<PAGE> 1
PRELIMINARY PROXY MATERIAL
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
BLUEGREEN CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Proposed maximum aggregate value of the transaction:
2) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE> 2
BLUEGREEN CORPORATION
4960 BLUE LAKE DRIVE
BOCA RATON, FL 33431
October , 1998
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders
(including any adjournment or postponement thereof, the "Special Meeting") of
Bluegreen Corporation (the "Company") to be held at the Company's offices at
4960 Blue Lake Drive, Boca Raton, Florida, on the 17th day of November, 1998, at
10:00 a.m., local time.
At the Special Meeting, you will be asked to consider and vote upon a
proposal (the "Proposal") to approve a series of related transactions resulting
in the issuance and sale of up to an aggregate of 5,882,354 shares of the
Company's common stock, $.01 par value per share (the "Common Stock"), at a
price per share equal to $8.50 to Morgan Stanley Real Estate Fund III, L.P.,
Morgan Stanley Real Estate Investors III, L.P.; MSP Real Estate Fund, L.P. and
MSREF III Special Fund, L.P. (collectively, the "Purchasers"), pursuant to a
Securities Purchase Agreement (the "Purchase Agreement"), dated as of August 14,
1998 by and among the Company and the Purchasers.
Approval of the Proposal is being sought in compliance with the rules of
the New York Stock Exchange ("NYSE"). The rules of the NYSE require stockholder
approval as a prerequisite to the listing of shares in transactions where the
number of shares of Common Stock to be issued is or will be equal to or in
excess of 20% of the number of shares outstanding immediately prior to such
issuance. To date, the Company has sold shares of Common Stock to
the Purchasers in accordance with the Purchase Agreement. In order to comply
with the rules of NYSE, the Purchase Agreement requires the Company to obtain
stockholder approval of the Proposal prior to selling to the Purchasers more
than an additional shares of Common Stock. The Company believes
that approval of the Proposal is an important part of its efforts to continue to
strengthen the Company's financial condition and provide it with the resources
necessary for continued growth.
AFTER CAREFUL REVIEW, THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED
THAT THE SALE OF COMMON STOCK TO THE PURCHASERS PURSUANT TO THE PURCHASE
AGREEMENT IS IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS.
THEREFORE, THE BOARD RECOMMENDS THAT YOU VOTE TO APPROVE THE PROPOSAL AT THE
SPECIAL MEETING.
As a stockholder, you have the opportunity to voice your opinion on the
Proposal. Your vote is important. EVEN IF YOU PLAN TO ATTEND THE SPECIAL
MEETING, PLEASE BE SURE TO COMPLETE, SIGN AND RETURN THE PROXY CARD IN THE
ENCLOSED, POSTAGE-PREPAID ENVELOPE AS PROMPTLY AS PRACTICABLE. You may revoke
your proxy at any time before it is exercised at the Special Meeting or vote
your shares personally if you attend the Special Meeting.
Attached are a Notice of Special Meeting of Stockholders and a Proxy
Statement containing a discussion of the Proposal. We urge you to read this
material carefully.
Thank you in advance for your participation and prompt attention.
Very truly yours,
George F. Donovan
President and Chief Executive Officer
<PAGE> 3
BLUEGREEN CORPORATION
4960 BLUE LAKE DRIVE
BOCA RATON, FL 33431
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 17, 1998
A Special Meeting of Stockholders (including any adjournment(s) or
postponement(s) thereof, the "Special Meeting") of Bluegreen Corporation (the
"Company") will be held at the Company's offices at 4960 Blue Lake Drive, Boca
Raton, Florida, on the 17th day of November, 1998, at 10:00 a.m., local time,
for the following purposes:
1. To consider and vote upon a proposal to approve a series of
related transactions resulting in the issuance and sale of up to
an aggregate of 5,882,354 shares of the Company's common stock
at a price per share equal to $8.50 to Morgan Stanley Real
Estate Fund III, L.P., Morgan Stanley Real Estate Investors III,
L.P., MSP Real Estate Fund, L.P. and MSREF III Special Fund,
L.P. (collectively, the "Purchasers"), pursuant to a Securities
Purchase Agreement (the "Purchase Agreement") dated as of August
14, 1998 by and among the Company and the Purchasers.
2. To transact such other business as may properly come before the
Special Meeting or any adjournment(s) or postponement(s)
thereof.
Only stockholders of record at the close of business on October 7, 1998
will be entitled to receive notice of and to vote at the Special Meeting.
A copy of the Purchase Agreement is attached as Appendix I to the Proxy
Statement.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE SPECIAL MEETING IN PERSON,
PLEASE VOTE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD PROMPTLY IN THE
ENVELOPE PROVIDED. IF YOU DO ATTEND THE SPECIAL MEETING, YOU MAY, IF YOU WISH,
WITHDRAW YOUR PROXY AND VOTE IN PERSON.
By order of the Board of Directors,
Patrick E. Rondeau
Clerk
Boca Raton, Florida
, 1998
<PAGE> 4
BLUEGREEN CORPORATION
4960 BLUE LAKE DRIVE
BOCA RATON, FL 33431
---------------------
PROXY STATEMENT
FOR THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 17, 1998
---------------------
INTRODUCTION
This Proxy Statement is being furnished to the holders of the common stock,
par value $.01 per share (the "Common Stock"), of Bluegreen Corporation, a
Massachusetts corporation (the "Company"), in connection with the solicitation
of proxies by the Board of Directors of the Company (the "Board") for use at a
special meeting of the stockholders of the Company to be held at the Company's
offices at 4960 Blue Lake Drive, Boca Raton, Florida, on the 17th day of
November, 1998, at 10:00 a.m., local time, and at any adjournment(s) or
postponement(s) thereof (the "Special Meeting"). This Proxy Statement and Notice
of Special Meeting of Stockholders and the proxy card are first being mailed to
stockholders of the Company on or about October , 1998.
PROPOSAL TO BE CONSIDERED AT THE SPECIAL MEETING
At the Special Meeting, the stockholders of the Company will consider and
vote upon a proposal (the "Proposal") to approve a series of related
transactions resulting in the issuance and sale of up to an aggregate of
5,882,354 shares of the Common Stock at a price per share equal to $8.50 to
Morgan Stanley Real Estate Fund III, L.P., Morgan Stanley Real Estate Investors
III, L.P., MSP Real Estate Fund, L.P. and MSREF III Special Fund, L.P.
(collectively, the "Purchasers"), pursuant to a Securities Purchase Agreement
(the "Purchase Agreement") dated as of August 14, 1998 by and among the Company
and the Purchasers.
Approval of the Proposal is being sought in compliance with the rules of
the New York Stock Exchange ("NYSE"). The rules of the NYSE require stockholder
approval as a prerequisite to the listing of shares in transactions in which the
number of shares of Common Stock to be issued is or will be equal to or in
excess of 20% of the number of shares outstanding immediately prior to such
issuance. To date, the Company has sold shares of Common Stock to
the Purchasers in accordance with the Purchase Agreement. In order to comply
with the rules of the NYSE, the Purchase Agreement requires the Company to
obtain stockholder approval of the Proposal prior to selling to the Purchasers
more than an additional shares of Common Stock.
THE BOARD (WITH THE EXCEPTION OF J. LARRY RUTHERFORD WHO ABSTAINED FROM
VOTING ON APPROVAL AND RECOMMENDATION OF THE PURCHASE AGREEMENT BECAUSE OF A
PRE-EXISTING BUSINESS RELATIONSHIP WITH AN AFFILIATE OF THE PURCHASERS),
RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE PROPOSAL. See "THE PROPOSAL -- Board
Recommendation; Reasons for the Transaction" and "THE PROPOSAL -- Interests of
Certain Persons." As of the date of this Proxy Statement, the Board knows of no
other business to come before the Special Meeting.
VOTING RIGHTS; VOTES REQUIRED FOR APPROVAL
The Board has fixed the close of business on October 7, 1998 (the "Record
Date") as the date for the determination of the stockholders entitled to notice
of and to vote at the Special Meeting. Accordingly, only holders of record of
Common Stock at the close of business on the Record Date will be entitled to
notice of and to vote at the Special Meeting. At the close of business on the
Record Date, there were shares of Common Stock outstanding and
entitled to vote at the Special Meeting.
Each holder of record of the Common Stock on the Record Date is entitled to
cast one vote per share in person or by proxy at the Special Meeting. Shares as
to which a nominee (such as a broker holding shares in street name for a
beneficial owner) has no voting authority in respect of matters before the
Special Committee
<PAGE> 5
will be deemed represented for quorum purposes but will not be deemed to be
voting on such matters and, therefore, will not be counted as negative votes as
to such matters. The affirmative vote of a majority of the shares of Common
Stock represented in person or by properly executed proxies is required to
approve the Proposal.
Adoption of the Proposal requires the affirmative vote of a majority of the
votes cast by the holders of shares of Common Stock entitled to vote thereon,
provided that, pursuant to NYSE rules, the total number of votes cast represents
at least 20% of the outstanding shares of Common Stock. Additionally, NYSE rules
require that affirmative votes cast by the Purchasers or any Permitted
Transferees not be counted as such, unless a majority of all other votes cast by
holders of shares of Common Stock are cast in favor of the Proposal. Shares of
Common Stock owned by the Purchasers are eligible to be counted for purposes of
determining if a quorum is present at the Special Meeting.
PROXIES
All shares of Common Stock represented by properly executed proxies
received prior to or at the Special Meeting and not revoked will be voted in
accordance with the instructions indicated in such proxies. If no instructions
are indicated, such proxies will be voted "FOR" the Proposal and in the
discretion of the persons named in the proxy on such other matters as may
properly be presented at the Special Meeting.
A stockholder may revoke his or her proxy at any time prior to its use by
delivering to the Clerk of the Company at 4960 Blue Lake Drive, Boca Raton,
Florida 33431 a signed notice of revocation or a later dated proxy, or by
attending the Special Meeting and voting in person. Attendance at the Special
Meeting will not in itself constitute the revocation of a proxy.
All of the directors and executive officers of the Company and certain
other related stockholders have agreed to vote or cause to be voted all shares
of Common Stock beneficially owned by them in favor of the Proposal. Such
directors, executive officers and related stockholders owned 3,756,594 shares of
Common Stock as of August 31, 1998 representing approximately 16.1% of the
Company's shares outstanding as of such date.
All costs of solicitation will be borne by the Company. The solicitation is
to be principally conducted by mail and may be supplemented by telephone and
personal contacts by directors, executive officers and regular employees of the
Company, without additional remuneration. Arrangements will be made with
brokerage houses, banks and custodians, nominees and other fiduciaries to
forward solicitation materials to the beneficial owners of shares held of
record. The Company will reimburse such persons for their reasonable
out-of-pocket expenses incurred in connection with the distribution of proxy
materials.
2
<PAGE> 6
MARKET PRICES FOR THE COMMON STOCK
The Common Stock is traded on the New York Stock Exchange and the Pacific
Stock Exchange (symbol "BXG"). Set forth below is certain information with
respect to the closing sale price of the Common Stock during the periods
indicated. The Company has not paid any dividends on its Common Stock during the
periods indicated.
<TABLE>
<CAPTION>
HIGH LOW
----- ----
<S> <C> <C>
FISCAL 1999
2nd Quarter (through September , 1998).................... $ $
1st Quarter................................................. $11 1/2 $7 5/8
FISCAL 1998
4th Quarter................................................. $8 5/8 $4 1/4
3rd Quarter................................................. $5 1/8 $4 1/8
2nd Quarter................................................. $4 1/4 $2 3/4
1st Quarter................................................. $3 3/4 $2 3/4
FISCAL 1997
4th Quarter................................................. $3 3/8 $2 5/8
3rd Quarter................................................. $3 3/8 $2 3/8
2nd Quarter................................................. $4 1/8 $2 7/8
1st Quarter................................................. $4 5/8 $3 3/4
</TABLE>
On August 13 , 1998, the last business day prior to the date on which the
signing the Purchase Agreement was publicly announced, the last reported sale
price for the Common Stock was $8 7/8 per share. On , 1998 (the most
recent practicable date before printing this Proxy Statement), the last reported
sale price for the Common Stock was $ per share. THE COMPANY'S STOCKHOLDERS
ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE COMMON STOCK.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of August 31, 1998 by (a) each
Director, (b) each of the executive officers listed in the Summary Compensation
Table below, (c) all current Directors and executive officers as a group and (d)
all persons known to be the beneficial owners of more than five percent of the
Company's outstanding Common Stock. A nominal amount of Common Stock held by
certain executive officers under the Company's 401(k) profit sharing plan has
been excluded from the table. Unless otherwise noted, each stockholder has sole
voting and investment power with respect to the shares of Common Stock listed.
3
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<TABLE>
<CAPTION>
SHARES OF
COMMON
STOCK
OPTIONS ISSUABLE UPON
EXERCISABLE CONVERSION OF TOTAL SHARES PERCENT
DIRECTOR COMMON WITHIN 60 DEBENTURES BENEFICIALLY OF SHARES
NAME AGE SINCE STOCK DAYS AND NOTES(1) OWNED OUTSTANDING(2)
---- --- -------- --------- ----------- ------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Joseph C. Abeles(3).................... 83 1987 443,601 15,250 442,065 900,916 3.8%
John F. Chiste......................... 42 -- -- 6,000 -- 6,000 *
George F. Donovan...................... 59 1991 102,074 294,876 -- 396,950 1.7%
Ralph A. Foote......................... 75 1987 13,832 112,185 -- 126,017 *
Michael J. Franco...................... 30 1998 -- -- -- -- --
L. Nicolas Gray........................ 51 -- -- 12,300 -- 12,300 *
John A. Henry.......................... 32 1998 -- -- -- -- --
Daniel C. Koscher...................... 42 -- 1,218 116,814 -- 118,032 *
Frederick M. Myers(4).................. 75 1990 34,398 106,223 -- 140,621 *
Patrick E. Rondeau..................... 52 -- 11,339 102,138 -- 113,477 *
J. Larry Rutherford.................... 52 1997 -- 5,000 -- 5,000 *
Stuart A. Shikiar(5)................... 53 1994 721,182 47,288 80,145 848,615 3.6%
Bradford T. Whitmore(6)................ 42 1990 758,146 100,261 -- 858,407 3.7%
All Directors and executive officers as
a group (17 persons)................. -- -- 2,088,648 974,172 522,210 3,585,030 14.4%
Grace Brothers, Ltd.
1560 Sherman Avenue
Suite 900
Evanston, Illinois 60201(7)............ -- -- 1,676,766 -- 1,782,244 3,459,010 13.7%
Friess Associates of Delaware, Inc.
3908 Kennett Pike
Greenville, Delaware 19807(7).......... -- -- 1,206,000 -- -- 1,206,000 5.2%
Morgan Stanley Dean Witter & Co., Inc.
1221 Avenue of the Americas
New York, NY 10020(7)(8)............... -- -- 2,941,177 -- -- 2,941,177 12.6%
</TABLE>
- ---------------
* Less than 1%
(1) The conversion prices of $8.24 per share and $3.92 per share (the conversion
prices on August 31, 1998) are used to determine the shares of Common Stock
into which the Company's 8.25% convertible subordinated debentures due 2012
(the "Debentures") and the Company's 8.00% convertible subordinated notes
payable due 2002 (the "Convertible Notes") are convertible, respectively. As
of August 31, 1998, there was an aggregate of $34.4 million principal amount
of the Debentures outstanding and $6.0 million principal amount of
Convertible Notes outstanding, respectively. Conversion prices under the
Debentures and the Convertible Notes are subject to adjustment in certain
circumstances; no adjustment is required in connection with the issuance of
shares of Common Stock under the Purchase Agreement.
(2) The denominator used to calculate the percent of shares outstanding includes
shares issuable upon conversion of any Debentures and Notes held by the
applicable stockholder or group and upon exercise of any options that are
exercisable within 60 days and held by the applicable stockholder or group,
plus 23,404,605 shares outstanding on August 31, 1998.
(3) Includes 11,574 shares and 36,407 shares issuable upon the conversion of
$300,000 aggregate principal amount of Debentures held by Mr. Abeles' wife
and 50,000 shares and 16,018 shares issuable upon the conversion of $132,000
aggregate principal amount of Debentures held by family trusts for which he
disclaims beneficial ownership.
(4) Includes 34,398 shares of Common Stock held by Mr. Myers' wife for which he
disclaims beneficial ownership.
(5) Includes 3,034 shares of Common Stock issuable upon the conversion of
$25,000 aggregate principal amount of Debentures held by a family trust for
which Mr. Shikiar disclaims beneficial ownership. Also
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<PAGE> 8
includes 534,706 shares of Common Stock and 15,169 shares issuable upon the
conversion of $125,000 aggregate principal amount of Debentures over which
Mr. Shikiar exercises voting and investment power.
(6) Mr. Whitmore is a general partner of Grace Brothers, Ltd. Mr. Whitmore
exercises shared voting and investment power with respect to shares held by
Grace Brothers, Ltd and disclaims beneficial ownership of such shares except
to the extent of his proportionate interest therein.
(7) Based on the most recent (as of August 31, 1998) Form 13F, 13G or 13D (as
applicable) filed with the Securities and Exchange Commission.
(8) Reflects the aggregate investment by the following affiliates of Morgan
Stanley Dean Witter & Co., Inc.: Morgan Stanley Real Estate Fund III, L.P.,
Morgan Stanley Real Estate Investors III, L.P., MSP Real Estate Fund, L.P.,
MSREF III Special Fund, L.P.
THE PROPOSAL
GENERAL
The purpose of the meeting is to consider and vote on the Proposal to
approve a series of related transactions resulting in the issuance and sale of
up to an aggregate of up to 5,882,354 shares of Common Stock to the Purchasers
at a price of $8.50 per share, pursuant to and in accordance with the terms of
the Purchase Agreement.
Pursuant to the terms of the Purchase Agreement, on August 14, 1998 (the
"Closing Date"), the Company issued and sold to the Purchasers a total of
2,941,177 shares of Company Common Stock for an aggregate purchase price of $25
million, and the Purchasers agreed to purchase up to an additional 2,941,177
shares of Company Common Stock for an aggregate purchase price of $25 million
over the eighteen month period commencing on the Closing Date. The purchase
price per share for all shares of Common Stock issued or issuable under the
Purchase Agreement is $8.50 (subject to adjustment for stock dividends, stock
splits and similar changes in capitalization). The last reported sale price of
the Common Stock on the New York Stock Exchange ("NYSE") on August 13, 1998 (the
last trading day prior to the Closing Date) was $8 7/8, and on ,
1998 (the most recent practicable date before the printing of this Proxy
Statement), the last reported sale price was $ . See "MARKET PRICES FOR
THE COMMON STOCK." The shares issued and issuable to the Purchasers were and
will be sold in private placement transactions. None of the shares of Common
Stock issued or issuable to the Purchasers under the Purchase Agreement have
been registered under the Securities Act of 1933 (the "Securities Act"). The
Purchasers have certain rights described herein to have their shares of Common
Stock registered in the future. See "THE PROPOSAL -- Related Transactions --
Registration Rights Agreement."
A COPY OF THE PURCHASE AGREEMENT IS ATTACHED HERETO AS APPENDIX I AND
INCORPORATED HEREIN BY REFERENCE. STOCKHOLDERS ARE URGED TO READ THE PURCHASE
AGREEMENT IN ITS ENTIRETY.
Stockholders are being asked to consider and vote upon the Proposal in
order to satisfy the requirements of the NYSE. See "THE PROPOSAL -- New York
Stock Exchange Rules."
NEW YORK STOCK EXCHANGE RULES
The NYSE, on which the Common Stock is listed, requires stockholder
approval as a prerequisite to the listing of shares in several instances,
including transactions where the number of shares of Common Stock to be issued
is or will be equal to or in excess of 20% of the number of shares outstanding
immediately prior to such issuance (the "Threshold Amount").
In accordance with the terms of the Purchase Agreement, as of September
[ ], 1998 the Company had issued and sold to the Purchasers
[ ] shares of Common Stock, representing [ %] of the shares of
Common Stock outstanding immediately prior to the Closing Date. In order to
comply with the requirements of the NYSE, the Purchase Agreement contains a
condition that requires the Company to obtain stockholder approval of the
Proposal prior to issuing and selling to the Purchasers more
5
<PAGE> 9
than an additional [ ] Remaining Shares, representing an
additional [ %] of the shares of Common Stock outstanding immediately prior to
the Closing Date. Thus, by approving the Proposal, stockholders will be
eliminating one of the conditions to the Company's issuance and sale of, and the
Purchasers' ability to purchase, shares of Common Stock in excess of the
Threshold Amount.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE PROPOSAL. See "THE
PROPOSAL -- Board Recommendations; Reasons for the Transactions." The Company's
financial advisor, Ladenburg Thalmann & Co, Inc. ("Ladenburg Thalmann"), has
delivered to the Board a written opinion dated August 13, 1998, to the effect
that, as of such date and based upon and subject to certain matters stated in
such opinion, the consideration to be received by the Company from the
Purchasers for the 5,882,354 shares of Common Stock to be issued and sold in
accordance with the terms of the Purchase Agreement is fair, from a financial
point of view, to the public stockholders of the Company. THE FULL TEXT OF THE
FAIRNESS OPINION RECEIVED BY THE COMPANY FROM LADENBURG THALMANN IS ATTACHED
HERETO AS APPENDIX II. STOCKHOLDERS ARE URGED TO READ SUCH OPINION IN ITS
ENTIRETY.
SUMMARY OF TERMS OF PURCHASE AGREEMENT
The following is a summary of certain provisions of the Purchase Agreement.
This summary is not intended to be a complete statement of all material
provisions of the Purchase Agreement and is subject to and qualified in its
entirety by the Purchase Agreement itself.
Initial Sale and Purchase of the Common Stock. On the Closing Date, and in
accordance with the terms of the Purchase Agreement, the Company sold to the
Purchasers 2,941,177 shares of Common Stock at a purchase price per share of
$8.50 for an aggregate purchase price of $25 million.
Subsequent Sales and Purchases of Common Stock. Subject to the terms and
conditions of the Purchase Agreement (as are more fully described below under
"Conditions to Subsequent Sales and Purchases of Common Stock"), the Company
shall, at its election, sell to the Purchasers, and the Purchasers shall be
required to purchase from the Company, at any time and from time to time (each
such time, a "Subsequent Closing Date"), during the eighteen month period
commencing on the Closing Date (the "Commitment Period"), up to an aggregate of
2,941,177 additional shares (subject to adjustment in certain circumstances) of
Common Stock (the "Remaining Shares") at a purchase price per share of $8.50
(subject to adjustment in certain circumstances), for an aggregate purchase
price of $25 million.
In the event that (i) on or prior to expiration of the Commitment Period,
the Company has not offered to sell to the Purchasers all of the Remaining
Shares or (ii) the Purchasers receive notice from the Company of a "Change of
Control" (as defined below), or the execution by the Company of a definitive
agreement which will result in a Change of Control, and the satisfaction or
waiver of all conditions of closing required under the terms of such definitive
agreement, then, in each such case, the Purchasers shall have the right, but not
the obligation, to purchase any or all Remaining Shares not sold to the
Purchasers as of such date at a purchase price per share of $8.50 (subject to
adjustment in certain circumstances), within 15 business days of the end of the
Commitment Period or receipt of the notice described in (ii) above. A Change of
Control is defined in the Purchase Agreement to mean: (i) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all or substantially all of the assets of the Company and its
subsidiaries; or (ii) a majority of the Board of Directors of the Company shall
consist of persons who are not Continuing Directors (as such term is defined in
the Purchase Agreement) of the Company; or (iii) the acquisition by any person
or Group (as defined in Section 13(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), but excluding Purchasers or their Permitted
Transferees or any of their respective affiliates) of the power, directly or
indirectly, to vote or direct the voting of securities having more than 50% of
the total voting power for the election of directors of the Company or of any
direct or indirect holding company thereof. Notwithstanding the foregoing, the
Purchasers' right to purchase any Remaining Shares upon expiration of the
Commitment Period under clause (i) above is subject to satisfaction of either of
the following conditions
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<PAGE> 10
(which shall not be conditions to the Purchasers' right to purchase any
Remaining Shares under clause (ii) above):
a. the Company achieving total revenues of at least $220,000,000 for
the 12-month period ended on the last day of the third full fiscal quarter
after the Closing Date; or
b. the Company achieving net income (excluding write-offs) of at
least $15,000,000 for the 12-month period ended on the last day of the
third full fiscal quarter after the Closing Date.
Representations and Warranties. The Purchase Agreement contains various
customary representations and warranties of the parties thereto. The Company's
representations include representations as to the Company's corporate
organization and qualification, the Company's subsidiaries, capitalization,
authority, Securities and Exchange Commission ("SEC") filings and securities law
matters, financial statements, compliance with applicable laws, legal
proceedings, employee benefits, absence of certain changes to the business of
the Company and each Company subsidiary, brokers and finders, licenses and
permits, the validity and binding effect of material agreements, properties and
insurance, taxes, environmental matters, and absence of certain unlawful
business practices. The representations of the Purchasers include
representations as to authority and investment representations customary in a
private placement transaction.
