<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended October 3, 1999
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number: 0-19292
BLUEGREEN CORPORATION
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
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<CAPTION>
<S> <C>
Massachusetts 03-0300793
- ------------------------------------------------------- --------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4960 Blue Lake Drive, Boca Raton, Florida 33431
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(Address of principal executive offices) (Zip Code)
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(561) 912-8000
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(Registrant's telephone number, including area code)
Not Applicable
- ------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
As of November 12, 1999, there were 25,127,756 shares of Common Stock, $.01 par
value per share, issued, 2,166,100 treasury shares and 22,961,656 shares
outstanding.
<PAGE> 2
BLUEGREEN CORPORATION
INDEX TO QUARTERLY REPORT ON FORM 10-Q
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PAGE
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PART I - FINANCIAL INFORMATION (UNAUDITED)
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS AT
MARCH 28, 1999 AND OCTOBER 3, 1999 .......................................... 3
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - THREE MONTHS
ENDED SEPTEMBER 27, 1998 AND OCTOBER 3, 1999 ................................ 4
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - SIX MONTHS
ENDED SEPTEMBER 27, 1998 AND OCTOBER 3, 1999 ................................ 5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - SIX MONTHS
ENDED SEPTEMBER 27, 1998 AND OCTOBER 3, 1999 ................................ 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ............................. 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION ............................... 17
ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK ............................................... 30
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS ................................................................ 30
ITEM 2. CHANGES IN SECURITIES ............................................................ 31
ITEM 3. DEFAULTS UPON SENIOR SECURITIES .................................................. 31
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS .............................. 31
ITEM 5. OTHER INFORMATION ................................................................ 31
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ................................................. 31
SIGNATURES.................................................................................... 32
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2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BLUEGREEN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MARCH 28, OCTOBER 3,
1999 1999
----------- ------------
(NOTE) (UNAUDITED)
<S> <C> <C>
ASSETS
Cash and cash equivalents (including restricted cash of
approximately $15.8 million and $14.4 million at
March 28, 1999 and October 3, 1999, respectively) ............ $ 55,557 $ 43,842
Contracts receivable, net ....................................... 20,167 11,448
Notes receivable, net ........................................... 64,380 83,439
Notes receivable from related party ............................. 4,168 --
Inventory, net .................................................. 142,628 172,279
Investment in securities ........................................ 17,106 15,717
Property and equipment, net ..................................... 26,052 30,532
Other assets .................................................... 19,064 23,460
--------- ---------
TOTAL ASSETS ................................................. $ 349,122 $ 380,717
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Accounts payable ................................................ $ 6,207 $ 5,945
Accrued liabilities and other ................................... 25,362 15,472
Deferred income ................................................. 5,792 4,209
Deferred income taxes ........................................... 13,507 20,077
Receivable-backed notes payable ................................. 9,884 15,918
Lines-of-credit and notes payable ............................... 17,615 43,126
10.50% senior secured notes payable ............................. 110,000 110,000
8.00% convertible subordinated notes payable to related
parties ..................................................... 6,000 6,000
8.25% convertible subordinated debentures ....................... 34,371 34,371
--------- ---------
TOTAL LIABILITIES ............................................ 228,738 255,118
Minority interest ............................................... 1,035 920
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value, 1,000 shares authorized;
none issued .................................................. -- --
Common stock, $.01 par value, 90,000 shares
authorized; 25,063 and 25,128 shares issued at March 28, 1999
and October 3, 1999, respectively ........................... 251 251
Additional paid-in capital ...................................... 107,206 107,390
Treasury stock, 968 and 2,034 common shares at cost at
March 28, 1999 and October 3, 1999, respectively ............ (4,545) (9,964)
Net unrealized gains on investments available-for-sale, net
of income taxes .............................................. 560 838
Retained earnings ............................................... 15,877 26,164
--------- ---------
TOTAL SHAREHOLDERS' EQUITY ................................... 119,349 124,679
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ................... $ 349,122 $ 380,717
========= =========
