<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 22, 1998
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
BLUEGREEN CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
MASSACHUSETTS 03-0300793
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
AND SUBSIDIARY GUARANTORS
BLUEGREEN RESORTS MANAGEMENT, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 65-0520217
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
BLUEGREEN RESORTS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 65-0520212
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
BLUEGREEN HOLDING CORPORATION (TEXAS)
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 65-0796382
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
PROPERTIES OF THE SOUTHWEST ONE, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 03-0315835
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
PROPERTIES OF THE SOUTHWEST, L.P.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 65-0796380
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
BLUEGREEN ASSET MANAGEMENT CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 03-0325365
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
BLUEGREEN CAROLINA LAND, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 03-031760
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
BLUEGREEN CORPORATION OF MONTANA
(exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
MONTANA 81-0400702
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
BLUEGREEN CORPORATION OF TENNESSEE
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 03-0316460
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
BLUEGREEN CORPORATION OF THE ROCKIES
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 65-0349373
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
BLUEGREEN PROPERTIES OF VIRGINIA, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 52-1752664
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
BLUEGREEN COMMUNITIES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 65-0484313
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
BLUEGREEN RESORTS INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 65-0803615
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
CAROLINA NATIONAL GOLF CLUB, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 62-1667685
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
LEISURE CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 03-0327285
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
PROPERTIES OF THE WEST, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 59-3300205
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
BG/RDI ACQUISITION CORP.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 65-0776572
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
RDI GROUP, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
FLORIDA 59-25041871
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
DELLONA ENTERPRISES, INC.
(exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
WISCONSIN 39-1130446
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
RESORT DEVELOPMENT INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
FLORIDA 59-2151678
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
RDI RESORT SERVICES CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
FLORIDA 59-2257190
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
RDI RESOURCES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
FLORIDA 65-0433722
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
6552
(Primary Standard Industrial Classification Code Number of each registrant)
---------------------
<TABLE>
<S> <C>
JOHN F. CHISTE
CHIEF FINANCIAL OFFICER
BLUEGREEN CORPORATION
5295 TOWN CENTER ROAD 5295 TOWN CENTER ROAD
BOCA RATON, FLORIDA 33486 BOCA RATON, FLORIDA 33486
(561) 361-2700 (561) 361-2700
(Address, including zip code, and telephone number, (Name, address, including zip code, and telephone number,
including area code, of each Registrant's Principal including area code, of agent for service)
Executive Offices)
</TABLE>
---------------------
WITH A COPY TO:
WILLIAM P. GELNAW, JR., ESQ.
CHOATE, HALL & STEWART
EXCHANGE PLACE
53 STATE STREET
BOSTON, DELAWARE 021098
(617) 248-5000
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and they are in compliance
with General Instruction G, check the following box: [ ]
---------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=================================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXMIUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED(1) REGISTERED PER UNIT(2) OFFERING PRICE REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10 1/2% Senior Secured Notes due 2008, Series
B............................................... $110,000,000 100% $110,000,000 $32,450
- ---------------------------------------------------------------------------------------------------------------------------------
Guarantees of 10 1/2% Senior Secured due 2008,
Series B........................................ (3) (3) (3) (3)
=================================================================================================================================
</TABLE>
(1) The issuer of the Notes registered hereby is Bluegreen Corporation. The
guarantees registered hereby are made by Bluegreen Resorts Management, Inc.,
Bluegreen Resorts, Inc, Bluegreen Holding Corporation (Texas), Properties of
the Southwest One, Inc., Properties of The Southwest, L.P., Bluegreen Asset
Management Corporation, Bluegreen Carolina Land, Inc., Bluegreen Corporation
of Montana, Bluegreen Corporation of Tennessee, Bluegreen Corporation of the
Rockies, Virginia Land & Forest Corporation, Bluegreen Communities, Inc.,
Bluegreen Resorts International, Inc., Carolina National Golf Club, Inc.,
Leisure Capital Corporation, Properties of The West, Inc., BG/RDI
Acquisition Corp., RDI Group, Inc., Dellona Enterprises, Inc., Resort
Development International, Inc., RDI Resort Services Corporation, and RDI
Resources, Inc.
(2) In accordance with Rule 457(f)(2), the registration fee is calculated based
on the book value of the securities as of the most recent practicable date.
(3) Pursuant to Rule 457 under the Securities Act of 1933, no separate fee is
payable for the guarantees.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED APRIL 22, 1998
PROSPECTUS
OFFER TO EXCHANGE UP TO $110,000,000 OF 10 1/2%
SENIOR SECURED NOTES DUE 2008, SERIES B OF BLUEGREEN CORPORATION,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
FOR ANY AND ALL OF ITS OUTSTANDING 10 1/2% SENIOR SECURED NOTES DUE 2008
(BLUEGREEN CORPORATION LOGO)
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1998, UNLESS EXTENDED
------------------------
Bluegreen Corporation, a Massachusetts corporation ("Bluegreen" or the
"Company"), hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus (as the same may be amended or supplemented from time
to time, this "Prospectus") and the accompanying letter of transmittal (the
"Letter of Transmittal," and together with this Prospectus, the "Exchange
Offer"), to exchange up to an aggregate amount of $110,000,000 of the Company's
10 1/2% Senior Secured Notes Due 2008, Series B (the "Exchange Notes"), which
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Statement of which this Prospectus
is a part, which Exchange Notes shall be guaranteed (the "Exchange Guarantees"),
jointly and severally, by each of the Subsidiary Guarantors (as defined) for a
like principal amount of the Company's outstanding 10 1/2% Senior Secured Notes
due 2008 (the "Outstanding Notes"), of which $110,000,000 in aggregate principal
amount was issued on April 1, 1998 and is outstanding as of the date hereof,
which Outstanding Notes have been guaranteed by the Subsidiary Guarantors (the
"Outstanding Guarantees"). The form and terms of the Exchange Notes and the
Exchange Guarantees are identical in all material respects to the terms of the
Outstanding Notes and the Outstanding Guarantees, except that (i) the Exchange
Notes will bear a Series B designation and will have been registered under the
Securities Act and, therefore, will not bear legends restricting their transfer
and will not contain certain provisions relating to an increase in the interest
rate which were included in the terms of the Outstanding Notes in certain
circumstances relating to the timing of the Exchange Offer and (ii) holders of
the Exchange Notes will not be entitled to certain rights of the holders of the
Outstanding Notes under the Exchange and Registration Rights Agreement dated
April 1, 1998 (the "Registration Rights Agreement"), which rights shall
terminate upon the consummation of the Exchange Offer. See "The Exchange
Offer -- Purpose and Effect of Exchange Offer." The Exchange Notes will evidence
the same indebtedness as the Outstanding Notes (which they replace) and will be
issued pursuant to, and entitled to the benefits of, the Indenture, dated as of
April 1, 1998, between the Company, the Subsidiary Guarantors and SunTrust Bank,
Central Florida, National Association, as trustee (the "Notes Trustee"),
governing the Outstanding Notes. The Exchange Notes and the Outstanding Notes
are hereinafter sometimes collectively referred to as the "Notes" and the
Outstanding Guarantees and the Exchange Guarantees are hereinafter sometimes
collectively referred to as the "Note Guarantees." See "The Exchange Offer" and
"Description of Notes."
The Exchange Notes will bear interest at the same rate and on the same terms
as the Outstanding Notes. Consequently, the Exchange Notes will bear interest at
the rate of 10 1/2% per annum and the interest thereon will be payable
semi-annually on April 1 and October 1 of each year, commencing October 1, 1998.
The Exchange Notes will bear interest from the date of the last interest payment
on the Outstanding Notes or, if no interest has been paid, from the date of
original issuance of the Outstanding Notes. Holders whose Outstanding Notes are
accepted for exchange will be deemed to have waived the right to receive any
interest accrued on the Outstanding Notes.
The Outstanding Notes were sold in an aggregate principal amount of $110
million by the Company on April 1, 1998 (the "Issue Date") to NatWest Capital
Markets Limited and McDonald & Company Securities, Inc. (the "Initial
Purchasers") in a transaction (the "Note Offering") not registered under the
Securities Act in reliance upon an exemption under the Securities Act. The
Initial Purchasers subsequently placed the Outstanding Notes with qualified
institutional buyers within the meaning of and in reliance upon Rule 144A under
the Securities Act. Accordingly, the Outstanding Notes may not be reoffered,
resold or otherwise transferred in the United States unless registered under the
Securities Act or unless an applicable exemption from the registration
requirements of the Securities Act is available. The Exchange Notes are being
offered hereunder in order to satisfy the obligations of the Company and the
Subsidiary Guarantors under the Registration Rights Agreement.
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission") to third parties, the Company believes
that Exchange Notes to be issued pursuant to the Exchange Offer may be offered
for resale, resold and otherwise transferred by any holder thereof (other than
(i) a broker-dealer who purchasers such Exchange Notes from the Company to
resell pursuant to Rule 144A or any other available exemption under the
Securities Act or (ii) any such holder that is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act) without compliance with
the registration and prospectus delivery provisions of the Securities Act,
provided that such Exchange Notes are acquired in the ordinary course of such
holder's business and such holder has no arrangement or understanding with any
person to participate in the distribution of such Exchange Notes. However, the
Company has not sought and does not intend to seek its own no-action letter in
connection with the Exchange Offer and there can be no assurance that the
Commission would make a similar determination with respect to the Exchange
Offer. Eligible holders of Outstanding Notes wishing to accept the Exchange
Offer must represent to the Company that such conditions have been met. Each
broker-dealer (a "Participating Broker-Dealer") that receives Exchange Notes for
its account pursuant to the Exchange Offer must acknowledge that it will deliver
a prospectus in connection with any resale of such
(Continued on next page)
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 15 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY HOLDERS OF OUTSTANDING NOTES AND PROSPECTIVE
PURCHASES OF EXCHANGE NOTES.
------------------------
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is April , 1998.
<PAGE> 3
(Continued from previous page)
Exchange Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a Participating Broker-Dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act. A
broker-dealer may nonetheless be deemed to be an "underwriter" under the
Securities Act notwithstanding such disclaimer. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a Participating
Broker-Dealer in connection with resales of Exchange Notes received in exchange
for Outstanding Notes where such Outstanding Notes were acquired by such
Participating Broker-Dealer as a result of marketing making activities or other
trading activities, provided such Outstanding Notes do not constitute any
portion of an unsold allotment from the original sale of the Outstanding Notes.
The Company has agreed that, for a period of 180 days after the Expiration Date,
it will make this Prospectus available to any Participating Broker-Dealer for
use in connection with any such resale. See "Plan of Distribution."
Holders of Outstanding Notes whose Outstanding Notes are not tendered and
accepted in the Exchange Offer will continue to hold such Outstanding Notes and
will be entitled to all the rights and benefits and will be subject to the
limitations applicable thereto under the Indenture. Following the consummation
of the Exchange Offer, the holders of Outstanding Notes will continue to be
subject to the existing restrictions on the transfer thereof and the Company
will have no further obligation to such holders to provide for the registration
under the Securities Act of the Outstanding Notes held by them. The Company will
not receive any proceeds from, and has agreed to pay all the expenses incurred
by it incident to, the Exchange Offer. No underwriter is being used in
connection with this Exchange Offer. See "The Exchange Offer."
Prior to the Exchange Offer, there has been no public market for the Notes.
The Company does not intend to list the Outstanding Notes or Exchange Notes on
any securities exchange or to seek approval for quotation through any automated
quotation system. To the extent that a market for the Notes does develop, the
market value of the Notes will depend on market conditions (including yields on
alternative investments), general economic conditions, the Company's financial
condition and other factors. Such conditions might cause the Notes, to the
extent that they are traded, to trade at a significant discount from face value.
See "Risk Factors -- Lack of a Public Market for the Notes; Restrictions on
Resales." Moreover, to the extent that Outstanding Notes are tendered and
accepted in the Exchange Offer, the trading market for untendered and tendered
but unaccepted Outstanding Notes could be adversely affected. No assurances can
be given as to the liquidity of the trading market for either the Outstanding
Notes or the Exchange Notes.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGES FROM, HOLDERS OF OUTSTANDING NOTES IN ANY JURISDICTION
IN WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
The Exchange Notes will be available initially only in book-entry form and
the Company expects that the Exchange Notes issued pursuant to the Exchange
Offer will be issued in the form of a Global Note (as defined herein), which
will be deposited with, or on behalf of, the Depository Trust Company ("DTC")
and registered in its name or in the name of Cede & Co., its nominee. Beneficial
interests in the Global Note representing the Exchange Notes will be shown on,
and transfers thereof will be effected through, records maintained by DTC and
its participants. So long as DTC or its nominee is the registered owner or
holder of the Global Note, DTC or such nominee, as the case may be, will be
considered the sole owner or holder of the Notes represented by such Global Note
for all purposes under the Indenture. Payments of the principal of, premium (if
any), and interest on the Global Note will be made to DTC or its nominee, as the
case may be, as the registered owners thereof. None of the Company, the Notes
Trustee or any Paying Agent will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in the Global Note or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interest. After the
initial issuance of the Global Note, Exchange Notes in certificated form will be
issued in exchange for the Global Note only under the limited circumstances set
forth in the Indenture.
Except as described herein, the Company may not redeem the Notes prior to
April 1, 2003. On or after such date, the Company may redeem the Notes, in whole
or in part, in cash, at any time, at the redemption prices set forth herein,
together with accrued and unpaid interest, if any, to the date of redemption. In
addition, at any time and from time to time on or prior to April 1, 2001, the
Company may, subject to certain requirements, redeem up to 35% of the aggregate
principal amount of the Notes with the cash proceeds of one or more Equity
Offerings (as defined) at a redemption price equal to 110.5% of the principal
amount to be redeemed, together with accrued and unpaid interest, if any, to the
date of the redemption, provided that, with respect to any such redemption of
the Notes, at least $65 million of the aggregate principal amount of the Notes
remains outstanding immediately after each such redemption. The Notes will not
be subject to any sinking fund requirement. Upon the occurrence of a Change of
Control (as defined), the Company will be required to make an offer to
repurchase the Notes at a price equal to 101% of the principal amount thereof,
together with accrued and unpaid interest, if any, to the date of repurchase.
See "Description of the Notes -- Optional Redemption" and "-- Change of
Control."
The Outstanding Notes are and the Exchange Notes will be senior obligations
of the Company. The Outstanding Notes rank and the Exchange Notes will rank pari
passu in right of payment with all existing and future Senior Indebtedness (as
defined) of the Company. The Outstanding Notes rank and the Exchange Notes will
rank senior in right of payment to all Subordinated Obligations (as defined) of
the Company. The Outstanding Notes are and the Exchange Notes will be
unconditionally guaranteed (the "Note Guarantees"), jointly and severally, by
each of the Subsidiary Guarantors (as defined). The Note Guarantees are and will
be senior obligations of each Subsidiary Guarantor and rank and will rank pari
passu in right of payment with all existing and future Senior Indebtedness of
each such Subsidiary Guarantor and senior in right of payment to all existing
and future Subordinated Obligations of each such Subsidiary Guarantor. The Note
Guarantees of certain of the Subsidiary Guarantors are and will be secured by a
Mortgage (as defined) on certain real property owned by such Subsidiary
Guarantors (the "Pledged Properties"). Except for such secured Note Guarantees,
the Notes and the Note Guarantees are and will be effectively subordinated to
any Secured Indebtedness (as defined) of the Company and the Subsidiary
Guarantors to the extent of the assets serving as security therefor. See
"Description of Notes."
The Company will accept for exchange any and all Outstanding Notes that are
validly tendered and not withdrawn on or prior to 5:00 p.m., New York City time,
on the date the Exchange Offer expires, which will be , 1998, unless
the Exchange Offer is extended by the Company in its sole discretion (the
"Expiration Date"). Tenders of Outstanding Notes may be withdrawn at any time
prior to the Expiration Date. Outstanding Notes may be tendered only in integral
multiples of $1,000. The Exchange Offer is not conditioned upon any minimum
principal amount of Outstanding Notes being tendered for exchange. However, the
Exchange Offer is subject to certain customary conditions. See "The Exchange
Offer -- Conditions."
<PAGE> 4
THE INITIAL PURCHASERS WHO PARTICIPATED IN THE NOTE OFFERING MAY, SUBJECT
TO LEGAL AND REGULATORY LIMITATIONS, ENGAGE IN TRANSACTIONS THAT STABILIZE,
MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES. SPECIFICALLY, THE INITIAL
PURCHASERS MAY BID FOR AND PURCHASE NOTES IN THE OPEN MARKET.
The Company has agreed to obtain certain title insurance policies in
connection with the mortgaging of the Pledged Properties (as defined). If all
such title insurance policies are not obtained by June 1, 1998, the interest
rate on the Notes will increase and any additional interest resulting from such
increase will be payable on the interest payment dates set forth herein. See
"Description of Notes -- Security."
EACH PROSPECTIVE PURCHASER OF THE NOTES MUST COMPLY WITH ALL APPLICABLE
LAWS AND REGULATIONS IN FORCE IN ANY JURISDICTION IN WHICH IT PURCHASES, OFFERS
OR SELLS NOTES, OR POSSESSES OR DISTRIBUTES THIS PROSPECTUS AND MUST OBTAIN ANY
CONSENT, APPROVAL OR PERMISSION REQUIRED OF IT FOR THE PURCHASE, OFFER OR SALE
BY IT OF THE NOTES UNDER THE LAW AND REGULATIONS IN FORCE IN ANY JURISDICTION TO
WHICH IT IS SUBJECT OR IN WHICH IT MAKES SUCH PURCHASES, OFFERS OR SALES, AND
NEITHER THE COMPANY NOR THE INITIAL PURCHASERS SHALL HAVE ANY RESPONSIBILITY
THEREFOR.
IN MAKING AN INVESTMENT DECISION REGARDING THE EXCHANGE NOTES OFFERED
HEREBY, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE COMPANY AND THE
TERMS OF THE EXCHANGE OFFER, INCLUDING THE MERITS AND RISKS INVOLVED. THE
CONTENTS OF THIS PROSPECTUS ARE NOT TO BE CONSTRUED AS LEGAL, INVESTMENT,
BUSINESS OR TAX ADVICE. EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN
ATTORNEY, BUSINESS ADVISOR AND TAX ADVISOR AS TO LEGAL, BUSINESS, TAX, FINANCIAL
AND RELATED ADVICE. NEITHER THE COMPANY NOR THE INITIAL PURCHASERS ARE MAKING
ANY REPRESENTATION TO ANY OFFEREE OR PURCHASER OF THE NOTES REGARDING THE
LEGALITY OF AN INVESTMENT THEREIN BY SUCH OFFEREE OR PURCHASER UNDER APPROPRIATE
LEGAL, INVESTMENT OR SIMILAR LAWS.
FORWARD-LOOKING STATEMENTS
The Company desires to take advantage of the "safe harbor" provisions of
the Private Securities Litigation Reform Act of 1995. Certain statements in this
Prospectus under the captions "Prospectus Summary," "Use of Proceeds," "Risk
Factors," "Management's Discussion and Analysis of Results of Operations and
Financial Condition" and "Business" and elsewhere, including the information
incorporated by reference, constitute "forward-looking statements" within the
meaning of Section 27A of the Securities Act and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Such forward-looking
statements (including, without limitation, information concerning estimated
remaining life-of-project sales and estimated remaining life-of-project field
operating profit, planned development, anticipated future efficiencies and/or
cost savings and liquidity) are subject to a number of risks and uncertainties,
many of which are beyond the Company's control, that could cause the actual
results, performance or achievements of the Company, or industry results, to
differ materially from any future results, performance or achievements expressed
or implied by such forward-looking statements. Given these uncertainties,
prospective investors are cautioned not to place undue reliance on such
forward-looking statements and no assurances can be given that the plans,
estimates and expectations reflected in such statements will be achieved. Such
risks, uncertainties and other important factors include, among others, the
following factors (as well as the other factors referred to in "Risk Factors"
and elsewhere herein): (a) changes in national, international or regional
economic conditions that can affect the real estate and timeshare markets, which
is cyclical in nature and highly sensitive to such changes, including, among
other factors, levels of employment and discretionary disposable income,
consumer confidence, available financing and interest rates; (b) the imposition
of additional compliance costs on the Company as the result of changes in any
environmental, zoning or other laws and regulations that govern the acquisition,
subdivision and sale of real estate and various aspects of the
i
<PAGE> 5
Company's financing operation; (c) risks associated with a large investment in
real estate and timeshare inventory at any given time (including risks that
inventories will decline in value due to changing market and economic conditions
and that the development and carrying costs of inventories may exceed those
anticipated); (d) risks associated with an inability to locate suitable
inventory for acquisition; (e) risks associated with delays in bringing the
Company's inventories to market due to, among other things, changes in
regulations governing the Company's operations, adverse weather conditions or
changes in the availability of development financing on terms acceptable to the
Company; (f) changes in applicable usury laws or the availability of interest
deductions or other provisions of federal or state tax law; (g) a decreased
willingness on the part of banks to extend direct customer lot financing, which
could result in the Company receiving less cash in connection with the sales of
real estate and/or lower sales; (h) the inability of the Company to find
external sources of liquidity on favorable terms to support its operations,
acquire, carry and develop residential land and timeshare inventories and
satisfy its debt and other obligations; (i) the inability of the Company to find
sources of capital on favorable terms for the pledge of land and timeshare notes
receivable; (j) an increase in prepayment rates, delinquency rates or defaults
with respect to Company-originated loans or an increase in the costs related to
reacquiring, carrying and disposing of properties reacquired through foreclosure
or deeds in lieu of foreclosure; (k) costs to develop inventory for sale and/or
selling, general and administrative expenses exceed those anticipated; and (l)
an increase or decrease in the number of residential land or resort properties
subject to percentage of completion accounting which requires deferral of profit
recognition on such projects until development is substantially complete. See
"Risk Factors." All forward-looking statements contained in this Prospectus
speak only as of the date of this Prospectus, and the Company expressly
disclaims any obligation or undertaking to disseminate any updates or revisions
to any forward-looking statement contained herein to reflect any change in the
Company's expectations with regard thereto or any change in events, conditions
or circumstances on which any such statement is based.
NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES
WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY
REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A
FINDING BY THE SECRETARY OF STATE OF NEW HAMPSHIRE THAT ANY DOCUMENT FILED UNDER
CHAPTER 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR
THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A
TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE
MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON,
SECURITY, OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY
PROSPECTIVE PURCHASER, CUSTOMER, OR CLIENT ANY REPRESENTATION INCONSISTENT WITH
THE PROVISIONS OF THIS PARAGRAPH.
INDUSTRY DATA
Market and industry data used throughout this Prospectus were obtained from
internal company surveys, industry publications, unpublished industry data and
estimates, discussions with industry sources and currently available
information. The sources for this data include, without limitation, the American
Resort Development Association ("ARDA"), a non-profit industry organization.
Industry publications generally state that the information contained therein has
been obtained from sources believed to be reliable, but there can be no
assurance as to the accuracy and completeness of such information. The Company
has not independently verified such market data. Similarly, internal Company
surveys, while believed by the Company to be reliable, have not been verified by
any independent sources. Accordingly, no assurance can be given that any such
data are accurate.
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<PAGE> 6
CERTAIN DEFINED TERMS
As used herein, the "Company" or "Bluegreen" refers to Bluegreen
Corporation and its subsidiaries, and "RDI" refers to RDI Group, Inc. and Resort
Title Agency, Inc. and their subsidiaries, in each case, unless the context
otherwise requires; "EBITDA" refers to net income before interest expense,
income taxes, depreciation and amortization; "estimated remaining
life-of-project sales" assumes sales of the existing, currently under
construction or development, and planned Timeshare Interests (as defined below)
or residential lots, as the case may be, at current retail prices; "estimated
remaining life-of-project field operating profit" is equal to the estimated
remaining life-of-project sales multiplied by average timeshare or residential
lot operating margins (gross profit less field selling, general and
administrative expenses, prior to the allocation of corporate overhead, as a
percentage of sales), as the case may be, for the nine-month period ended on the
applicable measurement date; "RDI Acquisition" means the Company's acquisition
effective September 30, 1997 of all of the issued and outstanding capital stock
of RDI; and "Aruba Transaction" means the December 15, 1997 acquisition by
Bluegreen Properties NV ("BG Aruba"), an Aruban limited liability company in
which the Company owns a 50% equity interest, of unsold Timeshare Interest
inventory (approximately 8,000 Timeshare Interests) of the La Cabana All Suite
Beach Resort & Racquet Club in Aruba (the "Aruba Resort"). Other capitalized
terms used in this Prospectus but not otherwise defined shall have the meanings
assigned to them in "Description of Notes -- Certain Definitions" beginning on
page 94. The Company's fiscal year ends on the Sunday closest to March 31.
Fiscal years are identified according to the calendar year in which they end.
For example, the fiscal year ended March 30, 1997 is referred to as "fiscal
1997." Unless the context otherwise requires, financial information for the
Company for the nine-month period ended December 28, 1997 includes financial
information for RDI and BG Aruba from September 30, 1997 and December 15, 1997,
respectively. See "Business -- Recent Acquisitions."
AVAILABLE INFORMATION
The Company and the Subsidiary Guarantors have filed with the Commission a
Registration Statement on Form S-4 (herein, together with all amendments,
exhibits and schedules thereto, the "Registration Statement") pursuant to the
Securities Act, and the rules and regulations promulgated thereunder, covering
the Exchange Notes being offered hereby. This Prospectus does not contain all
the information set forth in the Registration Statement. For further information
with respect to the Company and the Exchange Offer, reference is made to the
Registration Statement. Statements made in this Prospectus, or in any document
incorporated by reference herein, as to the contents of any contract, agreement
or other document referred to are not necessarily complete and, in each
instance, reference is made to the copy of such contract, agreement or other
document filed as an exhibit to the Exchange Offer Registration Statement for a
more complete description of the document or matter involved, and each such
statement shall be deemed qualified in its entirety by such reference.
The Company is subject to the informational requirements of the Exchange
Act and, in accordance therewith, files reports, proxy or information statements
and other information with the Commission. Such reports, proxy statements and
other information may be inspected and copies at the public reference facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth Street N.W., Room
1024, Washington, D.C. 20549, and at the following Regional Offices of the
Commission: 7 World Trade Center, Suite 1300, New York, New York 10048; and the
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such reports and other information may be obtained
from the Public Reference Section of the Commission at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, upon payment of prescribed fees. The
Commission 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
Commission through the Commission's Electronic Data Gathering, Analysis and
Retrieval (EDGAR) system.
The Company has agreed that, if at any time while the Notes are "restricted
securities" within the meaning of the Securities Act, the Company is not subject
to the informational requirements of the Exchange Act, the Company will furnish
to holders of the Notes, and to prospective purchasers designated by such
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<PAGE> 7
holders, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act to permit compliance with Rule 144A in connection with
resales of the Notes.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the Offering made hereby shall be deemed to be incorporated
by reference in this Prospectus and to be a part hereof from the date of filing
of such documents. The Company's Exchange Act file number is 0-19292.
Any statement contained herein or in a document incorporated or deemed to
be incorporated herein by reference shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document that is incorporated by reference herein
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 Prospectus.
The Prospectus incorporates documents by reference which are not presented
herein or delivered herewith. Bluegreen will provide, without charge, to each
person to whom this Prospectus is delivered, on the written or oral request of
such person, a copy of any or all of the documents incorporated herein by
reference (other than exhibits thereto, unless such exhibits are specifically
incorporated by reference into such documents). Written requests for such copies
should be directed to John F. Chiste, Chief Financial Officer and Treasurer of
the Company. Telephone inquiries may be directed to (561) 361-2700.
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<PAGE> 8
PROSPECTUS SUMMARY
The following is a summary of certain information contained elsewhere in
this Prospectus. Reference is made to, and this summary is qualified in its
entirety by, the more detailed information and the financial statements,
including the notes thereto, appearing elsewhere or incorporated by reference in
this Prospectus. This Prospectus contains forward-looking statements which
involve risks and uncertainties. The Company's actual results may differ
significantly from the results discussed in the forward-looking statements.
Factors that might cause such a difference include, but are not limited to,
those discussed in "Risk Factors."
THE COMPANY
The Company is a leading marketer of vacation and residential lifestyle
choices through its resorts and residential land businesses. The Company's
resorts business (the "Resorts Division") strategically acquires, develops and
markets Timeshare Interests in resorts generally located in popular high-volume,
"drive-to" vacation destinations. Timeshare Interests typically entitle the
buyer to a fully-furnished vacation residence for an annual one-week period in
perpetuity ("Timeshare Interests"), as well as access to over 1,500 resorts
worldwide through the Company's participation in timeshare exchange networks.
The Company currently markets and sells Timeshare Interests in eight resorts
located in the United States and the Caribbean. Prior to investing in new
timeshare projects, the Company performs extensive market research and testing
and, prior to completion of development, pre-sells a significant portion of its
Timeshare Interests inventory. The Company's residential land business (the
"Residential Land Division") strategically acquires, develops and subdivides
property and markets the subdivided residential lots to retail customers seeking
to build a home in a high quality residential setting. The Residential Land
Division's strategy is to locate its projects near major metropolitan centers
outside the perimeter of intense subdivision development or in popular
retirement areas. The Company has focused the Residential Land Division's
activities in certain proven, core markets in which the Company has developed
substantial marketing expertise and has a strong track record of success. Prior
to acquiring residential land, the Company typically utilizes market research,
conducts due diligence and, in the case of new project locations, engages in
pre-marketing techniques to evaluate market response and price acceptance. Once
a parcel of property is acquired, the Company pre-sells a significant portion of
its planned residential lots on such property prior to extensive capital
investment as a result of the Company's ability to bond its projects to
completion. The Company also generates significant interest income through its
financing of individual purchasers of Timeshare Interests and, to a lesser
extent, land sold by the Residential Land Division. For the nine-month period
ended December 28, 1997, the Company had aggregate revenues of approximately
$131.8 million and EBITDA of approximately $21.4 million.
The Resorts Division. The Company's Resorts Division was founded in 1994
to capitalize on the consistent growth of the timeshare industry. According to
ARDA and other industry sources, timeshare industry sales and the number of
Timeshare Interest owners grew at compound annual rates of approximately 16% and
22%, respectively, from 1980 to 1997 (see charts on page 2). The Company
currently markets and sells Timeshare Interests in eight resorts located in the
Smoky Mountains of Tennessee; Myrtle Beach, South Carolina; Orlando, Florida;
Branson, Missouri; Wisconsin Dells, Wisconsin; and Aruba. The Company also
manages 33 timeshare resorts (including seven of its own resorts) with an
aggregate of approximately 70,000 members, which the Company believes makes it
the second largest manager of timeshare resorts in North America (based on the
number of resorts managed). For the nine-month period ended December 28, 1997,
the Company sold 4,903 Timeshare Interests, an increase of 90.1%, compared to
2,579 Timeshare Interests sold for the comparable period in 1996. The Company's
estimated remaining life-of-project sales and estimated remaining
life-of-project field operating profit with respect to the Resorts Division
increased to approximately $674.6 million and $65.4 million, respectively, as of
December 28, 1997 from approximately $260.4 million and $11.2 million,
respectively, as of December 29, 1996. These increases are a direct result of
new projects developed by the Company in fiscal 1998, the RDI Acquisition and
the Aruba Transaction, which the Company believes will result in a significant
increase in revenues and field operating profit in fiscal 1999.
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The Resorts Division utilizes a variety of techniques to attract
prospective purchasers of Timeshare Interests, including targeted mailings,
direct mail mini-vacations, kiosks in retail locations, marketing to current
owners of Timeshare Interests and referrals. The majority of the Company's
Timeshare Interests are sold through on-site sales presentations. The Company
believes its ability to effectively implement and manage these marketing
activities has resulted in the generation of a predictable and increasing supply
of sales prospects. To support its marketing and sales efforts, the Company has
developed and continues to enhance its database to track its timeshare marketing
and sales programs. Management believes that, as the Company's timeshare
operations grow, this database will become an increasingly significant asset,
enabling it to take advantage of, among other things, less costly marketing and
referral opportunities.
According to ARDA, the primary reason cited by consumers for purchasing a
Timeshare Interest is the ability to exchange a Timeshare Interest for
accommodations at other resorts through worldwide exchange networks. Each of the
Company's timeshare resorts is affiliated with either Interval International
("II") or Resorts Condominium International, Inc. ("RCI"), the two largest
worldwide timeshare exchange companies. Participation in an exchange network
entitles owners to exchange their annual Timeshare Interests for occupancy at
over 1,500 participating II resorts or over 3,200 participating RCI resorts
worldwide. To further enhance the ability of its Timeshare Interest owners to
customize their vacation experience, the Company also intends to expand the
points-based vacation club system it acquired in the RDI Acquisition which, when
completed, will permit its Timeshare Interest owners to purchase an annual
allotment of points which can be redeemed for occupancy rights at all
Company-owned and participating managed resorts.
Prior to acquiring property for resorts, the Resorts Division undertakes a
full property review, including an environmental assessment, which is presented
for approval to the Company's investment committee ("Investment Committee"),
which was established in 1990 and consists of certain key members of senior
management. During the review process, acquisition specialists analyze market,
tourism and demographic data as well as the quality and diversity of the
location's existing amenities and attractions to determine the potential
strength of the timeshare market in such area and the availability of a variety
of recreational opportunities for prospective Timeshare Interest purchasers.
The Company has historically provided financing to approximately 89% of its
timeshare customers, who are required to make a downpayment of at least 10% of
the Timeshare Interest sales price and who typically finance the balance of the
sales price over a period of seven to ten years. As of December 28, 1997, the
Company had a timeshare receivables portfolio totaling approximately $66.5
million in principal amount, with a weighted average contractual yield of
approximately 15.8% per annum. The Company is currently negotiating with a
financial institution to provide the Company with a combined timeshare warehouse
financing and receivables purchase facility and a separate timeshare acquisition
and development facility. See "Management's Discussion and Analysis of Results
of Operations and Financial Condition."
Set forth below is certain information relating to the timeshare industry.
(Timeshare Graphs)
Source: ARDA (includes, with respect to 1995, 1996 and 1997, unpublished
estimates provided by ARDA)
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The Residential Land Division. The Residential Land Division is focused
primarily on land projects located in states in which the Company has developed
substantial marketing expertise and has a strong track record of success, such
as Texas, the Carolinas, New Mexico, Virginia, Tennessee and Arizona. The
Company believes no other company in the United States of comparable size or
financial resources markets and sells residential land to retail customers. For
the nine-month period ended December 28, 1997, the Residential Land Division had
revenues of approximately $78.8 million, an increase of 44.4% compared to
revenues of approximately $54.6 million for the comparable period in 1996. The
Company's estimated remaining life-of-project sales and estimated remaining
life-of-project field operating profit with respect to the Residential Land
Division increased to approximately $224.5 million and $47.6 million,
respectively, as of December 28, 1997 from approximately $209.3 million and
$32.4 million, respectively, as of December 29, 1996.
The Residential Land Division utilizes its proven marketing techniques and
proprietary Sales Information Management System ("SIMS") and other residential
land databases maintained by the Company to target families seeking a quality
lifestyle improvement which is generally unavailable in traditional suburban
developments. Based on the Company's extensive experience in marketing and
selling residential lots to its target customers, the Company has been able to
develop a comprehensive marketing and sales program that generates a significant
number of on-site sales presentations to potential prospects through low-cost,
high-yield newspaper advertising. In addition, SIMS and the other Residential
Land Division databases enable the Company to compile, process and maintain
comprehensive information concerning future sales prospects within each of its
operating regions. The Company currently has over 250,000 potential sales
prospects in its Residential Land Division databases. Through the Company's
targeted sales and marketing program, the Company believes that it has been able
to achieve a high conversion ratio of sales to prospects receiving on-site sales
presentations. The conversion ratio of sales to on-site sales presentations for
the ten-month period ended January 31, 1998 was approximately 20%.
The Residential Land Division acquires and develops land in two markets:
(i) near major metropolitan centers outside the perimeter of intense subdivision
development; and (ii) popular retirement areas. Prior to acquiring undeveloped
land, the Company researches market depth and forecasts market absorption. In
new market areas, the Company typically supplements its research with a
structured classified ad test marketing system that evaluates market response
and price acceptance. The Company's sales and marketing efforts begin as soon as
practicable after the Company enters into an agreement to acquire a parcel of
land. The Company's ability to bond projects to completion allows it to sell a
significant portion of its residential land inventory on a pre-development
basis, thereby reducing the Company's need for external capital to complete
improvements. The Company believes that its pre-acquisition research and test
marketing allow it to market its residential lots at predictable margins. As is
the case with the Resorts Division, all acquisitions of residential land are
subject to Investment Committee approval.
In fiscal 1997, the Company began construction of its first daily-fee golf
course as part of its long-term plan to participate in the growing daily-fee
golf market. The Company believes that because the demographics of this market
are similar to those of the Residential Land Division, daily-fee golf courses
are an attractive amenity that will increase the marketability of the Company's
adjacent residential lots in certain projects. The Company's first golf course,
the Carolina National Golf Club, is located near Southport, North Carolina, just
30 miles north of Myrtle Beach, South Carolina, one of the nation's most popular
golf destinations, and was designed by Masters Champion Fred Couples. Also, as
part of the RDI Acquisition, the Company acquired a daily-fee golf course
located in Wisconsin Dells, Wisconsin.
The Company's Common Stock is listed on the New York Stock Exchange and on
the Pacific Stock Exchange under the symbol "BXG." The Company's executive
offices are currently located at 5295 Town Center Road, Suite 400, Boca Raton,
Florida 33486. The Company's telephone number at such address is (561) 361-2700.
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<PAGE> 11
COMPETITIVE STRENGTHS
SUBSTANTIAL INTERNAL GROWTH CAPACITY
The Company believes its substantial investment in resort infrastructure
and core residential land holdings will allow it to convert current and planned
inventory into positive and sustainable revenues and cash flow. As of December
28, 1997, the Company had existing completed inventory of 19,659 Timeshare
Interests at its resorts, 7,900 Timeshare Interests under construction or
development, and plans to develop approximately 53,300 additional Timeshare
Interests at existing resorts. Based on the foregoing, the Resorts Division's
estimated remaining life-of-project sales and estimated remaining
life-of-project field operating profit were approximately $674.6 million and
$65.4 million, respectively, at December 28, 1997. The aggregate carrying amount
of Residential Land Division inventory at December 28, 1997 was $51.7 million.
The Residential Land Division's estimated remaining life-of-project sales and
estimated remaining life-of-project field operating profit were approximately
$224.5 million and $47.6 million, respectively, at December 28, 1997.
ATTRACTIVE LOCATIONS AND HIGH QUALITY LIFESTYLE PRODUCTS
The Company seeks to maximize sales penetration and cash flow by marketing
and selling high quality lifestyle products in attractive locations possessing
positive demographic and population attributes. The Resorts Division generally
markets Timeshare Interests in popular "drive-to" locations providing a high
quality, cost-effective vacation alternative to its buyers. The Resorts Division
also provides its customers, through its participation in II and RCI, access to
over 1,500 and 3,200 participating resorts worldwide, respectively. The
Residential Land Division markets residential lots (typically two to five
acres), which are larger than those generally available in traditional suburban
developments. These lots are often near attractive amenities and are located
near major metropolitan centers outside the perimeter of intense subdivision
development or in popular retirement areas.
STRONG INDUSTRY FUNDAMENTALS
The timeshare industry is one of the fastest growing segments of the
hospitality industry with a compound annual sales growth rate from 1980 to 1997
of approximately 16%. In addition, the number of timeshare resorts worldwide
increased 167.4% from 1,550 in 1984 to over 4,100 in 1994 (the most recent date
for which ARDA statistics are available). The Company believes that several
factors have contributed to this sustained industry growth including: (i)
increased flexibility of ownership due to the growth in the international
exchange programs and points-based vacation club systems; (ii) increased
consumer awareness of the economic values and benefits of timeshare ownership;
(iii) improvement in both the quality and management of the resorts; (iv) an
influx of brand-name national lodging companies to the timeshare industry; (v)
implementation of consumer protection regulations; (vi) availability of consumer
financing; and (vii) improvement in inventory management systems. The Company
believes that, despite the industry's growth, timeshare ownership has achieved
only an approximate 5% market penetration among United States households with
income above $50,000 per year.
RISK MANAGEMENT THROUGH PRE-SELLING AND RIGOROUS INTERNAL CONTROLS
The Company's acquisition and development strategies for both its Resorts
and its Residential Land Divisions are designed to reduce capital risk. Prior to
acquiring timeshare projects or residential land, the Company typically utilizes
market research and conducts due diligence. In addition, in the case of new
Residential Land Division locations, the Company engages in pre-marketing
techniques prior to acquiring residential land. The Company typically develops
its projects in phases, and its ability to bond projects to completion allows it
to sell a significant portion of Timeshare Interests or planned residential lots
on a pre-development basis prior to full capital investment. All acquisitions
must be approved by the Investment Committee.
ATTRACTIVE MARKET DEMOGRAPHICS
Both the Resorts and Residential Land Divisions target customers in the
40-55 year old age group. The Company's target group, which is one of the
fastest growing segments in the U.S., seeks to use its growing
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earning power to effect quality lifestyle improvements. The Company believes
that its products will allow it to effectively capitalize on the anticipated
growth and objectives of this target market.
SOPHISTICATED SALES INFORMATION MANAGEMENT SYSTEM
The Company's significant investment in its sales and marketing information
systems has enabled both its Resorts Division and its Residential Land Division
to compile, process and maintain comprehensive, valuable data regarding future
sales prospects. The Company currently has over 250,000 potential prospective
buyers in its databases. The Company believes that the ability to access this
information allows the Company to more accurately target its prospective
customers and, thus, reduce marketing costs and increase closing rates.
SUPERIOR SALES AND MARKETING PERSONNEL
The success of the Company's sales and marketing efforts depends heavily on
the knowledge and experience of its marketing and commission-based sales
personnel. The Company believes its marketing and sales personnel are among the
most experienced in the timeshare and residential land industries. The Company
has expended considerable resources in training such personnel in the effective
use of the Company's databases and sales marketing systems, site attributes and
surrounding area amenities. The Company enhances this sales and marketing
expertise through the Bluegreen Institute, a mandatory training program designed
to instill the Company's marketing and customer service philosophy in middle-
and lower-level management.
COST EFFICIENCIES THROUGH MULTI-SITE OPERATIONS AND RESORT MATURATION
As the Resorts Division grows, the Company believes it has significant
opportunities to realize economies of scale through the operation of a
multi-resort management system and the reduction of fixed operating costs as a
percentage of sales. In addition, the Company believes that, as its existing
resorts mature, a greater percentage of Timeshare Interests will be sold through
less expensive marketing techniques such as referrals and upgrade sales to
existing Timeshare Interest owners.
EXPERIENCED MANAGEMENT TEAM
The Company's five senior executive officers have over 100 years of
industry-related experience. The Company has employment agreements with each of
these executive officers, which expire in March 2001.
BUSINESS STRATEGY
In order to further enhance its market positions and to maximize
profitability and cash flow, the Company's principal strategic objectives are as
follows:
CAPITALIZE ON SIGNIFICANT GROWTH OPPORTUNITIES IN THE TIMESHARE INDUSTRY
The Resorts Division was founded in 1994 to capitalize on the rapid growth
of the timeshare industry. The Company intends to continue to aggressively
market and sell its existing and planned Timeshare Interest inventory through
the further development of in-house sales and marketing programs, exchange
program synergies and the use of technology and database management systems. The
Company's goal is to continue to increase sales of Timeshare Interests as a
percentage of the Company's total consolidated revenue, further diversifying the
Company's base of revenue.
IMPROVEMENT OF MARGINS IN RESORTS DIVISION
The Company believes that increased efficiency and a multi-resort
management system will reduce operating costs as a percentage of sales and allow
the Company to experience increased margins at its existing resorts by spreading
operating and corporate overhead costs over a larger revenue base. In addition,
the Company expects operating margins at its resorts to improve over time as a
greater percentage of Timeshare Interests are sold through more efficient, less
costly marketing techniques, such as referrals and sales of additional Timeshare
Interests to existing customers. The Company also believes that it will reduce
the Resorts Division's sales and marketing expenses, as a percentage of sales,
over time by targeting more
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<PAGE> 13
potential buyers through its Resorts Division database system and through lead
generation assistance and cross-marketing and selling from the Residential Land
Division.
ACQUISITIONS OF TIMESHARE RESORT ASSETS
The Company intends to continue to grow the Resorts Division through
acquisitions in destinations that will complement the Company's current resort
locations. Because the timeshare industry is highly fragmented, the Company
believes that significant opportunities exist to make selected acquisitions at
attractive valuations. Acquisitions the Company may consider include acquiring
additional Timeshare Interest inventory, operating companies, management
contracts, Timeshare Interest mortgage portfolios and properties or other
timeshare-related assets which may be integrated into the Company's operations.
FOCUS ON RESIDENTIAL LAND BUSINESS CORE MARKETS
The Company intends to continue to focus the Residential Land Division on
those regions where the market for its products is strongest, such as the
Southeast, Southwest, Rocky Mountain and Western regions of the United States
and to replenish its residential land inventory in such regions as existing
projects are sold-out. The Company believes that its in-depth knowledge of these
markets, together with the current strong economic growth and favorable
demographic trends in these regions, will enable it to continue to maintain
favorable operating margins and cash flows.
DEVELOPMENT OF POINTS-BASED VACATION CLUB SYSTEM
The Company intends to expand the points-based vacation club system that it
acquired in the RDI Acquisition. The Company's objective in expanding its
points-based vacation club system is to create, in conjunction with its
participation in worldwide timeshare exchange networks, a Bluegreen timeshare
system that maximizes the vacation flexibility of its current and prospective
Timeshare Interest owners.
INTERNATIONAL EXPANSION
The Company intends to selectively add timeshare resort locations in areas
outside the United States. Through the Aruba Transaction, the Company has
obtained Timeshare Interest inventory in the Caribbean. The Company intends to
continue to focus on the Caribbean region, as well as Central and South America,
as possible locations for additional resort properties.
GOLF COURSE DEVELOPMENT
In fiscal 1997, the Company began construction of its first 27 hole
daily-fee golf course as part of its long-term strategy to participate in the
growing daily-fee golf market. Management believes that the demographics of this
market are similar to those of the Company's Residential Land Division. As a
result, management believes that daily-fee golf courses are an attractive
amenity that will increase the marketability of the Company's adjacent
residential lots in certain projects.
CROSS UTILIZATION OF DATABASES
The Company intends to cross-utilize information contained in its
Residential Land Division and Resorts Division databases. Because the
Residential Land and Resorts Divisions target similar geographic markets and
demographics classes, the Company believes that such cross-utilization will
significantly enhance its sales and marketing efforts for each division.
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THE EXCHANGE OFFER
Issuer..................... Bluegreen Corporation
Outstanding Notes.......... The Outstanding Notes were sold by the Company on
April 1, 1998 to NatWest Capital Markets Limited
and McDonald & Company Securities, Inc.
(collectively, the "Initial Purchasers") pursuant
to a Purchase Agreement, dated March 26, 1998 (the
"Purchase Agreement"). The Initial Purchasers
subsequently resold the Outstanding Notes to
qualified institutional buyers pursuant to Rule
144A under the Securities Act.
Registration Rights
Agreement.................. Pursuant to the Purchase Agreement, the Company and
the Initial Purchasers entered into the
Registration Rights Agreement, which grants the
holders of the Outstanding Notes certain exchange
and registration rights. The Exchange Offer is
intended to satisfy such exchange and registration
rights which terminate upon the consummation of the
Exchange Offer.
Securities Offered......... $110,000,000 aggregate principal amount of 10 1/2%
Senior Secured Notes due 2008, Series B (the
"Exchange Notes").
The Exchange Offer......... The Company is offering to exchange $1,000
principal amount of Exchange Notes for each $1,000
principal amount of Outstanding Notes that are
properly tendered and accepted. The Company will
issue Exchange Notes on or promptly after the
Expiration Date. As of the date hereof, there is
$110,000,000 aggregate principal amount of
Outstanding Notes outstanding. The terms of the
Exchange Notes are identical in all material
respects to the terms of the Outstanding Notes for
which they may be exchanged pursuant to the
Exchange Offer, except that (i) the Exchange Notes
will bear a Series B designation and will have been
registered under the Securities Act and, therefore,
will not bear legends restricting their transfer
and will not contain certain provisions relating to
an increase in the interest rate which were
included in the terms of the Outstanding Notes in
certain circumstances relating to the timing of the
Exchange Offer and (ii) holders of the Exchange
Notes will not be entitled to certain rights of the
holders of the Outstanding Notes under the
Registration Rights Agreement, which rights shall
terminate upon the consummation of the Exchange
Offer. See "The Exchange Offer." The Exchange Offer
is not conditioned upon any minimum aggregate
principal amount of Outstanding Notes being
tendered for exchange.
Based on no-action letters issued by the staff of
the Commission to third parties with respect to
similar transactions, the Company believes that the
Exchange Notes issued pursuant to the Exchange
Offer in exchange for Outstanding Notes may be
offered for resale, resold and otherwise
transferred by holders thereof (other than (i) a
broker-dealer who purchases such Exchange Notes
from the Company to resell pursuant to Rule 144A or
any other available exemption under the Securities
Act, or (ii) a person that is an "affiliate" of the
Company within the meaning of Rule 405 of the
Securities Act) without compliance with the
registration and prospectus delivery requirements
of the Securities Act, provided that such Exchange
Notes are acquired in the ordinary course of such
holders' business and such holders are not engaged
in, have no arrangement or understanding with any
person to participate in, and do not intend to
engage in, any distribution of the Exchange Notes.
However, the Company has not sought and does not
intend to seek a no-action
7
<PAGE> 15
letter with respect to the Exchange Offer and there
can be no assurance that the staff of the
Commission would make a similar determination with
respect to the Exchange Offer. Each holder of
Exchange Notes other than a broker-dealer, must
represent that such conditions have been met. In
addition, each broker-dealer that receives Exchange
Notes for its own account pursuant to the Exchange
Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such
Exchange Notes.
The Letter of Transmittal accompanying this
Prospectus states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not
be deemed to admit that it is an "underwriter"
within the meaning of the Securities Act. A
broker-dealer may nonetheless be deemed to be an
"underwriter" under the Securities Act
notwithstanding such disclaimer. This Prospectus,
as it may be amended or supplemented from time to
time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange
for Outstanding Notes where such Outstanding Notes
were acquired by such broker-dealer as a result of
market-making activities or other trading
activities. Pursuant to the Registration Rights
Agreements, the Company has agreed that, for a
period of 180 days after the Expiration Date, it
will make this Prospectus available to any
broker-dealer for use in connection with any such
resale. See "The Exchange Offer -- Purpose and
Effect of the Exchange Offer" and "Plan of
Distribution."
Any holder who tenders in the Exchange Offer with
the intention to participate, or for the purpose of
participating, in a distribution of the Exchange
Notes could not rely on the position of the staff
of the Commission enunciated in no-action letters
and, in the absence of an applicable exemption,
must comply with the registration and prospectus
delivery requirements of the Securities Act in
connection with any resale transaction. Failure to
comply with such requirements in such instance may
result in such holder incurring liability under the
Securities Act for which the holder is not
indemnified by the Company.
Expiration Date............ 5:00 p.m., New York City time, on ,
1998, unless the Exchange Offer is extended in the
sole discretion of the Company, in which case the
term "Expiration Date" means the latest date and
time to which the Exchange Offer is extended. See
"The Exchange Offer -- Expiration Date; Extensions;
Amendments."
Accrued Interest on the
Exchange Notes........... Each Exchange Note will bear interest from the most
recent date to which interest has been paid on the
Outstanding Notes or, if no interest has been paid
on such Outstanding Notes, from April 1, 1998.
Holders whose Outstanding Notes are accepted for
exchange will be deemed to have waived the right to
receive any interest accrued on the Outstanding
Notes.
Exchange Date.............. As soon as practicable after the close of the
Exchange Offer, the Company will accept for
exchange all Outstanding Notes properly tendered
and not validly withdrawn prior to 5:00 p.m., New
York City time, on the Expiration Date. See "The
Exchange Offer -- Withdrawal of Tenders."
8
<PAGE> 16
Conditions to the Exchange
Offer...................... The Exchange Offer is subject to customary
conditions, certain of which may be waived by the
Company. The Company reserves the right to
terminate or amend the Exchange Offer at any time
prior to the Expiration Date upon the occurrence of
any such condition. The Exchange Offer is not
conditioned on any minimum aggregate principal
amount of Outstanding Notes being tendered for
exchange. See "The Exchange Offer -- Conditions."
Consequences of Failure to
Exchange................. Any Outstanding Notes not tendered pursuant to the
Exchange Offer will remain outstanding and continue
to accrue interest. Such Outstanding Notes will
remain "restricted securities" under the Securities
Act, subject to the transfer restrictions described
herein and contained in the Indenture. As a result,
the liquidity of the market for such Outstanding
Notes could be adversely affected upon completion
of the Exchange Offer. See "Risk
Factors -- Consequences of Failure to Exchange" and
"The Exchange Offer -- Consequences of Failure to
Exchange."
Certain Federal Income Tax
Considerations........... The exchange of the Outstanding Notes for Exchange
Notes by tendering holders should not be a taxable
exchange for U.S. Federal income tax purposes, and
such holders should not recognize any taxable gain
or loss for U.S. Federal income tax purposes as a
result of such exchange. See "Certain U.S. Federal
Income Tax Considerations."
Use of Proceeds............ There will be no cash proceeds to the Company from
the Exchange Offer. See "Use of Proceeds."
PROCEDURES FOR TENDERING OUTSTANDING NOTES
Tendering Outstanding
Notes...................... Each beneficial owner owning interests in
Outstanding Notes ("Beneficial Owner") through a
DTC Participant (as defined) must instruct such DTC
Participant to cause Outstanding Notes to be
tendered in accordance with the procedures set
forth in this Prospectus and in the applicable
Letter of Transmittal. See "The Exchange
Offer -- Procedures for Tendering -- Outstanding
Notes held through DTC."
Each participant (a "DTC Participant") in the
Depository Trust Company ("DTC") holding
Outstanding Notes through DTC must (i)
electronically transmit its acceptance to DTC
through the DTC Automated Tender Offer Program
("ATOP"), for which the transaction will be
eligible, and DTC will then verify the acceptance,
execute a book-entry delivery to the Exchange
Agent's (as defined herein) account at DTC and send
an Agent's Message (as defined herein) to the
Exchange Agent for its acceptance, or (ii) comply
with the guaranteed delivery procedures set forth
in this Prospectus and in the Letter of
Transmittal. By tendering through ATOP, DTC
Participants will expressly acknowledge receipt of
the accompanying Letter of Transmittal and agree to
be bound by its terms and the Company will be able
to enforce such agreement against such DTC
Participants. See "The Exchange Offer -- Procedures
for Tendering -- Outstanding Notes held through
DTC" and "-- Guaranteed Delivery
Procedures -- Outstanding Notes held through DTC."
9
<PAGE> 17
Each Holder must (i) complete and sign a Letter of
Transmittal, and mail or deliver such Letter of
Transmittal, and all other documents required by
the Letter of Transmittal, together with
certificate(s) representing all tendered
Outstanding Notes, to the Exchange Agent at its
address set forth in this Prospectus and in the
Letter of Transmittal, or (ii) comply with the
guaranteed delivery procedures set forth in this
Prospectus. See "The Exchange Offer -- Procedures
for Tendering," "-- Exchange Agent" and
"-- Guaranteed Delivery Procedure -- Outstanding
Notes held by Holders."
By tendering, each holder will represent to the
Company that, among other things, (i) the Exchange
Notes are to be acquired by the holder or the
person receiving such Exchange Notes, whether or
not such person is the holder, in the ordinary
course of business, (ii) the holder or any such
other person (other than a broker-dealer referred
to in the next sentence) is not engaging and does
not intend to engage, in the distribution of the
Exchange Notes, (iii) the holder or any such other
person has no arrangement or understanding with any
person to participate in the distribution of the
Exchange Notes, (iv) neither the holder nor any
such other person is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities
Act, and (v) the holder or any such other person
acknowledges that if such holder or other person
participates in the Exchange Offer for the purpose
of distributing the Exchange Notes it must comply
with the registration and prospectus delivery
requirements of the Securities Act in connection
with any resale of the Exchange Notes. Each
broker-dealer participating in the Exchange Offer
that receives Exchange Notes for its own account in
exchange for Outstanding Notes must acknowledge
that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "The
Exchange Offer -- Procedures for Tendering."
Guaranteed Delivery
Procedures................. DTC Participants holding Outstanding Notes through
DTC who wish to cause their Outstanding Notes to be
tendered, but who cannot transmit their acceptances
through ATOP prior to the Expiration Date, may
effect a tender in accordance with the procedures
set forth in this Prospectus and in the Letter of
Transmittal. See "The Exchange Offer -- Guaranteed
Delivery Procedures." Holders who wish to tender
their Outstanding Notes but (i) whose Outstanding
Notes are not immediately available and will not be
available for tendering prior to the Expiration
Date, or (ii) who cannot deliver their Outstanding
Notes, the Letter of Transmittal or any other
required documents to the Exchange Agent prior to
the Expiration Date, may effect a tender in
accordance with the procedures set forth in this
Prospectus. See "The Exchange Offer -- Guaranteed
Delivery Procedures."
Withdrawal Rights.......... The tender of Outstanding Notes pursuant to the
Exchange Offer may be withdrawn at any time prior
to 5:00 p.m., New York City time, on the Expiration
Date, in accordance with the procedures set forth
in this Prospectus. See "The Exchange
Offer -- Withdrawal of Tenders."
Exchange Agent............. SunTrust Bank, Central Florida, National
Association is serving as Exchange Agent in
connection with the Exchange Offer. See "The
Exchange Offer -- Exchange Agent."
10
<PAGE> 18
Shelf Registration
Statement.................. Under certain circumstances described in the
Registration Rights Agreement, certain holders of
Outstanding Notes (including holders who are not
permitted to participate in the Exchange Offer or
who may not freely resell Exchange Notes received
in the Exchange Offer) may require the Company to
file and use its reasonable efforts to cause to
become effective, a shelf registration statement
under the Securities Act, which would cover resales
of Outstanding Notes by such holders. See "The
Exchange Offer -- Purpose and Effect of the
Exchange Offer."
THE EXCHANGE NOTES
Securities Offered......... $110,000,000 aggregate principal amount of 10 1/2%
Senior Secured Notes due 2008, Series B that have
been registered under the Securities Act. See
"Description of Notes."
Maturity Date.............. April 1, 2008.
Interest Payment Dates..... April 1 and October 1 of each year, commencing
October 1, 1998.
Optional Redemption........ The Notes will be redeemable at the option of the
Company, in whole or in part, in cash, on or after
April 1, 2003, at the redemption prices set forth
herein, together with accrued and unpaid interest,
if any, to the date of redemption. In addition,
prior to April 1, 2001, the Company may redeem up
to 35% of the aggregate principal amount of the
Notes with the proceeds of one or more Equity
Offerings, at a redemption price equal to 110.5% of
the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of redemption,
provided that at least $65 million principal amount
of Notes remains outstanding after any such
redemption. See "Description of the
Notes -- Optional Redemption."
Ranking.................... The Outstanding Notes are and the Exchange Notes
will be senior obligations of the Company. The
Outstanding Notes rank and the Exchange Notes will
rank pari passu in right of payment with all
existing and future Senior Indebtedness of the
Company. The Outstanding Notes rank and the
Exchange Notes will rank senior in right of payment
to all existing and future Subordinated Obligations
of the Company. None of the assets of Bluegreen
Corporation will secure its obligations under the
Notes, and the Notes will be effectively
subordinated to Secured Indebtedness of the Company
to any third party to the extent of assets serving
as security therefor. As of December 28, 1997, on a
pro forma basis after giving effect to the Note
Offering and the application of the net proceeds
therefrom and excluding the Notes, the Company
would have approximately $25.9 million of Secured
Indebtedness outstanding. See "Description of
Notes -- Ranking."
Guarantees................. The Outstanding Notes are and the Exchange Notes
will be unconditionally guaranteed, jointly and
severally, by each of the Subsidiary Guarantors.
The Note Guarantees are and will be senior
obligations of each Subsidiary Guarantor and rank
and will rank pari passu in right of payment with
all existing and future Senior Indebtedness of each
such Subsidiary Guarantor and senior in right of
payment to all existing and future Subordinated
Indebtedness of each such Subsidiary Guarantor. See
"Description of Notes -- Note Guarantees."
Security................... The Note Guarantees of certain Subsidiary
Guarantors are and will be secured by a first
(subject to customary exceptions) mortgage or
similar
11
<PAGE> 19
instrument (each, a "Mortgage") on the Pledged
Properties of such Subsidiary Guarantors. Absent
the occurrence and the continuance of an Event of
Default, the Notes Trustee will be required to
release its lien on the Pledged Properties as
property is sold and the Trustee will not have a
lien on the proceeds of any such sale. As of
January 25, 1998, the Pledged Properties had an
aggregate book value of approximately $46.1
million. The Company has agreed to obtain certain
title insurance policies for the Pledged
Properties. If all such title insurance policies
are not obtained by June 1, 1998, the interest rate
on the Notes will increase. See "Description of
Notes -- Security." Except to the extent of the
assets serving as security for such Note
Guarantees, the Note Guarantees of each Subsidiary
Guarantor are and will be effectively subordinated
to the Secured Indebtedness of each Subsidiary
Guarantor to the extent of the assets serving as
security therefor. See "Description of
Notes -- Security."
Change of Control.......... Upon the occurrence of a Change of Control, the
Company will be required to make an offer to
repurchase the Notes at a price equal to 101% of
the principal amount thereof, together with accrued
and unpaid interest, if any, to the date of
repurchase. See "Description of Notes -- Optional
Redemption" and "-- Change of Control."
Restrictive Covenants...... The indenture under which the Outstanding Notes
were and the Exchange Notes will be issued (the
"Indenture") contains certain covenants that, among
other things, will limit (i) the incurrence of
additional indebtedness by the Company and its
Restricted Subsidiaries (as defined), (ii) the
payment of dividends on, and redemption of, capital
stock of the Company and the redemption of certain
Subordinated Obligations of the Company, (iii)
investments, (iv) sales of assets and subsidiary
stock, (v) transactions with affiliates and (vi)
consolidations, mergers and transfers of all or
substantially all the assets of the Company. The
Indenture also prohibits certain restrictions on
distributions from Restricted Subsidiaries.
However, all of these limitations and prohibitions
are subject to a number of important qualifications
and exceptions. See "Description of
Notes -- Certain Covenants."
Exchange Offer and Absence
of a Public Market for the
Notes..................... The Exchange Notes will generally be freely
transferable (subject to the restrictions discussed
elsewhere herein) but will be new securities for
which there will not initially be a market. The
Outstanding Notes have been designated for trading
in the PORTAL market. The Company does not intend
to apply for a listing of the Exchange Notes on any
securities exchange or on any automated dealer
quotation system. See "Plan for Distribution."
FOR MORE COMPLETE INFORMATION REGARDING THE NOTES, SEE "DESCRIPTION OF NOTES."
RISK FACTORS
Prospective acquirors of the Exchange Notes should consider carefully all
of the information set forth in this Prospectus and, in particular, should
evaluate the specific factors set forth under "Risk Factors" for risks involved
with an acquisition of the Exchange Notes.
12
<PAGE> 20
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
The summary consolidated financial data presented below for each of the
five years in the period ended March 30, 1997 are derived from the Company's
audited consolidated financial statements. The summary consolidated financial
data presented below for the nine month periods ended December 29, 1996 and
December 28, 1997 have been derived from unaudited financial statements. The
unaudited financial statements include all adjustments, consisting of normal
recurring accruals, which the Company considers necessary for a fair
presentation of its financial position and the results of operations for these
periods. Operating results for the nine months ended December 28, 1997 are not
necessarily indicative of the results that may be expected for the entire fiscal
year ended March 29, 1998. The summary consolidated financial data should be
read in conjunction with the Consolidated Financial Statements, related notes,
and other financial information appearing elsewhere or incorporated by reference
herein.
<TABLE>
<CAPTION>
AS OF OR FOR THE NINE
AS OF OR FOR THE YEAR ENDED, MONTHS ENDED,
-------------------------------------------------------- ---------------------------
MARCH 28, MARCH 27, APRIL 2, MARCH 31, MARCH 30, DECEMBER 29, DECEMBER 28,
1993 1994 1995 1996 1997 1996 1997
--------- --------- -------- --------- --------- ------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT AVERAGE SALES PRICE DATA AND SELECTED STATISTICAL DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Sales of real estate and
services......................... $ 53,349 $ 63,389 $ 91,922 $113,422 $109,722 $ 81,712 $124,487
Interest income and other(1)....... 10,191 7,952 7,264 7,388 6,159 4,577 7,324
-------- -------- -------- -------- -------- -------- --------
Total revenues................. 63,540 71,341 99,186 120,810 115,881 86,289 131,811
Cost of sales...................... 28,450 30,773 45,106 59,393 57,091 41,384 56,786
Selling, general and administrative
expenses......................... 22,652 26,444 36,521 43,735 51,441 38,051 55,526
-------- -------- -------- -------- -------- -------- --------
Operating income................... 12,438 14,124 17,559 17,682 7,349 6,854 19,499
Interest expense................... 7,284 6,551 6,737 6,276 5,459 3,916 6,512
Provisions for losses.............. 1,550 795 792 612 9,539 9,101 1,349
Other income....................... 1,727 1,175 372 122 259 184 120
Provision (benefit) for income
taxes............................ 1,874 3,022 4,265 4,449 (3,030) (2,451) 4,774
-------- -------- -------- -------- -------- -------- --------
Net income (loss).................. $ 3,457 $ 4,931 $ 6,137 $ 6,467 $ (4,360) $ (3,528) $ 6,984
======== ======== ======== ======== ======== ======== ========
OTHER DATA AND CREDIT STATISTICS:
EBITDA(2).......................... $ 14,172 $ 16,164 $ 18,522 $ 18,978 $ 8,291 $ 7,366 $ 21,396
EBITDA to senior interest expense
(as adjusted)(3)................. -- -- -- -- -- -- 2.4x
EBITDA to interest expense (as
adjusted)(3)..................... -- -- -- -- -- -- 1.9x
Total senior debt to EBITDA (as
adjusted)(4)..................... -- -- -- -- -- -- 4.1x
Total debt to EBITDA (as
adjusted)(4)..................... -- -- -- -- -- -- 5.5x
Weighted average interest rate on
notes receivable at period end... 11.0% 10.9% 12.4% 12.4% 13.3% 14.4% 15.0%
RESIDENTIAL LAND STATISTICS:
Gross margin on sales of real
estate(5)........................ 46.7% 51.5% 50.9% 47.6% 48.0% 49.4% 55.0%
Average sales price of land parcels
sold(6).......................... $ 21,368 $ 25,511 $ 30,969 $ 34,856 $ 38,572 $ 37,207 $ 47,449
Number of land parcels sold........ 2,560 2,489 2,397 2,347 2,057 1,498 1,740
RESORTS STATISTICS:
Number of resorts at period
end(7)........................... 0 1 2 3 4 3 8
Average sales price of timeshare
intervals sold(6)................ $ -- $ -- $ 7,119 $ 7,325 $ 8,362 $ 8,342 $ 8,695
Number of timeshare intervals
sold(6).......................... -- -- 952 1,865 3,195 2,579 4,903
BALANCE SHEET DATA:
Notes receivable, net.............. $ 35,653 $ 44,203 $ 40,311 $ 37,014 $ 34,619 $ 31,873 $ 73,116
Inventory, net..................... 28,245 38,793 62,345 73,595 86,661 81,108 112,297
Total assets....................... 122,853 139,617 152,222 154,963 169,627 158,301 254,808
Lines-of-credit, notes payable and
receivable-backed notes
payable.......................... 26,602 37,297 39,946 37,011 56,961 50,896 89,621(8)
Convertible debt................... 34,739 34,739 34,739 34,739 34,739 34,739 40,739
Shareholders' equity............... 46,868 51,854 58,040 64,698 59,243 60,041 66,649
</TABLE>
13
<PAGE> 21
- ---------------
(1) Interest income for fiscal 1993, 1994, 1995, 1996 and 1997 includes a
$695,000 gain, a $238,000 loss, a $411,000 loss, a $1.1 million gain and a
$96,000 loss, respectively, from sales of notes receivable in connection
with private placement REMIC transactions. See "Management's Discussion and
Analysis of Results of Operations and Financial Condition."
(2) EBITDA represents net income before interest expense, income taxes,
depreciation and amortization and, in the case of fiscal 1997, the provision
for non-recurring costs described below. EBITDA should not be considered in
isolation or construed as a substitute for the Company's net income, income
from operations, cash flows from operating activities or liquidity in
analyzing the Company's operating performance, financial position or cash
flows. EBITDA is not necessarily comparable to other similarly titled
captions of other companies due to potential inconsistencies in the method
of calculation. The Company has included EBITDA herein to provide additional
information related to the Company's ability to incur and service debt. The
following table reconciles EBITDA to net income (loss) (amounts in
thousands):
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
FOR THE YEAR ENDED, ENDED,
-------------------------------------------------------- ---------------------------
MARCH 28, MARCH 27, APRIL 2, MARCH 31, MARCH 30, DECEMBER 29, DECEMBER 28,
1993 1994 1995 1996 1997 1996 1997
--------- --------- -------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net income (loss)........... $ 3,457 $ 4,931 $ 6,137 $ 6,467 $(4,360) $(3,528) $ 6,984
Interest expense............ 7,284 6,551 6,737 6,276 5,459 3,916 6,512
Capitalized interest expense
included in cost of real
estate sold............... -- -- 82 149 956 422 1,781
Income taxes................ 1,874 3,022 4,265 4,449 (3,030) (2,451) 4,774
Provision for non-recurring
costs (a)................. -- -- -- -- 8,200 8,200 --
Depreciation and
amortization.............. 1,557 1,660 1,301 1,637 1,066 807 1,345
------- ------- ------- ------- ------- ------- -------
EBITDA...................... $14,172 $16,164 $18,522 $18,978 $ 8,291 $ 7,366 $21,396
======= ======= ======= ======= ======= ======= =======
</TABLE>
(a) The provision for non-recurring costs, which is included in Provision
for losses on the Consolidated Statement of Operations, represents the
Company's $8.2 million write-down of certain Communities Division and
Residential Land Division properties in the first quarter of fiscal
1997. See Note 4 to the Consolidated Financial Statements and
"Management's Discussion and Analysis of Results of Operations and
Financial Condition."
(3) Interest expense is pro forma after giving effect to the Note Offering and
the application of net proceeds therefrom assuming the Note Offering closed
on April 1, 1997, and includes amounts capitalized into inventory and pro
forma interest expense on the Notes. Senior interest expense excludes
interest expense on the Public Debentures (as defined) and the Convertible
Notes (as defined).
(4) Total debt is pro forma after giving effect to the Note Offering and the
application of net proceeds therefrom and excludes $15.4 million of
non-recourse indebtedness incurred by BG Aruba in connection with the Aruba
Transaction and $8.4 million of RDI debt related to notes receivable
previously sold with recourse to financial institutions. See
"Business -- Recent Acquisitions." Total senior debt also excludes the
Public Debentures and the Convertible Notes.
(5) Gross margin is computed as the difference between the sales price and the
related cost of inventory (including the cost of improvements, amenities and
in certain cases capitalized interest and real estate taxes), divided by the
sales price.
(6) Average sales price and unit sales data include those sales made during the
applicable period where recognition of revenue is deferred under the
percentage of completion method of accounting. See "Contracts Receivable and
Revenue Recognition" under Note 1 to the Consolidated Financial Statements.
(7) The number of resorts at December 28, 1997 includes the two resorts acquired
in the RDI Acquisition and the Aruba Resort. See "Business -- Recent
Acquisitions."
(8) Excludes $15.4 million of non-recourse indebtedness incurred by BG Aruba in
connection with the Aruba Transaction and $8.4 million of RDI debt related
to notes receivable previously sold with recourse to financial institutions.
See "Business -- Recent Acquisitions."
14
<PAGE> 22
RISK FACTORS
The following risk factors should be considered carefully in addition to
the other information contained in this Prospectus before purchasing the Notes
offered hereby. Unless otherwise indicated, references in this section to real
estate and inventories collectively encompass the Resorts Division, the
Residential Land Division and the Company's other operations.
REAL ESTATE MARKET AND GENERAL ECONOMIC CONDITIONS; INVENTORY CONCENTRATION
Real estate markets are cyclical in nature and highly sensitive to changes
in national and regional economic conditions, including, among other factors,
levels of employment and discretionary disposable income, consumer confidence,
available financing and interest rates. A downturn in the economy in general or
in the market for residential land or timeshare property could have a material
adverse effect on the Company's business, operating results and financial
condition. In addition, concentration in a given region may increase the
Company's susceptibility to a downturn in such region. The Company has in recent
years been dedicating greater resources to more capital intensive residential
land and timeshare projects and the level of its inventory has increased
materially. The Company will be required to make material capital expenditures
to develop its existing inventory as currently planned. There are substantial
risks associated with a large investment in residential land and timeshare
property inventory at any given time. These include the risks that (i)
residential land and timeshare property inventories will decline in value due to
changing market and economic conditions, (ii) development and carrying costs may
exceed those anticipated, (iii) there may be delays in bringing inventories to
market due to, among other things, changes in regulations, adverse weather
conditions or changes in the availability of development financing on terms
acceptable to the Company and (iv) banks and other lenders will cease financing
residential land and timeshare property sold by the Company with respect to
which the Company does not provide financing. No assurances can be given that
the Company will be able to continue sales at their current levels or that its
gross margins will not decline. See "Management's Discussion and Analysis of
Results of Operations and Financial Condition" and "Business."
With respect to the Company's timeshare operations, any adverse changes
affecting the timeshare industry such as an oversupply of Timeshare Interests, a
reduction in demand for Timeshare Interests, changes in travel and vacation
patterns, changes in governmental regulations of the timeshare industry and
increases in construction costs or taxes, as well as negative publicity for the
timeshare industry, could have a material adverse effect on the Company's
business, operating results and financial condition. See "Management's
Discussion and Analysis of Results of Operations and Financial Condition."
LEVERAGE; ABILITY TO SERVICE DEBT AND LIQUIDITY AND FINANCING REQUIREMENTS
Following the Note Offering and the Exchange Offer, the Company will
continue to have significant interest expense and principal repayment
obligations under its indebtedness. As of December 28, 1997, after giving effect
to the Note Offering and the application of the net proceeds therefrom, the
Company and its consolidated subsidiaries would have had total indebtedness of
approximately $181.1 million, including total secured indebtedness (other than
the Notes), of approximately $25.9 million. See "Selected Consolidated Financial
Data" and "Capitalization." Moreover, the Company is required to seek external
sources of liquidity to support its operations, finance the acquisition and
development of residential land and timeshare property inventory, finance a
substantial percentage of its sales and satisfy its debt and other obligations.
The Company anticipates that it will continue to require external sources of
liquidity to support its operations in the future. The Indenture permits the
Company to incur material additional indebtedness. See "Description of Notes."
The Company's ability to service or to refinance its indebtedness (including the
Notes) or to obtain additional financing (including its ability to consummate
future notes receivable securitizations) depends on its future performance,
which is subject to a number of factors, including the Company's business,
results of operations, leverage, financial condition and business prospects, the
performance of its receivables, prevailing interest rates, general economic
conditions and perceptions about the residential land and timeshare industries.
The Company is currently negotiating certain credit facilities for (i) the
financing and sale of its timeshare receivables, (ii) the financing of its
acquisition and development of timeshare properties and (iii) the acquisition
and development of residential land properties. No assurances can be given that
such credit
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facilities will be entered into or that funding will be provided on the terms
discussed herein, if at all, or that the Company will be able to obtain
sufficient external sources of liquidity on attractive terms, or at all. The
Company's existing credit facilities and its proposed facilities, if
consummated, will include, among other things, various representations and
warranties, conditions to funding, eligibility requirements for collateral,
affirmative, negative and financial covenants and events of default. See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition -- Liquidity and Capital Resources," "Business," "Description of Other
Indebtedness" and "Description of Notes."
The Company's level of debt and debt service requirements will have several
important effects on its future operations, including the following: (i) the
Company will have significant cash requirements to service debt, reducing funds
available for operations and future business opportunities and increasing the
Company's vulnerability to adverse economic and industry conditions; (ii) the
Company's leveraged position will increase its vulnerability to competitive
pressures; (iii) the financial covenants and other restrictions contained in the
Indenture, the Credit Agreements and other agreements relating to the Company's
indebtedness will require the Company to meet certain financial tests and will
restrict its ability to, among other things, borrow additional funds, dispose of
assets or pay cash dividends on, or repurchase, preferred or common stock; and
(iv) funds available for working capital, capital expenditures, acquisitions and
general corporate purposes may be limited. Certain of the Company's competitors
operate on a less leveraged basis and will have greater operating and financial
flexibility than the Company.
In addition to its other debt service obligations, the Company will be
required to redeem a specified amount of its 8 1/4% Convertible Subordinated
Debentures due 2012 (the "Public Debentures"), if not sooner converted into
Common Stock of the Company, annually commencing in 2003 and, if not sooner
converted into Common Stock of the Company, to repay in 2002 the $6 million
aggregate principal amount of convertible subordinated note indebtedness (the
"Convertible Notes") incurred in connection with the RDI Acquisition owed to one
of its directors and an affiliate of another of its directors. Absent an Event
of Default, the Indenture permits the making of scheduled payments on such
subordinated indebtedness. The Company's ability to make scheduled principal
payments, or to refinance its obligations, with respect to such indebtedness,
other existing indebtedness and future indebtedness, and to pay interest
thereon, will depend on its financial and operating performance, which, in turn,
is subject to prevailing economic conditions and to certain financial, business,
industry and other factors beyond its control. If the Company's cash flow and
capital resources are insufficient to fund its debt service obligations and
support its operations, the Company, among other consequences, may be forced to
reduce or delay planned capital expenditures, reduce its financing of sales,
sell assets, obtain additional equity capital or refinance or restructure its
debt. There can be no assurance that the Company's cash flow and capital
resources will be sufficient for payment of its indebtedness in the future. If
the Company is not able to satisfy its debt service obligations, it could
default on its indebtedness, including the Notes, which would entitle the
holders of such indebtedness to, among other things, accelerate the maturity
thereof. Any default under the documents governing indebtedness of the Company
could have a material adverse effect on the market value of the Notes. See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition -- Liquidity and Capital Resources" and "Description of Certain
Indebtedness."
ACQUISITION STRATEGY
A principal component of the Company's strategy is to continue to grow by
acquiring the land on which to develop additional timeshare projects or acquire
existing resorts from third party operators. Since the end of fiscal 1997, the
Resorts Division has acquired the land and begun development of its Harbour
Lights Resort in Myrtle Beach, South Carolina, acquired The Falls Village Resort
in Branson, Missouri and consummated the RDI Acquisition and the Aruba
Transaction. The Company's future growth and financial success will depend upon
a number of factors, including its ability to identify attractive resort
acquisition opportunities, consummate the acquisitions on favorable terms,
develop the resort and profitably sell Timeshare Interests at such resorts.
There can be no assurance that the Company will be successful with respect to
such factors. Currently, there are numerous potential buyers of resort real
estate which are better capitalized than the Company competing to acquire resort
properties which the Company may consider attractive acquisition
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opportunities. There can be no assurance that the Company will be able to
compete against such other buyers successfully.
Moreover, to successfully implement its business strategies, the Company
must integrate the newly acquired or developed resorts into its existing sales
and marketing programs. During the start-up phase of a new resort, the Company
expects to experience lower operating margins at that resort until the resort's
operations mature. The lower margins could be substantial and could negatively
impact the Company's cash flow. No assurances can be given that the Company's
operating margins will be maintained or improved as its resorts achieve maturity
or that new resorts will not reduce the Company's over-all operating margins.