Conditions to Subsequent Sales and Purchases of Common Stock. The
Purchasers' obligation to purchase, and the Company's obligation to sell, any
Remaining Shares on each Subsequent Closing Date are subject to, in each case,
satisfaction or waiver of the following conditions, among others, contained in
the Purchase Agreement on or prior to each Subsequent Closing Date:
a. The representations and warranties contained in the Purchase
Agreement must be true and correct in all material respects on and as of
the date of each Subsequent Closing Date, with the same effect as though
made on or as of each Subsequent Closing Date (except for representations
and warranties that speak as of a specific date other than such Subsequent
Closing Date (which need only be true and correct in all material respects
as of such date)), and the parties shall have performed all obligations and
complied in all material respects with all agreements, undertakings,
covenants and conditions required under the Purchase Agreement and the
Ancillary Documents to be performed by the Company at or prior to each
Subsequent Closing.
b. There shall not be in effect any order, decree or injunction of a
court or agency of competent jurisdiction which enjoins or prohibits
consummation of the sale and purchase of the Remaining Shares to be
purchased by the Purchasers at any subsequent closing.
c. Each of the parties shall have delivered to the other a
certificate, dated as of each Subsequent Closing Date, to the effect that
the foregoing conditions have each been satisfied.
d. The Remaining Shares to be issued to the Purchasers on each
Subsequent Closing Date shall be approved for listing on the NYSE and the
Pacific Stock Exchange (or such other national securities exchange or
securities trading system on which the Common Stock is listed), subject to
official notice of issuance and notice of results of the stockholder vote
at the Special Meeting prior to issuance of Common Stock to the Purchasers
resulting in ownership by the Purchasers of an aggregate of 20% or more of
the issued and outstanding shares of Common Stock as of August 14, 1998
(the "Threshold Date").
e. For any Remaining Shares to be issued on or after the Threshold
Date, the stockholders of the Company shall have duly approved the issuance
of such shares of Common Stock pursuant to the Purchase Agreement in
accordance with the rules of the NYSE.
f. All permits, consents, authorizations, orders and approvals of,
and filings and registrations with any governmental entity or any other
person required to be made or obtained under federal or state law, rule or
regulation in connection with the consummation of the transaction
contemplated by the Purchase Agreement on any Subsequent Closing Date shall
have been obtained or made and all statutory waiting periods thereunder
shall have expired, in each case, without the imposition of any terms or
conditions which, either individually or in the aggregate, are unduly
burdensome to the affected party or any of its affiliates or such that, had
they been known prior to the date of execution of the Purchase Agreement,
it is
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<PAGE> 11
reasonable to conclude that the affected party would not have entered into
the Purchase Agreement or the transactions contemplated thereby.
In addition to the foregoing, the Purchasers' obligation to purchase any
Remaining Shares is conditioned on the satisfaction or waiver of the following:
a. The Company paying to the Purchasers the costs and expenses
incurred by the Purchasers in connection with each Subsequent Closing,
which cost and expenses shall include all reasonable out-of-pocket costs
and expenses incurred by the Purchasers arising in connection with the
consummation of each Subsequent Closing, including, without limitation, all
filing fees, travel expenses and reasonable fees and expenses of the
Purchasers' counsel, accountants and consultants. In no event shall the
Company's aggregate reimbursement obligations for any purchases pursuant to
the Purchase Agreement exceed $250,000.
b. Since the Closing Date, there shall not have been any change,
event, occurrence or development in the assets, business, properties,
liabilities, business affairs, condition (financial or otherwise), or
results of operations of the Company or any Company subsidiary that has had
or could reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect. The term Material Adverse Effect is
defined as: any event, circumstance, change, development or effect which
individually or in the aggregate would have a material adverse effect on
(i) the assets, business, properties, liabilities, condition (financial or
otherwise), or results of operations of the Company and the Company
subsidiaries taken as a whole, (ii) the ability of the Company or any
Company subsidiary to perform its obligations under the Purchase Agreement
or the Ancillary Documents or (iii) the validity or enforceability of the
Purchase Agreement or any of the Ancillary Documents or the rights or
remedies of Purchasers hereunder the thereunder.
c. (i) Trading generally shall not have been suspended or materially
limited on or by, as the case may be, either the NYSE or the Pacific Stock
Exchange; (ii) trading of any securities of the Company or the Company
subsidiary shall not have been suspended on the NYSE or the Pacific Stock
Exchange; (iii) a general moratorium on commercial banking activities in
New York shall not have been declared by either Federal or New York State
Authorities; or (iv) there shall not have occurred an outbreak or
escalation of hostilities or any change in financial markets or any
calamity or crisis that in any such case, in the Purchasers' judgment, is
material and adverse to the Company.
No Termination of Obligations Upon Change of Control. The Company is
obligated to notify the Purchasers, (i) of the execution by the Company of a
definitive agreement with any person which will result in a Change of Control,
(ii) of the satisfaction of waiver of all conditions of closing required under
the terms of such definitive agreement, and (iii) immediately upon consummation
of a Change of Control. Upon a Change of Control of the Company, all rights and
obligations of the Purchasers who own any shares of Common Stock pursuant to the
Purchase Agreement shall continue in full force and effect unless the Purchasers
dispose of all of their shares of Common Stock as part of such Change of
Control. See "THE PROPOSAL -- Subsequent Sales and Purchases of Common Stock."
Lock-up; Restrictions on Sale or Transfer. As indicated above, the shares
of Common Stock issuable to the Purchasers under the Purchase Agreement were
issued in a private placement transaction and have not been registered under the
Securities Act. The Purchasers have agreed not to sell or transfer their shares
of Common Stock absent registration or a valid exemption from registration under
the Securities Act. In addition, prior to the earlier to occur of (x) the second
anniversary of the Closing Date or (y) six months following the first date on
which all shares of Common Stock to be sold under the Purchase Agreement shall
have been acquired by the Purchasers, but in no event earlier than the date that
is eighteen months from the Closing Date (the "Lock-Up Period"), none of the
Purchasers will, directly or indirectly offer, sell, transfer, assign, pledge,
hypothecate or otherwise dispose of (any such act, a "Transfer") any shares of
Common Stock purchased under the Purchase Agreement, except for (i) a Transfer
by Purchaser to a Permitted Transferee (as such term is defined in the Purchase
Agreement), provided that prior to such Transfer each such Permitted Transferee
consents in writing to be bound by the restrictions on Transfer set forth in the
Purchase Agreement, makes certain representations and warranties set forth in
the Purchase Agreement to the
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<PAGE> 12
Company and assumes all other rights and obligations of such Purchaser under the
Purchase Agreement; (ii) a Transfer to the Company or a wholly-owned direct or
indirect subsidiary of the Company; and (iii) a Transfer pursuant to a sale,
merger or consolidation in which the Company is a constituent corporation, or
upon a Change of Control.
Following the Lock-Up Period or the consummation of a Change of Control or
delivery of a notice that describes the events surrounding a Change of Control
as discussed above, each Purchaser and Permitted Transferee may, in its sole
discretion, freely and without limitations, Transfer any shares of Common Stock
owned by it, subject to compliance with all applicable law (including, without
limitation, compliance with federal and state securities laws). If a Change of
Control transaction is terminated prior to its completion, the Purchasers' right
to transfer any shares of Common Stock held by them shall be again subject to
the provisions pertaining to the restrictions on Transfer contained in the
Purchase Agreement.
Board Representation. As a condition to the initial sale of Common Stock
to the Purchasers under the Purchase Agreement, the Company was required to (i)
elect two Purchaser Designees (as such term is defined in the Purchase
Agreement) to the Company's Board of Directors and (ii) amend the Company's by-
laws to, among other things, provide that the provisions of Chapter 156B,
section 50A ("sec.50A") of the Massachusetts General Laws with respect to
staggered terms for directors shall apply to the Company. In accordance
therewith, on August 13, 1998, the Company (i) opted into the provisions of
sec.50A and amended and restated its by-laws to provide for a classified board
of directors consisting of three classes as nearly equal in size as possible,
(ii) expanded its Board of Directors by two positions, and (iii) elected Michael
J. Franco and John A. Henry, as designees of the Purchasers to fill the vacancy
created by such expansion. The terms of the Board's current members are
staggered as follows: Joseph C. Abeles, Ralph A. Foote and Mr. Henry will serve
in the class whose term expires in 1999; Frederick M. Myers, J. Larry Rutherford
and Stuart A. Shikiar will serve in the class whose term expires in 2000; and
George F. Donovan, Bradford T. Whitmore and Mr. Franco will serve in the class
whose term expires in 2001. Upon the expiration of the term of a class of
directors, directors within such class will be elected for a three-year term at
the annual meeting of stockholders in the year in which such term expires. The
amended and restated by-laws provide that directors may be removed only for
cause by the affirmative vote of the holders of a majority in voting power of
the shares issued, outstanding and entitled to vote and, any vacancy, however
occurring, including a vacancy resulting from an enlargement of the Board, may
only be filled by a vote of a majority of the directors then in office. In
accordance with its obligations under the Purchase Agreement, the Company's
Board has appointed Michael J. Franco to the Board's audit and nominating
committees.
In addition, the Purchase Agreement provides that, for so long as the
Purchasers and the Permitted Transferees own, in the aggregate at least 70% of
the aggregate number of shares of Common Stock actually issued to the Purchasers
pursuant to the Purchase Agreement (the "Required Interest"), the Purchasers
shall be entitled to designate an aggregate of two directors on the management
slate of nominees to the Company's Board of Directors (the "Purchaser
Designees"), except the foregoing number of directors shall be reduced to the
extent one or more Purchaser Designees have been elected to and are serving on
the Board of Directors and are not currently standing for re-election. In the
event that the aggregate interest owned by the Purchasers and the Permitted
Transferees shall be less than the Required Interest but equal to or greater
than at least 50% of the aggregate number of shares of Common Stock actually
issued to the Purchasers pursuant to the Purchase Agreement (the "Minimum
Interest"), and the Purchasers currently have two Purchaser Designees serving on
the Board of Directors, then the Purchasers shall cause one of the two Purchaser
Designees to resign within ten business days, the Board of Directors shall be
reduced by one member and thereafter the Purchasers shall be entitled to
designate one member on the management slate of nominees to the Company's Board
of Directors (until such time as the aggregate interest owned by the Purchasers
and the Permitted Transferees shall be less than the Minimum Interest, whereupon
Purchasers shall within ten business days cause the remaining Purchaser Designee
to resign and the Purchasers shall have no further rights to designate any
persons to the Company's Board of Directors) except the foregoing shall not
apply to the extent the Purchaser Designee has been elected to and is serving on
the Board of Directors and is not currently standing for re-election. At least
ninety days prior to each annual meeting of stockholders of which a Purchaser
Designee will stand for election, the Purchasers shall provide written notice to
the Company indicating the
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<PAGE> 13
Purchaser Designee(s) to be nominated at such annual meeting, and such notice
shall set forth as to each person proposed for nomination all information
relating to such persons as required to be disclosed and solicitations of
proxies for the election of directors pursuant to Regulation 14A under the
Exchange Act.
The Company has committed to use its reasonable best efforts at all times
to take such action as provided above as is necessary to ensure nomination,
recommendation and election of the Purchaser Designees to the Board of
Directors. As a condition precedent to the inclusion of any Purchaser Designee
on any slate of nominees to be recommended to the stockholders by the Board of
Directors, the Board may review the information provided with respect to each
Purchaser Designee to evaluate in good faith such Purchaser Designee's character
and fitness to serve as a director. If the Board determines in good faith that
any such Purchaser Designee lacks the character or fitness to serve as a
director based on applicable legal and reasonable commercial standards, the
Purchasers shall then have the right to propose an alternative Purchaser
Designee who is reasonably acceptable to the Company. All Purchaser Designees
elected to the Board of Directors shall receive, during the period in which they
serve, any and all benefits (including without limitation any director
compensation and grants of stock options under the 1998 Nonemployee Director
Plan) provided to the other members of the Board of Directors of the Company.
For as long as any Purchaser or Permitted Transferee has the right to
designate at least one director on a management slate of nominees to the
Company's Board of Directors, the Company has committed to use reasonable best
efforts to cause the Board of Directors and the stockholders of the Company not
to increase the members of the Board of Directors above nine without the prior
written consent of each Purchaser and Permitted Transferee, which consent may be
withheld in the Purchasers and Permitted Transferees' reasonable discretion. In
the event of a vacancy (either by death removal or resignation) of a director
other than a Purchaser Designee which does not cause the total number of
directors to be less than seven, the Company shall use reasonable best efforts
to cause the Board of Directors not to appoint a replacement to fill such
vacancy without the prior written consent of the Purchasers and Permitted
Transferees, which consent may be withheld in the Purchasers' and Permitted
Transferees' reasonable discretion.
For as long as Purchasers and the Permitted Transferees own, in the
aggregate, at least a Minimum Interest and the Purchaser Designees are serving
on the Board of Directors, the Purchasers and the Permitted Transferees shall
vote all of their shares of Common Stock for election of the management slate of
nominees (other than the Purchaser Designee) to the Company's Board of
Directors. In addition, the Purchasers have committed to vote and have committed
to cause the Permitted Transferees to vote all of their shares of Common Stock
in favor of the Proposal.
If at any time the Purchasers and the Permitted Transferees are entitled to
designate one or more nominees to the Company's Board of Directors and the
Purchasers do not have a representative on the Board, so long as the Purchasers
and the Permitted Transferees own, in the aggregate, at least the Minimum
Interest, the Company is obligated to permit two representatives (or in the case
that the Purchasers are entitled to designate only one nominee to the Board,
only one representative) of the Purchasers (which representatives must be
acceptable to the Company in its reasonable discretion) to attend, but not vote,
as observers at each meeting of the Board of Directors or any committee of the
Board empowered to act with full authority of the entire Board, including
telephonic meetings, provided that each such representative executes and
delivers to the Company a confidentiality agreement in a form reasonably
satisfactory to the Company prior to attendance at any such meetings.
Subject to availability on reasonable terms and at reasonable costs, for so
long as any Purchaser Designee remains on the Board of Directors, the Company
agreed to use reasonable best efforts to maintain directors' and officers'
liability insurance with financially sound and reputable insurers at a level of
coverage of at least $10,000,000.
Board of Directors Approvals. For so long as Purchasers and the Permitted
Transferees own, in the aggregate, at least the Required Interest, the following
actions by the Company or any Company Subsidiary shall require the affirmative
vote of at least one of the Purchaser Designees prior to the effectiveness or
consummation of such action (provided that if the Purchasers do not have a
representative on the Board of Directors as a result of the failure of the
Company to nominate any Purchaser Designee or failure of the
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<PAGE> 14
stockholders of the Company to elect any Purchaser Designee, then such action
shall require the approval of the Purchasers and Permitted Transferees holding a
majority of the shares of Common Stock issued pursuant to the Purchase
Agreement):
a. the consolidation or merger of the Company with or into another
Person (as such term is defined in the Purchase Agreement); the sale of all
or substantially all of the assets of the Company; or, except for sales of
receivables under an existing purchase facility (up to an aggregate of
$200,000,000), the sale, assignment, transfer, lease, conveyance or other
disposal of property or assets of the Company or any Company subsidiaries
in one or more related transactions where the aggregate consideration paid
exceeds $50,000,000;
b. the purchase or other acquisition of the business, assets or
securities of any other Person (whether by merger, another form of business
combination or otherwise) in one or more related transactions where the
aggregate consideration paid (exclusive of any future development costs)
exceeds $50,000,000;
c. the issuance of Senior Securities (as such term is defined in the
Purchase Agreement), or authorization of the issuance of any securities
convertible into or exchangeable for, or options, warrants or other rights
to acquire, any Senior Securities;
d. the issuance of Parity Securities (as such term is defined in the
Purchase Agreement), in excess of 8% of the then issued and outstanding
shares of Common Stock or at a price per share that is less then $8.50, any
time prior to expiration of the Commitment Period unless all of the
Remaining Shares have been issued to the Purchasers or the stockholders
have failed to approve the issuance of any shares of Common Stock to be
issued to the Purchasers on or after the Threshold Date; provided however,
that such restriction shall not be applicable to the issuances (i) to the
Purchasers or a Permitted Transferee pursuant to the Purchase Agreement, or
(ii) of securities upon conversion or exercise of any options, notes or
debentures outstanding as of the Closing Date, or (iii) grants of options
or issuances of securities upon exercise thereof pursuant to any existing
director or employee stock option or stock benefit plan approved by the
Company's Board of Directors;
e. the incurrence of any Indebtedness (as such term is defined in the
Purchase Agreement) by the Company or any Company subsidiary in an
aggregate principal amount which would cause the Total Debt to Total Market
Capitalization Ratio of the Company to be equal to or greater than 50%. The
Purchase Agreement defines Total Debt to Total Market Capitalization to
mean, as of any particular date, the ratio of (i) the Company's total
indebtedness (but excluding any indebtedness arising from pledged or
hypothecated receivables (land or timeshare) of the Company or any Company
subsidiary) less unrestricted cash of the Company to (ii) the Company's
total market capitalization (i.e., market value of the issued and
outstanding Common Stock) plus the Company's total indebtedness;
f. the declaration or payment of any dividend (other than a stock
dividend) or distribution on the shares of Common Stock, or the repurchase,
redemption or other acquisition of shares of Common Stock (other than in
connection with "cashless" exercises of options);
g. any amendment to the Restated Articles of Organization or bylaws
of the Company which could reasonably be expected to conflict with the
terms of the Purchase Agreement;
h. the entry into a material line of business that is unrelated to or
materially different from the Timeshare/Residential Business (as such term
is defined in the Purchase Agreement);
i. the entry into any transaction with any affiliate of the Company
other than transactions entered into with Company subsidiaries; and
j. the authorization or issuance of any capital stock of any Company
subsidiary, or any options, rights, warrants or securities convertible into
or exchangeable for any capital stock of any Company subsidiary (other than
pursuant to employee stock option plans in existence as of the Closing
Date).
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<PAGE> 15
Preemptive Rights. If the Company proposes to undertake an issuance of New
Securities (as defined below) for cash after the Closing Date, each Purchaser
and Permitted Transferee that owns any shares of Common Stock on the date of
issuance has the right to purchase its "proportionate share" of such New
Securities. Each Purchaser and Permitted Transferee that owns any shares of
Common Stock on such date also has the right of over allotment such that, if any
Purchaser or Permitted Transferee fails to exercise its rights to purchase its
proportionate share of New Securities to the fullest extent permitted, the other
Purchasers and Permitted Transferees may purchase its proportionate share of New
Securities that such Purchaser or Permitted Transferee elected not to purchase.
The term "New Securities" means (i) any capital stock of the Company, (ii)
any rights, options or warrants to purchase any such capital stock, or to
purchase any securities of any type whatsoever that are, or may become,
convertible into or exercisable for any such capital stock, and (iii) any
securities of any type whatsoever that are, or may become, convertible into or
exercisable for any such capital stock; provided, however, that "New Securities"
shall not include (A) shares of Common Stock issued upon conversion or exercise
of options, debentures, notes, warrants or rights outstanding as of the Closing
Date, (B) securities issued pursuant to the acquisition of another corporation
or legal entity by the Company by merger, consolidation, purchase of all or
substantially all of such other entity's assets, or acquisition transaction in
which the Company participates on an arm's length basis, (C) securities
(including options) issued in connection with any director or employee stock
option plan approved by the Board of Directors of the Company (or any committee
thereof) and the stockholders of the Company, or any shares of Common Stock
issued to any employee or officer for his own investment and as part of a bona
fide compensation plan approved by the Board of Directors, (D) any securities
issued in replacement of, or as dividends attributable to, any securities of the
Company outstanding as of the date hereof, (E) any securities issued to all
holders of shares of Common Stock on a pro rata basis, (F) any securities issued
(including, without limitation, any rights and any securities issued upon the
exercise of such rights or upon conversion of any securities issued upon
exercise of such rights) in connection with a stockholders rights plan approved
by the Board of Directors or (G) any securities issued upon conversion or
exercise of New Securities that the Purchasers previously elected not to
exercise their purchase rights or as to which such purchase rights did not
apply.
Financing Fees; Advisory Fees. For so long as Purchasers and Permitted
Transferees own, in the aggregate, at least the Minimum Interest, if the Board
of Directors authorizes the Company to finance or refinance the Company or any
of the Company's assets either through debt or equity offerings (other than
securitizations of installment land and/or timeshare receivables), or determines
to sell all or substantially all of the assets of the Company or of all of the
Company subsidiaries, or to consolidate or merge into or with any other Person
(whether or not the Company continues as the surviving person), or to acquire
all or substantially all of the assets, business or securities of any other
Person and elects to utilize the services of any investment or financial advisor
or commercial (but excluding commercial banking services that are incidental to
such debt or equity offerings) or investment banking firm in connection
therewith, Morgan Stanley, Dean Witter & Co. or any Affiliate or subsidiary
thereof ("MSDW") shall have the exclusive right to act as the Company's
financial agent and advisor and to manage such financings or offerings (provided
that MSDW has reasonable experience in the areas for which such services are to
be provided, and provided further that the Board of Directors, in its reasonable
judgment, has not determined that there exists any actual or potential conflict
of interest with regard to such representation (but not including a conflict of
interest that may exist as a result of Purchasers' ownership interest in the
Company)), and, as compensation for such services shall be entitled to receive a
fee equal to the then current market rate for similar financings, offerings or
transactions.
Adjustments to Purchase Price per Share. If, during the Commitment Period,
the Company shall declare or pay a dividend on the Common Stock payable in
shares of Common Stock or in rights to acquire Common Stock, or shall effect a
stock split or reverse stock split, or a combination, consolidation or
reclassification of the Common Stock, then the $8.50 price per share shall be
proportionately decreased or increased, as appropriate, to give effect to such
event.
Use of Proceeds. The Proceeds to be received by the Company from the sale
and issuance of any shares of Common Stock to the Purchasers under the Purchase
Agreement shall be used for the purpose of funding future acquisitions and
development plans, expanding the Company's operations, repaying existing
indebted-
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<PAGE> 16
ness of the Company or any of its subsidiaries and such other items as the Board
of Directors of the Company may approve from time to time. Notwithstanding the
foregoing, the Purchase Agreement permits the Company, at its discretion, to
utilize up to $34 million of the proceeds for the purpose of funding the
repurchase of all or any portion of the Company's 8.25% convertible subordinated
debentures due 2012 in accordance with the Company's right to call such
debentures and the holders' option to elect to receive cash in lieu of shares of
Common Stock as payment thereof. As of the date of this Proxy Statement, the
Company has not elected to call the Debentures, although it has the right and
may elect to do so at any time.
BOARD RECOMMENDATION; REASONS FOR THE TRANSACTION
In reaching its decision to approve the Purchase Agreement, the Board
consulted with Ladenburg Thalmann and the Company's legal advisors and primarily
considered the following factors:
1. The ability to control the amount and timing of sales of Remaining
Shares to the Purchasers for an extended period of time;
2. The purchase price per share under the Purchase Agreement in comparison
to the [ day] trailing average of the price per share of the Common Stock on the
NYSE;
3. The fact that the shares of Common Stock issued and issuable under the
Purchase Agreement were and will be sold in private placement transactions, are
not registered under the Securities Act and will be subject to a lock-up;
4. The opinion of Ladenburg Thalmann that the consideration to be received
by the Company for the issuance of Common Stock to the Purchasers pursuant to
the terms of the Purchase Agreement is fair, from a financial point of view, to
the stockholders of the Company;
5. The positive impact from the transaction on the Company's balance sheet
and financial condition, together with the ability of the Company to utilize the
proceeds from sale of Common Stock for the purpose of funding future
acquisitions and development plans, expanding the Company's operations, and
repaying existing indebtedness of the Company ( See "THE PURCHASE
AGREEMENT -- Use of Proceeds");
6. The business reputation, experience and success of the Purchasers and
MSDW in the real estate investment and investment banking industry;
7. The simultaneous execution of the Purchase Agreement and initial
purchase of Common Stock for $25 million in gross proceeds to the Company;
8. The fact that the transactions under the Purchase Agreement will not
result in an adjustment to the conversion price under the Debentures and
Convertible Notes; and
9. The fact that the purchase price under the Purchase Agreement will not
be subject to downward adjustment, and the Company's ability, subject to the
terms of the Purchase Agreement, to cause the Purchasers to purchase Common
Stock under the Purchase Agreement for an eighteen month period commencing on
the Closing Date.
The Board did not assign any specific or relative weight to the factors
discussed above.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE PURCHASE AGREEMENT
AND THE TRANSACTIONS CONTEMPLATED THEREBY AND RECOMMENDS THAT THE COMPANY'S
STOCKHOLDERS VOTE FOR APPROVAL OF THE PROPOSAL.
CONSEQUENCES IF STOCKHOLDER APPROVAL IS NOT OBTAINED
If stockholder approval of the Proposal is not obtained, the Company will
be prohibited under the terms of its listing agreement with the NYSE from
issuing more than an aggregate of approximately 1,151,507 shares of Common Stock
to the Purchasers in connection with the transactions contemplated under the
Purchase Agreement (slightly less than 20.0% of the shares of Common Stock
outstanding on the Closing Date). In such event, the Company would have the
ability to receive only $34.8 million in gross
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<PAGE> 17
proceeds from the sale of Common Stock under the Purchase Agreement, rather than
the entire $50 million it would have had the ability to receive had the Proposal
been approved. The Purchasers are not entitled to any remedial rights under the
Purchase Agreement if stockholders fail to approve the Proposal at the Special
Meeting.
EFFECT OF APPROVAL OF THE PROPOSAL ON EXISTING HOLDERS OF COMMON STOCK
The shares of Common Stock which have been issued, and the additional
shares of Common Stock which may be issued, to the Purchasers under the Purchase
Agreement contain the same rights and privileges as and are otherwise identical
to the shares of Common Stock currently held by all other existing holders of
Common Stock.
If the Proposal is approved, it could result in a substantial increase in
the number of shares of Common Stock outstanding. As a result, the voting power
and percentage ownership interest in the Company of each of the Company's
current stockholders (excluding the Purchasers) would be immediately reduced by
the sale and issuance of any Remaining Shares. In addition, the earnings per
share and book value per share of existing shares of Common Stock could be
increased or diluted, depending on whether the price per share for Remaining
Shares under the Purchase Agreement ($8.50) is above or below the then current
market price per share on the NYSE.
INTERESTS OF CERTAIN PERSONS
Prior to execution of the Purchase Agreement, none of the Purchasers was a
director, executive officer, five percent stockholder or affiliate of the
Company and the Company did not have an investment banking relationship with
MSDW. Immediately following the Initial Closing, pursuant to the Purchase
Agreement, two of the Purchasers' representatives, Michael J. Franco and John A.
Henry, became members of the Company's Board of Directors. See "THE
PROPOSAL -- Board Representation." J. Larry Rutherford, a member of the
Company's Board, abstained from the Board's vote approving the Proposal because
of an unrelated but pre-existing business relationship with an affiliate of the
Purchasers.