</TABLE>
Note: The condensed consolidated balance sheet at March 28, 1999 has been
derived from the audited consolidated financial statements at that date but
does not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
BLUEGREEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
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THREE MONTHS ENDED
-------------------------------
SEPTEMBER 27, OCTOBER 3,
1998 1999
------------- -----------
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REVENUES:
Sales ........................................... $ 61,403 $ 65,653
Other resort and golf operations revenue ........ 3,470 4,401
Interest income ................................. 3,487 4,099
Gain on sale of notes receivable ................ -- 884
Other income .................................... 5 228
-------- --------
68,365 75,265
COSTS AND EXPENSES:
Cost of sales ................................... 21,539 21,098
Cost of other resort and golf operations ........ 3,025 3,970
Selling, general and administrative expenses .... 30,985 35,718
Interest expense ................................ 3,362 3,674
Provision for loan losses ....................... 599 1,536
-------- --------
59,510 65,996
-------- --------
Income before income taxes ......................... 8,855 9,269
Provision for income taxes ........................ 3,542 3,577
Minority interest in loss of consolidated subsidiary (147) (170)
-------- --------
NET INCOME ......................................... $ 5,460 $ 5,862
======== ========
EARNINGS PER COMMON SHARE:
Basic .............................................. $ 0.25 $ 0.25
======== ========
Diluted ............................................ $ 0.21 $ 0.22
======== ========
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES:
Basic .............................................. 21,915 23,197
======== ========
Diluted ............................................ 28,965 29,527
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
BLUEGREEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
------------------------------
SEPTEMBER 27, OCTOBER 3,
1998 1999
------------- ----------
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REVENUES:
Sales ................................................. $ 117,060 $ 128,365
Other resort and golf operations revenue .............. 5,946 8,789
Interest income ....................................... 7,249 7,891
Gain on sale of notes receivable ...................... 2,053 884
Other income .......................................... 378 287
--------- ---------
132,686 146,216
COSTS AND EXPENSES:
Cost of sales ......................................... 42,407 42,822
Cost of other resort and golf operations .............. 5,277 7,718
Selling, general and administrative expense ........... 58,553 70,047
Interest expense ...................................... 7,106 6,630
Provision for loan losses ............................. 892 2,324
--------- ---------
114,235 129,541
--------- ---------
Income before income taxes ............................... 18,451 16,675
Provision for income taxes .............................. 7,381 6,503
Minority interest in loss of consolidated subsidiary ..... (129) (115)
--------- ---------
Income before extraordinary item ......................... 11,199 10,287
Extraordinary loss on early extinguishment of debt, net of
income taxes .......................................... (1,682) --
--------- ---------
NET INCOME ............................................... $ 9,517 $ 10,287
========= =========
EARNINGS PER COMMON SHARE:
Basic:
Income before extraordinary item ...................... $ 0.53 $ 0.44
Extraordinary loss on early extinguishment of debt,
net of income taxes................................. (0.08) --
--------- ---------
Net income ............................................ $ 0.45 $ 0.44
========= =========
Diluted:
Income before extraordinary item ...................... $ 0.43 $ 0.38
Extraordinary loss on early extinguishment of debt,
net of income taxes................................. (0.06) --
--------- ---------
Net income ............................................ $ 0.37 $ 0.38
========= =========
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES:
Basic .................................................... 21,132 23,315
========= =========
Diluted .................................................. 28,235 29,688
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 6
BLUEGREEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
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SIX MONTHS ENDED
---------------------------------
SEPTEMBER 27, OCTOBER 3,
1998 1999
---------------- ------------
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OPERATING ACTIVITIES:
Net income ..................................................... $ 9,517 $ 10,287
Adjustments to reconcile net income to net
cash flow provided (used) by operating activities:
Extraordinary loss on early extinguishment of debt,
net of taxes .......................................... 1,682 --
Minority interest in loss of consolidated subsidiary ..... (129) (115)
Depreciation and amortization ............................ 1,271 2,117
Gain on sale of notes receivable ......................... (2,053) (884)
(Gain) loss on sale of property and equipment ............ (276) 89
Loss on exchange of REMIC certificates ................... -- 179
Provision for loan losses ................................. 892 2,324
Provision for deferred income taxes ....................... 7,381 6,503
Interest accretion on investment in securities ............ (998) (1,223)
Proceeds from sale of notes receivable ................... 31,305 18,742
Proceeds from borrowings collateralized by notes
receivable ............................................ 2,671 13,065