Acquisitions involve certain risks and uncertainties. Such risks include
undisclosed liabilities, potential claims against the seller for which
indemnification will not be available (by virtue of caps or otherwise),
uncertainty as to future financial results, the failure of the seller of a
property or project to comply with applicable law in connection with such
property or project or otherwise (including the risks of monetary liabilities
and governmental liens and forfeiture), integrating distinct business operations
and projects, the increased demands acquisitions place on management resources
and other similar factors. No assurance can be given that past or future
acquisitions will be profitable. See "Business -- Recent Acquisitions."
RISKS RELATED TO DEVELOPMENT ACTIVITIES
The Company's growth strategy involves certain inherent risks including the
following: (i) the Company will be required to make material capital
expenditures to develop its residential land and timeshare property inventory
(the Company estimates that the total cash required to complete preparation for
the sale of its residential land and timeshare property inventory as of December
28, 1997 was approximately $186.0 million), (ii) planned development may be
delayed or abandoned and development and carrying costs may exceed those
anticipated, possibly making the project uneconomical or unprofitable, (iii) the
Company may experience a fluctuation in quarterly results due to an increase or
decrease in the number of residential land or timeshare projects subject to
percentage of completion accounting which requires net profit on such projects
to be recognized on a pro rata basis as development is completed, (iv) the
period between acquisition and sale of property may increase and the Company may
experience delays in bringing inventories to market, resulting in decreased
revenues and increased interest expense and carrying charges and (v) inventories
may decline in value due to changing market and economic conditions. Certain
inventories with a carrying value of $23.2 million were written-down by $8.2
million during the first quarter of fiscal 1997, in recognition of the change in
the Company's focus towards expansion of the Residential Land Division and the
Resorts Division in certain locations. See "Management's Discussion and Analysis
of Results of Operations and Financial Condition" and "Business." There can be
no assurance that the Company will complete planned development activities or be
able to acquire additional properties on attractive terms.
In addition, the Company's construction activities typically are performed
by third-party contractors, and, accordingly, the timing, quality and completion
of such activities cannot be controlled by the Company. Nevertheless,
construction claims may be asserted against the Company for construction defects
and such claims may give rise to liabilities. New development activities,
regardless of whether or not they are ultimately successful, typically require a
substantial portion of management's time and attention. Development activities
are also subject to risks relating to the inability to obtain, or delays in
obtaining, all necessary zoning, land-use, building, occupancy and other
required governmental permits and authorizations, the ability of the Company to
coordinate construction activities with the process of obtaining such permits
and authorizations, and the ability of the Company to obtain the financing
necessary to complete the necessary acquisition, construction, and/or conversion
work at its projects and resorts. In addition, certain states and local laws may
impose liability on property developers with respect to construction defects
discovered or repairs made by future owners of such property.
RISKS ASSOCIATED WITH CUSTOMER FINANCING AND RECEIVABLES
The Company offers financing of up to 90% of the purchase price to all
purchasers of its residential land properties or Timeshare Interests, as the
case may be, who qualify for such financing. Such loans are
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collateralized by liens on the underlying property and Timeshare Interest.
Currently, approximately 89% of the Company's timeshare buyers finance with the
Company, while approximately eight percent of the Company's residential land
customers use Company financings. As noted above, the Company requires external
sources of liquidity in order to offer financing to its customers. The
receivables arising from sales of Timeshare Interests and residential land
generally are pledged to institutional lenders or, in the case of residential
land receivables, sold in connection with private placement REMIC financings.
Under the pledged receivables facilities, the Company is typically advanced 90%
of the principal balance of eligible pledged receivables. The Company is
required to replace receivables that become delinquent or to pay down the loan
secured by such receivables to remain within required loan to value ratios. To
the extent the Company's receivables bear interest at a fixed rate and its
borrowings bear interest at a variable rate, the Company bears the risk of
increases in interest rates. The terms of REMIC financings require the Company
to repurchase or replace mortgage loans to the extent the Company has breached
any representations and warranties at the time of sale of its receivables to the
REMIC trust, and the Company, as servicer, is also required to make advances on
delinquent payments to the extent deemed recoverable. The Company is currently
negotiating with a financial institution to provide the Company with a combined
timeshare warehouse financing and receivables purchase facility and a timeshare
acquisition and development facility. See "Description of Other Indebtedness."
No assurances can be given that the Company will be able to obtain such
facilities on favorable terms, or at all. See "Management's Discussion and
Analysis of Results of Operations and Financial Condition."
The Company bears the risk of delinquencies and defaults by buyers who
finance through the Company the purchase of their Timeshare Interests or
residential land. General economic conditions have an impact on the ability of
borrowers to repay loans. Loss of earnings, illness and other similar factors
may lead to an increase in delinquencies. As of December 28, 1997, approximately
4.5% or $3.0 million principal amount of timeshare receivables and approximately
7.9% or $1.2 million principal amount of residential land receivables which were
held by the Company or by third parties under sales transactions where the
Company had a recourse liability were more than 30 days past due compared to
approximately 1.8% or $424,000 principal amount of timeshare receivables and
approximately 11.9% or $1.5 million principal amount of residential land
receivables as of March 30, 1997. Included in the above percentages are loans
with respect to which a foreclosure proceeding or other legal process had
commenced. The Company ceases to carry a receivable upon a foreclosure or when
it receives a deed in lieu of foreclosure, at which time the property goes back
into inventory. Historically, delinquencies on timeshare receivables have been
greater than those on land receivables. If the real estate market should
experience an overall decline in values such that the outstanding balances of
the Company's notes receivable are greater than the value of the mortgaged
properties, the actual rates of delinquencies, foreclosures and losses could be
materially higher than those now experienced. An increase in delinquency rates
or defaults on the Company's receivables could have a material adverse effect on
the Company's business, operating results and financial condition. The Company
may incur substantial costs and delays in connection with its servicing of
receivables, including costs in foreclosing or realizing on its collateral and
additional marketing and sales costs with respect to reacquired property. No
assurances can be given that reacquired property will be sold at a profit.
During fiscal 1997 and the nine-month period ended December 28, 1997, the
Company charged $1.3 million and $568,000, respectively, to its provision for
loan losses to reflect the difference between the unpaid principal balance of
the non-performing receivables and the estimated net realizable value of the
reacquired property. See "Business -- Customer Financing."
The majority of the Company's residential land sales are currently not
financed by the Company but rather with local banks. A decrease in the
willingness of such lenders to extend direct customer lot financing could cause
a decline in the level of the Company's sales and/or require material additional
credit facilities in order to enable the Company to provide financing to such
customers.
A portion of the Company's revenues historically has comprised gains on
sales of loans, and, although no assurances can be given, assuming the proposed
timeshare receivables purchase facility that the Company is currently
negotiating is consummated, it is anticipated that the portion of the Company's
revenues comprising such gains on sales is expected to increase significantly.
The gains are recorded in the Company's revenues and on its balance sheet (as
retained interests on loan sales) at the time of sale, and the amount of gains
recorded is based in part on management's estimates of future prepayment and
default rates and other considerations in
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light of then-current conditions. If actual prepayments with respect to loans
occur more quickly than was projected at the time such loans were sold, as can
occur when interest rates decline, interest would be less than expected and
earnings would be charged in the current period. If actual defaults with respect
to loans sold are greater than estimated, charge-offs would exceed previously
estimated amounts and earnings would be charged in the current period. See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition."
RISKS ASSOCIATED WITH TIMESHARE INTEREST EXCHANGE NETWORKS
The attractiveness of Timeshare Interests is enhanced significantly by the
availability of exchange networks that allow owners of Timeshare Interests to
exchange their occupancy right granted by their Timeshare Interests during a
particular year for an occupancy right granted at another participating network
resort. Several companies, including II and RCI, provide broad-based Timeshare
Interests exchange services. RDI's timeshare resorts (and its vacation club) are
currently qualified for participation in the RCI exchange network while the
Company's other timeshare resorts (and the Aruba Resort) are currently qualified
for participation in the II exchange network. No assurance can be given that the
Company's existing resorts and vacation club will continue to qualify, or its
future resorts will be able to qualify, for participation in either the RCI or
the II network or any other exchange network, or that the Company's customers
will continue to be satisfied with RCI's or II's exchange network. If such
exchange networks cease to function effectively, if the Company's resorts are
not accepted as exchanges for other desirable resorts, or if II or RCI ceases to
be a leading Timeshare Interest exchange network, the Company's sales of
Timeshare Interests could be materially adversely affected. The Company entered
into a five year agreement with II in May 1995, pursuant to which the Company
agreed to include in II's exchange network all vacation ownership resorts that
have been or will be acquired, developed or controlled by the Company. In
December 1993, and prior to its acquisition by the Company, RDI and its
point-based vacation club entered into a six year agreement with RCI pursuant to
which RDI agreed to include in RCI's exchange network the RDI point-based
vacation club. In connection with the RDI Acquisition, the Company has advised
each of II and RCI of the existence of its agreement with the other timeshare
interest exchange network and of the potential conflict. Although no assurances
can be given, based on its relationships with the exchange networks and its
discussions with such exchange networks to date, the Company believes that it
will be able to enter into a satisfactory resolution of this situation with each
of II and RCI. See "Business -- Industry Overviews -- Resorts
Division -- Participation in Timeshare Interest Exchange Networks."
HOLDING COMPANY STRUCTURE
The Notes will be obligations exclusively of the Company and the Subsidiary
Guarantors. Because a significant portion of the operations of the Company
currently are conducted through subsidiaries, the cash flow of the Company and
its ability to service its debt, including the Notes, are dependent upon the
cash flows of such subsidiaries and the distribution of those cash flows to the
Company, or upon loans or other payments of funds by such subsidiaries to the
Company. The Company's subsidiaries are separate and distinct legal entities
and, except pursuant to the Note Guarantees, have no obligation, contingent or
otherwise, to pay any amounts due pursuant to the Notes or to make any funds
available therefor, whether by dividends, loans or other payments. In addition,
the payment of dividends and certain loans and advances to the Company by such
subsidiaries may be subject to certain statutory or contractual restrictions,
are contingent upon the earnings of such subsidiaries and are subject to various
business considerations and legal restrictions. The Notes will be effectively
subordinated to all Indebtedness and other liabilities and commitments
(including trade payable and lease obligations) of the Company's subsidiaries
that are not Subsidiary Guarantors and to all Secured Indebtedness of the
Company and its subsidiaries (except to the extent of any Mortgages on the
Pledged Properties securing certain of the Note Guarantees). Any right of the
Company to receive assets of any such subsidiary upon the liquidation or
reorganization of such subsidiary (and the consequent right of the holders of
the Notes to participate in those assets) will be effectively subordinated to
the claims of those subsidiary's creditors, except to the extent that the
Company or the Notes Trustee, on behalf of the holders of Notes, pursuant to the
Note Guarantees, is itself recognized as a creditor of such subsidiary, in which
case the claims of the Company or the Notes Trustee, on behalf of the holders of
Notes, would still be subordinate to any
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security in the assets of such subsidiary and any Indebtedness of such
subsidiary senior to that held by the Company.
LIMITATION ON REPURCHASE OF NOTES UPON A CHANGE OF CONTROL
Upon a Change of Control (as defined in the Indenture), each holder of the
Notes will have certain rights, at the holder's option, to require the Company
to repurchase all or a portion of such holder's Notes. If a Change of Control
were to occur, there can be no assurances the Company would have sufficient
financial resources, or would be able to arrange financing, to repay the
repurchase price for all Notes tendered by the holders thereof. Certain events
involving a Change of Control may constitute an event of default under the
Company's other credit agreements and other debt instruments (including the
Credit Agreements). Moreover, the exercise by the holders of their right to
require the Company to repurchase the Notes as a result of the occurrence of a
Change of Control may create an event of default under the Company's credit
agreements and other debt instruments, and could create an event of default
under other future Credit Agreements or other debt instruments. Any such event
of default could effectively block the repurchase of the Notes. See "Description
of the Notes -- Change of Control."
FRAUDULENT CONVEYANCE CONSIDERATIONS
The issuance by the Subsidiary Guarantors of the Note Guarantees and the
grant of a Mortgage by certain Subsidiary Guarantors on the Pledged Properties
owned by such Subsidiary Guarantors to secure their Note Guarantees could be
subject to review under applicable federal and state fraudulent transfer or
conveyance laws in a bankruptcy proceeding or a lawsuit by or on behalf of
unpaid creditors of a Subsidiary Guarantor or a representative of such
creditors, such as a trustee or a Subsidiary Guarantor as debtor-in-possession.
Under such laws, if a court were to find that, at the time a Subsidiary
Guarantor issued the Note Guarantee or granted a Mortgage, either (i) the
Subsidiary Guarantor issued such Note Guarantee or granted such Mortgage with
the intent of hindering, delaying or defrauding creditors, or (ii) the
Subsidiary Guarantor received less than a reasonably equivalent value or fair
consideration for issuing such Note Guarantee or granting such Mortgage, and the
Subsidiary Guarantor (a) was insolvent or rendered insolvent by reason of the
issuance of such Note Guarantee or the granting of such Mortgage, (b) was
engaged in a business or a transaction, or was about to engage in a business or
a transaction, for which the assets remaining with the Subsidiary Guarantor
after giving effect to the issuance of such Note Guarantee or the granting of
such Mortgage, constituted an unreasonably small amount of capital, or (c)
intended to incur, or believed that it would incur, debts beyond its ability to
pay as they matured, such court could void the Subsidiary Guarantor's
obligations under such Note Guarantee and any Mortgage securing such Note
Guarantee and direct the repayment of any amounts paid thereunder to the
Subsidiary Guarantor or to a fund for the benefit of the Subsidiary Guarantor's
creditors, or take other action detrimental to the holders of the Notes.
The measure of insolvency for purposes of the foregoing will vary depending
upon the law of the jurisdiction which is being applied. Generally, however, an
entity will be considered insolvent for purposes of the foregoing if the sum of
its debts is greater than all of its property at a fair valuation, or if the
present fair saleable value of its assets is less than the amount that will be
required to pay its probable liabilities on its existing debts as they become
absolute and matured or if it could not pay its debts as they were due. Based
upon management's analysis of internal cash flow projections and other financial
information and estimated values of assets and liabilities of the Company's
subsidiaries which are Subsidiary Guarantors, the Company believes that,
immediately after issuance of the Notes and assuming no Event of Default exists
under the Indenture, the Subsidiary Guarantors will be solvent, and will have
sufficient capital to carry on their businesses and that the Subsidiary
Guarantors will be able to pay their debts as they mature. No assurance can be
given, however, as to what standard a court could apply in making such
determinations or that a court would reach the same conclusions with regard to
these issues.
RISK OF INABILITY TO REALIZE UPON MORTGAGES; INSUFFICIENT COLLATERAL
The Note Guarantees of six Subsidiary Guarantors will be secured by a
Mortgage on the Pledged Properties of each such Subsidiary Guarantor. The
ability of the Trustee to foreclose on such collateral upon the occurrence of an
Event of Default under the Indenture will be subject to legal requirements,
potential
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delays and practical problems associated with realization upon mortgages and
security interests in real property generally. Foreclosures are regulated by law
and are subject to a court's equitable powers. In certain circumstances, the
liens of the Trustee could become junior to certain governmental or other liens,
including, without limitation, liens for unpaid taxes or assessments or certain
environmental remediation liabilities. See "Description of Notes -- Security."
The proceeds of any sale of the Pledged Properties following an Event of
Default under the Indenture would not be sufficient to repay the Notes in full.
No appraisals were obtained on the Pledged Properties in connection with the
Note Offering or the Exchange Offer. As of January 25, 1998, the real property
comprising the Pledged Properties had an aggregate book value of approximately
$46.1 million. As noted below, inventory has been sold from the Pledged
Properties since such date. No assurances can be given that the property subject
to the Mortgages could be sold for such amount in the event of a foreclosure or
other comparable proceeding realizing on the Mortgages or that the property will
not decline in value. If a bankruptcy proceeding were to be commenced by or
against the Company and/or the Subsidiary Guarantors and the bankruptcy court
concluded that the applicable Subsidiary Guarantees were not adequately secured,
the holders of the Notes would have only an unsecured deficiency claim with
respect to the applicable Note Guarantee to the extent of such deficiency, and
would not be entitled to post-petition interest or reimbursement of costs of
collection (including attorney's fees). Any deficiency claim of the holder of
the Notes with respect to the Subsidiary Guarantors who executed Mortgages would
rank pari passu with any deficiency claims of all other general unsecured
creditors of the Company and/or the Subsidiary Guarantors. In addition, the
ability of the holders of the Notes to effect a sale of the Pledged Properties
may be subject to certain bankruptcy limitations in the event of a bankruptcy
proceeding involving the Company and/or the Subsidiary Guarantors, including
without limitation, the so called "automatic stay" under Section 362 of the
United States Bankruptcy Code, 11 U.S.C. sec. 101 et. seq., as amended from time
to time.
Pursuant to the terms of the Indenture and the Mortgages, the Notes Trustee
shall be required to release the lien of the Mortgages with respect to the sale
of any property covered thereby unless an Event of Default shall have occurred
and be continuing. Absent such an Event of Default, the Notes Trustee shall not
have a lien on the proceeds from a sale of the Pledged Properties. Consequently,
the value of the collateral covered by the Mortgages will diminish over time as
Pledged Properties are sold. Lots are currently being sold at each of the
Pledged Properties. Although no assurances can be given and the Pledged
Properties may be sold more quickly, the Company currently estimates based on
historical sales that the Pledged Properties will be sold-out over a one to
three year period. Except for the Mortgages on the Pledged Properties, neither
the Company nor any of its subsidiaries including the Subsidiary Guarantors has
provided or is required to provide any security for its obligations under the
Notes or the Note Guarantees, as applicable.
DEPENDENCE ON KEY PERSONNEL
The Company's success depends to a significant extent upon the experience
and abilities of the Company's senior management. The loss of the services of
one or more members of senior management could have a material adverse effect on
the Company and its business prospects. Although the Company has entered into
employment agreements with certain members of senior management, no assurances
can be given the Company will be able to retain the services of such
individuals. The Company's continued success is also dependent upon its ability
to hire, train and retain qualified marketing, sales, development, acquisition,
finance, management and administrative personnel. Such personnel are in
substantial demand and the cost of attracting or retaining such key personnel
could escalate over time. There can be no assurance that the Company will be
successful in attracting or retaining such personnel. See "Management."
VARIABILITY OF QUARTERLY RESULTS
The Company's earnings may be impacted by, among other things, the timing
of the completion of the acquisition and development of its timeshare resorts
and residential land projects, a shortage of ready-for-sale inventory in its key
market areas, inventory write-downs, levels of loan losses, and the potential
impact of adverse weather and other natural disasters at the Company's resorts.
Material fluctuations in operating results may also occur due to the requirement
that the Company use of the percentage of completion method of accounting. See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition."
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CONSEQUENCES OF FAILURE TO EXCHANGE
The Outstanding Notes have not been registered under the Securities Act or
any state securities laws, and therefore, may not be offered, sold or otherwise
transferred except in compliance with the registration requirements of the
Securities Act and any other applicable securities laws, or pursuant to an
exemption therefrom or in a transaction not subject thereto, and in each case in
compliance with certain other conditions and restrictions, including the right
of the Company and the Notes Trustee (as defined) in certain cases to require
the delivery of opinions of counsel, certifications and other information prior
to any such transfer. Outstanding Notes that remain outstanding after the
consummation of the Exchange Offer will continue to bear a legend reflecting
such restrictions on transfer. In addition, upon consummation of the Exchange
Offer, holders of Outstanding Notes that remain outstanding will not be entitled
to any rights to have such Outstanding Notes registered under the Securities Act
or to any similar rights under the Registration Rights Agreement (subject to
certain limited exceptions). The Company currently intends to register under the
Securities Act Outstanding Notes that remain outstanding after consummation of
the Exchange Offer only if such Outstanding Notes are held by Initial Purchasers
or persons ineligible to participate in the Exchange Offer (other than due
solely to the status of such holder as an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act). If Outstanding Notes are tendered
and accepted in the Exchange Offer, the market for untendered Outstanding Notes
is likely to diminish; accordingly, holders who do not tender their Outstanding
Notes may encounter difficulties in selling such notes following the Exchange
Offer. The Exchange Notes and any Outstanding Notes that remain outstanding
after consummation of the Exchange Offer will constitute a single series of debt
securities under the Indenture and, accordingly, will vote together as a single
class for purposes of determining whether holders of the requisite percentage in
outstanding principal amount of the Notes have taken certain actions or
exercised certain rights under the Indenture.
ABSENCE OF PUBLIC MARKET
The Outstanding Notes were issued to, and the Company believes are
currently owned by, a relatively small number of beneficial owners. The
Outstanding Notes have not been registered under the Securities Act and will be
subject to restrictions on transferability to the extent that they are not
exchanged for Exchange Notes. See "-- Consequences of Failure to Exchange."
Although the Exchange Notes will generally be permitted to be resold or
otherwise transferred by the holders (who are not affiliates of the Company)
without compliance with the registration and prospectus delivery requirements
under the Securities Act, they will constitute a new issue of securities with no
established trading market. If the Exchange Notes are traded after their initial
issuance, they may trade at a discount from their initial offering price,
depending upon prevailing interest rates, the market for similar securities and
other factors including general economic conditions and the financial condition
of the Company. The Company does not intend to apply for a listing or quotation
of the Exchange Notes on any securities exchange or stock market. Accordingly,
there can be no assurance as to the development or liquidity of any market for
the Exchange Notes. The liquidity of, and trading market for, the Notes also may
be adversely affected by general declines in the market for similar securities.
Such a decline may adversely affect such liquidity and trading markets
independent of the financial performance of, and prospects for, the Company.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Outstanding Notes, where such Outstanding Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such
Exchange Notes. Subject to certain provisions set forth in the Registration
Rights Agreement, the Company has agreed that, for a period of up to 180 days
after the consummation of the Exchange Offer, it will make this Prospectus
available to any Participating Broker-Dealer for use in connection with any such
resale. However, under certain circumstance, the Company has the right to
require that Participating Broker-Dealers suspend the resale of Exchange Notes
pursuant to this Prospectus. Notwithstanding that the Company may cause the
resale of Exchange Notes pursuant to this Prospectus to be suspended, the
Company has no obligation to extend the 180-day period referred to above
22
<PAGE> 30
during which Participating Broker-Dealers are entitled to use this Prospectus in
connection with such resales. See "The Exchange Offer -- Resale of the Exchange
Notes."
REGULATION
The Company is subject to extensive and complex federal, state, local and,
as a result of the Aruba Transaction, foreign regulation, and is required to
comply with various federal, state, local and foreign environmental, zoning,
land use, consumer protection, anti-fraud, labor, usury, truth-in-lending, equal
opportunity, timeshare registration, land sales, licensing and other laws and
regulations which govern its operations. Existing or future regulations may have
a material adverse impact on the Company's operations by, among other things,
imposing additional compliance costs, delaying the period in which projects are
brought to market and limiting the interest rate which the Company may charge to
customers who utilize its financing. The Company believes that it is in material
compliance with all applicable laws and regulations to which it is currently
subject. However, no assurances can be given that the costs of future compliance
will not be significant or that the Company is in fact in compliance with all
applicable laws and regulations. In addition, there can be no assurance that
laws and regulations applicable to the Company in any specific jurisdiction will
not be revised or that other laws or regulations (including without limitation
with respect to tax matters) will not be adopted which could increase the
Company's cost of compliance or prevent the Company from marketing or selling
its residential land or timeshare properties or conducting other operations in
such jurisdictions or otherwise have a material adverse impact on the Company's
operations. Any failure of the Company to comply with applicable laws or
regulations or any increase in the costs of compliance could have a material
adverse effect on the Company's business, operating results and financial
condition. See "Business -- Regulation" and "-- Litigation."
COMPETITION
The real estate industry is highly competitive. The Company's Resorts
Division competes with various high profile and well-established timeshare
resort operators. Many of the world's most recognized lodging, hospitality and
entertainment companies have begun to develop and sell Timeshare Interests in
resort properties. Major companies that now operate or are developing or
planning to develop timeshare resorts include Marriott Ownership Resorts
("Marriott"), The Walt Disney Company ("Disney"), Hilton Hotels Corporation
("Hilton"), Hyatt Corporation ("Hyatt"), Four Seasons Hotels & Resorts ("Four
Seasons") and Inter-Continental Hotels and Resorts ("Inter-Continental"). The
Company also competes with other publicly-traded timeshare companies, including
Signature Resorts, Inc. ("Signature"), Vistana, Inc. ("Vistana"), Fairfield
Communities, Inc. ("Fairfield") and Silverleaf, Inc. ("Silverleaf"), as well as
numerous other owners and operators of timeshare resorts. The Company's
Residential Land Division competes with builders, developers and others for the
acquisition of property and with local, regional and national developers,
homebuilders and others with respect to the sale of residential lots. Many of
the Company's competitors are larger and possess greater financial, marketing,
personnel and other resources than the Company. Although the Company believes it
can effectively compete in its market areas, no assurances can be given as to
the Company's future ability to locate, develop and sell attractive properties
in the markets in which it wishes to operate or that the entrance of high
profile and well-established operators into the Company's market areas will not
have a material adverse effect on the Company's operations. The development and
operation of additional timeshare resorts in the Company's markets could have a
material adverse impact on the demand for the Company's Timeshare Interests and
the Company's results of operations. In addition, with respect to its timeshare
business, the Company's management believes that industry competition will be
increased by recent and possible future consolidation in the timeshare industry
as the Company's competitors get larger. With respect to its finance operations,
the Company competes with banks, mortgage companies, other financial
institutions and government agencies offering financing of real estate. In
recent years, the Company has experienced increased competition with respect to
the financing of residential land sales as evidenced by the low percentage of
residential land sales financed by the Company since 1995. See
"Business -- Competition."
23
<PAGE> 31
RISKS OF DEVELOPMENT OF POINTS-BASED VACATION CLUB
The Company intends to actively pursue the expansion of the points-based
vacation club system currently operated by RDI to include the Company's other
existing and future timeshare resorts. However, there can be no assurance that
the Company will complete the expansion of RDI's points-based vacation club
system in this manner, if at all, or that, if completed, such expansion will be
successful. Risks associated with the Company's expansion of RDI's points-based
vacation club system include the risks that such expansion may be substantially
delayed or abandoned; the RDI points-based vacation club system cannot be
legally and efficiently combined or operated with the Company's current and
future timeshare operations; and points-based vacation club systems may be or
become subject to extensive regulation by federal, state and local
jurisdictions, possibly making such points-based system uneconomical or
unprofitable. In particular, the expansion will require the approval of various
regulators, homeowners' associations and others. No assurance can be given that
the necessary approvals will be obtained.
RISKS RELATED TO ARUBA TRANSACTION AND INTERNATIONAL OPERATIONS
The unsold Timeshare Interests acquired in the Aruba Transaction are owned
by BG Aruba, an Aruban limited liability company in which the Company has a
fifty percent equity interest and over which the Company exercises operational
control. Property ownership through a joint venture involves additional risks,
including the requirement of consents for certain decisions. If a dispute arises
between the Company and the holder of the other equity interest in BG Aruba, an
adverse resolution could have a material adverse effect on the Company's
investment in BG Aruba. In addition, the Company will be subject to certain
fiduciary obligations with respect to holders of other equity interest in BG
Aruba which may obligate it to act in a manner which is not necessarily in the
best interests of the Company. The Aruba Resort is managed and operated by an
unaffiliated third party. Sales of the unsold Timeshare Interest inventory
acquired by BG Aruba could be materially adversely affected by other
developments at the Aruba Resort, including without limitation any past or
future failure by the Aruba Resort and its owners (or the entity which sold the
Timeshare Interest inventory to BG Aruba) to comply with applicable laws and the
applicable agreements governing the Aruba Resort, which are outside of BG
Aruba's control. See "Business -- Recent Acquisitions."
As a result of the Aruba Transaction, the Company is now subject to a
number of risks related to international operations, including, among other
things, difficulties relating to administering its business globally and
managing foreign operations. These risks could have a material adverse effect on
the Company's business, results of operations and financial condition.
Additionally, part of the Company's strategy is to acquire additional timeshare
properties outside the United States. Changes in inflation, interest rates,
currencies, taxation, regulation or other social, political, economic, legal,
regulatory or diplomatic developments affecting the countries in which the
Company has (or intends to have) international operations could have a material
adverse effect on the Company's business, operating results and financial
condition.
RISKS ASSOCIATED WITH RESORT MANAGEMENT
The Company currently provides homeowners' association management services
at its existing timeshare resorts other than the Aruba Resort and intends to
provide the same services at its future timeshare resorts pursuant to management
agreements with the homeowners' associations at such resorts. In addition, RDI
also manages 26 timeshare resorts located in Florida, Alabama, Georgia, Virginia
and South Carolina. The Company's management agreements are generally for annual
terms and require the approval of the homeowners' association for renewal. If
the Company is unable to manage a resort in a manner which maintains
satisfaction among the homeowners, applicable law may give the homeowners'
association rights to terminate the management agreement. For the three months
ended December 28, 1997, the Company's revenues derived from fees paid by
homeowners' associations pursuant to the management agreements were
approximately $859,000. The Company did not derive any material management fees
prior to September 30, 1997, as the resort management business was acquired as
part of the RDI Acquisition. There can be no assurance that any homeowners'
association will not terminate its management agreement with the Company. Any
such termination could have a material adverse effect on the results of the
Company's resort management
24
<PAGE> 32
operations and revenues. In addition, as is the case with any manager of a
resort, the Company may become subject to disputes with members who are not
satisfied with the resort or its management.
NATURAL DISASTERS; UNINSURED LOSS
Certain of the Company's timeshare resorts and residential land projects
are located in areas that are susceptible to tropical storms and hurricanes. The
Company's resorts and residential land projects could suffer significant damage
as a result of wind storms, hurricanes, floods and other natural disasters. Any
such damage could impair the Company's ability to sell Timeshare Interests at
its resorts or residential lots at its residential land projects, and to collect
on outstanding notes receivable and adversely affect the Company's business,
operating results and financial condition.
There are certain types of losses that are not generally insured because
they are either uninsurable or not economically feasible to insure and for which
the Company does not have insurance coverage. Should an uninsured loss or a loss
in excess of insured limits occur, the Company could lose its investment in a
timeshare resort or any improvements at a residential land project as well as
the anticipated future revenues from such timeshare resort or residential land
project, and would continue to be obligated on any mortgage indebtedness or
other obligations related to the timeshare resort or residential land project.
LIMITED RESALE MARKET FOR TIMESHARE INTERESTS
The Company sells Timeshare Interests to buyers for leisure purposes and
not for investment. The Company believes that the market for resale of Timeshare
Interests by such buyers is presently limited and that any resales of Timeshare
Interests are typically at prices substantially less than the original purchase
price. These factors may make ownership of Timeshare Interests less attractive
to prospective buyers. In addition, attempts by buyers to resell their Timeshare
Interests may compete with sales of Timeshare Interests by the Company and could
depress the market price of Timeshare Interests sold by the Company.
POSSIBLE ENVIRONMENTAL LIABILITIES
Under various federal, state and local laws, ordinances and regulations,
the current or previous owner, manager or operator of real property may be
liable for the costs of removal or remediation of certain hazardous or toxic
substances located on or in, or emanating from, such property, as well as
related costs of investigation and property damage. Such laws often impose such
liability without regard to whether the owner, manager or operator knew of, or
was responsible for, the presence of such hazardous or toxic substances. Under
the Federal Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended ("CERCLA"), a lender may be liable either to the government
or to private parties for cleanup costs on property securing a loan, even if the
lender does not cause or contribute to the contamination. Certain states impose
a statutory lien for associated costs on property that is the subject of a
cleanup action by the state on account of hazardous wastes or hazardous
substances released or disposed of on the property. Such a lien will generally
have priority over all subsequent liens on the property and, in certain of these
states, will have priority over prior recorded liens including the lien of a
mortgage or deed of trust. In addition, under federal environmental legislation
and possibly under state law in a number of states, a secured party which takes
a deed in lieu of foreclosure or acquires a mortgaged property at a foreclosure
sale or otherwise is deemed an "owner" or "operator" of the property and may be
liable for the full costs of cleaning up a contaminated site. Such costs could
be substantial and are not limited to the value of property. The Company
believes that it is in compliance in all material respects with all federal,
state and local laws, ordinances and regulations regarding hazardous or toxic
substances, but no assurance can be given that hazardous or toxic substances
will not be found on its property or properties that it previously owned.
25
<PAGE> 33
COMPLIANCE WITH LAWS GOVERNING ACCESS
A number of state and federal laws, including the Fair Housing Act and the
Americans with Disabilities Act, impose requirements related to access and use
by disabled persons of a variety of public accommodations and facilities.
Although the Company believes that its timeshare resorts are in compliance with
these laws in all material respects, the Company may incur additional costs of
complying with such laws and no assurances can be given that the Company is in
fact in compliance with such laws. The ultimate amount of the cost of compliance
with such legislation is not currently ascertainable, and, while such costs are
not expected to have a material effect on the Company, such costs could be
substantial.
26
<PAGE> 34
USE OF PROCEEDS
The Company will not receive any of the proceeds of the issuance of the
Exchange Notes offered hereby. In consideration for issuing the Exchange Notes
as contemplated in this Prospectus, the Company will receive in exchange
Outstanding Notes in like principal amount. The issuance of the Exchange Notes
in exchange for the surrender of the Outstanding Notes will not result in any
increase in the indebtedness of the Company.
The net proceeds to the Company from the sale of the $110 million aggregate
principal amount of Outstanding Notes, after deducting discounts and estimated
expenses of the Note Offering, were approximately $105.7 million.
The Company used the net proceeds of the Note Offering to retire
approximately $91.8 million of existing indebtedness of the Company. The
indebtedness repaid consisted of approximately $88.1 million in aggregate
principal amount, approximately $1,028,000 in accrued interest and approximately
$2.7 million in costs associated with early extinguishment of debt. The
remainder of the net proceeds were used for working capital and to repay other
obligations of the Company. The Company will continue to require external
sources of capital to finance new property purchases and development, fund
operations, satisfy debt obligations and provide financing to purchasers of its
Timeshare Interests and residential land. See "Management's Discussion and
Analysis of Results of Operations and Financial Condition -- Liquidity and
Capital Resources."
The indebtedness to be repaid out of the proceeds from the Note Offering
bore interest at a weighted average interest rate of approximately 9.6% per
annum and had maturities ranging between April 1998 and November 2019.
Indebtedness repaid that was incurred within the year prior to April 1, 1998,
which included indebtedness advanced by the Initial Purchasers, was incurred for
inventory and acquisitions and development of residential land projects and
resorts, to finance the Company's operations and for working capital and general
corporate purposes. See "Plan of Distribution." None of the proceeds from the
Note Offering were used to pay any delinquent indebtedness.
27
<PAGE> 35
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 28, 1997, and the pro forma capitalization at such date as adjusted to
give effect to the Note Offering and the application of the net proceeds
therefrom. See "Use of Proceeds." This table should be read in conjunction with
the Consolidated Financial Statements of the Company, including the notes
thereto, included elsewhere in this Prospectus. The amounts are in thousands,
except per share data.
<TABLE>
<CAPTION>
AT DECEMBER 28, 1997
-----------------------
ACTUAL AS ADJUSTED
-------- -----------
(UNAUDITED)
<S> <C> <C>
Cash and cash equivalents (including restricted cash of
$13,300).................................................. $ 25,124 $ 44,996(1)
======== =========
Senior Debt:
Lines-of-credit and notes payable......................... $ 46,463 $ 1,910
10 1/2% Senior Secured Notes, due 2008.................... -- 110,000
Receivable-backed notes payable(2)........................ 51,536 13,033
Non-recourse Aruba Debt................................... 15,446 15,446
-------- ---------
Total senior debt................................. 113,445 140,389
Subordinated debt:
8.00% convertible subordinated notes payable to related
parties, due 2002...................................... 6,000 6,000
8.25% convertible subordinated debentures, due 2012....... 34,739 34,739
-------- ---------
Total debt........................................ 154,184 181,128
Minority interest........................................... 250 250
Total shareholders' equity(3)............................... 66,649 64,502(4)
-------- ---------
Total capitalization.............................. $221,083 $ 245,880
======== =========
</TABLE>
- ---------------
(1) Includes approximately $5.9 million of net proceeds from the Note Offering
which were used to retire additional indebtedness incurred after December
28, 1997 but prior to the closing of the Note Offering and approximately
$13.9 million of net proceeds from the Note Offering which were used for
working capital and to repay other obligations of the Company.
(2) Includes $8.4 million of RDI debt related to notes receivable previously
sold with recourse to financial institutions.
(3) Common Shares outstanding were approximately 20,743,000 actual and as
adjusted and do not include an aggregate of 2,287,190 shares of Common Stock
reserved for issuance under the Company's stock benefit and option plans,
4,215,898 shares of Common Stock issuable upon conversion of the Public
Debentures and 1,530,612 shares of Common Stock issuable upon conversion of
the Convertible Notes. See "Management -- Executive Compensation" and
"Description of Other Indebtedness."
(4) Includes the approximately $2,147,000 after tax effect of $2,700,000 of
estimated prepayment penalties and $878,000 of debt issuance costs
anticipated to be written off due to the early extinguishment of debt.
28
<PAGE> 36
BLUEGREEN CORPORATION
INTRODUCTION TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
(UNAUDITED)
The following pro forma condensed consolidated financial information
consists of a Pro Forma Condensed Consolidated Balance Sheet as of December 28,
1997 and Pro Forma Condensed Consolidated Statements of Operations for the Year
Ended March 30, 1997 and the Nine Months Ended December 28, 1997 (collectively,
"the Pro Forma Statements"). The Pro Forma Condensed Consolidated Balance Sheet
gives effect to the Note Offering as if it had occurred on December 28, 1997.
The Pro Forma Condensed Consolidated Statements of Operations give effect to the
Note Offering as if it had occurred at the beginning of the periods presented.
The pro forma adjustments to the Pro Forma Statements are based on the
assumptions and adjustments described in the accompanying notes to the Pro Forma
Statements.
The pro forma information for the Note Offering assumes the repayment of
certain indebtedness of the Company using a portion of the net proceeds received
from the Note Offering as if the Note Offering and the repayment had occurred as
of the beginning of the respective period.
The pro forma adjustments are based upon currently available information
and upon certain assumptions that management of the Company believes are
reasonable under the circumstances. The Pro Forma Statements do not purport to
be indicative of what the Company's financial position or results of operations
would actually have been if the aforementioned transactions in fact had occurred
on such date or at the beginning of the period indicated or to project the
Company's financial position or results of operations at any future date or for
any future period. The Pro Forma Condensed Consolidated Financial Information
should be read in conjunction with the Company's Consolidated Financial
Statements and related notes thereto included elsewhere herein.
29
<PAGE> 37
BLUEGREEN CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 28, 1997
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
FOR NOTE
HISTORICAL OFFERING PRO FORMA
DECEMBER 28, AND USE OF DECEMBER 28,
1997 PROCEEDS 1997
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents............................ $ 25,124 $ 19,872(D) $ 44,996
Contracts receivable, net............................ 12,646 -- 12,646
Notes receivable, net................................ 73,115 -- 73,115
Investment in securities............................. 10,600 -- 10,600
Inventory, net....................................... 112,297 -- 112,297
Property and equipment, net.......................... 11,147 -- 11,147
Debt issuance costs, net............................. 1,783 4,275(B)
(878)(C) 5,180
Other assets......................................... 8,096 -- 8,096
-------- -------- --------
Total assets............................... $254,808 $ 23,269 $278,077
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable..................................... $ 4,590 $ -- $ 4,590
Deferred income...................................... 8,322 -- 8,322
Accrued liabilities and other........................ 14,101 (97)(B)
(1,431)(C) 12,573
Lines-of-credit and notes payable.................... 61,909 (44,553)(B) 17,356
Deferred income taxes................................ 6,712 -- 6,712
Receivable-backed notes payable...................... 51,536 (38,503)(B) 13,033
10.50% senior secured notes payable.................. -- 110,000(A) 110,000
8.00% convertible notes payable to related parties... 6,000 -- 6,000
8.25% convertible subordinated debentures............ 34,739 -- 34,739
-------- -------- --------
Total liabilities.......................... 187,909 25,416 213,325
Minority interest.................................... 250 -- 250
SHAREHOLDERS' EQUITY
Common stock......................................... 208 -- 208
Capital-in-excess of par value....................... 71,844 -- 71,844
Accumulated deficit.................................. (4,179) (2,147)(C) (6,326)
Treasury stock....................................... (1,389) -- (l,389)
Net unrealized gains................................. 165 -- 165
-------- -------- --------
Total shareholders' equity................. 66,649 (2,147) 64,502
-------- -------- --------
Total liabilities and shareholders'
equity................................... $254,808 $ 23,269 $278,077
======== ======== ========
</TABLE>
- ---------------
(A) Issuance of the Notes.
(B) Extinguishment of existing debt of the Company and related accrued
interest. Also includes payment of $4.275 million of debt issuance costs.
(C) Payment of prepayment penalties of $2.7 million and write-off of debt
issuance costs on extinguished debt of $878,000, and related impact on
accumulated deficit.
(D) Includes $5.9 million of assumed net proceeds from the Note Offering which
will be used to retire additional indebtedness anticipated to be incurred
after December 28, 1997 but prior to the closing of the Note Offering and
approximately $13.9 million of assumed net proceeds from the Note Offering
which will be used for working capital and to repay other obligations of
the Company.
30
<PAGE> 38
BLUEGREEN CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED DECEMBER 28, 1997
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
NINE MONTHS FOR NOTE NINE MONTHS
ENDED OFFERING ENDED
DECEMBER 28, AND USE OF DECEMBER 28,
1997 PROCEEDS 1997
------------ ----------- ------------
<S> <C> <C> <C>
REVENUES:
Sales of real estate................................ $122,902 $ -- $122,902
Other resort services revenue....................... 1,585 1,585
Interest income and other(1)........................ 7,324 7,324
-------- ------- --------
131,811 -- 131,811
COST AND EXPENSES:
Cost of real estate sold............................ 55,277 55,277
Cost of other resort services....................... 1,509 1,509
Selling, general and administrative expense......... 55,526 55,526
Interest expense 6,512 (2,701)(A)
8,663(B)
321(C)
(419)(D) 12,376
Provisions for losses............................... 1,349 1,349
-------- ------- --------
120,173 5,864 126,037
-------- ------- --------
Income from operations.............................. 11,638 (5,864) 5,774
-- --
Other income........................................ 120 120
-------- ------- --------
Income before income taxes.......................... 11,758 (5,864) 5,894
Provision for income taxes.......................... 4,774 (2,416)(E) 2,358
-------- ------- --------
Income before extraordinary item.................... $ 6,984 $(3,448) $ 3,536
======== ======= ========
EARNINGS PER SHARE BEFORE EXTRAORDINARY ITEM:
Basic............................................. $ 0.35 $ 0.18
======== ========
Diluted........................................... $ 0.33 $ 0.17
======== ========
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES:
Basic............................................. 20,193 20,193
======== ========
Diluted........................................... 25,467 20,553(F)
======== ========
</TABLE>
- ---------------
(1) Interest income excludes $1.8 million of estimated interest income that
would have been earned on net proceeds from the Note Offering in excess of
historical debt that would have been repaid as of March 31, 1997.
(A) Elimination of historical interest expense incurred during the period on
debt assumed to be retired by the Note Offering.
(B) Pro forma interest expense on the Notes.
(C) Amortization of the pro forma $4.275 million of debt issuance costs
incurred in connection with the Note Offering.
(D) Elimination of historical amortization of debt issuance costs on debt
retired in connection with the Note Offering.
(E) Adjustment to the provision for income taxes for the above pro forma
adjustments.
(F) Pro Forma Diluted Weighted Average Number of Common and Common Equivalent
Shares is less than the historical amount, as the assumed conversion of the
Company's 8.00% convertible notes payable and 8.25% convertible debentures
would have an anti-dilutive effect on earnings per share on a pro forma
basis.
31
<PAGE> 39
BLUEGREEN CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED MARCH 30, 1997
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
HISTORICAL FOR NOTE PRO FORMA
YEAR ENDED OFFERING YEAR ENDED
MARCH 30, AND USE OF MARCH 30,
1997 PROCEEDS 1997
---------- ----------- ----------
<S> <C> <C> <C>
REVENUES:
Sales for real estate.................................. $109,721 $ -- $109,721
Interest income and other(1)........................... 6,159 -- 6,159
-------- -------- --------
115,880 -- 115,880
COST AND EXPENSES:
Cost of real estate sold............................... 57,090 -- 57,090
Selling, general and administrative expense............ 51,441 -- 51,441
Interest expense....................................... 5,459 (1,414)(A)
11,550(B)
428(C)
(199)(D) 15,824
Provisions for losses.................................. 9,539 -- 9,539
-------- -------- --------
123,529 10,365 133,894
-------- -------- --------
Loss from operations................................... (7,649) (10,365) (18,014)
Other income........................................... 260 -- 260
-------- -------- --------
Loss before income taxes............................... (7,389) (10,365) (17,754)
Benefit for income taxes............................... (3,029) (4,072)(E) (7,101)
-------- -------- --------
Loss before extraordinary item......................... $ (4,360) $ (6,293) $(10,653)
======== ======== ========
LOSS PER SHARE BEFORE EXTRAORDINARY ITEM:
Basic................................................ $ (0.21) $ (0.52)
======== ========
Diluted.............................................. $ (0.21) $ (0.52)
======== ========
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT
SHARES:
Basic................................................ 20,319 20,319
======== ========
Diluted.............................................. 20,319 20,319
======== ========
</TABLE>
- ---------------
(1) Interest income excludes $3.2 million of estimated interest income that
would have been earned on net proceeds from the Note Offering in excess of
historical debt that would have been repaid as of April 1, 1996.
(A) Elimination of interest expense incurred during the period on debt assumed
to be retired by the Note Offering.
(B) Pro forma interest expense on the Notes.
(C) Amortization of the pro forma $4.275 million of debt issuance costs
incurred in connection with the Note Offering.
(D) Elimination of historical amortization of debt issuance costs on debt
retired in connection with the Note Offering.
(E) Adjustment to the provision for income taxes for the above pro forma
adjustments.
32
<PAGE> 40
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below for each of the
five years in the period ended March 30, 1997 are derived from the Company's
audited consolidated financial statements, which have been audited by Ernst &
Young LLP, independent certified public accountants. The selected consolidated
financial data presented below for the nine month periods ended December 29,
1996 and December 28, 1997 have been derived from unaudited financial
statements. The unaudited financial statements include all adjustments,
consisting of normal recurring accruals, which the Company considers necessary
for a fair presentation of its financial position and the results of operations
for these periods. Operating results for the nine months ended December 28, 1997
are not necessarily indicative of the results that may be expected for the
entire fiscal year ended March 29, 1998. The selected consolidated financial
data should be read in conjunction with the Consolidated Financial Statements,
related notes, and other financial information appearing elsewhere or
incorporated by reference herein.
<TABLE>
<CAPTION>
AS OF OR FOR THE NINE
AS OF OR FOR THE YEAR ENDED, MONTHS ENDED,
-------------------------------------------------------- -----------------------------
MARCH 28, MARCH 27, APRIL 2, MARCH 31, MARCH 30, DECEMBER 29, DECEMBER 28,
1993 1994 1995 1996 1997 1996 1997
--------- --------- -------- --------- --------- ------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT AVERAGE SALES PRICE DATA AND SELECTED STATISTICAL DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Sale of real estate................... $ 53,349 $ 63,389 $ 91,922 $113,422 $109,722 $ 81,712 $122,902
Other resort services revenue......... -- -- -- -- -- -- 1,585
Interest income and other(1).......... 10,191 7,952 7,264 7,388 6,159 4,577 7,324
-------- -------- -------- -------- -------- -------- --------
Total revenues.................... 63,540 71,341 99,186 120,810 115,881 86,289 131,811
Cost of real estate sold.............. 28,450 30,773 45,106 59,393 57,091 41,384 55,277
Cost of other resort services......... -- -- -- -- -- -- 1,509
Selling, general and administrative
expenses............................ 22,652 26,444 36,521 43,735 51,441 38,051 55,526
Interest expense...................... 7,284 6,551 6,737 6,276 5,459 3,916 6,512
Provisions for losses................. 1,550 795 792 612 9,539 9,101 1,349
-------- -------- -------- -------- -------- -------- --------
Total expenses.................... 59,936 64,563 89,156 110,016 123,530 92,452 120,173
-------- -------- -------- -------- -------- -------- --------
Income (loss) from operations......... 3,604 6,778 10,030 10,794 (7,649) (6,163) 11,638
Other income.......................... 1,727 1,175 372 122 259 184 120
Provision (benefit) for income
taxes............................... 1,874 3,022 4,265 4,449 (3,030) (2,451) 4,774
-------- -------- -------- -------- -------- -------- --------
Net income (loss)..................... $ 3,457 $ 4,931 $ 6,137 $ 6,467 $ (4,360) $ (3,528) $ 6,984
======== ======== ======== ======== ======== ======== ========
OTHER DATA AND CREDIT STATISTICS:
EBITDA(2)............................. $ 14,172 $ 16,164 $ 18,522 $ 18,978 $ 8,291 $ 7,366 $ 21,396
EBITDA to senior interest expense (as
adjusted)(3)........................ -- -- -- -- -- -- 2.4x
EBITDA to interest expense (as
adjusted)(3)........................ -- -- -- -- -- -- 1.9x
Total senior debt to EBITDA (as
adjusted)(4)........................ -- -- -- -- -- -- 4.1x
Total debt to EBITDA (as
adjusted)(4)........................ -- -- -- -- -- -- 5.5x
Weighted average interest rate on
notes receivable at period end...... 11.0% 10.9% 12.4% 12.4% 13.3% 14.4% 15.0%
Ratio of earnings to fixed
charges(5).......................... 1.7x 2.2x 2.4x 2.1x nmf nmf 2.3x
Pro forma ratio of earnings to fixed
charges(5) -- -- -- -- nmf -- 1.4x
RESIDENTIAL LAND STATISTICS:
Gross margin on sales of real
estate(6)........................... 46.7% 51.5% 50.9% 47.6% 48.0% 49.4% 55.0%
Average sales price of land parcels
sold(7)............................. $ 21,368 $ 25,511 $ 30,969 $ 34,856 $ 38,572 $ 37,207 $ 47,449
Number of land parcels sold........... 2,560 2,489 2,397 2,347 2,057 1,498 1,740
RESORTS STATISTICS:
Number of resorts at period end(8).... -- 1 2 3 4 3 8
Average sales price of timeshare
intervals sold(7)................... $ -- $ -- $ 7,119 $ 7,325 $ 8,362 $ 8,342 $ 8,695
Number of timeshare intervals
sold(7)............................. -- -- 952 1,865 3,195 2,579 4,903
BALANCE SHEET DATA:
Notes receivable, net................. $ 35,653 $ 44,203 $ 40,311 $ 37,014 $ 34,619 $ 31,873 $ 73,116
Inventory, net........................ 28,245 38,793 62,345 73,595 86,661 81,108 112,297
Total assets.......................... 122,853 139,617 152,222 154,963 169,627 158,301 254,808
Lines-of-credit, notes payable and
receivable-backed notes payable..... 26,602 37,297 39,946 37,011 56,961 50,896 113,445
8.00% convertible subordinated notes
to related parties.................. -- -- -- -- -- -- 6,000
8.25% convertible subordinated
debentures.......................... 34,739 34,739 34,739 34,739 34,739 34,739 34,739
Shareholders' equity.................. 46,868 51,854 58,040 64,698 59,243 60,041 66,649
</TABLE>
33
<PAGE> 41
- ---------------
(1) Interest income for fiscal 1993, 1994, 1995, 1996 and 1997 includes a
$695,000 gain, a $238,000 loss, a $411,000 loss, a $1.1 million gain and a
$96,000 loss, respectively, from sales of notes receivable in connection
with private placement REMIC transactions. See "Management's Discussion and
Analysis of Results of Operations and Financial Condition."
(2) EBITDA represents net income before interest expense, income taxes,
depreciation and amortization and in the case of fiscal 1997, the provision
for non-recurring costs described below. EBITDA should not be considered in
isolation or construed as a substitute for the Company's net income, income
from operations, cash flows from operating activities or liquidity in
analyzing the Company's operating performance, financial position or cash
flows. EBITDA is not necessarily comparable to other similarly titled
captions of other companies due to potential inconsistencies in the method
of calculation. The Company has included EBITDA herein to provide additional
information related to the Company's ability to incur and service debt. The
following table reconciles EBITDA to net income (loss) (amounts in
thousands):
<TABLE>
<CAPTION>
FOR THE YEAR ENDED, FOR THE NINE MONTHS ENDED,
-------------------------------------------------------- ---------------------------
MARCH 28, MARCH 27, APRIL 2, MARCH 31, MARCH 30, DECEMBER 29, DECEMBER 28,
1993 1994 1995 1996 1997 1996 1997
--------- --------- -------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net income (loss).................. $ 3,457 $ 4,931 $ 6,137 $ 6,467 $ (4,360) $ (3,528) $ 6,984
Interest expense................... 7,284 6,551 6,737 6,276 5,459 3,916 6,512
Capitalized interest expense
included in cost of real estate
sold............................. -- -- 82 149 956 422 1,781
Income taxes....................... 1,874 3,022 4,265 4,449 (3,030) (2,451) 4,774
Provision for non-recurring
costs(a)......................... -- -- -- -- 8,200 8,200 --
Depreciation and amortization...... 1,557 1,660 1,301 1,637 1,066 807 1,345
------- ------- ------- ------- -------- -------- --------
EBITDA............................. $14,172 $16,164 $18,522 $18,978 $ 8,291 $ 7,366 $ 21,396
======= ======= ======= ======= ======== ======== ========
</TABLE>
(a) The provision non-recurring costs, which is included in Provision for
losses on the Consolidated Statement of Operations, represents the
Company's $8.2 million write-down of certain Communities Division and
Residential Land Division properties in the first quarter of fiscal
1997. See Note 4 to the Consolidated Financial Statements and
"Management's Discussion and Analysis of Results of Operations and
Financial Condition."
(3) Interest expense is pro forma after giving effect to the Note Offering and
the application of the net proceeds therefrom assuming the Note Offering
closed on April 1, 1997, and includes amounts capitalized into inventory and
pro forma interest expense on the Notes. Senior interest expense excludes
the interest expense on the Public Debentures and the Convertible Notes.
(4) Total debt is pro forma after giving effect to the Note Offering and the
application of the net proceeds therefrom and excludes $15.4 million of
non-recourse indebtedness incurred by BG Aruba in connection with the Aruba
Transaction and $8.4 million of RDI debt related to notes receivable
previously sold with recourse to financial institutions. See
"Business -- Recent Acquisitions." Total senior debt also excludes the
Public Debentures and the Convertible Notes.
(5) The pro forma ratios of earnings to fixed charges for the year ended March
30, 1997 and for the nine months ended December 28, 1997 give effect to the
Note Offering as if it occurred at the beginning of each applicable period.
For fiscal 1997, pro forma fiscal 1997 and for the nine-month period ended
December 29, 1996, the Company's fixed charges exceeded earnings by $9.4
million, $19.8 million and $7.8 million, respectively.
(6) Gross margin is computed as the difference between the sales price and the
related cost of inventory (including the cost of improvements, amenities and
in certain cases capitalized interest and real estate taxes), divided by the
sales price.
(7) Average sales price and unit sales data include those sales made during the
applicable period where recognition of revenue is deferred under the
percentage of completion method of accounting. See "Contracts Receivable and
Revenue Recognition" under Note 1 to the Consolidated Financial Statements.
(8) The number of resorts at December 28, 1997 includes the two resorts acquired
in the RDI Acquisition and the Aruba Resort. See "Business -- Recent
Acquisitions."
34
<PAGE> 42
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following discussion of the results of operations and financial
condition of the Company should be read in conjunction with the Company's
Consolidated Financial Statements and related Notes and the other financial
information included elsewhere in this Prospectus. Unless otherwise indicated in
this discussion, references to "real estate" and to "inventories" collectively
encompass the Resorts Division, Residential Land Division and the Company's
other inventories held for sale.
GENERAL
Real estate markets are cyclical in nature and highly sensitive to changes
in national and regional economic conditions, including, among other factors,
levels of employment and discretionary disposable income, consumer confidence,
available financing and interest rates. A downturn in the economy in general or
in the market for real estate could have a material adverse effect on the
Company.
The Company recognizes revenue on residential land and Timeshare Interest
sales when a minimum of 10% of the sales price has been received in cash, the
refund or rescission period has expired, collectibility of the receivable
representing the remainder of the sales price is reasonably assured and the
Company has completed substantially all of its obligations with respect to any
development relating to the real estate sold. In cases where all development has
not been completed, the Company recognizes revenue in accordance with the
percentage of completion method of accounting. Under this method of revenue
recognition, income is recognized as work progresses. Measures of progress are
based on the relationship of costs incurred to date to expected total costs. The
Company has been dedicating greater resources to more capital intensive
residential land and timeshare projects. As a result, the results for fiscal
1997 and the nine months ended December 28, 1997 reflect an increased amount of
revenue deferred under the percentage of completion method of accounting. See
"Contracts Receivable and Revenue Recognition" under Note 1 to the Consolidated
Financial Statements.
Costs associated with the acquisition and development of timeshare resorts
and residential land properties, including carrying costs such as interest and
taxes, are capitalized as real estate and development costs and allocated to
cost of real estate sold as the respective revenue is recognized.
The RDI Acquisition closed effective September 30, 1997 and was accounted
for using the purchase method of accounting and, accordingly, the results of
operations of RDI have been included in the Company's consolidated financial
statements from September 30, 1997. The Company, through BG Aruba, acquired
approximately 8,000 unsold Timeshare Interests inventory at the Aruba Resort on
December 15, 1997. The Company has a controlling interest in BG Aruba and has
therefore included the accounts of BG Aruba in its consolidated financial
statements as of and for the 13 days period ended December 28, 1997. Operations
for BG Aruba were not material for such 13-day period. See "Business -- Recent
Acquisitions."
The Company has historically experienced and expects to continue to
experience seasonal fluctuations in its gross revenues and net earnings in the
third fiscal quarter. This seasonality may cause significant fluctuations in the
quarterly operating results of the Company. As the Company's timeshare revenues
grow as a percentage of total revenues, the Company believes that the
fluctuations in revenues due to seasonality may be mitigated. In addition, other
material fluctuations in operating results may occur due to the timing of
development and the Company's use of the percentage of completion method of
accounting. Management expects that the Company will continue to invest in
projects that will require more substantial development (with greater capital
requirements) than in years prior to fiscal 1997. No assurances can be given
that the amount of revenue deferred under the percentage of completion
accounting method will not increase.
The Company believes that inflation and changing prices have not had a
material impact on its revenues and results of operations during any of fiscal
1995, 1996 or 1997 or the nine months ended December 28, 1997. Based on the
current economic climate, the Company does not expect that inflation and
changing prices will have a material impact on the Company's revenues or results
of operations. To the extent inflationary trends
35
<PAGE> 43
affect short-term interest rates, a portion of the Company's debt service costs
may be affected as well as the rate the Company charges on its new receivables.
During the periods covered by this discussion, the Company's real estate
operations were managed under three divisions and much of this discussion is
organized by such divisions. The Resorts Division manages the Company's
timeshare operations and the Residential Land Division acquires large tracts of
real estate which are subdivided, improved and sold, typically on a retail
basis. The Company's Communities Division, markets factory-built manufactured
homes and lot packages and undeveloped lots. In the first quarter of fiscal 1997
(June 1996), the Company decided to focus on the expansion of the Resorts
Division and the Residential Land Division in certain locations. Consistent with
this strategy, the Company does not intend to acquire any additional communities
related inventories and present Communities Division inventories are being
liquidated through a combination of bulk sales and retail sales. As of and for
the nine month period ended December 28, 1997, the Communities Division
comprised approximately 3% of consolidated inventory and sales of real estate.
Therefore, no separate discussion with respect to the Communities Division is
contained herein relative to the nine month period ended December 28, 1997 due
to immateriality.
Inventory is carried at the lower of cost, including costs of improvements
and amenities, incurred subsequent to acquisition, or fair value, net of costs
to dispose. See Note 1 of Notes to Consolidated Financial Statements. During the
first quarter of fiscal 1997, management changed its focus for marketing certain
of the Company's inventories in conjunction with a plan to accelerate the sale
of properties managed under the Communities Division and certain properties
managed under the Residential Land Division. This decision was largely the
result of management's focus on expansion of the Resort Division and Residential
Land Division in certain locations. Because of the strategy to accelerate sales,
management determined that inventories with a carrying value of $23.2 million
should be written-down by $8.2 million during the first quarter of fiscal 1997.
The $8.2 million in provisions included $4.8 million for certain Communities
Division inventories and $3.4 million for certain Residential Land Division
inventories. Management adopted a plan to aggressively pursue opportunities for
the bulk sale of a portion of the written-down assets and has reduced retail
prices on others to increase sales activity. At the time of the write-down, the
Company's Communities Division primarily consisted of three North Carolina
properties acquired in 1988. The Company began marketing home/lot packages in
1995 to accelerate sales at the properties. However, the projects had been slow
moving and yielded low gross profits and little to no operating profits. A
majority of the Residential Land Division parcels subject to write-down were
scattered lots acquired through foreclosure or deedback in lieu of foreclosure,
odd lots from former projects or properties located in parts of the country
where the Company has no plans for expansion. As of December 28, 1997,
approximately 73% (as measured by historical cost basis) of the inventories
subject to write-down had been sold. See Note 4 of Notes to Consolidated
Financial Statements.
A portion of the Company's revenues historically has comprised gains on
sales of loans, and, although no assurances can be given, assuming the proposed
timeshare receivables facility that the Company is currently negotiating is
consummated, the portion of the Company's revenues comprising such gains on
sales is expected to increase significantly. The gains are recorded in the
Company's revenues and on its balance sheet (as retained interests on loan
sales) at the time of sale, and the amount of gains recorded is based in part on
management's estimates of future prepayment and default rates and other
considerations in light of then-current conditions. If actual prepayments with
respect to loans occur more quickly than was projected at the time such loans
were sold, as can occur when interest rates decline, interest would be less than
expected and earnings would be charged in the current period. If actual defaults
with respect to loans sold are greater than estimated, charge-offs would exceed
previously estimated amounts and earnings would be charged in the current
period.
For purposes of the following discussion, gross margin is computed as the
difference between the sales price and the related cost of inventory (including
the costs of improvements, amenities and in certain cases capitalized interest)
divided by the sales price.
36
<PAGE> 44
RESULTS OF OPERATIONS
NINE MONTHS ENDED DECEMBER 29, 1996 AND DECEMBER 28, 1997
Sales. Consolidated sales of real estate increased 50% from $81.7 million
for the nine month period ended December 29, 1996 (the "1996 Period") to $122.9
million for the nine month period ended December 28, 1997 (the "1997 Period").
Increases in residential land and Timeshare Interest sales during the 1997
Period were partially offset by lower Communities Division sales.
As of December 28, 1997, approximately $18.0 million in sales or $8.3
million in estimated income was deferred under percentage of completion
accounting. At March 30, 1997, approximately $8.4 million of sales or $3.8
million in estimated income was deferred and is included on the Consolidated
Balance Sheet under the caption Deferred Revenue.
Residential Land Division
During the 1996 and 1997 Periods, residential land sales contributed $54.6
million or 67% and $78.8 million or 64%, respectively, of the Company's total
consolidated revenues from the sale of real estate.
The table set forth below outlines the number of parcels sold and the
average sales price per parcel for the Residential Land Division by geographic
region for the fiscal periods indicated, before giving effect to the percentage
of completion method of accounting and excluding a $2 million bulk land sale
during the 1997 Period.
<TABLE>
<CAPTION>
NINE MONTHS ENDED,
-----------------------------------------------------------
DECEMBER 29, 1996 DECEMBER 28, 1997
--------------------------- ---------------------------
AVERAGE AVERAGE
NUMBER OF SALES PRICE NUMBER OF SALES PRICE
GEOGRAPHIC REGION PARCELS SOLD PER PARCEL PARCELS SOLD PER PARCEL
- ----------------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Southwest................................... 822 $ 37,378 850 $ 44,417
Southeast................................... 178 35,375 268 54,021
Midwest..................................... 137 24,550 195 35,324
Mid-Atlantic................................ 123 34,274 148 42,717
Rocky Mountains............................. 175 41,163 184 35,554
West........................................ 20 149,425 59 170,478
Northeast and Canada........................ 43 21,952 36 14,417
----- -----
Totals...................................... 1,498 37,207 1,740 47,449
===== =====
</TABLE>
The aggregate number of parcels sold and aggregate average sales price per
parcel increased from the 1996 Period to the 1997 Period due to the following:
- Southwest region -- Increases attributable to the Company's Bentwater and
White Oak Estates projects in Granbury, Texas and Conroe, Texas, which
opened in February 1997.
- Southeast region -- Increases attributable to the Winding River property
in North Carolina which opened in February 1997. The project will feature
a host of amenities including a beach club, 27-hole championship golf
course, club-house, river amenities and bike paths.
- Midwest region -- Increases attributable to the opening of two properties
in Tennessee in March 1997. One project features lake frontage and the
other property lies adjacent to a daily-fee golf course currently under
development by a third party.
- West region -- Increases attributable to greater parcel sales and higher
average sales prices, which are indicative of the Company's Arizona
project gaining more momentum as it enters its third year in marketing and
sales. The majority of the Arizona property is being marketed in parcels
of 36 acres at retail prices ranging from $100,000 to $185,000.
The Company plans to continue to dedicate greater resources to residential
land properties located in areas with proven records of success. These locations
include, but are not limited to, Texas, the Carolinas, Virginia, Tennessee, New
Mexico and Arizona.
37
<PAGE> 45
The average gross margin for the Residential Land Division was 46.9% and
48.3% for the 1996 and 1997 Periods, respectively. The average gross margin
increased primarily due to the opening of the Company's Winding River Property
in North Carolina and increased sales at the Company's properties in New Mexico
and Arizona, which generated gross margins of 58.6%, 55.2% and 50.9%,
respectively, during the 1997 Period. The Company's Investment Committee
approves all property acquisitions. In order to be approved for purchase by the
Investment Committee, all residential land properties are expected to achieve
certain minimum economics including a minimum gross margin. No assurances can be
given that such minimum economics will be achieved.
Resorts Division
During the 1996 and 1997 Periods, sales of Timeshare Interests contributed
$20.8 million or 25% and $39.9 million or 32%, respectively, of the Company's
total consolidated revenues from the sale of real estate.
The following tables set forth information for sales of Timeshare Interests
associated with the Company's Resorts Division for the periods indicated, before
giving effect to the percentage of completion method of accounting and excluding
approximately $126,000 of incremental revenues from the conversion in the 1997
Period of 62 existing Timeshare Interests owners to the points-based vacation
club acquired in connection with the RDI Acquisition.
<TABLE>
<CAPTION>
NINE MONTHS ENDED,
---------------------------
DECEMBER 29, DECEMBER 28,
1996 1997
------------ ------------
<S> <C> <C>
Number of Timeshare Interests sold.......................... 2,579 4,903
Average sales price per Timeshare Interest.................. $8,342 $8,695
Gross margin................................................ 70% 74%
</TABLE>
The increase in Timeshare Interest sales during the 1997 Period was
partially due to the RDI Acquisition effective September 30, 1997, which
contributed approximately $4.2 million in Timeshare Interest sales (including
543 Timeshare Interests sold) during the 1997 Period. The increase in the number
of Timeshare Interests sold during the 1997 Period was also partially due to two
new resort properties that became operational during such period - Harbour
Lights in Myrtle Beach, South Carolina, and The Falls Village in Branson,
Missouri, which generated 569 and 556 Timeshare Interest sales, respectively,
during the 1997 Period. In addition, Timeshare Interest sales increased due to
the maturation of existing resorts and the increased effectiveness of marketing
programs.
During the 1997 Period, the improvement in gross margins from the Company's
resorts was primarily the result of increases in the retail selling prices,
particularly at the Company's Mountain Loft (Gatlinburg, Tennessee) and Laurel
Crest (Pigeon Forge, Tennessee) resorts, which generated gross margins of
approximately 75% and 76%, respectively, during the 1997 Period.
During the 1997 Period, other resort service revenue and related costs were
approximately $1.6 million and $1.5 million, respectively. Other resort services
include the resort property management services, resort title services and
certain retail amenity and lodging operations acquired in connection with the
RDI Acquisition. There were no resort service operations during the 1996 Period.
Interest Income and Other
Interest income and other increased 60% from $4.6 million for the 1996
Period to $7.3 million for the 1997 Period. The Company's interest income is
earned from its receivable portfolio, securities retained pursuant to REMIC
financings and cash and cash equivalents. The increase in interest income is
primarily due to an increase in the average note receivable balance during the
1997 Period as compared to the 1996 Period.
Selling, General and Administrative Expense (S,G&A Expense)
The Company's S,G&A Expense consists primarily of marketing costs,
advertising expenses, sales commissions and corporate overhead. S,G&A Expense
totaled $38.1 million and $55.5 million for the 1996
38
<PAGE> 46
Period and the 1997 Period, respectively. A significant portion of S,G&A Expense
is variable relative to sales and profitability levels and, therefore, increases
with growth in sales of real estate. As a percentage of sales of real estate,
S,G&A Expense (including corporate administrative expense) decreased from 44% in
the 1996 Period to 42% in the 1997 Period. The decrease in S,G&A Expense as a
percentage of sales is primarily due to the Company's strategic emphasis on
controlling costs, coupled with increasing the revenue base in the Resorts
Division to support the existing infrastructure.
Interest Expense
Interest expense totaled $3.9 million and $6.5 million for the 1996 Period
and 1997 Period, respectively. The 66% increase in interest expense for the 1997
Period was primarily attributable to increased borrowings associated with the
Company's receivable-backed notes payable and for the acquisition of residential
land and Timeshare Interest inventory.
Provisions for Losses
The Company recorded provisions for loan losses and for real estate taxes
and other costs associated with delinquent customers of $901,000 and $1.3
million during the 1996 Period and 1997 Period. The increase in the provision
for losses is commensurate with the significant increase in timeshare revenues
and receivables during the 1997 Period, as delinquencies as a percentage of
sales are higher for timeshare receivables than for residential land
receivables.
Summary
Based on the factors discussed above, the Company's net income increased
from a net loss of $3.5 million in the 1996 Period to net income of $7.0 million
in the 1997 Period.
YEARS ENDED APRIL 2, 1995, MARCH 31, 1996 AND MARCH 30, 1997
Sales. Consolidated sales of real estate were $91.9 million for the year
ended April 2, 1995 ("fiscal 1995") compared to $113.4 million for the year
ended March 31, 1996 ("fiscal 1996") and $109.7 million for the year ended March
30, 1997 ("fiscal 1997") representing an increase of 23.4% from fiscal 1995 to
fiscal 1996 and a decrease of 3.3% from fiscal 1996 to fiscal 1997. Increases in
fiscal 1997 Timeshare Interest sales were more than offset by lower Residential
Land Division and Communities Division sales. Among other reasons, decreases in
fiscal 1997 residential land revenues were the result of $6.7 million more in
sales being deferred subject to percentage of completion accounting.
Residential Land Division. During fiscal 1995, 1996 and 1997, residential
land sales contributed $72.6 million or 79%, $84.9 million or 75% and $72.6
million or 66%, respectively, of the Company's total consolidated revenues from
the sale of real estate.
39
<PAGE> 47
The table set forth below outlines the number of parcels sold and the
average sales price per parcel for the Residential Land Division by geographic
region for the periods indicated, before giving effect to the percentage of
completion method of accounting.
<TABLE>
<CAPTION>
YEARS ENDED,
------------------------------------------------------------------------------------
APRIL 2, 1995 MARCH 31, 1996 MARCH 30, 1997
-------------------------- -------------------------- --------------------------
AVERAGE AVERAGE AVERAGE
NUMBER OF SALES PRICE NUMBER OF SALES PRICE NUMBER OF SALES PRICE
GEOGRAPHIC REGION PARCELS SOLD PER PARCEL PARCELS SOLD PER PARCEL PARCELS SOLD PER PARCEL
- ----------------- ------------ ----------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Southwest................. 1,107 $34,999 1,117 $ 37,489 1,131 $ 39,719
Southeast................. 289 28,311 223 36,925 291 35,736
Rocky Mountains........... 339 32,033 297 44,524 218 40,499
Midwest................... 317 28,740 334 27,451 175 24,111
West...................... -- -- 19 138,347 34 147,816
Mid-Atlantic.............. 215 23,136 236 21,951 152 31,605
Northeast and Canada...... 130 18,176 121 12,313 56 20,423
----- ----- -----
Totals.................... 2,397 30,969 2,347 34,856 2,057 38,572
===== ===== =====
</TABLE>
1995 vs 1996 Comparison of Residential Land Division Parcels Sold and
Average Sales Prices. The number of parcels sold in the Southwest increased
only slightly from fiscal 1995 to 1996 due to a shortage of ready-to-market
Texas property during the first quarter. The reduction in the number of sales
from Texas properties was offset by an increase in the number of sales from the
Company's New Mexico project. The average sales price per parcel in the
Southwest increased during fiscal 1996 due to a greater number of parcel sales
from the Company's New Mexico project at a higher average selling price than
during 1995. There were 139 sales from the New Mexico project at an average
sales price of $44,141 during fiscal 1996 compared to 71 sales at an average
sales price of $41,599 during 1995.
The Company did not sell any parcels in the West during fiscal 1996.
The number of parcels sold in the Rocky Mountains region decreased during
fiscal 1996 due to fewer sales from the Company's Montana properties, partially
offset by more sales from Colorado properties. The average sales price per
parcel in the Rocky Mountains region increased during fiscal 1996 due to the
sale of larger tracts in two projects located in Colorado. In addition, during
fiscal 1996 the average sales price was affected by a single bulk sale
constituting approximately 8,300 acres in Colorado for $2.5 million. The average
sales price per parcel in the Rocky Mountains region, excluding the $2.5 million
bulk sale, was $36,228.
The number of parcels sold in the Midwest increased during fiscal 1996 due
to more sales momentum from the Tennessee properties which were reaching
maturity.
The number of parcels sold in the Southeast decreased because of slow sales
in a new project in South Carolina during the first quarter of fiscal 1996. This
was partially offset by higher sales of more expensive parcels from a North
Carolina property.
1996 vs 1997 Comparison of Residential Land Division Parcels Sold and
Average Sales Prices. The number of parcels sold in the Southwest, which
includes Texas and New Mexico, increased during fiscal 1997 due to more sales
made from the Company's Houston and Dallas projects than during fiscal 1996. The
increase in sales from these markets in the current year was partially offset by
lower sales from San Antonio properties due to a temporary shortage of
ready-to-market inventories which was remedied with a large acquisition in June,
1996.
The number of parcels sold in the Southeast, which includes North and South
Carolina, increased during fiscal 1997 due to the introduction of lots at
Winding River, the Company's 1,100 acre golf course community located in North
Carolina.
The number of parcels sold in the Rocky Mountains region decreased during
fiscal 1997 due to fewer sales from the Company's Idaho and Montana properties.
The Company does not expect to expand operations in these states beyond the
properties currently being marketed.
40
<PAGE> 48
The number of parcels sold in the Midwest decreased during fiscal 1997 due
to a shortage of inventory in Tennessee. The Company acquired two Tennessee
properties during the fourth quarter of fiscal 1997 and sales activity at the
projects commenced March 1997.
Sales in the West in fiscal 1996 and 1997 were derived from the Company's
subdivision in Arizona. Increased parcel sales and higher average sales prices
are indicative of the project gaining more momentum as it matures. The majority
of the Arizona property is being marketed in parcels of 36 acres at retail
prices during such periods from $130,000 to $150,000, although certain five acre
lots are also being marketed.
Projects in the Mid-Atlantic region have historically been located in
Pennsylvania, Virginia and West Virginia. Lower parcel sales in fiscal 1997
reflect reduced inventory holdings in Pennsylvania and West Virginia where the
Company has no plans for expansion.
The number of parcels sold in the Northeast and Canada reflect lower
inventory levels in these regions where the Company has no plans for expansion.
As mentioned above, the Company plans to continue to dedicate greater
resources to residential land properties located in areas with proven records of
success.
Comparison of Residential Land Division Gross Margins. The average gross
margin for the Residential Land Division was 57%, 51% and 45% for fiscal 1995,
1996 and 1997, respectively. The decrease in the gross margin from fiscal 1995
to 1997 was attributable to the continued liquidation of properties where the
Company is discontinuing residential land operations (and experienced sub-par
operating results) in locations such as the Northeast, Pennsylvania, West
Virginia, Montana and Idaho. As mentioned above, the Company's Investment
Committee approves all property acquisitions. In order to be approved for
purchase by the Investment Committee, all residential land (and timeshare)
properties are expected to achieve certain minimum economics including a minimum
gross margin. No assurances can be given that such minimum economics will be
achieved.
During the first quarter of fiscal 1997, the Company recorded provisions
for the write-down of certain residential land inventories in the amount of $3.4
million.
Resorts Division
During fiscal 1995, 1996 and 1997, sales of Timeshare Interests contributed
$5.9 million or 6%, $13.8 million or 12% and $27.4 million or 25%, respectively,
of the Company's total consolidated revenues from the sale of real estate.
The following table sets forth certain information for sales of Timeshare
Interests associated with the Company's Resorts Division for the periods
indicated, before giving effect to the percentage of completion method of
accounting.
<TABLE>
<CAPTION>
YEARS ENDED,
--------------------------------
APRIL 2, MARCH 31, MARCH 30,
1995 1996 1997
-------- --------- ---------
<S> <C> <C> <C>
Number of Timeshare Interests sold.......................... 952 1,865 3,195
Average sales price per Timeshare Interests................. $7,119 $7,325 $8,362
Gross margin................................................ 62% 67% 71%
</TABLE>
During fiscal 1995, all Timeshare Interest sales were generated from the
Company's first resort in Gatlinburg, Tennessee. During fiscal 1996, 1,374
Timeshare Interests were sold from the Gatlinburg resort, 484 Timeshare
Interests were sold from the Company's second resort in neighboring Pigeon
Forge, Tennessee and seven Timeshare Interests were sold from the Company's
resort in Myrtle Beach, South Carolina. During fiscal 1997, 1,451 Timeshare
Interests were sold from the Gatlinburg resort, 976 Timeshare Interests were
sold from the Company's second resort in neighboring Pigeon Forge, Tennessee and
768 Timeshare Interests were sold from the Company's resort in Myrtle Beach,
South Carolina. An immaterial amount of revenues were deferred under the
percentage of completion method of accounting at March 30, 1997.
41
<PAGE> 49
During fiscal 1997, gross margins from the Company's resorts in Gatlinburg,
Pigeon Forge and Myrtle Beach were 69%, 72% and 73%, respectively. The
improvement in gross margins from the Company's resorts was primarily the result
of increases to the retail selling prices.
Communities Division
During fiscal 1995, 1996 and 1997, the Communities Division generated $13.4
million or 15%, $14.7 million or 13% and $9.7 million or 9%, respectively, of
the Company's total consolidated revenues from the sale of real estate.
The following table sets forth certain information for sales associated
with the Company's Communities Division for the periods indicated.
<TABLE>
<CAPTION>
YEARS ENDED,
--------------------------------
APRIL 2, MARCH 31, MARCH 30,
1995 1996 1997
-------- --------- ---------
<S> <C> <C> <C>
Number of homes/lots sold................................... 133 206 146
Average sales price......................................... $100,866 $71,546 $66,422
Gross margin (1)............................................ 12% 10% 3%
</TABLE>
- ---------------
(1) A charge of $4.8 million was recorded during fiscal 1997 for the write-down
of certain inventories managed under the Communities Division and is
included in the Consolidated Statement of Operations under "Provisions for
losses."