RELATED TRANSACTIONS
Voting and Cooperation Agreement. Simultaneously with the execution of the
Purchase Agreement, each of the Purchasers and all of the directors and
executive officers of the Company and certain other related stockholders have
entered into a Voting and Cooperation Agreement dated as of August 14, 1998 (the
"Voting Agreement"). Pursuant to the terms of the Voting Agreement, all of the
directors and executive officers of the Company, and related stockholders who
are a party thereto (collectively, the "Stockholders"), have agreed to vote all
shares of Common Stock owned by them in favor of the Proposal. The Stockholders
have also agreed to vote or cause to be voted all shares of Common Stock
beneficially owned by them in favor of the nominees to the Board of Directors
that the Purchasers shall be entitled to designate in accordance with the terms
of the Purchase Agreement. The Stockholders owned 3,756,594 shares of Common
Stock as of August 31, 1998, representing 16.1% of the Company's outstanding
Common Stock as of such date.
Pursuant to the terms of the Voting Agreement, each Stockholder is entitled
to sell, transfer or otherwise dispose of his or its shares of Common Stock (and
any securities exercisable for or convertible into Common Stock) and, provided
the transferee is not a Related Person (as defined in the Voting Agreement),
such transferee will acquire the shares of Common Stock (or other securities)
free and clear of the terms and conditions of, and will not be bound by, the
Voting Agreement.
Registration Rights Agreement. As discussed above, under the terms of the
Purchase Agreement, the shares were issued in a private placement transaction
and the Purchasers agreed with the Company not to Transfer any shares of Common
Stock owned by them for a period commencing on the Closing Date and continuing
until the earlier to occur of (i) the second anniversary of the Closing Date, or
(ii) six months following the first date on which all shares of Common Stock to
be sold under the Purchase Agreement shall have been acquired by the Purchasers,
but not earlier than the 18th month anniversary of the Closing Date (the
"Lock-Up Period").
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<PAGE> 18
The Company has agreed to use its reasonable best efforts to have declared
effective prior to the expiration of the Lock-Up Period, or within 45 days
following (i) a Change of Control or (ii) receipt of a notice from the Company
of the execution by the Company of a definitive agreement which will result in a
Change of Control, a registration statement under the Securities Act, for the
offering on a continuous or delayed basis in the future all of the shares of
Common Stock of the Company acquired by the Purchasers pursuant to the Purchase
Agreement. The Company is obligated to maintain the effectiveness of the shelf
registration for a period of four years or until such earlier time as the
Purchasers no longer hold shares of Common Stock acquired pursuant to the
Purchase Agreement or such shares of Common Stock are transferable without
registration under the Securities Act.
The Purchasers are entitled to demand two registrations (the "Demand
Registrations") requiring the Company to register any Common Stock acquired by
the Purchasers under the Purchase Agreement, but in no event fewer shares than
would result in $10,000,000 in shares being registered pursuant to a demand.
Additionally, the Purchasers are entitled to unlimited "piggyback" registration
rights.
The Registration Rights Agreement grants the Company the right, exercisable
on not more than one occasion during any one-year period, from time to time, to
require the Purchasers not to sell under the shelf registration or pursuant to
the Demand Registrations or to suspend the effectiveness thereof during the
period starting with the date 30 days prior to the Company's good faith
estimate, of the proposed date of filing of a registration statement or a
preliminary prospectus supplement relating to an existing shelf registration
statement pertaining to an underwritten offering of equity securities of the
Company for the account of the Company, and ending on the date 90 days following
the effective date of such registration statement or the date of filing of such
prospectus supplement. In addition, the Company is entitled to postpone or
suspend (but not for a period exceeding 60 days per transaction) the filing or
effectiveness of a registration statement otherwise required to be prepared and
filed by it pursuant to the Registration Rights Agreement on not more than one
occasion during any 12-month period if the Company determines, in its good faith
judgment, that (i) such registration and offering or continued effectiveness
would interfere with any material financing, acquisition, disposition, corporate
reorganization or other material transaction involving the Company or any of its
subsidiaries, (ii) any preexisting negotiations, discussions or pending proposal
with respect to any such material transactions or public disclosure thereof
would be required prior to the time such disclosure might otherwise be required,
or (iii) when the Company is in possession of material information that it deems
advisable not to disclose in a registration statement.
All fees and expenses incident to the performance of or compliance with the
Registration Rights Agreement by the Company will be borne by the Company
whether or not any of the registration statements become effective. In addition,
the Company will reimburse the Purchasers whose securities are being registered
in a registration statement pursuant to the Registration Rights Agreement for
the reasonable fees and disbursements of not more than one counsel for such
Purchasers specifically chosen to represent the Purchasers with respect to the
registration statement, and appropriate local counsel.
The Company and each Purchaser whose shares of Common Stock are registered
pursuant to the Registration Rights Agreement have agreed to indemnify and hold
each other harmless from any losses, claims, damages, liabilities, costs and
expenses incurred by the indemnified party, that were caused by, arising out of
or based upon the indemnifying party's untrue or alleged untrue statements or
omissions of a material fact contained or required to be contained in any
registration statement.
The foregoing is a summary of the Voting Agreement and Registration Rights
Agreement. The summaries are not intended to be a complete statement of all
material provisions of the Voting Agreement and the Registration Rights
Agreement, and are qualified by reference to the full text of such agreements,
which have been filed as exhibits to the Company's Report on Form 8-K filed on
August 31, 1998, which Report has been incorporated herein by reference. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
15
<PAGE> 19
AMENDED AND RESTATED BY-LAWS
Pursuant to Massachusetts General Laws, Chapter 156B, section 17,
stockholders are hereby notified that on August 13, 1998 the Board of Directors
of the Company approved an amendment and restatement of the Company's By-laws.
The amended and restated By-laws differ from the previous by-laws in that they
classify the Board of Directors and limit the ability to remove directors and
fill of vacancies. See "THE PROPOSAL -- Board Representation." In addition to
the foregoing, the amended and restated By-laws provide (i) for an increase in
the ownership interest required to call a special meeting of stockholders from
10% to 25% and (ii) that shares of stock to which a nominee has no voting
authority as to a particular question or questions brought before a meeting of
stockholders will not be deemed to be cast with respect to such question or
questions, but will be counted for purposes of determining if a quorum is
present.
The classification of the Board of Directors, the limitations on the
removal of directors and filling of vacancies, and the increase in ownership
percentage required to call a special meeting of stockholders could have the
effect of making it more difficult for a third party to acquire, or of
discouraging a third party from acquiring, control of the Company.
TRANSACTION OF OTHER BUSINESS
The Board is not aware of any other matters that may be presented at the
Special Meeting, but if other matters do properly come before the Special
Meeting, it is intended that the persons named in the proxy will vote, pursuant
to their discretionary authority, according to their best judgment in the
interest of the Company.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Representatives of Ernst & Young LLP, the Company's independent certified
public accountants, will be present at the Special Meeting. They will have an
opportunity to make a statement if they desire to do so and will be available to
respond to appropriate questions from stockholders.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 1999 Annual
Meeting of Stockholders must be presented on or before February 26, 1999 for
inclusion in the proxy materials relating to that meeting and on or before
May 12, 1999 for matters to be considered timely such that, pursuant to Rule
14a-8 under the 1934 Act, the Company may not exercise its discretionary
authority to vote on such matters at that meeting. Any such proposals should be
sent to the Company at its principal offices addressed to the Clerk of the
Company. Other requirements for inclusion are set forth in Rule 14a-8 under the
Exchange Act.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy or information statements and other information
with the Securities and Exchange Commission (the "SEC"). The reports, proxy or
information statements and other information filed with the SEC by the Company
under the Exchange Act may be inspected and copied at public reference
facilities maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549, and at the SEC's regional offices located at Seven World Trade Center,
New York, New York 10048 and Northwest Atrium Center, Suite 1400, 500 West
Madison Street, Chicago, Illinois 60661. Copies of such material can be obtained
from the Public Reference Section of the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549 upon payment of prescribed fees. The SEC maintains a site
on the World Wide Web at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding registrants, such as the
Company, that file electronically with the SEC through the SEC's Electronic Data
Gathering, Analysis and Retrieval (EDGAR) system. The Common Stock is traded on
the New York Stock Exchange and certain of the Company's reports, proxy
materials and other
16
<PAGE> 20
information are available at the offices of the New York Stock Exchange, 20
Broad Street, New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, previously filed by the Company under the Exchange
Act, are incorporated in this Proxy Statement by reference and made a part
hereof:
(1) Annual Report on Form 10-K for the fiscal year ended March 29,
1998, filed on June 26, 1998;
(2) Quarterly Report on Form 10-Q for the fiscal quarter ended June
28, 1998, filed on August 12, 1998;
(3) Current Report on Form 8-K filed on July 23, 1998; and
(4) Current Report on Form 8-K filed on August 31, 1998.
The Company's Exchange Act file number is 001-19292
All documents after the date of this Proxy Statement and filed the Company
pursuant to sections 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the
date of the Special Meeting shall be deemed to be incorporated by reference into
this proxy statement and to be a part hereof from the date of filing such
documents. Any statement contained herein or in a document incorporated herein
by reference shall be deemed to be modified or superseded for purposes of this
proxy statement to the extent that a statement contained herein or in any other
subsequently filed document which is also incorporated herein by reference
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this proxy statement.
THIS PROXY STATEMENT INCORPORATES CERTAIN DOCUMENTS BY REFERENCE WHICH ARE
NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (WITHOUT EXHIBITS,
UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT) ARE AVAILABLE WITHOUT CHARGE TO EACH PERSON, INCLUDING ANY BENEFICIAL
OWNER OF COMMON STOCK, TO WHOM A COPY OF THIS PROXY STATEMENT IS DELIVERED, UPON
WRITTEN OR ORAL REQUEST AND WILL BE SENT BY FIRST CLASS MAIL OR OTHER EQUALLY
PROMPT MEANS WITHIN ONE BUSINESS DAY OF RECEIPT OF SUCH REQUEST. REQUESTS FOR
SUCH DOCUMENTS SHOULD BE DIRECTED TO BLUEGREEN CORPORATION, 4960 BLUE LAKE
DRIVE, BOCA RATON, FLORIDA 33431, ATTENTION: CLERK, TELEPHONE: (561) 912-8000.
TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE AT LEAST
FIVE BUSINESS DAYS BEFORE THE SCHEDULED DATE OF THE SPECIAL MEETING.
By order of the Board of Directors,
Patrick E. Rondeau
Clerk
, 1998
The Board hopes that stockholders will attend the Special Meeting. WHETHER
OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND RETURN THE
ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. A prompt response will greatly
facilitate arrangements for the Special Meeting, and your cooperation will be
appreciated. A person giving the enclosed proxy has the power to revoke it at
any time before it is exercised at the Special Meeting by written notice to the
Clerk of the Company, by sending a later dated proxy, or by revoking it in
person at the Special Meeting.
17
<PAGE> 21
APPENDIX I
SECURITIES PURCHASE AGREEMENT
BY AND AMONG
MORGAN STANLEY REAL ESTATE FUND III, L.P.,
MORGAN STANLEY REAL ESTATE INVESTORS III, L.P.,
MSP REAL ESTATE FUND, L.P.,
MSREF III SPECIAL FUND, L.P.
AND
BLUEGREEN CORPORATION
DATED AS OF AUGUST 14, 1998
<PAGE> 22
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I.
DEFINITIONS............................................... 1
Section 1.01. Definitions................................. 1
ARTICLE II.
SALE AND PURCHASE OF COMMON STOCK......................... 8
Section 2.01. Sale and Purchase of the Common Stock....... 8
Section 2.02. Closing..................................... 8
Section 2.03. Post-Closing Purchases...................... 8
Section 2.04. Use of Proceeds............................. 10
ARTICLE III.
REPRESENTATIONS AND WARRANTIES............................ 10
Section 3.01. Representations and Warranties of the
Company................................................ 10
Section 3.02. Representations and Warranties of
Purchasers............................................. 26
ARTICLE IV.
ADDITIONAL AGREEMENTS OF THE PARTIES...................... 28
Section 4.01. Taking of Necessary Action.................. 28
Section 4.02. Conduct of Business......................... 28
Section 4.03. Financial Statements and Other Reports...... 29
Section 4.04. Access...................................... 30
Section 4.05. Lost, Stolen, Destroyed or Mutilated
Securities............................................. 31
Section 4.06. No Termination of Obligations Upon Change of
Control................................................ 31
Section 4.07. Restrictions on Sale or Transfer; Legend.... 31
Section 4.08. Further Assurances.......................... 33
Section 4.09. Solicitation................................ 33
Section 4.10. Board Representation........................ 33
Section 4.11. Board of Directors Approvals................ 36
Section 4.12. Preemptive Rights........................... 37
Section 4.13. Adjustments................................. 39
Section 4.14. [Reserved].................................. 39
Section 4.15. Financing Fees; Advisory Fees............... 39
Section 4.16. Shareholder Approval........................ 40
Section 4.17. Notices of Purchasers....................... 41
ARTICLE V.
CONDITIONS OF CLOSING..................................... 41
Section 5.01. Conditions of Purchase at Closing........... 41
Section 5.02. Conditions of Sale at Closing............... 42
Section 5.03. Conditions of Purchase of Remaining
Shares................................................. 43
Section 5.04. Conditions of Sale of Remaining Shares...... 45
ARTICLE VI.
[RESERVED]................................................ 46
ARTICLE VII.
MISCELLANEOUS............................................. 46
Section 7.01. Survival of Representations and
Warranties............................................. 46
Section 7.02. Notices..................................... 46
Section 7.03. Entire Agreement; Amendment................. 48
Section 7.04. Counterparts................................ 48
Section 7.05. Governing Law............................... 48
</TABLE>
i
<PAGE> 23
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 7.06. Public Announcements........................ 48
Section 7.07. Expenses.................................... 48
Section 7.08. Indemnification............................. 49
Section 7.09. Successors and Assigns...................... 50
Section 7.10. Jurisdiction................................ 50
Section 7.11. Specific Performance........................ 51
Section 7.12. Captions.................................... 51
Section 7.13. Severability................................ 51
Section 7.14. Mutual Waiver of Jury Trial................. 51
Section 7.15. Exculpation................................. 51
Section 7.16. Obligations................................. 51
Section 7.17. Schedules................................... 51
EXHIBITS
Exhibit A -- Form of Notice of Issuance
Exhibit B -- Form of Registration Rights Agreement
Exhibit C -- Form of Shareholder Voting Agreements
Exhibit D -- Form of Legal Opinion of Company Counsel
Exhibit E -- Amendment to Company Bylaws
</TABLE>
ii
<PAGE> 24
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is dated as of August
14, 1998, by and among MORGAN STANLEY REAL ESTATE FUND III, L.P., a Delaware
limited partnership ("MSREF III"), MORGAN STANLEY REAL ESTATE INVESTORS III,
L.P., a Delaware limited partnership ("MSREI"), MSP REAL ESTATE FUND, L.P., a
Delaware limited partnership ("MSP"), MSREF III SPECIAL FUND, L.P., a Delaware
limited partnership ("MSREF Special") (MSREF III, MSREI, MSP and MSREF Special
are herein referred to individually as a "Purchaser" and collectively as
"Purchasers") and BLUEGREEN CORPORATION, a Massachusetts corporation (the
"Company"). Capitalized terms not otherwise defined where used herein shall have
the meanings ascribed thereto in Article I.
WHEREAS, Purchasers desire to purchase from the Company, and the Company
desires to sell to Purchasers, in the manner and subject to the terms and
conditions (including, without limitation, the conditions set forth in Section
2.03(c)) set forth in this Agreement, shares of its Common Stock for an
aggregate purchase price of up to $50,000,000;
WHEREAS, the Company and Purchasers desire to set forth certain agreements
herein.
NOW THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements herein contained and intending to be
legally bound hereby, the parties hereby agree as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.01. DEFINITIONS. As used in this Agreement, the following terms
shall have the meanings set forth below:
"AFFILIATE" or "AFFILIATE" shall mean, with respect to any Person, any
other Person which directly or indirectly controls or is controlled by or
is under common control with such Person. As used in this definition,
"control" (including its correlative meanings, "controlled by" and "under
common control with") shall mean possession, directly or indirectly, of
power to direct or cause the direction of management or policies of such
Person, whether through ownership of securities or partnership or other
ownership interests, by contract or otherwise.
"ANCILLARY DOCUMENTS" shall mean the Registration Rights Agreement and
Shareholder Voting Agreements.
"APPLICABLE LAW" shall mean all applicable provisions of all (i)
constitutions, treaties, statutes, laws (including common law), rules,
regulations, administrative positions, ordinances, codes or orders of any
Governmental Entity, self-regulating organization, securities exchange or
other securities trading system, (ii) Consents of, with or from any
Governmental Entity, and (iii) orders, decisions, injunctions, judgments,
awards and decrees of or agreement with any Governmental Entity.
"BOARD OF DIRECTORS" or "BOARD" shall mean the duly elected and
qualified board of directors of the Company.
"BUSINESS DAY" shall mean any day, other than a Saturday, Sunday or a
day on which banking institutions in the City of New York or Boca Raton,
Florida are authorized or obligated by law or executive order to close.
"CALCULATION DATE" shall mean the first date on which all the shares
of Common Stock to be sold pursuant to Sections 2.01 and 2.03 of this
Agreement shall have been acquired by Purchasers.
"CAPITALIZED LEASE OBLIGATIONS" means an obligation that is required
to be classified and accounted for as a capitalized lease for financial
reporting purposes in accordance with GAAP, and the amount of Indebtedness
represented by such obligation shall be the capitalized amount of such
obligation determined in accordance with GAAP.
<PAGE> 25
"CHANGE OF CONTROL" shall mean (i) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all or
substantially all of the assets of the Company and its Subsidiaries; or
(ii) a majority of the Board of Directors of the Company shall consist of
Persons who are not Continuing Directors of the Company; or (iii) the
acquisition by any Person or Group (as defined in Section 13(d) of the
Exchange Act, but excluding Purchasers or the Permitted Transferees or any
of their respective Affiliates) of the power, directly or indirectly, to
vote or direct the voting of securities having more than 50% of the total
voting power for the election of directors of the Company or of any direct
or indirect holding company thereof.
"CLOSING" and "CLOSING DATE" shall have the meanings set forth in
Section 2.02(a).
"CLOSING SHARE PRICE" shall mean $8.50 per share of Common Stock.
During the Commitment Period and for shares of Common Stock not yet sold to
Purchasers, the Closing Share Price shall be adjusted in accordance with
Section 4.13 hereof.
"CODE" shall mean the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
"CO-INVESTMENT PARTNERSHIP" shall mean any investment fund sponsored
by Morgan Stanley, Dean Witter & Co. or its Affiliates to co-invest
alongside Purchasers.
"COMMITMENT PERIOD" shall mean the 18 month period commencing on the
Closing Date.
"COMMON STOCK" shall mean the Common Stock, par value $.01 per share,
of the Company.
"COMPANY ENVIRONMENTAL REPORTS" shall have the meaning set forth in
Section 3.01(t)(vi).
"COMPANY PROPERTY" shall mean all real property directly or indirectly
owned or leased by the Company and the Company Subsidiaries.
"COMPANY SUBSIDIARY" and "COMPANY SUBSIDIARIES" shall have the
meanings set forth in Section 3.01(d).
"CONSENTS" shall mean any consent, approval, authorization, waiver,
permit, grant, franchise, concession, agreement, license, exemption or
order of registration, certificate, declaration or filing with, or report
or notice to, any Person or Governmental Entity.
"CONTINUING DIRECTOR" shall mean, as of the determination date, any
Person who (i) was a member of the Board of Directors of the Company on the
Closing Date (after giving effect to the provisions of Section 4.10), or
(ii) was nominated for election or elected to the Board of Directors of the
Company with the affirmative vote of a majority of the Continuing Directors
of the Company who were members of the Board of Directors at the time of
such nomination or election.
"CURRENCY AGREEMENT" shall mean, in respect of a Person, any foreign
exchange contract, currency swap agreement or other similar agreement as to
which such Person is a party or a beneficiary.
"DEVELOPMENT PROPERTIES" shall have the meaning set forth in Section
3.01(r)(ix).
"ENVIRONMENTAL CLAIM" shall have the meaning set forth in Section
3.01(t)(vii).
"ENVIRONMENTAL LAWS" shall have the meaning set forth in Section
3.01(t)(vii).
"ENVIRONMENTAL PERMITS" shall have the meaning set forth in Section
3.01(t)(i).
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"GAAP" shall mean generally accepted accounting principles in the
United States of America in effect from time to time, consistently applied.
2
<PAGE> 26
"GOVERNMENTAL ENTITY" shall mean any court, department, body, board,
bureau, administrative agency or commission or other governmental authority
or instrumentality, whether federal, state, local or foreign.
"HAZARDOUS SUBSTANCES" shall have the meaning set forth in Section
3.01(t)(vii).
"INDEBTEDNESS" shall mean, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium (if
any) in respect of indebtedness of such Person for borrowed money, (ii) the
principal of and premium (if any) in respect of obligations of such Person
evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person in respect of letters of credit or other
similar instruments (including reimbursement obligations with respect
thereto) (other than obligations with respect to letters of credit securing
obligations (other than obligations described in clauses (i), (ii) and (v))
entered into in the ordinary course of business of such Person to the
extent that such letters of credit are not drawn upon or, if and to the
extent drawn upon, such drawing is reimbursed no later than the third
business day following receipt by such Person of a demand for reimbursement
following payment on the letter of credit), (iv) all obligations of such
Person to pay the deferred and unpaid purchase price of property or
services (except trade payables and other accrued expenses incurred in the
ordinary course of business), which purchase price is due more than six
months after the date of placing such property in service or taking
delivery and title thereto or the completion of such services, (v) all
Capitalized Lease Obligations of such Person, (vi) all Indebtedness of
other Persons secured by a Lien on any asset of such Person, whether or not
such Indebtedness is assumed by such Person; provided, however, that if
such obligations have not been assumed, the amount of such Indebtedness
shall be deemed to be the lesser of the principal amount of the obligations
or the fair market value of the pledged property or assets, (vii) all
Indebtedness of other Persons to the extent guaranteed by such Person, and
(viii) to the extent not otherwise included in this definition, obligations
under Currency Agreements and Interest Rate Agreements. Unless specifically
set forth above, the amount of Indebtedness of any Person at any date shall
be the outstanding principal amount of all unconditional obligations as
described above, as such amount would be reflected on a balance sheet
prepared in accordance with GAAP, and the maximum liability of such Person,
upon the occurrence of the contingency giving rise to the obligation, of
any contingent obligations described above at such date.
"INTEREST RATE AGREEMENT" means with respect to any Person any
interest rate protection agreement, interest rate future agreement,
interest rate option agreement, interest rate swap agreement, interest rate
cap agreement, interest rate collar agreement, interest rate hedge
agreement or other similar agreement or arrangement as to which such Person
is party or a beneficiary.
"LIEN" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any conditional sale or other title
retention agreement or lease in the nature thereof).
"MATERIAL ADVERSE EFFECT" shall mean any event, circumstance, change,
development or effect which individually or in the aggregate would have a
material adverse effect on (i) the assets, business, properties,
liabilities, condition (financial or otherwise), or results of operations
of the Company and the Company Subsidiaries taken as a whole, (ii) the
ability of the Company or any Company Subsidiary to perform its obligations
under this Agreement or the Ancillary Documents or (iii) the validity or
enforceability of this Agreement or any of the Ancillary Documents or the
rights or remedies of Purchasers hereunder and thereunder.
"MAXIMUM SHARES" shall mean that number of shares of Common Stock
equal to $50,000,000 divided by the Closing Share Price, rounded up to the
next whole number in the event the foregoing calculation results in a
fractional share.
"MINIMUM INTEREST" shall mean ownership by Purchasers (or Permitted
Transferees) of at least 50% of the aggregate number of shares of Common
Stock theretofore actually issued to Purchasers (or Permitted Transferees)
pursuant to Sections 2.01 and 2.03 of this Agreement (as may be adjusted
for any dividends payable in shares of Common Stock or any stock split or
reverse stock split, combination, consolidation or reclassification of the
Common Stock), but excluding any shares of Common Stock
3
<PAGE> 27
issued to Purchasers (or any Permitted Transferees) upon exercise of the
preemptive rights set forth in Section 4.12.
"MINIMUM SHARES" shall mean that number of shares of Common Stock
equal to $25,000,000 divided by the Closing Share Price, rounded up to the
next whole number in the event the foregoing calculation results in a
fractional share.
"MSDW" shall have the meaning set forth in Section 4.15(a).
"NOTICE OF ISSUANCE" shall mean the notice delivered by the Company to
Purchasers in accordance with the provisions of Section 2.03, which shall
be substantially in the form attached hereto as EXHIBIT A.
"PARITY SECURITIES" shall mean any stock of any class or classes of
the Company deemed to rank on a parity with the Common Stock, either as to
dividends or upon liquidation, if the holders of such class or classes
shall be entitled to receipt of dividends or of amounts distributable upon
dissolution, liquidation or winding up of the Company, as the case may be,
without preference or priority, one over the other, as between the holders
of such stock and the holders of shares of Common Stock.
"PERMITS" shall have the meaning set forth in Section 3.01(p).
"PERMITTED INTEREST" shall mean ownership by Purchasers (or Permitted
Transferees) of at least 33 1/3% of the aggregate number of shares of
Common Stock theretofore actually issued to Purchasers (or Permitted
Transferees) pursuant to Sections 2.01 and 2.03 of this Agreement (as may
be adjusted for any dividends payable in shares of Common Stock or any
stock split or reverse stock split, combination, consolidation or
reclassification of the Common Stock), but excluding any shares of Common
Stock issued to Purchasers (or Permitted Transferees) upon exercise of the
preemptive rights set forth in Section 4.12.
"PERMITTED LIENS" shall mean any Lien that constitutes a "Permitted
Lien" under the Indenture for the Senior Notes as in effect on the date
hereof.
"PERMITTED TRANSFEREE" shall mean any Purchaser, Affiliate of
Purchasers, any Co-Investment Partnership and The Morgan Stanley Special
Situations Investment Program and the constituent investors therein or
Affiliates thereof (provided that MSDW or any Subsidiary or Affiliate
thereof has the sole power to vote and dispose of any shares of Common
Stock held by any constituent investors) or Affiliates of such constituent
investors).