Payments on borrowings collateralized by notes receivable . (2,180) (6,726)
CHANGE IN OPERATING ASSETS AND LIABILITIES:
Contracts receivable ........................................ 1,585 8,718
Notes receivable ............................................ (26,372) (39,717)
Inventory ................................................... (14,735) (11,729)
Other assets ................................................ (3,127) (4,017)
Accounts payable, accrued liabilities and other ............. 2,037 (11,493)
--------- --------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES .................. 8,471 (13,880)
--------- --------
INVESTING ACTIVITIES:
Purchases of property and equipment ............................ (6,697) (5,670)
Sales of property and equipment ................................ 898 692
Cash received from investment in securities .................... 786 2,699
Loan to related party .......................................... -- (256)
Principal payments received on loans to related party .......... -- 459
Other assets ................................................... -- (408)
--------- --------
NET CASH USED BY INVESTING ACTIVITIES ............................. (5,013) (2,484)
--------- --------
FINANCING ACTIVITIES:
Proceeds from issuance of 10.5% senior secured notes payable ... 110,000 --
Payment under short-term borrowings from underwriters .......... (22,149) --
Proceeds from borrowings under line-of-credit facilities and
other notes payable .......................................... -- 14,025
Payments under line-of-credit facilities and other notes payable (71,571) (2,541)
Payment of debt issuance costs ................................. (5,183) (1,510)
Proceeds from issuance of Common Stock ......................... 24,345 --
Payments for treasury stock .................................... -- (5,419)
Proceeds from exercise of employee and director stock options .. 355 94
--------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES ......................... 35,797 4,649
--------- --------
Net increase (decrease) in cash and cash equivalents .............. 39,255 (11,715)
Cash and cash equivalents at beginning of period .................. 31,065 55,557
--------- --------
Cash and cash equivalents at end of period ........................ 70,320 43,842
Restricted cash and cash equivalents at end of period ............. (15,595) (14,370)
--------- --------
Unrestricted cash and cash equivalents at end of period ........... $ 54,725 $ 29,472
========= ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE> 7
BLUEGREEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - - CONTINUED
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
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SIX MONTHS ENDED
-------------------------------------
SEPTEMBER 27, OCTOBER 3,
1998 1999
----------------- -----------------
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SUPPLEMENTAL SCHEDULE OF NON-CASH OPERATING, INVESTING
AND FINANCING ACTIVITIES
Inventory acquired through financing .................. $ 500 $13,986
=========== =======
Foreclosure of notes receivable, inventory and
fixed assets following default on notes receivable
from related party .................................. $ -- $ 3,965
=========== =======
Exchange of REMIC certificates for notes receivable
and inventory in connection with termination
of REMIC ............................................ $ -- $ 4,353
=========== =======
Inventory acquired through foreclosure or
deedback in lieu of foreclosure ...................... $ 3,641 $ 3,168
=========== =======
Conversion of 8.25% convertible subordinated
debentures into Common Stock ......................... $ 368 $ --
=========== =======
Sale of notes receivable in exchange for investment
in securities ....................................... $ 3,160 $ 1,474
=========== =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
7
<PAGE> 8
BLUEGREEN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 3, 1999
(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
periods. The results of operations for the three- and six-month periods
ended October 3, 1999 are not necessarily indicative of the results to be
expected for the fiscal year ending April 2, 2000. 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 28, 1999.
Organization
The Company is a leading marketer of vacation and residential lifestyle
choices through its resort and residential land and golf businesses which
are located predominantly in the Southeastern, Southwestern and Midwestern
United States. The Company's resort 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"). The Company currently develops, markets and sells Timeshare
Interests in ten resorts located in the United States and Aruba. The Company
also markets and sells Timeshare Interests at three off-site sales
locations. The Company's residential land and golf business (the
"Residential Land and Golf 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, in
some cases on properties featuring a golf course and related amenities.
During the six months ended October 3, 1999, sales generated by the
Company's Resorts Division and Residential Land and Golf Division comprised
approximately 53% and 47%, respectively, of the Company's total sales. The
Company also generates significant interest income by providing financing to
individual purchasers of Timeshare Interests sold by the Resorts Division
and, to a lesser extent, land sold by the Residential Land and Golf
Division.
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
balances and transactions are eliminated.
Use of Estimates
The preparation of the condensed consolidated financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the amounts reported in the
condensed consolidated financial statements and accompanying notes. Actual
results could differ from those estimates.