The reduction in the average sales price from fiscal 1995 to 1997 was
primarily attributable to a smaller number of site-built homes and a greater
number of lot-only sales. The $13.4 million in fiscal 1995 sales was comprised
of 110 manufactured homes with an average sales price of $77,243 and 23
site-built homes with an average sales price of $213,640. The $14.7 million in
fiscal 1996 sales was comprised of 114 manufactured homes with an average sales
price of $75,232, an additional 20 site-built homes with an average sales price
of $198,592, 71 sales of lots-only at an average sales price of $23,279 and one
larger acreage Southwestern bulk lot sale for $530,320. The $9.7 million in
fiscal 1997 sales was comprised of 73 manufactured homes with an average sales
price of $79,282, an additional 4 site-built homes with an average sales price
of $172,225 and 69 sales of lots at an average sales price of $46,355. During
fiscal 1997, as discussed above, the Company recorded provisions for the
write-down of certain communities related inventories in the amount of $4.8
million. See Note 4 to the Consolidated Financial Statements and discussion of
"Provisions for Losses" below.
Interest Income and Other
Interest income and other was $7.3 million, $7.4 million and $6.2 million
for 1995, 1996 and 1997, respectively. The Company's interest income is earned
from its note receivables, securities retained pursuant to REMIC financings and
cash and cash equivalents. Interest income for each year was also affected by
the sale of receivables in REMIC transactions, which resulted in a loss of
$411,000 in fiscal 1995, a gain of $1,119,572 in fiscal 1996 and a loss of
$96,211 in fiscal 1997.
Selling, General and Administrative Expenses (S, G & A Expenses)
S,G & A expenses totaled $36.5 million, $43.7 million and $51.4 million for
fiscal 1995, 1996 and 1997, respectively. As a percentage of sales of real
estate, S, G&A expenses were 40% for fiscal 1995, 39% for fiscal 1996 and 47%
for 1997. The increase as a percent of sales in fiscal 1997 was largely the
result of higher S,G&A expenses for the Resorts Division as well as higher
corporate general and administrative expenses. The Company invested in human
resources and other infrastructure during fiscal 1997 to support the anticipated
long-term growth of its Resorts Division. Furthermore, marketing expense tends
to be higher during the early years of a resort project and decreases as the
property reaches some maturity.
42
<PAGE> 50
Interest Expense
Interest expense totaled $6.7 million, $6.3 million and $5.5 million for
fiscal 1995, 1996 and 1997, respectively. The 13% decrease in interest expense
for fiscal 1997 was primarily attributable to an increase in the amount of
interest capitalized to inventory. The Company capitalized interest totaling
$1.9 million during fiscal 1996, compared to $3.0 million for 1997. The increase
in capitalized interest is the direct result of the Company acquiring certain
inventory which requires significant development with longer sell-out periods
(and therefore qualifying for interest capitalization). The effective cost of
borrowing (when adding back capitalized interest) was 10.5%, 11.1% and 10.2% for
fiscal 1995, 1996 and 1997, respectively.
Provisions for Losses
As noted above, the Company wrote down certain inventory in fiscal 1997. As
of March 30, 1997, approximately 50% of the inventories subject to write-down
had been sold (as measured by both number of properties and cost basis).
The Company recorded provisions for loan losses (or related advanced real
estate taxes for delinquent customers) totaling $792,000, $612,000 and $1.3
million during fiscal 1995, 1996 and 1997, respectively. Because a greater
percentage of the fiscal 1997 note portfolio consists of timeshare loans (where
historical default rates exceed those for land loans), higher provisions were
recorded. See the discussion below under "-- Liquidity and Capital Resources."
Summary
Based on the factors discussed above, the Company's net income increased
from $6.1 million in fiscal 1995 to $6.5 million in fiscal 1996 and decreased to
a net loss of $(4.4) million in 1997.
CHANGES IN FINANCIAL CONDITION
Years Ended April 2, 1995, March 31, 1996 and March 30, 1997
Cash and cash equivalents decreased by $1.7 million during fiscal 1995 and
increased $3.8 million and $200,000 during fiscal 1996 and fiscal 1997,
respectively.
Net cash provided by the Company's operations was $9.4 million and $15.0
million for fiscal 1995 and 1996, respectively. Net cash used by the Company's
operations was $8.2 million for fiscal 1997. The increase in cash flow from
operations during fiscal 1996 was primarily attributable to the Company
receiving $28.7 of net proceeds from private placement REMIC transactions during
fiscal 1996 compared to $22.7 million in fiscal 1995. The decrease in cash flow
from operations during fiscal 1997 was due to the Company receiving only $16.9
million of net proceeds from REMIC transactions combined with a $3.6 million
increase in cash paid for the acquisition and development of the Company's
inventories, a $4.1 million increase in cash paid to suppliers, employees and
sales representatives, and a $6.5 million decrease in cash received from
customers.
Net cash used by investing activities was $1.6 million and $1.2 million for
fiscal 1995 and 1996, respectively. Net cash provided by investing activities
was $1.3 million for fiscal 1997. The decrease in net cash used by investing
activities during fiscal 1996 was due to approximately $337,000 of additional
proceeds from sales of property and equipment as compared to fiscal 1995. The
increase in cash provided by investing activities during fiscal 1997 was
primarily due to $1.4 million of additional cash received from sales of
investments in securities and an $854,000 decrease in purchases of property and
equipment as compared to fiscal 1996.
Net cash used by financing activities was $9.6 million and $10.0 million
for fiscal 1995 and 1996, respectively. Net cash provided by financing
activities was $7.1 million for fiscal 1997. The increase in net cash used by
financing activities during fiscal 1996 was due to an increase in the net
payments under the Company's lines-of-credit and other notes payable. The
increase in net cash provided by financing activities during fiscal 1997 was due
to an $18.5 million increase in net borrowings under the Company's
lines-of-credit and other notes payable, partially offset by $1.4 million of
cash paid to buy treasury stock.
43
<PAGE> 51
Nine Months Ended December 29, 1996 and December 28, 1997
Cash and cash equivalents increased by $3.3 million and $13.5 million
during the 1996 Period and 1997 Period, respectively.
Net cash provided by the Company's operations was $892,000 and $14.1
million for the 1996 Period and 1997 Period, respectively. The increase in cash
flow from operations was primarily attributable to an increase in sales of
inventory during the 1997 Period as well as an increase in net cash provided by
the hypothecation of the Company's notes receivable from residential land and
Timeshare Interest sales.
Net cash provided by investing activities was $702,000 for the 1996 Period.
Net cash used by investing activities was $3.6 million for the 1997 Period. The
decrease in net cash provided by investing activities was due to cash paid to
acquire RDI of $6.2 million (including acquisition costs), net of cash acquired
with RDI of $3.8 million and a $2.0 million increase in property and equipment
purchases, partially offset by a $400,000 increase in cash received from the
Company's investment in REMIC securities.
Net cash provided by financing activities was $1.7 million and $3.0 million
for the 1996 Period and 1997 Period, respectively. The increase in net cash
provided by financing activities was due to the $6.0 million proceeds from the
issuance of the Convertible Notes and a decrease in cash payments for treasury
stock of $1.2 million offset by an increase in the net payments under the
Company's lines-of-credit and other notes payable of $5.5 million.
LIQUIDITY AND CAPITAL RESOURCES
The Company's capital resources are provided from both internal and
external sources. The Company's primary capital resources from internal
operations are: (i) cash sales of real estate, (ii) downpayments on real estate
and timeshare sales which are financed, (iii) principal and interest payments on
the purchase money mortgage loans arising from residential land sales and
contracts for deed arising from sales of Timeshare Interests (collectively
"Receivables") and (iv) proceeds from the sale of, or borrowings collateralized
by, Receivables. Historically, external sources of liquidity have included
borrowings under secured lines-of-credit, seller and bank financing of inventory
acquisitions and the issuance of debt securities. The Company's capital
resources are used to support the Company's operations, including (i) acquiring
and developing inventory, (ii) providing financing for customer purchases, (iii)
meeting operating expenses and (iv) satisfying the Company's debt and other
obligations. The net proceeds of the Note Offering were used to repay certain
outstanding indebtedness. The Company anticipates that it will continue to
require external sources of liquidity to support its operations and satisfy its
debt and other obligations.
Credit Facilities for Timeshare Receivables and Timeshare Inventories
The Company has various credit facilities with financial institutions that
provide for receivable financing for its timeshare projects. The interest rates
charged under these facilities range from the three-month London Interbank
Offered Rate ("LIBOR") plus 4.25% to the prime lending rate plus 3.75%. At
December 28, 1997, the aggregate outstanding principal balance under the credit
facilities was $43.3 million, including approximately $8.4 million of debt
associated with receivables previously sold by RDI to financial institutions
with recourse. In addition, the Company has various credit facilities with
financial institutions that provide for the financing of acquisition and
development of certain of its timeshare projects. At December 28, 1997, the
aggregate outstanding balance under such facilities was approximately $15.0
million.
In connection with the Note Offering, the Company retired all outstanding
indebtedness related to timeshare receivable and inventory financings, except
for debt associated with receivables previously sold to financial institutions
with recourse. The Company terminated the existing credit facilities for
timeshare receivable and inventory financings concurrently with the closing of
the Note Offering.
The Company is currently negotiating with a financial institution to
provide the Company with a $135 million combined timeshare warehouse financing
and receivables purchase facility. It is anticipated that the $35 million
warehouse facility and the $100 million receivable purchase facility will bear
interest at LIBOR plus 2.35% and a fixed rate equal to the weighted average term
Treasury rate plus 1.40%, respectively.
44
<PAGE> 52
Should the Company fail to sell to such financial institution during the term of
the purchase facility notes receivable with a cumulative present value of at
least $100 million, the interest rate on the purchase facility will increase by
.05% for each $10 million shortfall, to a maximum applicable margin of 1.60%.
Under the facility, eligible notes receivable would periodically move from the
warehouse facility to the purchase facility. Both the warehouse and the purchase
facility will have detailed requirements with respect to the eligibility of
notes receivable for inclusion and other conditions to funding. It is
anticipated that the borrowing base under the warehouse facility will be 95% of
the outstanding principal balance of eligible notes arising from the sale of
Timeshare Interests. Under the purchase facility, the Company will be required
to maintain a specified overcollateralization level and a cash reserve account.
Loans sold under this facility will be without recourse to the Company except
for breaches of representations and warranties made at the time of sale.
Fundings under the facility will terminate upon the occurrence of specified
trigger events. The Company will act as servicer under the purchase facility and
will be required to make advances to the financial institution to the extent it
believes such advances will be recoverable. If obtained, the combined facility
will expire two years from the closing date of the Note Offering. In addition to
other customary fees and expenses, the Company anticipates that it will pay a
fee equal to $575,000, $250,000 at the closing of this facility and $325,000
within 12 months of closing. In addition, the Company anticipates it will pay an
annual utilization fee equal to 1% of the incremental amount by which
outstanding indebtedness under the facility is below $10 million. The facility,
if entered into, will include various conditions to funding, eligibility
requirements for collateral, affirmative, negative and financial covenants, and
events of default. See "Description of Other Indebtedness."
In addition, the Company is currently negotiating with the same financial
institution referred to in the preceding paragraph to provide the Company with a
$25 million acquisition and development facility for its timeshare inventories.
The facility would include a two-year draw down period and have a term of seven
years. Principal would be repaid through agreed-upon release prices as Timeshare
Interests are sold at the financed resort, subject to minimum required
amortization. It is anticipated that the indebtedness under the facility would
bear interest at the three-month LIBOR plus 3.0%. With respect to any inventory
financed under the facility, the Company will be required to have provided
equity of at least 15% of the approved project costs. In connection with the
facility, the Company will also be required to pay certain fees and expenses to
the financial institution. See "Description of Other Indebtedness."
Credit Facilities for Residential Land Receivables and Residential Land
Inventories
The Company has a credit facility with a financial institution for the
pledge of land receivables. The Company uses this facility as a warehouse until
it accumulates a sufficient quantity of land receivables to sell under private
placement REMIC transactions. Under the terms of this facility, the Company is
entitled to advances secured by Receivables equal to 90% of the outstanding
principal balance of eligible pledged Receivables. The interest rates charged on
outstanding borrowings range from the prime lending rate plus 0.5% to prime plus
2.25%. At December 28, 1997, the aggregate outstanding principal balance under
this facility was $3.5 million. In connection with the Note Offering, the
Company intends to retire this indebtedness.
The Company has an existing $20.0 million revolving credit facility with a
financial institution for the pledge of Residential Land Division Receivables.
The Company uses the facility as a temporary warehouse until it accumulates a
sufficient quantity of residential land receivables to sell under private
placement REMIC transactions. Under the terms of this facility, the Company is
entitled to advances secured by Residential Land Division receivables up to 90%
of the outstanding principal balance of eligible pledged Residential Land
Division receivables. In addition, up to $8.0 million of the facility can be
used for land acquisition and development purposes. The interest rate charged on
outstanding borrowings ranges from prime plus 0.5% to 1.5%. At December 28,
1997, the outstanding principal balance under the facility was $4.7 million. All
principal and interest payments received on pledged Receivables are applied to
principal and interest due under the facility. The ability to borrow under the
facility expires in September 2000. Any outstanding indebtedness is due in
September 2002. This facility will be retained by the Company following the Note
Offering.
45
<PAGE> 53
Over the past three years, the Company has received 80% to 90% of its land
sales in cash. Accordingly, in recent years the Company has reduced the
borrowing capacity under credit agreements secured by land receivables. The
Company attributes the significant volume of cash sales to an increased
willingness on the part of certain local banks to extend more direct customer
lot financing. No assurances can be given that local banks will continue to
provide such customer financing.
Historically, the Company has funded development for road and utility
construction, amenities, surveys, and engineering fees from internal operations
and has financed the acquisition of residential land property through seller,
bank or financial institution loans. Terms for repayment under these loans
typically call for interest to be paid monthly and principal to be repaid
through lot releases. The release price is usually defined as a pre-determined
percentage of the gross selling price (typically 25% to 50%) of the parcels in
the subdivision. In addition, the agreements generally call for minimum
cumulative annual amortization. When the Company provides financing for its
customers (and therefore the release price is not available in cash at closing
to repay the lender), it is required to pay the creditor with cash derived from
other operating activities, principally from cash sales or the pledge of
Receivables originated from earlier property sales.
At December 28, 1997, the aggregate outstanding balance on the Company's
residential land acquisition and development loans was approximately $16.0
million. In connection with the Note Offering, the Company retired all
outstanding indebtedness under such loans. In addition, the Company is currently
negotiating with a financial institution for a $35 million revolving credit
facility. The Company expects to use this facility to finance the acquisition
and development of residential land projects and to finance land receivables.
The facility is expected to be secured by the real property (and personal
property related thereto) with respect to which borrowings are made, with the
lender to advance up to a specified percentage of the value of the mortgaged
property and eligible pledged receivables, provided that the maximum outstanding
amount secured by pledged receivables may not exceed $20.0 million. The interest
charged on outstanding borrowings is expected to be approximately prime plus
1.5%. It is anticipated that the facility will include customary conditions to
funding, eligibility requirements for collateral, affirmative, negative and
financial covenants and events of default. See "Description of Other
Indebtedness."
On December 15, 1997, the Company entered into a short-term loan with the
Initial Purchasers. The loan bore interest at the greater of 10% or the prime
rate plus 2.75% and was repaid on the closing of the Note Offering. The Company
was required to pay a fee equal to 1% of each advance. The Company borrowed
$22.1 million under the loan.
The Indenture and the Company's other credit facilities include certain
covenants restricting, among other things, the incurrence of debt, the payment
of dividends and other restricted payments, the incurrence of liens and
transactions with affiliates. Certain current and future credit facilities do or
will include financial covenants. No assurances can be given that such covenants
will not limit the Company's ability to satisfy or refinance its obligations or
otherwise adversely affect the Company's operations. See "Risk Factors --
Leverage; Ability to Service Debt and Liquidity and Financing Requirements."
See "Description of Other Indebtedness" for a further description of
certain indebtedness and facilities anticipated to be outstanding following the
effective date of this Prospectus.
The Company estimates that the total cash required to complete preparation
for the sale of its residential land and timeshare property inventory as of
December 28, 1997 was approximately $186.0 million. During the three-month
period ending March 29, 1998 and during fiscal 1998, the Company anticipates
spending approximately $7.9 million and approximately $47.5, respectively, for
expansion and development activities at the Company's timeshare resorts, and
approximately $14.6 million and approximately $55.7 million, respectively, for
the acquisition and development of residential land. The Company plans to fund
these expenditures primarily with available capacity on existing or proposed
credit facilities and cash generated from operations. There can be no assurances
that the Company will be able to obtain the financing necessary to complete the
foregoing plans.
Summary. The Company intends to continue to pursue a growth-oriented
strategy, particularly with respect to its Resorts Division. In connection with
this strategy, the Company may from time to time acquire,
46
<PAGE> 54
among other things, additional resort properties and completed Timeshare
Interests; land upon which additional resorts may be built; management
contracts; loan portfolios of Timeshare Interest mortgages; portfolios which
include properties or assets which may be integrated into the Company's
operations; and operating companies providing or possessing management, sales,
marketing, development, administration and/or other expertise with respect to
the Company's operations in the timeshare industry. In addition, the Company
intends to continue to focus the Residential Land Division on larger more
capital intensive projects particularly in those regions where the Company
believes the market for its products is strongest, such as the Southeast,
Southwest, Rocky Mountains and Western regions of the United States and to
replenish its residential land inventory in such regions as existing projects
are sold-out.
The Company believes that the net proceeds from the Note Offering and
anticipated cash generated from operations and anticipated future permitted
borrowings under existing or proposed credit facilities will be sufficient to
meet the Company's working capital, capital expenditures and debt service
requirements for the foreseeable future. The Company may, in the future, require
additional credit facilities or issuances of other corporate debt or equity
securities in connection with acquisitions or otherwise. Any debt incurred or
issued by the Company may be secured or unsecured, fixed or variable rate
interest and may be subject to such terms as management deems prudent. There can
be no assurance that the proposed credit facilities will be consummated on the
terms described herein, if at all, or that sufficient funds will be available
from operations or under existing, proposed or future revolving credit or other
borrowing arrangements to meet the Company's cash needs, including, without
limitation, its debt service obligations. As noted above the Indenture and the
Company's other credit facilities include customary conditions to funding,
eligibility requirements for collateral, certain financial and other affirmative
and negative covenants, including, among others, limits on the incurrence of
indebtedness, covenants concerning net worth and fixed charge coverage
requirements and debt to equity ratios and events of default. In addition, the
Company's future operating performance and ability to meet its financial
obligations will be subject to future economic conditions and to financial,
business and other factors, many of which will be beyond the Company's control.
Impact of Year 2000
Some of the Company's older computer programs were written using two digits
rather than four to define the applicable year. As a result, those computer
programs have time-sensitive software that recognizes a date using "00" as the
year 1900 rather than the year 2000. This could cause a system failure and
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar normal business activities.
The Company has completed an assessment relative to the modification or
replacement of portions of its software so that its computer systems will
function properly with respect to dates in the year 2000 and thereafter. The
total "Year 2000" project cost is estimated at approximately $400,000, which
consists of costs to be incurred to acquire upgraded software that will be
capitalized. It is anticipated that these costs will be paid for using cash from
operations.
The project is estimated to be completed not later than June 30, 1999,
which is prior to any anticipated impact on the Company's operating systems. The
Company believes that with modifications to existing software and conversions to
new software, the Year 2000 issue will not pose significant operational problems
for its computer systems. However, if such modifications and conversions are not
made, or are not completed timely, the Year 2000 issue could have a material
impact on the operations of the Company.
The costs of the project and the date on which the Company believes it will
complete the Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events, including
the continued availability of certain resources and other factors. However,
there can be no guarantee that these estimates will be achieved and actual
results could differ materially from those anticipated. Specific factors that
might cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant computer codes, and similar uncertainties.
47
<PAGE> 55
BUSINESS
The Company is a leading marketer of vacation and residential lifestyle
choices through its resorts and residential land businesses. The Resorts
Division strategically acquires, develops and markets Timeshare Interests in
resorts generally located in popular high-volume, "drive-to" vacation
destinations. Timeshare Interests typically entitle the buyer to a
fully-furnished vacation residence for an annual one-week period in perpetuity,
as well as access to over 1,500 resorts worldwide through the Company's
participation in timeshare exchange networks. The Company currently markets and
sells Timeshare Interests in eight resorts located in the United States and the
Caribbean. Prior to investing in new timeshare projects, the Company performs
extensive market research and testing and, prior to completion of development,
pre-sells a significant portion of its Timeshare Interests inventory. The
Residential Land Division strategically acquires, develops and subdivides
property and markets the subdivided residential lots to retail customers seeking
to build a home in a high quality residential setting. The Residential Land
Division's strategy is to locate its projects near major metropolitan centers
outside the perimeter of intense subdivision development or in popular
retirement areas. The Company has focused the Residential Land Division's
activities in certain proven, core markets in which the Company has developed
substantial marketing expertise and has a strong track record of success. Prior
to acquiring residential land, the Company typically utilizes market research,
conducts due diligence and, in the case of new project locations, engages in
pre-marketing techniques to evaluate market response and price acceptance. Once
a parcel of property is acquired, the Company pre-sells a significant portion of
its planned residential lots on such property prior to extensive capital
investment as a result of the Company's ability to bond its projects to
completion. The Company also generates significant interest income through its
financing of individual purchasers of Timeshare Interests and, to a lesser
extent, land sold by the Residential Land Division. For the nine-month period
ended December 28, 1997, the Company had aggregate revenues of approximately
$131.8 million and EBITDA of approximately $21.4 million.
The Resorts Division. The Company's Resorts Division was founded in 1994
to capitalize on the consistent growth of the timeshare industry. According to
ARDA and other industry sources, timeshare industry sales and the number of
Timeshare Interest owners grew at compound annual rates of approximately 16% and
22%, respectively, from 1980 to 1997 (see charts on page 53). The Company
currently markets and sells Timeshare Interests in eight resorts located in the
Smoky Mountains of Tennessee; Myrtle Beach, South Carolina; Orlando, Florida;
Branson, Missouri; Wisconsin Dells, Wisconsin; and Aruba. The Company also
manages 33 timeshare resorts (including seven of its own resorts) with an
aggregate of approximately 70,000 members, which the Company believes makes it
the second largest manager of timeshare resorts in North America (based on the
number of resorts managed). For the nine-month period ended December 28, 1997,
the Company sold 4,903 Timeshare Interests, an increase of 90.1%, compared to
2,579 Timeshare Interests sold for the comparable period in 1996. The Company's
estimated remaining life-of-project sales and estimated remaining
life-of-project field operating profit with respect to the Resorts Division
increased to approximately $674.6 million and $65.4 million, respectively, as of
December 28, 1997 from approximately $260.4 million and $11.2 million,
respectively, as of December 29, 1996. These increases are a direct result of
new projects developed by the Company in fiscal 1998, the RDI Acquisition and
the Aruba Transaction, which the Company believes will result in a significant
increase in revenues and field operating profit in fiscal 1999.
The Resorts Division utilizes a variety of techniques to attract
prospective purchasers of Timeshare Interests, including targeted mailings,
direct mail mini-vacations, kiosks in retail locations, marketing to current
owners of Timeshare Interests and referrals. The majority of the Company's
Timeshare Interests are sold through on-site sales presentations. The Company
believes its ability to effectively implement and manage these marketing
activities has resulted in the generation of a predictable and increasing supply
of sales prospects. To support its marketing and sales efforts, the Company has
developed and continues to enhance its database to track its timeshare marketing
and sales programs. Management believes that, as the Company's timeshare
operations grow, this database will become an increasingly significant asset,
enabling it to take advantage of, among other things, less costly marketing and
referral opportunities.
According to ARDA, the primary reason cited by consumers for purchasing a
Timeshare Interest is the ability to exchange a Timeshare Interest for
accommodations at other resorts through worldwide exchange
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networks. Each of the Company's timeshare resorts is affiliated with either II
or RCI, the two largest worldwide timeshare exchange companies. Participation in
an exchange network entitles owners to exchange their annual Timeshare Interests
for occupancy at over 1,500 participating II resorts or over 3,200 participating
RCI resorts worldwide. To further enhance the ability of its Timeshare Interest
owners to customize their vacation experience, the Company also intends to
expand the points-based vacation club system it acquired in the RDI Acquisition
which, when completed, will permit its Timeshare Interest owners to purchase an
annual allotment of points which can be redeemed for occupancy rights at all
Company-owned and participating managed resorts.
Prior to acquiring property for resorts, the Resorts Division undertakes a
full property review, including an environmental assessment, which is presented
for approval to the Company's Investment Committee, which was established in
1990 and consists of certain key members of senior management. During the review
process, acquisition specialists analyze market, tourism and demographic data as
well as the quality and diversity of the location's existing amenities and
attractions to determine the potential strength of the timeshare market in such
area and the availability of a variety of recreational opportunities for
prospective Timeshare Interest purchasers.
The Company has historically provided financing to approximately 89% of its
timeshare customers, who are required to make a downpayment of at least 10% of
the Timeshare Interest sales price and who typically finance the balance of the
sales price over a period of seven to ten years. As of December 28, 1997, the
Company had a timeshare receivables portfolio totaling approximately $66.5
million in principal amount, with a weighted average contractual yield of
approximately 15.8% per annum. The Company is currently negotiating with a
financial institution to provide the Company with a combined timeshare warehouse
financing and receivables purchase facility and a separate timeshare acquisition
and development facility. See "Management's Discussion and Analysis of Results
of Operations and Financial Condition."
The Residential Land Division. The Residential Land Division is focused
primarily on land projects located in states in which the Company has developed
substantial marketing expertise and has a strong track record of success, such
as Texas, the Carolinas, New Mexico, Virginia, Tennessee and Arizona. The
Company believes no other company in the United States of comparable size or
financial resources markets and sells residential land to retail customers. For
the nine-month period ended December 28, 1997, the Residential Land Division had
revenues of approximately $78.8 million, an increase of 44.4% compared to
revenues of approximately $54.6 million for the comparable period in 1996. The
Company's estimated remaining life-of-project sales and estimated remaining
life-of-project field operating profit with respect to the Residential Land
Division increased to approximately $224.5 million and $47.6 million,
respectively, as of December 28, 1997 from approximately $209.3 million and
$32.4 million, respectively, as of December 29, 1996.
The Residential Land Division utilizes its proven marketing techniques and
proprietary SIMS database and other residential land databases maintained by the
Company to target families seeking a quality lifestyle improvement which is
generally unavailable in traditional suburban developments. Based on the
Company's extensive experience in marketing and selling residential lots to its
target customers, the Company has been able to develop a comprehensive marketing
and sales program that generates a significant number of on-site sales
presentations to potential prospects through low-cost, high-yield newspaper
advertising. In addition, SIMS and the other Residential Land Division databases
enable the Company to compile, process and maintain comprehensive information
concerning future sales prospects within each of its operating regions. The
Company currently has over 250,000 potential sales prospects in its Residential
Land Division databases. Through the Company's targeted sales and marketing
program, the Company believes that it has been able to achieve a high conversion
ratio of sales to prospects receiving on-site sales presentations. The
conversion ratio of sales to on-site sales presentations for the ten-month
period ended January 31, 1998 was approximately 20%.
The Residential Land Division acquires and develops land in two markets:
(i) near major metropolitan centers outside the perimeter of intense subdivision
development; and (ii) popular retirement areas. Prior to acquiring undeveloped
land, the Company researches market depth and forecasts market absorption. In
new market areas, the Company typically supplements its research with a
structured classified ad test marketing
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system that evaluates market response and price acceptance. The Company's sales
and marketing efforts begin as soon as practicable after the Company enters into
an agreement to acquire a parcel of land. The Company's ability to bond projects
to completion allows it to sell a significant portion of its residential land
inventory on a pre-development basis, thereby reducing the Company's need for
external capital to complete improvements. The Company believes that its
pre-acquisition research and test marketing allow it to market its residential
lots at predictable margins. As is the case with the Resorts Division, all
acquisitions of residential land are subject to Investment Committee approval.
In fiscal 1997, the Company began construction of its first daily-fee golf
course as part of its long-term plan to participate in the growing daily-fee
golf market. The Company believes that because the demographics of this market
are similar to those of the Residential Land Division, daily-fee golf courses
are an attractive amenity that will increase the marketability of the Company's
adjacent residential lots in certain projects. The Company's first golf course,
the Carolina National Golf Club, is located near Southport, North Carolina, just
30 miles north of Myrtle Beach, South Carolina, one of the nation's most popular
golf destinations, and was designed by Masters Champion Fred Couples. Also, as
part of the RDI Acquisition, the Company acquired a daily-fee golf course
located in Wisconsin Dells, Wisconsin.
COMPETITIVE STRENGTHS
SUBSTANTIAL INTERNAL GROWTH CAPACITY
The Company believes its substantial investment in resort infrastructure
and core residential land holdings will allow it to convert current and planned
inventory into positive and sustainable revenues and cash flow. As of December
28, 1997, the Company had existing completed inventory of 19,659 Timeshare
Interests at its resorts, 7,900 Timeshare Interests under construction or
development, and plans to develop approximately 53,300 additional Timeshare
Interests at existing resorts. Based on the foregoing, the Resorts Division's
estimated remaining life-of-project sales and estimated remaining
life-of-project field operating profit were approximately $674.6 million and
$65.4 million, respectively, at December 28, 1997. The aggregate carrying amount
of Residential Land Division inventory at December 28, 1997 was $51.7 million.
The Residential Land Division's estimated remaining life-of-project sales and
estimated remaining life-of-project field operating profit were approximately
$224.5 million and $47.6 million, respectively, at December 28, 1997.
ATTRACTIVE LOCATIONS AND HIGH QUALITY LIFESTYLE PRODUCTS
The Company seeks to maximize sales penetration and cash flow by marketing
and selling high quality lifestyle products in attractive locations possessing
positive demographic and population attributes. The Resorts Division generally
markets Timeshare Interests in popular "drive-to" locations providing a high
quality, cost-effective vacation alternative to its buyers. The Resorts Division
also provides its customers, through its participation in II and RCI, access to
over 1,500 and 3,200 participating resorts worldwide, respectively. The
Residential Land Division markets residential lots (typically two to five
acres), which are larger than those generally available in traditional suburban
developments. These lots are often near attractive amenities and are located
near major metropolitan centers outside the perimeter of intense subdivision
development or in popular retirement areas.
STRONG INDUSTRY FUNDAMENTALS
The timeshare industry is one of the fastest growing segments of the
hospitality industry with a compound annual sales growth rate from 1980 to 1997
of approximately 16%. In addition, the number of timeshare resorts worldwide
increased 167.4% from 1,550 in 1984 to over 4,100 in 1994 (the most recent date
for which ARDA statistics are available). The Company believes that several
factors have contributed to this sustained industry growth including: (i)
increased flexibility of ownership due to the growth in the international
exchange programs and points-based vacation club systems; (ii) increased
consumer awareness of the economic values and benefits of timeshare ownership;
(iii) improvement in both the quality and management of the resorts; (iv) an
influx of brand-name national lodging companies to the timeshare industry; (v)
implementation of consumer protection regulations; (vi) availability of consumer
financing; and (vii) improvement in inventory management systems. The Company
believes that, despite the industry's growth,
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timeshare ownership has achieved only an approximate 5% market penetration among
United States households with income above $50,000 per year.
RISK MANAGEMENT THROUGH PRE-SELLING AND RIGOROUS INTERNAL CONTROLS
The Company's acquisition and development strategies for both its Resorts
and its Residential Land Divisions are designed to reduce capital risk. Prior to
acquiring timeshare projects or residential land, the Company typically utilizes
market research and conducts due diligence. In addition, in the case of new
Residential Land Division locations, the Company engages in pre-marketing
techniques prior to acquiring residential land. The Company typically develops
its projects in phases, and its ability to bond projects to completion allows it
to sell a significant portion of Timeshare Interests or planned residential lots
on a pre-development basis prior to full capital investment. All acquisitions
must be approved by the Investment Committee.
ATTRACTIVE MARKET DEMOGRAPHICS
Both the Resorts and Residential Land Divisions target customers in the
40-55 year old age group. The Company's target group, which is one of the
fastest growing segments in the U.S., seeks to use its growing earning power to
effect quality lifestyle improvements. The Company believes that its products
will allow it to effectively capitalize on the anticipated growth and objectives
of this target market.
SOPHISTICATED SALES INFORMATION MANAGEMENT SYSTEM
The Company's significant investment in its sales and marketing information
systems has enabled both its Resorts Division and its Residential Land Division
to compile, process and maintain comprehensive, valuable data regarding future
sales prospects. The Company currently has over 250,000 potential prospective
buyers in its databases. The Company believes that the ability to access this
information allows the Company to more accurately target its prospective
customers and, thus, reduce marketing costs and increase closing rates.
SUPERIOR SALES AND MARKETING PERSONNEL
The success of the Company's sales and marketing efforts depends heavily on
the knowledge and experience of its marketing and commission-based sales
personnel. The Company believes its marketing and sales personnel are among the
most experienced in the timeshare and residential land industries. The Company
has expended considerable resources in training such personnel in the effective
use of the Company's databases and sales marketing systems, site attributes and
surrounding area amenities. The Company enhances this sales and marketing
expertise through the Bluegreen Institute, a mandatory training program designed
to instill the Company's marketing and customer service philosophy in middle-
and lower-level management.
COST EFFICIENCIES THROUGH MULTI-SITE OPERATIONS AND RESORT MATURATION
As the Resorts Division grows, the Company believes it has significant
opportunities to realize economies of scale through the operation of a
multi-resort management system and the reduction of fixed operating costs as a
percentage of sales. In addition, the Company believes that, as its existing
resorts mature, a greater percentage of Timeshare Interests will be sold through
less expensive marketing techniques such as referrals and upgrade sales to
existing Timeshare Interest owners.
EXPERIENCED MANAGEMENT TEAM
The Company's five senior executive officers have over 100 years of
industry-related experience. The Company has employment agreements with each of
these executive officers, which expire in March 2001.
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BUSINESS STRATEGY
In order to further enhance its market positions and to maximize
profitability and cash flow, the Company's principal strategic objectives are as
follows:
CAPITALIZE ON SIGNIFICANT GROWTH OPPORTUNITIES IN THE TIMESHARE INDUSTRY
The Resorts Division was founded in 1994 to capitalize on the rapid growth
of the timeshare industry. The Company intends to continue to aggressively
market and sell its existing and planned Timeshare Interest inventory through
the further development of in-house sales and marketing programs, exchange
program synergies and the use of technology and database management systems. The
Company's goal is to continue to increase sales of Timeshare Interests as a
percentage of the Company's total consolidated revenue, further diversifying the
Company's base of revenue.
IMPROVEMENT OF MARGINS IN RESORTS DIVISION
The Company believes that increased efficiency and a multi-resort
management system will reduce operating costs as a percentage of sales and allow
the Company to experience increased margins at its existing resorts by spreading
operating and corporate overhead costs over a larger revenue base. In addition,
the Company expects operating margins at its resorts to improve over time as a
greater percentage of Timeshare Interests are sold through more efficient, less
costly marketing techniques, such as referrals and sales of additional Timeshare
Interests to existing customers. The Company also believes that it will reduce
the Resorts Division's sales and marketing expenses, as a percentage of sales,
over time by targeting more potential buyers through its Resorts Division
database system and through lead generation assistance and cross-marketing and
selling from the Residential Land Division.
ACQUISITIONS OF TIMESHARE RESORT ASSETS
The Company intends to continue to grow the Resorts Division through
acquisitions in destinations that will complement the Company's current resort
locations. Because the timeshare industry is highly fragmented, the Company
believes that significant opportunities exist to make selected acquisitions at
attractive valuations. Acquisitions the Company may consider include acquiring
additional Timeshare Interest inventory, operating companies, management
contracts, Timeshare Interest mortgage portfolios and properties or other
timeshare-related assets which may be integrated into the Company's operations.
FOCUS ON RESIDENTIAL LAND BUSINESS CORE MARKETS
The Company intends to continue to focus the Residential Land Division on
those regions where the market for its products is strongest, such as the
Southeast, Southwest, Rocky Mountain and Western regions of the United States
and to replenish its residential land inventory in such regions as existing
projects are sold-out. The Company believes that its in-depth knowledge of these
markets, together with the current strong economic growth and favorable
demographic trends in these regions, will enable it to continue to maintain
favorable operating margins and cash flows.
DEVELOPMENT OF POINTS-BASED VACATION CLUB SYSTEM
The Company intends to expand the points-based vacation club system that it
acquired in the RDI Acquisition. The Company's objective in expanding its
points-based vacation club system is to create, in conjunction with its
participation in worldwide timeshare exchange networks, a Bluegreen timeshare
system that maximizes the vacation flexibility of its current and prospective
Timeshare Interest owners.
INTERNATIONAL EXPANSION
The Company intends to selectively add timeshare resort locations in areas
outside the United States. Through the Aruba Transaction, the Company has
obtained Timeshare Interest inventory in the Caribbean. The Company intends to
continue to focus on the Caribbean region, as well as Central and South America,
as possible locations for additional resort properties.
GOLF COURSE DEVELOPMENT
In fiscal 1997, the Company began construction of its first 27 hole
daily-fee golf course as part of its long-term strategy to participate in the
growing daily-fee golf market. Management believes that the demographics
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of this market are similar to those of the Company's Residential Land Division.
As a result, management believes that daily-fee golf courses are an attractive
amenity that will increase the marketability of the Company's adjacent
residential lots in certain projects.
CROSS UTILIZATION OF DATABASES
The Company intends to cross-utilize information contained in its
Residential Land Division and Resorts Division databases. Because the
Residential Land and Resorts Divisions target similar geographic markets and
demographics classes, the Company believes that such cross-utilization will
significantly enhance its sales and marketing efforts for each division.
INDUSTRY OVERVIEWS
Resorts Division
The Market. The resort component of the leisure industry is serviced
primarily by two separate alternatives for overnight accommodations: commercial
lodging establishments and timeshare resorts. Commercial lodging consists
principally of hotels and motels in which a room is rented on a nightly, weekly
or monthly basis for the duration of the visit or rentals of privately-owned
condominium units or homes. For many vacationers, particularly those with
families, a lengthy stay at a quality commercial lodging establishment can be
expensive, and the space provided to such vacationers by these establishments
relative to the cost is often not economical. In addition, room rates at
commercial lodging establishments are subject to change periodically and
availability is often uncertain. The Company believes that Timeshare Interest
ownership presents an attractive vacation alternative to commercial lodging.
First introduced in Europe in the mid-1960's, Timeshare Interest ownership
has been one of the fastest growing segments of the hospitality industry over
the past two decades. According to ARDA, timeshare industry sales and the number
of Timeshare Interest owners have grown at compound annual rates of
approximately 16% and 22%, respectively, from 1980 to 1997 (see charts below).
(Timeshare Graphs)
Source: ARDA (includes, with respect to 1995, 1996 and 1997, unpublished
estimates provided by ARDA)
The Company believes that, based on ARDA reports and other industry data,
the following factors have contributed to the increased acceptance of the
timeshare concept among the general public and the substantial growth of the
timeshare industry:
- Consumer awareness of the value and benefits of Timeshare Interest
ownership, including the cost savings relative to other lodging
alternatives;
- Flexibility of Timeshare Interest ownership due to the growth of
international exchange organizations such as II and RCI and points-based
vacation club systems;
- The quality of the timeshare resorts and their management;
- Consumer confidence resulting from consumer protection regulation of the
timeshare industry and an influx of brand name national lodging companies
to the timeshare industry; and
- Availability of consumer financing for purchasers of Timeshare Interests.
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The timeshare industry traditionally has been highly fragmented and
dominated by a large number of local and regional resort developers and
operators, each with small resort portfolios generally of differing quality. The
Company believes that one of the most significant factors contributing to the
current success of the timeshare industry is the entry into the market of some
of the world's major lodging, hospitality and entertainment companies, such as
Marriott, Disney, Hilton, Hyatt, Four Seasons and Inter-Continental. Although
timeshare operations currently comprise only a small portion of these companies'
overall operations, their involvement in the timeshare industry, together with
other publicly-traded timeshare companies, has enhanced the industry's image
with the general public.
The Consumer. According to information compiled by ARDA, customers in the
40-55 year age range represented approximately 45.1% of all Timeshare Interest
owners in 1997. During the past two years, the median age of a Timeshare
Interest buyer at the time of purchase was 48. The median annual household
income of current Timeshare Interest owners in the United States is
approximately $71,000, with approximately 24% of all Timeshare Interest owners
having annual household incomes greater than $100,000 and approximately 12% of
such owners having annual household incomes greater than $125,000. The Company
believes that, despite the industry's growth, Timeshare Interest ownership has
achieved only an approximate 5% market penetration among United States
households with incomes above $50,000 per year.
Timeshare Interest Ownership. The purchase of a Timeshare Interest
typically entitles the buyer to use a fully-furnished vacation residence,
generally for a one-week period each year in perpetuity. Typically, the buyer
acquires an ownership interest in the vacation residence, which is often held as
tenant-in-common with other buyers of interests in the property.
The owners of Timeshare Interests manage the property through a non-profit
homeowners' association, which is governed by a board of directors or trustees
consisting of representatives of the developer and owners of Timeshare Interests
at the resort. The board hires a management company to which it delegates many
of the rights and responsibilities of the homeowners' association, including
grounds landscaping, security, housekeeping and operating supplies, garbage
collection, utilities, insurance, laundry and repairs and maintenance.
Each Timeshare Interest owner is required to pay the homeowners'
association a share of all costs of maintaining the property. These charges can
consist of an annual maintenance fee plus applicable real estate taxes and
special assessments, assessed on an as-needed basis. If the Timeshare Interest
owner does not pay such charges, such owner's use rights may be suspended and
the homeowners' association may foreclose on the owner's Timeshare Interest.
Participation in Timeshare Interest Exchange Networks. The Company
believes that its Timeshare Interests are made more attractive by the Company's
affiliation with Timeshare Interest exchange networks operated by II and RCI,
the two largest worldwide, timeshare exchange companies. Six of the Company's
timeshare resorts (including the Aruba Resort) are affiliated with II and have
been awarded II's highest designation (five stars), while the two resorts
acquired in the RDI Acquisition are affiliated with RCI. A Timeshare Interest
owner's participation in the II or RCI exchange network (the fee for which is
paid by the Company in the first year of such owner's participation) allows such
owner to exchange his annual Timeshare Interest for occupancy at over 1,500
participating resorts in the case of II and over 3,200 participating resorts in
the case of RCI, based upon availability and the payment of a variable exchange
fee. A member may exchange his Timeshare Interest for an occupancy right in
another participating resort by listing his Timeshare Interest as available with
the exchange organization and by requesting occupancy at another participating
resort, indicating the particular resort or geographic area to which the member
desires to travel, the size of the unit desired and the period during which
occupancy is desired. The exchange network assigns ratings to each listed
Timeshare Interest, based upon a number of factors, including the location and
size of the unit, the quality of the resort and the period during which the
Timeshare Interest is available, and attempts to satisfy the exchange request by
providing an occupancy right in another Timeshare Interest with a similar
rating. If the exchange network is unable to meet the member's initial request,
it suggests alternative resorts based on availability. The failure of the
Company to participate in qualified exchange networks or the failure of such
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networks to operate effectively could have a material adverse effect on the
Company. See "Risk Factors -- Risks Associated with Timeshare Interest Exchange
Networks."
Residential Land Division
The Residential Land Division operates within a specialized niche of the
real estate industry which focuses on the sale of residential land to retail
customers who intend to build a home on such land at some point in the future.
The participants in this market niche are generally individual landowners who
are selling specific parcels of property and small developers who focus
primarily on projects in their region. Although no specific data is available
regarding this market niche, the Company believes that no other company in the
United States of comparable size or financial resources currently markets and
sells residential land to retail customers.
Unlike commercial homebuilders who focus on vertical development, the
Residential Land Division focuses primarily on horizontal development
activities, such as grading, roads and utilities. As a result, the projects
undertaken by the Company and other participants in this market niche are
significantly less capital intensive than those undertaken by the commercial
homebuilders, which reduces the Company's risk of holding a large inventory of
property. In addition, the Company believes that, through its financial and
marketing resources, it is able to acquire properties in attractive locations
throughout the United States on a cost-effective basis thereby enabling the
Company's projects to achieve desired cash flows and targeted gross margins. The
Company's market niche is also the beneficiary of a number of trends, including
the large number of people entering into the 40-55 year age bracket and the
economic and population growth in certain of its primary markets.
RECENT ACQUISITIONS
Effective September 30, 1997, the Company consummated the RDI Acquisition.
RDI owns and operates timeshare projects located in Orlando, Florida (the
"Orlando Resort") and Wisconsin Dells, Wisconsin (the "Wisconsin Resort") and
provides management services to 31 other vacation ownership resorts. Although
all the existing Timeshare Interests at the Orlando Resort have been sold, the
Company plans to develop and market an additional 2,496 Timeshare Interests at
this property. As of December 28, 1997, the Wisconsin Resort consisted of 960
unsold Timeshare Interests. The amenities at the Wisconsin Resort include an
18-hole golf course and seven ski trails serviced by two chair lifts. The
Company plans to add nine more holes to the golf course, continue expanding the
Wisconsin Resort and develop land located on the property for sale by the
Residential Land Division. The purchase price for RDI was $7.5 million, of which
$6.0 million was paid in cash and $1.5 million was paid in the form of a
promissory note bearing interest at 9% per annum. The RDI Acquisition was
accounted for using the purchase method of accounting. No goodwill was recorded
by the Company as a result of the RDI Acquisition. See "Description of Other
Indebtedness" for a description of the indebtedness incurred by the Company to
finance the RDI Acquisition.
In connection with the RDI Acquisition, the Company (a) was granted an
option (the "Amclub Option") to acquire the capital stock or assets of AmClub,
Inc. ("AmClub"), a corporation owned by Jeffrey J. Keim, Randy Keim and David
Bidgood (collectively, the "RDI Stockholders"), which owns a timeshare resort in
Virginia known as Shenandoah Crossing Farm & Club (the "Virginia Resort"), and
(b) agreed to indemnify the RDI Stockholders from any obligations in respect of
guarantees executed by the RDI Stockholders of indebtedness of RDI and its
affiliates (including indebtedness of AmClub). Although all AmClub indebtedness
covered by such guarantees is collateralized by notes receivable, there can be
no assurance that the Company will not be required to make payments with respect
to such indemnification obligation. Pursuant to the AmClub Option the exercise
price for the purchase of AmClub's capital stock is $10,000, while the exercise
price for any assets of AmClub is equal to the fair market value of such assets
at the time of exercise. As of December 28, 1997, AmClub's total liabilities
were $14.0 million, and the total indebtedness guaranteed by the Company was
$2.7 million. The Company manages the Virginia Resort through RDI. The Company
has lent AmClub $300,000 for working capital purposes pursuant to 8% promissory
notes due April 30, 1998. AmClub's liabilities include approximately $4.4 owed
to a financial institution which has a mortgage on the Virginia Resort (the
"AmClub Senior Lender"). The Company and
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the AmClub Senior Lender have agreed in principle, subject to certain
conditions, to certain arrangements pursuant to which, among other things, (i)
the debt owed to the AmClub Senior Lender would cease to accrue interest, (ii)
the Company would lend up to $1 million to AmClub to fund the completion of
certain capital improvements, such loan to bear interest at the prime rate plus
1% and be secured by a mortgage on the Virginia Resort (the "Bluegreen Loan"),
(iii) the Company would market approximately ninety residential lots at the
Virginia Resort, with the Company receiving 55% of the net sales proceeds to
compensate it for its services and the remaining 45% to be paid to the Company
until the Bluegreen Loan has been paid in full, at which time such 45% of net
sales proceeds will be paid to the AmClub Senior Lender to repay indebtedness,
(iv) the Company would use its best efforts to sell certain other property at
the Virginia Resort and (v) the Company would have the option to repay the debt
owed to the AmClub Senior Lender with a lump sum cash payment reflecting a
specified discount on the outstanding balance owed. No assurances can be given
that the proposed arrangements will be consummated on these terms, if at all, or
that the Company's arrangements with respect to AmClub will be profitable.
In December 1997, the Company invested $250,000 of capital in BG Aruba in
exchange for a fifty percent equity interest. Concurrently, the Company and an
affiliate of the individual who owns the remaining equity interest in BG Aruba
each lent $3 million to BG Aruba. The loans are evidenced by promissory notes
due on December 15, 2000 and bearing interest at the prime rate plus 1%. BG
Aruba then acquired from a third party the unsold Timeshare Interest inventory
(approximately 8,000 Timeshare Interests) at the Aruba Resort (the "Aruba
Transaction"). Established in 1989, the Aruba Resort is a 449-suite ocean front
property which offers one, two and three-bedroom suites, garden suites and
penthouse accommodations. The purchase price for the Aruba Resort's timeshare
inventory was $6 million in cash and the assumption of approximately $16.6
million of indebtedness owed by the seller to a bank in Aruba. The indebtedness
is not guaranteed by Bluegreen or any of its wholly-owned subsidiaries. An
affiliate of the seller in the Aruba Transaction is responsible for the payment
of all interest on the indebtedness. BG Aruba recorded this indebtedness net of
imputed interest using a 12% discount rate. The debt is to be repaid over five
years from the release prices as Timeshare Interests are sold; BG Aruba will be
required to pay approximately 32% of the sales price of each Timeshare Interest
to the bank, subject to minimum monthly payments of approximately $278,000. See
"Description of Other Indebtedness." Under the terms of its agreement with its
joint venture partner, BG Aruba pays to the Company a quarterly management fee
equal to 7% of the net sales price (as defined) of Timeshare Interests (less any
discounts or incentives) sold by BG Aruba during the quarter for certain
management services performed for BG Aruba by the Company. After making minimum
principal payments (more fully described in "Description of Other Indebtedness")
and payment of the quarterly management fee, BG Aruba distributes cash flow from
operations, after deducting specified reserves, to the shareholders in
proportion to their equity interests. The shareholder agreement between the
Company and the individual who owns the remaining equity interest in BG Aruba
provides that the Company shall have majority control of BG Aruba's Board of
Directors and places certain restrictions on the transfer of equity interests in
BG Aruba. Due to its controlling financial interest in BG Aruba, the Company has
included BG Aruba in its consolidated financial statements as of December 28,
1997. See "Description of Other Indebtedness."
COMPANY PRODUCTS
Timeshare Resorts
Set forth below is a description of each of the Company's timeshare
resorts. All units at each of the properties have certain standard amenities,
including a full kitchen, at least two televisions, a VCR player and a CD
player. Some units have additional amenities, such as larger televisions and
game systems. Each property offers guests a clubhouse (with an indoor/outdoor
pool, a game room, exercise facilities and a lounge) and a hotel-type staff. The
Company manages each resort other than the Aruba Resort.
MountainLoft Resort -- Gatlinburg, Tennessee. The MountainLoft Resort in
Gatlinburg, Tennessee is located near the Great Smoky Mountains National Park
and is minutes from the family attractions of Pigeon Forge, Tennessee. Units are
located in individual chalets or mid-rise villa buildings. Each unit is fully
furnished with a whirlpool bath and private balconies, and certain units include
gas fireplaces.
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Laurel Crest -- Pigeon Forge, Tennessee. Laurel Crest is located in
proximity to the Great Smoky Mountains National Park and the Dollywood theme
park. In addition, visitors to Pigeon Forge can enjoy over 200 factory outlet
stores and music shows featuring renowned country music stars as well as partake
in a variety of outdoor activities, such as horseback riding, trout fishing,
boating, golfing and white water rafting.
Shore Crest Vacation Villas -- Myrtle Beach, South Carolina. Shore Crest
Vacation Villas is located on the beach in the Windy Hill section of North
Myrtle Beach a mile from the famous Barefoot Landing, with its restaurants,
theaters, shops and outlet stores.
Harbour Lights -- Myrtle Beach, South Carolina. Harbour Lights is located
in the Fantasy Harbour Complex in the center of Myrtle Beach. Nearby are Theater
Row, shopping, golf and restaurants. The resort's Activities Center overlooks
the Intracoastal Waterway.
The Falls Village -- Branson, Missouri. The Falls Village is located in
the Ozark Mountains. Fishing, boating and swimming are available at nearby Table
Rock Lake and Lake Taneycomo, and area theaters feature shows by country music
stars. Most customers of the resort come from areas within an eight to ten hour
drive of Branson.
Christmas Mountain -- Wisconsin Dells, Wisconsin. The Company acquired the
Christmas Mountain resort as part of the RDI Acquisition. Christmas Mountain
offers an 18-hole golf course and seven ski trails served by two chair lifts.
Other on-site amenities include horseback riding, tennis courts, a five-acre
lake with paddleboats and rowboats and four outdoor swimming pools. Christmas
Mountain attracts customers primarily from the greater Chicago area and other
locations within an eight to ten hour drive of Wisconsin Dells.
Orlando Sunshine -- Orlando, Florida. Orlando Sunshine was also acquired
as part of the RDI Acquisition. The resort is located on International Drive,
near Wet'n'Wild water park and Universal Studios.
La Cabana All Suite Beach Resort & Racquet Club -- Aruba, Dutch
Caribbean. BG Aruba acquired the unsold Timeshare Interest inventory of the
Aruba Resort (approximately 8,000 Timeshare Interests) in December 1997.
Established in 1989, the Aruba Resort is a 449-suite ocean front property which
offers one, two and three bedroom suites, garden suites and penthouse
accommodations. On-site amenities include tennis, racquetball, squash, casino,
two pools and private beach cabanas, none of which are owned or managed by the
Company.
The following table sets forth additional data with respect to each of the
properties managed under the Resorts Division.
<TABLE>
<CAPTION>
ORLANDO
SHORE CREST HARBOUR THE FALLS CHRISTMAS SUNSHINE
MOUNTAINLOFT LAUREL CREST MYRTLE LIGHTS VILLAGE MOUNTAIN(1) (1)
GATLINBURG, PIGEON FORGE, BEACH, MYRTLE BEACH, BRANSON, WISCONSIN ORLANDO,
LOCATION TN TN SC SC MO DELLS, WI FL
- -------- ------------ ------------- ----------- ------------- --------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Date sales commenced.......... 7/94 8/95 4/96 6/97 7/97 9/97 --
Number of Timeshare Interests
completed as of December 28,
1997 (3).................... 7,540 4,160 5,928 -- 1,535 1,137 --
Number of Timeshare Interests
under construction as of
December 28, 1997 (3)....... 1,040 1,664 -- 3,744 1,248 204 --
Number of additional Timeshare
Interests planned (3)(4).... 4,332 6,067 5,160 11,091 15,261 8,906 2,496
Average Timeshare Interests
selling price through
December 28, 1997........... $8,691 $8,509 $10,042 $ 7,990 $ 7,968 $8,093 $10,000(5)
Number of Timeshare Interests
sold through December 28,
1997........................ 3,788 2,642 2,554 617 587 177 --
<CAPTION>
LACABANA
RESORT(2)
LOCATION ARUBA
- -------- ----------
<S> <C>
Date sales commenced.......... 1/98
Number of Timeshare Interests
completed as of December 28,
1997 (3).................... 8,030
Number of Timeshare Interests
under construction as of
December 28, 1997 (3)....... --
Number of additional Timeshare
Interests planned (3)(4).... --
Average Timeshare Interests
selling price through
December 28, 1997........... $10,000(5)
Number of Timeshare Interests
sold through December 28,
1997........................ --
</TABLE>
- ---------------
(1) Acquired by the Company in the RDI Acquisition. See "-- Recent
Acquisitions."
(2) BG Aruba acquired unsold Timeshare Interests inventory at this resort in
December, 1997. See "-- Recent Acquisitions."
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<PAGE> 65
(3) The number of Timeshare Interests completed, under construction or planned
are intended to be sold in 52 weekly intervals.
(4) There can be no assurance that the Company will have the resources to
complete all such planned Timeshare Interests or that such Timeshare
Interests will be sold at favorable prices.
(5) Anticipated average selling prices once sales commence.
Certain Residential Land Projects
Set forth below is a description of the four largest projects currently
marketed by the Residential Land Division, which are representative of the types
of projects that the Company has been focusing on since 1993. These properties
represented 48.7% of the Residential Land Division's estimated remaining
life-of-project sales at December 28, 1997.
River Mountain Ranch -- San Antonio, Texas. The Company acquired 3,600
acres located approximately 35 miles outside of San Antonio, Texas in fiscal
1997 for $6.5 million. The property features frontage along the Guadalupe River
and is characteristic of the Texas Hill Country with its rolling meadows and
mature trees. The property also includes private river parks for picnics and
outings. The project includes 608 lots, with most ranging in size from three to
five acres. The Company began selling lots in October 1996 and aggregate sales
through December 28, 1997 were $14.4 million. Aggregate development costs
through December 28, 1997 were $4.1 million and the Company anticipates that the
remaining capital expenditures for the project will be $1.9 million. The Company
anticipates that the remaining lots will be sold-out over the next year.
Winding River Plantation -- Southport, North Carolina. The Company
acquired approximately 1,300 acres located near Southport, North Carolina (and
between Myrtle Beach, South Carolina and Wilmington, North Carolina) for $3.4
million in fiscal 1997. The property has frontage along the Lockwood Folly
River, a navigable waterway that leads to the Intercoastal Waterway and the
Atlantic Ocean. The project will include river amenities, a beach club and
tennis courts. In addition, the project is the site of the Company's first
daily-fee golf course, which opened for limited play in November 1997 and was
developed by Masters Champion Fred Couples. The Company anticipates that the
project will consist of a total of approximately 1,000 lots, which average
approximately one acre. The Company began selling lots in February 1997, and
aggregate sales through December 28, 1997 were $9.2 million. Aggregate
development costs through December 28, 1997 were $10.9 million and the Company
anticipates that the aggregate capital expenditures to complete development at
the project will be $13.4 million. The Company anticipates that the remaining
lots will be sold-out over the next four years.
Lake Ridge at Joe Pool Lake -- Cedar Hill, Texas. The Company acquired
1,400 acres located approximately 19 miles outside of Dallas, Texas and 30 miles
outside of Fort Worth, Texas in April 1994 for $6.1 million. The property is
located at Joe Pool Lake and is atop the highest elevation within 100 miles. The
lake has in excess of 7,500 acres of water for boating, fishing, windsurfing and
other water activities. Adjacent amenities (not owned or managed by the Company)
include a 154 acre park with baseball, football and soccer fields, a fishing
pool with a pier, camping areas and an 18-hole golf course. The project includes
252 lots, with most ranging in size from 1/4 to five acres and 399 acres
available for future development. The Company began selling lots in April 1994
and aggregate sales through December 28, 1997 were $25.1 million. Aggregate
development costs through December 28, 1997 were $11.7 million and the Company
anticipates that the remaining capital expenditures will be $10 million. The
Company anticipates that unsold lots will be sold-out over the next two years.
Crossroads Ranch -- Prescott, Arizona. The Company acquired 6,500 acres
located 20 miles north of Prescott, Arizona in July 1995 for $6.0 million. The
property has elevations ranging from 4,600 to 5,600 feet and a four-season
climate. The terrain includes pasture lands with seasonal creeks and rolling
hills. The property is 95 miles north of Phoenix and Scottsdale, approximately
2 1/2 hours south of the Grand Canyon and approximately one hour away from
Sedona. The Company anticipates that the project will include 153 lots, each
averaging 36 acres, and 26 lots, each averaging five acres. The Company provided
gravel roads and trails for hiking and horseback riding. Electric service was
installed underground so that utility poles would not spoil
58
<PAGE> 66
the views. The Company also created deed restrictions designed to ensure that
future development on the property is compatible with the land's ranch
character. The Company began selling lots in January 1996 and aggregate sales
through December 28, 1997 were $17.3 million. Aggregate development costs
through December 28, 1997 were $5.1 million and the Company anticipates that the
remaining capital expenditures will be $2.0 million. The Company anticipates
that the unsold lots will be sold-out over the next year.
ACQUISITION OF TIMESHARE AND RESIDENTIAL LAND INVENTORY
In order to provide centralized and uniform controls on the type, location
and amount of timeshare and residential land inventory that the Company
acquires, all such inventory acquisitions have required the approval of the
Investment Committee since 1990. The Investment Committee consists of George F.
Donovan, President and Chief Executive Officer; John F. Chiste, Treasurer and
Chief Financial Officer; Patrick E. Rondeau, Senior Vice President, Director of
Legal Affairs; L. Nicolas Gray, Senior Vice President -- Resorts Division; and
Daniel C. Koscher, Senior Vice President -- Residential Land Division. The
Investment Committee reviews each proposed inventory acquisition to determine
whether the property meets certain criteria, including estimated cash flows and
gross profit margins.
Resorts Division
The Company obtains information with respect to resort acquisition
opportunities through interaction by the Company's management team with resort
operators, lodging companies and financial institutions with which the Company
has established business relationships. The four resorts acquired and directly
developed by the Company (the Tennessee and South Carolina resorts) were
specifically designed and built for timeshare use to appeal to the Company's
targeted customers. Prior to acquiring property for future resorts, the Resorts
Division undertakes a full property review, including an environmental
assessment, which is presented to the Investment Committee for approval. During
the review process, acquisition specialists analyze market, tourism and
demographic data as well as the quality and diversity of the location's existing
amenities and attractions to determine the potential strength of the timeshare
market in such area and the availability of a variety of recreational
opportunities for prospective Timeshare Interest purchasers. Specifically, the
Company evaluates the following factors, among others, to determine the
viability of a potential new timeshare resort: (i) supply/demand ratio for
Timeshare Interests in the relevant market, (ii) the market's growth as a
vacation destination, (iii) competitive accommodation alternatives in the
market, (iv) uniqueness of location, and (v) barriers to entry that would limit
competition. The Company anticipates that its timeshare resorts will generally
have a sell-out term of approximately seven years.
During fiscal 1998, the Company acquired the land and began development of
its Harbour Lights Resort in Myrtle Beach, South Carolina, acquired The Falls
Village Resort in Branson, Missouri and consummated the RDI Acquisition and the
Aruba Transaction. As a result of these transactions, the Company's Timeshare
Interest inventory increased from 9,935 unsold Timeshare Interests as of March
30, 1997 to 19,659 unsold Timeshare Interests as of December 28, 1997, an
increase of 97.9%. See "-- Recent Acquisitions."
The Company intends to continue to pursue growth by expanding or
supplementing the Company's existing resorts operations through acquisitions in
destinations that will complement such existing operations. Because the
timeshare industry is highly fragmented, the Company believes that significant
opportunities exist to make selected acquisitions at attractive valuations.
Acquisitions the Company may consider include acquiring additional Timeshare
Interest inventory, operating companies, management contracts, Timeshare
Interest mortgage portfolios and properties or other timeshare-related assets
which may be integrated into the Company's operations. In addition, the Company
intends to continue to pursue timeshare resort locations in areas outside the
United States, particularly in the Caribbean, as well as Central and South
America. No assurances can be given that the Company will be successful in its
acquisition strategy. See "Risk Factors -- Acquisition Strategy."
59
<PAGE> 67
Residential Land Division
The Residential Land Division, through the Company's regional offices, and
subject to Investment Committee review and approval, typically acquires
inventory that (i) is located near a major population center outside the
perimeter of intense subdivision development or in popular retirement areas,
(ii) is suitable for subdivision, (iii) has attractive topographical features
and (iv) the Company believes will result in an acceptable profit margin and
cash flow to the Company based upon anticipated retail value. Properties are
generally subdivided for resale into parcels typically ranging in size from two
to five acres. During the nine-month period ended December 28, 1997, the Company
acquired 3,082 acres in nine separate transactions for a total purchase price of
approximately $9.5 million, or $3,090 per acre, and during fiscal 1997, the
Company acquired 19,254 acres in 23 separate transactions for a total purchase
price of $29.7 million, or $1,541 per acre. Seller, bank or similar financial
institution financing of $4.9 million, or 52% of the $9.5 million total purchase
price, was obtained with respect to purchases during the nine-month period ended
December 28, 1997, and $15.0 million, or 51% of the $29.7 million total purchase
price, was obtained with respect to purchases during fiscal 1997.
In connection with its review of potential residential land inventory, the
Investment Committee considers such established criteria as the economic
conditions in the area in which the parcel is located, environmental
sensitivity, availability of financing, whether the property is consistent with
the Company's general policies and the anticipated ability of that property to
produce acceptable profit margins and cash flow. As part of its long-term
strategy for the Residential Land Division, the Company in recent years has
focused on fewer, more capital-intensive projects. The Company intends to
continue to focus the Residential Land Division on those regions where the
Company believes the market for its products is strongest, such as the
Southeast, Southwest, Rocky Mountain and Western regions of the United States
and to replenish its residential land inventory in such regions as existing
projects are sold-out.
The Residential Land Division has several specialists who assist regional
management in locating inventory for acquisition. The Company has established
contacts with numerous land owners and real estate brokers in many of its market
areas, and because of such contacts and its long history of acquiring
properties, the Company believes that it is generally in a favorable position to
learn of available properties, often before the availability of such properties
is publicly known. In order to ensure such access, the Company attempts to
develop and maintain strong relationships with major property owners and
brokers. Regional offices regularly contact property owners, such as timber
companies, financial institutions and real estate brokers, by a combination of
telephone, mail and personal visits. In addition, prior to acquiring property in
new areas, the Company will conduct test marketing for a prospective project
prior to entering into an acquisition agreement to determine whether sufficient
customer demand exists for the project. To date, the Company's regional offices
generally have been able to locate and acquire adequate quantities of inventory
which meet the criteria established by the Investment Committee to support their
operational activities. In certain cases, however, the Company has experienced
short-term shortages of ready-for-sale inventory due to either difficulties in
acquiring property or delays in the approval and/or development process.
Shortfalls in ready-for-sale inventory may materially adversely affect the
Company's business, operating results and financial condition. See "Risk
Factors -- Acquisition Strategy" and "-- Risks Related to Development
Activities."
Once a desirable property is identified, the Company completes its initial
due diligence procedures and enters into a purchase agreement with the seller to
acquire the property. It is generally the Company's policy to advance only a
small downpayment of 1%-3% of the purchase price upon signing the purchase
agreement and to limit the liquidated damages associated with such purchase
agreement to the amount of its downpayment and any preliminary development
costs. In most cases, the Company is not required to advance the full purchase
price or enter into a note payable obligation until regulatory approvals for the
subdivision and sale of at least the initial phase of the project have been
obtained. While local approvals are being sought, the Company typically engages
in pre-marketing techniques and, with the consent of the seller and the
knowledge of prospective purchasers, occasionally attempt to pre-sell parcels,
subject to closing its purchase of the property. When the necessary regulatory
approvals have been received, the closing on the property occurs and the Company
obtains title to the property. The time between execution of a purchase
agreement and closing on a property has generally been six to 12 months.
Although the Company generally retains the right to cancel
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<PAGE> 68
purchase agreements without any loss beyond forfeiture of the downpayment and
preliminary development costs, few purchase agreements have been canceled
historically.
By requiring, in most cases, that regulatory approvals be obtained prior to
closing and by making small downpayments upon signing purchase agreements, the
Company is typically able to place a number of properties under contract without
expending significant amounts of cash. This strategy enables the Residential
Land Division to reduce (i) the time during which it actually owns specific
properties, (ii) the market risk associated with holding such properties and
(iii) the risk of acquiring properties that may not be suitable for sale. It
also provides the Residential Land Division an additional source of available
properties to meet customer demand. In certain circumstances, however, the
Company has acquired properties and then held such properties until their prime
marketing seasons.
Prior to closing on a purchase of residential land, the Company's policy is
to complete its own environmental assessment of the property. The purpose of the
Company's assessment is to evaluate the impact the proposed subdivision will
have on such items as flora and fauna, wetlands, endangered species, open space,
scenic vistas, recreation, transportation and community growth and character. To
obtain this information, the Company's acquisition specialists typically consult
with various groups and agencies including the appropriate county and state
planning agencies, environmental groups, state heritage programs, soil
conservation agencies and forestry groups. If the Company's environmental
assessment indicates that the proposed subdivision meets environmental criteria
and complies with zoning, building, health and other laws, the Company develops
a formal land use plan, which forms a basis for determining an appropriate
acquisition price. The Company attempts, where possible, to accommodate the
existing topographical features of the land, such as streams, hills, wooded
areas, stone walls, farm buildings and roads. Prior to closing on an
acquisition, the Company will typically have the property surveyed by a
professional surveyor and have soil analyses conducted to determine the
suitability of the site for septic systems. At closing, the Company also obtains
title insurance on the property.
MARKETING AND SALE OF INVENTORY
Resorts Division
The Resorts Division utilizes a variety of techniques to attract
prospective purchasers of Timeshare Interests, including targeted mailings,
direct mail mini-vacation invitations, kiosks in retail locations, marketing to
current owners and referrals. The Resorts Division provides hotel accommodations
to prospective purchasers at reduced prices in exchange for their touring the
timeshare resort. To support its marketing and sales efforts, the Company has
developed and continues to enhance its database to track its timeshare marketing
and sales programs. Management believes that, as the Resort Division's timeshare
operations grow, this database will become an increasingly significant asset,
enabling the Company to focus its marketing and sales efforts to take advantage
of, among other things, less costly marketing and referral opportunities.
Timeshare resorts are staffed with sales representatives, sales managers and an
on-site manager who oversees the day-to-day operations, all of whom are
employees of the Company. Sales personnel are generally experienced in resort
sales and undergo ongoing Company-sponsored training. During the nine-month
period ended December 28, 1997, total advertising expense for the Resorts
Division was $10.1 million or 25.5% of the division's $39.9 million in sales,
and during fiscal 1997, total advertising expense for the Resorts Division was
$7.6 million or 28% of such division's $27.4 million in sales.
The Company requires its sales staff to provide each timeshare customer
with a written disclosure statement regarding the Timeshare Interest to be sold
prior to the time the customer signs a purchase agreement. This disclosure
statement sets forth relevant information regarding timeshare ownership at the
resort and must be signed by every purchaser. The Company believes that this
information statement contains all material and relevant information a customer
requires to make an informed decision as to whether or not to purchase a
Timeshare Interest at one of its resorts.
After deciding to purchase a Timeshare Interest, a purchaser enters into a
purchase agreement and is required to pay the Company a deposit of at least 10%
of the purchase price. Purchasers are entitled to cancel
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<PAGE> 69
purchase agreements within specified periods after execution in accordance with
statutory requirements. Substantially all timeshare purchasers visit the resort
prior to purchasing.
The Company intends to expand the points-based vacation club system that it
acquired in the RDI Acquisition, which is currently only available to owners of
Timeshare Interests at the Company's Wisconsin Dells, Wisconsin and Orlando,
Florida resorts. Under a points-based vacation club system, members purchase an
annual allotment of points which can be redeemed for occupancy rights at
participating resorts. Compared to other vacation ownership arrangements, the
points-based system offers members significant flexibility in planning their
vacations. The number of points that are required for a stay at any one resort
varies, depending on a variety of factors, including the resort location, the
size of a unit, the vacation season and the days of the week used. Under this
system, members can select vacations according to their schedules, space needs
and available points. Subject to certain restrictions, members are typically
allowed to carry over for one year any unused points and to "borrow" points from
the forthcoming year. In addition, members are required to pay annual fees for
certain maintenance and management costs associated with the operation of the
resorts based on the number of points to which they are entitled. The Company's
expansion of the RDI points-based vacation club system involves certain risks
and uncertainties and no assurances can be given that the Company will be
successful. See "Risk Factors -- Acquisition Strategy", "-- Risks Related to
Development Activities" and "-- Risks of Development of Points-Based Vacation
Club".
The attractiveness of Timeshare Interest ownership has been enhanced
significantly by the availability of exchange networks that allow Timeshare
Interest owners to exchange the occupancy right in their Timeshare Interest in a
particular year, for an occupancy right at another participating network resort
at either the same or a different time. The two resorts acquired in the RDI
Acquisition are affiliated with the timeshare exchange network operated by RCI,
while the Company's six other resorts (including Aruba) are affiliated with II's
timeshare exchange network. In connection with the RDI Acquisition, the Company
has advised each of II and RCI of the existence of its agreement with the other
timeshare interest exchange network and of the potential conflict. Although the
Company believes this conflict will be resolved satisfactorily, no assurances
can be given. If the Company's resorts ceased to qualify for the exchange
networks or such networks ceased to operate effectively, the Company's sales of
Timeshare Interests and the performance of its timeshare receivables could be
materially adversely affected. See "Risk Factors -- Dependence on Timeshare
Interest Exchange Networks."
The following table sets forth certain information for sales of Timeshare
Interests by the Resorts Division for the periods indicated. Certain sales have
been deferred under percentage of completion accounting. See Contracts
Receivable and Revenue Recognition under Note 1 to the Consolidated Financial
Statements.
<TABLE>
<CAPTION>
YEAR ENDED, NINE MONTHS ENDED,
-------------------------------- ---------------------------
APRIL 2, MARCH 31, MARCH 30, DECEMBER 29, DECEMBER 28,
1995 1996 1997 1996 1997
-------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Number of Timeshare Interests sold......... 952 1,865 3,195 2,579 4,903
Average sales price per Timeshare
Interest................................. $7,119 $7,325 $8,362 $8,342 $8,695
Gross margin(1)............................ 62% 67% 71% 70% 74%
</TABLE>
- ---------------
(1) Gross margin is computed as the difference between the sales price and the
related cost of inventory (including the cost of improvements, amenities and
in certain cases capitalized interest), divided by the sales price.
For further information on sales attributable to the Resorts Division, see
"Management's Discussion and Analysis of Results of Operations and Financial
Condition."
Residential Land Division
In general, as soon as practicable after agreeing to acquire a property and
during the time period that appropriate improvements are being completed, the
Company establishes selling prices for the individual parcels taking into
account such matters as regional economic conditions, quality as a building
site, scenic views, road frontage and natural features such as lakes, mountains,
streams, ponds and wooded areas. The
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<PAGE> 70
Company also considers recent sales of comparable parcels in the area. Initial
decisions on pricing of parcels in a given area are made by the Company's
regional managers and, in all cases, are subject to approval by the Investment
Committee. Once such selling prices are established the Company commences its
marketing efforts.
The most widely used marketing technique by the Residential Land Division
is advertising in major newspapers in metropolitan areas located within a one to
three hour drive from the property and local newspapers. In addition, the
Company uses its proprietary database and inventory management system, which
enables the Company to compile quickly information on the previously identified
prospects most likely to be interested in a particular project. The Residential
Land Division also conducts direct mail campaigns to market property through the
use of brochures describing available parcels, as well as television and radio
advertising. Through this sales and marketing program, the Company believes that
it has been able to achieve a high conversion ratio of sales to prospects
receiving on-site sales presentations. The conversion ratio of sales to
prospects receiving on-site sales presentations for the ten-month period ended
January 31, 1998 was approximately 20%. A sales representative who is
knowledgeable about the property answers each inquiry generated by the Company's
marketing efforts, discusses the property with the prospective purchaser,
attempts to ascertain the purchaser's needs and determine whether the parcel
would be suitable for that person, and arranges an appointment for the purchaser
to visit the property. Substantially all prospective purchasers inspect a
property before purchasing. During the nine-month period ended December 28,
1997, the Residential Land Division incurred $5.6 million in advertising
expenses, or 7.2% of such division's $78.8 million in sales, and during fiscal
1997, the Residential Land Division incurred $6.3 million in advertising
expense, or 9% of such division's $72.6 million in sales.
The success of the Company's marketing efforts depends heavily on the
knowledge and experience of its sales personnel. The Company requires that,
prior to initiating the marketing effort for a property, every sales
representatives walk the property and become knowledgeable about each parcel and
applicable zoning, subdivision and building code requirements. Continued
training programs are conducted, including training with regional office sales
managers, weekly sales meetings and frequent site visits by an executive officer
of the Company. The Company enhances its sales and marketing organization
through the Bluegreen Institute, a mandatory training program, which is designed
to instill the Company's marketing and customer service philosophy in middle and
lower-level management. Additionally, the sales staff is evaluated against
performance standards established by the executive officers of the Company.
Substantially all of a sales representative's compensation is commission-based.
The Company requires its sales staff to provide each prospective purchaser
with a written disclosure statement regarding the property to be sold prior to
the time such purchaser signs a purchase agreement. This information statement,
which is either in the form of a U.S. Department of Housing and Urban
Development ("HUD") lot information statement, where required, or a Company
generated "Vital Information Statement," sets forth relevant information with
respect to, and risks associated with, the property and must be signed by each
purchaser. The Company believes that these information statements contain all
material and relevant information necessary for a prospective purchaser to make
an informed decision as to whether or not to purchase such property, including
the availability and estimated cost of utilities, restrictions regarding
property usage, status of access roads and information regarding rescission
rights.
After deciding to purchase a parcel, a purchaser enters into a purchase
agreement and is required to pay the Company a deposit of at least 10% of the
purchase price. Purchasers are entitled to cancel purchase agreements within
specified periods after execution in accordance with statutory requirements. The
closing of a residential land sale usually occurs two to eight weeks after
payment of the deposit. Upon closing of a residential land sale, the Company
typically delivers a warranty deed and a recent survey of the property to the
purchaser. Title insurance is available at the purchaser's expense.
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<PAGE> 71
The table to follow sets forth certain information regarding sales of
parcels by the Residential Land Division for the periods indicated. Certain
sales have been deferred under percentage of completion accounting. See
Contracts Receivable and Revenue Recognition under Note 1 to the Consolidated
Financial Statements and "Management's Discussion and Analysis of Results of
Operations and Financial Condition."
<TABLE>
<CAPTION>
YEAR ENDED, NINE MONTHS ENDED,
-------------------------------- ---------------------------
APRIL 2, MARCH 31, MARCH 30, DECEMBER 29, DECEMBER 28,
1995 1996 1997 1996 1997
-------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Number of parcels sold.................... 2,397 2,347 2,057 1,498 1,740
Average sales price per parcel............ $30,969 $34,856 $38,572 $37,207 $47,449
Gross margin(1)........................... 57% 51% 45% 47% 48%
</TABLE>
- ---------------
(1) Gross margin is computed as the difference between the sales price and the
related cost of inventory (including the cost of improvements, amenities and
in certain cases capitalized interest), divided by the sales price.
CUSTOMER FINANCING
General
During fiscal 1995, 1996 and 1997, and the nine-month period ended December
28, 1997, the Company financed 24%, 26%, 30% and 33%, respectively, of the
aggregate purchase price of its sales of Timeshare Interests and residential
land to customers that closed during these periods and received cash for the
remaining balance of the purchase price. The increase in the percentage of sales
financed by the Company since 1995 is primarily attributable to an increase in
the sales of Timeshare Interests over the same period. Sales of Timeshare
Interests accounted for 32% of consolidated sales of real estate during the
nine-month period ended December 28, 1997, compared to 6%, 12% and 25% of
consolidated sales during fiscal 1995, 1996 and 1997, respectively.
Approximately 89% of all Timeshare Interests finance with the Company (compared
to 8% of residential land purchasers in the nine-month period ended December 28,
1997 and 14% of residential land buyers in fiscal 1997). In recent years the
percentage of residential land customers who utilized the Company's financing
has declined materially due, among other things, to an increased willingness on
the part of local banks to extend direct lot financing to purchasers.
The Company believes that its financing is attractive to purchasers who
find it convenient to handle all facets of the purchase of residential land and
Timeshare Interests through a single source and because the downpayments
required by the Company are similar to those required by banks and mortgage
companies which offer this type of credit.
The Company offers financing of up to 90% of the purchase price of its
Timeshare Interests. The typical financing extended by the Company on a
Timeshare Interest during the nine-month period ended December 28, 1997 and
fiscal 1997 provides for a term of seven years and a fixed interest rate.
Historically, at the closing, the Company and the purchaser have executed a
contract for deed agreement. After the obligation is paid in full, the Company
delivers a deed to the purchaser. RDI has historically delivered the deed to
purchasers at the Closing of a sale, while securing repayment of the purchaser's
obligation by obtaining a mortgage on the purchaser's Timeshare Interest. In
connection with the expansion of its points-based vacation club system, the
Company anticipates that it will move to a note and mortgage system. The Company
does not believe that the transfer to a note and mortgage system will have a
material adverse effect on its servicing operations or financial results.