"PERSON" or "PERSON" shall mean an individual, corporation,
association, partnership, group (as defined in Section 13(d)(3) of the
Exchange Act), trust, joint venture, business trust or unincorporated
organization, or a government or any agency or political subdivision
thereof.
"PROJECTS" shall have the meaning set forth in Section 3.01(r)(ix).
"REGISTRATION RIGHTS AGREEMENT" shall mean the Registration Rights
Agreement to be executed by the Company and Purchasers at the Closing,
which shall be substantially in the form attached hereto as EXHIBIT B, as
amended from time to time in accordance with the terms thereof.
"REMAINING SHARES" shall have the meaning set forth in Section
2.03(a).
"REQUIRED INTEREST" shall mean ownership by Purchasers (or Permitted
Transferees) of at least 70% of the aggregate number of shares of Common
Stock theretofore actually issued to Purchasers (or Permitted Transferees)
pursuant to Sections 2.01 and 2.03 of this Agreement (as may be adjusted
for any dividends payable in shares of Common Stock or any stock split,
reverse stock split, combination, consolidation or reclassification of the
Common Stock), but excluding any shares of Common Stock issued to
Purchasers (or Permitted Transferees) upon exercise of the preemptive
rights set forth in Section 4.12.
"REQUIRED SHAREHOLDER APPROVAL" shall have the meaning set forth in
Section 5.03(i).
4
<PAGE> 28
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"SECURITIES FILINGS" shall have the meaning set forth in Section
3.01(h).
"SEC" shall mean the United States Securities and Exchange Commission.
"SENIOR NOTES" shall mean the 10.5% senior secured notes due April 1,
2008 of the Company dated April 1, 1998 in the aggregate original principal
amount of $110,000,000.
"SENIOR OFFICER'S CERTIFICATE" shall have the meaning set forth in
Section 4.03(a).
"SENIOR SECURITIES" shall mean any stock of any class or classes of
the Company deemed to rank prior to the Common Stock, either as to
dividends or upon liquidation, if the holders of such class or classes
shall be entitled to the receipt of dividends or of amounts distributable
upon dissolution, liquidation or winding up of the Company, as the case may
be, in preference or priority to the holders of Common Stock.
"SHAREHOLDER VOTING AGREEMENT" shall mean the Voting and Cooperation
Agreement to be executed by Purchasers and the Persons listed on SCHEDULE
5.01(i) hereto which shall be substantially in the form attached hereto as
EXHIBIT C, as amended from time to time in accordance with the provisions
thereof.
"SUBSEQUENT CLOSING" shall have the meaning set forth in Section
5.03(b).
"SUBSEQUENT CLOSING DATE" shall have the meaning set forth in Section
2.03(b).
"SUBSIDIARY" shall mean, with respect to any corporation (the
"parent") any other corporation, association or other business entity of
which 50% or more of the shares of the voting stock are owned or
controlled, directly or indirectly, by the parent or one or more
Subsidiaries of the parent, or by the parent and one or more of its
Subsidiaries.
"SURVIVING PERSON" shall mean the continuing or surviving Person of a
merger, consolidation or other corporate combination, the Person receiving
a transfer of all or a substantial part of the properties and assets of the
Company, or the Person consolidating with or merging into the Company in a
merger, consolidation or other corporate combination in which the Company
is the continuing or surviving Person, but in connection with which the
Common Stock of the Company is exchanged or converted into the securities
of any other Person or the right to receive cash or any other property.
"TAX" means any federal, state, local or foreign taxes, including, but
not limited to, income, gross receipts, windfall profits, premium, value
added, severance, stamp, occupation, property, environmental (including
Taxes under Code Section 59A), production, sales, use, license, excise,
franchise, payroll, employment, withholding or similar taxes, together with
any interest, additions or penalties with respect thereto and any interest
in respect of such penalties.
"TAX RETURNS" means any return, report, information return form,
declaration, claim for refund, statement or other document (including any
amendments thereto and including any schedule or attachment thereto) in
connection with Taxes that are required to be filed with any Governmental
Entity or other tax authority, or sent or provided to another party under
Applicable Law.
"THRESHOLD DATE" shall mean the Business Day on which the Company
issues to Purchasers (or Permitted Transferees) any shares of Common Stock
that, when added to the shares of Common Stock previously issued to
Purchasers (or Permitted Transferees) under the terms of this Agreement,
results in the ownership by Purchasers (and Permitted Transferees) of an
aggregate of 20% or more of the issued and outstanding shares of Common
Stock on the Closing Date (but excluding any shares of Common Stock issued
to Purchasers or Permitted Transferees on the Closing Date).
"TIMESHARE/RESIDENTIAL BUSINESS" shall mean the business of (i)
acquiring, developing, marketing, operating and financing vacation
ownership interests at resorts, (ii) acquiring residential land parcels and
developing, marketing and financing subdivided residential lots to retail
customers, and
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(iii) any other business incidental to any of the foregoing, whether or not
conducted by the Company or any Company Subsidiary on the Closing Date
including, without limitation, the title company business.
"TOTAL DEBT TO TOTAL MARKET CAPITALIZATION RATIO" means as of any
particular date, the ratio of (i) the Company's total Indebtedness (but
excluding any Indebtedness arising from pledged or hypothecated receivables
(land or timeshare) of the Company or any Company Subsidiary) (less
unrestricted cash of the Company) to (ii) the Company's total market
capitalization (i.e., market value of the issued and outstanding Common
Stock) plus the Company's total Indebtedness.
"TRANSFER" shall have the meaning as set forth in Section 4.07(a).
ARTICLE II.
SALE AND PURCHASE OF COMMON STOCK
SECTION 2.01. SALE AND PURCHASE OF THE COMMON STOCK. At the Closing,
subject to all of the terms and conditions of this Agreement, including the
satisfaction or waiver of the conditions set forth in Sections 5.01 and 5.02,
and in reliance upon the representations, warranties, covenants and agreements
of the parties set forth herein, the Company shall sell to Purchasers, and
Purchasers shall purchase from the Company, that number of shares of Common
Stock (which shall be a whole number of shares) equal to the Minimum Shares for
an aggregate purchase price equal to such number of shares of Common Stock to be
purchased multiplied by the Closing Share Price.
SECTION 2.02. CLOSING.
(a) Subject to the satisfaction or waiver of the conditions set forth
in Sections 5.01 and 5.02 of this Agreement, the purchase and sale of the
shares of Common Stock pursuant to Section 2.01 (the "Closing") shall take
place at the offices of Jones, Day, Reavis & Pogue, counsel to Purchasers,
at 599 Lexington Avenue, 32nd Floor, New York, New York 10017, on August
, 1998 (the "Closing Date"), or at such other time and place as may be
mutually agreed upon in writing by Purchasers and the Company.
(b) At the Closing, (i) the Company will deliver to Purchasers
certificates for the shares of Common Stock to be sold and issued in
accordance with the provisions of Section 2.01 registered in the respective
names and proportions set forth in a notice delivered by Purchasers to the
Company at least two Business Days prior to the Closing Date; (ii)
Purchasers shall deliver the aggregate purchase price for the shares to be
sold and issued and each Purchaser, in full payment for such shares of
Common Stock, will deliver to the Company in immediately available funds
via wire transfer to such account or accounts as the Company shall specify
in writing to Purchasers at least two Business Days prior to the Closing
Date, an amount equal to its pro rata share of the purchase price to be
paid by such Purchaser as set forth in the notice described in clause (i)
above; and (iii) each party shall take or cause to be taken such other
actions, and shall execute and deliver such other instruments or documents,
as shall be required under Article V hereof.
SECTION 2.03. POST-CLOSING PURCHASES.
(a) Subject to all of the terms and conditions of this Agreement,
including the satisfaction or waiver of the conditions set forth in
Sections 5.03 and 5.04 hereof, the Company shall, at its election, sell to
Purchasers, and Purchasers shall purchase from the Company, at any time and
from time to time prior to expiration of the Commitment Period up to an
aggregate number of shares of Common Stock equal to the Maximum Shares less
the Minimum Shares (the "Remaining Shares") for a purchase price per share
equal to the Closing Share Price. In the event that the determination of
the number of shares of Common Stock to be issued at any Subsequent Closing
Date would result in a fractional share of Common Stock being issued to
Purchasers, such fractional share shall be rounded up to the next whole
number and such adjusted amount shall constitute the number of shares of
Common Stock to be issued
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to Purchasers on such Subsequent Closing Date. If at any time the Company
desires to sell and issue all or any portion of such Remaining Shares to
Purchasers and has obtained approval of the Board of Directors to issue
such Remaining Shares, the Company shall deliver a Notice of Issuance to
each Purchaser not less than 15 Business Days prior to the proposed date of
the sale and purchase set forth therein which shall set forth the number of
shares of Common Stock to be sold and purchased (which shall have an
aggregate minimum purchase price of $1,000,000 unless the minimum purchase
price of any Remaining Shares left after giving effect to such purchase and
sale shall be less than $1,000,000, in which case the number of shares of
Common Stock to be purchased and sold shall be all of the unsold Remaining
Shares), the aggregate purchase price thereof (which shall be equal to such
number of shares of Common Stock to be sold and purchased multiplied by the
Closing Share Price) and any other information required to be stated
therein. All such unsold Remaining Shares shall be sold and purchased
pursuant to not more than two Notices of Issuance per month each for an
aggregate minimum purchase price of $1,000,000 (or the remaining amount in
the case of the last sale and purchase) and shall be sold and purchased
prior to expiration of the Commitment Period. Purchasers' obligations to
purchase any of the Remaining Shares as requested by the Company pursuant
to a Notice of Issuance shall be subject to the satisfaction or waiver of
the conditions set forth in Section 5.03 of this Agreement.
(b) Purchasers shall purchase the number of Remaining Shares set forth
in a Notice of Issuance delivered to Purchasers on the day (which shall be
a Business Day and shall not be less than 15 Business Days after delivery
of the Notice of Issuance to such Purchaser) and at the location set forth
therein, or at such other time and place as may be mutually agreed upon in
writing by Purchasers and the Company. On each such date (each a
"Subsequent Closing Date"), (i) the Company will deliver to Purchasers
certificates for such Remaining Shares to be purchased registered in the
respective names and denominations set forth in a notice delivered by
Purchasers to the Company at least two Business Days prior to the
Subsequent Closing Date, and (ii) the Purchasers, in full payment for such
Remaining Shares, will deliver to the Company in immediately available
funds via wire transfer to such account or accounts as the Company shall
specify in writing to Purchasers at least two Business Days prior to the
Subsequent Closing Date, an amount equal to the purchase price to be paid
by the Purchasers (which shall be equal to the number of Remaining Shares
to be purchased by the Purchasers on such Subsequent Closing Date
multiplied by the Closing Share Price).
(c) In the event that (i) on or prior to expiration of the Commitment
Period, the Company has not offered to sell to Purchasers all of the
Remaining Shares or (ii) Purchasers receive notice from the Company in
accordance with Section 4.06 hereof of the occurrence of, or the execution
by the Company of a definitive agreement which will result in a Change of
Control and the satisfaction or waiver of all conditions of closing (other
than the conditions which can only be satisfied on the closing date of such
transaction) required under the terms of such definitive agreement, then,
in each such case, and subject to the satisfaction of the conditions set
forth in Section 5.04, Purchasers shall have the right, but not the
obligation, to purchase any or all Remaining Shares not sold to Purchasers
as of such date at a purchase price per share equal to the Closing Share
Price, and the closing for the sale and issuance shall take place within 15
Business Days following expiration of the Commitment Period or receipt of
the notice described in clause (ii) above hereof, as the case may be.
Notwithstanding the foregoing, Purchasers' right to purchase any Remaining
Shares upon expiration of the Commitment Period under clause (i) above
shall be subject to satisfaction of either of the following conditions
(which shall not be conditions to Purchasers' right to purchase any
Remaining Shares under clause (ii) above) in addition to those set forth in
Sections 5.03 and 5.04 hereof:
(i) the Company achieving total revenues of at least $220,000,000
for the 12-month period ended on the last day of the third full fiscal
quarter after the Closing Date; or
(ii) the Company achieving net income (excluding write-offs) of at
least $15,000,000 for the 12-month period ended on the last day of the
third full fiscal quarter after the Closing Date.
SECTION 2.04. USE OF PROCEEDS. The proceeds to be received by the Company
from the sale and issuance of any shares of Common Stock to Purchasers hereunder
shall be used for purposes of funding future
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acquisitions and development plans, expanding the Company's operations, repaying
existing Indebtedness of the Company or any Company Subsidiary and such other
items as the Board of Directors may approve from time to time. Notwithstanding
the foregoing, the Company may utilize up to $34,000,000 of the proceeds for
purposes of funding the repurchase of all or any portion of the Company's 8.25%
convertible subordinated debentures due 2012 in accordance with the Company's
right to call such debentures and the holders' option to elect to receive cash
in lieu of shares of Common Stock as payment thereof.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and agrees with, Purchasers as follows:
(a) Organization and Good Standing. The Company and each Company
Subsidiary is a corporation or partnership duly organized, validly existing
and in good standing under the laws of the jurisdiction in which it was
incorporated or organized and has all requisite power and authority
(corporate or otherwise) to own, operate and lease its properties and to
carry on its business as it is now being conducted. The Company and each
Company Subsidiary is duly licensed or qualified as a foreign corporation
to transact business and is in good standing under the laws of each other
jurisdiction in which its ownership or lease of assets or conduct of its
business requires such qualification, except where the failure to be so
licensed or qualified in any such jurisdiction would not have a Material
Adverse Effect.
(b) Authorization. The Company has full corporate power and authority
to enter into this Agreement and the Ancillary Documents and to consummate
the transactions contemplated hereby and thereby. The execution, delivery
and performance of this Agreement and each Ancillary Document and the
consummation of the transactions contemplated hereby and thereby have been
duly authorized by the Board of Directors of the Company. Other than as set
forth in Section 4.16, no shareholder approval or other corporate
proceedings on the part of the Company are necessary to authorize the
execution, delivery and performance of this Agreement and each Ancillary
Document and the transactions contemplated hereby and thereby. This
Agreement has been, and on or prior to the Closing Date each Ancillary
Document will be, duly and validly executed and delivered by the Company.
This Agreement constitutes, and upon its execution on or prior to the
Closing Date each Ancillary Document will constitute, a valid and binding
obligation of the Company enforceable against the Company in accordance
with its terms subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting
creditors' rights generally and to general principles of equity.
(c) Capitalization. Schedule 3.01(c) sets forth as of the date hereof
(i) the authorized capital stock of the Company, the number of shares of
each class of capital stock issued and outstanding and the number of shares
of Common Stock reserved for issuance in connection with employee benefit,
stock option and dividend reinvestment plans, and (ii) all options,
warrants, convertible securities, subscriptions, scrip calls, contracts,
undertakings, arrangements and commitments to issue which may result in the
issuance of equity securities of the Company, in each case setting forth
the identity (which may be by class) of the holder thereof, the exercise or
similar price and the date of expiration or termination thereof. All of the
issued and outstanding shares of the Company's capital stock have been duly
and validly authorized and issued and are fully paid and non-assessable and
have been issued in compliance with all applicable requirements of law and
are not subject to any preemptive or similar rights. Other than as set
forth in Schedule 3.01(c) or pursuant to this Agreement, as of the date
hereof (i) there are no options, warrants, subscriptions, scrip calls,
commitments or other agreements which obligate the Company to issue, sell
or transfer, or repurchase, redeem or otherwise acquire any equity
securities of the Company, (ii) there are no outstanding securities or
rights convertible into or exchangeable for shares of any capital stock of
the Company, and (iii) there are no contracts, commitments, understandings
or arrangements which obligate the Company to issue additional shares of
its capital stock or equity securities or rights convertible into or
exchangeable for shares of any capital stock of the Company, or options,
warrants or rights to purchase or acquire any additional shares of its
capital stock. Except as set forth in Schedule
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3.01(c), as of the date hereof, there are no contracts, agreements or
understandings between the Company and any Person granting such Person the
right to require the Company to file a registration statement under the
Securities Act with respect to any securities of the Company owned or to be
owned by such Person or to require the Company to include such securities
in any other registration statement filed by the Company under the
Securities Act. The Company has duly and validly reserved from its issued
and outstanding shares of Common Stock the Maximum Shares. The shares of
Common Stock to be sold and issued to Purchasers during the Commitment
Period will, when issued to and paid for by Purchasers in accordance with
this Agreement, be duly and validly authorized and issued and will be fully
paid and non-assessable and will have been issued in compliance with all
applicable requirements of law and not be subject to any preemptive or
similar rights.
(d) Capitalization of Company Subsidiaries. Schedule 3.01(d) lists as
of the date hereof all Subsidiaries of the Company and their respective
jurisdictions of incorporation or formation (collectively, the "Company
Subsidiaries" and each individually a "Company Subsidiary"). Except as set
forth in Schedule 3.01(d), as of the date hereof the Company owns, directly
or indirectly, all the shares of outstanding capital stock of, or all
partnership interests in, each Company Subsidiary. Except as set forth on
Schedule 3.01(d), as of the date hereof there are no loans from the Company
to any Company Subsidiary or from any Company Subsidiary to the Company.
Except as set forth in Schedule 3.01(d), as of the date hereof (i) there
are no outstanding options, warrants, scrip calls, subscriptions,
commitments or other agreements which obligate any Company Subsidiary to
issue, sell or transfer, or repurchase, redeem or otherwise acquire any
securities of such Company Subsidiary, (ii) there are outstanding no
securities or rights convertible into or exchangeable for shares of any
capital stock of, or partnership interests in, any Company Subsidiary and
(iii) there are no contracts, commitments, understandings or arrangements
which obligate any Company Subsidiary to issue additional shares of its
capital stock or partnership interests or options, warrants or rights to
purchase or acquire any additional shares of its capital stock or
partnership interests. All of the issued and outstanding shares of capital
stock of each of the Company Subsidiaries are duly authorized, validly
issued, fully paid and non-assessable and have been issued in compliance
with all applicable requirements of law, and, as of the date hereof, except
as set forth in Schedule 3.01(d), are owned by the Company free and clear
of any Lien, preemptive rights, purchase options, purchase rights, calls,
exchange rights or other claims with respect thereto. Except as set forth
in Schedule 3.01(d) and for loans made to customers, including the Company
Subsidiaries listed therein, as of the date hereof none of the Company or
the Company Subsidiaries own directly or indirectly any interest or
investment in any corporation, partnership, joint venture, business, trust
or Person (other than investments in short-term investment securities).
(e) No Violation. Except as set forth in Schedule 3.01(e), the
execution, delivery and performance by the Company of this Agreement and
the Ancillary Documents, the consummation of the transactions by the
Company contemplated hereby and thereby and the compliance by the Company
with any of the provisions hereof and thereof will not conflict with,
violate or result in a breach of any provision of, require a Consent under,
or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination of or
accelerate the performance required by, or result in a right of termination
or acceleration under, (i) any provision of the articles of organization,
certificate of incorporation, bylaws or other governing instrument of the
Company or any Company Subsidiary or (ii) (x) any mortgage, note,
indenture, deed of trust, lease, loan agreement, warrant, registration
rights agreement or other agreement or instrument binding on the Company or
any Company Subsidiary or (y) assuming that the clearances, filings,
Consents and approvals specified in Schedule 3.01(f) have been obtained or
made and any waiting period applicable thereto has expired or been
terminated, any permit, concession, grant, franchise, license, judgment,
order, decree, ruling, injunction, statute, law, ordinance, rule,
regulation or administrative position of any Governmental Entity, self-
regulating organization, securities exchange or securities trading system
or any other Person, in the case of (x) or (y), binding on or otherwise
applicable to the Company, the Company Subsidiaries or their respective
properties or assets, and the result of which could reasonably be expected
to have a Material Adverse Effect.
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(f) Consents. Except as set forth in Schedule 3.01(f), no Consent,
approval, order or authorization of, or registration, declaration or filing
with, any Governmental Entity is required in connection with the execution,
delivery and performance of this Agreement and the Ancillary Documents by
the Company and the consummation of the transactions by the Company
hereunder and thereunder, including, without limitation, any required
filings with the Federal Trade Commission ("FTC") and the Department of
Justice ("DOJ") referred to in Section 4.01.
(g) Financial Statements; Absence of Undisclosed Liabilities.
(i) The Company has previously delivered to Purchasers copies of
(a) the consolidated balance sheet of the Company and the Company
Subsidiaries at March 30, 1997 and March 29, 1998, and the related
consolidated statements of operations, statements of shareholders'
equity and cash flows for the fiscal years ended March 31, 1996, March
30, 1997 and March 29, 1998, inclusive, as reported in the Company's
Annual Report on Form 10-K for the fiscal year ended March 29, 1998,
filed by the Company with the SEC under the Exchange Act, in each case
accompanied by the audit report of Ernst & Young LLP, independent public
accountants of the Company, and (b) the unaudited consolidated balance
sheet of the Company and the Company Subsidiaries at June 28, 1998 and
the related unaudited consolidated statement of operations, statements
of shareholders' equity and cash flows for the three month period then
ended. All of such financial statements fairly present the consolidated
financial position of the Company and the Company Subsidiaries as of the
dates shown and the results of the consolidated operations, statements
of shareholders' equity and cash flows of the Company and the Company
Subsidiaries for the respective fiscal periods or as of the respective
dates therein set forth, in each case subject, as to interim statements,
to changes resulting from year-end adjustments (none of which will be
material in amount and effect). All of such financial statements have
been prepared in accordance with GAAP consistently applied during the
periods involved, except as otherwise set forth in the notes thereto.
The Company has provided to Purchasers the fiscal year 1999 budget (for
the fiscal year ending March 31, 1999) of the Company which was prepared
in good faith and was based upon assumptions which the Company believed
were reasonable. Purchasers understand that the Company's actual results
may vary from the budget and no assurances can be given that the Company
will meet its projections. As of the date hereof, the Company is not
aware of any facts or circumstances which would cause the Company not to
attain the projections of aggregate sales and net income set forth in
the 1999 budget.
(ii) As of the date hereof and except as otherwise contemplated by
this Agreement, the Company and the Company Subsidiaries have no
liabilities or obligations of any nature (absolute, accrued, contingent
or otherwise) whether due or to become due, which are not fully
reflected or reserved against in the balance sheet as of June 28, 1998
included in such financial statements, except for liabilities that may
have arisen in the ordinary course of business and consistent with past
practice and that, either individually or in the aggregate, do not have
and could not reasonably be expected to have a Material Adverse Effect.
(h) Securities Filings. The Company has filed all reports,
registration statements, proxy statements, schedules, forms and other
documents, together with any amendments and supplements required to be made
with respect thereto, that were required to be filed with (i) the SEC under
the Securities Act or the Exchange Act and (ii) any applicable state
securities authorities (all such reports, statements, schedules, forms and
other documents are referred to herein collectively as the "Securities
Filings"). As of their respective dates, the Securities Filings, including
any financial statements contained therein, complied in all material
respects with all of the rules and regulations of the SEC promulgated under
the Securities Act or the Exchange Act and of any other regulatory
authority with which they were filed, and, except as disclosed on Schedule
3.01(h), none of the Securities Filings contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading and were
complete and accurate in all material respects. Except for general market
and economic conditions applicable to the Company's industries in general,
there are no facts known to the Company existing as of the date hereof
peculiar to the Company or any Company Subsidiary which the Company
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<PAGE> 34
has not disclosed in the Securities Filings or to Purchasers or their
counsel in writing which, either individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
(i) Compliance With Applicable Law. Neither the Company nor any
Company Subsidiary is in breach of, default under, or violation of its
Restated Articles of Organization, certificate of incorporation, bylaws or
other governing instrument or any law, statute, order, rule, regulation,
policy or guideline of any Governmental Entity applicable to the Company or
any Company Subsidiary, other than such defaults or violations which,
either individually or in the aggregate, could not reasonably be expected
to have a Material Adverse Effect. The business of the Company and of each
Company Subsidiary has been, and is currently being, conducted in
compliance with all Applicable Laws of any Governmental Entity, including,
without limitation, state condominium statutes, state time share statutes,
the Federal Trade Commission Act, the Truth-in-Lending Act and Regulation Z
promulgated thereunder, the Fair Housing Act, the Fair Debt Collection
Practices Act, the Equal Credit Opportunity Act and Regulation B
promulgated thereunder, the Interstate Land Sales Full Disclosure Act, the
Home Mortgage Disclosure Act and Regulation C promulgated thereunder, the
Civil Rights Acts of 1964 and 1968, building codes, land use laws,
environmental laws, federal and state telemarketing laws, and seller of
travel or travel agency laws, except where the failure to comply, either
individually or in the aggregate, could not reasonably be expected to have
a Material Adverse Effect.
(j) Legal Proceedings. There are no legal, administrative,
arbitration or other proceedings, claims, actions, inquiries or
governmental investigations of any nature pending against the Company or
any Company Subsidiary as of the date hereof or to which the Company or any
Company Subsidiary or any of their assets are subject as of the date hereof
that were required to be disclosed in the Securities Filings which were not
so disclosed, and, to the knowledge of the Company, there has not been
threatened any such proceeding, claim, action, inquiry or governmental
investigation against the Company or any Company Subsidiary, in each case
which, either individually or in the aggregate, would, if adversely
determined, have a Material Adverse Effect. Except as set forth in Schedule
3.1(j), as of the date hereof, neither the Company nor any Company
Subsidiary is subject to any outstanding order, writ, judgment, injunction,
or decree of any Governmental Entity.
(k) Employee Benefits.
(i) Each "employee benefit plan" (within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and any other material employee plan, agreement or
arrangement that is maintained or otherwise contributed to by the
Company or the Company Subsidiaries for the benefit of their employees
(collectively, "Company Plans") has been administered and is in material
compliance with the terms of such plan and all Applicable Laws. Each of
the Company Plans (including amendments thereto) in existence as of the
date hereof is fully described in or has been included as an exhibit to
the Securities Filings or is otherwise set forth in Schedule 3.01(k).