Fiscal Year
The Company's fiscal year consists of 52 or 53 weeks, ending on the Sunday
nearest the last day of March in each year. Therefore, fiscal year 2000 will
be 53 weeks long. The six-month periods ended September 27, 1998 and October
3, 1999 consisted of 26 weeks and 27 weeks, respectively.
Earnings Per Common Share
Basic earnings per common share is computed by dividing net income by the
weighted average number of common shares outstanding. Diluted earnings 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 on March 30, 1998.
8
<PAGE> 9
On August 14, 1998, the Company entered into a Securities Purchase Agreement
(the "Stock Agreement") by and among the Company, Morgan Stanley Real Estate
Investors III, L.P., Morgan Stanley Real Estate Fund III, L.P., MSP Real Estate
Fund, L.P., and MSREF III Special Fund, L.P., (collectively, the "Funds")
pursuant to which the Funds purchased an aggregate 4.1 million shares of the
Company's Common Stock through October 3, 1999. Pursuant to the Stock
Agreement, as amended, subject to certain conditions thereto, the Company has
the right to require the Funds, during the 18-month period commencing on August
14, 1998 (the "Commitment Period"), to purchase from the Company up to an
additional 1.8 million shares of Common Stock (the "Remaining Shares") at a
purchase price equal to $8.50 per share. If, on or prior to the expiration of
the Commitment Period, the Company has not offered to sell to the Funds all of
the Remaining Shares and the Company has achieved certain earnings levels for
the 12-month period ended January 2, 2000, or if a Change of Control (as
defined in the Stock Agreement) of the Company occurs during the Commitment
Period, the Funds will have the right to purchase any or all of the Remaining
Shares not previously sold to the Funds at a purchase price equal to $8.50 per
share. Therefore, as the Company has not as yet achieved the necessary earnings
levels for the Funds to exercise their right to purchase the remaining 1.8
million shares, these shares have not been included in the Company's
weighted-average shares outstanding for the purpose of computing diluted
earnings per share for the three and six months ended September 27, 1998 and
October 3, 1999.
The following table sets forth the computation of basic and diluted earnings
per share:
(in thousands, except per share data)
<TABLE>
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THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ------------------ ----------------------------------
SEPTEMBER 27, OCTOBER 3, SEPTEMBER 27, OCTOBER 3,
1998 1999 1998 1999
------------------ ------------------ ----------------- ----------------
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Basic earnings per share - numerators:
Income before extraordinary item .................... $ 5,460 $ 5,862 $ 11,199 $10,287
Extraordinary loss on early extinguishment of debt,
net of income taxes ............................. -- -- (1,682) --
------- ------- -------- -------
Net income .......................................... $ 5,460 $ 5,862 $ 9,517 $10,287
======= ======= ======== =======
Diluted earnings per share - numerators:
Income before extraordinary item - basic ............ $ 5,460 $ 5,862 $ 11,199 $10,287
Effect of dilutive securities (net of tax effects) .. 497 505 999 1,037
------- ------- -------- -------
Income before extraordinary item - diluted .......... 5,957 6,367 12,198 11,324
Extraordinary loss on early extinguishment of debt,
net of income taxes ............................. -- -- (1,682) --
------- ------- -------- -------
Net income - diluted ................................ $ 5,957 $ 6,367 $ 10,516 $11,324
======= ======= ======== =======
Denominator:
Denominator for basic earnings per share - weighted
average shares .................................. 21,915 23,197 21,132 23,315
Effect of dilutive securities:
Stock options .................................... 1,348 628 1,384 671
Convertible securities ........................... 5,702 5,702 5,719 5,702
------- ------- -------- -------
Dilutive potential common shares .................... 7,050 6,330 7,103 6,373
------- ------- -------- -------
Denominator for diluted earnings per share - adjusted
weighted-average shares and assumed conversions .. 28,965 29,527 28,235 29,688
======= ======= ======== =======
Basic earnings per common share:
Income before extraordinary item .................... $ 0.25 $ 0.25 $ 0.53 $ 0.44
Extraordinary loss on early extinguishment of debt,
net of income taxes ............................. -- -- (0.08) --
------- ------- -------- -------
Net income .......................................... $ 0.25 $ 0.25 $ 0.45 $ 0.44
======= ======= ======== =======
Diluted earnings per common share:
Income before extraordinary item .................... $ 0.21 $ 0.22 $ 0.43 $ 0.38
Extraordinary loss on early extinguishment of debt,
net of income taxes ............................. -- -- (0.06) --
------- ------- -------- -------
Net income .......................................... $ 0.21 $ 0.22 $ 0.37 $ 0.38
======= ======= ======== =======
</TABLE>
9
<PAGE> 10
Start-up Costs
In April, 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 98-5, Reporting the Costs of Start-up
Activities. The SOP is effective for the Company's fiscal 2000, and requires
that start-up costs capitalized prior to January 1, 1999 be written-off and
any future start-up costs to be expensed as incurred. The adoption of this
SOP had no significant impact on the Company's results of operations for the
three- and six-month periods ended October 3, 1999.