The Company also offers financing of up to 90% of the purchase price of all
parcels sold under the Residential Land Division to all purchasers who qualify
for such financing. The term of repayment on such financing has historically
ranged from five to 15 years although the Company, by offering reduced interest
rates, has been successful in encouraging customers during recent years to
finance their purchases over shorter terms with increased downpayments.
Management believes such strategy has improved the quality of the notes
receivable generated by its Residential Land Division in recent years. An
average note receivable underwritten by the Company during fiscal 1997 and the
nine month period ended December 28, 1997 has a
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<PAGE> 72
term of ten years. Most notes receivable bear interest at a fixed interest rate
and are secured by a first lien on the land.
The weighted average interest rate on the Company's notes receivable was
12.4%, 13.3% and 15.0% at March 31, 1996, March 30, 1997 and December 28, 1997,
respectively. The table below sets forth additional information relating to the
Company's notes receivable (amounts in thousands).
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED, ENDED,
--------------------- ------------
MARCH 31, MARCH 30, DECEMBER 28,
1996 1997 1997
--------- --------- ------------
<S> <C> <C> <C>
Notes receivable secured by land............................ $26,243 $12,334 $14,675
Notes receivable secured by Timeshare Interests............. 11,667 23,501 59,912
------- ------- -------
Notes receivable, gross..................................... 37,910 35,835 74,587
Reserve for loan losses..................................... (896) (1,216) (1,472)
------- ------- -------
Notes receivable, net....................................... $37,014 $34,619 $73,115
======= ======= =======
</TABLE>
Loan Underwriting
Resorts Division. Consistent with industry practice, Timeshare Interest
financing is not subject to extensive loan underwriting criteria. Customer
financing on sales of Timeshare Interests requires (i) receipt of a minimum
downpayment of 10% of the purchase price and (ii) a contract for deed and other
closing documents between the Company and the purchaser. The Company encourages
purchasers to make increased downpayments by offering a lower interest rate. In
addition, purchasers who do not elect to participate in the Company's
pre-authorized payment plan are charged interest at a rate which is one percent
greater than the otherwise prevailing rate. Historically, timeshare receivables
have had a higher default rate than residential land receivables. See
"-- Collection Policies" below.
Residential Land Division. The Company has established loan underwriting
criteria and procedures designed to reduce credit losses on its residential land
loan portfolio. The loan underwriting process undertaken by the Company's credit
department includes reviewing the applicant's credit history, verifying
employment and income as well as calculating certain debt-to-income ratios. The
primary focus of the Company's underwriting review is to determine the
applicant's ability to repay the loan in accordance with its terms. This
assessment is based on a number of factors, including the relationship of the
applicant's required monthly payment to disposable income. The Company also
examines the applicant's credit history through various credit reporting
agencies. In order to verify an applicant's employment status, the Company
generally contacts the applicant's employer. The Company also obtains current
pay stubs, recent tax returns and other tax forms from the applicant.
In order to obtain financing from the Residential Land Division, a
prospective purchaser must submit a completed and signed credit application,
purchase and sale agreement and pre-authorized checking agreement accompanied by
a voided check, if applicable, to the Company's credit department. All credit
decisions are made at the Company's corporate headquarters. Loan amounts under
$50,000 are approved by designated personnel located in the Company's corporate
headquarters, while loan amounts of $50,000 or more require approval from a
senior executive officer. In addition, rejected applications and any material
exceptions to the underwriting policy are also reviewed by senior management.
Customers are notified of the reasons for credit denial by mail.
The Company encourages customers to increase their downpayment and reduce
the loan term through the structure of its loan programs. Customers receive a
lower rate of interest as their downpayment increases and the loan term
shortens. Additionally, the Company encourages its customers to make timely
payments through a pre-authorized payment arrangement. Customers who do not
choose a pre-authorized payment plan are charged interest at a rate which is one
percent greater than the prevailing rate. Approximately 75% of purchasers using
the Company's financing have historically participated in the pre-authorized
payment plan.
After the credit decision has been made, the credit department categorizes
the file as either approved, pending or declined. Upon receipt of a credit
approval, the regional office schedules the closing with the
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<PAGE> 73
customer. Closings are typically conducted at the office of the Company's local
attorney or settlement agent, although in some cases the closing may take place
at the sales site or by mail.
When the original closing documents are received from the closing agent,
the Company verifies that the loan closed under terms approved by the Company's
credit department. A quality control audit is performed to verify that required
documents have been received and that they have been prepared and executed
correctly. If any revisions are required, notification is sent to the regional
office.
A loan file typically includes a copy of the signed security instrument,
the mortgage note, a copy of the deed, Truth-in-Lending disclosure, purchase and
sale agreement, credit application, local counsel opinion, Vital Information
Statement or purchaser's acknowledgment of receipt of HUD lot information
statement, HUD settlement statement and a copy of the assignment of mortgage and
an original note endorsement from the Company's subsidiary originating the sale
and the loan to the Company (if applicable). After the initial closing documents
are received, the recorded mortgage and assignment and original title insurance
policy are obtained in order to complete the loan file.
Collection Policies
Resorts Division. The Company's timeshare receivables have been
historically documented by contracts for deed, which allows the Company to
retain title to the Timeshare Interest until the obligation is paid in full,
thereby eliminating the need to foreclose in the event of a default. Collection
efforts and delinquency information concerning the Resorts Division are managed
at the Company's corporate headquarters. Servicing of the division's receivables
is handled by a staff of experienced collectors, assisted by an on-line mortgage
collection computer system. Unless circumstances otherwise dictate, collection
efforts are generally made by mail and telephone. If a contract for deed becomes
delinquent for ten days, a reminder letter is mailed to the customer. If the
customer fails to bring the account current, a late notice is mailed when the
account is 15 days delinquent (and telephone contact commences). After an
account is 45 days delinquent, the Company typically sends a third letter
advising the customer that such customer has 15 days within which to bring the
account current. Under the terms of the contract for deed, the borrower is in
default when the account becomes 60 days delinquent. At this time a default
letter is sent advising the customer that he or she has 30 days to bring the
account current or lose his or her contractual interest in the timeshare unit.
When the account becomes 90 days delinquent, the Company forwards a final letter
informing the customer that the contract for deed has been terminated. At such
time, the Timeshare Interest can be resold to a new purchaser. In connection
with the expansion of its points-based vacation club system, the Company
anticipates moving to a note and mortgage system. To the extent that this change
occurs, the Company does not anticipate that the period of time for realizing on
a defaulted timeshare receivable will be materially longer, because title to the
applicable property will be held by the vacation club trust.
Residential Land Division. Collection efforts and delinquency information
concerning the Residential Land Division are also managed at the Company's
corporate headquarters. Servicing of the division's receivables is handled by a
staff of experienced collectors, assisted by an on-line mortgage collection
computer system. Unless circumstances otherwise dictate, collection efforts are
generally made by mail and telephone. Collection efforts begin when an account
is ten days past due, at which time the Company mails a reminder letter.
Attempts are then made to contact the customer via telephone to determine the
reason for the delinquency and to bring the account current. The determination
of how to handle a delinquent loan is based upon many factors, including the
customer's payment history and the reason for the current inability to make
timely payments. If no agreement is made or the customer does not abide by the
agreement, collection efforts continue until the account is either brought
current or legal action is commenced. If not accelerated sooner, the Company
declares the loan in default when the loan becomes 60 days delinquent. When the
loan is 90 days past due, the accrual of interest is stopped (unless the loan is
considered an in-substance foreclosure loan, in which case all accrued interest
is reversed since the Company's means of recovery is determined through the
resale of the underlying collateral and not through collection on the note) and
the Credit/Collection Manager determines the action to be taken.
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<PAGE> 74
Loan Loss Reserves. At December 28, 1997, approximately 5.0% or $4.1
million of the aggregate $81.9 million principal amount of loans which were held
by the Company or by third parties under sales transactions in which the Company
had a limited recourse liability, were more than 30 days past due. At March 30,
1997, approximately 6% or $2.1 million of the aggregate $36.7 million principal
amount of loans which were held by the Company or by third parties under sales
transactions in which the Company had a limited recourse liability, were more
than 30 days past due. Of the $36.7 million principal amount of loans, $35.8
million were held by the Company, while approximately $840,000 were associated
with programs under which the Company has a limited recourse liability. In most
cases of limited recourse liability, the recourse to the Company terminates when
the principal balance of the loan becomes 70% or less of the original selling
price of the property underlying the loan. At March 31, 1996, approximately 7%
or $2.8 million of the aggregate $39.2 million principal amount of loans which
were held by the Company or by third parties under sales transactions in which
the Company had a limited recourse liability, were more than 30 days past due.
Reserve for loan losses as a percentage of period end notes receivable was
2.4%, 3.4% and 2.0% at March 31, 1996, March 30, 1997 and December 28, 1997,
respectively. The adequacy of the Company's reserve for loan losses is
determined by management and reviewed on a regular basis considering, among
other factors, historical frequency of default, loss experience, present and
expected economic conditions as well as the quality of the receivables. The
increase in the reserve for loan losses as a percent of period end loans is
primarily the result of the portfolio consisting of more timeshare receivables
where historical default rates exceed those on Residential Land Division
receivables. See "Risk Factors -- Risks Associated with Customer Financing and
Receivables."
The table below sets forth activity in the reserve for estimated loan
losses.
<TABLE>
<S> <C>
Reserve for loan losses, April 2, 1995...................... $1,089,652
Provision for loan losses................................... 344,718
Charge-offs................................................. (537,901)
----------
Reserve for loan losses, March 31, 1996..................... 896,469
Provision for loan losses................................... 1,008,271
Charge-offs................................................. (688,619)
----------
Reserve for loan losses, March 30, 1997..................... 1,216,121
Provision for loan losses................................... 1,109,540
Charge-offs................................................. (853,544)
----------
Reserve for loan losses, December 28, 1997.................. $1,472,117
==========
</TABLE>
SALES OF RECEIVABLES/PLEDGING OF RECEIVABLES
Since 1986, the Company has sold or pledged substantially all of its
receivables, generally retaining the right and obligation to service such
receivables. In the case of residential land receivables, the Company typically
transfers the receivables to a special purpose finance subsidiary, which in turn
enters into a receivables securitization. The receivables are typically sold by
such subsidiary with limited or no recourse. In the case of receivables in
securitization transactions pledged to a financial institution, the Company
generally must maintain a debt to eligible collateral rate (based on outstanding
principal balance of the pledged loans) of 90%. The Company is obligated to
pledge additional eligible receivables or make additional principal payments in
order to maintain this collateralization rate. Repurchases and additional
principal payments have not been material to date. At December 28, 1997, the
Company was subject to limited recourse requirements on approximately $8.6
million of receivables sold to financial institutions. See "Management's
Discussion and Analysis of Results of Operations and Financial
Condition -- Liquidity and Capital Resources."
As discussed above, private placement REMIC financings have provided
substantial capital resources to the Company. Under the terms of these
transactions, the receivables are sold to a REMIC trust and the Company has no
obligation to repurchase the receivables due to default by the borrowers. The
Company does, however, have the obligation to repurchase the receivables in the
event that there is any material defect in the loan documentation and related
representations and warranties as of the time of sale.
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<PAGE> 75
As discussed under "Management's Discussion and Analysis of Results of
Operations and Financial Condition," the Company is currently negotiating with a
financial institution to provide the Company with a combined warehouse financing
and receivables purchase facility. The Company will have no obligation to
repurchase the receivables due to default by the borrowers under the proposed
purchase facility. The Company will, however, have the obligation to repurchase
the receivables in the event that there is any material defect in the loan
documentation and related representations and warranties as of the time of sale.
RECEIVABLES SERVICING
Receivables servicing includes collecting payments from borrowers and
remitting such funds to the owners, lenders or investors in such receivables,
accounting for receivables principal and interest, making advances when
required, contacting delinquent borrowers, foreclosing in the event that
defaults are not remedied and performing other administrative duties. The
Company's obligation to provide receivables servicing and its rights to collect
fees are set forth in a servicing agreement. The Company has the obligation and
right to service all of the receivables it originates and retains the obligation
and right with respect to substantially all of the receivables it sells through
REMICs. The Company typically receives an annual servicing fee of approximately
.5% of the scheduled principal balance, which is deducted from payments
received.
CUSTOMER SERVICE
The Company emphasizes customer satisfaction and maintains full-time
customer service representatives in its Boca Raton headquarters to respond to
customer inquiries. At closing, all purchasers are provided with a toll-free
customer service phone number to facilitate any additional information requests.
Customer service surveys are sent to each purchaser to measure customer
satisfaction and to alert the Company to problems, if any.
REGULATION
The real estate industry is subject to extensive and complex regulation.
The Company is subject to compliance with various federal, state and local
environmental, zoning and other statutes and regulations regarding the
acquisition, subdivision and sale of real estate and Timeshare Interests and
various aspects of its financing operations. On a federal level, the Federal
Trade Commission has taken an active regulatory role through the Federal Trade
Commission Act, which prohibits unfair or deceptive acts or competition in
interstate commerce. In addition to the laws applicable to the Company's
customer financing and other operations discussed below, the Company is or may
be subject to the Fair Housing Act and various other federal statutes and
regulations. The Company is also subject to various foreign laws with respect to
the Aruba Resort. The Company believes that it is in compliance in all material
respects with such regulations. However, no assurance can be given that the cost
of complying with applicable laws and regulations will not be significant or
that the Company is in fact in compliance with applicable law. Any failure to
comply with applicable laws or regulations could have a material adverse effect
on the Company. See "Risk Factors -- Acquisition Strategy" and "-- Regulation."
The Company's sales and marketing of residential land are subject to
various consumer protection laws and to the Interstate Land Sales Full
Disclosure Act which establishes strict guidelines with respect to the marketing
and sale of land in interstate commerce. HUD has enforcement powers with respect
to this statute. In some instances, the Company has been exempt from HUD
registration requirements because of the size or number of the subdivided
parcels and the limited nature of its offerings. The Company, at its discretion,
may formally request an exemption advisory opinion from HUD to confirm the
exempt status of any particular offering. Several such exemption requests have
been submitted to, and approved by, HUD. In those cases where the Company and
its legal counsel determine parcels must be registered to be sold, the Company
files registration materials disclosing financial information concerning the
property, evidence of title and a description of the intended manner of offering
and advertising such property. The Company bears the cost of such registration,
which includes legal and filing fees. Many states also have statutes and
regulations governing the sale of real estate. Consequently, the Company
regularly consults with counsel for assistance in complying
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with federal, state and local law. The Company must obtain the approval of
numerous governmental authorities for its acquisition and marketing activities
and changes in local circumstances or applicable laws may necessitate the
application for, or the modification of, existing approvals.
The Company's timeshare resorts are subject to various regulatory
requirements including state and local approvals. The laws of most states
require the Company to file with a designated state authority for its approval a
detailed offering statement describing the Company and all material aspects of
the project and sale of Timeshare Interests. Laws in each state where the
Company sells Timeshare Interests generally grant the purchaser of a Timeshare
Interest the right to cancel a contract of purchase at any time within a
specified period following the earlier of the date the contract was signed or
the date the purchaser has received the last of the documents required to be
provided by the Company. Most states have other laws which regulate the
Company's activities, such as real estate licensure; seller's of travel
licensure; anti-fraud laws; telemarketing laws; price, gift and sweepstakes
laws; and labor laws. In addition, certain state and local laws may impose
liability on property developers with respect to construction defects discovered
or repairs made by future owners of such property. Pursuant to such laws, future
owners may recover from the Company amounts in connection with the repairs made
to the developed property. In compliance with state laws, the Company provides
its timeshare purchasers with a public disclosure statement which contains,
among other items, detailed information about the surrounding vicinity, the
resort and the purchaser's rights and obligations as a Timeshare Interests
owner.
Under various federal, state and local laws, ordinances and regulations,
the owner of real property generally is liable for the costs of removal or
remediation of certain hazardous or toxic substances located on or in, or
emanating from, such property, as well as related costs of investigation and
property damage. Such laws often impose such liability without regard to whether
the owner knew of, or was responsible for, the presence of such hazardous or
toxic substances. The presence of such substances, or the failure to properly
remediate such substances, may adversely affect the owner's ability to sell or
lease a property or to borrow using such real property as collateral. Other
federal and state laws require the removal or encapsulation of
asbestos-containing material when such material is in poor condition or in the
event of construction, demolition, remodeling or renovation. Other statutes may
require the removal of underground storage tanks. Noncompliance with these and
other environmental, health or safety requirements may result in the need to
cease or alter operations at a property.
The Company's customer financing activities are also subject to extensive
regulation, which may include, Truth-in-Lending Act and Regulation Z, the Fair
Housing Act, the Fair Debt Collection Practices Act, the Equal Credit
Opportunity Act and Regulation B, the Electronic Funds Transfer Act and
Regulation E, the Home Mortgage Disclosure Act and Regulation C, Unfair or
Deceptive Acts or Practices and Regulation AA and Right to Financial Privacy
Act.
Management is not aware of any pending regulatory contingencies that are
expected to have a materially adverse impact on the Company. See "Risk
Factors -- Regulation."
COMPETITION
The real estate industry is highly competitive. In each of its markets, the
Company competes against numerous developers and others in the real estate
business. The Resorts Division competes with various high profile and
well-established operators. Many of the world's most recognized lodging,
hospitality and entertainment companies have begun to develop and sell Timeshare
Interests in resort properties. Major companies that now operate or are
developing or planning to develop timeshare resorts include Marriott, Disney,
Hilton, Hyatt, Four Seasons and Inter-Continental. The Company also competes
with other publicly traded timeshare companies, including Signature, Vistana,
Fairfield, Silverleaf and numerous other owners and operators of timeshare
resorts. The Residential Land Division competes with builders, developers and
others for the acquisition of property and with local, regional and national
developers, housebuilders and others with respect to the sale of residential
lots. Competition may be generally smaller with respect to the Company's
residential lot sales in the more rural markets in which it operates. The
Company believes that it can compete on the basis of its reputation and the
price, location and quality of the products it offers for sale, as well as on
the basis of its experience in land acquisition, development and sale. Although,
as noted above, the Resorts Division competes with various high profile and
well-established operators, the Company believes
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that it can compete on the basis of its general reputation and the price,
location and quality of its timeshare resorts. The development and operation of
additional timeshare resorts in the Company's markets could have a material
adverse impact on the demand for the Company's Timeshare Interests and its
results of operations. In its customer financing activities, the Company
competes with banks, mortgage companies, other financial institutions and
government agencies offering financing of real estate. In recent years, the
Company has experienced increased competition with respect to the financing of
Residential Land Division sales as evidenced by the low percentage of
residential land sales internally financed since 1995. The Company believes
that, based on its interest rates and repayment schedules, the financing
packages it offers are convenient for customers and competitive with those of
other institutions which offer such financing. See "Risk
Factors -- Competition."
PERSONNEL
As of December 28, 1997, the Company had 1,501 full-time and 132 part-time
employees. Of the 1,633 employees, 105 were located at the Company's
headquarters in Boca Raton, Florida, 116 at the Company's corporate office in
Fort Myers, Florida and 1,412 in regional offices throughout the United States
and Canada (the field personnel include 269 field employees supporting the
Company's Residential Land Division as follows: three residential land
divisional presidents, seven residential land regional and district managers,
114 residential land sales personnel, 12 residential land project managers, nine
residential land acquisition specialists and 124 residential land administrative
and other support personnel. In addition, the Company employed 1,143 field
employees supporting the Company's Resorts Division as follows: four timeshare
divisional Presidents/regional directors, 264 timeshare sales personnel, two
directors of development and 873 timeshare administrative and other support
personnel). None of the Company's employees are represented by a collective
bargaining unit, and the Company believes that relations with its employees
generally are excellent.
LITIGATION
In the ordinary course of its business, the Company from time to time
becomes subject to claims or proceeding relating to the purchase, subdivision,
sale and/or financing of real estate. Additionally, from time to time, the
Company becomes involved in disputes with existing and former employees. The
Company believes that substantially all of the above are incidental to its
business.
On November 26, 1997, an action was filed in the U.S. District Court for
the Eastern District of Tennessee against the Company. The complaint purports to
be brought on behalf of a class of current and former timeshare sales
representative employees of the Company. It asserts claims for violations of the
minimum wage and overtime provisions of the Fair Labor Standards Act. The
Company is in the early stages of evaluating this litigation's potential impact,
if any, on the Company, and accordingly cannot predict the outcome with any
degree of certainty. Although no assurances can be given, the Company does not
believe that any likely outcome will have a material adverse effect on the
Company.
In May 1996, RDI and the RDI Stockholders entered into a letter agreement
(the "Letter Agreement") with certain individuals on behalf of an entity to be
formed by such individuals (the "Prospective Buyer") regarding the proposed
acquisition of RDI. The Letter Agreement indicated, among other things, that the
agreement was binding, the parties proposed to negotiate and execute a
definitive agreement consistent with the Letter Agreement by June 15, 1996 and
that the transaction would close by December 31, 1996. The Letter Agreement also
included an exclusivity provision pursuant to which the parties agreed to
negotiate in good faith exclusively with each other to enter into a definitive
agreement until June 30, 1996. On July 1, 1996, counsel for the Prospective
Buyer forwarded to RDI's counsel a letter which would have extended the June 15,
1996 and June 30, 1996 dates referred to above had it been executed by RDI and
the RDI Stockholders; the letter was not executed by RDI or the RDI
Stockholders. In September 1996, RDI informed the Prospective Buyer that RDI did
not wish to proceed with negotiations. The Prospective Buyer advised RDI in
writing shortly thereafter that, among other things, the Prospective Buyer
believed that the Letter Agreement was a binding agreement for the sale of RDI
and that the Prospective Buyer would assert its alleged right to prevent an
acquisition by RDI by any third party and take action against any such third
party and RDI and the RDI Stockholders. After September 1996, no further
negotiations with respect to the
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acquisition took place between RDI and the Prospective Buyer. The Company
executed and announced a purchase agreement for the RDI Acquisition in July 1997
and closed this transaction on October 3, 1997. To date, the Prospective Buyer
has taken no further action. Although no assurances can be given, the Company
believes that any claim by the Prospective Buyer would be meritless and the
Company would defend any such claim vigorously.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning each person
who is a director or executive officer of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
George F. Donovan......................... 59 President, Chief Executive Officer and Director
Daniel C. Koscher......................... 40 Senior Vice President -- Residential Land Division
L. Nicolas Gray........................... 51 Senior Vice President -- Resorts Division
Patrick E. Rondeau........................ 51 Senior Vice President, Director of Corporate
Legal Affairs and Clerk
John F. Chiste............................ 41 Chief Financial Officer and Treasurer
Joseph C. Abeles.......................... 83 Director
Ralph A. Foote............................ 75 Director
Frederick M. Myers........................ 75 Chairman of the Board and Director
J. Larry Rutherford....................... 51 Director
Stuart A. Shikiar......................... 51 Director
Bradford T. Whitmore...................... 40 Director
</TABLE>
GEORGE F. DONOVAN joined the Company as a Director in 1991 and was
appointed President and Chief Operating Officer in October 1993. He became Chief
Executive Officer in December, 1993. Mr. Donovan has served as an officer of a
number of other recreational real estate corporations, including Leisure
Management International, of which he was President from 1991 to 1993, and
Fairfield Communities, Inc., of which he was President from April 1979 to
December 1985.
DANIEL C. KOSCHER joined the Company in 1986. During his tenure, he has
served in various financial management positions including Chief Accounting
Officer, Vice President and Director of Planning/Budgeting. In 1997, he became
Senior Vice President, Residential Land Division. Prior to his employment with
the Company, Mr. Koscher was employed by the William Carter Company, a
manufacturing company located in Needham, Massachusetts. He has also been
employed by Cipher Data Products, Inc., a computer peripheral manufacturer
located in San Diego, California, as well as the State of Nevada as an audit
agent. Mr. Koscher holds an M.B.A. along with a B.B.A. in Accounting.
L. NICOLAS GRAY joined the Company in 1995 to oversee the Company's
timeshare resorts operation and was named Senior Vice President in 1997. Mr.
Gray has over 25 years of experience in the hospitality, timeshare and related
resort industries. Mr. Gray served as Director of Development for Resort
Condominium International, a timeshare exchange organization from 1993 to 1995.
Prior to that time, Mr. Gray was Executive Vice President and General Manager
for resort developments of Thousand Trails from 1989 to 1991 and Fairfield
Communities from 1979 to 1989.
PATRICK E. RONDEAU joined the Company in 1990 and was elected Vice
President and Director of Corporate Legal Affairs. He became Clerk in 1993 and
Senior Vice President in 1997. For more than five years prior to his employment
with the Company, Mr. Rondeau was a senior partner of Freedman, DeRosa &
Rondeau, located in North Adams, Massachusetts, which firm serves as legal
counsel to the Company on various matters. Mr. Rondeau holds a B.A. in Political
Science along with a J.D.
JOHN F. CHISTE joined the Company in July 1997 as Treasurer and Chief
Financial Officer. From January 1997 to June 1997, Mr. Chiste was employed by
Compscript, Inc. From December 1992 to January 1997, he served as the Chief
Financial Officer, Secretary and Treasurer of Computer Integration Corporation,
a publicly-held distribution company which provides information products and
services to corporations nationwide. From 1983 through 1992, Mr. Chiste
practiced as a Certified Public Accountant with Ernst & Young LLP.
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JOSEPH C. ABELES, a private investor, has been a Director of the Company
since 1987. Mr. Abeles has been a Director of Intermagnetics General Corporation
since 1986. He has also served as a Director of Igene Biotechnology, Inc. and
Ultralife Batteries, Inc. since 1991.
RALPH A. FOOTE has been a Director of the Company since 1987. Since 1955 he
has been a senior partner of Conley & Foote, a Middlebury, Vermont law firm
which serves as legal counsel to the Company with respect to various matters.
FREDERICK M. MYERS has been a Director of the Company since 1990 and has
served as Chairman of the Board since 1997. Since 1964 he has been a senior
partner of Cain, Hibbard, Myers & Cook, a Pittsfield, Massachusetts law firm
which serves as legal counsel to the Company with respect to various matters.
J. LARRY RUTHERFORD was elected to the Board of Directors in April 1997.
Since 1990, he has been President and Chief Executive Officer of Atlantic Gulf
Communities, a publicly traded real estate development company. In 1992, Mr.
Rutherford was named as a defendant in a three-count Information filed by the
State Attorney for Broward County, Florida. The charges in the Information,
which include a charge of vehicular homicide, relate to an April 1991 traffic
accident in which a passenger was killed. Following review of the circumstances
surrounding this accident and the charges, the Board determined that the
pendency of this proceeding likely will not adversely affect Mr. Rutherford's
ability to perform his duties as a Director of the Company.
STUART A. SHIKIAR has been a Director since 1994. Mr. Shikiar is an
investment advisor and has served as President of Shikiar Asset Management, Inc.
since November 1994. From 1993 to 1994, Mr. Shikiar was a general partner of
Omega Advisors, a private investment partnership. From 1985 to 1993, Mr. Shikiar
served as a Managing Director for Prudential Securities Investment Management,
Inc. Mr. Shikiar has been a Director of Ultralife Batteries, Inc. since 1991 and
Intermagnetics General Corporation since 1995.
BRADFORD T. WHITMORE has been a Director of the Company since 1990. Mr.
Whitmore has been a general partner of Grace Brothers, Ltd., an investment
partnership and securities broker-dealer, since 1986. He has been a trustee of
Aerospace Creditors Liquidating Trust since 1993.
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth compensation
for the past three fiscal years for the Company's Chief Executive Officer and
the other four most highly compensated executive officers (the "Named Executive
Officers").
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<PAGE> 81
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION --------------
-------------------- SECURITIES ALL OTHER
FISCAL BONUS UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) ($)(1) OPTIONS(#)(2) ($)(3)
- --------------------------- ------ --------- -------- -------------- ------------
<S> <C> <C> <C> <C> <C>
George F. Donovan....................... 1997 $300,000 $ 86,000 30,000 $59,183
President and Chief 1996 300,000 139,129 52,500 39,120
Executive Officer 1995 275,000 100,000 66,150 501
Patrick E. Rondeau...................... 1997 160,000 38,000 15,000 17,666
Senior Vice President, 1996 160,000 61,475 26,250 --
Director of Corporate 1995 150,000 35,000 33,075 --
Legal Affairs and Clerk
Daniel C. Koscher....................... 1997 150,000 38,000 15,000 8,369
Senior Vice President, 1996 150,000 61,475 26,250 1,751
Resid. Land Division 1995 125,000 33,000 33,075 1,430
L. Nicolas Gray......................... 1997 130,000 38,000 -- 20,582
Senior Vice President, 1996 -- -- -- --
Resorts Division 1995 -- -- -- --
Alan L. Murray(4)....................... 1997 175,000 -- 15,000 1,935
Treasurer and Chief 1996 175,000 61,475 26,250 2,078
Financial Officer 1995 160,000 35,000 33,075 2,204
</TABLE>
- ---------------
(1) Bonus amounts earned for each fiscal year are paid during the subsequent
year.
(2) Figures for 1997 represent incentive stock options granted under the
Company's 1995 Stock Incentive Plan. Figures for 1996 and 1995 represent
incentive stock options granted under the Company's Second Amended and
Restated 1985 Stock Option Plan. Incentive stock options for 1996 and 1995
have been adjusted to reflect the Common Stock dividends.
(3) Other compensation for 1997 includes contributions to the Company's Section
401(k) Retirement Savings Plan for the benefit of each Named Executive
Officer (Mr. Donovan, $2,375; Mr. Rondeau, $2,768; Mr. Koscher, $2,375; Mr.
Gray, $1,623; and Mr. Murray, $1,935) and dollar amounts of premiums paid on
life insurance policies for the benefit of the Named Executive Officer (Mr.
Donovan, $56,808; Mr. Rondeau, $14,898; Mr. Koscher, $5,994; and Mr. Gray,
$18,959).
(4) The Company entered into a separation agreement with Alan L. Murray on April
25, 1997. Under the agreement, the Company agreed to pay Mr. Murray $153,125
in severance pay and provide health benefits continuation for a period of
eighteen months, and accelerated the vesting date for all of Mr. Murray's
options, which remained exercisable until November 25, 1997.
Options Grants In Last Fiscal Year. The following table shows all stock
option grants to the Named Executive Officers during fiscal 1997.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATE OF STOCK
PERCENT OF TOTAL PRICE APPRECIATION FOR
NUMBER OF SHARES OPTIONS GRANTED TO OPTION TERM(2)
UNDERLYING OPTIONS EMPLOYEES EXERCISE PRICE EXPIRATION -----------------------
NAME GRANTED (#)(1) IN FISCAL YEAR PER SHARE DATE 5% 10%
- ---- ------------------ ------------------ -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
George F. Donovan......... 30,000 40% $4.25 6/5/06 $ 80,100 $203,100
Patrick E. Rondeau........ 15,000 20 4.25 6/5/06 40,050 101,550
Daniel C. Koscher......... 15,000 20 4.25 6/5/06 40,050 101,550
L. Nicolas Gray........... -- -- -- -- -- --
Alan M. Murray............ 15,000 20 4.25 6/5/06 40,050 101,550
</TABLE>
- ---------------
(1) These options vest in five equal annual installments, commencing on June 5,
1997.
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<PAGE> 82
(2) As required by the rules of the Securities and Exchange Commission,
potential values stated are based on the prescribed assumption that the
Company's common stock will appreciate in value from the date of grant to
the end of the option term at rates (compounded annually) of 5% and 10%,
respectively, and therefore are not intended to forecast possible future
appreciation, if any, in the price of the Company's common stock.
Fiscal Year-End Option Values. During fiscal 1997, none of the Named
Executive Officers exercised stock options issued by the Company. The following
table sets forth information regarding the number of vested and unvested options
and the unrealized value or spread (the difference between the exercise price
and the market value) of the unexercised options issued by the Company and held
by the Named Executive Officers on March 30, 1997. Unrealized value is computed
by multiplying the number of shares purchasable by the amount by which the
closing market price of the Company's Common Stock on the New York Stock
Exchange on March 30, 1997 exceeds the exercise price.
<TABLE>
<CAPTION>
NUMBER OF
SHARES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
(#) ($)
-------------------- --------------------
NAME VESTED UNVESTED VESTED UNVESTED
- ---- -------- --------- -------- ---------
<S> <C> <C> <C> <C>
George F. Donovan........................................ 174,552 203,418 -- --
Patrick E. Rondeau....................................... 66,408 55,845 $78,865 --
Daniel C. Koscher........................................ 81,084 55,845 88,898 --
L. Nicolas Gray.......................................... -- -- -- --
Alan L. Murray........................................... 147,672 -- 103,570 --
</TABLE>
Employment Agreements
In March, 1998, the Company entered into employment agreements with each of
George F. Donovan, John F. Chiste, L. Nicolas Gray, Daniel C. Koscher and
Patrick E. Rondeau. Each employment agreement is for a three year period (six
years in the case of Mr. Donovan) (subject to extension) and provides that the
employee will receive a base salary ($375,000 for Mr. Donovan and $175,000 for
each of Messrs. Chiste, Gray, Koscher and Rondeau) and certain other benefits
and will be eligible to receive a cash bonus as determined by the Board of
Directors. Under the employment agreements, if the Company terminates any
employee without cause, the Company will pay the employee his base salary for
the 12 months (24 months in the case of Mr. Donovan) following such termination
(which shall be reduced by the amount of any compensation the employee receives
from subsequent employment during such period). A termination of the employee
without cause shall be deemed to occur upon, among other things, a significant
decrease of the employee's position, duties or responsibilities, the failure by
the Company to obtain the assumption of the employment agreement by any
successor to the Company's business, or the sale of all or substantially all of
the business or assets of the Company or the Company's liquidation. Upon any
termination by the Company for cause (as defined in the employment agreements)
or by the employee, the employee shall be entitled only to amounts then due to
him. In the event the employee is disabled, the employee's employment shall be
terminated and the employee shall be entitled to receive his base salary for 12
months (24 months in the case of Mr. Donovan) following such termination.
Pursuant to his employment agreement, each employee agrees, for 12 months (24
months in the case of Mr. Donovan) following his termination, not to compete
with the Company, disclose confidential information about the Company, or
solicit the Company's current or former employees. In addition, Mr. Donovan's
employment agreement provides that the aggregate of $158,000 of indebtedness
owing by Mr. Donovan to the Company will be forgiven on a pro rata basis (20%
per year) over the five year period commencing on April 1, 1998. See "Certain
Relationships and Related Transactions."
In connection with the RDI Acquisition, each of the RDI stockholders
entered into a three-year employment agreement with the Company providing for an
annual base salary of $180,000 and the grant by the Company of an incentive
stock option to acquire 60,000 shares of the Company's Common Stock. The options
vest ratably over five years.
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<PAGE> 83
Compensation of Divisional Presidents and Regional Managers. The Company's
Divisional Presidents/Regional Executive Directors and Regional Managers have
oversight responsibility for the acquisition, development and sale of the
Company's real estate inventories. Compensation for the Company's six Division
Presidents/Regional Executive Directors includes a base salary that currently
ranges from $50,000 to $75,000 accompanied by performance bonuses. Compensation
for the Company's seven Regional Managers typically includes a base salary that
currently ranges from $25,000 to $80,000 accompanied by several performance
bonuses. Bonuses are established to reward strong performance by a subsidiary
and the payment of a bonus is subject to exceeding predetermined, acceptable
performance objectives. Management defined these objectives to address operating
benchmarks deemed critical to the success of the subsidiary. They include, but
are not limited to, the attainment of projected retail sales and operating
profit, containment of overhead costs, achievement of maximum operating profits,
optimizing transactional cash flow and, on a project by project basis,
surpassing gross margin projections. Annual bonus awards for Divisional
Presidents/Regional Managers generally do not exceed $200,000, with the
exception of those awards for management of the Company's Texas residential land
operation, where aggregate annual bonuses for fiscal 1997 ranged from $200,000
to $525,000.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On December 15, 1997, the Company entered into a short-term loan agreement
with the Initial Purchasers. The loan bears interest at the greater of 10% or
the prime rate plus 2.75%. The Company is required to pay a fee equal to 1% of
each advance. The Company repaid all amounts outstanding under the loan
(approximately $22.1 million principal amount as of the date hereof) upon the
closing of the Note Offering. See "Use of Proceeds."
The Company borrowed an aggregate of $6,000,000 from Joseph Abeles, a
director of the Company, and Grace Brothers, Ltd., an affiliate of Bradford T.
Whitmore, a director of the Company, pursuant to a Note Purchase Agreement dated
as of September 11, 1997 (the "Note Agreement"), which amount was used to fund a
portion of the purchase price in connection with the RDI Acquisition. See
"Description of Other Indebtedness -- Convertible Notes."
Frederick M. Myers, a Director of the Company, is a senior partner of the
Pittsfield, Massachusetts law firm of Cain, Hibbard, Myers & Cook, which
rendered services to the Company during fiscal 1997. The total amount paid to
Cain, Hibbard, Myers & Cook by the Company for services rendered during fiscal
1997 was approximately $10,600. It is anticipated that Cain, Hibbard, Myers &
Cook will continue to perform certain legal services for the Company during
fiscal 1998.
In connection with George F. Donovan's appointment as the Company's Chief
Executive Officer and his relocation, on November 17, 1993, the Board of
Directors authorized a $130,000 loan which accrued interest at the prime lending
rate through June 1, 1996. The loan does not bear interest from June 2, 1996
through June 1, 1998, at which time loan is due and payable. The Board also
approved the payment of $28,000 to Mr. Donovan's current residential community
for an equity membership. The equity membership is fully refundable by the
residential community in the event Mr. Donovan's home is sold. Mr. Donovan's
employment agreement provides that the aggregate of $158,000 of indebtedness
owing by Mr. Donovan to the Company will be forgiven on a pro rata basis (20%
per year) over the five-year period commencing on April 1, 1998. See
"Management -- Executive Compensation -- Employment Agreements."
Bradford T. Whitmore, a director of the Company, is a general partner of
Grace Brothers, Ltd., an investment partnership and broker-dealer. In March
1997, Grace Brothers, Ltd. extended a short-term loan to the Company in the
amount of $1.5 million which loan was repaid in May 1997. The interest rate
charged under the agreement was prime plus 1%.
In May 1988, the Company's Board of Directors approved a policy regarding
the purchase of property from the Company by employees or executive officers,
which policy was amended in March 1993. Under this policy, one residential
lot/Timeshare Interests per year may be purchased from the Company for 15% below
the retail price of such residential lot/Timeshare Interests. An employee taking
advantage of a discount may not receive a commission on the sale and the sale
will not be included for purposes of any bonus calculations. In addition,
employees or executive officers may receive financing on one residential
lot/Timeshare Interests at a time for up to 90% of the purchase price at the
prevailing rate provided that the employee qualifies for
76
<PAGE> 84
such financing under the Company's credit policy with no exceptions. Under the
policy, borrowings by any employee will be limited to $100,000. Any purchaser
under the policy must agree to hold the parcel for at least two years before
selling, provided that a sale may be made at any time after termination of
employment. Notwithstanding the foregoing, all purchases by executive officers
under the policy are required to be approved by the Board of Directors. No
purchases under the policy were made by any executive officer during fiscal
1997.
Any existing loans to the Company's officers and employees other than in
the ordinary course of business have been approved, and any such future loans
will be approved, by a majority of disinterested, non-management Directors. It
is also the Company's policy that any transaction with an employee, officer,
Director or principal shareholder, or affiliate of any of them, involving in
excess of $1,000 (other than in the ordinary course of the Company's business)
shall be approved by a majority vote of disinterested Directors, and any such
transaction will be on terms no less favorable to the Company than those which
could reasonably be obtained from an independent third party.
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<PAGE> 85
DESCRIPTION OF NOTES
GENERAL
The Outstanding Notes were and the Exchange Notes will be issued under the
Indenture, dated as of April 1, 1998 (the "Indenture"), among the Company, the
Subsidiary Guarantors and SunTrust Bank, Central Florida, National Association
("SunTrust"), as Notes Trustee (the "Notes Trustee"), a copy of which is
available upon request to the Company as set forth under "Available
Information." The Exchange Notes and the Outstanding Notes will constitute a
single class of debt securities under the Indenture and, accordingly, will vote
together as a single class for purposes of determining whether holders of the
requisite percentage in outstanding principal amount of the Notes have taken
certain actions or exercised certain rights under the Indenture. The following
is a summary of certain provisions of the Indenture and the Notes and does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, all the provisions of the Indenture (including the definitions of
certain terms therein and those terms made a part thereof by the Trust Indenture
Act of 1939, as amended) and the Notes. The definitions of certain terms used in
the following summary are set forth below under "-- Certain Definitions." As
used in this Description of the Notes, the "Company" refers to Bluegreen
Corporation and not its subsidiaries.
Except as otherwise indicated, the following description relates both to
the Outstanding Notes issued in the Note Offering and the Exchange Notes to be
issued in the Exchange Offer. The form and terms of the Exchange Notes are the
same as the form and terms of the Outstanding Notes in all material respects,
except that (i) the Exchange Notes will bear a Series B designation and have
been registered under the Securities Act and therefore will not bear legends
restricting the transfer thereof and will not contain certain provisions
relating to an increase in the interest rate which were included in the terms of
the Outstanding Notes in certain circumstances relating to the timing of the
Exchange Offer and (ii) the holders of the Exchange Notes will not be entitled
to certain rights of the holders of the Outstanding Notes under the Registration
Rights Agreement, which rights shall terminate upon the consummation of the
Exchange Offer. The Exchange Notes will be obligations of the Company evidencing
the same indebtedness as the outstanding Notes.
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes may be exchanged or transferred, at the office or agency of the
Company in the Borough of Manhattan, The City of New York (which initially shall
be the corporate trust office of the Notes Trustee in New York, New York),
except that, at the option of the Company, payment of interest may be made by
check mailed to the address of the holders as such address appears in the Note
Register. Initially, the Notes Trustee will act as Paying Agent and Registrar
for the Notes. The Notes may be presented for registration of transfer and
exchange at the offices of the Registrar, which initially will be the Notes
Trustee's corporate trust office. The Company may change any Paying Agent and
Registrar without notice to holders of the Notes.
For each Outstanding Note accepted for exchange, the holder of such
Outstanding Note will receive an Exchange Note having a principal amount equal
to that of the surrendered Outstanding Note.
The Notes will be issued only in fully registered form, without coupons, in
denominations of $1,000 and any integral multiple of $1,000. No service charge
will be made for any registration of transfer or exchange of Notes, but the
Company may require payment of a sum sufficient to cover any transfer tax or
other similar governmental charge payable in connection therewith.
TERMS OF NOTES
The Company sold $110 million aggregate principal amount of Outstanding
Notes in the Note Offering. The Notes will mature on April 1, 2008. Each Note
will bear interest at the rate of 10 1/2% per annum from the date of issuance,
or from the most recent date to which interest has been paid or provided for,
and will be payable semiannually on April 1 and October 1 of each year (each an
"Interest Payment Date"), commencing on October 1, 1998, to holders of record at
the close of business on the March 15 or September 15 immediately preceding the
Interest Payment Date. The interest rate on the Outstanding Notes is subject to
increase under certain circumstances. See "The Exchange Offer." Interest will be
computed on the basis of a
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<PAGE> 86
360-day year comprised of twelve 30-day months. The Notes will not be entitled
to the benefit of any mandatory sinking fund.
OPTIONAL REDEMPTION
Except as set forth below, the Notes will not be redeemable at the option
of the Company prior to April 1, 2003. On and after such date, the Notes will be
redeemable, at the Company's option, in whole or in part, at any time upon not
less than 30 nor more than 60 days' prior notice mailed by first-class mail to
each holder's registered address, at the following redemption prices (expressed
in percentages of principal amount), if redeemed during the 12-month period
commencing on April 1 of the years set forth below, plus accrued and unpaid
interest to the redemption date (subject to the right of holders of record on
the relevant record date to receive interest due on the relevant Interest
Payment Date):
<TABLE>
<CAPTION>
REDEMPTION
PERIOD PRICE
- ------ ----------
<S> <C>
2003........................................................ 105.25%
2004........................................................ 103.50
2005........................................................ 101.75
2006 and thereafter......................................... 100.00
</TABLE>
Optional Redemption Upon Equity Offering. In addition, at any time prior
to April 1, 2001, the Company may, at its option, redeem up to 35% of the
original aggregate principal amount of the Notes, with net cash proceeds of one
or more Equity Offerings, at a redemption price equal to 110.5% of the principal
amount thereof, plus accrued and unpaid interest thereon, if any, to the date of
redemption; provided, however, that after any such redemption the aggregate
principal amount of the Notes outstanding must equal at least $65 million. In
order to effect the foregoing redemption with the proceeds of any Equity
Offering, the Company shall make such redemption not more than 90 days after the
consummation of any such Equity Offering.
Selection. In the case of any partial redemption, selection of the Notes
for redemption will be made by the Notes Trustee on a pro rata basis, by lot or
by such other method as the Notes Trustee in its sole discretion shall deem to
be fair and appropriate; provided, however, that if a partial redemption is made
with proceeds of an Equity Offering, selection of the Notes or portion thereof
for redemption shall be made by the Notes Trustee only on a pro rata basis,
unless such method is otherwise prohibited. Notes may be redeemed in part in
multiples of $1,000 principal amount only. Notice of redemption will be sent, by
first class mail, postage prepaid, at least 45 days (unless a shorter period is
acceptable to the Notes Trustee) prior to the date fixed for redemption to each
holder whose Notes are to be redeemed at the last address for such holder then
shown on the registry books. If any Note is to be redeemed in part only, the
notice of redemption that relates to such Note shall state the portion of the
principal amount thereof to be redeemed. A new Note in principal amount equal to
the unredeemed portion thereof will be issued in the name of the holder thereof
upon cancellation of the original Note. On and after any redemption date,
interest will cease to accrue on the Notes or part thereof called for redemption
as long as the Company has deposited with the Paying Agent funds in satisfaction
of the redemption price pursuant to the Indenture.
RANKING
The Outstanding Notes are and the Exchange Notes will be senior obligations
of the Company. The Outstanding Notes rank and the Exchange Notes will rank pari
passu in right of payment with all existing and future Senior Indebtedness of
the Company (i.e., all indebtedness that is not by its terms expressly
subordinate or junior in right of payment to any other Indebtedness of the
Company). The Outstanding Notes rank and the Exchange Notes will rank senior in
right of payment to any existing and future Subordinated Obligations of the
Company. None of the assets of Bluegreen will secure its obligations under the
Notes, and the Notes will be effectively subordinated to Secured Indebtedness of
the Company to any third party to the extent of any assets serving as security
therefor. As described below, the Indenture allows the Company to incur
Permitted Liens. As of December 28, 1997, on a pro forma basis after giving
effect to the Note Offering
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<PAGE> 87
and the application of the net proceeds therefrom and excluding the Notes, the
Company would have approximately $25.9 million of Secured Indebtedness
outstanding.
SECURITY
The Note Guarantees of certain Subsidiary Guarantors are secured by a
Mortgage (subject to customary exceptions) on the respective Pledged Properties
of such Subsidiary Guarantors. The Pledged Properties consist of real property
presently owned by one of the Subsidiary Guarantors and located in: Texas, New
Mexico, Montana, Arizona, Virginia, Colorado, Idaho, and North Carolina. Such
Mortgages secure the payment and performance when due of all of the obligations
of each Subsidiary Guarantor that owns Pledged Property under their respective
Notes Guarantees. The Company has agreed to obtain certain title insurance
policies in connection with the mortgaging of the Pledged Properties. If all
such title insurance policies are not obtained by June 1, 1998, pursuant to the
Purchase Agreement, the interest rate on the Notes will increase by 0.50% and
any additional interest resulting from such increase will be payable on the
interest payment dates set forth herein. Such additional interest will cease to
accrue on the first to occur of the (i) the date on which a title insurance
policy for the last of the Pledged Properties is delivered to the Initial
Purchasers and (ii) the date on which the last of the Pledged Properties has
been sold. The proceeds of any sale of the Pledged Properties following an Event
of Default under the Indenture would not be sufficient to repay the Notes in
full. No appraisals on the Pledged Properties were obtained in connection with
the Note Offering or the Exchange Offer. As of January 25, 1998, the real
property comprising the Pledged Properties had an aggregate book value of
approximately $46.1 million. Inventory has been sold from the Pledged Properties
since such date. No assurances can be given that the property subject to the
Mortgages could be sold for such amount in the event of a foreclosure or other
comparable proceeding realizing on the Mortgages or that the property will not
decline in value. Pursuant to the terms of the Indenture and the Mortgages, the
Notes Trustee shall be required to release the lien of the Mortgages with
respect to the sale of any property covered thereby unless an Event of Default
shall have occurred and be continuing. Absent such an Event of Default the Notes
Trustee shall not have a lien on the proceeds from a sale of the Pledged
Properties. Consequently, the value of the collateral covered by the Mortgages
will diminish over time as Pledged Properties are sold. Lots are currently being
sold at each of the Pledged Properties. Although no assurances can be given and
the Pledged Properties may be sold more quickly, the Company currently estimates
based on historical sales that the Pledged Properties will be sold-out over a
one to three year period. Except for the Mortgages on the Pledged Properties,
neither the Company nor any of its subsidiaries including the Subsidiary
Guarantors has provided or is required to provide any security for its
obligations under the Notes or the Note Guarantees, as applicable. See "Risk
Factors -- Risk of Inability to Realize Upon Mortgages; Insufficient
Collateral."
NOTE GUARANTEES
Each Subsidiary Guarantor has unconditionally guaranteed, jointly and
severally, to each holder and the Notes Trustee, as primary obligor and not as a
surety, the full and prompt payment of principal of and interest on the Notes,
and the performance of all other obligations of the Company under the Indenture
and the Notes. The initial Subsidiary Guarantors are substantially all of the
Company's currently active Subsidiaries other than BG Aruba, Resort Title
Agency, Inc. and any Receivables Subsidiary and certain other subsidiaries which
do not have material assets. In addition to the initial Subsidiary Guarantors,
the Company will cause each Subsidiary of the Company that becomes a Restricted
Subsidiary after the date of the Indenture to execute and deliver a supplement
to the Indenture pursuant to which such Restricted Subsidiary will guarantee the
payment of the Notes on the same terms and conditions as the Note Guarantees by
the initial Subsidiary Guarantors.
The Outstanding Guarantees are and the Exchange Guarantees will be senior
obligations (i.e., not contractually subordinated to other obligations) of each
respective Subsidiary Guarantor. The Outstanding Guarantees rank and the
Exchange Guarantees will rank pari passu in right of payment with all future and
existing Senior Indebtedness of such Subsidiary Guarantor, and senior in right
of payment to all future and existing Subordinated Obligations of such
Subsidiary Guarantor. As stated above, the Note Guarantees of certain Subsidiary
Guarantors will be secured by a first Mortgage on the Pledged Properties. Except
for such
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<PAGE> 88
secured Note Guarantees, the Note Guarantees of each Subsidiary Guarantor will
be effectively subordinated to Secured Indebtedness of such Subsidiary Guarantor
to the extent of the assets serving as security therefor. As described below,
the Indenture allows the Subsidiaries to incur Permitted Liens. At December 28,
1997, on a pro forma basis after giving effect to the Note Offering and the
application of the net proceeds therefrom, the Subsidiary Guarantors had $14.9
million of Senior Indebtedness outstanding, other than the Note Guarantees.
The obligations of each Subsidiary Guarantor are limited to the maximum
amount as will, after giving effect to all other contingent and fixed
liabilities of such Subsidiary Guarantor (and after giving effect to any
collections from or payments made by or on behalf of any other Subsidiary
Guarantor in respect of the obligations of such other Subsidiary Guarantor under
its Note Guarantee or pursuant to its contribution obligations under the
Indenture) result in the obligations of such Subsidiary Guarantor under the Note
Guarantee not constituting a fraudulent conveyance or fraudulent transfer under
any federal or state law. Each Subsidiary Guarantor that makes a payment or
distribution under a Note Guarantee shall be entitled to contribution from each
other Subsidiary Guarantor in pro rata amount based on the Adjusted Net Assets
of each Subsidiary Guarantor.
Each Subsidiary Guarantor may consolidate with or merge into or sell its
assets to the Company or another Subsidiary Guarantor without limitation.
Subject to certain conditions, each Subsidiary Guarantor may also consolidate
with or merge into or sell all or substantially all its assets to a corporation,
partnership or trust other than the Company or another Subsidiary Guarantor
(whether or not affiliated with the Subsidiary Guarantor). Upon the sale or
disposition of a Subsidiary Guarantor (or all or substantially all of its
assets) to a Person (whether or not an Affiliate of the Subsidiary Guarantor)
which is not a Subsidiary of the Company, which sale or disposition is otherwise
in compliance with the Indenture (including the covenant described under
"-- Certain Covenants -- Limitation on Sales of Assets and Subsidiary Stock"),
such Subsidiary Guarantor shall be deemed released from all of its obligations
under the Indenture and its Note Guarantee and such Note Guarantee shall
terminate; provided, however, that any such termination shall occur only to the
extent that all obligations of such Subsidiary Guarantor under and all of its
guarantees of, and under all of its pledges of assets or other security
interests which secure, any other Indebtedness of the Company shall also
terminate upon such release, sale or transfer.
CHANGE OF CONTROL
Upon the occurrence of any of the following events (each a "Change of
Control"), each holder will have the right to require the Company to repurchase
all or any part of such holder's Notes at a purchase price in cash equal to 101%
of the principal amount thereof plus accrued and unpaid interest, if any, to the
date of purchase (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant Interest Payment Date): (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 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.
Within 30 days following any Change of Control, unless the Company has
mailed a redemption notice with respect to all the outstanding Notes in
connection with such Change of Control, the Company shall mail a notice to each
holder with a copy to the Notes Trustee stating: (1) that a Change of Control
has occurred and that such holder has the right to require the Company to
purchase such holder's Notes at a purchase price in cash equal to 101% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of purchase (subject to the right of holders of record on a record date to
receive interest on the relevant Interest Payment Date); (2) the repurchase date
(which shall be no earlier than 30 days nor later than 60 days from the date
such notice is mailed); and (3) the procedures determined by the Company,
consistent with the Indenture, that a holder must follow in order to have its
Notes purchased. To exercise the repurchase right, holders must comply with
certain procedures set forth in the Indenture.
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Rule 13e-4 under the Exchange Act requires the dissemination of certain
information to security holders in the event of an issuer tender offer and may
apply in the event that the repurchase option becomes available to the holders
of the Notes. The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to the
Indenture. To the extent that the provisions of any securities laws or
regulations conflict with provisions of the Indenture, the Company will comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations described in the Indenture by virtue thereof.
The definition of "Change of Control" includes, among other transactions, a
disposition of all or substantially all of the property and assets of the
Company and its Subsidiaries. With respect to the disposition of property or
assets, the phrase "all or substantially all" as used in the Indenture varies
according to the facts and circumstances of the subject transaction, has no
clearly established meaning under New York law (which is the law which governs
the Indenture) and is subject to judicial interpretation. Accordingly, in
certain circumstances there may be a degree of uncertainty in ascertaining
whether a particular transaction would involve a disposition of "all or
substantially all" of the property or assets of a Person, and therefore it may
be unclear as to whether a Change of Control has occurred and whether the
Company is required to make an offer to repurchase the Notes as described above.
Current and future Senior Indebtedness of the Company and its Subsidiaries
may contain prohibitions of certain events that would constitute a Change of
Control or require such Senior Indebtedness to be repurchased upon a Change of
Control. Moreover, the exercise by the holders of their right to require the
Company to repurchase the Notes could cause a default under such Senior
Indebtedness, even if the Change of Control itself does not, due to the
financial effect of such repurchase on the Company. Finally, the Company's
ability to pay cash to the holders upon a repurchase may be limited by the
Company's then existing financial resources. There can be no assurance that
sufficient funds will be available when necessary to make any required
repurchases. See "Risk Factors -- Limitation on Repurchase of Notes Upon a
Change of Control."
CERTAIN COVENANTS
The Indenture contains certain covenants including, among others, the
following:
Limitation on Indebtedness. (a) The Company shall not, and shall not
permit any of its Restricted Subsidiaries to, Incur any Indebtedness; provided,
however, that the Company and its Restricted Subsidiaries may Incur Indebtedness
if no Default or Event of Default shall have occurred and be continuing at the
time of such Incurrence or would occur as a consequence of such Incurrence and
the Consolidated Coverage Ratio would be equal to at least (x) 2.00 to 1.00 if
such Indebtedness is Incurred prior to April 1, 2000, (y) 2.25 to 1.00 if such
Indebtedness is Incurred after April 1, 2000 but prior to March 31, 2002 and (z)
2.50 to 1.00 after March 31, 2002.
(b) Notwithstanding the foregoing paragraph (a), the Company and its
Restricted Subsidiaries may Incur any or all of the following Indebtedness:
(i) Indebtedness Incurred under any Credit Agreements and/or pursuant
to seller financing in connection with the acquisition of inventory;
provided, however, after giving effect to such Incurrence, the aggregate
principal amount of such Indebtedness then outstanding does not exceed
$30.0 million;
(ii) Indebtedness represented by Capitalized Lease Obligations,
mortgage financing or purchase money obligations in addition to that
specified in clause (i) above, in each case Incurred for the purpose of
financing all or any part of the purchase price or cost of construction or
improvement of property used in a Permitted Business or Incurred to
refinance any such purchase price or cost of construction or improvement,
in each case Incurred no later than 365 days after the date of such
acquisition or the date of completion of such construction or improvement;
provided, however, that the principal amount of any Indebtedness Incurred
pursuant to this clause (ii) shall not exceed $2.0 million at any time
outstanding;
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(iii) Indebtedness outstanding pursuant to the Convertible Debentures,
the Convertible Notes and the RDI Note and other Existing Indebtedness
outstanding as of the Issue Date after the application of the net proceeds
of the Note Offering;
(iv) Indebtedness of the Company owing to and held by any Wholly-Owned
Subsidiary or Indebtedness of a Restricted Subsidiary owing to and held by
the Company or any Wholly-Owned Subsidiary; provided, however, that (A) if
the Company is the obligor on such Indebtedness, such Indebtedness is
expressly subordinate to the payment in full of all Obligations with
respect to the Notes and (B) any subsequent issuance or transfer of any
Capital Stock or any other event which results in any such Wholly-Owned
Subsidiary ceasing to be a Wholly-Owned Subsidiary or any subsequent
transfer of any such Indebtedness (except to the Company or any
Wholly-Owned Subsidiary) shall be deemed, in each case, to constitute the
Incurrence of such Indebtedness by the issuer thereof;
(v) Indebtedness represented by (A) the Outstanding Notes and any
Exchange Notes issued in exchange for the Outstanding Notes of any equal
principal amount, (B) the Note Guarantees, and (C) any Refinancing
Indebtedness Incurred in respect of any Indebtedness described in clauses
(i) through (iii) or this clause (v) or Incurred pursuant to paragraph (a)
above;
(vi) (A) Indebtedness of a Restricted Subsidiary Incurred and
outstanding on the date on which such Restricted Subsidiary was acquired by
the Company (other than Indebtedness Incurred in anticipation of, or to
provide all or any portion of the funds or credit support utilized to
consummate the transaction or series of related transactions pursuant to
which such Restricted Subsidiary became a Subsidiary or was otherwise
acquired by the Company); provided, however that, at the time such
Restricted Subsidiary is acquired by the Company, the Company would have
been able to Incur $1.00 of additional Indebtedness pursuant to paragraph
(a) above after giving effect to the Incurrence of such Indebtedness
pursuant to this clause (vi) and (B) Refinancing Indebtedness Incurred by a
Restricted Subsidiary in respect of Indebtedness incurred by such
Restricted Subsidiary pursuant to this clause (vi);
(vii) Indebtedness (A) in respect of performance bonds, completion and
maintenance bonds, bankers' acceptances, letters of credit and surety or
appeal bonds provided by the Company or any of its Restricted Subsidiaries
to their customers in the ordinary course of their business, (B) in respect
of performance bonds or similar obligations of the Company or any of its
Restricted Subsidiaries for or in connection with pledges, deposits or
payments made or given in the ordinary course of business in connection
with or to secure statutory, regulatory or similar obligations, including
obligations under health, safety or environmental obligations and (C)
arising from Guarantees to suppliers, lessors, licensees, contractors,
franchises or customers of obligations (other than Indebtedness) incurred
in the ordinary course of business;
(viii) Indebtedness arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations, or
from Guarantees or letters of credits, surety bonds or performance bonds
securing any obligations of the Company or any of its Restricted
Subsidiaries pursuant to such agreements, in each case Incurred in
connection with the disposition of any business assets or Restricted
Subsidiary of the Company (other than Guarantees of Indebtedness or other
obligations Incurred by any Person acquiring all or any portion of such
business assets or Restricted Subsidiary of the Company for the purpose of
financing such acquisition) not to exceed the gross proceeds actually
received by the Company or any of its Restricted Subsidiaries in connection
with such disposition; provided, however, that the principal amount of any
Indebtedness Incurred pursuant to this clause (viii) when taken together
with all Indebtedness Incurred pursuant to this clause (viii) and then
outstanding, shall not exceed $2.0 million;
(ix) Indebtedness under Currency Agreements and Interest Rate
Agreements; provided, however, that in the case of Currency Agreements and
Interest Rate Agreements such Currency Agreements and Interest Rate
Agreements are entered into for bona fide hedging purposes of the Company
or its Restricted Subsidiaries (as determined in good faith by the Board of
Directors of the Company) and correspond in terms of notional amount,
duration, currencies and interest rates as applicable, to Indebtedness of
the Company or its Restricted Subsidiaries Incurred without violation of
the Indenture
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or to business transactions of the Company or its Restricted Subsidiaries
on customary terms entered into in the ordinary course of business;
(x) Indebtedness consisting of (A) Guarantees by the Company (so long
as the Company could have Incurred such Indebtedness directly without
violation of the Indenture) and (B) Guarantees by a Restricted Subsidiary
of Senior Indebtedness Incurred by the Company without violation of the
Indenture (so long as such Restricted Subsidiary could have Incurred such
Indebtedness directly without violation of the Indenture);
(xi) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument issued by the
Company or its Subsidiaries drawn against insufficient funds in the
ordinary course of business in an amount not to exceed $250,000 at any
time, provided that such Indebtedness is extinguished within two business
days of its incurrence; and
(xii) Indebtedness (other than Indebtedness described in clauses
(i)-(xi)) in a principal amount which, when taken together with the
principal amount of all other Indebtedness Incurred pursuant to this clause
(xii) and then outstanding, will not exceed $10.0 million.
For purposes of determining compliance with this "Limitation on
Indebtedness" covenant, in the event that an item of Indebtedness meets the
criteria of more than one of the types of Indebtedness described in the above
clauses at the time of incurrence, the Company shall, in its sole discretion,
classify such item of Indebtedness and only be required to include the amount
and type of such Indebtedness in the applicable clause(s) so selected by the
Company. No fluctuation in currency exchange rates or interest rates following
the incurrence of any Indebtedness shall result in a Default hereunder if the
Indebtedness itself was incurred in compliance with the Indenture at the time of
incurrence.
(c) Neither the Company nor any Restricted Subsidiary shall Incur any
Indebtedness under paragraph (b) above if the proceeds thereof are used,
directly or indirectly, to refinance any Subordinated Obligations of the Company
unless such Indebtedness shall be subordinated to the Notes to at least the same
extent as such Subordinated Obligations. No Restricted Subsidiary shall Incur
any Indebtedness under paragraph (b) above if the proceeds thereof are used,
directly or indirectly, to refinance any Guarantor Subordinated Obligation of
such Subsidiary Guarantor unless such Indebtedness shall be subordinated to the
obligations of such Subsidiary Guarantor under the Note Guarantee to at least
the same extent as such Guarantor Subordinated Obligation.
(d) The Company will not permit any Unrestricted Subsidiary to Incur any
Indebtedness other than Non-Recourse Debt.
Limitation on Restricted Payments. (a) The Company shall not, and shall
not permit any of its Restricted Subsidiaries, directly or indirectly, to (i)
declare or pay any dividend or make any distribution on or in respect of its
Capital Stock (including any payment in connection with any merger or
consolidation involving the Company or any of its Restricted Subsidiaries)
except (A) dividends or distributions payable in its Capital Stock (other than
Disqualified Stock) or in options, warrants or other rights to purchase such
Capital Stock (other than Disqualified Stock) and (B) dividends or distributions
payable to the Company or a Restricted Subsidiary of the Company which holds any
equity interest in the paying Restricted Subsidiary, (ii) purchase, redeem,
retire or otherwise acquire for value any Capital Stock of the Company held by
Persons other than a Wholly-Owned Subsidiary of the Company or any Capital Stock
of a Restricted Subsidiary of the Company held by any Person, other than a
Wholly-Owned Subsidiary (in either case, other than in exchange for its Capital
Stock (other than Disqualified Stock)), (iii) purchase, repurchase, redeem,
defease or otherwise acquire or retire for value, any Subordinated Obligations
or (iv) make any Investment (other than a Permitted Investment) in any Person
(any such dividend, distribution, purchase, redemption, repurchase, defeasance,
other acquisition, retirement or Investment as described in preceding clauses
(i) through (iv) being referred to as a "Restricted Payment"), if at the time
the Company or such Restricted Subsidiary makes such Restricted Payment and
immediately after giving pro forma effect to such Restricted Payment: (1) a
Default shall have occurred and be continuing (or would result therefrom); or
(2) the Company is not able to incur an additional $1.00 of Indebtedness
pursuant to paragraph (a) under "Limitation on
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Indebtedness"; or (3) the aggregate amount of such Restricted Payment and all
other Restricted Payments declared or made subsequent to the Issue Date would
exceed the sum, without duplication, of (A) 50% of the Consolidated Net Income
accrued during the period (treated as one accounting period) from the first day
of the first fiscal quarter beginning on or after the Issue Date to the end of
the most recent fiscal quarter ending prior to the date of such Restricted
Payment as to which financial results are available (but in no event ending more
than 135 days prior to the date of such Restricted Payment) (or, in case such
Consolidated Net Income shall be a deficit, minus 100% of such deficit); (B) the
aggregate Net Cash Proceeds received by the Company from the issue or sale of
its Capital Stock subsequent to the Issue Date (other than Disqualified Stock
and other than Net Cash Proceeds received from an issuance or sale of such
Capital Stock to a Subsidiary of the Company); (C) the amount by which
Indebtedness of the Company is reduced on the Company's balance sheet upon the
conversion or exchange (other than by a Restricted Subsidiary of the Company)
subsequent to the Issue Date of any Indebtedness of the Company convertible or
exchangeable for Capital Stock of the Company (less the amount of any cash, or
other property, distributed by the Company upon such conversion or exchange);
(D) the amount equal to the net reduction in Investments (other than Permitted
Investments) made after the Issue Date by the Company or any of its Restricted
Subsidiaries in any Person resulting from (i) repurchases or redemptions of such
Investments by such Person, proceeds realized upon the sale of such Investment
to an unaffiliated purchaser, repayments of loans or advances or other transfers
of assets by such Person to the Company or any Restricted Subsidiary of the
Company or (ii) the redesignation of Unrestricted Subsidiaries to Restricted
Subsidiaries (valued in each case as provided in the definition of "Investment")
not to exceed, in the case of any Unrestricted Subsidiary, the amount of
Investments previously included in the calculation of the amount of Restricted
Payments; provided, however, that no amount shall be included under this Clause
(D) to the extent it is already included in Consolidated Net Income; and (E) $5
million.
(b) The provisions of paragraph (a) shall not prohibit: (i) any purchase or
redemption of Capital Stock or Subordinated Obligations of the Company made by
exchange for, conversion into or out of the proceeds of the substantially
concurrent sale of, Capital Stock of the Company (other than Disqualified Stock
and other than Capital Stock issued or sold to a Subsidiary); provided, however,
that (A) such purchase or redemption shall be excluded in the calculation of the
amount of Restricted Payments and (B) the Net Cash Proceeds (to the extent used
for such purchase or redemption) from such sale shall be excluded from clause
(3) (B) of paragraph (a); (ii) any purchase or redemption of Subordinated
Obligations of the Company made by exchange for, conversion into or out of the
proceeds of the substantially concurrent sale of, Subordinated Obligations
constituting Refinancing Indebtedness of the Company in compliance with the
"Limitation on Indebtedness" covenant; provided, further, that such purchase or
redemption shall be excluded in the calculation of the amount of Restricted
Payments; (iii) any purchase or redemption of Subordinated Obligations as a
result of a Change of Control (provided that the covenant described in
"Limitation on Repayments upon a Change of Control" is complied with); (iv) any
purchase or redemption of Subordinated Obligations from Net Available Cash to
the extent permitted under "Limitation on Sales of Assets and Subsidiary Stock"
below; provided, further, that such purchase or redemption shall be excluded in
the calculation of the amount of Restricted Payments; (v) payment by the Company
of any scheduled sinking fund payments under the Public Debentures; provided
that the Company reduces its required sinking fund payments to the maximum
amount permitted under the Indenture pursuant to which such Public Debentures
were issued; (vi) repayment of the Convertible Notes upon stated maturity,
provided, however, that the amount of such payment shall be included in the
calculation of the amount of permitted Restricted Payments subsequent to the
date of such payment; (vii) dividends paid within 60 days after the date of
declaration if at such date of declaration such dividend would have complied
with this provision; provided, however, that such dividend shall be included in
the calculation of the amount of Restricted Payments; and (viii) repurchases of
Capital Stock deemed to occur upon the exercise of stock options (other than
options relating to Disqualified Stock) if such Capital Stock represents a
portion of the exercise price of such options; provided, however, that in the
case of clauses (i), (ii), (iii), (iv) and (v) no Default or Event of Default
shall have occurred or be continuing at the time of such payment or as a result
thereof. As discussed below under "Description of Other Indebtedness," an Event
of Default under the Indenture may not prevent payment on the Public Debentures
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or the Convertible Notes for more than 90 days unless the Company's obligations
under the Notes have been and remain accelerated. See "Description of Other
Indebtedness."
(c) For purposes of determining compliance with the foregoing covenant,
Restricted Payments may be made with cash or non-cash assets, provided that any
Restricted Payment made other than in cash shall be valued at the fair market
value (determined, subject to the additional requirements of the immediately
succeeding proviso, in good faith by the Board of Directors) of the assets so
utilized in making such Restricted Payment, provided, however that (i) in the
case of any Restricted Payment made with Capital Stock or Indebtedness, such
Restricted Payment shall be deemed to be made in an amount equal to the greater
of the fair market value thereof and the liquidation preference (if any) or
principal amount of the Capital Stock or Indebtedness, as the case may be, so
utilized, (ii) in the case of any Restricted Payment made other than in cash in
an aggregate amount in excess of $2.0 million but less than $4.0 million, the
fairness of the valuation thereof (as determined by the Company) for purposes of
determining compliance with the "Limitation on Restricted Payments" covenant in
the Indenture shall be approved by a majority of the disinterested members of
the Board of Directors of the Company and (iii) in the case of any Restricted
Payment made other than in cash in an aggregate amount of $4.0 million or more,
a written opinion as to the fairness of the valuation thereof (as determined by
the Company) for purposes of determining compliance with the "Limitation on
Restricted Payments" covenant in the Indenture shall be issued by an independent
investment banking, accounting or qualified appraisal firm of national standing.
(d) Not later than the date of making any Restricted Payment, the Company
shall deliver to the Notes Trustee an Officer's Certificate stating that such
Restricted Payment complies with the Indenture and setting forth in reasonable
detail the basis upon which the required calculations were computed, which
calculations may be based upon the Company's latest available quarterly
financial statements, and a copy of any required investment banker's,
accountant's or appraiser's opinion.
Limitation on Liens. The Indenture provides that the Company will not and
will not permit any Restricted Subsidiary to, directly or indirectly, create or
permit to exist any Liens except for Permitted Liens.
Limitation on Restrictions on Distributions from Restricted
Subsidiaries. The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, create or permit to exist or become effective any consensual
encumbrance or consensual restriction on the ability of any such Restricted
Subsidiary to (a) pay dividends or make any other distributions on its Capital
Stock or pay any Indebtedness or other obligation owed to the Company, (b) make
any loans or advances to the Company, (c) transfer any of its property or assets
to the Company, or (d) guarantee the Notes, except: (i) any encumbrance or
restriction pursuant to an agreement in effect at or entered into on the Issue
Date, including, without limitation, the Indenture, the Notes and the Credit
Agreements, if any; (ii) any encumbrance or restriction with respect to such a
Restricted Subsidiary pursuant to an agreement relating to any Indebtedness
Incurred by such Restricted Subsidiary which was entered into on or prior to the
date on which such Restricted Subsidiary was acquired by the Company and
outstanding on such date (other than Indebtedness Incurred in anticipation of,
or to provide all or any portion of the funds or credit support utilized to
consummate, the transaction or series of related transactions pursuant to which
such Restricted Subsidiary became a Restricted Subsidiary of the Company or was
acquired by the Company) provided that such encumbrance or restriction is not
applicable to any properties or assets other than of the types owned or held by
such Restricted Subsidiary at the time it became a Restricted Subsidiary; (iii)
any encumbrance or restriction with respect to such a Restricted Subsidiary
effecting a refinancing of Indebtedness issued pursuant to an agreement referred
to in clauses (i) or (ii) or this clause (iii) or contained in any amendment to
an agreement referred to in clauses (i) or (ii) or this clause (iii) (or
effecting a Refinancing of such Refinancing Indebtedness pursuant to this clause
(iii) or contained in any amendment, modification, restatement, renewal or
supplement to an agreement referred to in clause (i) or (ii) or this clause
(iii)); provided, however, that the encumbrances and restrictions with respect
to such Restricted Subsidiary contained in any of such agreement, refinancing
agreement or amendment, taken as a whole, are no less favorable to the holders
of the Notes in any material respect, as determined in good faith by the Board
of Directors of the Company, than encumbrances and restrictions with respect to
such Restricted Subsidiary contained in agreements in effect at, or entered into
on, the Issue Date; (iv) in the case of clause (c), any encumbrance or
restriction (A) that restricts in a customary manner the subletting, assignment
or
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transfer of any property or asset that is a lease, license, conveyance or
contract or similar property or asset, (B) by virtue of any transfer of,
agreement to transfer, option or right with respect to, or Lien on, any property
or assets of the Company or any Restricted Subsidiary not otherwise prohibited
by the Indenture or (C) that is included in a licensing agreement to the extent
such restrictions limit the transfer of the property subject to such licensing
agreement; (v) in the case of clause (c) above, restrictions contained in
security agreements, mortgages or similar documents securing Indebtedness
(including purchase money Indebtedness) of a Restricted Subsidiary to the extent
such restrictions restrict the transfer of the property subject to such security
agreements, mortgages or similar documents; (vi) any restriction with respect to
such a Restricted Subsidiary imposed pursuant to an agreement entered into for
the sale or disposition of all or substantially all the Capital Stock or assets
of such Restricted Subsidiary pending the closing of such sale or disposition;
(vii) encumbrances or restrictions arising or existing by reason of applicable
law; (viii) any encumbrance or restriction pursuant to Indebtedness of
Restricted Subsidiaries that is permitted to be Incurred subsequent to the Issue
Date pursuant to the provisions of the covenant described under "-- Limitation
on Indebtedness"; and (ix) restrictions on cash or other deposits imposed by
customers under contracts incurred in the ordinary course of business consistent
with past practices.
Limitation on Sales of Assets and Subsidiary Stock. (a) The Company shall
not, and shall not permit any of its Restricted Subsidiaries to, make any Asset
Disposition unless (i) the Company or such Restricted Subsidiary receives
consideration at the time of such Asset Disposition at least equal to the fair
market value, as determined in good faith by the Company's Board of Directors
(including as to the value of all non-cash consideration), of the shares and
assets subject to such Asset Disposition, (ii) at least 75% of the consideration
thereof received by the Company or such Restricted Subsidiary is in the form of
cash or Cash Equivalents and (iii) an amount equal to 100% of the Net Available
Cash from such Asset Disposition is applied by the Company (or such Restricted
Subsidiary, as the case may be) (A) first, to the extent the Company or any
Restricted Subsidiary elects (or is required by the terms of any Secured
Indebtedness), (x) to prepay, repay or purchase Secured Indebtedness or (y) to
the investment in or acquisition of Additional Assets within 360 days from the
later of the date of such Asset Disposition or the receipt of such Net Available
Cash; (B) second, within 360 days from the receipt of such Net Available Cash,
to the extent of the balance of such Net Available Cash after application in
accordance with clause (A), to make an offer to purchase Notes at 100% of their
principal amount plus accrued and unpaid interest, if any, thereon; and (C)
third, to the extent of the balance of such Net Available Cash after application
in accordance with clauses (A) and (B) (w) to the investment in or acquisition
of Additional Assets, (x) the making of Temporary Cash Investments or (y) any
other purpose otherwise permitted under the Indenture, in each case within the
later of 45 days after the application of Net Available Cash in accordance with
clauses (A) and (B) or the date that is one year from the receipt of such Net
Available Cash; provided, however, that, in connection with any prepayment,
repayment or purchase of Indebtedness pursuant to clause (A) or (B) above, the
Company or such Restricted Subsidiary shall retire such Indebtedness and shall
cause the related loan commitment (if any) to be permanently reduced in an
amount equal to the principal amount so prepaid, repaid or purchased.
Notwithstanding the foregoing provisions, the Company and its Restricted
Subsidiaries shall not be required to apply any Net Available Cash in accordance
herewith except to the extent that the aggregate Net Available Cash from all
Asset Dispositions which are not applied in accordance with this covenant at any
time exceeds $10.0 million. The Company shall not be required to make an offer
for Notes pursuant to this covenant if the Net Available Cash available therefor
(after application of the proceeds as provided in clause (A)) is less than $10.0
million for any particular Asset Disposition (which lesser amounts shall be
carried forward for purposes of determining whether an offer is required with
respect to the Net Available Cash from any subsequent Asset Disposition).
For the purposes of this covenant, the following will be deemed to be cash:
(x) the assumption by the transferee of Senior Indebtedness of the Company or
Senior Indebtedness of any Restricted Subsidiary of the Company and the release
of the Company or such Restricted Subsidiary pursuant to a customary novation
agreement from all liability on such Senior Indebtedness in connection with such
Asset Disposition (in which case the Company shall, without further action, be
deemed to have applied such assumed Indebtedness in accordance with clause (A)
of the preceding paragraph) and (y) securities received by the Company or any
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Restricted Subsidiary of the Company from the transferee that are promptly (and
in any event within 90 days) converted by the Company or such Restricted
Subsidiary into cash.
(b) In the event of an Asset Disposition that requires the purchase of
Notes pursuant to clause (a) (iii) (B), the Company will be required to purchase
Notes tendered pursuant to an offer by the Company for the Notes at a purchase
price of 100% of their principal amount plus accrued and unpaid interest, if
any, to the purchase date in accordance with the procedures (including prorating
in the event of oversubscription) set forth in the Indenture. If the aggregate
purchase price of the Notes tendered pursuant to the offer is less than the Net
Available Cash allotted to the purchase of the Notes, the Company will apply the
remaining Net Available Cash in accordance with clause (a)(iii)(C) above.