(ii) As of the date hereof, there are no pending or, to the
knowledge of the Company, threatened, actions, claims or lawsuits which
have been asserted or instituted involving or arising out of the Company
Plans, with respect to the operation or administration of such plans
(other than routine benefit claims).
(iii) Neither the Company nor any Company Subsidiary has incurred,
and no event has occurred which would be reasonably likely to result in,
any material unfunded liability under ERISA or the Code with respect to
any Company Plan (other than routine expenses related to administration
of the Company Plans and payment of routine benefit claims), including,
but not limited to, liability resulting from a complete or partial
withdrawal from a multiemployer plan within the meaning of Section 3(37)
of ERISA or a termination of a Company Plan which is covered by Title IV
of ERISA, but which is not a multiemployer plan.
(iv) No Company Plan exists which could result in the payment to
any employee of the Company or any Company Subsidiary of any money or
other property or rights or accelerate or
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<PAGE> 35
provide any other rights or benefits to any such employee as a result of
the transaction contemplated by this Agreement, whether or not such
payment would constitute a parachute payment within the meaning of
Section 280G of the Code.
(v) As of the date hereof, neither the Company nor any Company
Subsidiary contributes to or is obligated to contribute to, or has
contributed to or has been obligated within the past five years to
contribute to, any multiemployer plan within the meaning of Section
3(37) of ERISA.
(vi) Except as disclosed in the Securities Filings or set forth on
Schedule 3.01(k), as of the date hereof, neither the Company nor any
Company Subsidiary maintains any plans or programs providing
post-retirement medical benefits (except as required by law), death
benefits or other post-retirement welfare benefits.
(vii) The Internal Revenue Service has issued a letter for each
Company Plan existing as of the date hereof that is intended to be
qualified under Section 401(a) of the Code, determining that such plan
is so qualified and is exempt from tax under Section 501(a) of the Code,
and nothing has occurred since the date of such determination letter
that has adversely affected such qualification.
(l) Absence of Certain Changes. Except as set forth in the Securities
Filings or on Schedule 3.01(l), since March 29, 1998 and through the date
hereof, the business of the Company and each Company Subsidiary has been
operated in the ordinary course of business and consistent with past
practice and, except as set forth in the Securities Filings or in Schedule
3.01(l) or as specifically provided in this Agreement or the Ancillary
Documents:
(i) except for circumstances affecting the Company's industry
generally, there has been no event, condition or change that
individually or in the aggregate has had or could reasonably be expected
in the foreseeable future to have a Material Adverse Effect;
(ii) neither the Company nor any Company Subsidiary has sold or
transferred any of the assets it owns except in the ordinary course of
business and consistent with past practice (it being understood that the
sale of receivables is in the ordinary course);
(iii) neither the Company nor any Company Subsidiary has incurred
any Indebtedness other than Indebtedness (x) to sellers of real property
and to trade creditors incurred in the ordinary course of business and
consistent with past practice, (y) under the Senior Notes, and (z) under
the existing credit facilities with Heller Financial, Inc., Foothill
Capital Corporation and Finova Capital Corporation;
(iv) neither the Company nor any Company Subsidiary has changed its
accounting policies or procedures as in effect on March 29, 1998;
(v) except as contemplated by this Agreement, neither the Company
nor any Company Subsidiary has amended or in any way altered its
Restated Articles of Organization, certificate of incorporation, bylaws,
partnership agreement or other governing document (provided that the
foregoing shall not apply to the reorganization and restructuring of
certain Company Subsidiaries on the terms previously disclosed to
Purchasers);
(vi) the Company has not (A) changed the number of shares of
authorized capital stock of the Company, (B) except as contemplated by
this Agreement, issued or granted any option, warrant, call, commitment,
subscription, right to purchase or agreement of any character relating
to the authorized or issued and outstanding capital stock of the Company
or any Company Subsidiary, or any securities convertible into shares of
such stock (except for grants of options to purchase Common Stock
approved by the Company's Board of Directors to be granted pursuant to
director or employee benefit plans of the Company), (C) split, combined
or reclassified any shares of the capital stock of the Company, (D)
declared, set aside or paid any dividend or other distribution (whether
in cash, stock or property or any combination thereof) in respect of the
capital stock of the Company, or (E) redeemed or otherwise acquired any
shares of such capital stock;
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<PAGE> 36
(vii) the Company has not increased the number of directors of the
Board other than as required by Section 4.10 hereof;
(viii) neither the Company nor any Company Subsidiary has acquired
any real estate assets, or any other assets other than in the ordinary
course of business and consistent with past practice;
(ix) neither the Company nor any Company Subsidiary has entered
into employment agreements with any employee (other than an agreement
terminable at will without any financial penalty), or granted any
increase in the compensation (including employee benefits) of any
employee, except for increases (A) in the ordinary course of business
and consistent with past practice, (B) as a result of collective
bargaining or (C) as required by any employment or other agreement,
policy or plan currently in effect; and
(x) neither the Company nor any Company Subsidiary has agreed,
whether in writing or otherwise, to take any action that, if taken,
would render any of the representations set forth in this Section
3.01(l) untrue in any material respect.
(m) Disclosure. Neither this Agreement nor any Ancillary Document nor
any certificate or disclosure statement delivered by or on behalf of the
Company or the Company Subsidiaries prior to the date hereof, nor any other
written materials delivered by the Company to Purchasers prior to the date
hereof in connection with the transactions contemplated hereby and
identified in Schedule 3.01(m), as of the date thereof contained any untrue
statement of a material fact or omitted to state a material fact necessary
in order to make the statements contained herein and therein, in light of
the circumstances under which they were made, not misleading. Other than
competitive factors and economic conditions affecting the Company's
industry generally, there are no facts known to the Company existing as of
the date hereof which the Company has not disclosed to Purchasers or their
counsel in writing which would cause any of the materials described in
Schedule 3.01(m) to contain an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements
contained therein, in light of the circumstances under which they were
made, not misleading.
(n) Securities Law Matters. None of the Company, the Company
Subsidiaries or any of their respective Affiliates or any other Person
acting on their behalf has, in connection with the offer and sale of the
Common Stock hereunder, engaged in (a) any form of general solicitation or
general advertising (as those terms are used within the meaning of Rule
502(c) under the Securities Act), (b) assuming the accuracy of Purchasers'
representations in Section 3.02(d), any action involving a public offering
within the meaning of Section 4(2) of the Securities Act, or (c) assuming
the accuracy of Purchasers' representations in Section 3.02(d), and
compliance by Purchasers and the Permitted Transferees with the terms
hereof, any action that would require the registration under the Securities
Act of the offering and sale of the Common Stock pursuant to this Agreement
or that would violate applicable state securities or "blue sky" laws. The
Company has not made and will not make, directly or indirectly, any offer
or sale of Common Stock of the same or similar classes as the Common Stock
if, as a result of such offer or sale, the offer and sale of the Common
Stock contemplated hereby could fail to be entitled to exemption from the
registration requirements of the Securities Act. As used herein, the terms
"offer' and "sale" have the meanings specified in Section 2(3) of the
Securities Act.
(o) Brokers and Finders. Except in connection with the "fairness
opinion" obtained by the Company in connection with the transactions
contemplated hereby, neither the Company nor any Company Subsidiary nor any
of their respective officers, directors, Affiliates, employees or agents
has utilized any broker, finder, placement agent or financial advisor or
incurred any liability for any fees or commissions in connection with any
of the transactions contemplated hereby or by the Ancillary Documents
except as provided in this Agreement.
(p) Licenses and Permits. The Company and the Company Subsidiaries
possess all material licenses, franchises, permits, certificates, Consents,
orders, approvals and authorizations (collectively, the "Permits") and have
made all declarations and filings with all Governmental Entities necessary
under law or otherwise to conduct their businesses as currently being
conducted, and each such Permit is valid
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<PAGE> 37
and subsisting and in full force and effect, except where the failure to
possess or do any of the foregoing could not reasonably be expected to have
a Material Adverse Effect. No negotiation, application, action or
proceeding is pending for the renewal or modification of any material
Permits which in any case could reasonably be expected to have a Material
Adverse Effect, and no application, petition, objection, opposition, action
or proceeding is pending or, to the knowledge of the Company, threatened
that may result in the denial of an application for renewal, revocation,
modification, nonrenewal or suspension of any Permit, the issuance of a
cease-and-desist order, or the imposition of any administrative or judicial
sanction with respect to the Company or the Company Subsidiaries which in
any case could reasonably be expected to have a Material Adverse Effect.
The Timeshare/Residential Business of the Company and the Company
Subsidiaries is being operated in accordance with all applicable Permits,
except where the failure to comply could not reasonably be expected to have
a Material Adverse Effect.
(q) MATERIAL AGREEMENTS. Each contract, agreement, understanding,
arrangement and commitment (the "Contracts") which is existing on the date
hereof and is Material to the business, results of operations, financial
condition, prospects or operations of the Company and the Company
Subsidiaries is described in or has been included as an exhibit to the
Securities Filings or is otherwise set forth on Schedule 3.01(q),
including, without limitation, all Contracts for Indebtedness. A true and
correct copy of each Contract set forth in Schedule 3.01(q) has been
delivered or made available to Purchasers including, without limitation,
all amendments and supplements thereto and any schedules and exhibits
attached thereto. For purposes of this Section 3.01(q), a Contract is
deemed "Material" if such Contract (i) has a maturity of one year or more
and (ii) involves (or could reasonably be expected to involve) (x) in the
case of any Contracts for the sale or purchase of any real property or
timeshare inventory or any Contracts relating to construction or renovation
or capital expenditures or capital additions or improvements, a dollar
amount in excess of $2,000,000 per annum or (y) in the case of any other
Contracts not described in (x), a dollar amount in excess of $1,000,000 per
annum. Each Contract referred to above and existing on the date hereof is a
valid, binding and enforceable agreement of the Company or a Company
Subsidiary and, no event has occurred that has caused, or with the passage
of time or giving of notice would cause, nor has the execution of this
Agreement caused, or will the transactions contemplated under this
Agreement cause the Company or any Company Subsidiary to be in default
under a material provision, or give rise to a right of acceleration, or
termination under any Contract, the result of which could reasonably be
expected to have a Material Adverse Effect.
(r) Properties and Insurance.
(i) The Securities Filings or Schedule 3.01(r)(i) set forth all of
the material real property directly or indirectly owned or leased by the
Company and the Company Subsidiaries as of the date hereof. Each of the
Company and each Company Subsidiary has good and marketable title in fee
simple to all such Company Property owned by it and good and valid title
to all personal property owned by it that is material to its business,
in each case, free and clear of all Liens other than the Permitted
Liens, those Liens disclosed on Schedule 3.01(r)(i) and those Liens
which would not, either individually or in the aggregate, have a
Material Adverse Effect. The Company and the Company Subsidiaries have
in full force and effect property damage, liability and other insurance
with financially sound and reputable insurers at levels of coverage
reasonable and customary in the Company's industry and, as of the date
hereof, there is no material claim by the Company or any Company
Subsidiary pending under any such insurance policies as to which
coverage has been questioned, denied or disputed by the underwriters of
such policies. Except as set forth in Schedule 3.01(r), policies of
title insurance (issued on customary American Land Title Association
forms) have been issued by national title insurance companies insuring
the fee simple title of the Company or the Company Subsidiaries, as the
case may be, to each of the Company Properties in amounts at least equal
to the original cost thereof subject only to Permitted Liens, such
policies are in full force and effect and no claim has been made under
any such policy, and the Company is not aware of any fact or information
which would constitute a defense by the issuer of any such policy or an
exclusion from coverage, except where the failure to have such insurance
could not reasonably be expected to
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<PAGE> 38
have a Material Adverse Effect. True and correct copies of all such
policies together with all exceptions referenced therein have been made
available by the Company to Purchasers.
(ii) Except as set forth in Schedule 3.01(r)(ii), as of the date
hereof, there is no uninsured physical damage to any Company Property in
excess of $50,000. Except as set forth in Schedule 3.01(r)(ii), as of
the date hereof each improved Company Property is in good operating
condition and repair and is structurally sound and free of defects, with
no alterations or repairs being required thereto under Applicable Laws
or insurance company requirements and consists of sufficient land,
parking areas, driveways and other improvements and lawful means of
access and utility service and capacity to permit the use thereof in the
manner and for the purposes for which it is presently devoted, except
where the failure of any of the foregoing could not reasonably be
expected to have a Material Adverse Effect. The Company has made
available to Purchasers true and complete copies of all engineering
reports, inspection reports, maintenance plans and other documents
relating to the condition of any Company Property prepared for the
Company or otherwise in the Company's or a Company Subsidiary's
possession.
(iii) Except as set forth in Schedule 3.01(r)(iii), and except as
could not either individually, or in the aggregate, reasonably be
expected to have a Material Adverse Effect, (A) no condemnation, eminent
domain or rezoning proceedings are pending or threatened with respect to
any of the Company Properties; (B) no road widening or change of grade
of any road adjacent to any Company Property is underway or has been
proposed; (C) there is no proposed change in the assessed value of any
Company Property; (D) no special assessment has been made or threatened
against any Company Property; and (E) no Company Property is subject to
any "impact fee" or to any agreement with any Governmental Entity to pay
for sewer extension, oversizing utilities, lighting or like expenses or
charges for work or services by such Governmental Entity.
(iv) Each of the Company Properties is an independent unit which
does not rely on any facilities located on any property not included in
such Company Property to fulfill any municipal or governmental
requirement or for the furnishing to such Company Property of any
essential building systems, utilities or customary amenities, other than
facilities the benefit of which inures to the Company Properties
pursuant to one or more valid easements, or facilities which are located
on or abutting Company Properties and are sufficient to serve more than
one property adequately and lawfully. Each of the improved timeshare
Company Properties is served by public water and sanitary systems and
all other utilities, and each of the improved timeshare Company
Properties has lawful access to public roads, in all cases sufficient
for the current use and occupancy of each Company Property. All parcels
of land included in each Company Property that purport to be contiguous
are contiguous and are not separated by strips, gaps or gores. No
improvements constituting a part of any Company Property encroach on
real property not constituting a part of such Company Property or an
abutting Company Property except where such encroachments could not
reasonably be expected to have a Material Adverse Effect.
(v) The Company has made available to Purchasers each survey, study
or report prepared by or for the Company or any Company Subsidiary in
connection with any Company Property's compliance or non-compliance with
the requirements of the Americans with Disabilities Act (the "ADA"),
other than routine correspondence and memoranda.
(vi) Schedule 3.01(r)(vi) sets forth a complete and accurate list
of all Material (as defined in Section 3.01(q) of this Agreement)
commitments, letters of intent, agreements, or similar written
understandings existing as of the date hereof made or entered into by
the Company or any Company Subsidiary to sell, mortgage, pledge or
hypothecate any Company Property or to otherwise enter into a Material
(as defined in Section 3.01(q) of this Agreement) transaction in respect
of the ownership or financing of any Company Property or to purchase or
acquire an option, right of first refusal or similar right in respect of
any real property, which has not yet been reduced to a written contract.
The Company has made available to Purchasers a true and correct copy of
each such Material commitment, letter of intent or other understanding.
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<PAGE> 39
(vii) Except as restricted by the existing credit facilities with
Heller Financial, Inc., Finova Capital Corporation and Foothill Capital
Corporation and by the Senior Notes and except as set forth in Schedule
3.01(r)(vii), as of the date hereof, the Company and Company
Subsidiaries have the right to sell, transfer, lease, and finance,
without limitations, the Company Properties.
(viii) The Company has provided to Purchasers a capital expenditure
budget for each Material Company Property set forth in the Securities
Filings which describes the capital expenditures which the Company has
budgeted for such Company Property for the period ending March 31, 1999.
The Company believes, as of the date hereof, that the costs and the
schedules set forth therein are reasonable estimates and projections.
Purchasers understand that the Company's actual results may vary from
the budget and no assurances can be given that the Company will meet its
projections. As of the date hereof, the Company is not aware of any
facts or circumstances which would cause the Company to exceed the
capital expenditure budget in the aggregate.
(ix) The Securities Filings or Schedule 3.01(r)(i) disclose each
material Company Property and Schedule 3.01(r)(ix) contains a list of
each property which, as of the date hereof, the Company has under letter
of intent or option which is Material (as defined in Section 3.01(q) of
this Agreement), which consists of or includes a material amount of
undeveloped land or which is intended to be or is in the process of
being developed or materially rehabilitated ("Development Properties")
and a brief description of the development or material rehabilitation
intended by the Company or any Company Subsidiary to be carried out or
completed therein (collectively, the "Projects"). Each Development
Property is zoned for the lawful development thereon of the Project. The
Company has obtained, or has no reason to believe it will not be able to
obtain in the ordinary course of business, all Permits, licenses,
Consents and authorizations required for the lawful development or
rehabilitation thereon of such Project, except where the failure to
obtain such Permits, licenses, Consents and authorizations could not
reasonably be expected to have a Material Adverse Effect. The Company
has made available to Purchasers all feasibility studies, soil tests,
due diligence reports and other studies, tests or reports performed by
or for the Company, or otherwise in the possession of the Company, which
relates to the Development Properties.
(s) Taxes. Each of the Company and each Company Subsidiary has filed
all federal, state and local income and franchise Tax Returns which are
required to be filed and all such Tax Returns are correct and complete in
all material respects. The Company and each Company Subsidiary has paid all
Taxes shown thereon to be due and all other taxes and assessments known to
the Company or any such Company Subsidiary to be payable by it, except to
the extent the same have become due and payable but are not yet delinquent
or to the extent the same are being contested in good faith and except to
the extent any such failure would not have a Material Adverse Effect. To
the extent that Tax liabilities and assessments have accrued but have not
yet become payable, such Tax liabilities have been adequately reflected as
liabilities on the books of the Company and the Company Subsidiaries and
adequate reserves have been established for the payment thereof. Schedule
3.01(s) sets forth the fiscal year through which the consolidated Federal
Income Tax Returns of the Company and the Company Subsidiaries have been
examined and reported on by the Internal Revenue Service. To the Company's
knowledge, there exists no dispute with the Internal Revenue Service with
respect to the consolidated Federal Income Tax Returns of the Company and
the Company Subsidiaries which, if adversely determined, would have a
Material Adverse Effect. Except as set forth on Schedule 3.01(s), the
Company is not subject to any audit by any Governmental Entity with regard
to any Tax nor has any Governmental Entity asserted against the Company any
liability for any Tax due and payable, but not paid, the result of which,
if adversely determined, could reasonably be expected to have a Material
Adverse Effect. As of the date hereof, none of the Company and the Company
Subsidiaries (i) has been a member of an affiliated group filing a
consolidated federal income tax return (other than a group the common
parent of which is the Company), or (ii) has any liability for the taxes of
any Person (other than any taxes of the Company and the Company
Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or successor, by
contract or otherwise.
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(t) Environmental Matters.
(i) Each of the Company and each Company Subsidiary has obtained,
and now is in compliance with and maintains as currently valid and
effective all permits required under the Environmental Laws (the
"Environmental Permits") in connection with the operation of its
businesses and properties, all of which Environmental Permits are listed
in Schedule 3.01(t), except where the failure to do any of the foregoing
could not reasonably be expected to have a Material Adverse Effect.
Except as disclosed in the Conclusions sections of the Company
Environmental Reports, each of the Company and each Company Subsidiary,
and each property of the Company and the Company Subsidiaries is, has
been, and will be in compliance with all terms and conditions of the
Environmental Permits and all Environmental Laws, except where the
failure to do any of the foregoing could not reasonably be expected to
have a Material Adverse Effect.
(ii) Each of the Company and each Company Subsidiary has provided
to Purchasers all written information and written communications
(whether from a Governmental Entity, citizens' group, tenant, employee
or other person) prepared or received by them or in its possession or
control as of the date hereof regarding (x) alleged or suspected
noncompliance in any material respect of any of the Company Properties
with any Environmental Laws or Environmental Permits or (y) alleged or
suspected material liability of the Company or the Company Subsidiaries
under any Environmental Law.
(iii) There are no environmental Liens, encumbrances or
restrictions on any of the Company Properties and, to the Company's
knowledge, no actions by any Governmental Entity or by any Persons have
been, or are in process of being, taken which are reasonably likely to
subject any Company Property to such Liens, encumbrances or
restrictions, except for such Liens, encumbrances or restrictions which,
either individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
(iv) No Environmental Claim with respect to the operations or the
businesses of the Company or the Company Subsidiaries, or with respect
to any Company Properties, has been asserted or, to the Company's
knowledge, threatened, and no circumstances exist with respect to the
Company or the Company Subsidiaries or the Company Properties that would
reasonably be expected to result in any liability or any Environmental
Claim being asserted, in any such case, against (i) the Company or the
Company Subsidiaries, or (ii) any Person whose liability for any
Environmental Claims the Company or the Company Subsidiaries has or may
have retained or assumed contractually, by operation of law or
otherwise, except any Environmental Claim which, either individually or
in the aggregate, could not reasonably be expected to have a Material
Adverse Effect.
(v) Except as disclosed in Schedule 3.01(t) or set forth in the
Conclusions sections of the Company Environmental Reports and except for
events or circumstances which could not reasonably be expected to have a
Material Adverse Effect, (i) no generation, storage, handling, disposal,
treatment, spillage or release of Hazardous Substances in violation of
any law has occurred or is occurring on the Company Properties, whether
conducted or caused by Company or the Company Subsidiary, their
predecessors, tenants or any other parties, and none of the Company or
the Company Subsidiaries has been notified or anticipates being notified
of potential responsibility in connection with any such activity or with
any site that has been placed on, or proposed to be placed on, the
National Priorities List or its state or foreign equivalents pursuant to
the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), 42 U.S.C. Sections 9601 et seq., or analogous state or
foreign laws, (ii) no Hazardous Substances are present on, in or under
any Company Property in a manner or condition that is reasonably likely
to give rise to an Environmental Claim, (iii) none of the Company or the
Company Subsidiaries has released or arranged for the release of any
Hazardous Substances at any location, (iv) no underground storage tanks,
above-ground storage tanks, surface impoundments, disposal areas, pits,
ponds, lagoons, open trenches or disused industrial equipment are
present at any Company Property, (v) no transformers, capacitators,
ballasts or other equipment containing polychlorinated biphenyls (PCBs)
are present at
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<PAGE> 41
any Company Property, except for any such transformers, capacitors,
ballasts or other equipment owned by any utility company, and (vi) no
asbestos or asbestos-containing material, no radon, no lead-based paint
and no lead in drinking water is present at any Company Property and no
employee, agent, contractor or subcontractor of the Company or the
Company Subsidiaries is now or has in the past been exposed to friable
asbestos or asbestos-containing material, radon, lead-based paint or
lead in drinking water at the Company Property.
(vi) The Company has provided Purchasers access to true and
complete copies of all existing Phase I environmental reports, Phase II
environmental reports, and all other reports, materials and data
prepared by or for the Company or the Company Subsidiaries or otherwise
in the possession of any of them with respect to the environmental
condition of any Company Property owned as of the date hereof
(collectively, the "Company Environmental Reports").
(vii) For purposes hereof, the terms listed below shall have the
following meanings:
(A) "Environmental Claim" shall mean any investigation or notice
(written or oral) or claims by any person including, without limit,
any Government Entity, neighbors, employees and tenants, alleging
potential liability (including potential liability for investigatory
costs, cleanup costs, governmental response costs, natural resources
damages, property damages, personal injuries or fatalities, or
penalties) arising out of, based on or resulting from (I) the
presence, generation, transportation, treatment, use, storage,
disposal or release of Hazardous Substances or the threatened release
of Hazardous Substances at any location, or (II) activities or
conditions forming the basis of any violation, or alleged violation
of, or liability or alleged liability under, any Environmental Law.
(B) "Environmental Laws" shall mean federal, state, local,
provincial, municipal and foreign laws, ordinances, principles of
common law, rules, bylaws, orders, governmental policies, statutes,
regulations, agreements and treaties relating to the pollution or
protection of the environment or of flora or fauna or their habitat
or of human health and safety, or to the cleanup or restoration of
the environment, including, but not limited to, any laws relating to
(I) generation, treatment, storage, disposal or transportation of
wastes, emissions or discharges or protection of the environment from
the same, (II) exposure of Persons to, or release or threat of
release of, Hazardous Substances, and (III) the safety and health of
workers and employees.
(C) "Hazardous Substances" shall mean all chemicals, pollutants,
contaminants, wastes, toxic substances, petroleum or any fraction
thereof, petroleum products, asbestos, radon and hazardous substances
(as defined in Section 101(14) of CERCLA, 42 U.S.C. Sections
6601(14)), or solid or hazardous wastes as now defined and regulated
under any Environmental Laws.
(u) Absence of Certain Business Practices. Neither the Company nor
any Company Subsidiary nor, to the Company's knowledge, any officer or
director purporting to act on behalf of the Company or any Company
Subsidiary has at any time: (i) made any contributions to any candidate for
political office, or failed to disclose fully any such contributions, in
violation of law, (ii) made any payment of funds to, or received or
retained any funds from, any state, federal or foreign governmental officer
or official, or other person charged with similar public or quasi-public
duties, other than payments required or allowed by Applicable Law, (iii)
violated or is in violation of any provision of the Foreign Corrupt
Practices Act of 1977, (iv) made any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment or (v) engaged in any material
transaction, maintained any bank account or used any material amount of
corporate funds except for transactions, bank accounts and funds which have
been and are reflected in the normally maintained books and records of the
Company and the Company Subsidiaries.
(v) Books of Account; Company Charter and Bylaws.
(i) The books of account and other financial records of the Company
and each Company Subsidiary are in all material respects true and
complete, have been maintained in accordance with
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<PAGE> 42
good business practices, and are accurately reflected in all material
respects in the financial statements included in the Securities Filings.
(ii) The Company has previously delivered or made available to
Purchasers true and complete copies of the Restated Articles of
Organization and bylaws of the Company, as amended, and the charters,
bylaws, partnership agreements, joint venture agreements or other
governing documents of each Company Subsidiary, in each case, as amended
through the date hereof.