Reclassifications
Certain prior period amounts have been reclassified to conform to the
current period presentation.
2. SALE OF NOTES RECEIVABLE
On October 1, 1999, the Company sold approximately $19.3 million aggregate
principal amount of timeshare notes receivable (the "Receivables") to
Bluegreen Receivables Finance Corporation III, a wholly-owned special
purpose subsidiary of the Company ("BRFC"). Concurrently, BRFC sold the
Receivables to an unaffiliated financial institution (the "Purchaser")
pursuant to an Asset Purchase Agreement dated as of June 26, 1998 (as
amended, the "Purchase Agreement"). In connection with the sale, the Company
recognized an $884,000 gain on sale of notes receivable which is included in
the condensed consolidated statements of income for the three- and
six-months ended October 3, 1999.
On June 26, 1998, the Company sold $32.4 million aggregate principal amount
of Receivables to BRFC. BRFC concurrently sold such Receivables to the
Purchaser pursuant to the Purchase Agreement and recognized a $2.1 million
gain on sale of notes receivable. This gain is included in the condensed
consolidated statement of income for the six-months ended September 27,
1998.
Under the Purchase Agreement, BRFC will be entitled to sell up to $100
million aggregate principal amount of timeshare receivables to the
Purchaser, of which $74.0 million in aggregate principal amount has been
sold as of October 3, 1999. The purchase facility has detailed requirements
with respect to the eligibility of receivables for purchase and a two-year
term. The Purchaser's obligation to purchase under the purchase facility
will terminate upon the occurrence of specified trigger events. The purchase
facility includes various conditions to purchase and other provisions
customary for securitizations of this type.
3. FORECLOSURE OF NOTES RECEIVABLE FROM RELATED PARTY
On October 7, 1998, Leisure Capital Corporation ("LCC"), a wholly-owned
subsidiary of the Company, acquired from a bank delinquent notes receivable
issued by AmClub, Inc. ("AmClub"), with an aggregate outstanding principal
balance of $5.3 million (the "AmClub Notes"). LCC acquired the AmClub Notes
for a purchase price of approximately $2.9 million. During fiscal 1999, the
Company had also advanced $1.3 million to AmClub, primarily for timeshare
resort improvements (the "AmClub Loan"). On December 14, 1998, LCC notified
AmClub that the AmClub Notes and AmClub Loan were in default and due
immediately. On September 1, 1999, the Company completed a foreclosure of
the underlying collateral securing the AmClub Notes and the AmClub Loan. As
a result of the foreclosure, the Company obtained a golf course, residential
land, land for future resort development (all of which properties are
located at the Shenandoah Crossing Farm & Club in Gordonsville, Virginia)
and a portfolio of timeshare notes receivable with an aggregate net carrying
value of approximately $4.0 million. AmClub was owned by the former
stockholders of RDI Group, Inc. ("RDI"), which was acquired by the Company
in fiscal 1998.
4. CONTINGENCIES
In addition to its other ordinary course litigation, the Company became a
defendant in two proceedings during fiscal 1999. First, an action was filed
against the Company on December 15, 1998. The plaintiff has asserted that
the Company is in breach of its obligations under, and has made certain
misrepresentations in connection with, a contract under which the Company
acted as marketing agent for the sale of undeveloped property owned by the
plaintiff. The plaintiff also alleges fraud, negligence and violation by the
Company of an alleged fiduciary duty owed to plaintiff. Among other things,
the plaintiff alleges that the Company failed to meet certain minimum sales
requirements under the marketing contract and failed to commit sufficient
resources to the sale of the property. The complaint seeks damages in excess
of $18 million and certain other remedies, including punitive damages.