Limitation on Affiliate Transactions. (a) The Company will not, and will
not permit any of its Restricted Subsidiaries to, directly or indirectly, enter
into or conduct any transaction or series of related transactions (including the
purchase, sale, lease or exchange of any property, employee compensation
arrangement or the rendering of any service) with or for the benefit of any
Affiliate of the Company, other than the Company or a Wholly-Owned Subsidiary
(an "Affiliate Transaction") unless: (i) the terms of such Affiliate Transaction
are no less favorable to the Company or such Restricted Subsidiary, as the case
may be, than those that could be obtained at the time of such transaction in
arm's length dealings with a Person who is not such an Affiliate; (ii) in the
event such Affiliate Transaction involves an aggregate amount in excess of $1.0
million or is a loan, advance or other Indebtedness, the terms of such
transaction have been approved by a majority of the disinterested members of
such Board, if any (and such majority determines that such Affiliate Transaction
satisfies the criteria in clause (i) above); and (iii) in the event such
Affiliate Transaction involves an aggregate amount in excess of $2.0 million,
the Company has received a written opinion from an independent investment
banking, accounting or appraisal firm of nationally recognized standing that
such Affiliate Transaction is fair to the Company or such Restricted Subsidiary,
as the case may be, from a financial point of view.
(b) The foregoing paragraph (a) shall not apply to (i) the Company's
employee compensation and other benefit arrangements (including without
limitation any option grants or other equity based awards), (ii) loans or
advances to employees in the ordinary course of business of the Company or any
of its Restricted Subsidiaries in aggregate amount outstanding not to exceed
$250,000 to any employee or $500,000 in the aggregate at any time, (iii) the
payment of reasonable and customary fees to directors of the Company who are not
employees of the Company (including without limitation the grant of stock
options), (iv) indemnification agreements with, and the payment of fees and
indemnities to, directors, officers and employees of the Company and its
Restricted Subsidiaries, in each case in the ordinary course of business, (v)
transactions pursuant to agreements in existence on the Issue Date which are (x)
described in the Prospectus or (y) otherwise, in the aggregate, immaterial to
the Company and its Restricted Subsidiaries taken as a whole, and, in either
case, are effected pursuant to the terms of such agreements as in effect on the
Issue Date, and (vi) transactions with respect to the acquisition of Accounts
Receivable and/or direct sales of Accounts Receivable to financial institutions
or sales of Accounts Receivable in connection with securitization transactions,
in each case in the ordinary course of business.
Limitation on Issuances of Capital Stock of Restricted Subsidiaries. The
Company will not permit any of its Restricted Subsidiaries to issue any Capital
Stock to any Person (other than to the Company or a Wholly-Owned Subsidiary of
the Company) or permit any Person (other than the Company or a Wholly-Owned
Subsidiary of the Company and other than directors' qualifying shares and, to
the extent required by local ownership laws in foreign countries, shares owned
by foreign shareholders) to own any Capital Stock of a Restricted Subsidiary of
the Company; provided, however, that this provision shall not prohibit (a) the
Company or any of its Restricted Subsidiaries from selling, leasing or otherwise
disposing of all of the Capital Stock of any Restricted Subsidiary, provided
that the net cash proceeds from such sale, lease or other disposition are
applied in accordance with the covenant described under the caption
"-- Limitation on Sales of Assets and Subsidiary Stock" or (b) the designation
of a Restricted Subsidiary as an Unrestricted Subsidiary in compliance with the
Indenture.
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Limitation on Repayment upon a Change of Control. The Company will not
make an offer to repurchase any Subordinated Obligations if it is required to do
so pursuant to a Change of Control until at least 60 days after the occurrence
of such Change of Control and shall not purchase any Subordinated Obligations
for 30 days following the time the Company is required to make purchases of the
Notes under the Indenture following such Change of Control.
Limitation on Sale/Leaseback Transactions. The Company will not, and will
not permit any Restricted Subsidiary to, directly or indirectly, enter into,
Guarantee or otherwise become liable with respect to any Sale/Leaseback
Transaction with respect to any property or assets unless (a) the Company or
such Restricted Subsidiary, as the case may be, would be entitled pursuant to
the Indenture to Incur Indebtedness secured by a Permitted Lien on such property
or assets in an amount equal to the Attributable Indebtedness with respect to
such Sale/Leaseback Transaction, (b) the Net Cash Proceeds from such
Sale/Leaseback Transaction are at least equal to the fair market value of the
property or assets subject to such Sale/Leaseback Transaction (such fair market
value determined, in the event such property or assets have a fair market value
in excess of $1.0 million, no more than 30 days prior to the effective date of
such Sale/Leaseback Transaction, by the Board of Directors of the Company as
evidenced by a resolution of such Board) and (c) the net cash proceeds of such
Sale/Leaseback Transaction are applied in accordance with the provisions
described under "-- Limitation on Sales of Assets and Subsidiary Stock."
SEC Reports. The Company will file with the Notes Trustee and provide to
the holders of the Notes (upon request), within 15 days after it files them with
the Commission, copies of the annual reports and of the information, documents
and other reports (or copies of such portions of any of the foregoing as the
Commission may by rules and regulations prescribe) which the Company files with
the Commission pursuant to Section 13 or 15(d) of the Exchange Act. In the event
that the Company is not required to file such reports with the Commission
pursuant to the Exchange Act, the Company will nevertheless deliver such
Exchange Act information to the holders of the Notes within 15 days after it
would have been required to file it with the Commission.
Limitation on Designations of Unrestricted Subsidiaries. The Company may
designate any Subsidiary of the Company (other than a Subsidiary of the Company
which owns Capital Stock of a Restricted Subsidiary) as an "Unrestricted
Subsidiary" under the Indenture (a "Designation") only if:
(a) no Default shall have occurred and be continuing at the time of or
after giving effect to such Designation; and
(b) except in the case of a newly organized Subsidiary in which the
Company and the Restricted Subsidiaries have made aggregate investments of
$10,000 or less, the Company would be permitted under the Indenture to make
an Investment at the time of Designation (assuming the effectiveness of
such Designation) in an amount (the "Designation Amount") equal to the sum
of (i) fair market value of the Capital Stock of such Subsidiary owned by
the Company and the Restricted Subsidiaries on such date and (ii) the
aggregate amount of other Investments of the Company and the Restricted
Subsidiaries in such Subsidiary on such date; and
(c) the Company would be permitted to incur $1.00 of additional
Indebtedness (other than permitted Indebtedness) pursuant to the covenant
described under "-- Limitation on Indebtedness" at the time of Designation
(assuming the effectiveness of such Designation).
In the event of any such Designation, the Company shall be deemed to have made
an Investment constituting a Restricted Payment pursuant to the covenant
described under "-- Limitation on Restricted Payments" for all purposes of the
Indenture in the Designation Amount. The Indenture will further provide that the
Company shall not, and shall not permit any Restricted Subsidiary to, at any
time (i) provide direct or indirect credit support for or a guarantee of any
Indebtedness of any Unrestricted Subsidiary (including of any undertaking,
agreement or instrument evidencing such Indebtedness), (ii) be directly or
indirectly liable for any Indebtedness of any Unrestricted Subsidiary or (iii)
be directly or indirectly liable for any Indebtedness which provides that the
holder thereof may (upon notice, lapse of time or both) declare a default
thereon or cause the payment thereof to be accelerated or payable prior to its
final scheduled maturity upon the
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occurrence of a default with respect to any Indebtedness of any Unrestricted
Subsidiary (including any right to take enforcement action against such
Unrestricted Subsidiary), except, in the case of clause (i) or (ii), to the
extent permitted under the covenant described under "-- Limitation on Restricted
Payments."
The Indenture further provides that the Company may revoke any Designation
of a Subsidiary as an Unrestricted Subsidiary (a "Revocation"), whereupon such
Subsidiary shall then constitute a Restricted Subsidiary, if:
(a) no Default shall have occurred and be continuing at the time of
and after giving effect to such Revocation; and
(b) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if Incurred at
such time, have been permitted to be Incurred for all purposes of the
Indenture.
All Designations and Revocations must be evidenced by Board Resolutions of
the Company delivered to the Notes Trustee certifying compliance with the
foregoing provisions.
Taxes. The Company will, and will cause its Restricted Subsidiaries to,
pay and discharge when due and payable all taxes, levies, imposts, duties or
other governmental charges ("Taxes") imposed on it or on its income or profits
or on any of its properties except such Taxes which are being contested in good
faith in appropriate proceedings and for which adequate reserves have been
established in accordance with GAAP.
Merger and Consolidation. The Company shall not consolidate with or merge
with or into, or convey, transfer or lease all or substantially all of its
assets to, any Person, unless: (a) the resulting, surviving or transferee Person
(the "Successor Company") shall be a corporation organized and existing under
the laws of the United States of America, any State thereof or the District of
Columbia and the Successor Company (if not the Company) shall expressly assume,
by supplemental indenture, executed and delivered to the Notes Trustee, in form
satisfactory to the Notes Trustee, all the obligations of the Company under the
Notes and the Indenture; (b) immediately after giving effect to such transaction
(and treating any Indebtedness that becomes an obligation of the Successor
Company or any Subsidiary of the Successor Company as a result of such
transaction as having been incurred by the Successor Company or such Restricted
Subsidiary at the time of such transaction), no Default or Event of Default
shall have occurred and be continuing; (c) immediately after giving effect to
such transaction, the Successor Company (i) shall have a Consolidated Net Worth
equal or greater to the Consolidated Net Worth of the Company immediately prior
to such transaction and (ii) shall be able to Incur at least an additional $1.00
of Indebtedness pursuant to paragraph (a) of "-- Limitation on Indebtedness";
(d) the Company shall have delivered to the Notes Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger or transfer and such supplemental indenture (if any) comply with the
Indenture; and (e) there has been delivered to the Notes Trustee an Opinion of
Counsel to the effect that holders of the Notes will not recognize income, gain
or loss for U.S. Federal income tax purposes as a result of such consolidation,
merger, conveyance, transfer or lease and will be subject to U.S. Federal income
tax on the same amount and in the same manner and at the same times as would
have been the case if such consolidation, merger, conveyance, transfer or lease
had not occurred.
The Successor Company will succeed to, and be substituted for, and may
exercise every right and power of, the Company under the Indenture, but, in the
case of a lease of all or substantially all its assets, the Company will not be
released from the obligation to pay the principal of and interest on the Notes.
Notwithstanding the foregoing clauses (b) and (c), any Restricted
Subsidiary of the Company may consolidate with, merge into or transfer all or
part of its properties and assets to the Company or any other Restricted
Subsidiary.
EVENTS OF DEFAULT
Each of the following constitutes an Event of Default under the Indenture:
(a) a default in any payment of interest on any Note when due, continued for 30
days, (b) a default in the payment of principal of any Note when due at its
Stated Maturity, upon optional redemption, upon required repurchase, upon
declaration or
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otherwise, (c) the failure by the Company to comply with its obligations under
the "Merger and Consolidation" covenant described under "Certain Covenants"
above, (d) the failure by the Company to comply for 30 days after notice by the
Trustee or holders of not less than 25% aggregate principal amount of Notes then
outstanding with any of its obligations under the covenants described under
"Change of Control" above or under covenants described under "Certain Covenants"
above (in each case, other than a failure to purchase Notes which shall
constitute an Event of Default under clause (b) above), other than "Merger and
Consolidation," (e) the failure by the Company or any Subsidiary Guarantor to
comply for 60 days after notice with its other agreements contained in the
Indenture, (f) Indebtedness of the Company or any Restricted Subsidiary is not
paid within any applicable grace period after final maturity or is accelerated
by the holders thereof because of a default and the total amount of such
Indebtedness unpaid or accelerated exceeds $2.0 million and such default shall
not have been cured or such acceleration rescinded after a 20-day period, (g)
certain events of bankruptcy, insolvency or reorganization of the Company or a
Significant Subsidiary (the "bankruptcy provisions"), (h) any judgment or decree
for the payment of money in excess of $2.0 million (to the extent not covered by
insurance) is rendered against the Company or a Significant Subsidiary and such
judgment or decree shall remain undischarged or unstayed for a period of 60 days
after such judgment becomes final and non-appealable (the "judgment default
provision"), (i) any Note Guarantee by a Significant Subsidiary ceases to be in
full force and effect (except as contemplated by the terms of the Indenture) or
any Subsidiary Guarantor that is a Significant Subsidiary denies or disaffirms
its obligations under the Indenture or its Note Guarantee and such Default
continues for 10 days, or (j) an event of default under, or if none is specified
therein, a failure to comply with any provision of any Mortgage and the
continuance of such event of default or failure to comply, as the case may be,
for a period of 30 days after written notice is given by the Notes Trustee to
the Company or to the Company and the Notes Trustee by the holders of at least
25% in aggregate principal amount of the Notes outstanding. However, a default
under clause (d) or (e) will not constitute an Event of Default until the Notes
Trustee or the holders of 25% in principal amount of the outstanding Notes
notify the Company of the default and the Company does not cure such default
within the time specified in clause (d) or (e) after receipt of such notice.
If an Event of Default occurs and is continuing, the Notes Trustee or the
holders of at least 25% in principal amount of the outstanding Notes by notice
to the Company may declare the principal of and accrued and unpaid interest, if
any, on all the Notes to be due and payable. Upon such a declaration, such
principal and accrued and unpaid interest shall be due and payable immediately.
If an Event of Default relating to certain events of bankruptcy, insolvency or
reorganization of the Company occurs, the principal of and accrued and unpaid
interest on all the Notes will become and be immediately due and payable without
any declaration or other act on the part of the Notes Trustee or any holders.
Under certain circumstances, the holders of a majority in principal amount of
the outstanding Notes may rescind any such acceleration with respect to the
Notes and its consequences.
Subject to the provisions of the Indenture relating to the duties of the
Notes Trustee, if an Event of Default occurs and is continuing, the Notes
Trustee will be under no obligation to exercise any of the rights or powers
under the Indenture at the request or direction of any of the holders unless
such holders have offered to the Notes Trustee reasonable indemnity or security
against any loss, liability or expense. Except to enforce the right to receive
payment of principal, premium (if any) or interest when due, no holder may
pursue any remedy with respect to the Indenture or the Notes unless (i) such
holder has previously given the Notes Trustee notice that an Event of Default is
continuing, (ii) holders of at least 25% in principal amount of the outstanding
Notes have requested the Notes Trustee to pursue the remedy, (iii) such holders
have offered the Notes Trustee reasonable security or indemnity against any
loss, liability or expense, (iv) the Notes Trustee has not complied with such
request within 60 days after the receipt of the request and the offer of
security or indemnity and (v) the holders of a majority in principal amount of
the outstanding Notes have not given the Notes Trustee a direction that, in the
opinion of the Notes Trustee, is inconsistent with such request within such
60-day period. Subject to certain restrictions, the holders of a majority in
principal amount of the outstanding Notes are given the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Notes Trustee or of exercising any trust or power conferred on the Notes
Trustee. The Notes Trustee, however, may refuse to follow any direction that
conflicts with law or the Indenture or that the Notes Trustee determines is
unduly prejudicial to the rights of any other holder or that would involve the
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Notes Trustee in personal liability. Prior to taking any action under the
Indenture, the Notes Trustee shall be entitled to indemnification satisfactory
to it in its sole discretion against all losses and expenses caused by taking or
not taking such action.
The Indenture provides that if a Default occurs and is continuing and is
known to the Notes Trustee, the Notes Trustee must mail to each holder notice of
the Default within 90 days after it occurs. Except in the case of a Default in
the payment of principal of, premium (if any) or interest on any Note, the Notes
Trustee may withhold notice if and so long as its board of directors, a
committee of its board of directors or a committee of its Trust officers in good
faith determines that withholding notice is in the interests of the holders of
the Notes. In addition, the Company is required to deliver to the Notes Trustee,
within 90 days after the end of each fiscal year, a certificate indicating
whether the signers thereof know of any Default that occurred during the
previous year. The Company also is required to deliver to the Notes Trustee,
within 30 days after the occurrence thereof, written notice of any events which
would constitute certain Defaults.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the
consent of the holders of a majority in principal amount of the Notes then
outstanding and any past default or compliance with any provisions may be waived
with the consent of the holders of a majority in principal amount of the Notes
then outstanding. However, without the consent of each holder of an outstanding
Note affected, no amendment may, among other things, (a) reduce the amount of
Notes whose holders must consent to an amendment, (b) reduce the stated rate of
or extend the stated time for payment of interest on any Note, (c) reduce the
principal of or extend the Stated Maturity of any Note, (d) reduce the premium
payable upon the redemption or repurchase of any Note or change the time at
which any Note may be redeemed as described under "-- Optional Redemption"
above, (e) make any Note payable in money other than that stated in the Note,
(f) impair the right of any holder to receive payment of principal of and
interest on such holder's Notes on or after the due dates therefor or to
institute suit for the enforcement of any payment on or with respect to such
holder's Notes or (g) make any change in the amendment provisions which require
each holder's consent or in the waiver provisions.
Without the consent of any holder, the Company and the Notes Trustee may
amend the Indenture to cure any ambiguity, omission, defect or inconsistency, to
provide for the assumption by a Successor Company of the obligations of the
Company under the Indenture, to add further Guarantees with respect to the
Notes, to add further security for the Notes, to add to the covenants of the
Company for the benefit of the holders or to surrender any right or power
conferred upon the Company, to make any change that does not adversely affect
the rights of any holder or to comply with any requirement of the Commission in
connection with the qualification of the Indenture under the Trust Indenture
Act.
The consent of the holders is not necessary under the Indenture to approve
the particular form of any proposed amendment. It is sufficient if such consent
approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Company is
required to mail to the holders a notice briefly describing such amendment.
However, the failure to give such notice to all the holders, or any defect
therein, will not impair or affect the validity of the amendment.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND SHAREHOLDERS
No director, officer or employee of the Company or any Subsidiary or
shareholder of the Company, as such, shall have any personal liability for any
obligations of the Company or any Subsidiary under the Notes, the Indenture, the
Note Guarantees, the Mortgages or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each holder by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes and the Note Guarantees and the grant of
the Mortgages. Such waiver may not be effective to waive liabilities under the
federal securities laws and it is the view of the Commission that such a waiver
is against public policy.
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DEFEASANCE
The Company at its option may at any time terminate all its obligations
under the Notes and the Indenture ("legal defeasance"), except for certain
obligations, including those respecting the defeasance trust and obligations to
register the transfer or exchange of the Notes, to replace mutilated, destroyed,
lost or stolen Notes and to maintain a registrar and paying agent in respect of
the Notes. In addition, the Company at its option may at any time terminate its
obligations under covenants described under "Certain Covenants" (other than
"Merger and Consolidation"), the operation of the cross acceleration provision,
the bankruptcy provisions with respect to Significant Subsidiaries, the judgment
default provision and the Note Guarantee provision described under "Events of
Default" above and the limitations contained in clauses (c) and (d) under
"Certain Covenants -- Merger and Consolidation" above ("covenant defeasance").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the Notes may not be accelerated because of
an Event of Default with respect thereto. If the Company exercises its covenant
defeasance option, payment of the Notes may not be accelerated because of an
Event of Default specified in clause (d, (f), (g) (with respect only to
Significant Subsidiaries), (h) or (i) under "Events of Default" above or because
of the failure of the Company to comply with clause (c) or (d) under "Certain
Covenants -- Merger and Consolidation" above.
In order to exercise either defeasance option, the Company must irrevocably
deposit in trust (the "defeasance trust") with the Notes Trustee money or U.S.
Government Obligations for the payment of principal, premium (if any) and
interest on the Notes to redemption or maturity, as the case may be, and must
comply with certain other conditions, including delivery to the Notes Trustee of
an Opinion of Counsel to the effect that holders of the Notes will not recognize
income, gain or loss for Federal income tax purposes as a result of such deposit
and defeasance and will be subject to Federal income tax on the same amount and
in the same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred (and, in the case of legal defeasance
only, such Opinion of Counsel must be based on a private or public ruling of the
Internal Revenue Service or other change in applicable Federal income tax law).
SATISFACTION AND DISCHARGE OF THE INDENTURE
The Indenture will cease to be of further effect (except as otherwise
expressly provided for in the Indenture) when either (a) all outstanding Notes
have been delivered (other than lost, stolen or destroyed Notes which have been
replaced) to the Notes Trustee for cancellation or (b) all outstanding Notes
have become due and payable, whether at maturity or as a result of the mailing
of a notice of redemption pursuant to the terms of the Indenture and the Company
has irrevocably deposited with the Notes Trustee funds sufficient to pay at
maturity or upon redemption all outstanding Notes, including interest thereon
(other than lost, stolen, mutilated or destroyed Notes which have been
replaced), and, in either case, the Company has paid all other sums payable
under the Indenture. The Notes Trustee is required to acknowledge satisfaction
and discharge of the Indenture on demand of the Company accompanied by an
Officer's Certificate and an Opinion of Counsel at the cost and expense of the
Company.
TRANSFER AND EXCHANGE
Subject to the transfer restrictions described in this Prospectus, holders
may transfer or exchange their Notes in accordance with the Indenture. See
"Transfer Restrictions on the Notes." Upon any transfer of a Note, the registrar
may require a holder, among other things, to furnish appropriate endorsements
and transfer documents, and to pay any taxes and fees required by law or
permitted by the Indenture. The registrar is not required to transfer or
exchange any Notes selected for redemption nor is the registrar required to
transfer or exchange any Notes for a period of 15 days before a selection of
Notes to be redeemed. The registered holder of a Note may be treated as the
owner of it for all purposes.
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CONCERNING THE NOTES TRUSTEE
SunTrust is the Notes Trustee under the Indenture and has been appointed by
the Company as registrar and paying agent with regard to the Notes. The Notes
Trustee's current address is 225 East Robinson Street, Suite 250, Orlando,
Florida 32801.
The Indenture contains certain limitations on the rights of the Notes
Trustee, should it become a creditor of the Company, to obtain payment of claims
in certain cases, or to realize on certain property received in respect of any
such claim a security or otherwise. The Notes Trustee will be permitted to
engage in other transactions; however, if it acquires any conflicting interest
(as defined) it must eliminate such conflict or resign.
The holders of a majority in aggregate principal amount of the then
outstanding Notes issued under the Indenture will have the right to direct the
time, method and place of conducting any proceeding for exercising any remedy
available to the Notes Trustee. The Indenture provides that in case an Event of
Default shall occur (which shall not be cured) the Notes Trustee will be
required, in the exercise of its power, to use the degree of care of a prudent
man in the conduct of his own affairs. Subject to such provisions, the Notes
Trustee will be under no obligation to exercise any of its rights or powers
under the Indenture at the request of any of the holders of the Notes issued
thereunder unless they shall have offered to the Notes Trustee security and
indemnity satisfactory to it.
GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
CERTAIN DEFINITIONS
"Accounts Receivable" means collectively Mortgages Receivable and Timeshare
Interests Receivable.
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) in a Permitted Business; (ii) the Capital Stock
of a Person that becomes a Restricted Subsidiary as a result of the acquisition
of such Capital Stock by the Company or a Restricted Subsidiary of the Company;
(iii) Capital Stock constituting a minority interest in any Person that at such
time is a Restricted Subsidiary of the Company; or (iv) Permitted Investments of
the type and in the amounts described in clause (vii) of the definition thereof;
provided, however, that, in the case of clauses (ii) and (iii), such Restricted
Subsidiary is primarily engaged in a Permitted Business.
"Adjusted Net Assets" of a Subsidiary Guarantor at any date shall mean the
lesser of the amount by which (i) the fair value of the property of such
Subsidiary Guarantor exceeds the total amount of liabilities, including, without
limitation, the probable liability of such Subsidiary Guarantor with respect to
its contingent liabilities (after giving effect to all other fixed and
contingent liabilities incurred or assumed on such date), but excluding
liabilities under the Note Guarantees, of such Subsidiary Guarantor at such date
and (ii) the present fair salable value of the assets of such Subsidiary
Guarantor at such date exceeds the amount that will be required to pay the
probable liability of such Subsidiary Guarantor on its debts (after giving
effect to all other fixed and contingent liabilities incurred or assumed on such
date and after giving effect to any collection from any Subsidiary by such
Subsidiary Guarantor in respect of the obligations of such Subsidiary under the
Note Guarantees), excluding debt in respect of the Note Guarantees, as they
become absolute and matured.
"Affiliate" of any specified person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
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"Asset Disposition" means any sale, lease, transfer, issuance or other
disposition (or series of related sales, leases, transfers, issuances or
dispositions that are part of a common plan) of shares of Capital Stock of (or
any other equity interests in) a Restricted Subsidiary (other than directors'
qualifying shares and, to the extent required by local ownership laws in foreign
countries, shares owned by foreign shareholders) or of any other property or
other assets (each referred to for the purposes of this definition as a
"disposition") by the Company or any of its Restricted Subsidiaries (including
any disposition by means of a merger, consolidation or similar transaction)
other than (i) a disposition by a Restricted Subsidiary to the Company or by the
Company or a Restricted Subsidiary to a Wholly-Owned Subsidiary, (ii) sales or
other transfers in the ordinary course of business (including, without
limitation, bulk sales in the ordinary course of business consistent with past
practices), of Timeshare Interests, points in a points-based vacation club
system, Accounts Receivable (including, without limitation, direct sales to
financial institutions and sales or transfers in connection with securitization
transactions in the ordinary course of business) or Residential Lots or other
real property (including, without limitation, bulk sales in the ordinary course
of business consistent with past practices), (iii) a disposition of obsolete or
worn out equipment or equipment that is no longer useful in the conduct of the
business of the Company and its Restricted Subsidiaries and that is disposed of
in each case in the ordinary course of business, (iv) dispositions of property
for net proceeds which, when taken collectively with the net proceeds of any
other such dispositions under this clause (iv) that were consummated since the
beginning of the calendar year in which such disposition is consummated, do not
exceed $1.0 million, (v) transactions permitted under "Certain
Covenants -- Merger and Consolidation" above and (vi) Permitted Investments.
Notwithstanding anything to the contrary contained above, a Restricted Payment
made in compliance with the "Limitation on Restricted Payments" covenant shall
not constitute an Asset Disposition (except for purposes of determinations of
the Consolidated Coverage Ratio) to the extent that such Restricted Payment as
of the date made together with all other Restricted Payments not constituting
Asset Dispositions pursuant to this sentence made subsequent to the Issue Date
do not exceed, as of such date, 50% of the amount calculated in accordance with
clause (a)(3) set forth under "-- Certain Covenants -- Limitation on Restricted
Payments."
"Attributable Indebtedness" in respect of a Sale/Leaseback Transaction
means, as at the time of determination, the present value (discounted at the
interest rate per annum equal to the discount rate which would be applicable to
a Capitalized Lease Obligation with a like term in accordance with GAAP) of the
total obligations of the lessee for rental payments during the remaining term of
the lease included in such Sale/Leaseback Transaction (including any period for
which such lease has been extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness, the quotient obtained by dividing (i) the sum of the product of
the numbers of years (rounded upwards to the nearest month) from the date of
determination to the dates of each successive scheduled principal payment of
such Indebtedness or redemption multiplied by the amount of such payment by (ii)
the sum of all such payments.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"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, and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date such lease may be terminated without penalty.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof, (iii) certificates of deposit, time
deposits and eurodollar time deposits with maturities of one year or less from
the date of acquisition, bankers' acceptances with maturities not exceeding one
year and overnight bank deposits, in each case with any commercial bank having
capital and surplus in excess of $500 million, (iv) repurchase obligations for
underlying securities of the types described in clauses (ii) and (iii) entered
into with any financial institution meeting the qualifications specified in
clause (iii) above, (v) commercial
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paper rated A-1 or the equivalent thereof by Moody's Investors Service, Inc.
("Moody's") or Standard and Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc. ("S&P") and in each case maturing within one year
after the date of acquisition, (vi) investment funds investing 95% of their
assets in securities of the types described in clauses (i)(v) above, and (vii)
readily marketable direct obligations issued by any state of the United States
of America or any political subdivision thereof having one of the two highest
rating categories obtainable form either Moody's or S&P.
"Consolidated Cash Flow" for any period means the Consolidated Net Income
for such period, plus, without duplication, the following to the extent deducted
in calculating such Consolidated Net Income: (i) income tax expense, (ii)
Consolidated Interest Expense, (iii) depreciation expense, (iv) amortization
expense, and (v) all other non-cash items reducing Consolidated Net Income
(excluding any non-cash item to the extent it represents an accrual of or
reserve for cash disbursements for any subsequent period prior to the stated
maturity of the Notes) and less, (x) the aggregate amount of contingent and
"earnout" payments in respect of any Permitted Business acquired by the Company
or any Restricted Subsidiary that are paid in cash during such period and (y) to
the extent added in calculating Consolidated Net Income, non-cash items
(excluding such non-cash items to the extent they represent an accrual for cash
receipts reasonably expected to be received prior to the Stated Maturity of the
Notes), in each case for such period. Notwithstanding the foregoing, the income
tax expense, depreciation expense and amortization expense of a Subsidiary of
the Company shall be included in Consolidated Cash Flow only to the extent (and
in the same proportion) that the net income of such Subsidiary was included in
calculating Consolidated Net Income.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of Consolidated Cash Flow for the period of
the most recent four consecutive fiscal quarters ending prior to the date of
such determination and as to which financial statements are available to (ii)
Consolidated Interest Expense for such four fiscal quarters; provided, however,
that (A) if the Company or any of its Restricted Subsidiaries has Incurred any
Indebtedness since the beginning of such period and through the date of
determination of the Consolidated Coverage Ratio that remains outstanding or if
the transaction giving rise to the need to calculate Consolidated Coverage Ratio
is an Incurrence of Indebtedness, or both, Consolidated Cash Flow and
Consolidated Interest Expense for such period shall be calculated after giving
effect on a pro forma basis to (l) such Indebtedness as if such Indebtedness had
been Incurred on the first day of such period (provided that if such
Indebtedness is incurred under a revolving credit facility (or similar
arrangement or under any predecessor revolving credit or similar arrangement)
only that portion of such Indebtedness that constitutes the one year projected
average daily balance of such Indebtedness (as determined in good faith by the
Board of Directors of the Company) shall be deemed outstanding for purposes of
this calculation), and (2) the discharge of any other Indebtedness repaid,
repurchased, defeased or otherwise discharged with the proceeds of such new
Indebtedness as if such discharge had occurred on the first day of such period,
(B) if since the beginning of such period any Indebtedness of the Company or any
of its Restricted Subsidiaries has been repaid, repurchased, defeased or
otherwise discharged (other than Indebtedness under a revolving credit or
similar arrangement unless such revolving credit Indebtedness has been
permanently repaid and the underlying commitment terminated and has not been
replaced), Consolidated Interest Expense for such period shall be calculated
after giving pro forma effect thereto as if such Indebtedness had been repaid,
repurchased, defeased or otherwise discharged on the first day of such period,
(C) if since the beginning of such period the Company or any of its Restricted
Subsidiaries shall have made any Asset Disposition or if the transaction giving
rise to the need to calculate the Consolidated Coverage Ratio is an Asset
Disposition, Consolidated Cash Flow for such period shall be reduced by an
amount equal to the Consolidated Cash Flow (if positive) attributable to the
assets which are the subject of all such Asset Dispositions for such period or
increased by an amount equal to the Consolidated Cash Flow (if negative)
attributable thereto for such period, and Consolidated Interest Expense for such
period shall be (i) reduced by an amount equal to the Consolidated Interest
Expense attributable to any Indebtedness of the Company or any of its Restricted
Subsidiaries repaid, repurchased, defeased or otherwise discharged with respect
to the Company and its continuing Restricted Subsidiaries in connection with all
such Asset Dispositions for such period (or, if the Capital Stock of any
Restricted Subsidiary of the Company is sold, the Consolidated Interest Expense
for such period directly attributable to the Indebtedness of such Restricted
Subsidiary to the extent the Company and its continuing Restricted Subsidiaries
are no longer liable for such Indebtedness after such sale) and
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(ii) increased by interest income attributable to the assets which are the
subject of all such Asset Dispositions during such period, (D) if since the
beginning of such period the Company or any of its Restricted Subsidiaries (by
merger or otherwise) shall have made an Investment in any Restricted Subsidiary
of the Company (or any Person which becomes a Restricted Subsidiary of the
Company as a result thereof) or an acquisition of assets occurring in connection
with a transaction causing a calculation to be made hereunder which constitutes
all or substantially all of an operating unit of a business, Consolidated Cash
Flow and Consolidated Interest Expense for such period shall be calculated after
giving pro forma effect thereto (including the incurrence of any Indebtedness)
as if such Investment or acquisition occurred on the first day of such period
and (E) if since the beginning of such period any Person (that subsequently
became a Restricted Subsidiary of the Company or was merged with or into the
Company or any Restricted Subsidiary of the Company since the beginning of such
period) shall have repaid, repurchased, defeased or otherwise discharged
Indebtedness or made any Asset Disposition, Investment or acquisition of assets
that would have required an adjustment pursuant to clause (B), (C) or (D) above
if made by the Company or a Restricted Subsidiary of the Company during such
period, Consolidated Cash Flow and Consolidated Interest Expense for such period
shall be calculated after giving pro forma effect thereto as if such Asset
Disposition, Investment or acquisition occurred on the first day of such period.
For purposes of this definition, whenever pro forma effect is to be given to an
acquisition of assets, the amount of income or earnings relating thereto and the
amount of Consolidated Interest Expense associated with any Indebtedness
incurred in connection therewith, the pro forma calculations shall be determined
in good faith by a responsible financial or accounting officer of the Company.
If any Indebtedness bears a floating rate of interest and is being given pro
forma effect, the interest expense on such Indebtedness shall be calculated as
if the rate in effect on the date of determination had been the applicable rate
for the entire period (taking into account any Interest Rate Agreement
applicable to such Indebtedness if such Interest Rate Agreement has a remaining
term in excess of 12 months).
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Company and its Restricted Subsidiaries determined in accordance
with GAAP, plus, to the extent not included in such interest expense and to the
extent Incurred by the Company or its Restricted Subsidiaries (i) interest
expense attributable to Capitalized Lease Obligations, (ii) capitalized
interest, (iii) amortization of debt discount, (iv) non-cash interest expense,
(v) commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financing, (vi) interest actually paid
by the Company or any such Restricted Subsidiary under any guarantee of
Indebtedness or other obligation of any other Person, (vii) net payments
(whether positive or negative) pursuant to Interest Rate Agreements, (viii) the
cash contributions to any employee stock ownership plan or similar trust to the
extent such contributions are used by such plan or trust to pay interest or fees
to any Person (other than the Company) in connection with Indebtedness Incurred
by such plan or trust and (ix) cash and Disqualified Stock dividends in respect
of all Preferred Stock of Subsidiaries and Disqualified Stock of the Company
held by Persons other than the Company or a Wholly-Owned Subsidiary and less (a)
to the extent included in such interest expense, the amortization of capitalized
debt issuance costs and (b) interest income. Notwithstanding the foregoing, the
Consolidated Interest Expense with respect to any Restricted Subsidiary of the
Company, that was not a Wholly-Owned Subsidiary, shall be included only to the
extent (and in the same proportion) that the net income of such Restricted
Subsidiary was included in calculating Consolidated Net Income.
"Consolidated Net Income" means, for any period, the net income (loss) of
the Company and its consolidated Subsidiaries determined in accordance with
GAAP; provided, however, that there shall not be included in such Consolidated
Net Income: (i) any net income (loss) of any Person acquired by the Company or
any of its Restricted Subsidiaries in a pooling of interests transaction for any
period prior to the date of such acquisition, (ii) any net income of any
Restricted Subsidiary of the Company if such Restricted Subsidiary is subject to
restrictions, directly or indirectly, on the payment of dividends or the making
of distributions by such Restricted Subsidiary, directly or indirectly, to the
Company to the extent of such restriction (other than restrictions in effect on
the Issue Date with respect to a Restricted Subsidiary of the Company and other
than restrictions that are created or exist in compliance with the "Limitation
on Restrictions on Distributions from Restricted Subsidiaries" covenant), (iii)
any gain or loss realized upon the sale or other disposition of any assets of
the Company or its consolidated Restricted Subsidiaries (including pursuant to
any Sale/Leaseback
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Transaction) which are not sold or otherwise disposed of in the ordinary course
of business (it being understood that direct sales of Accounts Receivable to a
financial institution or sales of Accounts Receivable in connection with
securitization transactions shall be deemed to be in the ordinary course of
business) and any gain or loss realized upon the sale or other disposition of
any Capital Stock of any Person, (iv) any extraordinary gain or loss, (v) the
cumulative effect of a change in accounting principles, (vi) the net income of
any Person, other than a Restricted Subsidiary, except to the extent of the
lesser of (A) cash dividends or distributions actually paid to the Company or
any of its Restricted Subsidiaries by such Person and (B) the net income of such
Person (but in no event less than zero), and the net loss of such Person (other
than an Unrestricted Subsidiary) shall be included only to the extent of the
aggregate Investment of the Company or any of its Restricted Subsidiaries in
such Person and (vii) any non-cash expenses attributable to grants or exercises
of employee stock options. Notwithstanding the foregoing, for the purpose of the
covenant described under "Certain Covenants -- Limitation on Restricted
Payments" only, there shall be excluded from Consolidated Net Income any
dividends, repayments of loans or advances or other transfers of assets from
Unrestricted Subsidiaries to the Company or a Restricted Subsidiary to the
extent such dividends, repayments or transfers increase the amount of Restricted
Payments permitted under such covenant pursuant to clause (a)(3)(D) thereof.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and its consolidated Restricted Subsidiaries,
determined on a consolidated basis in accordance with GAAP, as of the end of the
most recent fiscal quarter of the Company ending prior to the taking of any
action for the purpose of which the determination is being made and for which
financial statements are available (but in no event ending more than 135 days
prior to the taking of such action), as (i) the par or stated value of all
outstanding Capital Stock of the Company plus (ii) paid in capital or capital
surplus relating to such Capital Stock plus (iii) any retained earnings or
earned surplus less (A) any accumulated deficit and (B) any amounts attributable
to Disqualified Stock.
"Continuing Director" of any Person means, as of the date of determination,
any Person who (i) was a member of the Board of Directors of such Person on the
date of the Indenture or (ii) was nominated for election or elected to the Board
of Directors of such Person with the affirmative vote of a majority of the
Continuing Directors of such Person who were members of such Board of Directors
at the time of such nomination or election.
"Convertible Debentures" means the Company's 8.25% Convertible Subordinated
Debentures due May 15, 2012 issued pursuant to that certain Indenture dated as
of May 15, 1987 between The Patten Corporation and Shawmut Bank, N.A., as
trustee.
"Convertible Notes" means the Company's 8% Convertible Notes due September
11, 2002 in the aggregate principal amount of $6,000,000 orginally issued to
Joseph C. Abeles and Grace Brothers, Ltd.
"Credit Agreements" means any credit agreement or similar facility or any
other agreement governing Indebtedness entered into by the Company or any
Restricted Subsidiary, as any of the same may be amended, waived, modified,
refinanced with Refinancing Indebtedness or replaced from time to time (except
to the extent any such amendment, waiver, modification, replacement or
refinancing would be prohibited by the terms of the Indenture).
"Currency Agreement" means 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.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Disqualified Stock" means any Capital Stock which, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event (other than an event which
would constitute a Change of Control), (i) matures (excluding any maturity as
the result of an optional redemption by the issuer thereof) or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
final Stated Maturity of the Notes, or (ii) is convertible into or exchangeable
(unless at the sole option of the issuer
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thereof) for (a) debt securities or (b) any Capital Stock referred to in (i)
above, in each case at any time prior to the final Stated Maturity of the Notes.
"Equity Offering" means an offering for cash by the Company of its common
stock, or options, warrants or rights with respect to its common stock, which in
any case is registered with the Securities and Exchange Commission under the
Securities Act of 1933.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor statute or statutes thereto.
"Existing Indebtedness" means Indebtedness of the Company or its Restricted
Subsidiaries in existence on the Issue Date, plus interest accrued, thereon,
after application of the net proceeds of the Notes as described in the
Prospectus.
"fair market value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for cash,
between a willing seller and a willing and able buyer, neither of whom is under
undue pressure or compulsion to complete the transaction. Fair market value
shall be determined by the Board of Directors of the Company acting reasonably
and in good faith and shall be evidenced by a Board Resolution of the Board of
Directors of the Company delivered to the Notes Trustee.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the date of the Indenture, including those set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession All ratios and computations based on GAAP contained in the
Indenture shall be computed in conformity with GAAP.
"Group" shall mean any "group" for purposes of Section 13(d) of the
Exchange Act.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person and any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness of such other Person (whether arising by virtue of partnership
arrangements, or by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for purposes of assuring in any
other manner the obligee of such Indebtedness of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in part);
provided, however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such Person becomes a Restricted Subsidiary (whether by
merger, consolidation, acquisition or otherwise) shall be deemed to be incurred
by such Restricted Subsidiary at the time it becomes a Restricted Subsidiary;
provided that a change in GAAP that results in an obligation of such Person that
exists at such time becoming Indebtedness shall not be deemed an incurrence of
such Indebtedness.
"Indebtedness" means, 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
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service or taking delivery and title thereto or the completion of such services,
(v) all Capitalized Lease Obligations and all Attributable Indebtedness 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,
(viii) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock or, with
respect to any Restricted Subsidiary of the Company, any Preferred Stock of such
Restricted Subsidiary to the extent such obligation arises on or before the
Stated Maturity of the Notes (but excluding, in each case, accrued dividends)
with the amount of Indebtedness represented by such Disqualified Stock or
Preferred Stock, as the case may be, being equal to the greater of its voluntary
or involuntary liquidation preference and its maximum fixed repurchase price;
provided that, for purposes hereof the "maximum fixed repurchase price" of any
Disqualified Stock or Preferred Stock, as the case may be, which does not have a
fixed repurchase price shall be calculated in accordance with the terms of such
Disqualified Stock or Preferred Stock, as the case may be, as if such
Disqualified Stock or Preferred Stock, as the case may be, were purchased on any
date on which Indebtedness shall be required to be determined pursuant to the
Indenture, and if such price is based on the fair market value of such
Disqualified Stock or Preferred Stock, as the case may be, such fair market
value shall be determined in good faith by the Board of Directors of the Company
and (ix) 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.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts payable on the balance sheet of such Person) or other
extension of credit (including by way of Guarantee or similar arrangement, but
excluding any debt or extension of credit represented by a bank deposit other
than a time deposit) or capital contribution to (by means of any transfer of
cash or other property to others or any payment for property or services for the
account or use of others), or any purchase or acquisition of Capital Stock,
Indebtedness or other similar instruments issued by such Person. For purposes of
the "Limitation on Restricted Payments" covenant and the definition of
"Unrestricted Subsidiary", (i) "Investment" shall include the portion
(proportionate to the Company's equity interest in a Restricted Subsidiary to be
designated as an Unrestricted Subsidiary) of the fair market value of the net
assets of such Restricted Subsidiary of the Company at the time that such
Restricted Subsidiary is designated an Unrestricted Subsidiary; provided,
however, that upon a redesignation of such Subsidiary as a Restricted
Subsidiary, the Company shall be deemed to continue to have a permanent
"Investment" in an Unrestricted Subsidiary in an amount (if positive) equal to
(x) the Company's "Investment" in such Subsidiary at the time of such
redesignation less (y) the portion (proportionate to the Company's equity
interest in such Subsidiary) of the fair market value of the net assets of such
Subsidiary at the time that such Subsidiary is so redesignated a Restricted
Subsidiary; and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer, in each case as determined in good faith by the Board of Directors and
evidenced by a resolution of such Board of Directors certified in an Officers'
Certificate to the Notes Trustee. Notwithstanding the foregoing, in no event
shall the issuance of Capital Stock (other than Disqualified Stock) of the
Company in exchange for Capital Stock, property or assets of another Person
constitute an Investment by the Company in such other Person.
"Issue Date" means the date on which the Outstanding Notes were originally
issued.
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"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).
"Mortgages Receivable" means the receivables of the Company and its
Restricted Subsidiaries arising from sales by the Company and its Restricted
Subsidiaries of Residential Lots or otherwise acquired by the Company or a
Restricted Subsidiary determined on a consolidated basis in accordance with
GAAP.
"Net Available Cash" from an Asset Disposition means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or otherwise, but only as and when
received, but excluding any other consideration received in the form of
assumption by the acquiring Person of Indebtedness or other obligations relating
to the properties or assets subject to such Asset Disposition) therefrom in each
case net of (i) all legal, title and recording tax expenses, commissions and
other fees and expenses incurred, and all Federal, state, foreign and local
taxes required to be paid or accrued as a liability under GAAP, as a consequence
of such Asset Disposition, (ii) all distributions and other payments required to
be made to any Person owning a beneficial interest in assets subject to sale or
minority interest holders in Subsidiaries or joint ventures as a result of such
Asset Disposition, (iii) the deduction of appropriate amounts to be provided by
the seller as a reserve, in accordance with GAAP, against any liabilities
associated with the assets disposed of in such Asset Disposition, provided
however, that upon any reduction in such reserves (other than to the extent
resulting from payments of the respective reserved liabilities), Net Available
Cash shall be increased by the amount of such reduction to reserves, and
retained by the Company or any Restricted Subsidiary of the Company after such
Asset Disposition and (iv) any portion of the purchase price from an Asset
Disposition placed in escrow (whether as a reserve for adjustment of the
purchase price, for satisfaction of indemnities in respect of such Asset
Disposition or otherwise in connection with such Asset Disposition) provided,
however, that upon the termination of such escrow, Net Available Cash shall be
increased by any portion of funds therein released to the Company or any
Restricted Subsidiary.
"Net Cash Proceeds," with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result of such issuance or sale.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
nor any Restricted Subsidiary (a) provides any guarantee or credit support of
any kind (including any undertaking, Guarantee, indemnity, agreement or
instrument that would constitute Indebtedness) or (b) is directly or indirectly
liable (as a guarantor, general partner or otherwise) and (ii) no default with
respect to which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any Restricted Subsidiary to declare a default under such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its Stated Maturity.
"Officer" means the Chairman of the Board, the Vice-Chairman of the Board,
the Chief Executive Officer, the Chief Financial Officer, the President, any
Vice-President, the Treasurer or the Secretary of the Company.
"Note Guarantee" means the Guarantee of the Notes by a Subsidiary
Guarantor.
"Officer's Certificate" shall mean a certificate signed by two Officers of
the Company, at least one of whom shall be the principal executive, financial or
accounting officer of the Company.
"Opinion of Counsel" means a written opinion, in form and substance
acceptable to the Notes Trustee, from legal counsel acceptable to the Notes
Trustee.
"Permitted Business" means any business which is the same as, or related,
ancillary or complementary to, any of the businesses of the Company and its
Restricted Subsidiaries on the date of the Indenture, as reasonably determined
by the Company's Board of Directors.
"Permitted Investment" means an Investment by the Company or any of its
Restricted Subsidiaries in (i) the Company or a Wholly-Owned Subsidiary of the
Company; provided, however, that the primary business of such Wholly-Owned
Subsidiary is a Permitted Business; (ii) another Person if as a result of such
Investment such other Person becomes a Wholly-Owned Subsidiary of the Company or
is merged or
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consolidated with or into, or transfers or conveys all or substantially all its
assets to, the Company or a Wholly-Owned Subsidiary of the Company; provided,
however, that in each case such Person's primary business is a Permitted
Business; (iii) Temporary Cash Investments; (iv) a Receivables Subsidiary or
originations, purchases or acquisitions of Accounts Receivable by the Company or
any Restricted Subsidiary created or acquired in the ordinary course of
business; (v) payroll, travel and similar advances to cover matters that are
expected at the time of such advances ultimately to be treated as expenses for
accounting purposes and that are made in the ordinary course of business; (vi)
stock, obligations or securities received in settlement of debts created in the
ordinary course of business and owing to the Company or any of its Restricted
Subsidiaries or in satisfaction of judgments or claims; (vii) a Person engaged
in a Permitted Business or a loan or advance by the Company the proceeds of
which are used solely to make an investment in a Person engaged in a Permitted
Business or a Guarantee by the Company of Indebtedness of any Person in which
such Investment has been made provided, however, that no Permitted Investments
may be made pursuant to this clause (vii) to the extent the amount thereof
would, when taken together with all other Permitted Investments made pursuant to
this clause (vii), exceed $3.0 million in the aggregate (plus, to the extent not
previously reinvested, any return of capital realized on Permitted Investments
made pursuant to this clause (vii), or any release or other cancellation of any
Guarantee constituting such Permitted Investment); (viii) Persons to the extent
such Investment is received by the Company or any Restricted Subsidiary as
consideration for asset dispositions effected in compliance with the covenant
described under "Limitations on Sales of Assets and Subsidiary Stock"; (ix)
prepayments and other credits to suppliers made in the ordinary course of
business consistent with the past practices of the Company and its Restricted
Subsidiaries; (x) Investments in connection with pledges, deposits, payments or
performance bonds made or given in the ordinary course of business in connection
with or to secure statutory, regulatory or similar obligations, including
obligations under health, safety or environmental obligations; (xi) Investments
in Currency Agreements and Interest Rate Protection Agreements permitted by the
covenant described under "-- Certain Covenants -- Limitation on Indebtedness";
and (xii) any Investment acquired by the Company or any of its Restricted
Subsidiaries (A) in exchange for any other Investment or accounts receivable
held by the Company or any such Restricted Subsidiary in connection with or as a
result of a bankruptcy, workout, reorganization or recapitalization of the
issuer of such other Investment or accounts receivable or (B) as a result of a
foreclosure (or deed in lieu of) by the Company or any of its Restricted
Subsidiaries with respect to any secured Investment or other transfer of title
with respect to any secured Investment in default;
"Permitted Liens" means: (i) Liens granted by the Company and the
Subsidiary Guarantors which secure Indebtedness to the extent the Indebtedness
is incurred pursuant to paragraph (a) or clause (i) of paragraph (b) under the
"Limitation on Incurrence of Indebtedness" covenant and Liens granted to the
Trustee or the Pledged Properties securing the obligations of certain Subsidiary
Guarantors under their respective Note Guarantees; (ii) Liens in favor of the
Company or any Subsidiary Guarantor; (iii) Liens existing on the Issue Date;
(iv) Liens on property of a Person existing at the time such Person is acquired
by or merged into or consolidated with the Company or any Restricted Subsidiary
thereof; provided that such Liens were in existence prior to the contemplation
of such acquisition and do not extend to any assets of the Company or its
Restricted Subsidiaries other than those acquired in connection with such merger
or consolidation; (v) Liens to secure the performance of statutory obligations,
surety or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business; (vi) Liens in respect of
extensions, renewals, refundings or refinancings of any Indebtedness secured by
the Liens referred to in clauses (i), (ii) and (iii) above and (vii) below;
provided that the Liens in connection with such renewal, extensions, renewals,
refundings or refinancing shall be limited to all or part of the specific
property which was subject to the original Lien; (vii) Liens for taxes,
assessments or governmental charges or claims that are not yet delinquent or
that are being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded; provided that any reserve or other
appropriate provisions as shall be required in conformity with GAAP shall have
been made therefor; (viii) any Lien securing purchase money obligations incurred
in compliance with paragraph (b)(ii) of the "Limitation on Indebtedness"
covenant, provided that such Liens do not extend to any property (other than the
property so purchased) owned by the Company or its Restricted Subsidiaries and
is not incurred more than 30 days after the incurrence of such Indebtedness
secured by such Lien; (ix) Liens to secure Capitalized Lease Obligations (except
in respect of
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Sale/Leaseback Transactions) on real or personal property of the Company to the
extent consummated in compliance with paragraph (b)(ii) of the "Limitation on
Indebtedness" covenant, provided that such Liens do not extend to or cover any
property of the Company or any of its Subsidiaries other than the property
subject to such Capitalized Lease Obligation; (x) Liens incurred in the ordinary
course of business of the Company or any Restricted Subsidiary thereof with
respect to obligations that do not exceed $1.0 million at any one time
outstanding and that (A) are not incurred in connection with the borrowing of
money or the obtaining of advances or credit (other than trade credit in the
ordinary course of business) and (B) do not in the aggregate materially detract
from the value of the property or materially impair the use thereof in the
operation of the business by the Company or such Restricted Subsidiary; (xi)
Liens on property or assets at the time the Company or any Restricted Subsidiary
acquired such assets, including any acquisition by means of a merger or
consolidation with or into the Company or such Restricted Subsidiary,
provided,however, that (A) if any such Lien is incurred in anticipation of such
transaction, such property or assets subject to such Lien will have a fair
market value at the date of the acquisition thereof not in excess of the lesser
of (1) the aggregate purchase price paid or owed by the Company or such
Restricted Subsidiary in connection with the acquisition thereof and of any
other property and assets acquired simultaneously therewith and (2) the fair
market value of all such property and assets acquired by the Company or such
Restricted Subsidiary and (B) any such Lien will not extend to any other
property or assets owned by the Company or any Restricted Subsidiary; (xii)
Liens on property or assets of the Company securing Interest Rate Agreements and
Currency Agreements so long as the related Indebtedness is permitted under
"-- Certain Covenants -- Limitation on Indebtedness" and is secured by a Lien on
the same property securing the relevant Interest Rate Agreement or Currency
Agreement; (xiii) survey exceptions, encumbrances, easements or, reservations
of, or rights of others for, licenses, rights-of-way, sewers, electric lines,
telegraph and telephone lines and other similar purposes or zoning or other
restrictions as to the use of real property of the Company or such Restricted
Subsidiary incidental to the ordinary course of conduct of the business of the
Company or such Restricted Subsidiary or as to the ownership of properties of
the Company or any Restricted Subsidiary, which, in either case, were not
incurred in connection with Indebtedness and which do not in the aggregate
materially adversely affect the value of said properties or materially impair
their use in the operation of the business of the Company or any Restricted
Subsidiary; (xiv) judgment Liens with respect to judgments that do not cause an
Event of Default under clause (h) of the provision of the Indenture described
under "-- Events of Default"; (xv) Liens with respect to a purchase and sale
agreement or other option or right to acquire property entered into in the
ordinary course of business consistent with past practices prior to the closing
date of such purchase; (xvi) Liens with respect to deposits made by the Company
or any Restricted Subsidiary in connection with the acquisition of inventory in
the ordinary course of business consistent with past practices; and (xvii) Liens
with respect to mineral rights associated with any real property of the Company
or any Restricted Subsidiary.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision hereof or any
other entity.
"Preferred Stock," as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"RDI Note" means the Promissory Note in the aggregate principal amount of
$1,500,000 issued in the RDI Acquisition to the RDI Stockholders.
"Receivables and Related Assets" means Accounts Receivable and instruments,
chattel paper, obligations, general intangibles, mortgages, deeds, records and
other similar assets, in each case relating to such Accounts Receivable.
"Receivables Subsidiary" means a Subsidiary which is established and
continues to operate for the limited purpose of acquiring, selling and financing
Receivables and Related Assets in connection with receivables securitization or
financing transactions.
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"Refinancing Indebtedness" means Indebtedness that refunds, refinances,
replaces, renews, repays prepays, reduces, defeases, retires or extends
(including pursuant to any defeasance or discharge mechanism) (collectively,
"refinances," and "refinanced" shall have a correlative meaning) any
Indebtedness existing on the date of the Indenture or Incurred in compliance
with the Indenture (including Indebtedness of the Company that refinances
Indebtedness of any Restricted Subsidiary and Indebtedness of any Restricted
Subsidiary that refinances Indebtedness of another Restricted Subsidiary)
including Indebtedness that refinances Refinancing Indebtedness; provided,
however, that (i) the Refinancing Indebtedness has a Stated Maturity no earlier
than the earlier of (A) the first anniversary of the Stated Maturity of the
Notes and (B) Stated Maturity of the Indebtedness being refinanced, (ii) the
Refinancing Indebtedness has an Average Life at the time such Refinancing
Indebtedness is Incurred that is equal to or greater than the lesser of (A) the
Average Life of the Notes and (B) the Average Life of the Indebtedness being
refinanced and, (iii) the Refinancing Indebtedness is in an aggregate principal
amount (or if issued with original issue discount, an aggregate issue price)
that is equal to (or 101% of, in the case of a refinancing of the Notes in
connection with a Change of Control) or less than the sum of the aggregate
principal amount (or if issued with original issue discount, the aggregate
accreted value) then outstanding of the Indebtedness being refinanced (plus the
amount of any premium required to be paid in connection therewith and reasonable
fees and expenses therewith); provided, further, that Refinancing Indebtedness
shall not include Indebtedness of a Subsidiary which refinances Indebtedness of
the Company.
"Residential Lots" means the parcels of real property sold by the Company
and its Restricted Subsidiaries in the ordinary course of their residential land
business.
"Restricted Subsidiary" means any Subsidiary of the Company other an
Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby the Company or a Restricted Subsidiary
transfers such property to a Person and the Company or a Subsidiary leases it
from such Person.
"Secured Indebtedness" means any Senior Indebtedness of the Company or a
Subsidiary Guarantor secured by a Lien.
"Senior Indebtedness" means Indebtedness that is not by its terms expressly
subordinate or junior in right of payment to any other Indebtedness of the
Company or the Note Guarantee of a Subsidiary Guarantor.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision, but excluding any provisions providing for the repurchase, redemption
or repayment of such security at the option of the holder thereof upon the
happening of any contingency unless such contingency has occurred.
"Subordinated Obligations" means Indebtedness that is expressly subordinate
or junior in right of payment to any other Indebtedness of the Company or the
Note Guarantee of a Subsidiary Guarantor.
"Subsidiary" of any Person means any corporation, association, partnership
or other business entity of which more than 50% of the total voting power of
shares of Capital Stock or other interests (including partnership interests)
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by (i) such Person, (ii) such Person and one
or more Subsidiaries of such Person or (iii) one or more Subsidiaries of such
Person. Unless otherwise specified herein, each reference to a Subsidiary shall
refer to a Subsidiary of the Company.
"Subsidiary Guarantor" means each Subsidiary of the Company in existence on
the Issue Date and each Subsidiary (other than Unrestricted Subsidiaries)
created or acquired by the Company after the Issue Date, other than BG Aruba,
Resort Title Agency, Inc., any Receivables Subsidiary and any Subsidiary which
is established and continues to operate for the limited purpose of holding a
real estate broker's license and acting
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as a broker for the benefit of the Company and its Subsidiaries in connection
with the sale of real estate or Timeshare Interests and certain other
Subsidiaries which have individually less than $50,000 of assets.
"Temporary Cash Investments" means any of the following: (i) any Investment
in direct obligations of the United States of America or any agency thereof or
obligations Guaranteed by the United States of America or any agency thereof;
(ii) Investments in time deposit accounts, certificates of deposit and money
market deposits maturing within 180 days of the date of acquisition thereof
issued by a bank or trust company which is organized under the laws of the
United States of America, any state thereof or any foreign country recognized by
the United States of America having capital surplus and undivided profits
aggregating in excess of $250 million (or the foreign currency equivalent
thereof) and whose long-term debt, or whose parent holding company's long-term
debt, is rated "A" (or such similar equivalent rating) or higher by at least one
nationally recognized statistical rating organization (as defined in Rule 436
under the Securities Act); (iii) repurchase obligations with a term of not more
than 30 days for underlying securities of the types described in clause (i)
above entered into with a bank meeting the qualifications described in clause
(ii) above; (iv) Investments in commercial paper, maturing not more than 180
days after the date of acquisition, issued by a corporation (other than an
Affiliate of the Company) organized and in existence under the laws of the
United States of America or any foreign country recognized by the United States
of America with a rating at the time as of which any investment therein is made
of "P-l" (or higher) according to Moody's or "A-1 (or higher) according to S&P;
(v) Investments in securities with maturities of six months or less from the
date of acquisition issued or fully guaranteed by any state, commonwealth or
territory of the United States of America, or by any political subdivision or
taxing authority thereof, and rated at least "A" by S&P or "A" by Moody's; and
(vi) Investments in mutual funds whose investment guidelines restrict such
funds' investments to those satisfying the provisions of clauses (i) through (v)
above.
"Timeshare Interests" means the right to use (whether arising by virtue of
a club membership or a deeded interest in real property or otherwise) a
fully-furnished vacation residence for a specified period each year or
otherwise, sold by the Company and its Restricted Subsidiaries in the ordinary
course of their resorts business.
"Timeshare Interests Receivable" means the receivables of the Company and
its Restricted Subsidiaries arising from sales by the Company and its Restricted
Subsidiaries of Timeshare Interests or otherwise acquired by the Company or a
Restricted Subsidiary (but excluding any receivables for service or other fees
in respect of such Timeshare Interests) determined on a consolidated basis in
accordance with GAAP.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of
the Company (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Subsidiary or any of its
Subsidiaries owns any Capital Stock or Indebtedness of, or owns or holds any
Lien on any property of, the Company or any Restricted Subsidiary of the Company
that is not a Subsidiary of the Subsidiary to be so designated; provided
however, that each Subsidiary to be so designated and each of its Subsidiaries
has not at the time of such designation, and does not thereafter create, Incur,
issue, assume, Guarantee or otherwise becomes liable with respect to any
Indebtedness other than Non-Recourse Debt and either (A) the Subsidiary to be so
designated has total consolidated assets of $10,000 or less or (B) if such
Subsidiary has consolidated assets greater than $10,000, then such designation
would be permitted under "Limitation on Restricted Payments." The Board of
Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary subject to the limitations contained in "Limitation on Designations
of Unrestricted Subsidiaries."
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable or redeemable at the issuer's option.
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"Wholly-Owned Subsidiary" means a Restricted Subsidiary of the Company, all
of the Capital Stock of which (other than directors' qualifying shares) is owned
by the Company or another Wholly-Owned Subsidiary.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Outstanding Notes were originally sold by the Company on April 1, 1998
to the Initial Purchasers pursuant to the Purchase Agreement among the Company,
the Subsidiary Guarantors and the Initial Purchasers. The Initial Purchasers
subsequently resold the Outstanding Notes to qualified institutional buyers
pursuant to Rule 144A under the Securities Act. Pursuant to the Purchase
Agreement, the Company entered into the Registration Rights Agreement, pursuant
to which the Company has agreed, for the benefit of the holders of the
Outstanding Notes, at the Company's cost, to use its reasonable efforts to (i)
file a registration statement with the Commission within 75 days after the Issue
Date of the Outstanding Notes with respect to the Exchange Offer for the
Outstanding Notes, and (ii) cause the registration statement to be declared
effective under the Securities Act within 135 days after the Issue Date. Upon
the registration statement being declared effective, the Company will offer the
Exchange Notes in exchange for the Outstanding Notes. The Company will keep the
Exchange Offer open for no less than 30 days (or longer if required by
applicable law) after the date on which notice of the Exchange Offer is mailed
to the holders of the Outstanding Notes.
For each Outstanding Note properly tendered and accepted pursuant to the
Exchange Offer, the holder of such Outstanding Note will receive an Exchange
Note having a principal amount equal to that of the Outstanding Note tendered.
Interest on each Exchange Note will accrue from the last respective interest
date on which interest was paid on the Outstanding Note tendered in exchange
therefor or, if no interest has been paid on such Outstanding Note, from the
Issue Date. Holders whose Outstanding Notes are accepted for exchange will be
deemed to have waived the right to receive any interest accrued on the
Outstanding Notes.
Each holder of the Outstanding Notes who wishes to exchange the Outstanding
Notes for Exchange Notes in the Exchange Offer will be required to represent in
the Letter of Transmittal that (i) it is not an affiliate of the Company or the
Subsidiary Guarantors, (ii) the Exchange Notes to be received by it were
acquired in the ordinary course of its business and (iii) at the time of
commencement of the Exchange Offer, it has no arrangement with any person to
participate in the distribution (within the meaning of the Securities Act) of
the Exchange Notes and that it is not acting on behalf of a person who could not
truthfully make the foregoing representations.
If the holder is not a broker-dealer, it will be required to represent that
it is not engaged in, and does not intend to engage in, the distribution of the
Exchange Notes. If the holder is a broker-dealer that will receive Exchange
Notes for its own account in exchange for Outstanding Notes that were acquired
as a result of market making activities or other trading activities, it will be
required to acknowledge that it will deliver a prospectus in connection with any
resale of the Exchange Notes.
In the event that applicable interpretations of the staff of the Commission
do not permit the Company to effect the Exchange Offer, or if for any other
reason the Exchange Offer is not consummated within 165 days after the Issue
Date, or, under certain circumstances, if the Initial Purchasers or any holder
of Outstanding Notes (other than the Initial Purchasers) who is not eligible to
participate in the Exchange Offer shall so request (each a "Shelf Request"), the
Company will at its cost, (a) within 75 days of such Shelf Request, file a shelf
registration statement covering resales of the Outstanding Notes (a "Shelf
Registration Statement"), (b) use its reasonable efforts to cause such Shelf
Registration Statement to be declared effective under the Securities Act no
later than 135 days following a Shelf Request and (c) use its reasonable efforts
to keep effective such Shelf Registration Statement until the earlier of one
year after the Issue Date and such time as all of the applicable Outstanding
Notes have been sold thereunder. The Company will, in the event of the filing of
a Shelf Registration Statement, provide to each holder of the Outstanding Notes
copies of the prospectus which is a part of such Shelf Registration Statement,
notify each such holder when such Shelf Registration Statement has become
effective and take certain other actions as are required to permit unrestricted
resales of the Outstanding Notes. A holder that sells its Outstanding Notes
pursuant to a Shelf Registration Statement generally will be required to be
named as a selling securityholder in the related prospectus and to deliver a
prospectus to purchasers, will be subject to certain of the civil liability
provisions
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under the Securities Act in connection with such sales and will be bound by the
provisions of the Registration Rights Agreement which are applicable to such
holder (including certain indemnification obligations).
If the Company or the Subsidiary Guarantors fail to comply with the above
provisions or if such Shelf Registration Statement fails to become effective,
then, as liquidated damages, additional interest (the "Additional Interest")
shall become payable with respect to the Outstanding Notes as follows:
(i) if the registration statement for the Exchange Offer is not filed
within 75 days after the Issue Date or the Shelf Registration Statement is
not filed within 75 days following the Shelf Request, Additional Interest
shall accrue on the Outstanding Notes over and above the stated interest
percentage at a rate of 0.50% per annum for the first 30 days commencing on
the 76th day after the Issue Date or the Shelf Request, respectively, such
Additional Interest rate increasing by an additional 0.50% per annum at the
beginning of each subsequent 30-day period;
(ii) if the registration statement for the Exchange Offer or the Shelf
Registration Statement is not declared effective within, in the case of the
Exchange Offer registration statement, 135 days following the Issue Date
or, in the case of the Shelf Registration Statement, 135 days following a
Shelf Request, the Additional Interest shall accrue on the Outstanding
Notes over and above the stated interest percentage at a rate of 0.50% per
annum for the first 30 days commencing on the 135th day after the Issue
Date or the Shelf Request, respectively, such Additional Interest rate
increasing by an additional 0.50% per annum at the beginning of each
subsequent 30-day period; or
(iii) if (A) the Company has not exchanged all Outstanding Notes
validly tendered in accordance with the terms of the Exchange Offer on or
prior to 165 days after the Issue Date or (B) the registration statement
for the Exchange Offer ceases to be effective at any time prior to the time
that the Exchange Offer is consummated or (C) if applicable, the Shelf
Registration Statement has been declared effective and such Shelf
Registration Statement ceases to be effective at any time prior to the
first anniversary of the Issue Date (unless all the Outstanding Notes have
been sold thereunder or as otherwise provided herein), then the Additional
Interest shall accrue on the Outstanding Notes over and above the stated
interest at a rate of 0.50% per annum for the first 30 days commencing on
(x) the 165th day after the Issue Date with respect to the Outstanding
Notes validly tendered and not exchanged by the Company, in the case of (A)
above, or (y) the day of the registration statement for the Exchange Offer
ceases to be effective or usable for its intended purpose in the case of
(B) above, or (z) the day the Shelf Registration Statement ceases to be
effective in the case of (C) above, the rate of such Additional Interest
increasing by an additional 0.50% per annum at the beginning of each
subsequent 30-day period; provided, however, that the Additional Interest
rate payable on the Outstanding Notes may not exceed in the aggregate 1.5%
per annum; and provided further, that (1) upon the filing of the
registration statement for the Exchange Offer or the Shelf Registration
Statement (in the case of clause (i) above), (2) upon the effectiveness of
such registration statement for the Exchange Offer or the Shelf
Registration Statement (in the case of (ii) above), or (3) upon the
exchange of Exchange Notes for all Outstanding Notes tendered (in the case
of clause (iii)(A) above), or upon the effectiveness of the registration
statement which had ceased to remain effective in the case of clause
(iii)(B) above, or upon the effectiveness of the Shelf Registration
Statement which had ceased to remain effective (in the case of clause
(iii)(C) above), the Additional Interest accruing on the Outstanding Notes
as a result of such clause (or the relevant subclause thereof) shall cease
to accrue.
Any Additional Interest due pursuant to clauses (i), (ii) or (iii) above
will be payable in cash, on the same original interest payment dates as interest
on the Outstanding Notes. The amount of Additional Interest will be determined
by multiplying the applicable rate of such Additional Interest by the principal
amount of the Outstanding Notes multiplied by a fraction, the numerator of which
is the number of days such Additional Interest was applicable during such period
(determined on the basis of a 360-day year comprised of twelve 30-day months),
and the denominator of which is 360.
The summary herein of all material provisions of the Registration Rights
Agreement does not purport to be exhaustive and is subject to, and is qualified
in its entirety by, all the provisions of the Registration Rights Agreement, a
copy of which is available upon request to the Company. See "Available
Information."
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Following the consummation of the Exchange Offer, holders of the
Outstanding Notes who were eligible to participate in the Exchange Offer but who
did not tender their Outstanding Notes will not have any further exchange or
registration rights and such Outstanding Notes will continue to be subject to
certain restrictions on transfer. Accordingly, the liquidity of the market for
such Outstanding Notes could be adversely affected. See "Risk
Factors -- Consequences of Failure to Exchange."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all
Outstanding Notes validly tendered and not withdrawn prior to 5:00 p.m., New
York City time, on the Expiration Date. The Company will issue $1,000 principal
amount of Exchange Notes in exchange for each $1,000 principal amount of
Outstanding Notes accepted in the Exchange Offer. Holders may tender some or all
of their Outstanding Notes pursuant to the Exchange Offer. However, Outstanding
Notes may be tendered only in integral multiples of $1,000.
The form and terms of the Exchange Notes are the same as the form and terms
of the Outstanding Notes except that (i) the Exchange Notes will bear a Series B
designation and will have been registered under the Securities Act and,
therefore, will not bear legends restricting the transfer thereof and will not
contain certain provisions relating to an increase in the interest rate which
were included in the terms of the Outstanding Notes in certain circumstances
relating to the timing of the Exchange Offer and (ii) holders of the Exchange
Notes will not be entitled to certain rights of the holders of the Outstanding
Notes under the Registration Rights Agreement, which rights shall terminate upon
the consummation of the Exchange Offer. The Exchange Notes will evidence the
same debt as the Outstanding Notes (which they replace) and will be issued under
and entitled to the benefits of the Indenture. The Outstanding Notes and the
Exchange Notes will constitute a single class of debt securities under the
Indenture.
As of the date of this Prospectus $110,000,000 aggregate principal amount
of Outstanding Notes are outstanding. The Company has fixed the close of
business , 1998 as the record date for the Exchange Offer for purposes
of determining the person to whom this Prospectus and the Letter of Transmittal
will be mailed initially.
Holders of the Outstanding Notes do not have any appraisal or dissenters'
rights in connection with the Exchange Offer. The Company intends to conduct the
Exchange Offer in accordance with the applicable requirements of the Exchange
Act and the rules and regulations of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Outstanding
Notes when, as and if the Company has given oral or written notice thereof to
the Exchange Agent. The Exchange Agent will act as agent for the tendering
holders for the purpose of receiving the Outstanding Notes from the Company.
If any tendered Outstanding Notes are not accepted for exchange because of
an invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Outstanding Notes will be
returned, without expense, to the tendering holder thereof as promptly as
practicable after the Expiration Date.
Holders who tender Outstanding Notes in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions of
the Letter of Transmittal, transfer taxes with respect to the exchange of
Outstanding Notes pursuant to the Exchange Offer. The Company will pay all
charges and expenses, other than the transfer taxes in certain circumstances, in
connection with the Exchange Offer. See "-- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1998, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
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In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and will mail to the registered
holders an announcement thereof, each prior to 9:00 a.m., New York City time, on
the next business day after the previously scheduled expiration date. The
Company reserves the right, (i) to delay accepting any Outstanding Notes, to
extend the Exchange Offer or to terminate the Exchange Offer if any of the
conditions set forth below under "-- Conditions" shall not have been satisfied,
by giving oral or written notice of such delay, extension or termination to the
Exchange Agent or (ii) to amend the terms of the Exchange Offer in any manner.
Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice thereof to the
registered holders.
PROCEDURES FOR TENDERING
The tender of Outstanding Notes pursuant to any of the procedures set forth
in this Prospectus and in the Letter of Transmittal will constitute a binding
agreement between the Tendering Holder and the Company in accordance with the
terms and subject to the conditions set forth herein and in the Letter of
Transmittal. The tender of Outstanding Notes will constitute an agreement to
deliver good and marketable title to all tendered Outstanding Notes prior to the
Expiration Date free and clear of all liens, charges, claims, encumbrances,
interests and restrictions of any kind. Holders must follow the procedures set
forth in this Prospectus in order to properly and effectively tender Outstanding
Notes.
EXCEPT AS PROVIDED IN "-- GUARANTEED DELIVERY PROCEDURES," UNLESS THE
OUTSTANDING NOTES BEING TENDERED ARE DEPOSITED BY THE HOLDER WITH THE EXCHANGE
AGENT PRIOR TO THE EXPIRATION DATE (ACCOMPANIED BY A PROPERLY COMPLETED AND DULY
EXECUTED LETTER OF TRANSMITTAL), THE COMPANY MAY, AT ITS OPTION, REJECT SUCH
TENDER. ISSUANCE OF OUTSTANDING NOTES WILL BE MADE ONLY AGAINST DEPOSIT OF
TENDERED OUTSTANDING NOTES AND DELIVERY OF ALL OTHER REQUIRED DOCUMENTS.
NOTWITHSTANDING THE FOREGOING, DTC PARTICIPANTS TENDERING THROUGH ATOP WILL BE
DEEMED TO HAVE MADE VALID DELIVERY WHERE THE EXCHANGE AGENT RECEIVES AN AGENT'S
MESSAGE (DEFINED BELOW) PRIOR TO THE EXPIRATION DATE.
Outstanding Notes held through DTC. Each Beneficial Owner holding
Outstanding Notes through a DTC Participant must instruct such DTC Participant
to cause its Outstanding Notes to be tendered in accordance with the procedures
set forth in this Prospectus.
Pursuant to an authorization given by DTC to the DTC Participants, each DTC
Participant holding Outstanding Notes through DTC must (i) electronically
transmit its acceptance through ATOP, and DTC will then verify the acceptance,
execute a book-entry delivery to the Exchange Agent's account at DTC and send an
Agent's Message to the Exchange Agent for its acceptance, or (ii) comply with
the guaranteed delivery procedures set forth below and in the Notice of
Guaranteed Delivery. See "-- Guaranteed Delivery Procedures."
The Exchange Agent will (promptly after the date of this Prospectus)
establish accounts at DTC for purposes of the Exchange Offer with respect to
Outstanding Notes held through DTC, and any financial institution that is a DTC
Participant may make book-entry delivery of interests in Outstanding Notes into
the Exchange Agent's account through ATOP. However, although delivery of
interests in the Outstanding Notes may be effected through book-entry transfer
into the Exchange Agent's account through ATOP, an Agent's Message in connection
with such book-entry transfer, and any other required documents, must be
transmitted to and received by the Exchange Agent at its address set forth under
"-- Exchange Agent," or the guaranteed delivery procedures set forth below must
be complied with, in each case, prior to the Expiration Date. Delivery of
documents to DTC does not constitute delivery to the Exchange Agent. The
confirmation of a book-entry transfer into the Exchange Agent's account at DTC
as described above is referred to herein as a "Book-Entry Confirmation."
The term "Agent's Message" means a message transmitted by DTC to, and
received by, the Exchange Agent and forming a part of the Book-Entry
Confirmation, which states that DTC has received an express
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acknowledgment from each DTC Participant tendering through ATOP that such DTC
Participants have received a Letter of Transmittal and agree to be bound by the
terms of the Letter of Transmittal and that the Company may enforce such
agreement against such DTC Participants.
Cede & Co., as the Holder of the global certificates representing the
Outstanding Notes (a "Global Security"), will tender a portion of each Global
Security equal to the aggregate principal amount due at the stated maturity or
number of shares for which instructions to tender are given by DTC Participants.
Outstanding Notes held by Holders. Each Holder must (i) complete and sign
and mail or deliver the accompanying Letter of Transmittal, and any other
documents required by the Letter of Transmittal, together with certificate(s)
representing all tendered Outstanding Notes, to the Exchange Agent at its
address set forth under "-- Exchange Agent," or (ii) comply with the guaranteed
delivery procedures set forth below and in the Notice of Guaranteed Delivery.
See "-- Guaranteed Delivery Procedures."
All signatures on a Letter of Transmittal must be guaranteed by any member
firm of a registered national securities exchange or of the National Association
of Securities Dealers, Inc., a commercial bank or trust company having an office
or correspondent in the United States or an "eligible guarantor" institution
within the meaning of Rule 17Ad-15 under the Exchange Act (each an "Eligible
Institution"); provided, however, that signatures on a Letter of Transmittal
need not be guaranteed if such Outstanding Notes are tendered for the account of
an Eligible Institution including (as such terms are defined in Rule 17Ad-15):
(i) a bank; (ii) a broker, dealer, municipal securities dealer, municipal
securities broker, government securities dealer or government securities broker;
(iii) a credit union; (iv) a national securities exchange, registered securities
association or clearing agency; or (v) a savings institution that is a
participant in a Securities Transfer Association recognized program.
If a Letter of Transmittal or any Outstanding Note is signed by a trustee,
executor, administrator, guardian, attorney-in-fact, agent, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person must so indicate when signing, and proper evidence satisfactory to
the Company of the authority of such person so to act must be submitted.
Holders should indicate in the applicable box in the Letter of Transmittal
the name and address to which substitute certificates evidencing Outstanding
Notes for amounts not tendered are to be issued or sent, if different from the
name and address of the person signing the Letter of Transmittal. In the case of
issuance in a different name, the employer identification or social security
number of the person named must also be indicated. If no instructions are given,
such Outstanding Notes not tendered, as the case may be, will be returned to the
person signing the Letter of Transmittal.
By tendering, each Holder and each DTC Participant will make to the Company
the representations set forth in the third paragraph under the heading
"-- Purpose and Effect of the Exchange Offer."
No alternative, conditional, irregular or contingent tenders will be
accepted (unless waived). By executing a Letter of Transmittal or transmitting
an acceptance through ATOP, as the case may be, each Tendering Holder waives any
right to receive any notice of the acceptance for purchase of its Outstanding
Notes.
All questions as to the validity, form, eligibility (including time of
receipt), and acceptance and withdrawal of tendered Outstanding Notes will be
resolved by the Company in its sole discretion, whose determination will be
final and binding. The Company reserves the absolute right to reject any or all
tenders that are not in proper form or the acceptance of which may, in the
opinion of counsel for the Company, be unlawful. The Company also reserves the
absolute right to waive any condition to the Exchange Offer and any
irregularities or conditions of tender as to particular Outstanding Notes. The
Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding. Unless waived, any irregularities in connection with tenders must be
cured within such time as the Company shall determine. The Company and the
Exchange Agent shall not be under any duty to give notification of defects in
such tenders and shall not incur liabilities for failure to give such
notification. Tenders of Outstanding Notes will not be deemed to have been made
until such irregularities have been cured or waived. Any Outstanding Notes
received by the Exchange Agent that are not properly tendered and as to which
the irregularities have not been cured or waived will be returned by the
Exchange Agent to the
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tendering Holder, unless otherwise provided in the Letter of Transmittal, as
soon as practicable following the Expiration Date.
LETTERS OF TRANSMITTAL AND OUTSTANDING NOTES MUST BE SENT ONLY TO THE
EXCHANGE AGENT. DO NOT SEND LETTERS OF TRANSMITTAL OR OUTSTANDING NOTES TO THE
COMPANY OR DTC.