(iii) The minute books and other corporate records of the Company
and each Company Subsidiary have been made available to Purchaser,
contain in all material respects accurate records of all meetings held
prior to the date hereof and accurately reflect in all material respects
all other corporate action of the shareholders and board of directors
and any committees of the board of directors of the Company and the
Company Subsidiaries which are corporations and all actions of the
partners of the Company Subsidiaries which are partnerships or joint
ventures, through the date hereof.
(w) Operating Company Status. The Company is primarily engaged,
directly or through majority-owned Company Subsidiaries, in the production
or sale of a product or service other than the investment of capital,
within the meaning of the plan assets regulations issued by the Department
of Labor (29 C.F.R. Section 2510.3-101).
(x) HSR Compliance. As of the date hereof, all assets of the Company
and the Company Subsidiaries on a consolidated basis which do not
constitute (a)(i) real property that is used primarily for office or
residential purposes, including a vacation ownership interest in a resort,
or (ii) assets incidental to the ownership of such real property, in either
case, within the meaning of Section 802.2(d) of the Rules, Regulations and
Interpretations under the HSR Act (the "HSR Rules"), or (b) a hotel or
motel (other than a hotel or motel that includes a gambling casino),
improvements to any such hotel or motel, including golf, swimming, tennis,
restaurant, health club or parking facilities (but excluding ski
facilities) or assets incidental to the ownership of any such hotel or
motel, within the meaning of Section 802.2(e) of the HSR Rules or (c) real
property used primarily as a golf course or a swimming or tennis club
facility or assets incidental to the ownership of any such property, within
the meaning of Section 802.2(b) of the HSR Rules (collectively, "Non-Exempt
Assets"), do not have a value in excess of $15,000,000.
SECTION 3.02. REPRESENTATIONS AND WARRANTIES OF PURCHASERS. The
Purchasers, jointly and severally, represent and warrant to, and agree with, the
Company as follows:
(a) Organization. Each Purchaser is a limited partnership validly
existing and in good standing under the laws of its jurisdiction of
organization. Each Purchaser has a term continuing until at least December
31, 2007 and the Purchasers have sufficient capital to satisfy their
obligations under this Agreement.
(b) Authorization; No Conflicts. Each Purchaser has full power and
authority to enter into this Agreement and the Ancillary Documents to which
it is a party and to consummate the transactions hereby and thereby. The
execution, delivery and performance by each Purchaser of this Agreement and
the Ancillary Documents to which it is a party and the consummation of the
transactions contemplated hereby and thereby have been authorized by all
necessary action on the part of Purchasers. This Agreement has been, and on
or prior to the Closing Date the Ancillary Documents to which each
Purchaser is a party will be, executed and delivered by such Purchaser and
this Agreement is, and upon the execution on or prior to the Closing Date
the Ancillary Documents to which each Purchaser is a party will be, the
valid and binding obligation of such Purchaser, enforceable against it in
accordance with its terms subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights generally and to general principles of equity.
The execution, delivery and performance by each Purchaser of this Agreement
and the Ancillary Documents to which it is a party, and the consummation of
the transactions contemplated hereby and thereby and the compliance by each
Purchaser with any of the provisions hereof and thereof will not conflict
with, violate or result in a breach of any provision of, require a Consent
under, or constitute a default (or an event,
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<PAGE> 43
which, with notice or lapse of time or both, would constitute a default)
under, (i) any organizational document of any Purchaser or (ii) any
mortgage, note, indenture, deed of trust, lease, loan agreement or other
agreement or instrument of any Purchaser, or (iii) assuming that the
clearances, filings, Consents and approvals specified in Schedule 3.01(d)
have been obtained or made and any waiting period applicable thereto has
expired or been terminated, any permit, concession, grant, franchise,
license, judgment, order, decree, ruling, injunction, statute, law,
ordinance, rule or regulation binding or applicable to any Purchaser or its
respective properties or assets.
(c) Consents and Approvals. Except as set forth in Schedule 3.01(f),
no Consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required on the part
of Purchasers in connection with the execution, delivery and performance by
each Purchaser of this Agreement and the Ancillary Documents to which it is
a party and the consummation of the transactions hereby and thereby.
(d) Investment Intent; Suitability. Each Purchaser is acquiring the
Common Stock solely for its own account for investment and not with a view
to any distribution thereof in violation of the Securities Act. Each
Purchaser is an "accredited investor" as such term is defined in Rule 501
under the Securities Act. No Purchaser shall Transfer any Common Stock or
other securities acquired pursuant to this Agreement except in compliance
with all Applicable Law.
(e) Investigation by Purchasers. Each Purchaser acknowledges that it
has had an opportunity to ask questions of and receive answers from the
Company regarding the Company and the Company Subsidiaries and their
respective businesses, assets, results of operations and financial
condition and the terms and conditions of the issuance of the Common Stock.
Notwithstanding anything contained herein to the contrary, no investigation
by Purchasers shall in any way affect Purchasers' right to rely upon the
Company's representations, warranties and covenants contained herein.
(f) Investment Experience. Each Purchaser (a) has such knowledge,
experience and skill in evaluating and investing in common stocks and other
securities, based on actual participation in financial, investment and
business matters, so that it is capable of evaluating the merits and risks
of an investment in the Common Stock, (b) has such knowledge, experience
and skill in financial and business matters that it is capable of
evaluating the merits and risks of investment in the Company and the
suitability of the Common Stock as an investment, and (c) can bear the
economic risk of an investment in the Common Stock. Each Purchaser
understands that an investment in the Common Stock on the terms set forth
in this Agreement is speculative and involves certain risks and
uncertainties. Each Purchaser has (i) received a copy of the Offering
Memorandum dated March 27, 1998 relating to the Senior Notes and reviewed
the "Risk Factors" set forth therein and (ii) reviewed the Securities
Filings.
(g) Brokers and Finders. None of the Purchasers nor any of their
officers, directors, employees, Affiliates or agents has utilized any
broker, finder, placement agent or financial advisor or incurred any
liability for any fees or commissions in connection with any of the
transactions contemplated hereby or by the Ancillary Documents.
(h) Company Common Stock. As of the date hereof, Purchasers do not
own any shares of Common Stock.
ARTICLE IV.
ADDITIONAL AGREEMENTS OF THE PARTIES
SECTION 4.01. TAKING OF NECESSARY ACTION. Each of the parties hereto
agrees to use all reasonable efforts to take or cause to be taken all action and
to do or cause to be done all things necessary, proper or advisable under
Applicable Law to consummate and make effective the transactions contemplated by
this Agreement. Without limiting the foregoing, the Company and Purchasers will,
and the Company shall cause the Company Subsidiaries to, each use all reasonable
efforts to make all filings and obtain all Consents of Governmental Entities
which may be necessary or, in the opinion of Purchasers or the Company, as the
case
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may be, advisable for the consummation of the transactions contemplated by this
Agreement and the Ancillary Documents, including, but not limited to, any
filings with the FTC or DOJ under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended ("HSR Act").
SECTION 4.02. CONDUCT OF BUSINESS. Except as otherwise required to perform
its obligations under this Agreement or in any agreement contemplated herein,
from the date hereof through the Closing Date, the Company shall, and shall
cause each of the Company Subsidiaries to:
(a) conduct its operations in the ordinary course of business in a
first-class manner and consistent with past practice;
(b) unless required pursuant to the terms of this Agreement or the
Ancillary Agreements, or consented to in writing by Purchasers, not amend
or in any way alter its Restated Articles of Organization, certificate of
incorporation, bylaws, partnership agreement or other governing document
(provided that the foregoing shall not restrict the reorganization and
restructuring of certain of the Company Subsidiaries on the terms
previously disclosed to Purchasers);
(c) not engage in any other act, other than in the ordinary course of
business and consistent with past practice, that could reasonably be
expected to have a Material Adverse Effect or in any way delay or impair
consummation of the transactions contemplated by this Agreement and the
Ancillary Documents;
(d) not change the number of shares of the authorized capital stock of
the Company, issue or grant any option, warrant, call, commitment,
subscription, right to purchase or agreement of any character relating to
the authorized or issued capital stock of the Company or any Company
Subsidiary, or any securities convertible into shares of such stock (except
for grants of options to purchase Common Stock approved by the Board of
Directors to be granted pursuant to existing Company Plans), split, combine
or reclassify any shares of the capital stock of the Company, declare, set
aside or pay any dividend or other distribution (whether in cash, stock or
property or any combination thereof) in respect of the capital stock of the
Company, or redeem or otherwise acquire any shares of such capital stock;
(e) not increase the number of directors of the Board of Directors of
the Company without the express written consent of Purchasers other than as
required by Section 4.10;
(f) not sell or transfer any of the assets it owns, except in the
ordinary course of its business and consistent with past practice (it being
understood that sales of loan receivables shall be deemed in the ordinary
course of business);
(g) except for seller financing and borrowings under the Company's
existing credit facilities with Heller Financial, Inc., Foothill Capital
Corporation and Finova Capital Corporation, not incur any Indebtedness
other than Indebtedness to trade creditors incurred in the ordinary course
of business and consistent with past practice;
(h) not change its accounting policies or procedures in any material
manner;
(i) not do any other act which would reasonably be expected to cause
any representation or warranty in this Agreement to be or become untrue in
any material respect.
SECTION 4.03. FINANCIAL STATEMENTS AND OTHER REPORTS. For so long as
Purchasers or the Permitted Transferees own any shares of Common Stock (except
in the case of (d) below which shall apply only for so long as Purchasers and
the Permitted Transferees own in the aggregate at least the Permitted Interest),
the Company covenants that it will deliver to Purchasers or the Permitted
Transferees (provided, however, that delivery to any Permitted Transferee of any
financial statements or other reports shall be made only to a wholly-owned
(excluding the ownership interests of MSDW employees and consultants) MSDW
entity as general partner, investment advisor or other representative on behalf
of the Permitted Transferees), as the case may be:
(a) as soon as practicable and in any event within 45 days after the
end of each quarterly period (other than the last quarterly period) in each
fiscal year, consolidated statements of operations, statements of
shareholders' equity and cash flows of the Company for the period from the
beginning of
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the then current fiscal year to the end of such quarterly period, and a
consolidated balance sheet of the Company at the end of such quarterly
period setting forth in each case in comparative form figures for the
corresponding period or date in the preceding fiscal year, together with a
certificate from a senior officer of the Company ("Senior Officer's
Certificate") to the effect that such financial statements have been
prepared in accordance with GAAP consistently applied during the periods
involved (except as otherwise indicated in the notes thereto and subject to
year-end adjustments) and that such financial statements fairly present the
results of operations and changes in financial position, shareholders'
equity, cash flows and financial position of the Company and the Company
Subsidiaries as of and for the period then ended; provided however, that
delivery pursuant to clause (c) below of a copy of the Company's periodic
report on Form 10-Q for such period filed with the SEC shall be deemed to
satisfy the requirements of this clause (a);
(b) as soon as practicable and in any event within 90 days after the
end of each fiscal year, a consolidated balance sheet of the Company as of
the end of such fiscal year and the related consolidated statements of
operations, statements of shareholders' equity and cash flows for such
fiscal year, setting forth in each case in comparative form the
corresponding figures from the preceding fiscal year, together with the
audit report of Ernst & Young LLP, or other independent public accountants
of recognized standing selected by the Company; provided, however, that
delivery pursuant to clause (c) below of a copy of the Annual Report on
Form 10-K of the Company for such fiscal year filed with the SEC shall be
deemed to satisfy the requirements of this clause (b);
(c) promptly upon transmission thereof, copies of all such financial
statements, proxy statements, notices and reports as it shall send to its
shareholders and to its lenders and copies of all such registration
statements, other than registration statements relating to employee benefit
or dividend reinvestment plans, and all such regular and periodic reports
on Forms 10-K, 10-Q and 8-K (or similar or substitute forms) as it shall
file with the SEC; and
(d) from time to time such additional information regarding results of
operations, financial condition, business or prospects of the Company and
the Company Subsidiaries as Purchasers or the Permitted Transferees may
reasonably request.
SECTION 4.04. ACCESS.
(a) Between the date hereof and the Closing Date and in order to
permit Purchasers to complete their due diligence examination of the
Company and the Company Subsidiaries, the Company shall permit
representatives of Purchasers to have full access: (i) to inspect the
facilities and properties of the Company and any of the Company
Subsidiaries, (ii) to examine the corporate books, records, agreements and
files of the Company or any of the Company Subsidiaries and make copies or
extracts therefrom and (iii) to consult with the directors, officers or
other employees of the Company and any of the Company Subsidiaries and the
Company's independent auditors and legal counsel, all upon reasonable
notice and at such reasonable times as the Purchasers may reasonably
request.
(b) For so long as Purchasers or the Permitted Transferees own, in the
aggregate, at least the Permitted Interest, the Company will permit
representatives of each Purchaser and any Permitted Transferee (provided,
however, that in the case of access rights by Permitted Transferees, access
rights shall be granted only to a wholly-owned (excluding the ownership
interests of MSDW employees and consultants) MSDW entity as general
partner, investment advisor or other representative on behalf of the
Permitted Transferees) to visit and inspect any of the properties of the
Company or any of the Company Subsidiaries, to examine the corporate books,
records, agreements and files of the Company and the Company Subsidiaries
and make copies or extracts therefrom and to advise and consult with the
principal officers of the Company regarding the affairs, finances and
accounts of the Company and the Company Subsidiaries, all upon reasonable
notice and at such reasonable times any Purchaser or such wholly-owned MSDW
entity may reasonably request.
SECTION 4.05. LOST, STOLEN, DESTROYED OR MUTILATED SECURITIES. Upon
receipt of evidence satisfactory to the Company of the loss, theft, destruction
or mutilation of any certificate for any security of the Company
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owned by Purchasers or the Permitted Transferees and, in the case of loss, theft
or destruction, upon delivery of an undertaking by the holder thereof to
indemnify the Company (and, if requested by the Company, the delivery of an
indemnity bond sufficient in the judgment of the Company to protect the Company
from any loss it may suffer if a certificate is replaced), or, in the case of
mutilation, upon surrender and cancellation thereof, the Company will issue a
new certificate for an equivalent number of shares of Common Stock or other
security of like tenor, as the case may be.
SECTION 4.06. NO TERMINATION OF OBLIGATIONS UPON CHANGE OF CONTROL. The
Company shall promptly notify Purchasers and the Permitted Transferees (but in
the case of the Permitted Transferees, such notice shall be sent only to a
wholly-owned (excluding the ownership interests of MSDW employees and
consultants) MSDW entity as general partner, investment advisor or other
representative on behalf of the Permitted Transferees) (i) of the execution by
the Company of a definitive agreement with any Person which will result in a
Change of Control, (ii) of the satisfaction or waiver of all conditions of
closing (other than conditions which can only be satisfied on the closing date
of such transaction) required under the terms of such definitive agreement, and
(iii) immediately upon consummation of a Change of Control. Upon a Change of
Control of the Company, all rights and obligations of Purchasers and any
Permitted Transferee who owns any shares of Common Stock hereunder (including,
without limitation, all registration rights under the Registration Rights
Agreement) shall continue in full force and effect unless such Purchasers or
Permitted Transferees, as the case may be, dispose of their respective shares of
Common Stock as part of such Change of Control.
SECTION 4.07. RESTRICTIONS ON SALE OR TRANSFER; LEGEND.
(a) Prior to the earlier to occur of (x) the second anniversary of the
Closing Date or (y) six months following the Calculation Date, but in no
event earlier than the date that is 18 months from the Closing Date (the
"Lock-up Period"), none of the Purchasers or Permitted Transferees will,
directly or indirectly, offer, sell, transfer, assign, pledge, hypothecate
(provided that nothing herein to the contrary shall restrict the bona fide
pledge or hypothecation of any shares of Common Stock issued to Purchasers
or any Permitted Transferee prior to the expiration of the Lock-up Period
or the foreclosure of any such pledge or hypothecation so long as any
pledgee remains subject to the provisions of this Section 4.07; upon any
foreclosure of such pledge, the pledgee shall not have any rights or
obligations under this Agreement but shall constitute a Purchaser under the
Registration Rights Agreement) or otherwise dispose of (any such act, a
"Transfer") any shares of Common Stock purchased hereunder, except for, and
subject in each case to, compliance with all Applicable Law and receipt of
any necessary governmental Consents, (i) a Transfer by Purchaser to a
Permitted Transferee, provided that prior to such Transfer each such
Permitted Transferee consents in writing to be bound by the restrictions on
Transfer set forth in this Section 4.07, makes the representations and
warranties set forth in the first sentence of Section 3.02(d) and in
Section 3.02(f) to the Company and assumes all other rights and obligations
of such Purchaser under this Agreement and the Registration Rights
Agreement; (ii) a Transfer to the Company or to a wholly-owned direct or
indirect subsidiary of the Company; and (iii) a Transfer pursuant to a
sale, merger or consolidation in which the Company is a constituent
corporation, or upon a Change of Control as provided in Section 4.07(b).
(b) Subject to Section 4.07(c), following the Lock-up Period or the
consummation of a Change of Control or delivery of notice that the events
described in Section 4.06(i) and (ii) have occurred, each Purchaser and
Permitted Transferee may, in its sole discretion, freely and without any
limitations, transfer any shares of Common Stock owned by it, subject to
compliance with all Applicable Law (including, without limitation,
compliance with the Securities Act), provided, however, that if the
transaction to which notice is provided under Sections 4.06(i) and (ii) is
terminated, Purchasers' and the Permitted Transferees' right to Transfer
any shares of Common Stock held by them shall be again subject to the
provisions of this Section 4.07.
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(c) Each Purchaser acknowledges and agrees that as of the date hereof
the shares of Common Stock have not been registered under the Securities
Act or the securities laws of any state, that the shares of Common Stock
will be characterized as "restricted securities' under federal securities
laws and that under such laws and applicable regulations the shares of
Common Stock cannot be sold or otherwise disposed of or otherwise
Transferred without registration under the Securities Act or an exemption
therefrom. Each Purchaser acknowledges that, except as provided in the
Registration Rights Agreement, none of the Purchasers or Permitted
Transferees has any right to require the Company to register the Common
Stock. Each Purchaser further acknowledges and agrees that each certificate
of Common Stock to be issued to Purchasers or any Permitted Transferee
hereunder shall bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE TRANSFERRED,
SOLD OR OTHERWISE DISPOSED OF IN ABSENCE OF (I) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SHARES UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR
(II) AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED. THIS CERTIFICATE IS ISSUED PURSUANT TO AND SUBJECT TO THE
RESTRICTIONS ON TRANSFER, VOTING AND OTHER PROVISIONS OF A SECURITIES PURCHASE
AGREEMENT DATED AS OF AUGUST , 1998 BETWEEN THE COMPANY AND THE
PURCHASERS REFERRED TO THEREIN, A COPY OF WHICH IS ON FILE WITH THE COMPANY.
EXCEPT AS PROVIDED IN SUCH SECURITIES PURCHASE AGREEMENT, THE SHARES REPRESENTED
BY THIS CERTIFICATE ARE NOT TRANSFERABLE AND ANY PURPORTED TRANSFER IN VIOLATION
OF THE PROVISIONS OF SUCH SECURITIES PURCHASE AGREEMENT SHALL BE VOID AND OF NO
FORCE AND EFFECT.
Any holder of the Common Stock may request the Company to remove the legend
described herein from the certificates evidencing such Common Stock by
submitting to the Company such certificates, together with an opinion of counsel
reasonably satisfactory to the Company to the effect that such legend is no
longer required under the Securities Act.
SECTION 4.08. FURTHER ASSURANCES. The Company and Purchasers shall execute
and deliver, or cause to be executed and delivered, such additional instruments
and other documents and shall take such further actions as the Company or
Purchasers, as the case may be, may reasonably request to effectuate, carry out
and comply with all of the terms of this Agreement and the Ancillary Documents
and the transactions contemplated hereby and thereby, including, without
limitation, making application as soon as practicable for all Consents required
in connection with the transactions contemplated hereby and diligently pursuing
the receipt of such Consents in good faith.
SECTION 4.09. SOLICITATION. From the date hereof until the Closing Date,
neither the Company nor any of the Company Subsidiaries shall, and the Company
shall direct and use its reasonable best efforts to cause its directors,
officers, employees, agents and representatives not to, initiate, solicit or
encourage, directly or indirectly, any inquiries with respect to, or the making
of, any Investment Proposal or engage in any negotiations concerning, provide
any nonpublic information or data to, or have any discussions with, any Person
(other than Purchasers) relating to, an Investment Proposal, or enter into any
agreement with respect to, or otherwise take any action to effect or facilitate
any effort or attempt to make or implement an Investment Proposal. On the date
hereof, the Company and the Company Subsidiaries shall terminate all existing
negotiations and discussions with any Person (other than Purchasers) relating to
any Investment Proposal. For purposes of this Section 4.09, an "Investment
Proposal" shall mean any proposal for the sale, exchange or issuance by the
Company, whether in a private or public offering, of any shares of Common Stock
or other securities or any securities, options, rights or warrants convertible
into or exchangeable for any Common Stock (other than options granted in the
ordinary course and shares issued upon exercise of options or upon conversion of
outstanding convertible debt securities) or other equity securities of the
Company or any sale of all or a material portion of the assets of the Company
(other than sales in the ordinary course of business) or merger with or into any
other Person (whether or not the Company is the Surviving Person, but excluding
any merger of a Company Subsidiary with and into the Company or any other
Company
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Subsidiary) or any financing or any investment banking or financing services
(other than as set forth in Schedule 3.01(r)(vi) or as contemplated by this
Agreement) involving the Company or any of the Company Subsidiaries.
SECTION 4.10. BOARD REPRESENTATION.
(a) On or prior to the Closing Date, the Board of Directors of the
Company shall be expanded by two positions, and Michael J. Franco and John
A. Henry shall be appointed to fill the vacancies created by such expansion
with Mr. Henry designated as a Class I director and Mr. Franco designated
as a Class III director. Thereafter, for so long as Purchasers and the
Permitted Transferees own, in the aggregate, at least the Required
Interest, Purchasers shall be entitled to designate an aggregate of two
directors on the management slate of nominees to the Company's Board of
Directors (the "Purchaser Designees") (with MSP having the right to
designate one director and MSREF III having the right to designate one
director) except the foregoing number of directors shall be reduced to the
extent one or more Purchaser Designees have been elected to and are serving
on the Board of Directors and are in a class of directors not currently
standing for re-election. In the event that the aggregate interest owned by
Purchasers and the Permitted Transferees shall be less than the Required
Interest but equal to or greater than the Minimum Interest and Purchasers
currently have two Purchaser Designees serving on the Board of Directors,
then Purchasers shall cause one of the two Purchaser Designees to resign
within 10 Business Days, the Board of Directors shall be reduced by one
member and thereafter MSP shall be entitled to designate one member on the
management slate of nominees to the Company's Board of Directors (until
such time as the aggregate interest owned by Purchasers and the Permitted
Transferees shall be less than the Minimum Interest, whereupon Purchasers
shall within 10 Business Days cause the remaining Purchaser Designee to
resign and Purchasers shall have no further rights under this Section)
except the foregoing shall not apply to the extent MSP's Purchaser Designee
has been elected to and is serving on the Board of Directors and is in a
class of directors not currently standing for re-election. At least 90 days
prior to each annual meeting of shareholders at which a Purchaser Designee
will stand for election, MSREF III and MSP, as the case may be, shall
provide written notice to the Company indicating the Purchaser Designee to
be nominated by each such Purchaser at such annual meeting, and such notice
shall set forth as to each Person proposed for nomination all information
relating to such Persons that is required to be disclosed in solicitations
of proxies for election of directors pursuant to Regulation 14A under the
Exchange Act (including such Person's written consent to being named in the
related proxy statement as a nominee and to serving as a director if
elected).
(b) The Company shall use its reasonable best efforts at all times to
take such action as is necessary to ensure that the nominating committee of
the Board of Directors (or the full Board if there is no nominating
committee) of the Company shall nominate and recommend to the shareholders
of the Company and the shareholders of the Company shall elect the
Purchaser Designees to the Board of Directors. As a condition precedent to
the inclusion of any Purchaser Designee on any slate of nominees to be
recommended to shareholders by the Board of Directors pursuant to Section
4.10(a), the nominating committee of the Board (or the full Board if there
is no nominating committee) may review the information provided pursuant to
Section 4.10(a) to evaluate in good faith such Purchaser Designee's
character and fitness to serve as a director. If the nominating committee
(or the full Board if there is no nominating committee) determines in good
faith that any such Purchaser Designee lacks the character or fitness to
serve as a director based on applicable legal and reasonable commercial
standards, the nominating committee (or the full Board if there is no
nominating committee) shall inform the Purchaser who nominated such
Purchaser Designee of such determination, and such Purchaser shall then
have the right to propose an alternative Purchaser Designee who is
reasonably acceptable to the Company. All Purchaser Designees elected to
the Board of Directors shall receive, during the period in which they
serve, any and all benefits (including, without limitation, any director
compensation and grants of stock options under the 1998 Non-Employee
Director Plan) provided to the other members of the Board of Directors of
the Company.
(c) If at any time Purchasers and the Permitted Transferees are
entitled to designate one or more nominees to the Board of Directors
pursuant to this Section 4.10 and Purchasers do not have a
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representative on the Board, so long as Purchasers and the Permitted
Transferees own, in the aggregate, at least the Minimum Interest, the
Company shall permit two representatives (or in the case that Purchasers
are entitled to designate only one nominee to the Board, only one
representative) of Purchasers (which representatives shall be acceptable to
the Company in its reasonable discretion) to attend, but not vote, as
observers at each meeting of the Board of Directors or any committee of the
Board empowered to act with full authority of the entire Board, including
telephonic meetings, provided that each such representative executes and
delivers to the Company a confidentiality agreement in a form reasonably
satisfactory to the Company prior to attendance at any such meetings. The
Company shall cause notice of any meeting of the Board of Directors or any
such committee of the Board to be delivered to any such representatives at
the same time and in the same manner as notice is given to the members of
the Board of Directors. Such representatives will be entitled to receive
all written materials given to the members of the Board of Directors in
connection with such meetings at the time such materials and information
are given to the Board of Directors. The Company shall reimburse such
representatives for his or her reasonable out-of-pocket expenses incurred
in connection with attending meetings of the Board of Directors or any such
committee of the Board.
