2,187 2,177 1,483 1,541
Provision for losses................ 155 225 120 112
Net income.......................... 1,588 2,319 985 1,575
Income per common share .07 .11 .05 .07
Three Months Ended
June 26, September 25, January 1, April 2,
1994 1994 1995 1995
Sales of real estate................ $ 22,044 $ 25,384 $ 19,254 $ 25,240
Interest income and other........... 1,451 1,756 1,974 2,083
Provision for losses................ 165 250 187 190
Net income.......................... 1,278 2,118 881 1,860
Income per common share .06 .09 .05 .09
</TABLE>
13. Fair Value of Financial Instruments
The following methods and assumptions were used by the Company in estimating its
fair values disclosures for financial instruments: Cash and cash equivalents:
The amounts reported in the balance sheet for cash and cash equivalents
approximates fair value.
Notes receivable: The carrying amounts reported in the balance sheet for notes
receivable approximates fair value based on (i) prices established by loan
pricing services and (ii) discounted future cash flows using current rates at
which similar loans with similar maturities would be made to borrowers with
similar credit risk.
Investment in securities: The carrying amounts reported in the balance sheet for
investment in securities approximates fair value based on estimates from
dealers.
Lines-of-credit, notes payable and receivable-backed notes payable: The carrying
amounts reported in the balance sheet approximate their fair value based upon
(i) the indebtedness having short-term maturities which provide for variable
interest rates and (ii) the discounted future cash flows of long-term
indebtedness.
8.25% convertible subordinated debentures: The fair value of the Company's 8.25%
convertible subordinated debentures is based on the quoted market price as
reported on the New York Stock Exchange.
March 31, 1996
Carrying
Amount Fair Value
Cash and cash equivalents..................... $11,389,141 $11,389,141
Notes receivable.............................. 37,013,802 37,013,802
Investment in securities. .................... 9,699,435 9,699,435
Lines-of-credit, notes payable and
receivable-backed notes payable.............. 37,011,233 37,011,233
8.25% convertible subordinated debentures...... 34,739,000 30,570,320
14. Subsequent Event
On May 15, 1996, the Company sold approximately $13.2 million aggregate
principal amount of its mortgage notes receivable to a limited purpose
subsidiary which then sold the notes receivable to a REMIC trust (the "1996
REMIC Trust"), resulting in aggregate proceeds to the Company of $11.8 million.
The 1996 REMIC Trust issued three classes of REMIC certificates representing
ownership interest in the pool of notes comprising such trust. Collections of
principal and interest on the notes in the 1996 REMIC Trust, net of certain
servicing and trustee fees, are remitted to certificateholders on a monthly
basis based on an established order of priority. In connection with the 1996
REMIC transaction, the Company retained certain subordinated classes of
certificates.
A portion of the proceeds from the transaction was used to repay approximately
$5.6 million of outstanding debt. An additional $263,000 was used to fund a cash
reserve account. The balance of the proceeds, after payment of issuance
expenses, resulted in an increase to the Company's unrestricted cash of
approximately $5.8 million. The transaction was not material to the Company's
statement of income.
Consent of Independent Certified Public Accountants
We consent to the incorporation by reference in this Annual Report (Form ~10-K)
of ~Bluegreen Corporation of our report dated April 26, 1996, except for Note 14
as to which the date is May 15, 1996 included in the 1996 Annual Report to
Shareholders of ~Bluegreen Corporation.
We also consent to the incorporation by reference in ~(i) the Registration
Statement (Form ~S-8 No. 33-26613) pertaining to the second amended and restated
1985 stock option plan of the Registrant and in the related Prospectus, ~(ii)
the Registration Statement (Form ~S-8 No. 33~-16292) pertaining to the 1987
employee stock purchase plan of the Registrant and in the related Prospectus,
~(iii) the Registration Statement (Form ~S-8 No. 33-26614) pertaining to the
1988 outside directors stock option plan of the Registrant and in the related
Prospectus, ~(iv) the Registration Statement (Form ~S-8 No. 33-48075) pertaining
to the Registrant retirement savings plan and in the related Prospectus and ~(v)
the Registration Statement (Form ~S-8 No. 33~-61687) pertaining to the amended
1988 outside directors stock option plan and the 1995 stock incentive plan of
the Registrant and in the related Prospectus of our report dated April 26, 1996,
except for Note 14 as to which the date is May 15, 1996, with respect to the
consolidated financial statements of ~Bluegreen Corporation incorporated herein
by reference for the year ended March 31, 1996.
West Palm Beach, Florida
June 18, 1996
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Mar-31-1996
<PERIOD-START> Apr-03-1995
<PERIOD-END> Mar-31-1996
<CASH> 11,389,141
<SECURITIES> 9,699,435
<RECEIVABLES> 50,361,478
<ALLOWANCES> 896,469
<INVENTORY> 73,595,014
<CURRENT-ASSETS> 4,286,401
<PP&E> 10,130,406
<DEPRECIATION> 4,891,306
<TOTAL-ASSETS> 154,963,033
<CURRENT-LIABILITIES> 21,385,353
<BONDS> 34,739,000
0
0
<COMMON> 205,334
<OTHER-SE> 64,492,792
<TOTAL-LIABILITY-AND-EQUITY> 154,963,033
<SALES> 113,422,228
<TOTAL-REVENUES> 120,932,207
<CGS> 59,393,392
<TOTAL-COSTS> 59,393,392
<OTHER-EXPENSES> 43,734,724
<LOSS-PROVISION> 611,979
<INTEREST-EXPENSE> 6,276,187
<INCOME-PRETAX> 10,915,925
<INCOME-TAX> 4,449,069
<INCOME-CONTINUING> 6,466,856
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,466,856
<EPS-PRIMARY> .30
<EPS-DILUTED> .30
</TABLE>