The method of delivery of Outstanding Notes and Letters of Transmittal, any
required signature guarantees and all other required documents, including
delivery through DTC and any acceptance through ATOP, is at the election and
risk of the persons tendering and delivering acceptances or Letters of
Transmittal and, except as otherwise provided in the applicable Letter of
Transmittal, delivery will be deemed made only when actually received by the
Exchange Agent. If delivery is by mail, it is suggested that the Holder use
properly insured, registered mail with return receipt requested, and that the
mailing be made sufficiently in advance of the Expiration Date to permit
delivery to the Exchange Agent prior to the Expiration Date.
GUARANTEED DELIVERY PROCEDURES
Outstanding Notes held through DTC. DTC Participants holding Outstanding
Notes through DTC who wish to cause their Outstanding Notes to be tendered, but
who cannot transmit their acceptances through ATOP prior to the Expiration Date,
may cause a tender to be effected if:
(a) guaranteed delivery is made by or through an Eligible Institution;
(b) prior to 5:00 p.m., New York City time on the Expiration Date, the
Exchange Agent receives from such Eligible Institution a properly completed
and duly executed Notice of Guaranteed Delivery (by mail, hand delivery,
facsimile transmission or overnight courier) substantially in the form
provided by the Company herewith; and
(c) Book-Entry Confirmation and an Agent's Message in connection
therewith (as described above) are received by the Exchange Agent within
three New York Stock Exchange ("NYSE") trading days after the date of the
execution of the Notice of Guaranteed Delivery.
Outstanding Notes held by Holders. Holders who wish to tender their
Outstanding Notes and (i) whose Outstanding Notes are not immediately available,
(ii) who cannot deliver their Outstanding Notes, the Letter of Transmittal or
any other required documents to the Exchange Agent or (iii) who cannot complete
the procedures for book-entry transfer, prior to the Expiration Date, may effect
a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to 5:00 p.m., New York City time on the Expiration Date, the
Exchange Agent receives from such Eligible Institution a properly completed
and duly executed Notice of Guaranteed Delivery (by facsimile transmission,
mail or hand delivery) setting forth the name and address of the holder,
the certificate number(s) of such Outstanding Notes and the principal
amount of Outstanding Notes tendered, stating that the tender is being made
thereby and guaranteeing that, within three NYSE trading days after the
Expiration Date, the Letter of Transmittal (or facsimile thereof) together
with the certificate(s) representing the Outstanding Notes (or a
confirmation of book-entry transfer of such Outstanding Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility), and any
other documents required by the Letter of Transmittal will be deposited by
the Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as the certificate(s) representing all tendered
Outstanding Notes in proper form for transfer (or a confirmation or
book-entry transfer of such Outstanding Notes into the Exchange Agent's
account at the Book-Entry Transfer Facility), and all other documents
required by the Letter of Transmittal are received by the Exchange Agent
upon three NYSE trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Outstanding Notes according to the
guaranteed delivery procedures set forth above.
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WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Outstanding Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date.
Outstanding Notes held through DTC. DTC Participants holding Outstanding
Notes who have transmitted their acceptances through ATOP may, prior to 5:00
p.m., New York City time, on the Expiration Date, withdraw the instruction given
thereby by delivering to the Exchange Agent, at its address set forth under
"-- Exchange Agent," a written, telegraphic or facsimile notice of withdrawal of
such instruction. Such notice of withdrawal must contain the name and number of
the DTC Participant, the principal amount due at the Stated Maturity date of the
Outstanding Notes to which such withdrawal related and the signature of the DTC
Participant. Withdrawal of such an instruction will be effective upon receipt of
such written notice of withdrawal by the Exchange Agent.
Outstanding Notes held by Holders. Holders may withdraw a tender of
Outstanding Notes in the Exchange Offer, by a telegram, telex, letter or
facsimile transmission notice of withdrawal received by the Exchange Agent at
its address set forth herein prior to 5:00 p.m., New York City time, on the
Expiration Date. Any such notice of withdrawal must (i) specify the name of the
person having deposited the Outstanding Notes to be withdrawn (the "Depositor"),
(ii) identify the Outstanding Notes to be withdrawn (including the certificate
number(s) and principal amount due at the Stated Maturity of such Outstanding
Notes, or, in the case of Outstanding Notes transferred by book-entry transfer,
the name and number of the account at the Book-Entry Transfer Facility to be
credited), (iii) be signed by the holder in the same manner as the original
signature on the Letter of Transmittal by which such Outstanding Notes were
tendered (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the Trustee with respect to the
Outstanding Notes register the transfer of such Outstanding Notes into the name
of the person withdrawing the tender and (iv) specify the name in which any such
Outstanding Notes are to be registered, if different from that of the Depositor.
All questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by the Company, whose determination
shall be final and binding on all parties. Any Outstanding Notes so withdrawn
will be deemed not to have been validly tendered for purposes of the Exchange
Offer and no Exchange Notes will be issued with respect thereto unless the
Outstanding Notes so withdrawn are validly retendered. Any Outstanding Notes
which have been tendered but which are not accepted for exchange will be
returned to the holder thereof without cost to such holder as soon as
practicable after withdrawal, rejection of tender or termination of the Exchange
Offer. Properly withdrawn Outstanding Notes may be retendered by following one
of the procedures described above under "-- Procedures for Tendering" at any
time prior to the Expiration Date.
All signatures on a notice of withdrawal must be guaranteed by an Eligible
Institution; provided, however, that signatures on the notice of withdrawal need
not be guaranteed if the Outstanding Notes being withdrawn are held for the
account of an Eligible Institution.
A withdrawal of an instruction or a withdrawal of a tender must be executed
by a DTC Participant or a Holder, as the case may be, in the same manner as the
person's name appears on its transmission through ATOP or Letter of Transmittal,
as the case may be, to which such withdrawal relates. If a notice of withdrawal
is signed by a trustee, partner, executor, administrator, guardian,
attorney-in-fact, agent, officer of a corporation or other person acting in a
fiduciary or representative capacity, such person must so indicate when signing
and must submit with the revocation appropriate evidence of authority to execute
the notice of withdrawal. A DTC Participant or a Holder may withdraw an
instruction or a tender, as the case may be, only if such withdrawal complies
with the provisions of this Prospectus.
A withdrawal of a tender of Outstanding Notes by a DTC Participant or a
Holder, as the case may be, may be rescinded only by a new transmission of an
acceptance through ATOP or execution and delivery of a new Letter of
Transmittal, as the case may be, in accordance with the procedures described
herein.
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CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange securities for, any Outstanding
Notes, and may terminate or amend the Exchange Offer as provided herein before
the acceptance of such Outstanding Notes, if:
(a) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency with respect to the Exchange Offer
which, in the judgment of the Company upon written advice of counsel, could
reasonably be expected to materially impair the ability of the Company to
proceed with the Exchange Offer or any material adverse development has
occurred in any existing action or proceeding with respect to the Company
or any of the subsidiaries; or
(b) any law, statute, rule, regulation or interpretation by the staff
of the Commission is proposed, adopted or enacted, which, in the judgment
of the company and based on written advice of counsel, could reasonably be
expected to materially impair the ability of the Company to proceed with
the Exchange Offer or materially impair the contemplated benefits of the
Exchange Offer to the Company; or
(c) any governmental approval has not been obtained, which approval
the Company shall, in its discretion and based on written advice of
counsel, deem necessary for the consummation of the Exchange Offer as
contemplated hereby.
If any of the conditions are not satisfied, the Company may (i) refuse to
accept any Outstanding Notes and return all tendered Outstanding Notes to the
tendering holders, (ii) extend the Exchange Offer and retain all Outstanding
Notes tendered prior to the expiration of the Exchange Offer, subject, however,
to the rights of holders to withdraw such Outstanding Notes (see "-- Withdrawal
of Tenders") or (iii) waive such unsatisfied conditions with respect to the
Exchange Offer and accept all properly tendered Outstanding Notes which have not
been withdrawn.
EXCHANGE AGENT
SunTrust Bank, Central Florida, National Association has been appointed as
Exchange Agent for the Exchange Offer. Questions and requests for assistance,
requests for additional copies of this Prospectus or of the Letter of
Transmittal and requests for Notice of Guaranteed Delivery should be directed to
the Exchange Agent addressed as follows:
By Facsimile Transmission:
SunTrust Bank, Central Florida, NA
225 East Robinson Street
Suite 250
Orlando, Florida 32801
(407) 237-5299
Attn: Theresa Hawkins
Confirm by Telephone:
Theresa Hawkins
(407) 237-4791
By Mail or Overnight Courier:
SunTrust Bank, Central Florida, NA
c/o First Chicago Trust Company of New York
Corporate Trust
8th Floor
14 Wall Street
New York, New York 10005
Delivery to an address other than as set forth above, or transmission of
instructions via a facsimile number other than the one set forth above, will not
constitute a valid delivery.
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FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telecopy, telephone or in person by officers and
regular employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The Company will pay the Exchange
Agent reasonable and customary fees for its services and will reimburse it for
its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs, among others.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the
Outstanding Notes, as reflected in the Company's accounting records on the date
of exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by the Company.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Outstanding Notes that are not exchanged for Exchange Notes pursuant to
the Exchange Offer will remain restricted securities. Accordingly, such
Outstanding Notes may be resold only (i) to the Company (upon redemption thereof
or otherwise), (ii) so long as the Outstanding Notes are eligible for resale
pursuant to Rule 144A, to a person inside the United States whom the seller
reasonably believes is a qualified institutional buyer within the meaning of
Rule 144A under the Securities Act in a transaction meeting the requirements of
Rule 144A, in accordance with Rule 144 under the Securities Act, or pursuant to
another exemption from the registration requirements of the Securities Act (and
based upon an opinion of counsel reasonably acceptable to the Company), (iii)
outside the United States to a foreign person in a transaction meeting the
requirements of Rule 904 under the Securities Act, or (iv) pursuant to an
effective registration statement under the Securities Act, in each case in
accordance with any applicable securities laws of any state of the United
States. See "Risk Factors -- Consequences of Failure to Exchange."
RESALE OF THE EXCHANGE NOTES
With respect to resales of Exchange Notes, based on interpretations by the
staff of the Commission set forth in no-action letters issued to third parties,
the Company believes that a holder or other person who receives Exchange Notes
in the ordinary course of business, whether or not such person is the holder
(other than (i) a broker-dealer who purchases such Exchange Notes from the
Company to resell pursuant to Rule 144A or any other available exemption under
the Securities Act or (ii) a person that is an "affiliate" of the Company within
the meaning of Rule 405 under the Securities Act) who receives Exchange Notes in
exchange for Outstanding Notes, and who is not participating, does not intend to
participate, and has no arrangement or understanding with person to participate,
in the distribution of the Exchange Notes, will be allowed to resell the
Exchange Notes to the public without further registration under the Securities
Act and without delivering to the purchasers of the Exchange Notes a prospectus
that satisfies the requirements of Section 10 of the Securities Act. However, if
any holder acquires Exchange Notes in the Exchange Offer for the purpose of
distributing or participating in a distribution of the Exchange Notes, such
holder cannot rely on the position of the staff of the Commission enunciated in
such no-action letters or any similar interpretive letters, and must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction, unless an exemption from registration is
otherwise available. Further, each Participating Broker-Dealer that receives
Exchange Notes for its own account in exchange for Exchange Notes, where such
Securities were acquired by such Participating Broker-Dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange Notes.
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As contemplated by these no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent to
the Company in the Letter of Transmittal that (i) the Exchange Notes are to be
acquired by the holder or the person receiving such Exchange Notes, whether or
not such person is the holder, in the ordinary course of business, (ii) the
holder or any such other person (other than a broker-dealer referred to in the
next sentence) is not engaging and does not intend to engage, in the
distribution of the Exchange Notes, (iii) the holder or any such other person
has no arrangement or understanding with any person to participate in the
distribution of the Exchange Notes, (iv) neither the holder nor any such other
person is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act, and (v) the holder or any such other person acknowledges that if
such holder or other person participates in the Exchange Offer for the purpose
of distributing the Exchange Notes it must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale of the Exchange Notes and cannot rely on those no-action letters. As
indicated above, each Participating Broker-Dealer that receives Exchange Notes
for its own account in exchange for Outstanding Notes must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange Notes.
For a description of the procedures for such resales by Participating
Broker-Dealers, see "Plan of Distribution."
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DESCRIPTION OF OTHER INDEBTEDNESS
The following discussion describes certain indebtedness, other than the
Notes, that will be outstanding as of the date of this Prospectus.
CONVERTIBLE SUBORDINATED DEBENTURES
In May 1987, the Company sold $46.0 million principal amount of its 8 1/4%
Convertible Subordinated Debentures due 2012 (the "Public Debentures"), of which
$34.7 million were outstanding at December 28, 1997. The Public Debentures are
convertible at any time prior to maturity, unless previously redeemed, into
Common Stock at a current conversion price of $8.24 per share, subject to
adjustment under certain conditions. The Public Debentures are redeemable at any
time, at the Company's option, in whole or in part, at a redemption price equal
to 100% of the face amount, plus accrued interest, if any. The Company is
obligated to redeem annually, commencing May 15, 2003, 10% of the original
principal amount of the Public Debentures at 100% of the face amount, plus
accrued interest, if any. The Company may reduce the principal amount of Public
Debentures to be redeemed by subtracting 100% of the principal amount of any
Public Debentures that the Company has delivered for cancellation upon
repurchase (other than pursuant to an Offer (defined below)) or following a
conversion or redemption (other than a mandatory redemption). Through December
28, 1997, the Company had repurchased (other than pursuant to an Offer) Public
Debentures in the aggregate principal amount of $11.3 million. Such redemptions
are calculated to retire 90% of the principal amount of the Public Debentures
prior to maturity. Interest is payable semi-annually on May 15 and November 15.
The Public Debentures are unsecured and subordinated to all existing and
future senior indebtedness of the Company. No payment on account of principal or
interest on the Public Debentures may be made unless, (i) at the time proposed
for any such payment, full payment of amounts then due in respect of senior
indebtedness shall have been made or duly provided for and (ii) at the time for,
or immediately after giving effect to, any such payment, there shall not exist
or be created under any senior indebtedness, any default which shall not have
been cured or waived, provided that no such event of default will prevent
payment on the Public Debentures for more than 90 days unless the maturity of
such senior indebtedness has been and remains accelerated. Consequently, if an
Event of Default were to occur and be continuing under the Notes, absent an
acceleration of the Notes the Notes Trustees and/or the holders of the Notes
will only be able to block payments on the Public Debentures for 90 days.
Under financial covenants contained in the Indenture pursuant to which the
Public Debentures were issued, the Company is required to maintain a net worth
of not less than $29.0 million. Should the Company's net worth fall below $29.0
million for two consecutive quarters, the Company is required to make an offer
to purchase 20% of the outstanding Public Debentures at par, plus accrued
interest.
CONVERTIBLE NOTES
The Company borrowed an aggregate $6,000,000 from Joseph Abeles, a director
of the Company, and Grace Brothers, Ltd., an affiliate of Bradford T. Whitmore,
a director of the Company, pursuant to a Note Purchase Agreement dated as of
September 11, 1997 (the "Note Agreement"), which amount was used to fund a
portion of the purchase price in connection with the RDI Acquisition. Pursuant
to the Note Agreement, the Company executed the Convertible Notes in the
aggregate principal amount of $6,000,000. The Convertible Notes have a maturity
date of September 11, 2002, and the outstanding balances of the Convertible
Notes are convertible into Common Stock at a conversion price of $3.92 per
share, subject to adjustment. Interest is payable quarterly in arrears on
December 11, March 11, June 11 and September 11 of each year. The Convertible
Notes may not be prepaid without the consent of the holders thereof. The
Convertible Notes are subordinated to the Notes to the same extent the Public
Debentures are subordinated to the Notes (described above); the Convertible
Notes are not contractually subordinated to any other indebtedness of the
Company.
RDI NOTE
In connection with the RDI Acquisition, the Company and a wholly-owned
subsidiary of the Company issued a 9% promissory note in the principal amount of
$1,500,000 to the former stockholders of RDI (the
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"RDI Note"). The principal amount of the RDI Note is payable as follows:
$250,000 on March 29, 1998, $250,000 on September 29, 1998, and $1,000,000 on
September 29, 1999. Interest is payable in arrears when principal payments are
required to be made. The Company may at any time prepay all or a portion of the
RDI Note. Amounts payable under the RDI Note may be set off by the Company
against any amounts payable to the Company under its indemnification rights
contained in the Stock Purchase Agreement by and among the Company and the RDI
Stockholders.
ARUBA DEBT
In connection with the acquisition by BG Aruba, an Aruban limited liability
company in which the Company owns a fifty percent equity interest, of the unsold
Timeshare Interest inventory of the Aruba Resort, BG Aruba assumed approximately
$16.6 million of the indebtedness (the "Aruba Debt") owed by the seller to
Interbank Aruba N.V. (the "Bank"). The Aruba Debt is not guaranteed by Bluegreen
or any of its wholly-owned subsidiaries. An affiliate of the seller is
responsible for payment of all interest on the Aruba Debt; BG Aruba is not
responsible for any such interest payments and the Aruba Debt shall not be
declared in default for any failure of the seller to make an interest payment.
Under the Aruba Debt, BG Aruba must make minimum monthly payments of
approximately $278,000. The Aruba Debt is secured by the unsold Timeshare
Interest inventory of the Aruba resort. Upon payment to the Bank of 31.48% of
the purchase price of each Timeshare Interest sold, the Bank will release from
collateral such interest.
The cash portion of the purchase price for the Timeshare Interests at the
Aruba Resort was financed through $3.0 million loaned to BG Aruba by the Company
and $3.0 loaned to BG Aruba by an affiliate of the individual who owns the
remaining equity interest in BG Aruba, pursuant to promissory notes due December
15, 2000 and bearing interest at the prime rate plus 1%.
CREDIT FACILITIES
The Company has an existing $20.0 million revolving credit facility with a
financial institution for the pledge of Residential Land Division Receivables.
The Company uses the facility as a temporary warehouse until it accumulates a
sufficient quantity of residential land receivables to sell under private
placement REMIC transactions. Under the terms of this facility, the Company is
entitled to advances secured by Residential Land Division receivables up to 90%
of the outstanding principal balance of eligible pledged Residential Land
Division receivables. In addition, up to $8.0 million of the facility can be
used for land acquisition and development purposes. The interest rate charged on
outstanding borrowings ranges from prime plus 0.5% to 1.5%. At December 28,
1997, the outstanding principal balance under the facility was $4.7 million. All
principal and interest payments received on pledged Receivables are applied to
principal and interest due under the facility. The ability to borrow under the
facility expires in September 2000. Any outstanding indebtedness, is due in
September 2002. The Company retained this facility following the Note Offering.
The Company is currently negotiating with another financial institution for
a $35.0 million revolving credit facility. The Company expects to use this
facility to finance the acquisition and development of residential land projects
and to finance land receivables. The facility is expected to be secured by the
real property (and personal property related thereto) with respect to which
borrowings are made, with the lender to advance up to a specified percentage of
the value of the mortgaged property and eligible pledged receivables, provided
that the maximum outstanding amount secured by pledged receivables may not
exceed $20.0 million. The interest charged on outstanding borrowings is expected
to be approximately prime plus 1.5%.
The Company is currently negotiating with a financial institution to
provide the Company with a $135 million combined timeshare warehouse financing
and receivables purchase facility. It is anticipated that the $35 million
warehouse facility and the $100 million receivable purchase facility will bear
interest at LIBOR plus 2.35% and a fixed rate equal to the weighted average term
Treasury rate plus 1.40%, respectively. Should the Company fail to sell to such
financial institution during the term of the purchase facility notes receivable
with cumulative present value of at least $100 million, the interest rate will
increase by .05% for each $10 million shortfall, to a maximum applicable margin
of 1.60%. Under the facility, eligible notes receivable would
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periodically move from the warehouse facility to the purchase facility. Both the
warehouse and the purchase facility will have detailed requirements with respect
to the eligibility of notes receivable for inclusion and other conditions to
funding. It is anticipated that the borrowing base under the warehouse facility
will be 95% of the outstanding principal balance of eligible notes arising from
the sale of completed Timeshare Interests. Under the purchase facility, the
Company will be required to maintain a specified overcollateralization level and
a cash reserve account. Loans sold under this facility will be without recourse
to the Company except for breaches of representations and warranties made at the
time of sale. Fundings under the facility will terminate upon the occurrence of
specified trigger events. The Company will act as servicer under the purchase
facility and will be required to make advances to the financial institution to
the extent it believes such advances will be recoverable. If obtained, the
combined facility will expire two years from the closing date of the Note
Offering. In addition to other customary fees and expenses, the Company
anticipates that it will pay a fee equal to $575,000, $250,000 at the closing of
this facility and $325,000 within 12 months of closing. In addition, the Company
anticipates that it will pay an annual utilization fee equal to 1% of the
incremental amount by which outstanding indebtedness under the facility is below
$10 million. The facility, if entered into, will include various conditions to
funding, eligibility requirements for collateral, affirmative, negative and
financial covenants, and events of default, to be negotiated.
In addition, the Company is currently negotiating with the same financial
institution referred to in the preceding paragraph to provide the Company with a
$25 million acquisition and development facility for its timeshare inventories.
The facility would include a two-year draw down period and have a term of seven
years. Principal would be repaid through agreed-upon release prices as Timeshare
Interests are sold at the financed resort, subject to minimum required
amortizations. It is anticipated that the indebtedness under the facility would
bear interest at the three-month LIBOR plus 3.0%. With respect to any inventory
financed under the facility, the Company will be required to have provided
equity of at least 15% of the approved project costs. The facility will include
certain minimum financial covenants for the Company. In connection with the
facility, the Company will also be required to pay certain fees and expenses to
the financial institution. The Company anticipates that it will pay a commitment
fee equal to $250,000, $100,000 at the closing of this facility and the
remainder paid through a 1% fee on each draw until the total commitment fee is
paid.
The Company's credit facilities include, and its proposed facilities will
include, among other things, customary representations and warranties,
provisions with respect to the payment of customary fees and expenses,
conditions to funding, eligibility requirements and advance rates for
collateral, events of default and certain financial and other affirmative and
negative covenants, including, among others, limits on the incurrence of
indebtedness, covenants concerning net worth and fixed charge coverage
requirements and debt to equity ratios.
No assurances can be given that the proposed credit facilities described
above will be entered into or that funding will be provided on the terms
discussed herein, if at all, or that the Company will be able to obtain
sufficient external sources of liquidity on attractive terms, or at all. See
"Risk Factors -- Leverage; Ability to Service Debt and Liquidity and Finance
Requirements."
119
<PAGE> 127
BOOK-ENTRY, DELIVERY AND FORM
Except as described in the next paragraph, each of the Exchange Notes
initially will be represented by a single permanent global certificate in
definitive, fully registered form (the "Global Securities"). The Global
Securities will be deposited upon issuance with the Notes Trustee as custodian
for the Depository Trust Company ("DTC") and registered in the name of a nominee
of DTC for credit to an account of a direct or indirect participant as described
below.
The Outstanding Notes were offered and sold by the Initial Purchasers
solely to qualified institutional buyers in reliance on Rule 144A.
Global Securities. The Company expects that pursuant to procedures
established by DTC (i) upon the issuance of the Global Securities, DTC or its
custodian will credit, on its internal system, the principal amount of Notes of
the individual beneficial interest represented by such Global Security to the
respective accounts for persons who have accounts with DTC and (ii) ownership of
beneficial interests in the Global Securities will be shown on, and the transfer
of such ownership will be effected only through, records maintained by DTC or
its nominee (with respect to interests of persons who have accounts with DTC
("participants")) and the records of participants (with respect to interests of
persons other than participants).
So long as DTC, or its nominee, is the registered owner or holder of the
Global Securities, DTC or such nominee, as the case may be, will be considered
the sole owner or holder of the Notes represented by the Global Securities for
all purposes under the Indenture. No beneficial owner of an interest in any of
the Global Securities will be able to transfer that interest except in
accordance with DTC's procedures.
Payments on the Global Securities will be made to DTC or its nominee, as
the case may be, as the registered owner thereof. None of the Company, the Notes
Trustee or any Paying Agent will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in a Global Security or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interest.
The Company expects that DTC or its nominee, upon receipt of any payment in
respect of a Global Security, will credit participants' accounts with payments
in amounts proportionate to their respective beneficial interests in the
applicable Global Security as shown on the records of DTC or its nominee. The
Company also expects that payments by participants to owners of beneficial
interests in the Global Securities held through such participants will be
governed by standing instructions and customary practice, as is now the case
with securities held for the accounts of customers registered in the names of
nominees for such customers. Such payments will be the responsibility of such
participants.
Transfers between participants in DTC will be effective in the ordinary way
in accordance with DTC rules and will be settled in clearinghouse funds. If a
holder requires physical delivery of a Certificated Security for any reason,
including to sell such security to persons in states which require physical
delivery of Certificated Securities, or to pledge such securities, such holder
must transfer its interest in the applicable Global Security, in accordance with
the normal procedures of DTC and with the procedures set forth in the Indenture.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Global Securities only at the direction of one or more
participants to whose account the DTC interests in the Global Securities are
credited and only in respect of such portion of the securities as to which such
participant or participants has or have given such direction. However, if there
is an Event of Default under the Indenture DTC will exchange the Global
Securities representing Notes for Certificated Securities, which it will
distribute to its participants.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants and facilitate the clearance and settlement of
securities transactions between participants through electronic book-entry
changes
120
<PAGE> 128
in accounts of its participants, thereby eliminating the need for physical
movement of certificates. Participants include securities brokers and dealers,
banks, trust companies and clearing corporations and certain other
organizations. Indirect access to the DTC system is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly
("indirect participants").
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Securities among participants of DTC, it is
under no obligation to perform such procedures, and such procedures may be
discontinued at any time. None of the Company, the Notes Trustee or the Transfer
Agent will have any responsibility for the performance by DTC or its
participants or indirect participants of their respect obligations under the
rules and procedures governing their operations.
The information in this section concerning DTC and its book-entry system
has been obtained from sources that the Company believes to be reliable, but the
Company takes no responsibility for the accuracy thereof.
EXCHANGE OF BOOK-ENTRY NOTES FOR CERTIFICATED NOTES
The Global Note is exchangeable for definitive Notes in registered
uncertificated form if (i) DTC (x) notifies the Company that it is unwilling or
unable to continue as depositary for the Global Note and the Company thereupon
fails to appoint a successor depositary or (y) has ceased to be a clearing
agency registered under the Exchange Act; (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of the
Notes in certificated form; or (iii) there shall have occurred and be continuing
a Default or an Event of Default with respect to the Notes. In all cases,
certificated Notes delivered in exchange for the Global Note or beneficial
interests therein will be registered in the names, and issued in any approved
denominations, requested by or on behalf of the depositary (in accordance with
its customary procedures).
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is based upon current provisions of the Internal
Revenue Code of 1986, as amended, applicable Treasury regulations, judicial
authority and administrative rulings and practice. There can be no assurance
that the Internal Revenue Service (the "IRS") will not take a contrary view, and
no ruling from the IRS has been or will be sought. Legislative, judicial or
administrative changes or interpretations may be forthcoming that could alter or
modify the statements and conditions set forth herein. Any such changes or
interpretations may or may not be retroactive and could affect the tax
consequences to holders. Certain holders (including insurance companies,
tax-exempt organizations, financial institutions, broker-dealers, foreign
corporations and persons who are not citizens or residents of the United States)
may be subject to special rules not discussed below.
THE COMPANY RECOMMENDS THAT EACH HOLDER CONSULT SUCH HOLDER'S OWN TAX
ADVISER AS TO THE PARTICULAR TAX CONSEQUENCES OF EXCHANGING SUCH HOLDER'S OLD
NOTES FOR NEW NOTES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL
OR FOREIGN TAX LAWS.
The Company believes that the exchange of Outstanding Notes for Exchange
Notes pursuant to the Exchange Offer will not be treated as an "exchange" for
federal income tax purposes because the Exchange Notes will not be considered to
differ materially in kind or extent from the Outstanding Notes. Rather, the
Exchange Notes received by a holder will be treated as a continuation of the
Outstanding Notes in the hands of such holder. As a result, there will be no
federal income tax consequences to holders exchanging Outstanding Notes for
Exchange Notes pursuant to the Exchange Offer.
PLAN OF DISTRIBUTION
Based on interpretations of the staff of the Division of Corporation
Finance of the Commission set forth in no-action letters issued to third
parties, the Company believes that, except as described below, Exchange
121
<PAGE> 129
Notes issued pursuant to the Exchange Offer may be offered for resale, resold
and otherwise transferred by the respective holders thereof without further
compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that (i) such Exchange Notes are acquired in the
ordinary course of such holder's business and (ii) such holder is not
participating, and has no arrangement or understanding with any person to
participate, in a distribution of the Exchange Notes. A holder of Outstanding
Notes that is an "affiliate" of the Company within the meaning of Rule 405 under
the Securities Act or that is a broker-dealer that purchased Outstanding Notes
from the Company to resell pursuant to an exemption from registration under the
Securities Act (a) cannot rely on such interpretations by the staff of the
Division of Corporation Finance of the Commission, (b) will not be permitted or
entitled to tender such Outstanding Notes in the Exchange Offer and (c) must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any sale or other transfer of such Outstanding
Notes unless such sale or transfer is made pursuant to an exemption from such
requirements. In addition, any holder who tenders Outstanding Notes in the
Exchange Offer with the intention or for the purpose of participating in a
distribution of the Exchange Notes cannot rely on such interpretations by the
staff of the Division of Corporation Finance of the Commission and must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with the secondary resale transaction. Unless an exemption from
registration is otherwise available, any such resale transaction should be
covered by an effective registration statement containing selling security
holders information required by Item 507 of Regulation S-K under the Securities
Act. To date, the staff of the Division of Corporation Finance of the Commission
has taken the position that a broker-dealer that has acquired securities in
exchange for securities that were acquired by such broker-dealer as a result of
market-making activities or other trading activities may fulfill the prospectus
delivery requirements with the prospectus contained in an exchange offer
registration statement.
Each holder of Outstanding Notes who wishes to exchange its Outstanding
Notes for Exchange Notes in the Exchange Offer will be required to make certain
representations to the Company set forth in "The Exchange Offer -- Purpose and
Effect of the Exchange Offer."
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such Exchange Notes. This Prospectus may be used by a broker-dealer in
connection with resales of Exchange Notes received in exchange for Outstanding
Notes where such Outstanding Notes were acquired as a result of market-making
activities or other trading activities. Subject to certain provisions set forth
in the Registration Rights Agreement, the Company has agreed that, for a period
of up to 180 days after the consummation of the Exchange Offer, it will make
this Prospectus available to any broker-dealer for use in connection with any
such resale. See "Risk Factors -- Absence of Public Market" and "The Exchange
Offer -- Resale of the Exchange Notes."
The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such Exchange Notes. Any
broker-dealer that resells Exchange Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit from any
such resale of Exchange Notes and any commissions or concessions received by any
such person may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that by acknowledging that it will deliver
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. A broker-dealer
may nonetheless be deemed to be an "underwriter" under the Securities Act
notwithstanding such disclaimer.
Subject to certain provisions set forth in the Registration Rights
Agreement, for a period of 180 days after the date the Exchange Offer is
consummated, the Company will promptly send additional copies of this
122
<PAGE> 130
Prospectus and any amendment or supplement to this Prospectus to any
Participating Broker-Dealer that requests such documents in the Letter of
Transmittal. The Company has agreed to pay the expenses incident to the Exchange
Offer, other than any discounts or commissions incurred upon the sale of the
Exchange Notes.
LEGAL MATTERS
The validity of the issuance of the Exchange Notes will be passed upon for
the Company by Choate, Hall & Stewart (a partnership including professional
corporations), Boston, Massachusetts.
EXPERTS
The consolidated financial statements of Bluegreen Corporation at March 30,
1997 and March 31, 1996, and for each of the three years in the period ended
March 30, 1997, appearing in this Prospectus and Registration Statement have
been audited by Ernst & Young LLP, independent certified public accountants, as
set forth in their report thereon appearing elsewhere herein, and are included
in reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
123
<PAGE> 131
BLUEGREEN CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Consolidated Financial Statements as of March 31, 1996 and
March 30, 1997 and for the Fiscal Years Ended April 2,
1995; March 31, 1996; and March 30, 1997:
Report of Independent Certified Public Accountants........ F-2
Consolidated Balance Sheets............................... F-3
Consolidated Statements of Operations..................... F-4
Consolidated Statements of Shareholders' Equity........... F-5
Consolidated Statements of Cash Flows..................... F-6
Notes to Consolidated Financial Statements................ F-8
Unaudited Condensed Consolidated Financial Statements as of
December 28, 1997 and for the Nine Months Ended December
29, 1996 and December 28, 1997:
Unaudited Condensed Consolidated Balance Sheet............ F-29
Unaudited Condensed Consolidated Statements of
Operations............................................. F-30
Unaudited Condensed Consolidated Statements of Cash
Flows.................................................. F-31
Notes to Unaudited Condensed Consolidated Financial
Statements............................................. F-32
</TABLE>
F-1
<PAGE> 132
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders
Bluegreen Corporation
We have audited the accompanying consolidated balance sheets of Bluegreen
Corporation as of March 30, 1997 and March 31, 1996, and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the three years in the period ended March 30, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above, present fairly,
in all material respects, the consolidated financial position of Bluegreen
Corporation at March 30, 1997 and March 31, 1996, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended March 30, 1997, in conformity with generally accepted accounting
principles.
West Palm Beach, Florida
May 2, 1997, except for Note 14 as to
which the date is February 17, 1998
F-2
<PAGE> 133
BLUEGREEN CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, MARCH 30,
1996 1997
------------ ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents (including restricted cash of
approximately $7.7 million and $8.0 million at March 31,
1996 and March 30, 1997, respectively).................... $ 11,389,141 $ 11,597,147
Contracts receivable, net................................... 12,451,207 14,308,424
Notes receivable, net....................................... 37,013,802 34,619,325
Investment in securities.................................... 9,699,435 11,066,693
Inventory, net.............................................. 73,595,014 86,660,559
Property and equipment, net................................. 5,239,100 4,948,554
Debt issuance costs, net.................................... 1,288,933 1,063,755
Other assets................................................ 4,286,401 5,362,572
------------ ------------
TOTAL ASSETS...................................... $154,963,033 $169,627,029
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable............................................ $ 2,557,797 $ 1,917,907
Deferred revenue............................................ 746,955 3,791,924
Accrued liabilities and other............................... 9,142,108 10,118,268
Lines-of-credit and notes payable........................... 17,287,767 35,905,552
Deferred income taxes....................................... 6,067,814 2,855,946
Receivable-backed notes payable............................. 19,723,466 21,055,002
8.25% convertible subordinated debentures................... 34,739,000 34,739,000
------------ ------------
TOTAL LIABILITIES................................. 90,264,907 110,383,599
Commitments and contingencies
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value, 1,000,000 shares
authorized; none issued................................... -- --
Common stock, $.01 par value, 90,000,000 shares authorized;
20,533,410 and 20,601,871 shares outstanding at March 31,
1996 and March 30, 1997, respectively..................... 205,334 206,019
Capital-in-excess of par value.............................. 71,296,158 71,410,755
Accumulated deficit......................................... (6,803,366) (11,162,923)
Treasury stock, 443,000 common shares at March 30, 1997 at
cost...................................................... -- (1,369,772)
Net unrealized gains on investments available-for-sale, net
of income taxes........................................... -- 159,351
------------ ------------
Total shareholders' equity.................................. 64,698,126 59,243,430
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........ $154,963,033 $169,627,029
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 134
BLUEGREEN CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED
-----------------------------------------
APRIL 2, MARCH 31, MARCH 30,
1995 1996 1997
----------- ------------ ------------
<S> <C> <C> <C>
REVENUES:
Sales of real estate................................ $91,921,990 $113,422,228 $109,721,561
Interest income and other........................... 7,263,759 7,388,095 6,158,909
----------- ------------ ------------
99,185,749 120,810,323 115,880,470
COST AND EXPENSES:
Cost of real estate sold............................ 45,105,841 59,393,392 57,090,546
Selling, general and administrative expenses........ 36,520,817 43,734,724 51,441,301
Interest expense.................................... 6,737,687 6,276,187 5,458,919
Provisions for losses............................... 792,000 611,979 9,539,081
----------- ------------ ------------
89,156,345 110,016,282 123,529,847
----------- ------------ ------------
Income (loss) from operations......................... 10,029,404 10,794,041 (7,649,377)
Other income.......................................... 372,443 121,884 260,299
----------- ------------ ------------
Income (loss) before income taxes..................... 10,401,847 10,915,925 (7,389,078)
Provision (benefit) for income taxes.................. 4,264,758 4,449,069 (3,029,521)
----------- ------------ ------------
NET INCOME (LOSS)..................................... $ 6,137,089 $ 6,466,856 $ (4,359,557)
=========== ============ ============
EARNINGS (LOSS) PER COMMON SHARE:
Basic............................................... $ .30 $ .32 $ (.21)
=========== ============ ============
Diluted............................................. $ .29 $ .30 $ (.21)
=========== ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES:
Basic............................................... 20,415,856 20,508,037 20,318,509
=========== ============ ============
Diluted............................................. 21,476,638 21,775,291 20,318,509
=========== ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 135
BLUEGREEN CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED APRIL 2, 1995, MARCH 31, 1996 AND MARCH 30, 1997
<TABLE>
<CAPTION>
NET
UNREALIZED
GAINS ON
INVESTMENTS
COMMON AVAILABLE-
COMMON STOCK CAPITAL IN TREASURY FOR-
SHARES $.01 PAR EXCESS OF ACCUMULATED STOCK AT SALE, NET OF
ISSUED VALUE PAR VALUE DEFICIT COST INCOME TAXES TOTAL
---------- -------- ----------- ------------ ----------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at March 27, 1994...... 17,795,974 $177,960 $61,099,625 $(9,423,926) $ -- $ -- $51,853,659
4% stock dividend.............. 711,076 7,111 2,570,540 (2,577,651) -- -- --
5% stock dividend.............. 925,751 9,257 3,115,152 (3,124,409) -- -- --
Cash payment for dividends in
lieu of fractional shares.... -- -- -- (5,432) -- -- (5,432)
Shares issued to employees upon
exercise of qualified stock
options...................... 37,933 379 54,282 -- -- -- 54,661
Net income..................... -- -- -- 6,137,089 -- -- 6,137,089
---------- -------- ----------- ------------ ----------- -------- -----------
Balance at April 2, 1995....... 19,470,734 194,707 66,839,599 (8,994,329) -- -- 58,039,977
5% stock dividend.............. 976,418 9,764 4,262,236 (4,272,000) -- -- --
Cash payment for dividends in
lieu of fractional shares.... -- -- -- (3,893) -- -- (3,893)
Shares issued to employees upon
exercise of qualified stock
options...................... 86,258 863 194,323 -- -- -- 195,186
Net income..................... -- -- -- 6,466,856 -- -- 6,466,856
---------- -------- ----------- ------------ ----------- -------- -----------
Balance at March 31, 1996...... 20,533,410 205,334 71,296,158 (6,803,366) -- -- 64,698,126
Net unrealized gains on
investments
available-for-sale, net of
income taxes................. -- -- -- -- -- 159,351 159,351
Shares issued to employees upon
exercise of qualified stock
options...................... 68,461 685 114,597 -- -- -- 115,282
Shares repurchased............. -- -- -- -- (1,369,772) -- (1,369,772)
Net loss....................... -- -- -- (4,359,557) -- -- (4,359,557)
---------- -------- ----------- ------------ ----------- -------- -----------
Balance at March 30, 1997...... 20,601,871 $206,019 $71,410,755 $(11,162,923) $(1,369,772) $159,351 $59,243,430
========== ======== =========== ============ =========== ======== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 136
BLUEGREEN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED
------------------------------------------
APRIL 2, MARCH 31, MARCH 30,
1995 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Cash received from customers including net cash
collected as servicer of notes receivable to be
remitted to investors........................... $ 78,667,484 $ 94,939,565 $ 88,471,780
Interest received.................................. 5,409,259 6,220,829 5,247,636
Cash paid for land acquisitions and real estate
development..................................... (48,374,125) (61,236,096) (64,860,397)
Cash paid to suppliers, employees and sales
representatives................................. (33,337,031) (44,567,809) (48,688,033)
Interest paid, net of capitalized interest......... (6,287,133) (5,918,887) (4,964,170)
Income taxes paid, net of refunds.................. (3,097,292) (3,316,235) (1,677,762)
Proceeds from borrowings collateralized by notes
receivable...................................... 8,587,550 19,438,016 18,157,349
Payments on borrowings collateralized by notes
receivable...................................... (14,845,131) (19,229,268) (16,825,813)
Net proceeds from REMIC transactions............... 22,706,101 28,688,041 16,934,571
------------ ------------ ------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES..... 9,429,682 15,018,156 (8,204,839)
------------ ------------ ------------
INVESTING ACTIVITIES:
Purchases of property and equipment................ (1,769,077) (1,895,510) (1,041,769)
Sales of property and equipment.................... 452,822 789,433 843,445
Cash received from investment in securities........ -- 275,816 1,699,032
Additions to other long-term assets................ (259,109) (410,814) (180,505)
------------ ------------ ------------
NET CASH FLOW (USED) PROVIDED BY INVESTING
ACTIVITIES......................................... (1,575,364) (1,241,075) 1,320,203
------------ ------------ ------------
FINANCING ACTIVITIES:
Borrowings under line-of-credit facilities......... 3,916,436 5,795,604 16,887,870
Borrowings under secured credit facility........... -- -- 3,800,000
Payments under line-of-credit facilities........... -- (4,053,615) (5,484,517)
Payments on other long-term debt................... (13,539,555) (11,909,697) (6,856,221)
Proceeds from exercise of employee stock options... 54,661 195,186 115,282
Cash paid for repurchase of common shares.......... -- -- (1,369,772)
Payment for stock dividends in lieu of fractional
shares.......................................... (5,432) (3,893) --
------------ ------------ ------------
NET CASH FLOW (USED) PROVIDED BY FINANCING
ACTIVITIES......................................... (9,573,890) (9,976,415) 7,092,642
------------ ------------ ------------
Net (decrease) increase in cash and cash
equivalents........................................ (1,719,572) 3,800,666 208,006
Cash and cash equivalents at beginning of year....... 9,308,047 7,588,475 11,389,141
------------ ------------ ------------
Cash and cash equivalents at end of year............. 7,588,475 11,389,141 11,597,147
Restricted cash and cash equivalents end of year..... (5,164,650) (7,683,901) (7,978,256)
------------ ------------ ------------
Unrestricted cash and cash equivalents
at end of year .................................... $ 2,423,825 $ 3,705,240 $ 3,618,891
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 137
BLUEGREEN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
<TABLE>
<CAPTION>
YEARS ENDED
------------------------------------------
APRIL 2, MARCH 31, MARCH 30,
1995 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
RECONCILIATION OF NET INCOME (LOSS) TO NET CASH FLOW
PROVIDED (USED) BY OPERATING ACTIVITIES:
Net income (loss).................................. $ 6,137,089 $ 6,466,856 $ (4,359,557)
Adjustments to reconcile net income (loss) to net
cash flow provided (used) by operating
activities:
Depreciation and amortization................... 1,301,125 1,636,933 1,065,794
Loss (gain) on REMIC transactions............... 411,000 (1,119,572) 96,211
(Gain) loss on sale of property and equipment... (54,519) 48,561 (82,310)
Provisions for losses........................... 792,000 611,979 9,539,081
Interest accretion on investment in
securities.................................... (2,222,724) (1,170,367) (996,531)
Proceeds from borrowings collateralized by notes
receivable.................................... 8,587,550 19,438,016 18,157,349
Payments on borrowings collateralized by notes
receivable.................................... (14,845,131) (19,229,268) (16,825,813)
Provision (benefit) for deferred income taxes... 1,326,791 998,095 (3,419,109)
(INCREASE) DECREASE IN OPERATING ASSETS:
Contracts receivable............................ (3,122,652) 600,047 (1,857,217)
Inventory....................................... (4,452,058) (2,003,195) (9,125,901)
Other assets.................................... 1,264,688 274,414 (1,076,176)
Notes receivable and investment in securities... 11,864,101 10,446,396 (2,798,395)
INCREASE (DECREASE) IN OPERATING LIABILITIES:
Accounts payable, accrued liabilities and
other......................................... 2,442,422 (1,980,739) 3,477,735
------------ ------------ ------------
NET CASH FLOW PROVIDED (USED) BY OPERATING
ACTIVITIES......................................... $ 9,429,682 $ 15,018,156 $ (8,204,839)
============ ============ ============
SUPPLEMENTAL SCHEDULE OF NON-CASH OPERATING AND
FINANCING ACTIVITIES
Inventory acquired through financing
transactions ................................. $ 17,680,680 $ 6,595,450 $ 10,030,647
============ ============ ============
Inventory acquired through foreclosure or
deedback in lieu of foreclosure............... $ 1,139,993 $ 1,609,697 $ 1,957,916
============ ============ ============
Investment in securities retained in connection
with REMIC transactions....................... $ 2,674,370 $ 2,044,029 $ 1,774,319
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 138
BLUEGREEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Organization
Bluegreen Corporation (the "Company") is a national leisure product company
operating predominantly in the Southeastern, Southwestern and Midwestern United
States. The Company's primary business is (i) the acquisition, development and
sale of residential land and (ii) the acquisition and development of timeshare
properties which are sold in weekly intervals. The Company offers financing to
its land and timeshare purchasers.
Land and timeshare products are typically located in scenic areas or
popular vacation destinations throughout the United States. The Company's
products are primarily sold to middle-class individuals with ages ranging from
forty to fifty-five. The Company changed its name, effective March 8, 1996, from
Patten Corporation.
Principles of Consolidation
The financial statements include the accounts of Bluegreen Corporation and
all wholly owned subsidiaries. All significant intercompany transactions are
eliminated.
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company invests cash in excess of immediate operating requirements in
short-term time deposits and money market instruments generally with original
maturities of three months or less. The Company maintains cash and cash
equivalents with various financial institutions. These financial institutions
are located throughout the country and Company policy is designed to limit
exposure to any one institution. However, a significant portion of the Company's
unrestricted cash is maintained with a single bank and, accordingly, the Company
is subject to credit risk. Periodic evaluations of the relative credit standing
of financial institutions maintaining Company deposits are performed to evaluate
and mitigate, if necessary, credit risk.
Restricted cash consists of funds collected as servicer under
receivable-backed note agreements, along with customer deposits on real estate
maintained in escrow accounts.
Contracts Receivable and Revenue Recognition
In accordance with the requirements of Statement of Financial Accounting
Standards ("SFAS") No. 66, the Company recognizes revenue on retail land sales
and timeshare sales when a minimum of 10% of the sales price has been received
in cash, the refund period has expired, collectibility of the receivable
representing the remainder of the sales price is reasonably assured and the
Company has completed substantially all of its obligations with respect to any
development related to the real estate sold. In cases where all development has
not been completed, the Company recognizes revenue in accordance with the
percentage of completion method of accounting.
Sales which do not meet the criteria for revenue recognition described
above are deferred using the deposit method. Under the deposit method, cash
received from customers is classified as a refundable deposit in the liability
section of the Consolidated Balance Sheet and profit recognition is deferred
until the requirements of SFAS No. 66 are met.
F-8
<PAGE> 139
BLUEGREEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Contracts receivable is net of an allowance for cancellations amounting to
$451,000 and $112,000 at March 30, 1997 and March 31, 1996, respectively.
Notes Receivable
Notes receivable are carried at amortized cost. Interest income is
suspended on all notes receivable when principal or interest payments are more
than three months contractually past due and not resumed until such loans become
contractually current.
Impact of Recently Issued Accounting Standards
From time to time certain receivables have been securitized and sold to
investors through Real Estate Mortgage Investment Conduits (REMICs). See Note 3.
To date, the servicing rights to securitized receivables have been retained by
the Company. SFAS No. 122, "Accounting for Mortgage Servicing Rights", requires
that a separate asset be recognized for rights to service mortgage loans for
others. Servicing rights retained by the Company have not been material to date.
SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities" establishes new criteria for determining whether
a transfer of financial assets occurring after December 31, 1997 in exchange for
cash or other consideration should be accounted for as a sale or as a pledge of
collateral in a secured borrowing. It also establishes new accounting
requirements for pledged collateral and new criteria for the extinguishment of
liabilities. The Company does not believe the adoption of SFAS No. 125 in 1998
will have a material affect on the Company's operations or financial condition.
Investment in Securities
The Company's investment in securities are considered available-for-sale
and are carried at fair value in accordance with SFAS No. 115 "Accounting for
Certain Investments in Debt and Equity Securities". Accordingly, unrealized
holding gains or losses on available-for-sale investments are recorded as
adjustments to common shareholders' equity, net of income taxes. Declines in
fair value deemed other than temporary are charged to operations.
Interest on the Company's securities is accreted at effective yield rates
which reflect interest at pass-through rates, the arbitrage resulting from rate
differentials between the notes in the REMIC pool and pass-through rates, along
with the effect of estimated prepayments and foreclosure losses. See Note 3.
Inventory
Inventory consists of real estate acquired for sale and is carried at the
lower of cost, including costs of improvements and amenities incurred subsequent
to acquisition or estimated fair value, net of costs to dispose. Real estate
reacquired through foreclosure or deedback in lieu of foreclosure is recorded at
the lower of fair value, net of costs to dispose, or the carrying value of the
loan. The Company adopted SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed Of " in April, 1996. The
initial adoption of this Statement did not have a material impact on the
Company's financial condition or results of operations.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed on the
straight-line method based on the estimated useful lives of the related assets.
F-9
<PAGE> 140
BLUEGREEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Debt Issuance Costs
Costs associated with obtaining financing have been capitalized and are
amortized under an accelerated method (which approximates the interest method)
over the terms of the related debt.
Treasury Stock
The Company accounts for repurchases of common stock using the cost method
with common stock in treasury classified in the balance sheets as a reduction of
common shareholders' equity.
Advertising Expense
The Company expenses advertising costs the first time the advertising takes
place, which is within one year, except for direct-response advertising, which
is capitalized and amortized over its expected period of future benefit. The
Company uses direct-response advertising for its timeshare products and the
advertising consists of direct mail with a response card confirming the
prospective customer's pre-determined site-visit.
At March 30, 1997, $517,000 of advertising was reported in other assets.
Comparable amounts were not material at March 31, 1996. Advertising expense was
$7.1 million, $10.0 million and $13.9 million for the years ended April 2, 1995,
March 31, 1996 and March 30, 1997, respectively.
Income Taxes
The Company and its subsidiaries file a consolidated federal income tax
return. Income taxes have been provided using the liability method in accordance
with SFAS No. 109, "Accounting for Income Taxes".
Stock Based Compensation
The Company grants stock options for a fixed number of shares to employees
with an exercise price equal to the fair value of the shares at the date of
grant. The Company has elected to account for stock option grants in accordance
with APB Opinion No. 25, "Accounting for Stock Issued to Employees", and,
accordingly, recognizes no compensation expense in connection with stock option
grants. See Note 11 for pro forma information regarding net earnings and
earnings per share as required by SFAS 123 when adopted.
Earnings (Loss) Per Common Share
In February, 1997, the Financial Accounting Standards Board (FASB) issued
SFAS No. 128, "Earnings Per Share", which became effective for the Company's
quarter ended December 28, 1997. Basic earnings (loss) per common share is
computed by dividing net income (loss) by the weighted average number of common
shares outstanding. Diluted earnings (loss) per common share is computed in the
same manner as basic earnings per share, but also gives effect to all dilutive
stock options using the treasury stock method. The Company's 8.25% convertible
subordinated debentures were not assumed to be converted into common stock for
the purposes of this computation, as the impact would be antidilutive for all
years presented. The earnings (loss) per common share and weighted average
number of common and common equivalent shares for each of the three years in the
period ended March 30, 1997 have been restated in accordance with SFAS No. 128.
F-10
<PAGE> 141
BLUEGREEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table sets forth the computation of basic and diluted
earnings (loss) per share:
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------
APRIL 2, MARCH 31, MARCH 30,
1995 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
Numerator:
Numerator for basic and diluted earnings (loss) per
share -- net income (loss) $ 6,137,089 $ 6,466,856 $ (4,359,557)
============ ============ ============
Denominator:
Denominator for basic earnings (loss) per share --
weighted-average shares 20,415,856 20,508,037 20,318,509
Effect of dilutive securities:
Stock options 1,060,782 1,267,254 --
------------ ------------ ------------
Denominator for diluted earnings (loss) per share --
adjusted weighted-average shares 21,476,638 21,775,291 20,318,509
============ ============ ============
Basic earnings (loss) per share $ .30 $ .32 $ (.21)
============ ============ ============
Diluted earnings (loss) per share $ .29 $ .30 $ (.21)
============ ============ ============
</TABLE>
Reclassifications
Certain reclassifications of prior period amounts have been made to conform
to the current year presentation.
2. NOTES RECEIVABLE
The weighted average interest rate on notes receivable was 13.3% and 12.4%
at March 30, 1997 and March 31, 1996, respectively. The table below sets forth
additional information relating to the Company's notes receivable.
<TABLE>
<CAPTION>
MARCH 31, 1996 MARCH 30, 1997
-------------- --------------
<S> <C> <C>
Notes receivable secured by land............................ $26,243,222 $12,334,283
Notes receivable secured by timeshare intervals............. 11,667,049 23,501,163
----------- -----------
Notes receivable, gross..................................... 37,910,271 35,835,446
Reserve for loan losses..................................... (896,469) (1,216,121)
----------- -----------
Notes receivable, net....................................... $37,013,802 $34,619,325
=========== ===========
</TABLE>
Approximately 69% of the Company's notes receivable secured by land bear
interest at variable rates, while approximately 31% bear interest at fixed
rates. The average interest rate charged on loans secured by land was 12.0% at
March 30, 1997. All of the Company's timeshare loans bear interest at fixed
rates. The average interest rate charged on loans secured by timeshare intervals
was 15.7% at March 30, 1997.
The Company's timeshare receivables are secured by property located in
Tennessee and South Carolina. No concentrations of credit exist for the
Company's notes receivable secured by land.
F-11
<PAGE> 142
BLUEGREEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The table below sets forth activity in the reserve for estimated loan
losses.
<TABLE>
<S> <C>
Reserve for loan losses, April 2, 1995...................... $1,089,652
Provision for losses........................................ 344,718
Charge-offs................................................. (537,901)
----------
Reserve for loan losses, March 31, 1996..................... 896,469
Provision for losses........................................ 1,008,271
Charge-offs................................................. (688,619)
----------
Reserve for loan losses, March 30, 1997..................... $1,216,121
==========
</TABLE>
Installments due on notes receivable held by the Company during each of the
five fiscal years subsequent to 1997, and thereafter, are set forth below.
<TABLE>
<S> <C>
1998........................................................ $ 4,626,469
1999........................................................ 4,456,082
2000........................................................ 5,167,790
2001........................................................ 5,424,765
2002........................................................ 5,440,360
Thereafter.................................................. 10,719,980
-----------
Total............................................. $35,835,446
===========
</TABLE>
3. INVESTMENT IN SECURITIES
The Company's investment in securities and associated unrealized gains and
losses are set forth below.
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED
AVAILABLE-FOR-SALE SECURITIES COST GAIN LOSS FAIR VALUE
- ----------------------------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
1994 REMIC debt securities........... $ 3,892,575 $ -- $22,659 $ 3,869,916
1995 REMIC debt securities........... 4,999,733 198,705 -- 5,198,438
1996 REMIC debt securities........... 1,904,299 94,040 -- 1,998,339
----------- -------- ------- -----------
Total...................... $10,796,607 $292,745 $22,659 $11,066,693
=========== ======== ======= ===========
</TABLE>
Contractual maturities and yield of investments are set forth below. See
also Note 13.
<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE SECURITIES FAIR VALUE EFFECTIVE YIELD
- ----------------------------- ----------- ----------------
<S> <C> <C>
After one year but within five.......................... $ 3,869,916 11.91%
After five years but within ten......................... 7,196,777 7.44%
-----------
Total......................................... $11,066,693
===========
</TABLE>
F-12
<PAGE> 143
BLUEGREEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. INVENTORY
The Company's net inventory holdings as of March 30, 1997 and March 31,
1996, summarized by division, are set forth below. Interest capitalized during
fiscal 1997 and fiscal 1996 totaled $3.0 million and $1.9 million, respectively.
Interest expense in the Consolidated Statements of Operations is net of
capitalized interest.
<TABLE>
<CAPTION>
MARCH 30, 1997
--------------------------------------------------------
GEOGRAPHIC REGION LAND RESORTS(1) COMMUNITIES(2) TOTAL
- ----------------- ----------- ----------- -------------- -----------
<S> <C> <C> <C> <C>
Southeast.............................. $ 7,997,611 $15,028,592 $ 5,685,074 $28,711,277
Midwest................................ 8,050,969 12,495,034 -- 20,546,003
Southwest.............................. 19,959,473 -- -- 19,959,473
Rocky Mountains........................ 7,533,939 -- -- 7,533,939
West................................... 5,511,879 -- -- 5,511,879
Mid-Atlantic........................... 4,015,647 -- -- 4,015,647
Northeast.............................. 382,341 -- -- 382,341
----------- ----------- ----------- -----------
Totals....................... $53,451,859 $27,523,626 $ 5,685,074 $86,660,559
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1996
--------------------------------------------------------
GEOGRAPHIC REGION LAND RESORTS(1) COMMUNITIES(2) TOTAL
- ----------------- ----------- ----------- -------------- -----------
<S> <C> <C> <C> <C>
Southeast.............................. $ 2,252,239 $ 5,189,815 $13,983,521 $21,425,575
Midwest................................ 6,293,008 10,839,389 -- 17,132,397
Southwest.............................. 15,118,191 -- 142,790 15,260,981
Rocky Mountains........................ 9,299,344 -- 50,800 9,350,144
West................................... 5,923,972 -- -- 5,923,972
Mid-Atlantic........................... 2,490,025 -- -- 2,490,025
Northeast.............................. 1,982,895 -- -- 1,982,895
Canada................................. 29,025 -- -- 29,025
----------- ----------- ----------- -----------
Totals....................... $43,388,699 $16,029,204 $14,177,111 $73,595,014
=========== =========== =========== ===========
</TABLE>
- ---------------
(1) Resorts Division inventory as of March 30, 1997, consists of land inventory
of 5.4 million and $22.1 million of unit construction-in-progress. Resorts
Division inventory as of March 31, 1996, consists of land inventory of $6.1
million and $9.9 million of unit construction-in-progress.
(2) Communities Division inventory as of March 30, 1997, consists of land
inventory of $1.5 million and $4.2 million of housing unit
construction-in-progress. Communities Division inventory as of March 31,
1996, consists of land inventory of $10.5 million and $3.7 million of
housing unit construction-in-progress.
During the first quarter of fiscal 1997, management changed its focus for
marketing certain of its inventories in an effort to expedite sales absorption,
and use the proceeds from such sales for its more profitable land and timeshare
projects. Based on the Company's exit-plans, management determined that
inventories with a carrying value of $23.2 million should be written-down by
$8.2 million to reflect their estimated fair value, less costs to sell. A
substantial portion of the write-down ($4.8 million) related to inventories
managed under the Communities Division. Home-building and other efforts under
the Communities Division will cease upon sell-out of the existing inventories.
The other inventories that were subject to write-down are managed under the Land
Division and are located in areas of the country where the Company does not plan
to continue operations beyond liquidating the existing properties. All such
inventories are being liquidated through a combination of bulk sales and retail
sales at reduced prices. Approximately 50% of the properties subject to
write-down had been sold by March 30, 1997. No substantial gains or losses were
F-13
<PAGE> 144
BLUEGREEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
recognized in connection with the sale of these inventories. Although no
assurances can be given, the remaining inventories subject to write-down are
expected to be fully liquidated in 12-18 months.
5. PROPERTY AND EQUIPMENT
The table below sets forth the property and equipment held by the Company
at the period end indicated.
<TABLE>
<CAPTION>
USEFUL MARCH 31, MARCH 30,
LIFE 1996 1997
--------- ----------- -----------
<S> <C> <C> <C>
Land, buildings and building improvements................. 30 years $ 3,837,382 $ 3,161,601
Office equipment, furniture and fixtures.................. 3-5 years 4,466,821 4,126,990
Aircraft.................................................. 3-5 years 1,375,001 1,153,968
Vehicles and equipment.................................... 3-5 years 451,202 435,274
----------- -----------
10,130,406 8,877,833
Accumulated depreciation.................................. (4,891,306) (3,929,279)
----------- -----------
Total........................................... $ 5,239,100 $ 4,948,554
=========== ===========
</TABLE>
Depreciation expense included in the Consolidated Statements of Operations
totaled $811,000, $1.0 million and $1.1 million for fiscal 1997, 1996 and 1995,
respectively.
6. LINES-OF-CREDIT AND NOTES PAYABLE
The Company has outstanding borrowings with various financial institutions
and other lenders which have been used to finance the acquisition and
development of inventory and to fund operations. Significant financial data
related to the Company's borrowing facilities is set forth below.
<TABLE>
<CAPTION>
MARCH 31, MARCH 30,
1996 1997
----------- -----------
<S> <C> <C>
Lines-of-credit secured by land and timeshare inventory with
interest rates ranging from 10.25% to 10.75% at March 30,
1997 and 10.50% to 10.75% at March 31, 1996. Maturities
range from 1997 to 1999................................... $ 6,394,245 $17,797,600
Notes and mortgage notes secured by certain inventory and
property and equipment with interest rates ranging from
7.5% to 11.25% at March 30, 1997 and 6.2% to 11.0% at
March 31, 1996. Maturities range from 1997 to 2019........ 10,700,245 17,960,558
Lease obligations with a weighted average interest rate of
11% at March 30, 1997. Maturities range from 1998 to
2001...................................................... 193,277 147,394
----------- -----------
Total............................................. $17,287,767 $35,905,552
=========== ===========
</TABLE>
F-14
<PAGE> 145
BLUEGREEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At March 30, 1997, $5.0 million remained available under lines-of-credit.
The table below sets forth the contractual minimum principal payments required
on the Company's lines-of-credit and notes payable for each of the five fiscal
years subsequent to 1997, and thereafter. Such minimum contractual payments may
differ from actual payments due to the effect of principal payments required on
a lot or timeshare interval release basis for certain of the above obligations.
<TABLE>
<S> <C>
1998........................................................ $21,020,491
1999........................................................ 5,702,848
2000........................................................ 5,974,495
2001........................................................ 590,039
2002........................................................ 235,052
Thereafter.................................................. 2,382,627
-----------
Total............................................. $35,905,552
===========
</TABLE>
The Company is required to comply with certain covenants under several of
its debt agreements discussed above, including, without limitation, requirements
to (i) maintain net worth of at least $42.0 million, (ii) maintain certain
minimum leverage ratios, (iii) limit S,G&A expenses to 50% of revenues, and (iv)
comply with various other restrictive covenants. The Company was in compliance
with such covenants at March 30, 1997, and for each reporting period during
fiscal 1996 and 1995.
7. CONVERTIBLE SUBORDINATED DEBENTURES
The Company has $34.7 million of its 8.25% Convertible Subordinated
Debentures (the "Debentures") outstanding at March 30, 1997 and March 31, 1996.
The Debentures are convertible at any time prior to maturity (2012), unless
previously redeemed, into common stock of the Company at a current conversion
price of $8.24 per share, subject to adjustment under certain conditions. The
Debentures are redeemable at any time, at the Company's option, in whole or in
part. On May 15, 1997, the redemption price was 100% of the face amount. The
Company is obligated to redeem annually 10% of the principal amount of the
Debentures originally issued, commencing May 15, 2003. Such redemptions are
calculated to retire 90% of the principal amount of the Debentures prior to
maturity. The Debentures are unsecured and subordinated to all senior
indebtedness of the Company. Interest is payable semi-annually on May 15 and
November 15.
Under financial covenants of the Indenture pursuant to which the Debentures
were issued, the Company is required to maintain net worth of not less than
$29.0 million. Should net worth fall below $29.0 million for two consecutive
quarters, the Company is required to make an offer to purchase 20% of the
outstanding Debentures at par, plus accrued interest.
8. RECEIVABLE-BACKED NOTES PAYABLE
The Company has various credit facilities for the pledge of land and
timeshare receivables. The interest rate charged under one agreement is the
three-month London Interbank Offered Rate plus 4.25%, while the other agreements
call for interest at prime plus 2%. At March 30, 1997, the $21.1 million in
receivable-backed notes payable was collateralized by $27.1 million in
receivables. At March 31, 1996, the $19.7 million in receivable-backed notes
payable was secured by $27.0 million in receivables. Payments received on the
receivables are applied to reduce principal and pay interest monthly. At March
30, 1997, $27.2 million remained available under credit facilities.
F-15
<PAGE> 146
BLUEGREEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Installments due on receivable-backed notes payable based upon principal
payments due on receivables in each of the four fiscal years subsequent to 1997
is set forth below.
<TABLE>
<S> <C>
1998........................................................ $ 4,890,941
1999........................................................ 5,363,014
2000........................................................ 5,954,346
2001........................................................ 4,846,701
-----------
Total............................................. $21,055,002
===========
</TABLE>
9. INCOME TAXES
The (benefit) provision for income taxes consists of the following:
<TABLE>
<CAPTION>
YEARS ENDED
-------------------------------------
APRIL 2, MARCH 31, MARCH 30,
1995 1996 1997
---------- ---------- -----------
<S> <C> <C> <C>
Federal:
Current........................................ $2,307,313 $2,590,910 $ 269,960
Deferred....................................... 380,195 1,207,941 (3,192,841)
---------- ---------- -----------
2,687,508 3,798,851 (2,922,881)
State:
Current........................................ 630,654 860,064 119,628
Deferred....................................... 946,596 (209,846) (226,268)
---------- ---------- -----------
1,577,250 650,218 (106,640)
---------- ---------- -----------
Total.................................. $4,264,758 $4,449,069 $(3,029,521)
========== ========== ===========
</TABLE>
(Loss) income before income taxes (excluding Canadian operations) was
$(7.4) million in fiscal 1997, $10.9 million in fiscal 1996 and $10.4 million in
fiscal 1995.
The reasons for the difference between the provision for income taxes and
the amount which results from applying the federal statutory tax rate in fiscal
1997, 1996 and 1995 to income before income taxes are as follows:
<TABLE>
<CAPTION>
YEARS ENDED
-------------------------------------
APRIL 2, MARCH 31, MARCH 30,
1995 1996 1997
---------- ---------- -----------
<S> <C> <C> <C>
Income tax (benefit) expense at statutory rate... $3,536,628 $3,720,573 $(2,512,286)
Effect of state taxes, net of federal tax
benefit........................................ 728,130 728,496 (517,235)
---------- ---------- -----------
$4,264,758 $4,449,069 $(3,029,521)
========== ========== ===========
</TABLE>
F-16
<PAGE> 147
BLUEGREEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At March 30, 1997 and March 31, 1996, deferred income taxes consist of the
following components:
<TABLE>
<CAPTION>
MARCH 31, MARCH 30,
1996 1997
----------- -----------
<S> <C> <C>
Deferred federal and state tax (assets) liabilities:
Installment sales treatment of notes........................ $ 8,473,340 $ 8,931,920
Deferred foreign tax liability due to installment sale
treatment of notes........................................ 185,000 --
Deferred federal and state loss carryforwards/AMT credits... (1,990,365) (5,125,584)
Other....................................................... (600,161) (950,390)
----------- -----------
Deferred income taxes....................................... $ 6,067,814 $ 2,855,946
=========== ===========
</TABLE>
As of March 30, 1997, the Company had $2.1 million of AMT credit
carryforwards which have no expiration period and approximately $7.5 million of
federal net operating loss ("NOL") that may be offset against future taxable
income through 2012.
10. COMMITMENTS AND CONTINGENCIES
At March 30, 1997, estimated cost to complete development work in
subdivisions from which lots have been sold totaled $48.9 million. Development
is estimated to be completed within the next five years as follows:
1998 -- $24.0 million; 1999 -- $11.8 million; 2000 -- $4.4 million; 2001 -- $4.4
million and 2002 -- $4.3 million.
The Company is party to certain ordinary course litigation. Although no
assurances can be given, in the opinion of management, based on the advice of
counsel, the potential outcome is not expected to have a materially adverse
effect on the operations or financial condition of the Company.
11. STOCK OPTION PLANS AND EMPLOYEE RETIREMENT SAVINGS PLAN
The Employee's Stock Option Plan expired in September, 1995. The Company
received shareholder approval for a new employee stock option plan (the 1995
Stock Incentive Plan) at a meeting held on July 20, 1995. As of March 30, 1997,
there were 453 individuals eligible to participate in the 1995 Stock Incentive
Plan. Options under each plan expire ten years from the date of grant. A summary
of stock option activity for each plan is presented below.
Employee Stock Option Plan
<TABLE>
<CAPTION>
NUMBER NUMBER
OF SHARES OPTION PRICE OF SHARES
RESERVED OPTIONS PER SHARE EXERCISABLE
--------- --------- -------------- -----------
<S> <C> <C> <C> <C>
Balance at April 2, 1995...................... 1,839,317 962,422 $1.25 - $12.26 286,529
Granted....................................... -- 250,000 $4.51
Forfeited..................................... -- (96,550) $1.25 - $12.26
Exercised..................................... (82,258) (82,258) $1.25 - $ 3.28
Expiration of plan............................ (723,445) --
Stock dividends............................... 52,268 52,268
--------- ---------
Balance at March 31, 1996..................... 1,085,882 1,085,882 $1.25 - $11.64 381,528
Forfeited..................................... (97,551) (97,551) $1.25 - $11.64
Exercised..................................... (44,612) (44,612) $1.25 - $ 4.16
--------- ---------
Balance at March 30, 1997..................... 943,719 943,719 $1.25 - $11.64 566,388
========= =========
</TABLE>
F-17
<PAGE> 148
BLUEGREEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1995 Stock Incentive Plan
<TABLE>
<CAPTION>
NUMBER NUMBER
OF SHARES OPTION PRICE OF SHARES
RESERVED OPTIONS PER SHARE EXERCISABLE
--------- --------- --------------- -----------
<S> <C> <C> <C> <C>
Balance at March 31, 1996.................... 1,000,000 -- -- --
Granted...................................... -- 75,000 $4.25 --
--------- ---------
Balance at March 30, 1997.................... 1,000,000 75,000 $4.25 --
========= =========
</TABLE>
Outside Directors Plan
In fiscal 1988, the Company's shareholders adopted a stock option plan
covering the Company's non-employee Directors (the "Director Plan"). The
Director Plan provided for the grant to the Company's non-employee directors
(the "Outside Directors") of non-qualified stock options to purchase up to an
aggregate of 150,000 shares of common stock at a price not less than the fair
market value at the date of grant. The Director Plan was amended in September,
1991, to increase the number of issuable shares from 150,000 to 300,000 and
again in July, 1995, to increase the number of issuable shares by an additional
200,000. Options expire ten years from the date of grant. A summary of stock
option activity related to the Company's Director Plan is presented below.
<TABLE>
<CAPTION>
NUMBER NUMBER
OF SHARES OPTION PRICE OF SHARES
RESERVED OPTIONS PER SHARE EXERCISABLE
--------- --------- ------------ -----------
<S> <C> <C> <C> <C>
Balance at April 2, 1995....................... 340,704 337,335 $.83 - $4.78 186,474
Additional shares issuable..................... 200,000 --
Granted........................................ -- 75,000 $3.80
Stock dividends................................ 17,035 20,617
--------- ---------
Balance at March 31, 1996...................... 557,739 432,952 $.83 - $4.78 276,134
Granted........................................ -- 75,000 $3.13
Exercised...................................... -- (23,849) $.83 - $1.46
--------- ---------
Balance at March 30, 1997...................... 557,739 484,103 $.83 - $4.78 328,227
========= =========
</TABLE>
Pro forma information regarding net income and earnings per share is
required by SFAS No. 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of that
Statement. The fair value for these options was estimated at the date of grant
using a Black-Scholes option pricing model with the following weighted average
assumptions for fiscal 1995, 1996 and 1997: risk free investment rates of 5%,
dividend yields of 1%, a volatility factor of the expected market price of the
Company's common stock of .369; and a weighted average life of the options of 10
years.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows.
<TABLE>
<CAPTION>
1995 1996 1997
----------- ---------- -----------
<S> <C> <C> <C>
Pro forma net income (loss)...................... $ 6,087,609 $6,338,928 $(4,562,126)
=========== ========== ===========
Pro forma earnings (loss) per share:
Basic.......................................... $ .30 $ .31 $ (.22)
Diluted........................................ .28 .29 (.22)
</TABLE>
F-18
<PAGE> 149
BLUEGREEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Employee Retirement Savings Plan
The Company's Employee Retirement Plan is a code section 401(k) Retirement
Savings Plan (the "Plan"). All employees at least 21 years of age with one year
of employment with the Company are eligible to participate in the Plan. Employer
contributions to the Plan are at the sole discretion of the Company and were not
material to the operations of the Company for fiscal 1995, 1996 and 1997.
12. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Summarized quarterly financial information for the years ended March 31,
1996 and March 30, 1997 is presented below (in 000's except for per share
information). (Loss) earnings per common share has been restated in accordance
with SFAS No. 128 (See Note 1).
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------
JULY 2, OCTOBER 1, DECEMBER 31, MARCH 31,
1995 1995 1995 1996
-------- ------------- ------------ ---------
<S> <C> <C> <C> <C>
Sales of real estate...................... $24,641 $33,258 $23,935 $31,588
Gross profit.............................. 12,449 16,035 10,805 14,740
Net income................................ 1,588 2,319 985 1,575
Earnings per common share:
Basic................................... .08 .11 .05 .08
Diluted................................. .07 .11 .05 .07
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------
JUNE 30, SEPTEMBER 29, DECEMBER 29, MARCH 30,
1996 1996 1996 1997
-------- ------------- ------------ ---------
<S> <C> <C> <C> <C>
Sales of real estate...................... $28,782 $26,451 $26,478 $28,010
Gross profit.............................. 14,329 13,252 12,747 12,303
Net (loss) income......................... (4,124) 576 20 (832)
(Loss) earnings per common share:
Basic................................... (.20) .03 .00 (.04)
Diluted................................. (.20) .03 .00 (.04)
</TABLE>
13. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating the fair values of its financial instruments:
Cash and cash equivalents: The amounts reported in the balance sheets for
cash and cash equivalents approximates fair value.
Contracts receivable: The amounts reported in the balance sheets for
contracts receivable approximates fair value. Contracts receivable are
non-interest bearing and generally convert into cash or an interest bearing
mortgage note receivable within thirty days.
Notes receivable: The carrying amounts reported in the balance sheets for
notes receivable approximates fair value based on (i) prices established by loan
pricing services and (ii) discounted future cash flows using current rates at
which similar loans with similar maturities would be made to borrowers with
similar credit risk.
Investment in securities: Investment in securities are carried at fair
value based on estimates from dealers.
F-19
<PAGE> 150
BLUEGREEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Lines-of-credit, notes payable and receivable-backed notes payable: The
carrying amounts reported in the balance sheets approximate their fair value
based upon short-term maturities of the indebtedness which provide for variable
interest rates.
8.25% convertible subordinated debentures: The fair value of the Company's
8.25% convertible subordinated debentures is based on the quoted market price as
reported on the New York Stock Exchange.
<TABLE>
<CAPTION>
MARCH 31, 1996 MARCH 30, 1997
------------------------- -------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Cash and cash equivalents................... $11,389,141 $11,389,141 $11,597,147 $11,597,147
Contracts receivable........................ 12,451,207 12,451,207 14,308,424 14,308,424
Notes receivable............................ 37,013,802 37,013,802 34,619,325 34,619,325
Investment in securities.................... 9,699,435 9,699,435 11,066,693 11,066,693
Lines-of-credit, notes payable and
receivable-backed notes payable........... 37,011,233 37,011,233 56,960,554 56,960,554
8.25% convertible subordinated debentures... 34,739,000 30,570,320 34,739,000 29,832,116
</TABLE>
14. SUPPLEMENTAL GUARANTOR INFORMATION
Under the terms of the Note Offering, all of the Company's subsidiaries,
with the exception of the Non-Guarantor Subsidiaries, as defined below, will
fully and unconditionally guarantee, jointly and severally, the full and prompt
payment of principal and interest on the Company's $110 million Senior Secured
Notes due 2008 (the Notes), and the performance of all other obligations of the
Company under the Notes and related indenture. The Non-Guarantor Subsidiaries
are:
Patten Receivables Finance Corporation III
Patten Receivables Finance Corporation VI
Bluegreen Land and Realty, Inc.
Patten Receivables Finance Corporation VII
Patten Receivables Finance Corporation VIII
CDP Realty, Inc.
Patten Receivables Finance Corporation IX
Patten Receivables Finance Corporation X
Bluegreen Receivables Finance Corporation I
BXG Realty Tenn, Inc.
Bluegreen Properties N.V.
Resort Title Agency, Inc.
Blue Ridge Public Service Company
RDI Vacation Club, Inc.
Vacation Trust, Inc.