(d) For so long as any Purchaser or Permitted Transferee has the right
to designate at least one director on a management slate of nominees to the
Company's Board of Directors, the Company shall use reasonable best efforts
to cause the Board of Directors and the shareholders of the Company not to
increase the number of members of the Board of Directors above nine without
the prior written consent of each Purchaser and Permitted Transferee
(unless such increase is required to comply with Applicable Law), which
consent may be withheld in each Purchaser's and Permitted Transferee's
reasonable discretion. In the event of a vacancy (either by death, removal
or resignation) of a director other than a Purchaser Designee which does
not cause the total number of directors to be less than seven, the Company
shall use reasonable best efforts to cause the Board of Directors not to
appoint a replacement to fill such vacancy without the prior written
consent of each Purchaser and Permitted Transferee (unless required to
comply with Applicable Law and the Company's bylaws), which consent may be
withheld in each Purchaser's and Permitted Transferee's reasonable
discretion.
(e) Each Purchaser Designee shall be entitled to serve on any standing
committee of the Board except to the extent the Purchaser Designee's
participation would cause the Purchaser Designees' participation on such
committee to exceed their proportionate representation on the full Board,
provided, however, that at least one Purchaser Designee may serve on each
standing committee selected in accordance with this subsection (e). Subject
to the preceding sentence, MSREF III and MSP shall each have the right to
select the committees of the Board on which its Purchaser Designee will
serve. The Company shall use its reasonable best efforts at all times as is
necessary to ensure that each Purchaser Designee is appointed to all such
committees of the Board of Directors.
(f) For so long as Purchasers and the Permitted Transferees own, in
the aggregate, at least the Minimum Interest and the Purchaser Designees
are serving on the Board of Directors, Purchasers shall, and shall cause
the Permitted Transferees, to vote all of their shares of Common Stock at
any regular or special meeting of the shareholders of the Company (and any
adjournments thereof) called for the purpose of electing directors to the
Board, or, to the extent permitted by the Company's Restated Articles of
Organization and Amended and Restated Bylaws and by Applicable Law, in any
written consent executed in lieu of such a meeting of shareholders, for
election of the management slate of nominees (other than the Purchaser
Designees) to the Company's Board of Directors. The Purchasers shall and
shall cause the Permitted Transferees to vote all of their shares of Common
Stock at any regular or special meeting of the shareholders of the Company
(and any adjournments thereof) called for the purpose of approving the
issuance of the shares under this Agreement in favor of such issuance and
the transactions contemplated by this Agreement.
(g) Subject to availability on reasonable terms and at a reasonable
cost, for so long as any Purchaser Designee remains on the Board of
Directors, the Company shall use reasonable best efforts to maintain
directors' and officers' liability insurance with financially sound and
reputable insurers at a level of coverage of at least $10,000,000.
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(h) It is understood and agreed that the Company's Board of Directors
is subject to fiduciary duties under Applicable Law, and that the Company's
shareholders have rights with respect to the composition of the Board of
Directors under Applicable Law and the Company's Amended and Restated
Bylaws. Accordingly, for purposes of this Section 4.10, all obligations of
the Company under paragraphs (a), (b), (d) and (e) hereof shall be deemed
to be "to use reasonable best efforts" to cause the intended action to be
taken, recognizing that the Company cannot guaranty what action its Board
of Directors or stockholders may take in the future.
SECTION 4.11. BOARD OF DIRECTORS APPROVALS. Notwithstanding anything
contained in the Company's Restated Articles of Organization or its bylaws, for
so long as Purchasers and the Permitted Transferees own, in the aggregate, at
least the Required Interest, the following actions by the Company or any Company
Subsidiary shall require the affirmative vote of at least one of the Purchaser
Designees prior to the effectiveness or consummation of such action (provided
that if Purchasers do not have a representative on the Board of Directors as a
result of the failure of the Company to nominate any Purchaser Designee or
failure of the shareholders of the Company to elect any Purchaser Designee, then
such action shall require the approval of the Purchasers and Permitted
Transferees holding a majority of the shares of Common Stock issued pursuant to
this Agreement):
(a) the consolidation or merger of the Company with or into another
Person (other than a merger of a Company Subsidiary into the Company or
another Company Subsidiary); the sale of all or substantially all of the
assets of the Company; or, except for sales of receivables under the
existing purchase facility with Heller Financial, Inc. or its permitted
successors or assigns, (up to an aggregate of $200,000,000) the sale,
assignment, transfer, lease, conveyance or other disposal of property or
assets of the Company or the Company Subsidiaries in one or more related
transactions where the aggregate consideration paid exceeds $50,000,000;
(b) the purchase or other acquisition of the business, assets or
securities of any other Person (whether by merger, another form of business
combination or otherwise) in one or more related transactions where the
aggregate consideration paid (exclusive of any future development costs)
exceeds $50,000,000;
(c) the issuance of any Senior Securities, or authorization of the
issuance of any securities convertible into or exchangeable for, or
options, warrants or other rights to acquire, any Senior Securities;
(d) except for any issuances (i) to Purchasers or a Permitted
Transferee pursuant to this Agreement or (ii) of securities upon conversion
or exercise of any options, notes or debentures outstanding as of the date
hereof or (iii) grants of options or issuances of securities upon exercise
thereof pursuant to any existing director or employee stock option or stock
benefit plan approved by the Company's Board of Directors, the issuance of
Parity Securities, or authorization of the issuance of any securities
convertible into or exchangeable for, or options, warrants or other rights
to acquire, any Parity Securities, in each case, in excess of 8% of the
then issued and outstanding shares of Common Stock or at a price per share
that is less than the Closing Share Price, or at any time prior to
expiration of the Commitment Period unless the Maximum Shares have been
issued to Purchasers or the shareholders have failed to approve the
issuance of any shares of Common Stock to be issued to Purchasers in
accordance with this Agreement on or after the Threshold Date at the
meeting referred to in Section 4.16;
(e) the incurrence of any Indebtedness by the Company or any Company
Subsidiary in an aggregate principal amount which would cause the Total
Market Capitalization Ratio of the Company to be equal to or greater than
50%;
(f) the declaration or payment of any dividend (other than a stock
dividend) or distribution on the shares of Common Stock, or the repurchase,
redemption or other acquisition of shares of Common Stock (other than in
connection with "cashless" exercises of options);
(g) any amendment to the Restated Articles of Organization or bylaws
of the Company which could reasonably be expected to conflict with the
terms of this Agreement;
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<PAGE> 51
(h) the entry into a material line of business that is unrelated to or
materially different from the Timeshare/Residential Business;
(i) the entry into any transaction with any Affiliate other than
transactions entered into with Company Subsidiaries; and
(j) the authorization or issuance of any capital stock of any Company
Subsidiary, or any options, rights, warrants or securities convertible into
or exchangeable for any capital stock of any Company Subsidiary (other than
pursuant to employee stock option plans in existence as of the date
hereof).
SECTION 4.12. PREEMPTIVE RIGHTS.
(a) In the event the Company proposes to undertake an issuance of New
Securities (as defined below) for cash after the date hereof, each
Purchaser and Permitted Transferee that owns any shares of Common Stock on
the date of issuance shall have the right to purchase its "proportionate
share" of such New Securities on the terms and conditions set forth herein.
Each Purchaser and Permitted Transferee that owns any shares of Common
Stock on such date shall also have the right of over allotment such that,
if any Purchaser or Permitted Transferee fails to exercise its rights
hereunder to purchase its proportionate share of New Securities to the
fullest extent permitted, the other Purchasers and Permitted Transferees
may purchase its proportionate share of New Securities that such Purchaser
or Permitted Transferee elected not to purchase. For purposes of this
Section 4.12, each Purchaser's and Permitted Transferee's "proportionate
share" means the number of New Securities proposed to be issued and sold
multiplied by a fraction, the numerator of which is the number of shares of
Common Stock issued to such Purchaser or Permitted Transferee pursuant to
Article II hereof and held on such date by such Person (determined (i)
during the Commitment Period, assuming that the Maximum Shares have been
issued to the Purchasers or their Permitted Transferees and (ii) after the
Commitment Period, based on the actual number of shares issued pursuant to
Article II hereof and then held on such date by such Person) and the
denominator of which is the total number of shares of Common Stock
outstanding (determined (i) during the Commitment Period, on a fully
diluted basis assuming full exercise and conversion of all outstanding
options, warrants, rights and other securities which are convertible or
exchangeable shares of Common Stock and issuance of the Maximum Shares, and
(ii) after the Commitment Period, on a fully diluted basis assuming full
exercise and conversion of all outstanding options, warrants, rights and
other securities which are convertible or exchangeable for shares of Common
Stock).
(b) As used in this Section 4.12, the term "New Securities" shall mean
(i) any capital stock of the Company, (ii) any rights, options or warrants
to purchase any such capital stock, or to purchase any securities of any
type whatsoever that are, or may become, convertible into or exercisable
for any such capital stock, and (iii) any securities of any type whatsoever
that are, or may become, convertible into or exercisable for any such
capital stock; provided, however, that "New Securities" shall not include
(A) shares of Common Stock issued upon conversion or exercise of options,
debentures, notes, warrants or rights outstanding as of the date hereof,
(B) securities issued pursuant to the acquisition of another corporation or
legal entity by the Company by merger, consolidation, purchase of all or
substantially all of such other entity's assets, or acquisition transaction
in which the Company participates on an arm's length basis, (C) securities
(including options) issued in connection with any director or employee
stock option plan approved by the Board of Directors of the Company (or any
committee thereof) and the shareholders of the Company, or any shares of
Common Stock issued to any employee or officer for his own investment and
as part of a bona fide compensation plan approved by the Board of
Directors, (D) any securities issued in replacement of, or as dividends
attributable to, any securities of the Company outstanding as of the date
hereof, (E) any securities issued to all holders of shares of Common Stock
on a pro rata basis, (F) any securities issued (including, without
limitation, any rights and any securities issued upon the exercise of such
rights) in connection with a shareholders rights plan approved by the Board
of Directors or (G) any securities issued upon conversion or exercise of
New Securities that Purchasers previously elected not to exercise their
purchase rights hereunder or as to which such purchase rights did not
apply.
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<PAGE> 52
(c) In the event the Company proposes to undertake an issuance of New
Securities, it shall give Purchasers and the Permitted Transferees written
notice of its intention to do so at least 20 days prior to such issuance,
describing the New Securities and the price and terms upon which the
Company proposes to issue the same (the "Original Notice"). Each Purchaser
and Permitted Transferee may purchase (i) such number of New Securities up
to such Purchaser's or Permitted Transferee's proportionate share of such
New Securities ("Full Amount") plus (ii) to the extent other Purchasers or
Permitted Transferees do not exercise their Full Amount, any additional New
Securities that the other Purchasers or Permitted Transferees elected not
to purchase in amount as agreed to by the Purchasers and Permitted
Transferees electing to purchase such additional New Securities (it being
understood that in no event shall the Company be required to issue, in the
aggregate, an amount of New Securities in excess of the aggregate amount
issuable if all Purchasers and Permitted Transferees purchased their
respective Full Amounts), for the price and upon the terms and conditions
pertaining to the issuance of the New Securities (notwithstanding any
changes that may be made to the terms and conditions set forth in the
Original Notice) by giving written notice to the Company no later than 15
days after the date of receiving the Original Notice ("Notice Date")
identifying the number of New Securities to be purchased. If any Purchasers
or Permitted Transferees elect to purchase any New Securities within such
15-day period, such New Securities shall be issued and sold to each of them
in accordance with the terms and conditions pertaining to the issuance of
the New Securities (notwithstanding any changes that may be made to the
terms and conditions set forth in the Original Notice). Any New Securities
that the Purchasers and Permitted Transferees elected not to purchase may
be sold by the Company in accordance with the terms and conditions
pertaining to such issuance of New Securities.
(d) Notwithstanding anything to the contrary contained in this Section
4.12, upon any purchase of any New Securities by a Purchaser or Permitted
Transferee pursuant to Section 4.12 on a later date than the issuance of
the New Securities that gave rise to such Purchaser's or Permitted
Transferee's purchase rights under Section 4.12, (i) the purchase price
shall be adjusted by subtracting therefrom the value of any dividend or
distribution received in respect of such New Securities after the date of
such issuance and prior to the purchase by such Purchaser or Permitted
Transferee hereunder, and (ii) the purchase price and number of shares or
amount to be purchased shall be adjusted to reflect any stock split, stock
dividend or other combination or reclassification of the capital stock
during such time.
(e) Upon written notice to the Company, each Purchaser and Permitted
Transferee, in their sole discretion, may terminate all of its rights under
this Section 4.12, or may suspend its rights under this Section 4.12 for
any period of time set forth in such notice.
SECTION 4.13. ADJUSTMENTS. If during the Commitment Period, the Company
shall declare or pay a dividend on the Common Stock payable in shares of Common
Stock or in rights to acquire Common Stock, or shall effect a stock split or
reverse stock split, or a combination, consolidation or reclassification of the
Common Stock, then the Closing Share Price shall be proportionately decreased or
increased, as appropriate, to give effect to such event.
SECTION 4.14. [RESERVED].
SECTION 4.15. FINANCING FEES; ADVISORY FEES.
(a) Subject to any rights held by any Person existing prior to the
Closing Date (which the Company agrees it will not extend beyond their
current term), and except for a fairness opinion relating to the
transactions contemplated by this Agreement, for so long as Purchasers and
Permitted Transferees own, in the aggregate, at least the Minimum Interest,
in the event that the Board of Directors authorizes the Company to finance
or refinance the Company or any of the Company's assets either through debt
or equity offerings (other than securitizations of installment land and/or
timeshare receivables) and elects to utilize the services of any investment
or financial advisor or commercial (but excluding commercial banking
services that are incidental to such debt or equity offerings) or
investment banking firm in connection therewith, Morgan Stanley, Dean
Witter & Co. or any Affiliate or subsidiary thereof ("MSDW") shall have the
exclusive right to act as the Company's financial agent and advisor and to
manage such financings or offerings (provided that MSDW has reasonable
experience in the areas for
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<PAGE> 53
which such services are to be provided, and provided further that the Board
of Directors, in its reasonable judgement, has not determined that there
exists any actual or potential conflict of interest with regard to such
representation (but not including a conflict of interest that may exist as
a result of Purchasers' ownership interest in the Company)), and, as
compensation for such services shall be entitled to receive a fee equal to
the then current market rate for similar financings or offerings expressed
as a percentage of the aggregate gross proceeds received from such
financing or offerings, which fees are to be paid to MSDW at the closing of
such transaction. In connection with such services, the Company will enter
into a placement, underwriting or other engagement agreement with MSDW or a
subsidiary or Affiliate thereof, which shall contain terms and conditions
customary for that type of service.
(b) For so long as Purchasers and Permitted Transferees own, in the
aggregate, at least the Minimum Interest, in the event the Company
determines to sell all or substantially all of the assets of the Company or
of all of the Company Subsidiaries, or to consolidate or merge into or with
any other Person (whether or not the Company continues as the Surviving
Person), or to acquire all or substantially all of the assets, business or
securities of any other Person and elects to utilize the services of an
investment or financial advisor or commercial (but excluding commercial
banking services that are incidental to such transactions) or investment
banking firm in connection therewith, MSDW shall have the exclusive right
to act as advisor and/or underwriter to the Company in connection with such
transactions (provided that the Board of Directors, in its reasonable
judgment, has not determined that there exists any actual or potential
conflict of interest with regard to such representation (but not including
a conflict of interest that may exist as a result of Purchasers' ownership
interest in the Company)), and, as compensation for such services to be
provided, MSDW shall be entitled to receive a fee equal to the then current
market rate for similar transactions, which fees are to be paid to MSDW at
the closing of such transaction. In connection with such services, the
Company will enter into a placement, underwriting or other engagement
agreement with MSDW or a subsidiary or Affiliate thereof, which shall
contain terms and conditions customary for that type of service.
SECTION 4.16. SHAREHOLDER APPROVAL. The Company shall take all action
necessary in accordance with all Applicable Law and in accordance with its
Restated Articles of Organization and bylaws to convene a meeting of its
shareholders as soon as reasonably practicable after the date hereof (but in no
event later than the earlier to occur of (x) November 30, 1998, or (y) the
Threshold Date) to consider and vote upon the issuance of the shares of Common
Stock to be issued to Purchasers in accordance with this Agreement on or after
the Threshold Date. The Company, acting through its Board of Directors, shall
recommend to its shareholders the approval of the issuance of the shares of
Common Stock to be issued to Purchasers in accordance with this Agreement, and
shall use its reasonable best efforts to obtain such approval of its
shareholders.
SECTION 4.17. NOTICES OF PURCHASERS. Purchasers agree to promptly notify
the Company of the consummation of any Transfer to any Person (including a
Permitted Transferee) of any shares of Common Stock issued to Purchasers under
the terms of this Agreement. Purchasers further agree to promptly notify the
Company when the Purchasers and any Permitted Transferees own less than the
Required Interest, the Minimum Interest and the Permitted Interest.
ARTICLE V.
CONDITIONS OF CLOSING
SECTION 5.01. CONDITIONS OF PURCHASE AT CLOSING. The obligations of
Purchasers to purchase the Common Stock to be purchased at the Closing are
subject to satisfaction or waiver of each of the following conditions on or
prior to the Closing Date:
(a) Representations and Warranties; Covenants. The representations
and warranties of the Company contained in this Agreement and the Ancillary
Documents and in each certificate or document delivered by the Company to
Purchasers in connection with the transactions contemplated hereby and
thereby shall be true and correct in all material respects on and as of the
date of this Agreement or the
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<PAGE> 54
date of such Ancillary Documents, certificates or other documents, as the
case may be, and on and as of the Closing Date, with the same effect as
though made on and as of the Closing Date (except for representations and
warranties that speak as of a specific date other than the Closing Date
(which need only be true and correct in all material respects as of such
date)), and the Company shall have performed all obligations and complied
in all material respects with all agreements, undertakings, covenants and
conditions required hereunder and thereunder to be performed by it at or
prior to the Closing.
(b) Opinion of Counsel. Purchasers shall have received at the Closing
from Choate, Hall & Stewart counsel to the Company, a favorable written
opinion dated as of the Closing Date which shall be to the effect set forth
in Exhibit D hereto.
(c) No Injunction. There shall not be in effect any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits consummation of the transactions contemplated hereby.
(d) Regulatory Approvals. All Permits, Consents, authorizations,
orders and approvals of, and filings and registrations with any
Governmental Entity or any other Person required to be made or obtained
under any federal or state law, rule or regulation in connection with the
execution, delivery and performance of this Agreement and the Ancillary
Documents and the consummation of the transactions contemplated hereby and
thereby on the Closing Date shall have been obtained or made, and all
statutory waiting periods thereunder in respect thereof shall have expired,
in each case, without the imposition of any terms or conditions which,
either individually or in the aggregate, are unduly burdensome to
Purchasers or any of their Affiliates or are such that, had they been known
to Purchasers prior to the date hereof, it is reasonable to conclude that
Purchasers would not have entered into this Agreement or the transactions
contemplated hereby.
(e) Company Certificate. The Company shall have delivered to
Purchasers a certificate, dated the Closing Date, signed by its chief
executive officer and its chief financial officer, in form and substance
satisfactory to Purchasers to the effect that the conditions set forth in
this Section 5.01 hereof have been satisfied.
(f) Registration Rights Agreement. (i) The Registration Rights
Agreement shall have been executed and delivered by the parties thereto and
shall be in full force and effect and (ii) all Consents, approvals,
waivers, amendments, or authorizations required under any agreements set
forth in Schedule 3.01(c) in connection with the execution, delivery and
performance by the Company of the Registration Rights Agreement which are
necessary in order for Purchasers to have the full benefit or enjoyment of
the provisions of the Registration Rights Agreement shall have been
obtained.
(g) Payment of Expenses. The Company shall have paid to Purchasers
the costs and expenses described in Section 7.07 hereof.
(h) Appointment of Purchaser Designees. The Purchaser Designees shall
have been appointed to the Board of Directors.
(i) Shareholder Voting Agreements. The Shareholder Voting Agreements
shall have been executed and delivered by each Person listed on Schedule
5.01(i) hereof and shall be in full force and effect.
(j) Amendment of Bylaws. The Company's bylaws shall have been amended
to provide for a staggered board of directors in accordance with Exhibit E
hereto, such amendment shall be in form and substance reasonably
satisfactory to Purchasers and shall have been approved by the Board of
Directors, such amendment shall have been duly filed if filing thereof is
required by any Governmental Entity or the New York Stock Exchange, such
amended bylaws shall be in full force and effect and copies of such amended
bylaws shall have been delivered to Purchasers.
(k) Exchange Listing. The maximum number of shares of Common Stock
which can be issued to Purchasers prior to the Threshold Date (which shall
be equal to 19.99% of the issued and outstanding shares of Common Stock on
the Closing Date (but excluding any shares of Common Stock issued to
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<PAGE> 55
Purchasers of the Permitted Transferees on the Closing Date)), shall be
approved for listing on the New York Stock Exchange and the Pacific Stock
Exchange subject to notice of issuance.
SECTION 5.02. CONDITIONS OF SALE AT CLOSING. The obligation of the Company
to sell and issue the Common Stock to be sold and issued at the Closing is
subject to satisfaction or waiver of each of the following conditions on or
prior to the Closing Date:
(a) Representations and Warranties; Covenants. The representations
and warranties of Purchasers contained in this Agreement and the Ancillary
Documents and in any certificates or other documents delivered by
Purchasers to the Company in connection with the transactions contemplated
hereby and thereby shall be true and correct in all material respects on
and as of the date of this Agreement or the date of such Ancillary
Documents, certificates or other documents, as the case may be, and on and
as of the Closing Date with the same effect as though made on and as of the
Closing Date (except for representations and warranties that speak as of a
specific date other than the Closing Date (which need only be true and
correct in all material respects as of such date)), and Purchasers shall
have performed all obligations and complied in all material respects with
all agreements, undertakings, covenants and conditions required to be
performed by each of them at or prior to the Closing.
(b) No Injunction. There shall not be in effect any order, decree or
injunction of a court or agency of competent jurisdiction with enjoins or
prohibits consummation of the transactions contemplated hereby.
(c) Regulatory Approvals. All Permits, Consents, authorizations,
orders and approvals of, and filings and registrations with any
Governmental Entity or any other Person required to be made or obtained
under any federal or state law, rule or regulation for or in connection
with the execution, delivery and performance of this Agreement and the
Ancillary Documents and the consummation of the transactions contemplated
hereby and thereby on the Closing Date shall have been obtained or made,
and all statutory waiting periods thereunder in respect thereof shall have
expired, in each case without the imposition of any terms or conditions
which, either individually or in the aggregate, are unduly burdensome to
the Company or any of its Affiliates or are such that, had they been known
to the Company prior to the date hereof, it is reasonable to conclude that
the Company would not have entered into this Agreement or the transactions
contemplated hereby.
(d) Exchange Listing. The maximum number of shares of Common Stock
which can be issued to Purchasers prior to the Threshold Date (which shall
be equal to 19.99% of the issued and outstanding shares of Common Stock on
the Closing Date (but excluding any shares of Common Stock issued to
Purchasers of the Permitted Transferees on the Closing Date)), shall be
approved for listing on the New York Stock Exchange and the Pacific Stock
Exchange subject to notice of issuance.
(e) Purchasers' Certificate. Each Purchaser shall have delivered to
the Company a certificate, dated the Closing Date, in form and substance
satisfactory to the Company to the effect that the conditions set forth in
this Section 5.02 have been satisfied.
SECTION 5.03. CONDITIONS OF PURCHASE OF REMAINING SHARES. The Purchasers'
obligations to purchase the Remaining Shares on each Subsequent Closing Date
shall be subject to, in each case, satisfaction or waiver of each of the
following conditions on or prior to each Subsequent Closing Date:
(a) Representations and Warranties; Covenants. The representations
and warranties of the Company contained in this Agreement and the Ancillary
Documents and in each certificate or document delivered by the Company to
Purchasers in connection with the transactions contemplated hereby and
thereby shall be true and correct in all material respects on and as of the
Subsequent Closing Date, with the same effect as though made on or as of
the Subsequent Closing Date (except for representations and warranties that
speak as of a specific date other than such Subsequent Closing Date (which
need only be true and correct in all material respects as of such date)),
and the Company shall have performed all obligations and complied in all
material respects with all agreements, undertakings, covenants and
conditions required hereunder and thereunder to be performed by the Company
at or prior to the Subsequent Closing Date.
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(b) Opinion of Counsel. Purchasers shall have received at the closing
of any sale and purchase of any Remaining Shares (each a "Subsequent
Closing") from Choate, Hall & Stewart or any other counsel to the Company
satisfactory to Purchasers, a favorable written opinion dated as of the
date of the Subsequent Closing which shall be to the effect set forth in
Exhibit D hereto.
(c) No Injunction. There shall not be in effect any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits consummation of the sale and purchase of the Remaining Shares to
be purchased by Purchasers at the Subsequent Closing.
(d) Company Certificate. The Company shall have delivered to
Purchasers a certificate, dated as of the Subsequent Closing Date, signed
by its chief executive officer and its chief financial officer, in form and
substance satisfactory to Purchasers to the effect that the conditions set
forth in this Section 5.03 hereof have been satisfied.
(e) Payment of Expenses. The Company shall have paid to Purchasers
the costs and expenses incurred by Purchasers in connection with the
Subsequent Closing pursuant to Section 7.07 hereof.
(f) Material Adverse Effect. Since the Closing Date, there shall not
have been any change, event, occurrence or development in the assets,
business, properties, liabilities, business affairs, condition (financial
or otherwise), or results of operations of the Company or any Company
Subsidiary that has had or could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect.