Management has determined that separate, full financial statements are not
required and, accordingly, are not provided. Supplemental financial information
for Bluegreen Corporation, its combined non-guarantor subsidiaries and its
combined guarantor subsidiaries is presented below:
F-20
<PAGE> 151
BLUEGREEN CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET AT MARCH 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR GUARANTOR
CORPORATION SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents............ $ 4,303 $ 3,103 $ 3,984 $ -- $ 11,390
Contracts receivable, net............ 836 -- 11,615 -- 12,451
Notes receivable, net................ -- 8,127 28,887 -- 37,014
Investment in securities............. -- 9,699 -- -- 9,699
Inventory, net....................... 21,872 -- 51,723 -- 73,595
Property and equipment, net.......... 2,312 -- 2,927 -- 5,239
Investments in subsidiaries.......... -- -- -- -- --
Debt issuance costs, net............. 936 6 347 -- 1,289
Intercompany receivable.............. 20,630 3,232 -- (23,862) --
Other assets......................... 975 291 3,020 -- 4,286
-------- ------- -------- -------- --------
Total assets............... $ 51,864 $24,458 $102,503 $(23,862) $154,963
======== ======= ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Accounts payable..................... $ 2,377 $ -- $ 181 $ -- $ 2,558
Intercompany payable................. -- -- 23,862 (23,862) --
Deferred revenue..................... 117 -- 630 -- 747
Accrued liabilities and other........ 3,271 2,985 2,887 -- 9,143
Lines-of-credit and notes payable.... 3,425 -- 13,862 -- 17,287
Deferred income taxes................ 6,068 -- -- -- 6,068
Receivable-backed notes payable...... -- 6,271 13,452 -- 19,723
8.25% convertible subordinated
debentures......................... 34,739 -- -- -- 34,739
-------- ------- -------- -------- --------
Total liabilities.......... 49,997 9,256 54,874 (23,862) 90,265
SHAREHOLDERS' EQUITY
Preferred stock...................... -- -- -- -- --
Common stock......................... 205 -- -- -- 205
Capital-in-excess of par value....... 71,296 -- -- -- 71,296
Accumulated deficit.................. (69,634) 15,202 47,629 -- (6,803)
-------- ------- -------- -------- --------
Total shareholders'
equity................... 1,867 15,202 47,629 -- 64,698
-------- ------- -------- -------- --------
Total liabilities and
shareholders' equity..... $ 51,864 $24,458 $102,503 $(23,862) $154,963
======== ======= ======== ======== ========
</TABLE>
F-21
<PAGE> 152
BLUEGREEN CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET AT MARCH 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR GUARANTOR
CORPORATION SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents............ $ 3,353 $ 3,442 $ 4,802 $ -- $ 11,597
Contracts receivable, net............ 1,185 -- 13,123 -- 14,308
Notes receivable, net................ -- 5,588 29,031 -- 34,619
Investment in securities............. -- 11,067 -- -- 11,067
Inventory, net....................... 14,566 -- 72,095 -- 86,661
Property and equipment, net.......... 2,418 -- 2,531 -- 4,949
Investments in subsidiaries.......... -- -- -- -- --
Debt issuance costs, net............. 854 -- 210 -- 1,064
Intercompany receivable.............. 17,045 1,882 -- (18,927) --
Other assets......................... 2,024 395 2,943 -- 5,362
-------- ------- -------- -------- --------
Total assets............... $ 41,445 $22,374 $124,735 $(18,927) $169,627
======== ======= ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Accounts payable..................... $ 1,478 $ -- $ 440 $ -- $ 1,918
Intercompany payable................. -- -- 18,927 (18,927) --
Deferred revenue..................... 46 -- 3,746 -- 3,792
Accrued liabilities and other........ 6,376 3,304 438 -- 10,118
Lines-of-credit and notes payable.... 1,928 -- 33,977 -- 35,905
Deferred income taxes................ 2,843 -- 13 -- 2,856
Receivable-backed notes payable...... -- 3,514 17,541 -- 21,055
8.25% convertible subordinated
debentures......................... 34,739 -- -- -- 34,739
-------- ------- -------- -------- --------
Total liabilities.......... 47,410 6,818 75,082 (18,927) 110,383
SHAREHOLDERS' EQUITY:
Preferred stock...................... -- -- -- -- --
Common stock......................... 206 -- -- -- 206
Capital-in-excess of par value....... 71,411 -- -- -- 71,411
Accumulated deficit.................. (76,212) 15,397 49,653 -- (11,162)
Treasury stock....................... (1,370) -- -- -- (1,370)
Net unrealized gains................. -- 159 -- -- 159
-------- ------- -------- -------- --------
Total shareholders'
equity................... (5,965) 15,556 49,653 -- 59,244
-------- ------- -------- -------- --------
Total liabilities and
shareholders' equity..... $ 41,445 $22,374 $124,735 $(18,927) $169,627
======== ======= ======== ======== ========
</TABLE>
F-22
<PAGE> 153
BLUEGREEN CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED APRIL 2, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR GUARANTOR
CORPORATION SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Sales of real estate............... $15,073 $ -- $76,849 $ -- $91,922
Management fee revenue............. 7,132 -- -- (7,132) --
Interest income and other.......... 533 2,104 4,626 -- 7,263
------- ------ ------- ------- -------
22,738 2,104 81,475 (7,132) 99,185
------- ------ ------- ------- -------
COST AND EXPENSES:
Cost of real estate sold........... 10,357 -- 34,749 -- 45,106
Selling, general and administrative
expense......................... 12,492 130 31,030 (7,132) 36,520
Interest expense................... 3,095 -- 3,643 -- 6,738
Provisions for losses.............. -- -- 792 -- 792
------- ------ ------- ------- -------
25,944 130 70,214 (7,132) 89,156
------- ------ ------- ------- -------
Income (loss) from operations........ (3,206) 1,974 11,261 -- 10,029
Other income......................... 269 -- 104 -- 373
------- ------ ------- ------- -------
Income (loss) before income taxes.... (2,937) 1,974 11,365 -- 10,402
Provision (benefit) for income
taxes.............................. (1,204) 809 4,660 -- 4,265
------- ------ ------- ------- -------
Net income (loss).......... $(1,733) $1,165 $ 6,705 $ -- $ 6,137
======= ====== ======= ======= =======
</TABLE>
F-23
<PAGE> 154
BLUEGREEN CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED MARCH 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR GUARANTOR
CORPORATION SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Sales of real estate............... $25,586 $ -- $87,836 $ -- $113,422
Management fee revenue............. 8,253 -- -- (8,253) --
Interest income and other.......... 1,740 2,367 3,281 -- 7,388
------- ------ ------- ------- --------
35,579 2,367 91,117 (8,253) 120,810
------- ------ ------- ------- --------
COST AND EXPENSES:
Cost of real estate sold........... 16,413 -- 42,981 -- 59,394
Selling, general and administrative
expense......................... 18,078 240 33,669 (8,253) 43,734
Interest expense................... 2,344 1,489 2,443 -- 6,276
Provisions for losses.............. -- -- 612 -- 612
------- ------ ------- ------- --------
36,835 1,729 79,705 (8,253) 110,016
------- ------ ------- ------- --------
Income (loss) from operations........ (1,256) 638 11,412 -- 10,794
Other income......................... 96 -- 26 -- 122
------- ------ ------- ------- --------
Income (loss) before income taxes.... (1,160) 638 11,438 -- 10,916
Provision (benefit) for income
taxes.............................. (473) 260 4,662 -- 4,449
------- ------ ------- ------- --------
Net income (loss).......... $ (687) $ 378 $ 6,776 $ -- $ 6,467
======= ====== ======= ======= ========
</TABLE>
F-24
<PAGE> 155
BLUEGREEN CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED MARCH 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR GUARANTOR
CORPORATION SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Sales of real estate............... $ 28,148 $ -- $81,573 $ -- $109,721
Management fee revenue............. 8,297 -- -- (8,297) --
Interest income and other.......... 2,378 1,029 2,752 -- 6,159
-------- ------ ------- ------- --------
38,823 1,029 84,325 (8,297) 115,880
-------- ------ ------- ------- --------
COST AND EXPENSES:
Cost of real estate sold........... 20,616 -- 36,475 -- 57,091
Selling, general and administrative
expense......................... 22,298 100 37,341 (8,297) 51,442
Interest expense................... 2,886 600 1,973 -- 5,459
Provisions for losses.............. 4,425 -- 5,113 -- 9,538
-------- ------ ------- ------- --------
50,225 700 80,902 (8,297) 123,530
-------- ------ ------- ------- --------
Income (loss) from operations........ (11,402) 329 3,423 -- (7,650)
Other income......................... 253 -- 7 -- 260
-------- ------ ------- ------- --------
Income (loss) before income taxes.... (11,149) 329 3,430 -- (7,390)
Provision (benefit) for income
taxes.............................. (4,571) 135 1,406 -- (3,030)
-------- ------ ------- ------- --------
Net income (loss).......... $ (6,578) $ 194 $ 2,024 $ -- $ (4,360)
======== ====== ======= ======= ========
</TABLE>
F-25
<PAGE> 156
BLUEGREEN CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED APRIL 2, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR GUARANTOR
CORPORATION SUBSIDIARIES SUBSIDIARIES CONSOLIDATED
----------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)............................. $(1,733) $ 1,165 $ 6,705 $ 6,137
Depreciation and amortization................. 658 (605) 1,249 1,302
Loss on REMIC transaction..................... -- 410 -- 410
Gain on sale of property and equipment........ -- -- (55) (55)
Provisions for losses......................... -- -- 792 792
Interest accretion on investment in
securities................................. -- (2,223) -- (2,223)
Proceeds from borrowings collateralized by
notes...................................... -- -- 8,588 8,588
Payments on borrowings collateralized by
notes...................................... -- -- (14,845) (14,845)
Provision for deferred income taxes........... 1,327 -- -- 1,327
(Increase) decrease in operating assets:
Contracts receivable.......................... 281 -- (3,403) (3,122)
Inventory..................................... (6,447) -- 1,995 (4,452)
Other assets.................................. 392 (104) 976 1,264
Intercompany receivable/payable............... 1,575 (3,076) 1,501 --
Notes receivable and investments in
securities................................. -- 3,404 8,460 11,864
Increase in operating liabilities:
Accounts payable, accrued liabilities and
other...................................... 870 505 1,067 2,442
------- -------- -------- --------
Net cash (used) provided by operating
activities................................. (3,077) (524) 13,030 9,429
------- -------- -------- --------
INVESTING ACTIVITIES:
Purchases of property and equipment........... (1,037) -- (732) (1,769)
Sales of property and equipment............... -- -- 453 453
Additions to other long-term assets........... -- -- (259) (259)
------- -------- -------- --------
Net cash used in investing activities........... (1,037) -- (538) (1,575)
------- -------- -------- --------
FINANCING ACTIVITIES:
Proceeds from borrowings under line-of-credit
facilities and other notes payable......... 1,985 -- 1,932 3,917
Payments under line-of-credit facilities and
other notes payable........................ -- -- (13,540) (13,540)
Payments for stock dividends in lieu of
fractional shares.......................... (5) -- -- (5)
Proceeds from exercise of employee stock
options.................................... 54 -- -- 54
------- -------- -------- --------
Net cash flow (used) provided by financing
activities................................. 2,034 -- (11,608) (9,574)
------- -------- -------- --------
Net (decrease) increase in cash and cash
equivalents................................ (2,080) (524) 884 (1,720)
Cash and cash equivalents at beginning of
year....................................... 3,484 2,914 2,910 9,308
------- -------- -------- --------
Cash and cash equivalents at end of year...... 1,404 2,390 3,794 7,588
Restricted cash and cash equivalents at end of
year....................................... (177) (2,390) (2,597) (5,164)
------- -------- -------- --------
Unrestricted cash and cash equivalents at end
of year.................................... $ 1,227 $ -- $ 1,197 $ 2,424
======= ======== ======== ========
</TABLE>
F-26
<PAGE> 157
BLUEGREEN CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED MARCH 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR GUARANTOR
CORPORATION SUBSIDIARIES SUBSIDIARIES CONSOLIDATED
----------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)............................. $ (687) $ 378 $ 6,776 $ 6,467
Depreciation and amortization................. 588 599 450 1,637
Gain on REMIC transaction..................... -- (1,120) -- (1,120)
Loss on sale of property and equipment........ -- -- 49 49
Provisions for losses......................... -- -- 612 612
Interest accretion on investment in
securities................................. -- (1,170) -- (1,170)
Proceeds from borrowings collateralized by
notes...................................... -- -- 19,438 19,438
Payments on borrowings collateralized by
notes...................................... -- (8,195) (11,035) (19,230)
Provision for deferred income taxes........... 998 -- -- 998
(Increase) decrease in operating assets:
Contracts receivable.......................... 137 -- 463 600
Inventory..................................... (4,567) -- 2,564 (2,003)
Other assets.................................. (42) (185) 501 274
Intercompany receivable/payable............... 9,552 (13,942) 4,390 --
Notes receivable and investment in
securities................................. -- 23,532 (13,086) 10,446
Increase (decrease) in operating liabilities:
Accounts payable, accrued liabilities and
other...................................... (1,736) 540 (784) (1,980)
------- -------- -------- --------
Net cash provided by operating activities..... 4,243 437 10,338 15,018
------- -------- -------- --------
INVESTING ACTIVITIES:
Purchases of property and equipment........... (974) -- (921) (1,895)
Sales of property and equipment............... -- -- 789 789
Cash received from investment in securities... -- 276 -- 276
Additions to other long-term assets........... -- -- (411) (411)
------- -------- -------- --------
Net cash flow (used) provided by investing
activities.................................... (974) 276 (543) (1,241)
------- -------- -------- --------
FINANCING ACTIVITIES:
Proceeds from borrowings under line-of-credit
facilities and other notes payable......... -- -- 5,796 5,796
Payments under line-of-credit facilities and
other notes payable........................ (562) -- (15,401) (15,963)
Payments for stock dividends in lieu of
fractional shares.......................... (4) -- -- (4)
Proceeds from exercise of employee stock
options.................................... 195 -- -- 195
------- -------- -------- --------
Net cash flow used by financing activities.... (371) -- (9,605) (9,976)
------- -------- -------- --------
Net increase in cash and cash equivalents..... 2,898 713 190 3,801
Cash and cash equivalents at beginning of
year....................................... 1,405 2,390 3,794 7,589
------- -------- -------- --------
Cash and cash equivalents at end of year...... 4,303 3,103 3,984 11,390
Restricted cash and cash equivalents at end of
year....................................... (759) (3,103) (3,822) (7,684)
------- -------- -------- --------
Unrestricted cash and cash equivalents at end
of year.................................... $ 3,544 $ -- $ 162 $ 3,706
======= ======== ======== ========
</TABLE>
F-27
<PAGE> 158
BLUEGREEN CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED MARCH 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR GUARANTOR
CORPORATION SUBSIDIARIES SUBSIDIARIES CONSOLIDATED
----------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)............................. $(6,578) $ 194 $ 2,024 $ (4,360)
Depreciation and amortization................. 590 6 470 1,066
Loss on REMIC transaction..................... -- 96 -- 96
Gain on sale of property and equipment........ -- -- (82) (82)
Provisions for losses......................... 4,426 -- 5,113 9,539
Interest accretion on investment in
securities................................. -- (997) -- (997)
Proceeds from borrowings collateralized by
notes...................................... -- -- 18,157 18,157
Payments on borrowings collateralized by
notes...................................... -- (2,757) (14,069) (16,826)
Benefit for deferred income taxes............. (3,225) -- (194) (3,419)
(Increase) decrease in operating assets:
Contracts receivable.......................... (348) -- (1,509) (1,857)
Inventory..................................... 2,880 -- (12,005) (9,125)
Other assets.................................. (1,049) (104) 77 (1,076)
Intercompany receivable/payable............... 3,585 1,351 (4,936) --
Notes receivable.............................. -- 638 (3,436) (2,798)
Increase in operating liabilities:
Accounts payable, accrued liabilities and
other...................................... 2,135 213 1,130 3,478
------- ------- -------- --------
Net cash (used) provided by operating
activities................................. 2,416 (1,360) (9,260) (8,204)
------- ------- -------- --------
INVESTING ACTIVITIES:
Purchases of property and equipment........... (614) -- (428) (1,042)
Sales of property and equipment............... -- -- 843 843
Other long term assets........................ -- -- -- --
Cash received from investment in securities... -- 1,699 -- 1,699
Additions to other long-term assets........... -- -- (181) (181)
------- ------- -------- --------
Net cash flow (used) provided by investing
activities.................................... (614) 1,699 415 1,500
------- ------- -------- --------
FINANCING ACTIVITIES:
Proceeds from borrowings under line-of-credit
facilities and other notes payable......... 606 -- 20,082 20,688
Payments under line-of-credit facilities and
other notes payable........................ (2,103) -- (10,238) (12,341)
Payments for treasury stock................... (1,370) -- -- (1,370)
Proceeds from exercise of employee stock
options.................................... 115 -- -- 115
------- ------- -------- --------
Net cash flow (used) provided by financing
activities................................. (2,752) -- 9,663 6,911
------- ------- -------- --------
Net (decrease) increase in cash and cash
equivalents................................ (950) 339 818 207
Cash and cash equivalents at beginning of
year....................................... 4,303 3,103 3,984 11,390
------- ------- -------- --------
Cash and cash equivalents at end of year...... 3,353 3,442 4,802 11,597
Restricted cash and cash equivalents at end of
year....................................... (1,932) (3,442) (2,604) (7,978)
------- ------- -------- --------
Unrestricted cash and cash equivalents at end
of year.................................... $ 1,421 $ -- $ 2,198 $ 3,619
======= ======= ======== ========
</TABLE>
F-28
<PAGE> 159
BLUEGREEN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 28, 1997
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Cash and cash equivalents (including restricted cash of
approximately $13,300 at December 28, 1997)............... $ 25,124
Contracts receivable, net................................... 12,646
Notes receivable, net....................................... 73,115
Investment in securities.................................... 10,600
Inventory, net.............................................. 112,297
Property and equipment, net................................. 11,147
Debt issuance costs, net.................................... 1,783
Other assets................................................ 8,096
--------
TOTAL ASSETS...................................... $254,808
========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable............................................ $ 4,591
Deferred income............................................. 8,322
Accrued liabilities and other............................... 14,101
Lines-of-credit and notes payable........................... 61,909
Deferred income taxes....................................... 6,712
Receivable-backed notes payable............................. 51,535
8.00% convertible subordinated notes payable to related
parties................................................... 6,000
8.25% convertible subordinated debentures................... 34,739
--------
TOTAL LIABILITIES................................. 187,909
Minority interest........................................... 250
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value, 1,000 shares authorized;
none issued............................................... --
Common stock, $.01 par value, 90,000 shares authorized;
20,743 shares issued at December 28, 1997................. 208
Capital-in-excess of par value.............................. 71,844
Accumulated deficit......................................... (4,179)
Treasury stock, 450 common shares at cost at December 28,
1997...................................................... (1,389)
Net unrealized gains on investments available-for-sale, net
of income taxes........................................... 165
--------
TOTAL SHAREHOLDERS' EQUITY........................ 66,649
--------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........ $254,808
========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-29
<PAGE> 160
BLUEGREEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
---------------------------
DECEMBER 29, DECEMBER 28,
1996 1997
------------ ------------
<S> <C> <C>
REVENUES:
Sales of real estate...................................... $ 81,712 $122,902
Other resort services revenue............................. -- 1,585
Interest income and other................................. 4,577 7,324
-------- --------
86,289 131,811
COST AND EXPENSES:
Cost of real estate sold.................................. 41,384 55,277
Cost of other resort services............................. -- 1,509
Selling, general and administrative expense............... 38,051 55,526
Interest expense.......................................... 3,916 6,512
Provisions for losses..................................... 9,101 1,349
-------- --------
92,452 120,173
-------- --------
Income (loss) from operations............................... (6,163) 11,638
Other income................................................ 184 120
-------- --------
Income (loss) before income taxes........................... (5,979) 11,758
Provision (benefit) for income taxes........................ (2,451) 4,774
-------- --------
Net income (loss)........................................... $ (3,528) $ 6,984
======== ========
EARNINGS (LOSS) PER COMMON SHARE:
Basic....................................................... $ (.17) $ .35
======== ========
Diluted..................................................... $ (.17) $ .33
======== ========
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT
SHARES:
Basic....................................................... 20,372 20,193
======== ========
Diluted..................................................... 20,372 25,467
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-30
<PAGE> 161
BLUEGREEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
---------------------------
DECEMBER 29, DECEMBER 28,
1996 1997
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)......................................... $(3,528) $ 6,984
Adjustments to reconcile net income (loss) to net cash
flow provided by operating activities, net of effects of
acquisition:
Depreciation and amortization........................... 807 1,345
Loss on REMIC transaction............................... 96 --
Gain on sale of property and equipment.................. (44) --
Provisions for losses................................... 9,101 1,349
Interest accretion on investment in securities.......... (745) (1,047)
Proceeds from borrowings collateralized by notes
Receivable............................................. 14,004 26,495
Payments on borrowings collateralized by notes
Receivable............................................. (14,060) (11,440)
Provision (benefit) for deferred income taxes........... (2,451) 4,774
(INCREASE) DECREASE IN OPERATING ASSETS:
Contracts receivable.................................... 4,310 1,662
Inventory............................................... (3,442) 3,944
Other assets............................................ (574) (2,062)
Notes receivable........................................ 855 (22,437)
INCREASE (DECREASE) IN OPERATING LIABILITIES:
Accounts payable, accrued liabilities and other......... (3,437) 4,531
------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES................... 892 14,098
------- --------
INVESTING ACTIVITIES:
Acquisition of RDI Group, Inc. and Resort Title Agency,
Inc., net of cash acquired.............................. -- (2,421)
Purchases of property and equipment....................... (998) (2,909)
Sales of property and equipment........................... 586 225
Cash received from investment in securities............... 1,114 1,524
------- --------
NET CASH FLOW (USED) PROVIDED BY INVESTING ACTIVITIES....... 702 (3,581)
------- --------
FINANCING ACTIVITIES:
Proceeds from issuance of 8% convertible subordinated
notes payable........................................... -- 6,000
Proceeds from borrowings under line-of-credit facilities
and other notes payable................................. 11,946 36,136
Payments under line-of-credit facilities and other notes
payable ................................................ (8,877) (38,531)
Payment of debt issuance costs............................ (206) (900)
Payments for treasury stock............................... (1,245) (19)
Proceeds from exercise of employee stock options.......... 115 324
------- --------
NET CASH FLOW PROVIDED BY FINANCING ACTIVITIES.............. 1,733 3,010
------- --------
Net increase in cash and cash equivalents................... 3,327 13,527
Cash and cash equivalents at beginning of period............ 11,389 11,597
------- --------
Cash and cash equivalents at end of period.................. 14,716 25,124
Restricted cash and cash equivalents at end of period....... (8,617) (13,300)
------- --------
Unrestricted cash and cash equivalents at end of period..... $ 6,099 $ 11,824
======= ========
SUPPLEMENTAL SCHEDULE OF NON-CASH OPERATING, INVESTING AND
FINANCING ACTIVITIES
Inventory acquired through financing...................... $10,630 $ 22,974
======= ========
Inventory acquired through foreclosure or Deedback in lieu
of foreclosure.......................................... $ 1,490 $ 2,497
======= ========
Property and equipment acquired through financing....... $ -- $ 812
======= ========
Investment in securities retained in Connection with REMIC
transactions............................................ $ 1,774 $ --
======= ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-31
<PAGE> 162
BLUEGREEN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 28, 1997
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
The financial information furnished herein reflects all adjustments
consisting of normal recurring accruals that, in the opinion of management, are
necessary for a fair presentation of the results for the interim period. The
results of operations for the nine-month period ended December 28, 1997 are not
necessarily indicative of the results to be expected for the fiscal year ending
March 29, 1998. For further information, refer to the consolidated financial
statements and notes thereto included in Bluegreen Corporation's (the Company's)
Annual Report to Shareholders for the fiscal year ended March 30, 1997.
Organization
The Company is a national leisure and lifestyle product company operating
predominantly in the southeastern, southwestern and midwestern United States.
The Company's primary business is (i) the acquisition and development of
timeshare properties which are sold in weekly intervals (Resorts Division) and
(ii) the acquisition, development and sale of residential land (Land Division)
or residential home/lot packages (Communities Division). The Company offers
financing to its Resort, Land and Communities product purchasers.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of the
Company, all of its wholly-owned subsidiaries and entities in which the Company
holds a controlling financial interest. All significant intercompany
transactions are eliminated.
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Earnings (Loss) Per Common Share
In February, 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per
Share", which became effective for the Company's quarter ended December 28,
1997. Basic earnings (loss) per common share is computed by dividing net income
(loss) by the weighted average number of common shares outstanding. Diluted
earnings (loss) per common share is computed in the same manner as basic
earnings per share, but also gives effect to all dilutive stock options using
the treasury stock method and includes an adjustment, if dilutive, to both net
income and shares outstanding as if the Company's 8.00% convertible subordinated
notes payable and 8.25% convertible subordinated debentures were converted into
common stock at the beginning of the earliest period reported or the date of
issuance, if later. The earnings (loss) per common share and weighted average
number of common and common equivalent shares for the nine-month period ended
December 29, 1996 have been restated in accordance with SFAS No. 128.
F-32
<PAGE> 163
BLUEGREEN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table sets forth the computation of basic and diluted
earnings (loss) per share:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
---------------------------
DECEMBER 29, DECEMBER 28,
1996 1997
------------ ------------
<S> <C> <C>
Numerator:
Numerator for basic earnings (loss) per share -- net
income (loss).......................................... $(3,528) $ 6,984
Effect of dilutive securities (net of tax effects):
8.25% convertible subordinated debentures.............. -- 1,277
8.00% convertible subordinated notes payable........... -- 85
------- -------
-- 1,362
------- -------
Numerator for diluted earnings (loss) per share -- net
income (loss) after assumed conversions................ $(3,528) $ 8,346
======= =======
Denominator:
Denominator for basic earnings (loss) per
share -- weighted-average shares....................... 20,372 20,193
Effect of dilutive securities:
Stock options.......................................... -- 360
8.25% convertible subordinated debentures.............. -- 4,216
8.00% convertible subordinated notes payable........... -- 698
------- -------
Dilutive potential common shares.......................... -- 5,274
------- -------
Denominator for diluted earnings (loss) per
share -- adjusted weighted-average shares and assumed
conversions............................................ 20,372 25,467
======= =======
Basic earnings (loss) per share........................... $ (0.17) $ 0.35
======= =======
Diluted earnings (loss) per share......................... $ (0.17) $ 0.33
======= =======
</TABLE>
New Pronouncements
In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive Income"
and SFAS No. 131 "Disclosure about Segments of an Enterprise and Related
Information" which are effective for fiscal years beginning after December 15,
1997. Accordingly, the Company plans to adopt SFAS No. 130 and SFAS No. 131 with
the fiscal year beginning March 30, 1998. SFAS No. 130 and SFAS No. 131 do not
have any impact on the financial results or financial condition of the Company,
but will result in the disclosure of the components of comprehensive income and
in certain changes in required disclosures of segment information.
Reclassifications
Certain prior period amounts have been reclassified to conform to the
current period presentation
2. ACQUISITION
Effective September 30, 1997, a wholly-owned subsidiary of the Company
acquired all of the issued and outstanding common stock of RDI Group Inc. and
Resort Title Agency, Inc. (collectively "RDI") for a purchase price of $7.5
million consisting of $6 million cash and a $1.5 million, 9% promissory note due
October 3, 1999. The acquisition was accounted for using the purchase method of
accounting and, accordingly, the results of operations of RDI have been included
in the Company's condensed consolidated
F-33
<PAGE> 164
BLUEGREEN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
financial statements from September 30, 1997. As the net assets acquired from
RDI equaled the purchase price, no goodwill was recognized in connection with
the acquisition of RDI.
The Company financed the cash portion of the purchase price pursuant to the
issuance of two, 8% convertible promissory notes in the aggregate principal
amount of $6 million (the Notes) to a member of the Board of Directors of the
Company (the Board) and an affiliate of a Board member. The Notes, which were
executed on September 11, 1997, are due on September 11, 2002, and are
convertible into the Company's common stock at a conversion price of $3.92 per
share, subject to adjustment. Pursuant to a Subordination Agreement executed by
each of the holders of the Notes, the rights of the holders of the Notes are
subordinated to the Senior Secured Notes due 2008 of the Company to the same
extent that the Public Debentures are subordinated to such Senior Secured Notes.
Headquartered in Fort Myers, Florida, RDI was privately-held and presently
owns timeshare resorts in Orlando, Florida and Wisconsin Dells, Wisconsin, as
well as a points-based vacation club. In addition, RDI manages approximately 30
vacation ownership resorts, located in the southeastern sun-belt states, with a
member base of approximately 60,000.
The following pro forma financial information presents the combined results
of operations of the Company and RDI as if the acquisition had occurred on April
1, 1996, after giving effect to certain adjustments, including increased
interest expense on debt related to the acquisition, and related income tax
effects. The pro forma financial information does not necessarily reflect the
results of operations that would have occurred had the Company and RDI
constituted a single entity during such periods.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------------------
DECEMBER 29, 1996 DECEMBER 28, 1997
----------------- -----------------
(UNAUDITED -- AMOUNTS IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
Net revenues.................................. $102,859 $146,380
======== ========
Net income (loss)............................. (4,311) 8,686
======== ========
Earnings (loss) per share:
Basic....................................... $ (0.21) $ 0.43
======== ========
Diluted..................................... $ (0.21) $ 0.39
======== ========
</TABLE>
3. JOINT VENTURE
On December 15, 1997, the Company invested $250,000 of capital in Bluegreen
Properties N.V. (BPNV), an entity organized in Aruba that previously had no
operations, in exchange for a 50% ownership interest. Concurrently, the Company
and an affiliate of the other 50% owner of BPNV (who is not an affiliate of the
Company), each loaned BPNV $3 million pursuant to promissory notes due on
December 15, 2000 and bearing interest at the prime rate plus 1%. BPNV then
acquired from a third party approximately 8,000 unsold timeshare intervals at
the La Cabana All-Suite Beach Resort, a fully developed timeshare resort in
Oranjestad, Aruba in exchange for $6 million cash and the assumption of
approximately $16.6 million of interest-free debt from a bank in Aruba. The debt
was recorded by BPNV at approximately $12.5 million, which reflects a discount
based on an imputed interest rate of 12%. The debt is to be repaid over five
years through release-prices as intervals are sold, subject to minimum monthly
payments of approximately $278,000.
In addition to its 50% ownership interest, the Company will receive a
quarterly management fee from BPNV equal to 7% of BPNV's net sales in exchange
for the Company's involvement in the day-to-day operations of BPNV. The Company
also has majority control of BPNV's board of directors and has a controlling
financial interest in BPNV. Therefore, the accounts of BPNV are included in the
Company's
F-34
<PAGE> 165
BLUEGREEN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
condensed consolidated financial statements as of December 28, 1997. The
operations of BPNV for the 13 days ended December 28, 1997 were not significant.
4. INVENTORY
The Company's inventories by geographic region, which consist of real
estate acquired for sale, are summarized below (amounts in thousands).
<TABLE>
<CAPTION>
DECEMBER 28, 1997
------------------------------------------
GEOGRAPHIC REGION LAND RESORTS COMMUNITIES TOTAL
- ----------------- ------- ------- ----------- --------
<S> <C> <C> <C> <C>
Southeast........................................... $12,520 $20,403 $3,588 $ 36,511
Southwest........................................... 24,902 -- -- 24,902
Midwest............................................. 4,548 18,118 -- 22,666
Caribbean........................................... -- 18,447 -- 18,447
Rocky Mountains..................................... 3,575 -- -- 3,575
Mid-Atlantic........................................ 3,327 -- -- 3,327
West................................................ 2,420 -- -- 2,420
Northeast........................................... 397 -- -- 397
Canada.............................................. 52 -- -- 52
------- ------- ------ --------
Totals.................................... $51,741 $56,968 $3,588 $112,297
======= ======= ====== ========
</TABLE>
During 1996 management changed its focus for marketing certain of the
Company's inventories in conjunction with a plan to accelerate the sale of
properties managed under the Communities Division and certain properties managed
under the Land Division. This decision was largely the result of management's
focus on expansion of the Company's Resorts Division and Land Division in
certain locations. Because of the strategy to accelerate sales, management
determined that inventories with a carrying value of $23.2 million should be
written-down by $8.2 million during the nine months ended December 29, 1996. The
$8.2 million in provisions included $4.8 million for certain Communities
Division inventories and $3.4 million for certain Land Division inventories.
Management adopted a plan to aggressively pursue opportunities for the bulk sale
of a portion of the written-down assets and has reduced retail prices on others
to increase sales activity. The Company's Communities Division primarily
consists of three North Carolina properties acquired in 1988. The Company began
marketing home/lot packages in 1995 to accelerate sales at the properties.
However, the projects had been slow moving and yielded low gross profits and
little to no operating profits. A majority of the Land Division parcels subject
to write-down were scattered lots acquired through foreclosure or deedback in
lieu of foreclosure, odd lots from former projects and properties located in
parts of the country where the Company has no plans for expansion. As of
December 28, 1997, approximately 73% (measured by historical cost basis) of the
inventories subject to write-down had been sold.
5. CREDIT FACILITY
On December 15, 1997, the Company entered into a short term credit
facility. The credit facility bears interest at the greater of 10% or the prime
rate plus 2.75% and is due no later than 150 days from the first advance on the
line (December 18, 1997). The Company is required to pay a commitment fee equal
to 1% of each advance. Through December 28, 1997, the Company had borrowed $8
million under the credit facility.
6. QUARTERLY FINANCIAL INFORMATION
Summarized quarterly financial information for the three quarters in the
period ended December 31, 1997 is presented below (in 000's, except for per
share information).
F-35
<PAGE> 166
BLUEGREEN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------
JUNE 29, SEPTEMBER 28, DECEMBER 28,
1997 1997 1997
-------- ------------- ------------
<S> <C> <C> <C>
Sales of real estate.................................... $33,091 $45,321 $44,490
Gross profit............................................ 17,935 23,903 25,787
Net income.............................................. 1,739 2,770 2,475
Earnings per common share:
Basic................................................. 0.09 0.14 0.12
Diluted............................................... 0.08 0.13 0.11
</TABLE>
7. LITIGATION
The Company is party to certain ordinary course litigation. Although no
assurances can be given, in the opinion of management, based on the advice of
counsel, the potential outcome is not expected to have a materially adverse
effect on the operations or financial condition of the Company.
On November 26, 1997, an action was filed in the U.S. District Court for
the Eastern District of Tennessee against the Company. The complaint purports to
be brought on behalf of a class of current and former timeshare sales
representative employees of the Company. It asserts claims for violations of the
minimum wage and overtime provisions of the Fair Labor Standards Act. The
Company is in the early stages of evaluating this litigation's potential impact,
if any, on the Company, and accordingly cannot predict the outcome with any
degree of certainty. Although no assurances can be given, the Company does not
believe that any likely outcome will have a material adverse effect on the
Company.
8. SUPPLEMENTAL GUARANTOR INFORMATION
Under the terms of the Note Offering, all of the Company's subsidiaries,
with the exception of the Non-Guarantor Subsidiaries, as defined below, will
fully and unconditionally guarantee, jointly and severally, the full and prompt
payment of principal and interest on the Company's $110 million Senior Secured
Notes due 2008 (the Notes), and the performance of all other obligations of the
Company under the Notes and related indenture. The Non-Guarantor Subsidiaries
are:
Patten Receivables Finance Corporation III
Patten Receivables Finance Corporation VI
Bluegreen Land and Realty, Inc.
Patten Receivables Finance Corporation VII
Patten Receivables Finance Corporation VIII
CDP Realty, Inc.
Patten Receivables Finance Corporation IX
Patten Receivables Finance Corporation X
Bluegreen Receivables Finance Corporation I
BXG Realty Tenn, Inc.
Bluegreen Properties N.V.
Resort Title Agency, Inc.
Blue Ridge Public Service Company
RDI Vacation Club, Inc.
Vacation Trust, Inc.
Management has determined that separate, full financial statements are not
required and, accordingly, are not provided. Supplemental financial information
for Bluegreen Corporation, its combined non-guarantor subsidiaries and its
combined guarantor subsidiaries is presented below:
F-36
<PAGE> 167
BLUEGREEN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET AT DECEMBER 28, 1997
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR GUARANTOR
CORPORATION SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents............ $ 11,490 $ 3,915 $ 9,719 $ -- $ 25,124
Contracts receivable, net............ 296 -- 12,350 -- 12,646
Notes receivable, net................ -- 4,211 68,904 -- 73,115
Investment in securities............. -- 10,590 10 -- 10,600
Inventory, net....................... 14,315 18,447 79,535 -- 112,297
Property and equipment, net.......... 2,726 77 8,344 -- 11,147
Investments in subsidiaries.......... 7,947 -- -- (7,947) --
Debt issuance costs, net............. 859 4 920 -- 1,783
Intercompany receivable.............. 2,875 5,953 -- (8,828) --
Other assets......................... 4,084 1,703 5,467 (3,158) 8,096
-------- ------- -------- -------- --------
Total assets............... $ 44,592 $44,900 $185,249 $(19,933) $254,808
======== ======= ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
LIABILITIES:
Accounts payable..................... $ 2,117 $ 85 $ 2,546 $ (157) $ 4,591
Intercompany payable................. -- -- 8,828 (8,828) --
Deferred income...................... 240 -- 8,082 -- 8,322
Accrued liabilities and other........ 1,082 3,584 9,435 -- 14,101
Lines-of-credit and notes payable.... 4,848 18,476 41,585 (3,000) 61,909
Deferred income taxes................ 8,242 -- (1,530) -- 6,712
Receivable-backed notes payable...... -- 3,536 47,999 -- 51,535
8.00% convertible notes payable to
related parties.................... 6,000 -- -- -- 6,000
8.25% convertible subordinated
debentures......................... 34,739 -- -- -- 34,739
-------- ------- -------- -------- --------
Total liabilities.......... 57,268 25,681 116,945 (11,985) 187,909
Minority interest.................... -- -- -- 250 250
SHAREHOLDERS' EQUITY (DEFICIT)
Preferred stock...................... -- -- -- -- --
Common stock......................... 208 6 3 (9) 208
Capital-in-excess of par value....... 71,844 495 8,001 (8,496) 71,844
Retained earnings (accumulated
deficit)........................... (83,339) 18,553 60,300 307 (4,179)
Treasury stock....................... (1,389) -- -- -- (1,389)
Net unrealized gains................. -- 165 -- -- 165
-------- ------- -------- -------- --------
Total shareholders' equity
(deficit)................ (12,676) 19,219 68,304 (8,198) 66,649
-------- ------- -------- -------- --------
Total liabilities and
shareholders' equity
(deficit)................ $ 44,592 $44,900 $185,249 $(19,933) $254,808
======== ======= ======== ======== ========
</TABLE>
F-37
<PAGE> 168
BLUEGREEN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED DECEMBER 29, 1996
------------------------------------------------------------------------
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR GUARANTOR
CORPORATION SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Sales of real estate................. $21,983 $ -- $59,729 $ -- $81,712
Management fee revenue............... 6,431 -- -- (6,431) --
Other resort services revenue........ -- -- -- -- --
Interest income and other............ 5 955 3,617 -- 4,577
------- ---- ------- ------- -------
28,419 955 63,346 (6,431) 86,289
------- ---- ------- ------- -------
COST AND EXPENSES:
Cost of real estate sold........... 11,394 -- 29,990 -- 41,384
Cost of other resort services...... -- -- -- -- --
Management fees.................... -- 96 6,335 (6,431) --
Selling, general and administrative
expense......................... 16,583 -- 21,468 -- 38,051
Interest expense................... 243 410 3,263 -- 3,916
Provisions for losses.............. 4,426 -- 4,675 -- 9,101
------- ---- ------- ------- -------
32,646 506 65,731 (6,431) 92,452
------- ---- ------- ------- -------
Income (loss) from operations........ (4,227) 449 (2,385) -- (6,163)
Other income (expense)............... 9 404 (229) -- 184
------- ---- ------- ------- -------
Income (loss) before income taxes.... (4,218) 853 (2,614) -- (5,979)
Provision (benefit) for income
taxes.............................. (1,687) 341 (1,105) -- (2,451)
------- ---- ------- ------- -------
Net income (loss).......... $(2,531) $512 $(1,509) $ -- $(3,528)
======= ==== ======= ======= =======
</TABLE>
F-38
<PAGE> 169
BLUEGREEN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED DECEMBER 28, 1997
------------------------------------------------------------------------
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR GUARANTOR
CORPORATION SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Sales of real estate............... $21,391 $ -- $101,511 $ -- $122,902
Management fee revenue............. 10,978 -- -- (10,978) --
Other resort services revenue...... -- 202 1,383 -- 1,585
Interest income and other.......... 356 1,513 5,455 -- 7,324
------- ------ -------- -------- --------
32,725 1,715 108,349 (10,878) 131,811
COST AND EXPENSES:
Cost of real estate sold........... 10,599 -- 44,678 -- 55,277
Cost of other resort services...... -- 120 1,389 -- 1,509
Management fees.................... -- 171 10,807 (10,978) --
Selling, general and administrative
expense......................... 18,883 -- 36,643 -- 55,526
Interest expense................... 2,730 331 3,451 -- 6,512
Provision for losses............... -- -- 1,349 -- 1,349
------- ------ -------- -------- --------
32,212 622 98,317 (10,978) 120,173
------- ------ -------- -------- --------
Income from operations............. 513 1,093 10,032 -- 11,638
Other income (expense)............. 120 9 (9) -- 120
------- ------ -------- -------- --------
Income before income taxes......... 633 1,102 10,023 -- 11,758
Provision for income taxes......... 253 441 4,080 -- 4,774
------- ------ -------- -------- --------
Net income................. $ 380 $ 661 $ 5,943 $ -- $ 6,984
======= ====== ======== ======== ========
</TABLE>
F-39
<PAGE> 170
BLUEGREEN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED DECEMBER 29, 1996
---------------------------------------------------------
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR GUARANTOR
CORPORATION SUBSIDIARIES SUBSIDIARIES CONSOLIDATED
----------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)............................. $(2,531) $ 512 $ (1,509) $ (3,528)
Depreciation and amortization................. 429 4 374 807
Loss on REMIC transaction..................... -- 96 -- 96
Gain on sale of property and equipment........ -- -- (44) (44)
Provisions for losses......................... 4,426 -- 4,675 9,101
Interest accretion on investment in
securities................................. -- (745) -- (745)
Proceeds from borrowings collateralized by
notes...................................... -- -- 14,004 14,004
Payments on borrowings collateralized by
notes...................................... -- (2,132) (11,928) (14,060)
Benefit for deferred income taxes............. (1,687) 341 (1,105) (2,451)
(Increase) decrease in operating assets:
Contracts receivable.......................... 387 -- 3,923 4,310
Inventory..................................... (872) -- (2,570) (3,442)
Other assets.................................. (72) (98) (404) (574)
Intercompany receivable/payable............... 10,383 1,045 (11,428) --
Notes receivable.............................. -- 18 837 855
Increase (decrease) in operating liabilities:
Accounts payable, accrued liabilities and
other...................................... (4,858) 193 1,228 (3,437)
------- ------- -------- --------
Net cash provided (used) by operating
activities................................. 5,605 (766) (3,947) 892
------- ------- -------- --------
INVESTING ACTIVITIES:
Purchases of property and equipment........... (548) -- (450) (998)
Sales of property and equipment............... -- -- 586 586
Cash received from investment in securities... -- 1,114 -- 1,114
------- ------- -------- --------
Net cash flow (used) provided by investing
activities.................................... (548) 1,114 136 702
------- ------- -------- --------
FINANCING ACTIVITIES:
Proceeds from issuance of 8% convertible notes
payable.................................... -- -- -- --
Proceeds from borrowings under line-of-credit
facilities and other notes payable......... 606 -- 11,340 11,946
Payments under line-of-credit facilities and
other notes payable........................ (1,874) -- (7,003) (8,877)
Payment of debt issuance costs................ -- -- (206) (206)
Payments for treasury stock................... (1,245) -- -- (1,245)
Proceeds from exercise of employee stock
options.................................... 115 -- -- 115
------- ------- -------- --------
Net cash flow (used) provided by financing
activities................................. (2,398) -- 4,131 1,733
------- ------- -------- --------
Net increase in cash and cash equivalents..... 2,659 348 320 3,327
Cash and cash equivalents at beginning of
period..................................... 4,302 3,103 3,984 11,389
------- ------- -------- --------
Cash and cash equivalents at end of period.... 6,961 3,451 4,304 14,716
Restricted cash and cash equivalents at end of
period..................................... (1,137) (3,451) (4,029) (8,617)
------- ------- -------- --------
Unrestricted cash and cash equivalents at end
of period.................................. $ 5,824 $ -- $ 275 $ 6,099
======= ======= ======== ========
</TABLE>
F-40
<PAGE> 171
BLUEGREEN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED DECEMBER 28, 1997
---------------------------------------------------------
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR GUARANTOR
CORPORATION SUBSIDIARIES SUBSIDIARIES CONSOLIDATED
----------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income.................................... $ 380 $ 661 $ 5,943 $ 6,984
Depreciation and amortization................. 520 -- 825 1,345
Loss on REMIC transaction..................... -- -- -- --
Gain on sale of property and equipment........ -- -- -- --
Provisions for losses......................... -- -- 1,349 1,349
Interest accretion on investment in
securities................................. -- (1,047) -- (1,047)
Proceeds from borrowings collateralized by
notes...................................... -- 1,471 25,024 26,495
Payments on borrowings collateralized by
notes...................................... -- (1,449) (9,991) (11,440)
Provision (benefit) for deferred income
taxes...................................... 5,399 -- (625) 4,774
(Increase) decrease in operating assets:
Contracts receivable.......................... 888 -- 774 1,662
Inventory..................................... 251 (6,000) 9,693 3,944
Other assets.................................. (2,059) (1,299) 1,296 (2,062)
Intercompany receivable/payable............... 10,597 (1,545) (9,052) --
Notes receivable.............................. -- 1,377 (23,814) (22,437)
Increase (decrease) in operating liabilities:
Accounts payable, accrued liabilities and
other...................................... (8,534) 361 12,704 4,531
Net cash provided (used) by operating
activities................................. 7,442 (7,470) 14,126 14,098
INVESTING ACTIVITIES:
Acquisition of RDI Group, Inc. and Resort
Title Agency, Inc., net of cash acquired... (6,197) -- 3,776 (2,421)
Purchase of property and equipment............ (771) (77) (2,061) (2,909)
Sales of property and equipment............... -- -- 225 225
Cash received from investment in securities... -- 1,524 -- 1,524
------- ------- -------- --------
Net cash flow (used) provided by investing
activities.................................... (6,968) 1,447 1,940 (3,581)
------- ------- -------- --------
FINANCING ACTIVITIES:
Proceeds from issuance of 8% convertible notes
payable.................................... 6,000 -- -- 6,000
Proceeds from borrowings under line-of-credit
facilities and other notes payable......... 6,998 6,000 23,138 36,136
Payments under line-of-credit facilities and
other notes payable........................ (5,578) -- (32,953) (38,531)
Payment of debt issuance costs................ (62) (4) (834) (900)
Payments for treasury stock................... (19) 500 (500) (19)
Proceeds from exercise of employee stock
options.................................... 324 -- -- 324
------- ------- -------- --------
Net cash flow provided (used) by financing
activities................................. 7,663 6,496 (11,149) 3,010
------- ------- -------- --------
Net increase in cash and cash equivalents..... 8,137 473 4,917 13,527
Cash and cash equivalents at beginning of
period..................................... 3,353 3,442 4,802 11,597
------- ------- -------- --------
Cash and cash equivalents at end of period.... 11,490 3,915 9,719 25,124
Restricted cash and cash equivalents at end of
period..................................... (210) (3,902) (9,188) (13,300)
------- ------- -------- --------
Unrestricted cash and cash equivalents at end
of period.................................. $11,280 $ 13 $ 531 $ 11,824
======= ======= ======== ========
</TABLE>
F-41
<PAGE> 172
======================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED IN CONNECTION
WITH THE OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION
NOT CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE NOTES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................... iii
Incorporation of Certain Documents by
Reference............................... iv
Prospectus Summary........................ 1
Risk Factors.............................. 15
Use of Proceeds........................... 27
Capitalization............................ 28
Pro Forma Financial Information........... 30
Selected Consolidated Financial Data...... 33
Management's Discussion and Analysis of
Results of Operations and Financial
Condition............................... 35
Business.................................. 48
Management................................ 72
Certain Relationships and Related
Transactions............................ 76
Description of Notes...................... 78
The Exchange Offer........................ 107
Description of Other Indebtedness......... 117
Book-Entry, Delivery and Form............. 120
Certain U.S. Federal Income Tax
Considerations.......................... 121
Plan of Distribution...................... 121
Legal Matters............................. 124
Independent Certified Public
Accountants............................. 124
Index to Consolidated Financial
Statements.............................. F-1
</TABLE>
======================================================
======================================================
$110,000,000
(BLUEGREEN CORPORATION LOGO)
10 1/2% SENIOR SECURED
NOTES DUE 2008, SERIES B
--------------------
PROSPECTUS
--------------------
OFFER TO EXCHANGE UP TO $110,000,000 OF 10 1/2% SENIOR SECURED NOTES DUE 2008,
SERIES B WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, FOR ANY AND ALL OF ITS OUTSTANDING 10 1/2% SENIOR SECURED NOTES DUE
2008, OF WHICH $110,000,000 IN PRINCIPAL AMOUNT IS OUTSTANDING ON THE DATE
HEREOF.
======================================================
<PAGE> 173
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Bluegreen Corporation is a Massachusetts corporation. Section 67 of Chapter
156B of the Massachusetts General Laws provides that a corporation may indemnify
its directors and officers to the extent specified in or authorized by (i) the
articles of organization, (ii) a by-law adopted by the stockholders, or (iii) a
vote adopted by the holders of a majority of the shares of stock entitled to
vote on the election of directors. In all instances, the extent to which a
corporation provides indemnification to its directors and officers under Section
67 is optional. In its Restated Articles of Organization, Bluegreen Corporation
has elected to commit to provide indemnification to its directors and officers
in specified circumstances. Generally, the Articles of Organization provide that
Bluegreen Corporation shall indemnify directors and officers of Bluegreen
Corporation against liabilities and expenses arising out of legal proceedings
brought against them by reason of their status as directors or officers or by
reason of their agreeing to serve, at the request of Bluegreen Corporation, as a
director or officer with another organization. Under this provision, a director
or officer of Bluegreen Corporation shall be indemnified by Bluegreen
Corporation for all costs and expenses (including attorneys' fees), judgments,
liabilities and amounts paid in settlement of such proceedings, even if he is
not successful on the merits, if he acted in good faith in the reasonable belief
that his action was in the best interests of Bluegreen Corporation. The Board of
Directors of Bluegreen Corporation may authorize advancing litigation expenses
to a director or officer at his request upon receipt of an undertaking by any
such director or officer to repay such expenses if it is ultimately determined
that he is not entitled to indemnification for such expenses.
Article VI of Bluegreen Corporation's Restated Articles of Organization
eliminates the personal liability of Bluegreen Corporation's directors to
Bluegreen Corporation or its stockholders for monetary damages for breach of a
director's fiduciary duty, except to the extent Chapter 156B of the
Massachusetts General Laws prohibits the elimination or limitation of such
liability.
Certain of the Registrants (Bluegreen Resorts Management, Inc.; Bluegreen
Resorts, Inc.; Bluegreen Holding Corporation (Texas); Properties of the
Southwest One, Inc.; Bluegreen Asset Management Corporation; Bluegreen Carolina
Land, Inc.; Bluegreen Corporation of Tennessee; Bluegreen Corporation of the
Rockies; Bluegreen Properties of Virginia, Inc.; Bluegreen Communities, Inc. and
BG/RDI Acquisition Corporation are Delaware corporations. Section 145 of the
Delaware General Corporation Law provides that a corporation may indemnify a
director, officer, employee or agent against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation and provides that he shall not have been
adjudged to be liable to the corporation, and with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful.
The Certificates of Incorporation for Bluegreen Corporation of Tennessee,
Bluegreen Asset Management Corporation and BG/RDI Acquisition Corp. provide that
no director of the Company shall be personally liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty, (ii)
for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law or (iv) for any transaction from which the director derived an
improper personal benefit.
II-1
<PAGE> 174
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
1.1 -- Purchase Agreement dated as of March 26, 1998 by and among
the Registrant and the Initial Purchasers named therein
relating to the 10 1/2% Senior Secured Notes due 2008.+
3.1 -- Restated Articles of Organization, as amended (incorporated
by reference to exhibit of same designation to Annual Report
on Form 10-K for the year ended March 31, 1996).
3.2 -- Restated and amended By-laws of the Registrant (incorporated
by reference to Exhibit 3.3 to Annual Report on Form 10-K
for the fiscal year ended April 2, 1995).
3.3 -- Certificate of Incorporation of BG/RDI Acquisition Corp.+
3.4 -- By-laws of BG/RDI Acquisition Corp.+
3.5 -- Articles of Incorporation of Bluegreen Corporation of
Montana+
3.6 -- By-laws of Bluegreen Corporation of Montana+
3.7 -- Certificate of Incorporation of Bluegreen Asset Management
Corporation+
3.8 -- By-laws of Bluegreen Asset Management Corporation+
3.9 -- Certificate of Incorporation of Bluegreen Carolina Land,
Inc.+
3.10 -- By-laws of Bluegreen Carolina Land, Inc.+
3.11 -- Certificate of Incorporation of Bluegreen Communities, Inc.+
3.12 -- By-laws of Bluegreen Communities, Inc.+
3.13 -- Certificate of Incorporation of Bluegreen Corporation of
Tennessee+
3.14 -- By-laws of Bluegreen Corporation of Tennessee+
3.15 -- Certificate of Incorporation of Bluegreen Corporation of the
Rockies+
3.16 -- By-laws of Bluegreen Corporation of the Rockies+
3.17 -- Certificate of Incorporation of Bluegreen Holding
Corporation (Texas)+
3.18 -- By-laws of Bluegreen Holding Corporation (Texas)+
3.19 -- Certificate of Incorporation of Bluegreen Properties of
Virginia, Inc.+
3.20 -- By-laws of Bluegreen Properties of Virginia, Inc.+
3.21 -- Certificate of Incorporation of Bluegreen Resorts
International, Inc.+
3.22 -- By-laws of Bluegreen Resorts International, Inc.+
3.23 -- Certificate of Incorporation of Bluegreen Resorts
Management, Inc.+
3.24 -- By-laws of Bluegreen Resorts Management, Inc.+
3.25 -- Certificate of Incorporation of Bluegreen Resorts, Inc.+
3.26 -- By-laws of Bluegreen Resorts, Inc.+
3.27 -- Articles of Incorporation of Carolina National Golf Club,
Inc.+
3.28 -- By-laws of Carolina National Golf Club, Inc.+
3.29 -- Articles of Incorporation of Leisure Capital Corp.+
3.30 -- By-laws of Leisure Capital Corp.+
3.31 -- Certificate of Incorporation of Properties of the Southwest
One, Inc.+
3.32 -- By-laws of Properties of the Southwest One, Inc.+
3.33 -- Certificate of Incorporation of Properties of the West,
Inc.+
3.34 -- By-laws of Properties of the West, Inc.+
3.35 -- Articles of Incorporation of Dellona Enterprise, Inc.+
</TABLE>
II-2
<PAGE> 175
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
3.36 -- By-laws of Dellona Enterprise, Inc.+
3.37 -- Articles of Incorporation of RDI Group, Inc.+
3.38 -- By-laws of RDI Group, Inc.+
3.39 -- Articles of Incorporation of RDI Resort Services
Corporation+
3.40 -- By-laws of RDI Resort Services Corporation+
3.41 -- Articles of Incorporation of RDI Resources, Inc.+
3.42 -- By-laws of RDI Resources, Inc.+
3.43 -- Articles of Incorporation of Resort Development
International, Inc.+
3.44 -- By-laws of Resort Development International, Inc.+
3.45 -- Certificate of Limited Partnership of Properties of the
Southwest, L.P.+
4.4 -- Specimen of Common Stock Certificate (incorporated by
reference to exhibit of same designation to Registration
Statement on Form S-1, File No. 33-13076).
4.6 -- Form of Indenture dated as of May 15, 1987 relating to the
Company's 8.25% Convertible Subordinated Debentures Due
2012, including Form of Debenture (incorporated by reference
to exhibit of same designation to Registration Statement on
Form S-1, File No. 33-13753).
4.7 -- Indenture dated as of April 1, 1998 by and among the
Registrant, certain subsidiaries of the Registrant, and
SunTrust Bank, Central Florida, National Association, as
trustee, for the 10 1/2% Senior Secured Notes due 2008.+
5.1 -- Opinion of Choate, Hall & Stewart.+
10.24 -- Form of Agreement dated June 27, 1989 between the Registrant
and Peoples Heritage Savings Bank relating to sale of
mortgage notes receivable (incorporated by reference to
exhibit of same designation to Annual Report on Form 10-K
for the fiscal year ended April 2, 1989).
10.47 -- Amended and Restated Loan and Security Agreement entered
into as of January 9, 1990 by Patten Receivables Finance
Corporation VI, Finova Capital Corporation (fka Greyhound
Real Estate Finance Corporation) and the Registrant as
Guarantor (incorporated by reference to exhibit of same
designation to Annual Report on Form 10-K for the fiscal
year ended April 1, 1990).
10.53 -- Modification dated July 16, 1990 of Amended and Restated
Loan and Security Agreement entered into as of January 9,
1990 by Patten Receivables Finance Corporation VI, Finova
Capital Corporation (fka Greyhound Real Estate Finance
Corporation) and the Registrant as Guarantor (incorporated
by reference to exhibit of same designation to Annual Report
on Form 190K for the fiscal year ended April 1, 1990).
10.58 -- Amendment No. 2 dated March 23, 1991 to the Amended and
Restated Loan and Security Agreement entered into as of
January 9, 1990, by Patten Receivables Finance Corporation
VI, Finova Capital Corporation (fka Greyhound Real Estate
Finance Corporation) and The Registrant as Guarantor
(incorporated by reference to exhibit of same designation to
Annual Report on Form 10-K for the fiscal year ended March
31, 1991).
10.59 -- Amendment No. 3 dated November 21, 1991 to Amended and
Restated Loan and Security Agreement entered into as of
January 9, 1990 by Patten Receivables Finance Corporation
VI, Finova Capital Corporation (fka Greyhound Real Estate
Finance Corporation) and the Registrant as Guarantor
(incorporated by reference to exhibit 10.100 to Annual
Report on Form 10-K for the year ended March 31, 1996).
</TABLE>
II-3
<PAGE> 176
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
10.60 -- Amendment No. 4 dated January 30, 1992 to Amended and
Restated Loan and Security Agreement entered into as of
January 9, 1990 by Patten Receivables Finance Corporation
VI, Finova Capital Corporation (fka Greyhound Real Estate
Finance Corporation) and the Registrant as Guarantor
(incorporated by reference to Exhibit 10.101 to Annual
Report on Form 10-K for the year ended March 31, 1996).
10.61 -- Amendment No. 5 dated October, 1992 to Amended and Restated
Loan and Security Agreement entered into as of January 9,
1990 by Patten Receivables Finance Corporation VI, Finova
Capital Corporation (fka Greyhound Real Estate Finance
Corporation) and the Registrant as Guarantor (incorporated
by reference to Exhibit 10.102 to Annual Report on Form 10-K
for the year ended March 31, 1996).
10.62 -- Amendment No. 6 dated May 12, 1993 to Amended and Restated
Loan and Security Agreement entered into as of January 9,
1990 by Patten Receivables Finance Corporation VI, Finova
Capital Corporation (fka Greyhound Real Estate Finance
Corporation) and the Registrant as Guarantor (incorporated
by reference to Exhibit 10.88 to Annual Report on Form 10-K
for the fiscal year ended March 27, 1994).
10.63 -- Amendment No. 7 dated February 18, 1994 to Amended and
Restated Loan and Security Agreement entered into as of
January 9, 1990 by Patten Receivables Finance Corporation
VI, Finova Capital Corporation (fka Greyhound Real Estate
Finance Corporation) and the Registrant as Guarantor
(incorporated by reference to Exhibit 10.89 to Annual Report
on Form 10-K for the Fiscal year ended March 27, 1994).
10.64 -- Amendment No. 8 dated March 25, 1994 to Amended and Restated
Loan and Security Agreement entered into as of January 9,
1990 by Patten Receivables Finance Corporation VI, Finova
Capital Corporation (fka Greyhound Real Estate Finance
Corporation) and the Registrant as Guarantor (incorporated
by reference to Exhibit 10.103 to Annual Report on Form 10-K
for the year ended March 31, 1996).
10.65 -- Amendment No. 9 dated June 29, 1994 to Amended and Restated
Loan and Security Agreement entered into as of January 9,
1990 by Patten Receivables Finance Corporation VI, Finova
Capital Corporation (fka Greyhound Real Estate Finance
Corporation) and the Registrant as Guarantor (incorporated
by reference to Exhibit 10.91 to Quarterly Report on Form
10-Q for the period ended September 25, 1994).
10.66 -- Amendment No. 10 dated December 14, 1994 to Amended and
Restated Loan and Security Agreement entered into as of
January 9, 1990 by Patten Receivables Finance Corporation
VI, Finova Capital Corporation (fka Greyhound Real Estate
Finance Corporation) and the Registrant as Guarantor
(incorporated by reference to Exhibit 10.94 to Annual Report
on Form 10-K for the fiscal year ended April 2, 1995).
10.67 -- Amendment No. 11 dated October 31, 1995 to Amended and
Restated Loan and Security Agreement entered into as of
January 9, 1990 by Patten Receivables Finance Corporation
VI, Finova Capital Corporation (fka Greyhound Real Estate
Finance Corporation) and the Registrant as Guarantor
(incorporated by reference to Exhibit 10.104 to Annual
Report on Form 10-K for the year ended March 31, 1996).
10.68 -- Amendment No. 12 dated May 1, 1996 to Amended and Restated
Loan and Security Agreement entered into as of January 9,
1990 by Patten receivables Finance Corporation VI, Finova
Capital Corporation (fka Greyhound Real Estate Finance
Corporation) and the Registrant as Guarantor (incorporated
by reference to Exhibit 10.104 to Annual Report on Form 10-K
for the year ended March 31, 1996).
10.77 -- Registrant's Amended 1988 Outside Directors Stock Option
Plan (incorporated by reference to exhibit of same
designation to Annual Report on Form 10-K for the fiscal
year ended March 29, 1992).
</TABLE>
II-4
<PAGE> 177
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
10.78 -- Registrant's 1988 Amended Outside Director's Stock Option
Plan (incorporated by reference to exhibit to Registration
Statement on Form S-1, File No. 33-61687).
10.79 -- Registrant's 1995 Stock Incentive Plan (incorporated by
reference to Exhibit to Registration Statement on Form S-1,
File No. 33-61687).
10.80 -- Registrant's Retirement Savings Plan (incorporated by
reference to Registration Statement on Form S-8, File No.
33-48075).
10.85 -- Loan and Security Agreement by and between the Registrant
and Foothill Capital Corporation dated as of October 29,
1993 (incorporated by reference to exhibit of same
designation to Annual Report on Form 10-K for the fiscal
year ended March 27, 1994).
10.86 -- First Amendment dated December 23, 1993 to Loan and Security
Agreement entered into on October 29, 1993 by and between
the Registrant and Foothill Capital Corporation
(incorporated by reference to exhibit of same designation to
Annual Report on Form 10-K for the fiscal year ended March
27, 1994).
10.87 -- Amendment No. 2 dated February 16, 1995 to Amended Loan and
Security Agreement entered into on October 29, 1993 by and
between the Registrant and Foothill Capital Corporation
(incorporated by reference to Exhibit 10.111 to Annual
Report on Form 10-K for the year ended March 31, 1996).
10.88 -- Amendment No. 3 dated March 28, 1995 to Amendment Loan and
Security Agreement entered into on October 29, 1993 by and
between the Registrant and Foothill Capital Corporation
(incorporated by reference to Exhibit 10.112 to Annual
Report on Form 10-K for the year ended March 31, 1996).
10.89 -- Amendment No. 4 dated June 15, 1995 to Amended Loan and
Security Agreement entered into on October 29, 1993 by and
between the Registrant and Foothill Capital Corporation
(incorporated by reference to Exhibit 10.113 to Annual
Report on Form 10-K for the year ended March 31, 1996).
10.90 -- Amendment No. 4 dated June 15, 1995 to Amended Loan and
Security Agreement entered into on October 29, 1993 by and
between the Registrant and Foothill Capital Corporation
(incorporated by reference to Exhibit 10.114 to Annual
Report on Form 10-K for the year ended March 31, 1996).
10.91 -- Amendment No. 6 dated March 8, 1996 to Amended Loan and
Security Agreement entered into on October 29, 1993 by and
between the Registrant and Foothill Capital Corporation
(incorporated by reference to Exhibit 10.115 to Annual
Report on Form 10-K for the year ended March 31, 1996).
10.92 -- Amendment No. 7 dated March 24, 1997 to Amended Loan and
Security Agreement entered into on October 29, 1993 by and
between the Registrant and Foothill Capital Corporation.+
10.93 -- Stock Purchase Agreement dated as of November 22, 1994 by
and among Harry S. Patten and the Purchasers named therein
(incorporated by reference to exhibit of same designation to
Current Report on Form 8-K dated November 22, 1994).
10.97 -- Pooling and Servicing Agreement dated as of April 15, 1994,
among Patten Receivables Financial Corporation IX, the
Registrant, Patten Corporation REMIC Trust, Series 1994-1
and First Trust National Association, as Trustee
(incorporated by reference to Exhibit 10.84 to Annual Report
on Form 10-K for the fiscal year ended March 27, 1994).
10.98 -- Pooling and Servicing Agreement dated as of June 15, 1995,
among Patten Receivables Finance Corporation X, the
Registrant, Patten Corporation REMIC Trust, Series 1995-1
and First Trust National Association, as Trustee
(incorporated by reference to exhibit to Current Report on
Form 8-K dated July 12, 1995).
</TABLE>
II-5
<PAGE> 178
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
10.99 -- Pooling and Servicing Agreement dated as of April 15, 1996,
among Bluegreen Receivables Finance Corporation I, the
Registrant, Bluegreen Corporation REMIC Trust, Series 1996-1
and First Trust National Association, as Trustee
(incorporated by reference to exhibit to Current Report on
Form 8-K dated May 15, 1996).
10.100 -- Pooling and Servicing Agreement dated as of November 15,
1996, among Bluegreen Receivables Finance Corporation II,
the Registrant, Bluegreen Corporation REMIC Trust, Series
1996-2 and First Trust National Association, as Trustee
(incorporated by reference to exhibit to Current Report on
Form 8-K dated December 11, 1996).
10.106 -- Construction Loan Agreement by and between the National Bank
of South Carolina and Bluegreen Resorts, Inc. (fka Patten
Resorts, Inc.) dated February 28, 1996 (incorporated by
reference to exhibit of same designation to Annual Report on
Form 10-K for the year ended March 31, 1996).
10.107 -- Loan and Security Agreement by and between Heller Financial,
Inc. and Bluegreen Resorts, Inc. (fka Patten Resorts, Inc.)
dated February 28, 1996 (incorporated by reference to
exhibit of same designation to Annual Report on Form 10-K
for the year ended March 31, 1996).
10.108 -- First amendment dated February 27, 1997 to Loan and Security
Agreement by and between Heller Financial, Inc. and
Bluegreen Resorts, Inc. (fka Patten Resorts, Inc.) dated
February 28, 1996 (incorporated by reference to exhibit of
same designation to Annual Report on Form 10-K for the year
ended March 31, 1996).
10.115 -- Acquisition, Construction and Receivables Loan and Security
Agreement by and between Finova Capital Corporation and the
Registrant dated June 9, 1995 (incorporated by reference to
Exhibit 10.108 to Annual Report on Form 10-K for the year
ended March 31, 1996).
10.116 -- Amendment No. 1 dated March 8, 1996 to Acquisition,
Construction and Receivables Loan and Security Agreement by
and between Finova Capital Corporation and the Registrant
dated June 9, 1995.+
10.120 -- Amended and Restated Loan and Security Agreement dated as of
December 14, 1994 by and between Finova Capital Corporation
(fka Greyhound Real Estate Finance Corporation) and the
Registrant (incorporated by reference to Exhibit 10.95 to
Annual Report on Form 10-K for the fiscal year ended April
2, 1995).
10.121 -- Amendment No. 1 dated April 12, 1995 to the Amended and
Restated Loan and Security Agreement entered into on
December 14, 1994 between Finova Capital Corporation and the
Registrant (incorporated by reference to Exhibit 10.109 to
Annual Report on Form 10-K for the year ended March 31,
1996).
10.122 -- Amendment No. 2 dated November 21, 1995 to the Amended and
Restated Loan and Security Agreement entered into on
December 14, 1994 between Finova Capital Corporation and the
Registrant (incorporated by reference to Exhibit 10.110 to
Annual Report on Form 10-K for the year ended March 31,
1996).
10.123 -- Exchange and Registration Rights Agreement dated April 1,
1998, by and among the Registrant and the persons named
therein, relating to the 10 1/2% Senior Secured Notes due
2008.+
10.124 -- Employment Agreement between George F. Donovan and the
Company dated March, 1998.+
10.125 -- Employment Agreement between John F. Chiste and the Company
dated March, 1998.+
10.126 -- Employment Agreement between Nicolas Gray and the Company
dated March, 1998.+
10.127 -- Employment Agreement between Daniel C. Koscher and the
Company dated March, 1998.+
10.128 -- Employment Agreement between Patrick E. Rondeau and the
Company dated March, 1998.+
12.1 -- Statement Re: Computation of Ratio of Earnings to Fixed
Charges.
21.1 -- List of Subsidiaries
</TABLE>
II-6
<PAGE> 179
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
23.1 -- Consent of Ernst & Young LLP.
23.2 -- Consent of Choate, Hall & Stewart (included as part of
Exhibit 5.1).
24.1 -- Powers of Attorney (included in signature pages to
Registration Statement).
25.1 -- Statement of eligibility of SunTrust Bank Central Florida,
National Association, as trustee.+
99.1 -- Letter of Transmittal with respect to the Exchange Offer.
99.2 -- Notice of Guaranteed Delivery with respect to the Exchange
Offer.
99.3 -- Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
</TABLE>
- ---------------
+ To be filed by amendment.
ITEM 22. UNDERTAKINGS
(a) Each of the undersigned registrants hereby undertakes that insofar as
indemnification for liabilities arising under the Securities Act of 1993, as
amended ("the Act"), may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
such Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim of
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or the registrant in the successful defense of
any action, suit paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, such Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(b) Each of the undersigned registrants hereby undertakes to respond to
requests for information that is incorporated by reference into this prospectus
pursuant to Item 4, 10(b), 11, or 13 of this Form, within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.
(c) Each of the undersigned registrants hereby undertakes to supply by
means of a post-effective amendment all information concerning in a transaction,
and the company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(d) Each of the undersigned registrants hereby undertakes:
(1) To file, during any period which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a) (3) of the
Securities Act of 1993;
(ii) To reflect in the prospectus and facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) of the Securities Act of
1933 if, in the aggregate, the changes in volume and price represent no
more than a 20 percent change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table in the
effective Registration Statement;
II-7
<PAGE> 180
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-8
<PAGE> 181
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Bluegreen Corporation has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of Boca
Raton, State of Florida, on April 21, 1998.
BLUEGREEN CORPORATION
By: /s/ GEORGE F. DONOVAN
------------------------------------
George F. Donovan
President and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints George
F. Donovan, Patrick E. Rondeau, John F. Chiste and William P. Gelnaw, Jr., and
each of them, with full power to act without the other, such person's true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign this Registration Statement, and any and all amendments
thereto (including pre- and post-effective amendments) or any registration
statement for the same offering that is to be effective upon filing pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, and to file the same,
with exhibits and schedules thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing necessary or desirable to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ GEORGE F. DONOVAN President, Chief Executive April 21, 1998
- ----------------------------------------------------- Officer and Director
George F. Donovan (Principal Executive Officer)
/s/ JOHN F. CHISTE Chief Financial Officer and April 21, 1998
- ----------------------------------------------------- Treasurer (Principal Financial
John F. Chiste Officer)
/s/ ANTHONY M. PULEO Chief Accounting Officer April 21, 1998
- ----------------------------------------------------- (Principal Accounting Officer)
Anthony M. Puleo
/s/ JOSEPH C. ABELES Director April 21, 1998
- -----------------------------------------------------
Joseph C. Abeles
/s/ RALPH A. FOOTE Director April 21, 1998
- -----------------------------------------------------
Ralph A. Foote
Director April 21, 1998
- -----------------------------------------------------
Frederick M. Myers
</TABLE>
II-9
<PAGE> 182
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ J. LARRY RUTHERFORD Director April 21, 1998
- -----------------------------------------------------
J. Larry Rutherford
/s/ STUART A. SHIKIAR Director April 21, 1998
- -----------------------------------------------------
Stuart A. Shikiar
/s/ BRADFORD T. WHITMORE Director April 21, 1998
- -----------------------------------------------------
Bradford T. Whitmore
</TABLE>
II-10
<PAGE> 183
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Bluegreen Resorts Management, Inc. has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Boca Raton, State of Florida, on April 21, 1998.
BLUEGREEN RESORTS MANAGEMENT, INC.
By: /s/ PATRICK E. RONDEAU
------------------------------------
Patrick E. Rondeau
President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints George
F. Donovan, Patrick E. Rondeau, John F. Chiste and William P. Gelnaw, Jr., and
each of them, with full power to act without the other, such person's true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign this Registration Statement, and any and all amendments
thereto (including pre- and post-effective amendments) or any registration
statement for the same offering that is to be effective upon filing pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, and to file the same,
with exhibits and schedules thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing necessary or desirable to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ PATRICK E. RONDEAU President, Secretary and April 21, 1998
- ----------------------------------------------------- Director
Patrick E. Rondeau (Chief Executive Officer)
/s/ JOHN F. CHISTE Principal Financial Officer April 21, 1998
- -----------------------------------------------------
John F. Chiste
/s/ ANTHONY M. PULEO Principal Accounting Officer April 21, 1998
- -----------------------------------------------------
Anthony M. Puleo
/s/ L. NICOLAS GRAY Director April 21, 1998
- -----------------------------------------------------
L. Nicolas Gray
/s/ DANNY L. FERGUSON Director April 21, 1998
- -----------------------------------------------------
Danny L. Ferguson
</TABLE>
II-11
<PAGE> 184
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Bluegreen Resorts, Inc. has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of Boca
Raton, State of Florida, on April 21, 1998.
BLUEGREEN RESORTS, INC.
By: /s/ PATRICK E. RONDEAU
------------------------------------
Patrick E. Rondeau
President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints George
F. Donovan, Patrick E. Rondeau, John F. Chiste and William P. Gelnaw, Jr., and
each of them, with full power to act without the other, such person's true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign this Registration Statement, and any and all amendments
thereto (including pre- and post-effective amendments) or any registration
statement for the same offering that is to be effective upon filing pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, and to file the same,
with exhibits and schedules thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing necessary or desirable to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ PATRICK E. RONDEAU President, Secretary and April 21, 1998
- ----------------------------------------------------- Director
Patrick E. Rondeau (Chief Executive Officer)
/s/ JOHN F. CHISTE Principal Financial Officer April 21, 1998
- -----------------------------------------------------
John F. Chiste
/s/ ANTHONY M. PULEO Principal Accounting Officer April 21, 1998
- -----------------------------------------------------
Anthony M. Puleo
/s/ L. NICOLAS GRAY Director April 21, 1998
- -----------------------------------------------------
L. Nicolas Gray
/s/ DANNY L. FERGUSON Director April 21, 1998
- -----------------------------------------------------
Danny L. Ferguson
</TABLE>
II-12
<PAGE> 185
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Bluegreen Holding Corporation (Texas) has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boca Raton, State of Florida, on April 21, 1998.
BLUEGREEN HOLDING CORPORATION (TEXAS)
By: /s/ PATRICK E. RONDEAU
------------------------------------
Patrick E. Rondeau
President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints George
F. Donovan, Patrick E. Rondeau, John F. Chiste and William P. Gelnaw, Jr., and
each of them, with full power to act without the other, such person's true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign this Registration Statement, and any and all amendments
thereto (including pre- and post-effective amendments) or any registration
statement for the same offering that is to be effective upon filing pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, and to file the same,
with exhibits and schedules thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing necessary or desirable to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ PATRICK E. RONDEAU President, Secretary and April 21, 1998
- ----------------------------------------------------- Director
Patrick E. Rondeau (Chief Executive Officer)
/s/ JOHN F. CHISTE Principal Financial Officer and April 21, 1998
- ----------------------------------------------------- Director
John F. Chiste
/s/ ANTHONY M. PULEO Principal Accounting Officer and April 21, 1998
- ----------------------------------------------------- Director
Anthony M. Puleo
</TABLE>
II-13
<PAGE> 186
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Properties of the Southwest One, Inc. has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boca Raton, State of Florida, on April 21, 1998.
PROPERTIES OF THE SOUTHWEST ONE, INC.
By: /s/ PATRICK E. RONDEAU
------------------------------------
Patrick E. Rondeau
President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints George
F. Donovan, Patrick E. Rondeau, John F. Chiste and William P. Gelnaw, Jr., and
each of them, with full power to act without the other, such person's true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign this Registration Statement, and any and all amendments
thereto (including pre- and post-effective amendments) or any registration
statement for the same offering that is to be effective upon filing pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, and to file the same,
with exhibits and schedules thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing necessary or desirable to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ PATRICK E. RONDEAU President, Secretary and April 21, 1998
- ----------------------------------------------------- Director
Patrick E. Rondeau (Chief Executive Officer)
/s/ JOHN F. CHISTE Principal Financial Officer April 21, 1998
- -----------------------------------------------------
John F. Chiste
/s/ ANTHONY M. PULEO Principal Accounting Officer April 21, 1998
- -----------------------------------------------------
Anthony M. Puleo
/s/ DANIEL C. KOSCHER Director April 21, 1998
- -----------------------------------------------------
Daniel C. Koscher
/s/ DANNY L. FERGUSON Director April 21, 1998
- -----------------------------------------------------
Danny L. Ferguson
</TABLE>
II-14
<PAGE> 187
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Bluegreen Asset Management Corporation has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boca Raton, State of Florida, on April 21, 1998.
BLUEGREEN ASSET MANAGEMENT
CORPORATION
By: /s/ PATRICK E. RONDEAU
------------------------------------
Patrick E. Rondea
President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints George
F. Donovan, Patrick E. Rondeau, John F. Chiste and William P. Gelnaw, Jr., and
each of them, with full power to act without the other, such person's true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign this Registration Statement, and any and all amendments
thereto (including pre- and post-effective amendments) or any registration
statement for the same offering that is to be effective upon filing pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, and to file the same,
with exhibits and schedules thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing necessary or desirable to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ PATRICK E. RONDEAU President, Secretary and April 21, 1998
- ----------------------------------------------------- Director
Patrick E. Rondeau (Chief Executive Officer)
/s/ JOHN F. CHISTE Principal Financial Officer April 21, 1998
- -----------------------------------------------------
John F. Chiste
/s/ ANTHONY M. PULEO Principal Financial Officer April 21, 1998
- -----------------------------------------------------
Anthony M. Puleo
/s/ DANIEL C. KOSCHER Director April 21, 1998
- -----------------------------------------------------
Daniel C. Koscher
/s/ DANNY L. FERGUSON Director April 21, 1998
- -----------------------------------------------------
Danny L. Ferguson
</TABLE>
II-15
<PAGE> 188
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Bluegreen Carolina Land, Inc. has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Boca Raton, State of Florida, on April 21, 1998.
BLUEGREEN CAROLINA LAND, INC.
By: /s/ PATRICK E. RONDEAU
------------------------------------
Patrick E. Rondeau
President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints George
F. Donovan, Patrick E. Rondeau, John F. Chiste and William P. Gelnaw, Jr., and
each of them, with full power to act without the other, such person's true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign this Registration Statement, and any and all amendments
thereto (including pre- and post-effective amendments) or any registration
statement for the same offering that is to be effective upon filing pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, and to file the same,
with exhibits and schedules thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing necessary or desirable to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<C> <S> <C>
/s/ PATRICK E. RONDEAU President, Secretary and April 21, 1998
- ----------------------------------------------------- Director
Patrick E. Rondeau (Chief Executive Officer)
/s/ JOHN F. CHISTE Principal Financial Officer April 21, 1998
- -----------------------------------------------------
John F. Chiste
/s/ ANTHONY M. PULEO Principal Accounting Officer April 21, 1998
- -----------------------------------------------------
Anthony M. Puleo
/s/ DANIEL C. KOSCHER Director April 21, 1998
- -----------------------------------------------------
Daniel C. Koscher
/s/ DANNY L. FERGUSON Director April 21, 1998
- -----------------------------------------------------
Danny L. Ferguson
</TABLE>
II-16
<PAGE> 189
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Bluegreen Corporation of Montana has duly caused this Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Boca Raton, State of Florida, on April 21, 1998.
BLUEGREEN CORPORATION OF MONTANA
By: /s/ PATRICK E. RONDEAU
------------------------------------
Patrick E. Rondeau
President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints George
F. Donovan, Patrick E. Rondeau, John F. Chiste and William P. Gelnaw, Jr., and
each of them, with full power to act without the other, such person's true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign this Registration Statement, and any and all amendments
thereto (including pre- and post-effective amendments) or any registration
statement for the same offering that is to be effective upon filing pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, and to file the same,
with exhibits and schedules thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing necessary or desirable to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ PATRICK E. RONDEAU President, Secretary and April 21, 1998
- ----------------------------------------------------- Director
Patrick E. Rondeau (Chief Executive Officer)
/s/ JOHN F. CHISTE Principal Financial Officer April 21, 1998
- -----------------------------------------------------
John F. Chiste
/s/ ANTHONY M. PULEO Principal Accounting Officer April 21, 1998
- -----------------------------------------------------
Anthony M. Puleo
/s/ DANIEL C. KOSCHER Director April 21, 1998
- -----------------------------------------------------
Daniel C. Koscher
/s/ DANNY L. FERGUSON Director April 21, 1998
- -----------------------------------------------------
Danny L. Ferguson
</TABLE>
II-17
<PAGE> 190
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Bluegreen Corporation of Tennessee has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Boca Raton, State of Florida, on April 21, 1998.