(g) Market. (i) Trading generally shall not have been suspended or
materially limited on or by, as the case may be, either the New York Stock
Exchange or the Pacific Stock Exchange, (ii) trading of any securities of
the Company or the Company Subsidiaries shall not have been suspended on
the New York Stock Exchange or the Pacific Stock Exchange, (iii) a general
moratorium on commercial banking activities in New York shall not have been
declared by either Federal or New York State authorities and (iv) there
shall not have occurred any outbreak or escalation of hostilities or any
change in financial markets or any calamity or crisis that, in any such
case, in Purchasers' judgment, is material and adverse to the Company.
(h) Exchange Listing. The Remaining Shares to be issued to Purchasers
on the Subsequent Closing Date shall be approved for listing on the New
York Stock Exchange and Pacific Stock Exchange (or such other national
securities exchange or securities trading system on which the Common Stock
is listed) subject to official notice of issuance and notice of results of
the shareholder vote prior to the Threshold Date.
(i) Shareholder Approval. For any Remaining Shares to be issued on or
after the Threshold Date, the shareholders of the Company shall have duly
approved the issuance of such shares of Common Stock pursuant to this
Agreement (the "Required Shareholder Approval") in accordance with Section
4.16 of the Agreement and all Applicable Laws.
(j) Regulatory Approvals. All Permits, Consents, authorizations,
orders and approvals of, and filings and registrations with any
Governmental Entity or any other Person required to be made or obtained
under any federal or state law, rule or regulation in connection with the
consummation of the transactions contemplated hereby on such Subsequent
Closing Date shall have been obtained or made, and all statutory waiting
periods thereunder in respect thereof shall have expired, in each case,
without the imposition of any terms or conditions which, either
individually or in the aggregate, are unduly burdensome to Purchasers or
any of their Affiliates or are such that, had they been known to Purchasers
prior to the date hereof, it is reasonable to conclude that Purchasers
would not have entered into this Agreement or the transactions contemplated
hereby.
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SECTION 5.04. CONDITIONS OF SALE OF REMAINING SHARES. The obligation of
the Company to sell and issue any Remaining Shares is subject to satisfaction or
waiver of each of the following conditions on or prior to any Subsequent Closing
Date:
(a) Representations and Warranties; Covenants. The representations
and warranties of Purchaser contained in this Agreement and the Ancillary
Documents and in each certificate or document delivered by Purchasers to
the Company in connection with the transactions contemplated hereby and
thereby shall be true and correct in all material respects on and as of the
Subsequent Closing Date with the same effect as though made on and as of
the Subsequent Closing Date (except for representations and warranties that
speak as of a specific date other than such Subsequent Closing Date (which
need only be true and correct in all material respects as of such date)),
and Purchasers shall have performed all obligations and complied with all
agreements, undertakings, covenants and conditions required by each of them
to be performed at or prior to the Subsequent Closing Date.
(b) No Injunction. There shall not be in effect any order, decree or
injunction of a court or agency of competent jurisdiction with enjoins or
prohibits consummation of the sale and purchase of the Remaining Shares to
be sold and issued by the Company at the Subsequent Closing.
(c) Purchasers' Certificate. Purchasers shall have delivered to the
Company a certificate, dated as of the Subsequent Closing Date, in form and
substance satisfactory to the Company to the effect that the conditions set
forth in this Section 5.04 have been satisfied.
(d) Shareholder Approval. For any Remaining Shares to be issued on or
after the Threshold Date, the Required Shareholder Approval shall have been
obtained.
(e) Regulatory Approvals. All Permits, Consents, authorizations,
orders and approvals of, and filings and registrations with any
Governmental Entity or any other Person required to be made or obtained
under any federal or state law, rule or regulation for or in connection
with the consummation of the transactions contemplated hereby on such
Subsequent Closing Date shall have been obtained or made, and all statutory
waiting periods thereunder in respect thereof shall have expired, in each
case without the imposition of any terms or conditions which, either
individually or in the aggregate, are unduly burdensome to the Company or
any of its Affiliates or are such that, had they been known to the Company
prior to the date hereof, it is reasonable to conclude that the Company
would not have entered into this Agreement or the transactions contemplated
hereby.
(f) Exchange Listing. The Remaining Shares to be issued to Purchasers
on the Subsequent Closing Date shall be approved for listing on the New
York Stock Exchange and Pacific Stock Exchange (or such other national
securities exchange or securities trading system on which the Common Stock
is listed) subject to official notice of issuance and notice of results of
the shareholder vote prior to the Threshold Date.
ARTICLE VI.
[RESERVED]
ARTICLE VII.
MISCELLANEOUS
SECTION 7.01. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All covenants
and agreements and all representations and warranties made herein or in any
Schedule or Exhibit hereto, or in any certificates or documents delivered in
connection with the Closing shall survive the Closing for a period of 18 months
following each issuance of shares of Common Stock to Purchasers pursuant to
Sections 2.01 and 2.03 of this Agreement.
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SECTION 7.02. NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given, if delivered
personally, by telecopier or sent by overnight courier as follows:
(a) If to Purchasers, to:
<TABLE>
<S> <C>
c/o Morgan Stanley Real Estate Fund III, L.P. With copies to:
37th Floor Jones, Day, Reavis & Pogue
1585 Broadway 2300 Trammell Crow Center
New York, New York 10036-8293 2001 Ross Avenue
Phone: (212) 761-6084 Dallas, Texas 75201
Fax: (212) 761-0508 Phone: (214) 220-3939
Attn: Mr. Michael Franco and Fax: (214) 969-5100
Mr. Michael Foster Attn: David J. Lowery, Esq.
</TABLE>
(b) If to the Company, to:
<TABLE>
<S> <C>
With a copy to:
Bluegreen Corporation Choate, Hall & Stewart
4960 Blue Lake Drive Exchange Place
Boca Raton, Florida 33431 53 State Street
Phone: (561) 912-8000 Boston, Massachusetts 02109
Fax: (561) 912-8100 Phone: (617) 248-5000
Attn: Patrick E. Rondeau, Esq. Fax: (617) 248-4000
Mr. John F. Chiste Attn: William P. Gelnaw, Esq.
</TABLE>
or to such other address or addresses as shall be designated in writing. All
notices shall be effective when received.
SECTION 7.03. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the
Ancillary Documents and the documents described herein and therein or attached
or delivered pursuant hereto or thereto set forth the entire agreement between
the parties hereto with respect to the transactions contemplated by this
Agreement. Any provision of this Agreement may be amended or modified in whole
or in part at any time by an agreement in writing among the parties hereto
(provided that agreement by the Purchasers and the Permitted Transferee shall
only require agreement of the Purchasers and Permitted Transferees holding a
majority of the shares of Common Stock issued pursuant to this Agreement)
executed in the same manner as this Agreement. No failure on the part of any
party to exercise, and no delay in exercising, any right shall operate as a
waiver thereof nor shall any single or partial exercise by any party of any
right preclude any other or future exercise thereof or the exercise of any other
right. No investigation by Purchasers of the Company prior to or after the date
hereof shall stop or prevent Purchasers from exercising any right hereunder or
be deemed to be a waiver of any such right. This Agreement shall be construed
without regard to any presumption or rule requiring construction or
interpretation against the party drafting or causing any instrument to be
drafted.
SECTION 7.04. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original, but all
of which together shall constitute one and the same instrument.
35
<PAGE> 59
SECTION 7.05. GOVERNING LAW. This Agreement shall be governed by, and
interpreted in accordance with, the laws of the State of Massachusetts
applicable to contracts made and to be performed in that State without giving
effect to the conflict of laws of that State.
SECTION 7.06. PUBLIC ANNOUNCEMENTS. Subject to each party's disclosure
obligations imposed by law and any stock exchange, the Company agrees to provide
Purchasers for their review all news releases and other public disclosures that
the Company anticipates distributing relating to this Agreement and the
transactions contemplated hereby prior to any dissemination of the same.
Purchasers shall also have the right to review and, before filing or other
public dissemination, approve (which approval will not be unreasonably withheld)
any statements made or information provided with respect to Purchasers or the
Permitted Transferees or the transactions contemplated by this Agreement,
including, without limitation, such statements intended to be included in any
future Securities Filings prepared by or on behalf of the Company. Subject to
its disclosure obligations imposed by law and the New York Stock Exchange or
Pacific Stock Exchange, the Company shall not use the name (or any derivative
thereof) of any Purchaser or Permitted Transferee in any news release or public
disclosures without the prior written consent of Purchasers.
SECTION 7.07. EXPENSES. The Company and the Company Subsidiaries shall
bear their own costs and expenses incurred in connection with this Agreement and
the Ancillary Documents and the transactions contemplated hereby and thereby,
including the fees and expenses of the Company's financial advisors, accountants
and counsel. Upon the Closing, the Company agrees to pay or reimburse Purchasers
on the Closing Date for all reasonable out-of-pocket costs and expenses incurred
by Purchasers arising in connection with Purchasers' due diligence investigation
of the Company, the preparation and negotiation of this Agreement and the
Ancillary Documents and the consummation of the transactions contemplated hereby
and thereby, including, without limitation, all filing fees, travel expenses and
the reasonable fees and expenses of Purchasers' counsel, accountants and
consultants. On each Subsequent Closing Date, the Company agrees to pay or
reimburse Purchasers for all reasonable out-of-pocket costs and expenses
incurred by Purchasers arising in connection with consummating the transactions
contemplated hereby, including, without limitation, all filing fees, travel
expenses and the reasonable fees and expenses of Purchasers' counsel,
accountants and consultants. In no event shall the Company's aggregate
reimbursement obligation for the foregoing exceed $250,000.
SECTION 7.08. INDEMNIFICATION.
(a) The Company agrees to indemnify and save harmless Purchasers, each
person who controls Purchasers within the meaning of the Exchange Act
(including the general partners thereof), and each of the respective
partners, officers, directors, employees, agents and Affiliates of the
foregoing in their respective capacities as such (the "Purchaser
Indemnitees"), to the fullest extent lawful, from and against any and all
actions, suits, claims, proceedings, costs, damages, judgments, amounts
paid in settlement (subject to Section 7.08(d)) and expenses (including
reasonable attorneys' fees and disbursements) (collectively, "Losses")
relating to or arising out of (i) any inaccuracy in or breach of the
representations, warranties, covenants or agreements made by the Company
herein when made or deemed made (provided that if the Company has disclosed
in writing to Purchasers any inaccuracy or breach of representations or
warranties prior to a Closing or Subsequent Closing and the Purchasers
elect to consummate the transactions at such Closing or Subsequent Closing,
the Company shall have no obligations to indemnify the Purchaser
Indemnitees for such inaccuracy or breach); (ii) any other conduct by the
Company or its employees or agents as a result of which, in whole or in
part, any Purchaser Indemnitee is made a party to, or otherwise incurs any
loss pursuant to, any action, suit, claim or proceeding arising out of or
relating to any such conduct; or (iii) any action or failure to act
undertaken by a Purchaser Indemnitee at the request of the Company.
(b) The Company shall reimburse the Purchaser Indemnitees for all
reasonable out-of-pocket expenses (including attorneys' fees and
disbursements) as they are incurred in connection with investigating,
preparing to defend or defending any such action, suit, claim or proceeding
(including any inquiry or investigation) whether or not a Purchaser
Indemnitee is a party thereto.
36
<PAGE> 60
(c) In the event that the foregoing indemnity is unavailable to any
Purchaser Indemnitee for any reason, the Company agrees to contribute to
any such Losses and will do so in such proportion as is appropriate to
reflect the relative fault of each party in connection with the conduct
which resulted in the Losses. The parties agree that it would not be just
or equitable if contribution were determined by pro rata allocation or by
any other method of allocation which does not take account of relative
fault and other equitable considerations. The parties further agree that if
and to the extent that pro rata contribution were nevertheless considered
by a court, all Purchaser Indemnitees shall collectively be deemed to be
one person. No Purchaser Indemnitee shall in any event have liability to
the Company arising out of an inaccuracy in or breach of the
representations, warranties, covenants or agreements made by the Company
herein, other conduct by the Company or their employees or agents, or any
action or failure to act undertaken by a Purchaser Indemnitee at the
request of the Company.
(d) A Purchaser Indemnitee shall give written notice to the Company of
any claim with respect to which it seeks indemnification promptly after the
discovery by such party of any matters giving rise to a claim for
indemnification; provided that the failure of any Purchaser Indemnitee to
give notice as provided herein shall not relieve the Company of its
obligations under this Section 7.08 unless and to the extent that the
Company shall have been prejudiced by the failure of such Purchaser
Indemnitee to so notify the Company. In case any such action, suit, claim
or proceeding is brought against a Purchaser Indemnitee, the Company shall
be entitled to participate in the defense thereof and, to the extent that
it may wish, to assume the defense thereof, with counsel satisfactory to
such Purchaser Indemnitee, and after notice from the Company of its
election so to assume the defense thereof, the Company will not be liable
to such Purchaser Indemnitee under this Section 7.08 for any legal or other
expense subsequently incurred by such Purchaser Indemnitee in connection
with the defense thereof; provided, however, that (i) if the Company shall
elect not to assume the defense of such claim or action or (ii) if such
Purchaser Indemnitee reasonably determines that there may be a conflict
between the positions of the Company and of Purchaser Indemnitee in
defending such claim or action, then separate counsel shall be entitled to
participate in and conduct the defense, and the Company shall be liable for
any legal or other expenses reasonably incurred by Purchaser Indemnitee in
connection with the defense. The Company shall not be liable for any
settlement of any action, suit, claim or proceeding effected without its
written consent; provided, however, that the Company shall not unreasonably
withhold, delay or condition its consent. The Company further agrees that
it will not, without Purchaser Indemnitee's prior written consent, settle
or compromise any claim or consent to entry of any judgment in respect
thereof in any pending or threatened action, suit, claim or proceeding in
respect of which indemnification may be sought hereunder (whether or not
any Purchaser Indemnitee is an actual or potential party to such action,
suit, claim or proceeding) unless such settlement or compromise includes an
unconditional release of Purchasers and each other Purchaser Indemnitee
from all liability arising out of such action, suit, claim or proceeding.
(e) The obligations of the Company under this Section 7.08 shall
survive the transfer of the shares of Common Stock or the termination of
this Agreement or the consummation of the transactions contemplated hereby.
(f) The rights of Purchasers under this Section 7.08 shall be in
addition to any liability that the Company might otherwise have to
Purchasers under this Agreement, at common law or otherwise.
SECTION 7.09. SUCCESSORS AND ASSIGNS. Subject to Applicable Law and the
provisions of Section 4.07, Purchasers may assign their respective rights under
this Agreement in whole or in part to any Permitted Transferee, but no such
assignment shall relieve any Purchaser of its obligations hereunder. No
transferee of Purchasers (or the Permitted Transferees) which is not a Permitted
Transferee shall have any rights under this Agreement. The Company may not
assign any of its rights or delegate any of its duties under this Agreement
without the prior written consent of Purchasers. Any purported assignment in
violation of this Section 7.09 shall be void.
SECTION 7.10. JURISDICTION. The courts of the State of New York in New
York County and the United States District Court for the Southern District of
New York shall have jurisdiction over the parties with respect to any dispute or
controversy between them arising under or in connection with this Agreement
37
<PAGE> 61
and, by execution and delivery of this Agreement, each of the parties to this
Agreement submits to the jurisdiction of those courts, including, but not
limited to, the in personam and subject matter jurisdiction of those courts,
waives any objections to such jurisdiction on the grounds of venue or forum non
conveniens, the absence of in personam or subject matter jurisdiction and any
similar grounds, consents to service of process by mail (in accordance with
Section 7.02) or any other manner permitted by law, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement.
SECTION 7.11. SPECIFIC PERFORMANCE. The Company acknowledges that the
rights granted to Purchasers in this Agreement are of a special, unique and
extraordinary character, and that any breach of this Agreement by the Company
could not be compensated for by damages. Accordingly, if the Company breaches
its obligations under this Agreement, Purchasers shall be entitled, in addition
to any other remedies that they may have, to seek enforcement of this Agreement
by a decree of specific performance requiring the Company to fulfill its
obligations under this Agreement.
SECTION 7.12. CAPTIONS. The captions contained in this Agreement are for
reference purposes only and are not part of this Agreement.
SECTION 7.13. SEVERABILITY. Should any part of this Agreement for any
reason be declared invalid, such decision shall not affect the validity of any
remaining portion, which remaining portion shall remain in full force and effect
as if this Agreement had been executed with the invalid portion thereof
eliminated, and it is hereby declared the intention of the parties here to that
they would have executed the remaining portion of this Agreement without
including therein any such part or parts which may, for any reason, be hereafter
declared invalid.
SECTION 7.14. MUTUAL WAIVER OF JURY TRIAL. Because disputes arising in
connection with complex financial transactions are most quickly and economically
resolved by an experienced and expert person and the parties wish applicable
state and federal laws to apply (rather than arbitration rules), the parties
desire that their disputes be resolved by a judge applying such Applicable Laws.
Therefore, to achieve the best combination of the benefits of the judicial
system and of arbitration, the parties hereto waive all right to trial by jury
in any action, suit or proceeding brought to enforce or defend any rights or
remedies under this Agreement.
SECTION 7.15. EXCULPATION. Notwithstanding any provision herein to the
contrary, the liability of each Purchaser shall be limited to the assets of such
Purchaser and no partner, shareholder, officer, director, employee or agent of
Purchaser shall have any personal liability hereunder (except to the extent
provided under Applicable Law with respect to unlawful distribution or
fraudulent transfers or conveyances).
SECTION 7.16. OBLIGATIONS. All obligations of Purchasers under this
Agreement shall be joint and several.
SECTION 7.17. SCHEDULES. All references to a "Schedule" in this Agreement
shall refer to the schedules included in the letter from the Company to
Purchasers dated as of the date hereof which is hereby incorporated herein by
reference.
38
<PAGE> 62
SIGNATURES
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
or by their respective duly authorized officers, all as of the date first above
written.
BLUEGREEN CORPORATION
By: /s/ George F. Donovan
--------------------------------------------------------
Name: George F. Donovan
Title: President and Chief Executive Officer
MORGAN STANLEY REAL ESTATE
FUND III, L.P.
By: MSREF III, Inc.
Its: General Partner
By: /s/ Michael J. Franco
--------------------------------------------------------
Name: Michael J. Franco
Title: Vice President
MORGAN STANLEY REAL ESTATE
INVESTORS III, L.P.
By: MSREF III, Inc.
Its: General Partner
By: /s/ Michael J. Franco
--------------------------------------------------------
Name: Michael J. Franco
Title: Vice President
MSP REAL ESTATE FUND, L.P.
By: MSREF III, Inc.
Its: General Partner
By: /s/ Michael J. Franco
--------------------------------------------------------
Name: Michael J. Franco
Title: Vice President
MSREF III SPECIAL FUND, L.P.
By: MSREF III, Inc.
Its: General Partner
By: /s/ Michael J. Franco
--------------------------------------------------------
Name: Michael J. Franco
Title: Vice President
39
<PAGE> 63
APPENDIX II
[LADENBURG THALMANN & CO. INC. LETTERHEAD]
August 13, 1998
The Board of Directors
Bluegreen Corporation
5295 Town Center Road
Boca Raton, FL 33486
Gentlemen:
You have requested our opinion as to fairness from a financial point of
view to the stockholders of Bluegreen Corporation ("Bluegreen" or the "Company")
of the consideration to be received by the Company in connection with the sale
of the Company's common stock to Morgan Stanley Real Estate Fund III, L.P.,
Morgan Stanley Real Estate Investors III, L.P., MSP Real Estate Fund, L.P. and
MSREF III Special Fund, L.P. (collectively the "Purchasers"). Pursuant to the
draft Securities Purchase Agreement (the "Purchase Agreement") by and among the
Purchasers and Bluegreen dated August 11, 1998.
The Purchase Agreement provides that at the time of Closing the Company
agrees to sell and the Purchasers agree to buy 2,941,177 shares of the Company's
common stock at the Closing Price defined as $8.50 per share for an aggregate
consideration of $25.0 million. The Purchase Agreement further defines the
terms, conditions and forms of post-closing purchases of the Company's common
stock, for an eighteen month period following the close of the transaction. With
respect to the post-closing purchases, the Purchasers have the right to purchase
in part or in whole an additional 2,941,177 shares of the common stock at the
Closing Price. Furthermore, with respect to the post closing purchases, the
Company has the right to sell in part or in whole an additional 2,941,177 shares
to the Purchasers at the Closing Price.
In arriving at our opinion, we have reviewed such information as we have
deemed necessary or appropriate for the purpose of stating the opinions
expressed herein. We have reviewed information including, but not limited to,
the following: (i) the draft of the Securities Purchase Agreement dated August
11, 1998; (ii) audited financial statements for the Company for the three fiscal
years ended March 29, 1998; (iii) unaudited financial statements for the three
months ended June 29, 1997 and June 29, 1998, respectively; (iv) financial
forecasts and related information provided to us by the Company; (v) drafts of
the Voting and Cooperation Agreement and Registration Rights Agreement dated
August 11, 1998; (vi) Bluegreen's common stock price and trading history, and
(vii) publicly available market information regarding Bluegreen and its
competitors. In addition, we have had several conversations with the Company's
management regarding Bluegreen, its business prospects, competitors and the
industry.
In rendering our opinion, we have assumed on bases and relied upon the
accuracy, completeness and fairness, without assuming any responsibility for the
independent verification of, all financial and other information that was
available to us from public sources, that was provided to us by Bluegreen, or
that was otherwise reviewed by us. With respect to financial forecasts, we have
assumed that they have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the Company's management as to
the future financial performance of the Company. We have not made or been
provided with an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of Bluegreen, nor have we been furnished
with any such evaluation or appraisals. Our opinion is necessarily based upon
information available to us, and financial, stock market and other conditions
and circumstances existing and disclosed to us, as of the date hereof.
<PAGE> 64
In conducting our investigation and analyses and in arriving at our opinion
expressed herein, we have taken into account such accepted financial and
investment banking procedures and considerations as we have deemed relevant,
including: (i) historical revenues, operating earnings, net income and
capitalization of the Company and certain other publicly held companies in
businesses we believe to be comparable to the Company's; (ii) acquisition
multiples that have historically been paid for other companies in businesses we
believe to be comparable to the Company's; (iii) a restricted stock analysis
examining the discount/premiums paid in the purchase of restricted public common
stock for companies of comparable size to Bluegreen; (iv) the current financial
and market position and results of operations of the Company; and (v) the
general condition of the securities market.
We have assumed, with the consent of the Company, that this transaction
will comply with all applicable federal and state laws and will not result in
the breach or cancellation of any contracts material to the Company.
As part of our investment banking services, we are regularly engaged in the
valuation of businesses and securities in connection with mergers, acquisitions,
underwritings, sales and distributions of listed and unlisted securities,
private placements and valuations for estate, corporate or other purposes. We
have been retained by the Board of Directors of Bluegreen to provide this
opinion and have received fees and indemnification against certain liabilities
for the services rendered pursuant to this engagement.
In the ordinary course of business, we actively trade securities for our
own account and for the accounts of our customers and, accordingly, may at any
time hold a long or short position in the debt or equity securities of the
Company. As you are aware, we also regularly publish research reports regarding
the business and securities of publicly-owned companies, including Bluegreen.
It is understood that this letter is for the information of the Board of
Directors of the Company in connection with the proposed purchase of the
Company's common stock by the Purchasers and does not constitute a
recommendation to any director as to how such director should vote on the
proposed transaction. It is understood that this fairness opinion is not to be
quoted, excerpted or summarized, in whole or in part, without our prior written
consent. We understand that this opinion will be filed with the Securities and
Exchange Commission and distributed to the Company's stockholders as part of the
Company's proxy statement in connection with the issuance and sale of the
Company's common stock to the Purchasers. We hereby consent to the foregoing use
of this opinion.
Based upon and subject to the foregoing it is our opinion that, as of the
date hereof, the consideration to be received by the Company from the Purchasers
is fair, from a financial point of view, to the public stockholders of the
Company.
Very truly yours,
/s/ Ladenburg Thalmann
LADENBURG THALMANN & CO. INC.
2
<PAGE> 65
BLUEGREEN CORPORATION
4960 BLUE LAKE DRIVE
BOCA RATON, FL 33431
The undersigned stockholder of BLUEGREEN CORPORATION, a Massachusetts
corporation, hereby acknowledges receipt of the Notice of Special Meeting of
Stockholders and Proxy Statement, each dated October 7, 1998, and hereby
appoints Patrick E. Rondeau and Anthony M. Puleo, acting singly and both of them
acting together, proxies and attorneys-in-fact with full power of substitution,
on behalf and in the name of the undersigned, to represent the undersigned at
the Special Meeting of Stockholders of BLUEGREEN CORPORATION to be held on
November 17, 1998 at the Company's offices at 4960 Blue Lake Drive, Boca Raton,
Florida, and at any adjournment(s) thereof and to vote all shares of Common
Stock which the undersigned would be entitled to vote if then and there
personally present, on the matters set forth below. Such attorneys or
substitutes shall have and may exercise all of the powers of said
attorneys-in-fact thereunder.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER, OR IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE PROPOSAL AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS
AS MAY COME BEFORE THE ANNUAL MEETING AND ANY ADJOURNMENT(S) THEREOF.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING:
to approve a series of related transactions resulting in the issuance
and sale of up to an aggregate of 5,882,354 shares of the Company's
common stock at a price per share equal to $8.50 to Morgan Stanley Real
Estate Fund III, L.P., Morgan Stanley Real Estate Investors III, L.P.,
MSP Real Estate Fund, L.P. and MSREF III Special Fund, L.P.
(collectively, the "Purchasers"), pursuant to a Securities Purchase
Agreement (the "Purchase Agreement") dated as of August 14, 1998 by and
among the Company and the Purchasers.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
In their discretion, the Proxies are authorized to vote upon such other business
as may properly come before this meeting and any adjournment(s) thereof.
Please sign exactly as your name
appears on this proxy. When
shares are held by joint tenants
or as community property, both
should sign. When signing as
attorney, executor,
administrator, trustee or
guardian, please give full title
as such. If a corporation,
please sign the full corporate
name by President or other
authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
Dated: , 1998
------------------------
--------------------------------
Signature(s)
--------------------------------
Signature(s)