BLUEGREEN CORPORATION OF TENNESSEE
By: /s/ PATRICK E. RONDEAU
------------------------------------
Patrick E. Rondeau
President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints George
F. Donovan, Patrick E. Rondeau, John F. Chiste and William P. Gelnaw, Jr., and
each of them, with full power to act without the other, such person's true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign this Registration Statement, and any and all amendments
thereto (including pre- and post-effective amendments) or any registration
statement for the same offering that is to be effective upon filing pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, and to file the same,
with exhibits and schedules thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing necessary or desirable to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ PATRICK E. RONDEAU President, Secretary and April 21, 1998
- ----------------------------------------------------- Director
Patrick E. Rondeau (Chief Executive Officer)
/s/ JOHN F. CHISTE Principal Financial Officer April 21, 1998
- -----------------------------------------------------
John F. Chiste
/s/ ANTHONY M. PULEO Principal Accounting Officer April 21, 1998
- -----------------------------------------------------
Anthony M. Puleo
/s/ DANIEL C. KOSCHER Director April 21, 1998
- -----------------------------------------------------
Daniel C. Koscher
/s/ DANNY L. FERGUSON Director April 21, 1998
- -----------------------------------------------------
Danny L. Ferguson
</TABLE>
II-18
<PAGE> 191
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Bluegreen Corporation of the Rockies has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Boca Raton, State of Florida, on April 21, 1998.
BLUEGREEN CORPORATION
OF THE ROCKIES
By: /s/ PATRICK E. RONDEAU
------------------------------------
Patrick E. Rondeau
President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints George
F. Donovan, Patrick E. Rondeau, John F. Chiste and William P. Gelnaw, Jr., and
each of them, with full power to act without the other, such person's true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign this Registration Statement, and any and all amendments
thereto (including pre- and post-effective amendments) or any registration
statement for the same offering that is to be effective upon filing pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, and to file the same,
with exhibits and schedules thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing necessary or desirable to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ PATRICK E. RONDEAU President, Secretary and April 21, 1998
- ----------------------------------------------------- Director
Patrick E. Rondeau (Chief Executive Officer)
/s/ JOHN F. CHISTE Principal Financial Officer April 21, 1998
- -----------------------------------------------------
John F. Chiste
/s/ ANTHONY M. PULEO Principal Accounting Officer April 21, 1998
- -----------------------------------------------------
Anthony M. Puleo
/s/ DANIEL C. KOSCHER Director April 21, 1998
- -----------------------------------------------------
Daniel C. Koscher
/s/ DANNY L. FERGUSON Director April 21, 1998
- -----------------------------------------------------
Danny L. Ferguson
</TABLE>
II-19
<PAGE> 192
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Bluegreen Properties of Virginia, Inc. has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boca Raton, State of Florida, on April 21, 1998.
BLUEGREEN PROPERTIES
OF VIRGINIA, INC.
By: /s/ PATRICK E. RONDEAU
------------------------------------
Patrick E. Rondeau
President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints George
F. Donovan, Patrick E. Rondeau, John F. Chiste and William P. Gelnaw, Jr., and
each of them, with full power to act without the other, such person's true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign this Registration Statement, and any and all amendments
thereto (including pre- and post-effective amendments) or any registration
statement for the same offering that is to be effective upon filing pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, and to file the same,
with exhibits and schedules thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing necessary or desirable to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ PATRICK E. RONDEAU President, Secretary and April 21, 1998
- ----------------------------------------------------- Director
Patrick E. Rondeau (Chief Executive Officer)
/s/ JOHN F. CHISTE Principal Financial Officer April 21, 1998
- -----------------------------------------------------
John F. Chiste
/s/ ANTHONY M. PULEO Principal Accounting Officer April 21, 1998
- -----------------------------------------------------
Anthony M. Puleo
/s/ DANIEL C. KOSCHER Director April 21, 1998
- -----------------------------------------------------
Daniel C. Koscher
/s/ DANNY L. FERGUSON Director April 21, 1998
- -----------------------------------------------------
Danny L. Ferguson
</TABLE>
II-20
<PAGE> 193
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Bluegreen Communities, Inc. has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Boca Raton, State of Florida, on April 21, 1998.
BLUEGREEN COMMUNITIES, INC.
By: /s/ PATRICK E. RONDEAU
------------------------------------
Patrick E. Rondeau
President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints George
F. Donovan, Patrick E. Rondeau, John F. Chiste and William P. Gelnaw, Jr., and
each of them, with full power to act without the other, such person's true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign this Registration Statement, and any and all amendments
thereto (including pre- and post-effective amendments) or any registration
statement for the same offering that is to be effective upon filing pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, and to file the same,
with exhibits and schedules thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing necessary or desirable to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ PATRICK E. RONDEAU President, Secretary and April 21, 1998
- ----------------------------------------------------- Director
Patrick E. Rondeau (Chief Executive Officer)
/s/ JOHN F. CHISTE Principal Financial Officer April 21, 1998
- -----------------------------------------------------
John F. Chiste
/s/ ANTHONY M. PULEO Principal Accounting Officer April 21, 1998
- -----------------------------------------------------
Anthony M. Puleo
/s/ DANIEL C. KOSCHER Director April 21, 1998
- -----------------------------------------------------
Daniel C. Koscher
/s/ DANNY L. FERGUSON Director April 21, 1998
- -----------------------------------------------------
Danny L. Ferguson
</TABLE>
II-21
<PAGE> 194
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Bluegreen Resorts International, Inc. has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boca Raton, State of Florida, on April 21, 1998.
BLUEGREEN RESORTS
INTERNATIONAL, INC.
By: /s/ PATRICK E. RONDEAU
------------------------------------
Patrick E. Rondeau
President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints George
F. Donovan, Patrick E. Rondeau, John F. Chiste and William P. Gelnaw, Jr., and
each of them, with full power to act without the other, such person's true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign this Registration Statement, and any and all amendments
thereto (including pre- and post-effective amendments) or any registration
statement for the same offering that is to be effective upon filing pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, and to file the same,
with exhibits and schedules thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing necessary or desirable to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ PATRICK E. RONDEAU President, Secretary and April 21, 1998
- ----------------------------------------------------- Director
Patrick E. Rondeau (Chief Executive Officer)
/s/ JOHN F. CHISTE Principal Financial Officer April 21, 1998
- -----------------------------------------------------
John F. Chiste
/s/ ANTHONY M. PULEO Principal Accounting Officer April 21, 1998
- -----------------------------------------------------
Anthony M. Puleo
/s/ L. NICHOLAS GRAY Director April 21, 1998
- -----------------------------------------------------
L. Nicholas Gray
/s/ DANNY L. FERGUSON Director April 21, 1998
- -----------------------------------------------------
Danny L. Ferguson
</TABLE>
II-22
<PAGE> 195
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Carolina National Golf Club, Inc. has duly caused this Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Boca Raton, State of Florida, on April 21, 1998.
CAROLINA NATIONAL GOLF CLUB, INC.
By: /s/ PATRICK E. RONDEAU
------------------------------------
Patrick E. Rondeau
President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints George
F. Donovan, Patrick E. Rondeau, John F. Chiste and William P. Gelnaw, Jr., and
each of them, with full power to act without the other, such person's true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign this Registration Statement, and any and all amendments
thereto (including pre- and post-effective amendments) or any registration
statement for the same offering that is to be effective upon filing pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, and to file the same,
with exhibits and schedules thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing necessary or desirable to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ PATRICK E. RONDEAU President, Secretary and April 21, 1998
- ----------------------------------------------------- Director
Patrick E. Rondeau (Chief Executive Officer)
/s/ JOHN F. CHISTE Principal Financial Officer April 21, 1998
- -----------------------------------------------------
John F. Chiste
/s/ ANTHONY M. PULEO Principal Accounting Officer April 21, 1998
- -----------------------------------------------------
Anthony M. Puleo
/s/ DANIEL C. KOSCHER Director April 21, 1998
- -----------------------------------------------------
Daniel C. Koscher
/s/ DANNY L. FERGUSON Director April 21, 1998
- -----------------------------------------------------
Danny L. Ferguson
</TABLE>
II-23
<PAGE> 196
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Leisure Capital Corporation has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Boca Raton, State of Florida, on April 21, 1998.
LEISURE CAPITAL CORPORATION
By: /s/ PATRICK E. RONDEAU
------------------------------------
Patrick E. Rondeau
President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints George
F. Donovan, Patrick E. Rondeau, John F. Chiste and William P. Gelnaw, Jr., and
each of them, with full power to act without the other, such person's true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign this Registration Statement, and any and all amendments
thereto (including pre- and post-effective amendments) or any registration
statement for the same offering that is to be effective upon filing pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, and to file the same,
with exhibits and schedules thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing necessary or desirable to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ PATRICK E. RONDEAU President, Secretary and April 21, 1998
- ----------------------------------------------------- Director
Patrick E. Rondeau (Chief Executive Officer)
/s/ JOHN F. CHISTE Principal Financial Officer April 21, 1998
- -----------------------------------------------------
John F. Chiste
/s/ ANTHONY M. PULEO Principal Accounting Officer April 21, 1998
- -----------------------------------------------------
Anthony M. Puleo
/s/ L. NICOLAS GRAY Director April 21, 1998
- -----------------------------------------------------
L. Nicolas Gray
/s/ DANNY L. FERGUSON Director April 21, 1998
- -----------------------------------------------------
Danny L. Ferguson
</TABLE>
II-24
<PAGE> 197
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Properties of the West, Inc. has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Boca Raton, State of Florida, on April 21, 1998.
PROPERTIES OF THE WEST, INC.
By: /s/ PATRICK E. RONDEAU
------------------------------------
Patrick E. Rondeau
President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints George
F. Donovan, Patrick E. Rondeau, John F. Chiste and William P. Gelnaw, Jr., and
each of them, with full power to act without the other, such person's true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign this Registration Statement, and any and all amendments
thereto (including pre- and post-effective amendments) or any registration
statement for the same offering that is to be effective upon filing pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, and to file the same,
with exhibits and schedules thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing necessary or desirable to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ PATRICK E. RONDEAU President, Secretary and April 21, 1998
- ----------------------------------------------------- Director
Patrick E. Rondeau (Chief Executive Officer)
/s/ JOHN F. CHISTE Principal Financial Officer April 21, 1998
- -----------------------------------------------------
John F. Chiste
/s/ ANTHONY M. PULEO Principal Accounting Officer April 21, 1998
- -----------------------------------------------------
Anthony M. Puleo
/s/ DANIEL C. KOSCHER Director April 21, 1998
- -----------------------------------------------------
Daniel C. Koscher
/s/ DANNY L. FERGUSON Director April 21, 1998
- -----------------------------------------------------
Danny L. Ferguson
</TABLE>
II-25
<PAGE> 198
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
BG/RDI Acquisition Corporation has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Boca Raton, State of Florida, on April 21, 1998.
BG/RDI ACQUISITION CORPORATION
By: /s/ PATRICK E. RONDEAU
------------------------------------
Patrick E. Rondeau
President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints George
F. Donovan, Patrick E. Rondeau, John F. Chiste and William P. Gelnaw, Jr., and
each of them, with full power to act without the other, such person's true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign this Registration Statement, and any and all amendments
thereto (including pre- and post-effective amendments) or any registration
statement for the same offering that is to be effective upon filing pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, and to file the same,
with exhibits and schedules thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing necessary or desirable to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ PATRICK E. RONDEAU President, Secretary and April 21, 1998
- ----------------------------------------------------- Director
Patrick E. Rondeau (Chief Executive Officer)
/s/ JOHN F. CHISTE Principal Financial Officer April 21, 1998
- -----------------------------------------------------
John F. Chiste
/s/ ANTHONY M. PULEO Principal Accounting Officer April 21, 1998
- -----------------------------------------------------
Anthony M. Puleo
/s/ L. NICOLAS GRAY Director April 21, 1998
- -----------------------------------------------------
L. Nicolas Gray
/s/ DANNY L. FERGUSON Director April 21, 1998
- -----------------------------------------------------
Danny L. Ferguson
</TABLE>
II-26
<PAGE> 199
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Dellona Enterprises, Inc. has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Boca Raton, State of Florida, on April 21, 1998.
DELLONA ENTERPRISES, INC.
By: /s/ PATRICK E. RONDEAU
------------------------------------
Patrick E. Rondeau
President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints George
F. Donovan, Patrick E. Rondeau, John F. Chiste and William P. Gelnaw, Jr., and
each of them, with full power to act without the other, such person's true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign this Registration Statement, and any and all amendments
thereto (including pre- and post-effective amendments) or any registration
statement for the same offering that is to be effective upon filing pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, and to file the same,
with exhibits and schedules thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing necessary or desirable to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ PATRICK E. RONDEAU President, Secretary and April 21, 1998
- ----------------------------------------------------- Director
Patrick E. Rondeau (Chief Executive Officer)
/s/ JOHN F. CHISTE Principal Financial Officer April 21, 1998
- -----------------------------------------------------
John F. Chiste
/s/ ANTHONY M. PULEO Principal Accounting Officer April 21, 1998
- -----------------------------------------------------
Anthony M. Puleo
/s/ L. NICOLAS GRAY Director April 21, 1998
- -----------------------------------------------------
L. Nicolas Gray
/s/ DANNY L. FERGUSON Director April 21, 1998
- -----------------------------------------------------
Danny L. Ferguson
</TABLE>
II-27
<PAGE> 200
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Resorts Development International, Inc. has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boca Raton, State of Florida, on April 21, 1998.
RESORTS DEVELOPMENT
INTERNATIONAL, INC.
By: /s/ PATRICK E. RONDEAU
------------------------------------
Patrick E. Rondeau
President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints George
F. Donovan, Patrick E. Rondeau, John F. Chiste and William P. Gelnaw, Jr., and
each of them, with full power to act without the other, such person's true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign this Registration Statement, and any and all amendments
thereto (including pre- and post-effective amendments) or any registration
statement for the same offering that is to be effective upon filing pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, and to file the same,
with exhibits and schedules thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing necessary or desirable to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ PATRICK E. RONDEAU President, Secretary and April 21, 1998
- ----------------------------------------------------- Director
Patrick E. Rondeau (Chief Executive Officer)
/s/ JOHN F. CHISTE Principal Financial Officer April 21, 1998
- -----------------------------------------------------
John F. Chiste
/s/ ANTHONY M. PULEO Principal Accounting Officer April 21, 1998
- -----------------------------------------------------
Anthony M. Puleo
/s/ L. NICOLAS GRAY Director April 21, 1998
- -----------------------------------------------------
L. Nicolas Gray
/s/ DANNY L. FERGUSON Director April 21, 1998
- -----------------------------------------------------
Danny L. Ferguson
</TABLE>
II-28
<PAGE> 201
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, RDI
Resorts Services Corporation has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Boca Raton, State of Florida, on April 21, 1998.
RDI RESORTS SERVICES CORPORATION
By: /s/ PATRICK E. RONDEAU
------------------------------------
Patrick E. Rondeau
President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints George
F. Donovan, Patrick E. Rondeau, John F. Chiste and William P. Gelnaw, Jr., and
each of them, with full power to act without the other, such person's true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign this Registration Statement, and any and all amendments
thereto (including pre- and post-effective amendments) or any registration
statement for the same offering that is to be effective upon filing pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, and to file the same,
with exhibits and schedules thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing necessary or desirable to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ PATRICK E. RONDEAU President, Secretary and April 21, 1998
- ----------------------------------------------------- Director
Patrick E. Rondeau (Chief Executive Officer)
/s/ JOHN F. CHISTE Principal Financial Officer April 21, 1998
- -----------------------------------------------------
John F. Chiste
/s/ ANTHONY M. PULEO Principal Accounting Officer April 21, 1998
- -----------------------------------------------------
Anthony M. Puleo
/s/ L. NICOLAS GRAY Director April 21, 1998
- -----------------------------------------------------
L. Nicolas Gray
/s/ DANNY L. FERGUSON Director April 21, 1998
- -----------------------------------------------------
Danny L. Ferguson
</TABLE>
II-29
<PAGE> 202
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, RDI
Resources, Inc. has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Boca Raton,
State of Florida, on April 21, 1998.
RDI RESOURCES, INC.
By: /s/ PATRICK E. RONDEAU
------------------------------------
Patrick E. Rondeau
President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints George
F. Donovan, Patrick E. Rondeau, John F. Chiste and William P. Gelnaw, Jr., and
each of them, with full power to act without the other, such person's true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign this Registration Statement, and any and all amendments
thereto (including pre- and post-effective amendments) or any registration
statement for the same offering that is to be effective upon filing pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, and to file the same,
with exhibits and schedules thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing necessary or desirable to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ PATRICK E. RONDEAU President, Secretary and April 21, 1998
- ----------------------------------------------------- Director
Patrick E. Rondeau (Chief Executive Officer)
/s/ JOHN F. CHISTE Principal Financial Officer April 21, 1998
- -----------------------------------------------------
John F. Chiste
/s/ ANTHONY M. PULEO Principal Accounting Officer April 21, 1998
- -----------------------------------------------------
Anthony M. Puleo
/s/ L. NICOLAS GRAY Director April 21, 1998
- -----------------------------------------------------
L. Nicolas Gray
/s/ DANNY L. FERGUSON Director April 21, 1998
- -----------------------------------------------------
Danny L. Ferguson
</TABLE>
II-30
<PAGE> 203
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Properties of the Southwest, L.P. has duly caused this Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Boca Raton, State of Florida, on April 21, 1998.
PROPERTIES OF THE SOUTHWEST, L.P.
By Properties of the Southwest One,
Inc., its General Partner
By: /s/ PATRICK E. RONDEAU
------------------------------------
Patrick E. Rondeau
President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints George
F. Donovan, Patrick E. Rondeau, John F. Chiste and William P. Gelnaw, Jr., and
each of them, with full power to act without the other, such person's true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign this Registration Statement, and any and all amendments
thereto (including pre- and post-effective amendments) or any registration
statement for the same offering that is to be effective upon filing pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, and to file the same,
with exhibits and schedules thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing necessary or desirable to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ PATRICK E. RONDEAU President, Secretary and April 21, 1998
- ----------------------------------------------------- Director of Properties of the
Patrick E. Rondeau Southwest One, Inc., the
General Partner of Properties
of the Southwest, L.P.
/s/ JOHN F. CHISTE Principal Financial Officer April 21, 1998
- -----------------------------------------------------
John F. Chiste
/s/ ANTHONY M. PULEO Principal Accounting Officer April 21, 1998
- -----------------------------------------------------
Anthony M. Puleo
/s/ DANIEL C. KOSCHER Director of Properties of the April 21, 1998
- ----------------------------------------------------- Southwest One, Inc., the
Daniel C. Koscher General Partner of Properties
of the Southwest, L.P
/s/ DANNY L. FERGUSON Director of Properties of the April 21, 1998
- ----------------------------------------------------- Southwest One, Inc., the
Danny L. Ferguson General Partner of Properties
of the Southwest, L.P.
</TABLE>
II-31
<PAGE> 1
EXHIBIT 12.1
STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS EXCEPT RATIOS)
<TABLE>
<CAPTION>
YEAR ENDED
---------------------------------------------------------------------
PRO FORMA
MARCH 28, MARCH 27, APRIL 2, MARCH 31, MARCH 30, MARCH 30,
1993 1994 1995 1996 1997 1997
--------- --------- -------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
EARNINGS:
Income before taxes......... $ 5,331 $ 7,952 $10,402 $10,916 $(7,389) $(17,754)
Fixed charges............... 7,284 6,551 7,165 8,180 8,429 18,794
Less: capitalized
interest.................. -- -- (427) (1,904) (2,970) (2,970)
Plus: amortization of
previously capitalized
interest.................. -- -- 82 149 956 956
------- ------- ------- ------- ------- --------
$12,615 $14,503 $17,222 $17,341 $ (974) $ (974)
======= ======= ======= ======= ======= ========
FIXED CHARGES:
Interest expense............ $ 7,284 $ 6,551 $ 6,738 $ 6,276 $ 5,459 $ 15,824
Capitalized interest........ -- -- 427 1,904 2,970 2,970
------- ------- ------- ------- ------- --------
$ 7,284 $ 6,551 $ 7,165 $ 8,180 $ 8,429 $ 18,794
======= ======= ======= ======= ======= ========
Ratio of earnings to fixed
charges..................... 1.7 2.2 2.4 2.1 nmf nmf
======= ======= ======= ======= ======= ========
<CAPTION>
NINE MONTHS ENDED
------------------------------------------
PRO FORMA
DECEMBER 29, DECEMBER 28, DECEMBER 28,
1996 1997 1997
------------ ------------ ------------
<S> <C> <C> <C>
EARNINGS:
Income before taxes......... $(5,979) $11,758 $ 5,895
Fixed charges............... 6,171 8,883 14,746
Less: capitalized
interest.................. (2,255) (2,371) (2,371)
Plus: amortization of
previously capitalized
interest.................. 422 1,781 1,781
------- ------- -------
$(1,641) $20,051 $20,051
======= ======= =======
FIXED CHARGES:
Interest expense............ $ 3,916 $ 6,512 $12,375
Capitalized interest........ 2,255 2,371 2,371
------- ------- -------
$ 6,171 $ 8,883 $14,746
======= ======= =======
Ratio of earnings to fixed
charges..................... nmf 2.3 1.4
======= ======= =======
</TABLE>
- ---------------
nmf -- Not meaningful. For fiscal 1997, pro forma fiscal 1997 and for the
nine-month period ended December 29, 1996, the Company's fixed charges exceeded
earnings by $9.4 million, $19.8 million and $7.8 million, respectively.
<PAGE> 1
EXHIBIT 21.1
<TABLE>
<CAPTION>
JURISDICTION
SUBSIDIARY OF INCORPORATION
---------- ----------------
<S> <C>
BR/RDI ACQUISITION CORP. Delaware
BLUEGREEN CORPORATION OF MONTANA Montana
BLUEGREEN ASSET MANAGEMENT CORPORATION Delaware
BLUEGREEN CAROLINA LAND, INC. Delaware
BLUEGREEN COMMUNITIES, INC. Delaware
BLUEGREEN CORPORATION Massachusetts
BLUEGREEN CORPORATION GREAT LAKES (WI) Wisconsin
BLUEGREEN CORPORATION GULF-ATLANTIC Delaware
BLUEGREEN CORPORATION MID-ATLANTIC Delaware
BLUEGREEN CORPORATION MIDLAND Delaware
BLUEGREEN CORPORATION OF CANADA Delaware
BLUEGREEN CORPORATION OF LAKE CARROLL Delaware
BLUEGREEN CORPORATION OF MICHIGAN Delaware
BLUEGREEN CORPORATION OF MISSOURI Delaware
BLUEGREEN CORPORATION OF OHIO Ohio
BLUEGREEN CORPORATION OF TENNESSEE Delaware
BLUEGREEN CORPORATION OF THE ROCKIES Delaware
BLUEGREEN CORPORATION SOUTHWEST Delaware
BLUEGREEN GEORGIA CORPORATION Delaware
BLUEGREEN HOLDING CORPORATION (TEXAS) Delaware
BLUEGREEN LAND AND REALTY, INC. Colorado
BLUEGREEN PROPERTIES, N.V. Aruba
BLUEGREEN PROPERTIES OF VIRGINIA, INC. Delaware
BLUEGREEN RECEIVABLES FINANCE CORPORATION I Delaware
BLUEGREEN RECEIVABLES FINANCE CORPORATION II Delaware
BLUEGREEN RESORTS INTERNATIONAL, INC. Delaware
BLUEGREEN RESORTS MANAGEMENT, INC. Delaware
BLUEGREEN RESORTS, INC. Delaware
BXG REALTY TENN, INC. Tennessee
CAROLINA COASTAL PROPERTIES, INC. Delaware
CAROLINA NATIONAL GOLF CLUB, INC. North Carolina
GULF ATLANTIC LAND & TIMBER CORPORATION Delaware
LEISURE CAPITAL CORP. Vermont
NEW ENGLAND ADVERTISING CORP. Vermont
PATTEN RECEIVABLES FINANCE CORPORATION IX Delaware
PATTEN RECEIVABLES FINANCE CORPORATION VI Delaware
PATTEN RECEIVABLES FINANCE CORPORATION X Delaware
PROPERTIES OF THE SOUTHWEST ONE, INC. Delaware
PROPERTIES OF THE SOUTHWEST, L.P. Delaware
PROPERTIES OF THE WEST, INC. Delaware
SOUTH FLORIDA AVIATION, INC. Florida
TRADING CORPORATION OF SOUTH FLORIDA Florida
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
JURISDICTION
SUBSIDIARY OF INCORPORATION
---------- ----------------
<S> <C>
WOODLAND ACRES, INC. Delaware
DELLONA ENTERPRISE, INC. Wisconsin
INTERVAL RESORT PROPERTY MANAGEMENT Florida
RDI GROUP, INC. Florida
RDI REALTY, INC. Florida
RDI RESORT SERVICES CORPORATION Florida
RDI RESOURCES, INC. Florida
RDI VACATION CLUB, INC. Florida
RDI VACATION SHOPPE TRAVEL, INC. Florida
RESORT DEVELOPMENT INTERNATIONAL, INC. Florida
RESORT OWNERSHIP, INC. Florida
RESORT TITLE AGENCY, INC. Florida
VACATION TRUST, INC. Florida
VACATIONS UNLIMITED, INC. Florida
</TABLE>
2
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the captions "Experts" and
"Selected Consolidated Financial Data" and to the use of our report dated May 2,
1997, except for Note 14, as to which the date is February 17, 1998, in the
Registration Statement (Form S-4) and the related Prospectus of Bluegreen
Corporation for the registration of $110,000,000 of 10.5% senior secured notes
due 2008.
West Palm Beach, Florida
April 16, 1998
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
10 1/2% SENIOR SECURED NOTES DUE 2008
BLUEGREEN CORPORATION
PURSUANT TO PROSPECTUS
DATED , 1998
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME ON , 1998, UNLESS THE EXCHANGE OFFER IS EXTENDED BY THE COMPANY
IN ITS SOLE DISCRETION, TENDERS OF 10 1/2% SENIOR SECURED NOTES DUE 2008 MAY
ONLY BE WITHDRAWN UNDER THE CIRCUMSTANCES DESCRIBED IN THE PROSPECTUS AND
HEREIN.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
SUNTRUST BANK, CENTRAL FLORIDA,
NATIONAL ASSOCIATION
<TABLE>
<S> <C>
By Registered or Certified Mail: By Overnight Courier:
SunTrust Bank, Central Florida, SunTrust Bank, Central Florida,
National Association National Association
By Hand before 4:30 P.M.: By Facsimile:
SunTrust Bank, Central Florida, SunTrust Bank, Central Florida,
National Association National Association
Attention: Attention:
Confirm by Telephone to:
- ------------------------------------------------------------------------------------------------------
DESCRIPTION OF OUTSTANDING NOTES TENDERED
- ------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF HOLDER(S) OUTSTANDING NOTES TENDERED
(PLEASE FILL IN, IN BLANK, EXACTLY AS NAME(S) (ATTACH ADDITIONAL SCHEDULE
APPEAR(S) ON OUTSTANDING NOTES) IF NECESSARY)
- ------------------------------------------------------------------------------------------------------
(1) (2) (3)
CERTIFICATE TOTAL PRINCIPAL
NUMBER(S) AMOUNT OF
(IF ENCLOSING OUTSTANDING
CERTIFICATES) NOTES TENDERED
- ------------------------------------------------------------------------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
TOTAL
- ------------------------------------------------------------------------------------------------------
</TABLE>
THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF THE PROSPECTUS, DATED ,
1998 (THE "PROSPECTUS"), OF BLUEGREEN CORPORATION, A MASSACHUSETTS CORPORATION
(THE "COMPANY"), AND THIS LETTER OF TRANSMITTAL RELATING TO THE OFFER (THE
"EXCHANGE OFFER") OF THE COMPANY, UPON THE TERMS AND SUBJECT TO THE CONDITIONS
SET FORTH IN THE PROSPECTUS AND HEREIN AND THE INSTRUCTIONS HERETO, TO EXCHANGE
$1,000 PRINCIPAL AMOUNT OF ITS 10 1/2% SENIOR SECURED NOTES DUE 2008, SERIES B
(THE "EXCHANGE NOTES") FOR EACH $1,000 PRINCIPAL AMOUNT OF ITS OUTSTANDING
10 1/2% SENIOR SECURED NOTES DUE 2008 (THE "OUTSTANDING NOTES"), OF WHICH $110
MILLION AGGREGATE PRINCIPAL AMOUNT IS OUTSTANDING. THE MINIMUM PERMITTED TENDER
IS $1,000 PRINCIPAL AMOUNT OF OUTSTANDING NOTES, AND ALL OTHER TENDERS MUST BE
IN INTEGRAL MULTIPLES OF $1,000.
<PAGE> 2
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION BY
FACSIMILE, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
The Exchange Offer will expire at 5:00 p.m., New York City time, on
, 1998 (the "Expiration Date"), unless extended by the Company in its
sole discretion, in which case the term Expiration Date shall mean the latest
date and time to which the Exchange Offer is extended.
HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE EXCHANGE NOTES PURSUANT TO THE
EXCHANGE OFFER MUST VALIDLY TENDER THEIR OUTSTANDING NOTES TO THE EXCHANGE AGENT
PRIOR TO 5:00 P.M. ON THE EXPIRATION DATE.
This Letter of Transmittal should be used only to exchange the Outstanding
Notes, pursuant to the Exchange Offer as set forth in the Prospectus.
This Letter of Transmittal is to be used (a) if Outstanding Notes are to be
physically delivered to the Exchange Agent or (b) if delivery of Outstanding
Notes is to be made by book-entry transfer to the account maintained by the
Exchange Agent at The Depository Trust Company ("DTC" or the "Book-Entry
Transfer Facility") pursuant to the procedures set forth in the Prospectus under
the caption "The Exchange Offer -- Procedures for Tendering." Delivery of
documents to the Book-Entry Transfer Facility does not constitute delivery to
the Exchange Agent.
Holders whose Outstanding Notes are not available or who cannot deliver
their Outstanding Notes and all other documents required hereby to the Exchange
Agent by 5:00 p.m. on the Expiration Date nevertheless may tender their
Outstanding Notes in accordance with the guaranteed delivery procedures set
forth in the Prospectus under the caption "The Exchange Offer -- Guaranteed
Delivery Procedures." See Instruction 1.
THE EXCHANGE OFFER IS NOT BEING MADE TO (NOR WILL THE SURRENDER OF
OUTSTANDING NOTES FOR EXCHANGE BE ACCEPTED FROM OR ON BEHALF OF) HOLDERS IN ANY
JURISDICTION IN WHICH THE MAKING OR ACCEPTANCE OF THE EXCHANGE OFFER WOULD NOT
BE IN COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION.
All capitalized terms used herein and not defined herein shall have the
meanings ascribed to them in the Prospectus.
HOLDERS WHO WISH TO EXCHANGE THEIR OUTSTANDING NOTES MUST COMPLETE COLUMNS
(1) THROUGH (3) IN THE BOX ENTITLED "DESCRIPTION OF OUTSTANDING NOTES TENDERED"
ON THE PRIOR PAGE, COMPLETE THE BOX BELOW ENTITLED "METHOD OF DELIVERY" AND SIGN
WHERE INDICATED BELOW.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OUTSTANDING
NOTES TENDERED" AND SIGNING THIS LETTER OF TRANSMITTAL, WILL BE DEEMED TO HAVE
TENDERED THE OUTSTANDING NOTES AND MADE CERTAIN REPRESENTATIONS DESCRIBED IN THE
PROSPECTUS AND HEREIN.
<PAGE> 3
METHOD OF DELIVERY
[ ] CHECK HERE IF CERTIFICATE FOR TENDERED OUTSTANDING NOTES ARE ENCLOSED
HEREWITH.
[ ] CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:
----------------------------------------------
Account Number: Transaction Code Number:
------------- ------------------------
Principal Amount of Tendered Notes:
-----------------------------------------
----------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING (SEE INSTRUCTIONS 1 AND 4):
Name(s) of Registered Holder(s):
--------------------------------------------
Window Ticket Number (if any):
----------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
-------------------------
Name of Eligible Institution which Guaranteed Delivery:
---------------------
IF DELIVERED BY THE BOOK-ENTRY TRANSFER FACILITY, PROVIDE THE FOLLOWING
INFORMATION:
[ ] The Depository Trust Company
Account Number: Transaction Code Number:
------------- ----------------------
----------------------------------------------------------------------------
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE TEN ADDITIONAL
COPIES OF THE PROSPECTUS AND COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
PLEASE NOTE: THE COMPANY HAS AGREED THAT, FOR A PERIOD OF DAYS AFTER THE
EXPIRATION DATE, IT WILL MAKE COPIES OF THE PROSPECTUS AVAILABLE TO ANY
PARTICIPATING BROKER-DEALER FOR USE IN CONNECTION WITH RESALES OF THE
EXCHANGE NOTES.
Name:
-----------------------------------------------------------------------
Address:
--------------------------------------------------------------------
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
<PAGE> 4
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the principal amount of Outstanding
Notes indicated in the box entitled "Description of Outstanding Notes Tendered."
Subject to, and effective upon, the acceptance for exchange of the Outstanding
Notes tendered hereby, the undersigned hereby irrevocably sells, assigns and
transfers to or upon the order of the Company all right, title and interest in
and to such Outstanding Notes, and hereby irrevocably constitutes and appoints
the Exchange Agent the true and lawful agent and attorney-in-fact of the
undersigned (with full knowledge that said Exchange Agent also acts as the agent
of the Company and as Trustee under the Indenture governing the Outstanding
Notes and the Exchange Notes) with respect to such Outstanding Notes, with full
power of substitution (such power of attorney being deemed to be an irrevocable
power coupled with an interest) to (a) deliver certificates representing such
Outstanding Notes, and to deliver all accompanying evidences of transfer and
authenticity to or upon the order of the Company upon receipt by the Exchange
Agent, as the undersigned's agent, of the Exchange Notes to which the
undersigned is entitled upon the acceptance by the Company of such Outstanding
Notes for exchange pursuant to the Exchange Offer, (b) receive all benefits and
otherwise to exercise all rights of beneficial ownership of such Outstanding
Notes, all in accordance with the terms of the Exchange Offer, and (c) present
such Outstanding Notes for transfer on the register for such Outstanding Notes,
and receive all benefits and otherwise exercise all rights of beneficial
ownership of such Notes, all in accordance with the terms of the Exchange Offer.
The undersigned acknowledges that prior to this Exchange Offer, there has
been no public market for the Outstanding Notes or the Exchange Notes. If a
market for the Exchange Notes should develop, the Exchange Notes could trade at
a discount from their principal amount. The undersigned is aware that the
Company does not intend to list the Exchange Notes on a national securities
exchange and that there can be no assurance that an active market for the
Exchange Notes will develop.
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of
Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange
Notes, it represents that the Outstanding Notes to be exchanged for Exchange
Notes were acquired as a result of market-making activities or other trading
activities and it acknowledges that it will deliver a prospectus in connection
with any resale of such Exchange Notes; however, by so acknowledging and by
delivering a prospectus, the undersigned will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL TENDERS BE ACCEPTED FROM
OR ON BEHALF OF, HOLDERS OF THE OUTSTANDING NOTES IN ANY JURISDICTION IN WHICH
THE MAKING OF THE OFFER OR ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH
THE LAWS OF SUCH JURISDICTION OR WOULD OTHERWISE NOT BE IN COMPLIANCE WITH ANY
PROVISION OF ANY APPLICABLE SECURITY LAW.
The undersigned represents that (a) it is not an "affiliate," as defined
under Rule 405 of the Securities Act, of the Company or any of the Subsidiary
Guarantors (as defined in the Prospectus), (b) it is not engaged in, and does
not intend to engage in, and has no arrangement or understanding with any person
to participate in, a distribution of the Exchange Notes, and (c) it is acquiring
the Exchange Notes in the ordinary course of business. In addition, the
undersigned acknowledges that an person participating in the Exchange Offer for
the purpose of distributing the Exchange Notes must, in the absence of an
exemption therefrom, comply with the registration and prospectus deliver
requirements of the Securities Act in connection with a secondary resale of the
Exchange Notes and cannot rely on the position of the staff of the Securities
and Exchange Commission enunciated in no action letters and failure to comply
with such requirements in such instance could result in the undersigned
incurring liability under the Securities Act for which the undersigned is not
indemnified by the Company. The undersigned will, upon request, execute and
deliver any additional documents deemed by the Exchange Agent or the Company to
be necessary or desirable to complete the assignment, transfer and purchase of
the Notes tendered hereby.
The undersigned understands and acknowledges that the Company reserves the
right, in its sole discretion, the purchase or make offers for any Outstanding
Notes that remain outstanding subsequent to the Expiration Date or to terminate
the Exchange Offer and, to the extent permitted by applicable law, purchase
Outstanding Notes in the open market, in privately negotiated transactions or
otherwise. The terms of any such purchases or offers will differ from the terms
of the Exchange Offer.
The undersigned hereby represents and warrants that (a) the undersigned
accepts the terms and conditions of the Exchange Offer, (b) the undersigned has
a net long position within the meaning of Rule 14e-4 under the Exchange Act
("Rule 14e-4") equal to or greater than the principal amount of Outstanding
Notes tendered hereby, (c) the tender of such Outstanding Notes complies with
Rule 14e-4 (to the extent that Rule 14e-4 is applicable to such exchange), (d)
the undersigned has full power and authority to tender, exchange, assign and
transfer the Outstanding Notes tendered hereby, and (e) when the same are
accepted for exchange by the Company, the Company will acquire good and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances and not subject to any adverse claim or
<PAGE> 5
right. The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the sale, assignment and transfer of the Outstanding Notes
tendered hereby.
The undersigned agrees that all authority conferred or agreed to be
conferred by this Letter of Transmittal and every obligation of the undersigned
hereunder shall be binding upon the successors, assigns, heirs, executors,
administrators, trustees in bankruptcy and legal representatives of the
undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. The undersigned also agrees that, except as
stated in the Prospectus, the Outstanding Notes tendered hereby cannot be
withdrawn.
The undersigned understands that tenders of the Outstanding Notes pursuant
to any one of the procedures described in the Prospectus under the caption "The
Exchange Offer -- Procedures for Tendering" and in the instructions hereto will
constitute a binding agreement between the undersigned and the Company in
accordance with the terms and subject to the conditions of the Exchange Offer.
The undersigned understands that by tendering Outstanding Notes pursuant to
one of the procedures described in the Prospectus and the instructions thereto,
the tendering holder will be deemed to have waived the right to receive any
payment in respect of interest on the Outstanding Notes accrued up to the date
of issuance of the Exchange Notes.
The undersigned recognizes that, under certain circumstances set forth in
the Prospectus, the Company may not be required to accept for exchange any of
the Outstanding Notes tendered. Outstanding Notes not accepted for exchange or
withdrawn will be returned to the undersigned at the address set forth below
unless otherwise indicated under "Special Delivery Instructions" below.
Unless otherwise indicated herein under the box entitled "Special Issuance
Instructions" below, Exchange Notes, and Outstanding Notes not validly tendered
or accepted for exchange, will be issued in the name of the undersigned.
Similarly, unless otherwise indicated under the box entitled "Special Delivery
Instructions" below, Exchange Notes, and Outstanding Notes not validly tendered
or accepted for exchange, will be delivered to the undersigned at the address
shown below the signature of the undersigned. The undersigned recognizes that
the Company has no obligation pursuant to the "Special Issuance Instructions" to
transfer any Outstanding Notes from the name of the registered holder thereof if
the Company does not accept for exchange any of the principal amount of such
Outstanding Notes so tendered.
All questions as to the validity, form, eligibility (including time of
receipt), and withdrawal of the tendered Outstanding Notes will be determined by
the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all
Outstanding Notes not properly tendered or any Outstanding Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company reserves the absolute right to reject any and all
Outstanding Notes not properly tendered or any Outstanding Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the right to waive any irregularities or
conditions of tender as to particular Outstanding Notes. The Company's
interpretation of the terms and conditions of the Exchange Offer (including the
instruction sin this Letter of Transmittal) will be final and binding. Unless
waived, any defects or irregularities in connection with tenders of Outstanding
Notes must be cured within such time as the Company shall determine. Neither the
Company, the Exchange Agent nor any other person shall be under any duty to give
notification of defects or irregularities with respect to tenders of Outstanding
Notes, nor shall any of them incur any liability for failure to give such
notification. Tenders of Outstanding Notes will not be deemed to have been made
until such irregularities have been cured or waived. Any Outstanding Notes
received by the Exchange Agent that are not properly tendered and as to which
the defects or irregularities have not been cured or waived will be returned
without cost to such holder by the Exchange Agent to the tendering holders of
Outstanding Notes, unless otherwise provided in this Letter of Transmittal, as
soon as practicable following the Expiration Date.
<PAGE> 6
SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
X
- --------------------------------------------------------------------------------
X
- --------------------------------------------------------------------------------
(SIGNATURE(S) OF HOLDER(S) OR AUTHORIZED SIGNATORY)
Must be signed by the registered holder(s) of the Outstanding Notes exactly
as their name(s) appear(s) on certificate(s) for the Outstanding Notes or by
person(s) with this Letter of Transmittal. If signature is by a trustee,
executor, administrator, guardian, attorney-in-fact, officer of a corporation,
agent or other person acting in a fiduciary or representative capacity, please
provide the following information. See Instruction 3.
Name(s)
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title)
-----------------------------------------------------------
Address:
------------------------------------------------------------------------
(INCLUDING ZIP CODE)
(Area Code and Telephone Number)
------------------------------------------------
SIGNATURE GUARANTEE
(SEE INSTRUCTIONS 3)
- --------------------------------------------------------------------------------
(Name of Eligible Institution Guaranteeing Signature(s))
- --------------------------------------------------------------------------------
(Address, Including Zip Code, and Telephone No., Including Area Code, of Firm)
- --------------------------------------------------------------------------------
(Authorized Signature)
- --------------------------------------------------------------------------------
(Printed Name)
- --------------------------------------------------------------------------------
(Title)
Dated:
---------------------,
<PAGE> 7
- ------------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 3, 4 AND 6)
To be completed ONLY if certificates for Outstanding Notes in a
principal amount not exchanged and/or certificates for Exchange Notes are
to be issued in the name of someone other than the undersigned, or if
Outstanding Notes are to be returned by credit to an account maintained by
the Book-Entry Transfer Facility.
Issue (check appropriate box)
[ ] Exchange Notes to:
[ ] Outstanding Notes to:
Name:
-------------------------------------------------------
(PLEASE PRINT)
Address:
----------------------------------------------------
------------------------------------------------------------
ZIP CODE
------------------------------------------------------------
TAXPAYER IDENTIFICATION NUMBER
(YOU MUST ALSO COMPLETE
SUBSTITUTE FORM W-9 BELOW.)
Credit unaccepted Outstanding Notes tendered by book-entry transfer to:
[ ] The Depository Trust Company account set forth below
------------------------------------------------------------
(DTC ACCOUNT NUMBER)
============================================================
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3, 4, AND 6)
To be completed ONLY if certificates for Outstanding Notes in a
principal amount not exchange and/or certificates for Exchange Notes are
to be sent to someone other than undersigned at an address other than that
shown above.
Deliver (check appropriate box)
[ ] Exchange Notes to:
[ ] Outstanding Notes to:
Name:
-------------------------------------------------------
(PLEASE PRINT)
Address:
----------------------------------------------------
------------------------------------------------------------
ZIP CODE
------------------------------------------------------------
TAXPAYER IDENTIFICATION NUMBER
(YOU MUST ALSO COMPLETE
SUBSTITUTE FORM W-9 BELOW.)
- ------------------------------------------------------------
<PAGE> 8
INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF
THE OFFER AND THE SOLICITATION
1. Delivery of this Letter of Transmittal and Certificates; Guaranteed
Delivery Procedures. To be effectively tendered pursuant to the Exchange Offer,
the Outstanding Notes, together with a properly completed Letter of Transmittal
(or facsimile thereof), duly executed by the registered holder thereof, and any
other documents required by this Letter of Transmittal, must be received by the
Exchange Agent at one of its addresses set forth on the first page of this
Letter of Transmittal. If the beneficial owner of any Outstanding Notes is not
the registered holder, then such person may validly tender his or her
Outstanding Notes only by obtaining and submitting to the Exchange Agent a
properly completed Letter of Transmittal from the registered holder. OUTSTANDING
NOTES SHOULD BE DELIVERED ONLY TO THE EXCHANGE AGENT AND NOT TO THE COMPANY OR
TO ANY OTHER PERSON.
THE METHOD OF DELIVERY OF OUTSTANDING NOTES AND ALL OTHER REQUIRED
DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE HOLDER.
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY TO THE EXCHANGE
AGENT BY 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
If a holder desires to tender Outstanding Notes and such holder's
Outstanding Notes are not immediately available or time will not permit such
holder's Letter of Transmittal, Outstanding Notes or other required documents to
reach the Exchange Agent on or before the Expiration Date, such holder's tender
may be effected if:
(a) the tender is made through an Eligible Institution (as defined);
(b) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Deliver (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder of the Outstanding Notes,
the certificate number or numbers of such Outstanding Notes and the
principal amount of Outstanding Notes tendered, stating that the tender is
being made thereby, and guaranteeing that, within three business days after
the Expiration Date, the Letter of Transmittal (or facsimile thereof)
together with the certificate(s) representing the Outstanding Notes to be
tendered in proper form for transfer or a Book-Entry Confirmation, as the
case may be, and any other documents required by the Letter of Transmittal
will be deposited by the Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof) together with the certificate(s) representing all
tendered Outstanding Notes in proper form for transfer and all other
documents required by this Letter of Transmittal are received by the
Exchange Agent within three business days after the Expiration Date.
2. Withdrawal of Tenders. Tendered Outstanding Notes may be withdrawn at
any time prior to 5:00 p.m., New York City time, on the Expiration Date, unless
previously accepted for exchange.
To be effective, a written or facsimile transmission notice of withdrawal
must (a) be received by the Exchange Agent at one of its addresses set forth on
the first page of this Letter of Transmittal prior to 5:00 p.m., New York City
time, on the Expiration Date, unless previously accepted for exchange, (b)
specify the name of the person who tendered the Outstanding Notes, (c) contain
the description of the Outstanding Notes to be withdrawn, the certificate
numbers shown on the particular certificate evidencing such Outstanding Notes
and the aggregate principal amount represented by such Outstanding Notes and (d)
be signed by the holder of such Outstanding Notes in the same manner as the
original signature appears on this Letter of Transmittal (including any required
signature guarantee) or be accompanied by evidence sufficient to have the
Trustee with respect to the Outstanding Notes register the transfer of such
Outstanding Notes into the name of the holder withdrawing the tender. The
signature(s) on the notice of withdrawal must be guaranteed by an Eligible
Institution unless such Outstanding Notes have been tendered (a) by a registered
holder of Outstanding Notes who has not completed either the box entitled
"Special Issuance Instructions" or the box entitled "Special Delivery
Instructions" on this Letter of Transmittal or (b) for the account of an
Eligible Institution. All questions as to the validity, form and eligibility
(including time of receipt) of such withdrawal notices shall be determined by
the company, whose determination shall be final and binding on all parties. If
the Outstanding Notes to be withdrawn have been delivered or otherwise
identified to the Exchange Agent, a signed notice of withdrawal is effective
immediately upon receipt by the Exchange Agent of a written or facsimile
transmission notice of withdrawal even if physical release is not yet effected.
In addition, such notice must specify, in the case of Outstanding Notes tendered
by delivery of certificates for such outstanding Notes, the name of the
registered holder (if different from that of the tendering holder) to be
credited with the withdrawn Outstanding Notes. Withdrawals may not be rescinded,
and any Outstanding Notes withdrawn will thereafter be deemed not validly
tendered for purposes of the Exchange Offer. However, properly withdrawn
Outstanding Notes may be retendered by following one of the procedures described
under "The Exchange Offer -- Procedures for Tendering" in the Prospectus at any
time on or prior to the applicable Expiration Date.
<PAGE> 9
3. Signatures on this Letter of Transmittal, Bond Powers and Endorsement;
Guarantee of Signatures. If this Letter of Transmittal is signed by the
registered holder(s) of the Outstanding Notes tendered hereby, the signature
must correspond exactly with the name(s) as written on the face of the
certificates without any change whatsoever.
If any Outstanding Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any Outstanding Notes tendered hereby are registered in different names
on several certificates, it will be necessary to complete, sign and submit as
many separate copies of this Letter of Transmittal as there are different
registrations of certificates.
When this Letter of Transmittal is signed by the registered holder or
holders specified herein and tendered hereby, no endorsements of certificates or
separate bond powers are required unless Exchange Notes are to be issued, or
certificates for any untendered principal amount of Outstanding Notes are to be
reissued, to a person other than the registered holder.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of any certificate(s) specified herein, such certificate(s)
must be endorsed or accompanied by appropriate bond powers, in either cased
signed exactly as the name(s) of the registered holder(s) appear(s) on the
certificate(s).
If this Letter of Transmittal or a Notice of Guaranteed Delivery or any
certificates or bond powers are signed by trustees, executors, administrators,
guardians, attorney-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, such persons should so indicate when
signing, and unless waived by the Company, evidence satisfactory to the Company
of their authority so to act must be submitted with this Letter of Transmittal.
Except as described below, signatures on this Letter of Transmittal or a
notice of withdrawal, as the case may be, must be guaranteed by an Eligible
Institution, Signatures of this Letter of Transmittal or a notice of withdrawal,
as the case may be, need not be guaranteed if the Outstanding Notes tendered
pursuant hereto are tendered (a) by a registered holder of Outstanding Notes who
has not completed either the box "Special Issuance Instructions" or the box
entitled "Special Delivery Instructions" on this Letter of Transmittal or (b)
for the account of an Eligible Institution. In the event that signatures on this
Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be by a firm which is a member of
a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. or by a commercial bank or trust company
having an office or correspondent in the United States (each as "Eligible
Institutions").
Endorsements on certificates for Outstanding Notes or signatures on bond
powers required by this Instruction 3 must be guaranteed by an Eligible
Incitation.
4. Special Issuance and Delivery Instructions. Tendering holders should
indicate in the applicable box the name and address to which certificates for
Exchange notes and/or substitute certificates evidencing Outstanding Notes for
the principal amounts not exchanged are to be issued or sent, if different from
the name and address of the person signing this Letter of Transmittal. In the
case of issuance in a different name, the employer identification or social
security number of the person named must also be indicated. If not such
instructions are given, any Outstanding Notes not exchanged will be returned to
the name and address of the person signing this Letter of Transmittal.
5. Tax Identification Number Withholding. Federal income tax law of the
United States requires that a holder of Outstanding Notes whose Outstanding
Notes are accepted for exchange provide the Company with the holder's correct
taxpayer identification number, which, in the case of a holder who is an
individual, is his or her social security number, or otherwise establish an
exemption from backup withholding. If the Company is not provided with the
correct taxpayer identification number, the exchanging holder of Outstanding
Notes may be subject to a $50 penalty imposed by the Internal Revenue Service
(the "IRS"). In addition, interest on the Exchange Notes acquired pursuant to
the Exchange Offer may be subject to backup withholding in an amount equal to
31% of any interest payment. If withholding occurs and results in an overpayment
of taxes, a refund may be obtained.
To prevent backup withholding, an exchanging holder of Outstanding Notes
must provide his correct taxpayer identification number by completing the
Substitute Form W-9 provided in this Letter of Transmittal, certifying that the
taxpayer identification number provided is correct (or that the exchanging
holder of Outstanding Notes is awaiting a taxpayer identification number) and
that either (a) the exchanging holder has not yet been notified by the IRS that
such holder is subject to backup withholding as a result of failure to report
all interest or dividends or (b) the IRS has notified the exchanging holder that
such holder is no longer subject to backup withholding.
Certain exchanging holders of Outstanding Notes (including, among others,
all corporations and certain foreign individuals)are not subject to these backup
withholding requirements. A foreign individual and other exempt holders other
than foreign individuals (e.g., corporations) should certify, in accordance with
the enclosed "Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9," to such exempt status on the Substitute
<PAGE> 10
Form W-9 provided in this Letter of Transmittal. Foreign individuals should
complete and provide Form W-8 to indicate their foreign status.
6. Transfer Taxes. Holders tendering pursuant to the Exchange Offer will
not be obligated to pay brokerage commissions or fees or to pay transfer taxes
with respect to their exchange under the Exchange Offer unless the box entitled
"Special Issuance Instructions" in this Letter of Transmittal has been
completed, or unless the Exchange Notes are to be issued to any person other
than the holder of the Outstanding Notes tendered for exchange. The company will
pay all other charges or expenses in connection with the Exchange Offer. If
holders tender Outstanding Notes for exchange and the Exchange Offer is not
consummated, certificates representing the Outstanding Notes will be returned to
the holders at the Company's expense.
Except as provided in this Instructions 6, it will not be necessary for
transfer tax stamps to be affixed to the certificate(s) specified in this Letter
of Transmittal.
7. Inadequate Space. If the space provided herein is inadequate, the
aggregate principal amount of the Outstanding Notes being tendered and the
certificate numbers (if available) should be listed on a separate schedule
attached hereto and separately signed by all parties required to sign this
Letter of Transmittal.
8. Partial Tenders. Tenders of Outstanding Notes will be accepted only in
integral multiples of $1,000. If tenders are to be made with respect to less
than the entire principal amount of any Outstanding Notes, fill in the principal
amount of Outstanding Notes which are tendered in column (3) in the box on the
cover entitled "Description of Outstanding Notes Tendered." In the case of
partial tenders, new certificates representing the Outstanding Notes in fully
registered form for the remainder of the principal amount of the Outstanding
Notes will be sent to the person(s) as promptly as practicable after the
expiration or termination of the Exchange Offer.
9. Mutilated, Lost, Stolen or Destroyed Notes. Any holder whose
Outstanding Notes have been mutilated, lost, stolen or destroyed should contact
the Exchange Agent at the address indicated above for further instructions.
10. Request for Assistance or Additional Copies. Requests for assistance
or additional copies of the Prospectus or this Letter of Transmittal may be
obtained from the Exchange Agent at its telephone number set forth on the first
page.
11. No Conditional Tender. No alternative, conditional, irregular or
contingent tender of Notes on transmittal of this Letter of Transmittal will be
accepted.
<PAGE> 11
PAYER'S NAME:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
PART I--PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND ----------------------------
SUBSTITUTE CERTIFY BY SIGNING AND DATING BELOW. SOCIAL SECURITY NUMBER
FORMW-9
OR
----------------------------
EMPLOYER IDENTIFICATION NUMBER
---------------------------------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE CERTIFICATION -- UNDER PENALTIES OF PERJURY, I CERTIFY PART II --
THAT: AWAITING TIN [ ]
(1) THE NUMBER SHOWN ON THIS FORM IS MY CORRECT TAXPAYER
IDENTIFICATION NUMBER (OR I AM WAITING FOR NUMBER TO PART III --
BE ISSUED TO ME)(AND EXEMPT [ ]
(2) I AM NOT SUBJECT TO BACKUP WITHHOLDING EITHER
BECAUSE: (A) I AM EXEMPT FROM BACKUP WITHHOLDING; OR
(B) I HAVE NOT BEEN NOTIFIED BY THE INTERNAL REVENUE
SERVICE ("IRS") THAT I AM SUBJECT TO BACKUP
WITHHOLDING AS A RESULT OF FAILURE TO REPORT ALL
INTEREST OR DIVIDENDS, OR (C) THE IRS HAS NOTIFIED
ME THAT I AM NO LONGER SUBJECT TO BACKUP
WITHHOLDING.
---------------------------------------------------------------------------------------------
CERTIFICATION INSTRUCTIONS -- YOU MUST CROSS OUT ITEM (2) ABOVE IF YOU HAVE BEEN
NOTIFIED BY THE IRS THAT YOU ARE SUBJECT TO BACKUP WITHHOLDING BECAUSE OF
PAYER'S REQUEST FOR UNDER-REPORTING INTEREST OR DIVIDENDS ON YOUR TAX RETURN. HOWEVER, IF AFTER BEING
TAXPAYER IDENTIFICATION NOTIFIED BY THE IRS THAT YOU WERE SUBJECT TO BACKUP WITHHOLDING YOU RECEIVED ANOTHER
NUMBER ("TIN") NOTIFICATION FROM THE IRS STATING THAT YOU ARE NO LONGER SUBJECT TO BACKUP
WITHHOLDING, DO NOT CROSS OUT ITEM (2). IF YOU ARE EXEMPT FROM BACKUP WITHHOLDING,
CHECK THE BOX IN PART III.
SIGNATURE __________ DATE __________ , 1998
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER AND THE
SOLICITATION. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER OF SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE
BOX IN PART II OF SUBSTITUTE FORM W-9.
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I CERTIFY UNDER PENALTIES OF PERJURY THAT A TAXPAYER IDENTIFICATION NUMBER HAS NOT BEEN ISSUED TO ME, AND EITHER
(A) I HAVE MAILED OR DELIVERED AN APPLICATION TO RECEIVE A TAXPAYER IDENTIFICATION NUMBER TO THE APPROPRIATE
INTERNAL REVENUE SERVICE CENTER OR SOCIAL SECURITY ADMINISTRATION OFFICE OR (B) I INTEND TO MAIL OR DELIVER AN
APPLICATION IN THE NEAR FUTURE. I UNDERSTAND THAT IF I DO NOT PROVIDE A TAXPAYER IDENTIFICATION NUMBER TO THE PAYER
BY THE TIME OF PAYMENT, 31% OF ALL REPORTABLE PAYMENTS MADE TO ME WILL BE WITHHELD UNTIL I PROVIDE A NUMBER AND
TAT, IF I DO NOT PROVIDE MY TAXPAYER IDENTIFICATION NUMBER WITHIN 60 DAYS, SUCH RETAINED AMOUNTS SHALL BE REMITTED
TO THE IRS AS BACKUP WITHHOLDING.
--------------------------------- ,
------------------------------------------------------------------ 1998
Signature Date
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 12
OFFER TO EXCHANGE
10 1/2% SENIOR SECURED NOTES DUE 2008, SERIES B
FOR ANY AND ALL OUTSTANDING
10 1/2% SENIOR SECURED NOTES DUE 2008
OF
BLUEGREEN CORPORATION
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON
, 1998, UNLESS EXTENDED. TENDERS OF 10 1/2% SENIOR SECURED NOTES DUE
2008, SERIES B MAY ONLY BE WITHDRAWN UNDER THE CIRCUMSTANCES DESCRIBED IN THE
PROSPECTUS AND THE LETTER OF TRANSMITTAL.
, 1998
To Our Clients:
Enclosed for your consideration is the Prospectus dated , 1998
(the "Prospectus") and the related letter of Transmittal and instructions
thereto (the "Letter of Transmittal") in connection with the offer (the
"Exchange Offer") of Bluegreen Corporation, a Massachusetts corporation (the
"Company"), to exchange $1,000 principal amount of its 10 1/2% Senior Secured
Notes due 2008, Series B (the "Exchange Notes") for each $1,000 principal amount
of its outstanding 10 1/2% Senior Secured Notes due 2008 (the "Outstanding
Notes").
Consummation of the Exchange Offer is subject to certain conditions
described in the Prospectus. Capitalized terms used herein but not defined shall
have the meanings ascribed to them in the Prospectus.
WE ARE THE REGISTERED HOLDER OF OUTSTANDING NOTES HELD BY US FOR YOUR
ACCOUNT. A TENDER OF ANY SUCH OUTSTANDING NOTES CAN BE MADE ONLY BY US AS THE
REGISTERED HOLDER AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL
IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO
TENDER OUTSTANDING NOTES HELD BY US FOR YOUR ACCOUNT.
Accordingly, we request instructions as to whether you wish us to tender
any or all such Outstanding Notes held by us for your account pursuant to the
terms and conditions set forth in the Prospectus and the Letter of Transmittal.
We urge you to read carefully the Prospectus an the Letter of Transmittal before
instructing us to tender your Outstanding Notes.
Your instructions to us should be forwarded as promptly as possible in
order to permit us to tender Outstanding Notes on your behalf in accordance with
the provisions of the Exchange Offer. THE EXCHANGE OFFER WILL EXPIRE AT 5:00
P.M., NEW YORK CITY TIME ON , 1998 (the "Expiration Date"), UNLESS
EXTENDED. Outstanding Notes tendered pursuant to the Exchange Offer may only be
withdrawn under the circumstances described in the Prospectus and the Letter of
Transmittal.
Your attention is directed to the following:
1. The Exchange Offer is for the entire aggregate principal amount of
Outstanding Notes.
2. Consummation of the Exchange Offer is conditioned upon the
conditions set forth in the Prospectus under the caption "The Exchange
Offer -- Conditions."
3. Tendering holders may withdraw their tender at any time until the
Expiration Date.
4. Any transfer taxes incident to the transfer of Outstanding Notes
from the tendering holder to the Company will be paid by the Company,
except as provided in the Prospectus and the instructions to the letter of
Transmittal.
5. The Exchange Offer is not being made to (nor will the surrender of
Outstanding Notes for exchange be accepted from or on behalf of) holders of
Outstanding Notes in any jurisdiction in which the making or acceptance of
the Exchange Offer would not be in compliance with the laws of such
jurisdiction.
6. The acceptance for exchange of Outstanding Notes validly tendered
and not be validly withdrawn and the issuance of Exchange Notes will be
made as promptly as practicable after the Expiration Date. However, subject
to rules promulgated pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Company expressly reserves the right to
delay acceptance of any of the Outstanding Notes or to terminate the
Exchange Offer and not accept for purchase any Outstanding Notes not
theretofore accepted if any of the conditions
<PAGE> 13
set forth in the Prospectus under the caption "The Exchange Offer
Conditions" shall not have been satisfied or waived by the Company.
7. The Company expressly reserves the right, in its sole discretion,
(i) to delay accepting any Outstanding Notes, (ii) to extend the Exchange
Offer, (iii) to amend the terms of the Exchange Offer or (iv) to terminate
the Exchange Offer. Any delay, extension, amendment or termination will be
followed as promptly as practicable by oral or written notice to the
Exchange Agent and the Company will mail to the registered holders an
announcement thereof, each prior to 9:00 a.m., New York City time, on the
next business day after the previously scheduled Expiration Date. Except as
otherwise provided in the Prospectus, withdrawal rights with respect to
Outstanding Notes tendered pursuant to the Exchange Offer will not be
extended or reinstated as a result of an extension or amendment of the
Exchange Offer.
8. Consummation of the Exchange Offer may have adverse consequences to
non-tendering Outstanding Note holders, including that the reduced amount
of Outstanding Notes as a result of the Exchange Offer may adversely affect
the trading market, liquidity and market price of the Outstanding Notes.
If you wish to have us tender any or all of the Outstanding Notes held by
us for your account, please so instruct us by completing, executing and
returning to us the instruction form that follows:
<PAGE> 14
BLUEGREEN CORPORATION
INSTRUCTIONS REGARDING THE EXCHANGE OFFER
WITH RESPECT TO THE
10 1/2% SENIOR SECURED NOTES DUE 2008, SERIES B
TO REGISTERED HOLDER AND/OR PARTICIPANTS OF
THE BOOK-ENTRY TRANSFER FACILITY
THE UNDERSIGNED ACKNOWLEDGE(S) RECEIPT OF YOUR LETTER AND THE ENCLOSED
DOCUMENTS REFERRED TO THEREIN RELATING TO THE EXCHANGE OFFER OF THE COMPANY.
THIS WILL INSTRUCT YOU TO TENDER THE PRINCIPAL AMOUNT OF OUTSTANDING NOTES
INDICATED BELOW HELD BY YOU FOR THE ACCOUNT OF THE UNDERSIGNED PURSUANT TO THE
TERMS OF AND CONDITIONS SET FORTH IN THE PROSPECTUS AND THE LETTER OF
TRANSMITTAL.
<TABLE>
<S> <C>
Box 1 [ ] Please tender the Outstanding Notes held by you for my account, as
indicated below.
Box 2 [ ] Please do not tender any Outstanding Notes held by you for my account.
</TABLE>
The aggregate face amount of the Notes held by you for the account of the
undersigned is [fill in amount]: $ of the 10 1/2% Senior Secured
Notes due 2008.
With respect to the Exchange Offer, the undersigned hereby instructs you [check
appropriate box]:
<TABLE>
<S> <C>
[ ] To TENDER the following Notes held by you for the account of the
undersigned [insert principal amount of notes to be tendered if
any]: $.
[ ] NOT TO TENDER any Notes held by you for the account of the undersigned.
Date: ------------------------------, 1998 ----------------------------------------------
----------------------------------------------
Signature(s)
Principal Amount of Outstanding Notes to be Tendered: $ * (must be in the principal amount
of $1,000 or an integral multiple thereof)
- ---------------------------------------------- ----------------------------------------------
- ---------------------------------------------- Taxpayer Identification or Social Security
Please print name(s) here Number
- ---------------------------------------------- ----------------------------------------------
Area code and Telephone Number My Account Number with You
</TABLE>
*UNLESS OTHERWISE INDICATED, SIGNATURE(S) HEREON BY BENEFICIAL OWNER(S) SHALL
CONSTITUTE AN INSTRUCTION TO THE NOMINEE TO TENDER ALL OUTSTANDING NOTES OF SUCH
BENEFICIAL OWNER(S).
If the undersigned instructs you to tender the Notes held by you for the
account of the undersigned, it is understood that you are authorized (a) to
make, on behalf of the undersigned (and the undersigned, by its signature below,
hereby makes to you), the representations and warranties contained in the Letter
of Transmittal that are to be made with respect to the undersigned as a
beneficial owner, including but not limited to the representations that (i) the
undersigned's principal residence is in the state of [fill in state]
, (ii) the undersigned is acquiring the Exchange Notes in the
ordinary course of business of the undersigned, (iii) the undersigned is not
participating, does not intend to participate, and has no arrangement or
understanding with any person to participate in the distribution of the Exchange
Notes, (iv) the undersigned acknowledges that any person participating in the
Exchange Offer for the purpose of distributing the Exchange Notes must comply
with the registration and prospectus delivery requirements of the Securities Act
of 1933, as amended (the "Act"), in connection with a secondary resale
transaction of the Exchange Notes acquired by such person and cannot rely on the
position of the Staff of the Securities and Exchange Commission set forth in
noaction letters that are discussed in the section of the Prospectus entitled
"The Exchange Offer -- Resales of the New Notes," and (v) the undersigned is not
an "affiliate," as defined in Rule 405 under the Act, of the Company; (b) to
agree,
<PAGE> 15
on behalf of the undersigned, as set forth in the Letter of Transmittal; and (c)
to take such other action as necessary under the Prospectus or the Letter of
Transmittal to effect the valid tender of such Notes.
[ ] Check this box if the Beneficial Owner of the Notes is a Participating
Broker-Dealer and such Participating Broker-Dealer acquired the Notes
for its own account as a result of market-making activities or other
trading activities. IF THIS BOX IS CHECKED, PLEASE SEND A COPY OF
THESE INSTRUCTIONS TO JOHN F. CHISTE, CHIEF FINANCIAL OFFICER OF THE
COMPANY, VIA FACSIMILE: (561) .
<PAGE> 16
SUNTRUST BANK, CENTRAL FLORIDA,
NATIONAL ASSOCIATION
[ADDRESS]
BLUEGREEN CORPORATION
OFFER TO EXCHANGE
10 1/2% SENIOR SECURED NOTES DUE 2008, SERIES B
FOR ANY AND ALL OUTSTANDING
10 1/2% SENIOR SECURED NOTES DUE 2008
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON
, 1998, UNLESS EXTENDED. TENDERS OF 10 1/2% SENIOR SECURED NOTES
DUE 2008, SERIES B MAY ONLY BE WITHDRAWN UNDER THE CIRCUMSTANCES DESCRIBED IN
THE PROSPECTUS AND THE LETTER OF TRANSMITTAL.
To Brokers, Dealers, Commercial Banks, Trust Companies and other Nominees:
We have been appointed by Bluegreen Corporation, a Massachusetts
corporation (the "Company"), to act as the Exchange Agent in connection with the
offer (the "Exchange Offer") of the Company to exchange $1,000 principal amount
of its 10 1/2% Senior Secured Notes due 2008, Series B for each $1,000 principal
amount of its 10 1/2% Senior Secured Notes due 2008 (the "Outstanding Notes"),
upon the terms and subject to the conditions set forth in the Prospectus dated ,
1998 (the "Prospectus") and in the related Letter of Transmittal and the
instructions thereto (the "Letter of Transmittal").
Enclosed herewith are copies of the following documents:
1. The Prospectus;
2. The Letter of Transmittal for your use and for the information of
your clients, together with guidelines of the Internal Revenue Service for
Certification of Taxpayer Identification Number on Substitute Form W-9
providing information relating to backup federal income tax withholding;
3. Notice of Guaranteed Delivery to be used to accept the Exchange
Offer if the Notes and all other required documents cannot be delivered to
the Exchange Agent on or prior to the Expiration Date (as defined);
4. A form of letter which may be sent to your clients for whose
account you hold the Notes in your name or in the name of a nominee, with
space provided for obtaining such clients' instructions with regard to the
Exchange Offer; and
5. A return envelope addressed to the Exchange Agent.
PLEASE NOTE THAT THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME ON , 1998 (the "Expiration Date"), UNLESS EXTENDED. WE URGE YOU
TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE.
The Company will not pay any fees or commission to any broker or dealer or
other person (other than to the Exchange Agent) for soliciting tenders of the
Notes pursuant to the Exchange Offer. You will be reimbursed for customary
mailing and handling expenses incurred by you in forwarding the enclosed
materials to your clients.
Additional copies of the enclosed materials may be obtained by contacting
the Exchange Agent as provided in the enclosed Letter of Transmittal.
Very truly yours,
SUNTRUST BANK, CENTRAL FLORIDA,
NATIONAL ASSOCIATION
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON, THE AGENT OF THE COMPANY OR THE EXCHANGE AGENT OR AUTHORIZE
YOU OR ANY OTHER PERSON TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION ON
BEHALF OF ANY OF THEM WITH RESPECT TO THE EXCHANGE OFFER NOT CONTAINED IN THE
PROSPECTUS OR THE LETTER OF TRANSMITTAL.
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
TO TENDER FOR EXCHANGE
10 1/2% SENIOR SECURED NOTES DUE 2008, SERIES B
OF
BLUEGREEN CORPORATION
PURSUANT TO
PROSPECTUS DATED , 1998
This Notice of Guaranteed Delivery or a form substantially equivalent
hereto must be used to accept the offer (the "Exchange Offer") of Bluegreen
Corporation, a Massachusetts corporation (the "Company"), to exchange $1,000
principal amount of its 10 1/2% Senior Secured Notes due 2008, Series B for each
$1,000 principal amount of its outstanding 10 1/2% Senior Secured Notes due 2008
(the "Outstanding Notes") if (a) certificates representing the Outstanding Notes
are not immediately available or (b) time will not permit the Outstanding Notes
and all other required documents to reach the Exchange Agent on or prior to the
Expiration Date. This form may be delivered by an Eligible Institution (as
defined) by mail or hand delivery, or transmitted via facsimile, telegram or
telex, to the Exchange Agent as set forth below. All capitalized terms used
herein but not defined herein shall have the meanings ascribed to them in the
Prospectus dated , 1998 (the "Prospectus").
THE EXCHANGE OFFER IS NOT BEING MADE TO (NOR WILL THE SURRENDER OF
OUTSTANDING NOTES BE ACCEPTED FROM OR ON BEHALF OF) HOLDERS OF OUTSTANDING NOTES
IN ANY JURISDICTION IN WHICH THE MAKING OR ACCEPTANCE OF THE EXCHANGE OFFER
WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION.
- --------------------------------------------------------------------------------
The Exchange Offer will expire at 5:00 p.m., New York City Time on
, 1998, unless extended. Tenders of 10 1/2% Senior Secured
Notes due 2008, Series B may only be withdrawn under the circumstances
described in the Prospectus and the Letter of Transmittal.
- --------------------------------------------------------------------------------
The Exchange Agent for the Exchange Offer:
SUNTRUST BANK, CENTRAL FLORIDA, NATIONAL ASSOCIATION
<TABLE>
<S> <C>
By Registered or Certified Mail: By Overnight Courier:
SunTrust Bank, Central Florida, SunTrust Bank, Central Florida,
National Association National Association
Attention: Attention:
By Hand before 4:30 P.M.: By Facsimile:
SunTrust Bank, Central Florida, SunTrust Bank, Central Florida,
National Association National Association
Attention: Attention:
Confirm by Telephone to:
</TABLE>
Delivery of this Notice of Guaranteed Delivery to an address, or
transmission via facsimile, telegram or telex, other than as set forth above,
will not constitute a valid delivery.
This form is not to be used to guarantee signatures. if a signature on the
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
Ladies and Gentlemen:
The undersigned hereby tender(s) to the Company, upon the terms and subject
to the conditions set forth in the Prospectus, receipt of which is hereby
acknowledged, the principal amount of Outstanding Notes set forth below,
pursuant to the guaranteed delivery procedures set forth in the Prospectus under
the caption "The Exchange Offer -- Guaranteed Delivery Procedures."
<PAGE> 2
Subject to and effective upon acceptance for exchange of the Outstanding
Notes tendered herewith, the undersigned hereby sells, assigns and transfers to
or upon the order of the Company all right, title and interest in and to, and
any and all claims in respect of or arising or having arisen as a result of the
undersigned's status as a holder of, all Outstanding Notes tendered hereby. In
the event of a termination of the Exchange Offer, the Outstanding Notes tendered
pursuant thereto will be returned promptly to the tendering Outstanding Note
holder.
The undersigned hereby represents and warrants that the undersigned accepts
the terms and conditions of the Prospectus and the Letter of Transmittal, has
full power and authority to tender, sell, assign and transfer the Outstanding
Notes tendered hereby and that the Company will acquire good and unencumbered
title thereto, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim. The undersigned will, upon
request, execute and deliver any additional documents deemed by the Exchange
Agent or the Company to be necessary or desirable to complete the sale,
assignment and transfer of the Outstanding Notes tendered.
All authority herein conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death or incapacity of the undersigned and
every obligation of the undersigned under this Notice of Guaranteed Delivery
shall be binding upon the heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and other legal
representatives of the undersigned.
<PAGE> 3
PLEASE SIGN AND COMPLETE
<TABLE>
<S> <C>
Signature(s) of Registered Holder(s) or Authorized
Signatory: Addresses:
- ----------------------------------------------------- -----------------------------------------------------
- ----------------------------------------------------- -----------------------------------------------------
- ----------------------------------------------------- -----------------------------------------------------
Name(s) of Registered Holder(s) No.: Area Code and Telephone
- ----------------------------------------------------- -----------------------------------------------------
- ----------------------------------------------------- -----------------------------------------------------
</TABLE>
If Outstanding Notes will be delivered by a book-entry transfer, provide the
following information:
Principal Amount of Outstanding Notes Tendered:
---------------------------------
Transaction Code No.:
-----------------------------------------------------------
Certificate No(s). of Outstanding Notes (if available):
-------------------------
Depository Account No.:
---------------------------------------------------------
This Notice of Guaranteed Delivery must be signed by the registered
holder(s) of Outstanding Notes exactly as their name(s) appear(s) on the
Outstanding Notes or by person(s) authorized to become registered holder(s) by
endorsements and documents transmitted with this Notice of Guaranteed Delivery.
If signature is by a trustee, guardian, attorney-in-fact, officer of a
corporation, executor, administrator, agent or other representative, such person
must provide the following information:
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):
------------------------------------------------------------------------
------------------------------------------------------------------------
Capacity:
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Address(es):
--------------------------------------------------------------------
--------------------------------------------------------------------
<PAGE> 4
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member of a registered national securities exchange or a
member of the National Association of Securities Dealers, Inc. or a commercial
bank or trust company having an office or correspondent in the United States
(each, an "Eligible Institution"), hereby guarantees that, within three business
days from the date of this Notice of Guaranteed Delivery, a properly completed
and validly executed Letter of Transmittal (or a facsimile thereof), together
with Outstanding Notes tendered hereby in proper form for transfer (or
confirmation of the book-entry transfer of such Outstanding Notes into the
Exchange Agent's account at a Book-Entry Transfer Facility) and all other
required documents will be deposited by the undersigned with the Exchange Agent
at one of its addresses set fort above.
Name of Firm:
-------------------------------------------------------------------
Authorized Signature:
-----------------------------------------------------------
Address:
------------------------------------------------------------------------
Name:
---------------------------------------------------------------------------
Title:
--------------------------------------------------------------------------
Area Code and Telephone No.:
----------------------------------------------------
Date:
---------------------------------------------------------------------------
DO NOT SEND OUTSTANDING NOTES WITH THIS FORM. ACTUAL SURRENDER OF NOTES
MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, A PROPERLY COMPLETED AND
VALIDLY EXECUTED LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS:
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery. A properly completed and duly executed copy of this Notice of
Guaranteed Delivery and any other documents required by this Notice of
Guaranteed Delivery must be received by the Exchange Agent at its address set
forth herein prior to the Expiration Date. The method of delivery is at the
election and sole risk of the holders and the delivery will be deemed made only
when actually received by the Exchange Agent. In all cases, sufficient time
should be allowed to assure timely delivery.
2. Requests for Assistance or Additional Copies. Questions and requests
for assistance and requests for additional copies of this document and/or the
Prospectus may be directed to the Exchange Agent at the address specified in the
Prospectus. Holders may also contact their broker, dealer, commercial bank,
trust company or other nominee for assistance concerning the Exchange Offer.
<PAGE> 1
EXHIBIT 99.3
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- -----------------------------------------------------------
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- -----------------------------------------------------------
<C> <S> <C>
1. An individual's account. The individual
2. Two or more individuals (joint The actual owner of
account) the account or, if
combined funds, any
one of the
individuals(1)
3. Husband and wife (joint The actual owner of
account) the account or, if
joint funds, either
person(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint The adult or, if the
account) minor is the only
contributor, the
minor(1)
6. Account in the name of The ward, minor or
guardian or committee for a incompetent person(3)
designated ward, minor, or
incompetent person
7. a. The usual revocable savings The grantor-
trust account (grantor is trustee(1)
also trustee)
b. So-called trust account The actual owner(1)
that is not a legal or valid
trust under State law
8. Sole proprietorship account The owner(4)
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------
GIVE THE EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- -----------------------------------------------------------
<C> <S> <C>
9. A valid trust, estate, or The legal entity (Do
pension trust not furnish the
identifying number of
the personal
representative or
trustee unless the
legal entity itself is
not designated in the
account title)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization
account
12. Partnership account held in The partnership
the name of the business
13. Association, club, or other The organization
tax-exempt organization
14. A broker or registered nominee The broker or nominee
15. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a State
or local government, school
district, or prison) that
receives agricultural program
payments
- -----------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension trust.
Note: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a), or an individual
retirement.
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- An international organization or any agency, or instrumentality thereof.
- A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An exempt charitable remainder trust, or a non-exempt trust described in
Section 4947(a)(1).
- An entity registered at all times under the Investment Company Act of 1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under Section 1441.
- Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals. NOTE: You may be
subject to backup withholding if this interest is $600 or more, and is paid
in the course of the payer's trade or business and you have not provided
your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
Section 852).
- Payments described in Section 6049(b)(5) to non-resident aliens.
- Payments on tax-free covenant bonds under Section 1451.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
EXEMPT PAYEES DESCRIBED ABOVE SHOULD FILE FORM W-9 TO AVOID POSSIBLE ERRONEOUS
BACKUP WITHHOLDING. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under Sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividends,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. The IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Beginning January 1, 1993, payers must generally
withhold 31% of taxable interest, dividends, and certain other payments to a
payee who does not furnish a taxpayer identification number to a payer. Certain
penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you
fail to furnish your correct taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE STATEMENTS WITH RESPECT TO WITHHOLDING. -- If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- If you falsify
certifications or affirmations, you are subject to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
CONSULTANT OR THE INTERNAL REVENUE SERVICE.