10
<PAGE> 11
Second, an action was filed on July 10, 1998 against two subsidiaries of the
Company and various other defendants. The Company itself is not named as a
defendant. The Company's subsidiaries acquired certain real property (the
"Property"). The Property was acquired subject to certain alleged oil and
gas leasehold interests and rights (the "Interests") held by the plaintiffs
in the action (the "Plaintiffs"). The Company's subsidiaries developed the
Property and have resold parcels to numerous customers. The Plaintiffs
allege, among other things, breach of contract, slander of title and that
the Company's subsidiaries and their purchasers have unlawfully trespassed
on easements and otherwise violated and prevented the Plaintiffs from
exploiting the Interests. The Plaintiffs claim damages in excess of $40
million, as well as punitive or exemplary damages in an amount of at least
$50 million and certain other remedies.
The Company is continuing to evaluate these actions and their potential
impact, if any, on the Company and accordingly cannot predict the outcomes
with any degree of certainty. However, based upon all of the facts presently
under consideration of management, the Company believes that it has
substantial defenses to the allegations in each of the actions and intends
to defend each of these matters vigorously. The Company does not believe
that any likely outcome of either case will have a material adverse effect
on the Company's financial condition or results of operations.
On September 17, 1999, the Company received a Notice of Proposed Audit
Report (the "Notice") from the State of Wisconsin Department of Revenue (the
"DOR") alleging that, subject to possible changes made in a final Notice of
Field Audit Action, two subsidiaries now owned by the Company failed to pay
sales and use taxes to the State of Wisconsin during the period from January
1, 1994 through September 30, 1997. The majority of the proposed assessment
is based on the subsidiaries not charging sales tax to purchasers of
Timeshare Interests at the Company's Christmas Mountain Village resort. In
addition to the proposed assessment, the Notice indicates that interest
would be charged, but no penalties would be assessed. These subsidiaries
were acquired by the Company in connection with the acquisition of RDI on
September 30, 1997. Under the RDI purchase agreement, the Company has the
right to set off payments owed by the Company to RDI's former stockholders
and to make a claim against such stockholders for certain amounts previously
paid for any breach of representations and warranties. The Company intends
to exercise these rights to mitigate any settlement with the DOR in this
matter. If a Notice of Field Audit Action is issued by the DOR in this
matter, the Company intends to vigorously appeal any assessment of sales tax
on Timeshare Interest sales.
5. SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION
On April 1, 1998, the Company consummated a private placement offering (the
"Offering") of $110 million in aggregate principal amount of 10.5% senior
secured notes due April 1, 2008 (the "Notes"). None of the assets of
Bluegreen Corporation secure its obligations under the Notes, and the Notes
are effectively subordinated to secured indebtedness of the Company to any
third party to the extent of assets serving as security therefor. The Notes
are unconditionally guaranteed, jointly and severally, by each of the
Company's subsidiaries (the "Subsidiary Guarantors"), with the exception of
Bluegreen Properties N.V., Resort Title Agency, Inc., any special purpose
finance subsidiary, any subsidiary which is formed and continues to operate
for the limited purpose of holding a real estate license and acting as a
broker, and certain other subsidiaries which have individually less then
$50,000 of assets (collectively, "Non-Guarantor Subsidiaries").
Supplemental financial information for Bluegreen Corporation, its combined
Non-Guarantor Subsidiaries and its combined Subsidiary Guarantors is
presented below:
11
<PAGE> 12
CONDENSED CONSOLIDATING BALANCE SHEET AT OCTOBER 3, 1999
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR SUBSIDIARY
CORPORATION SUBSIDIARIES GUARANTORS ELIMINATIONS CONSOLIDATED
------------ --------------- -------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents ................ $ 27,534 $ 7,167 $ 9,141 $ -- $ 43,842
Contracts receivable, net ................ 502 424 10,522 -- 11,448
Intercompany receivable .................. 95,114 -- -- (95,114) --
Notes receivable, net .................... 465 7,182 75,792 -- 83,439
Inventory, net ........................... 19,445 14,101 138,733 -- 172,279
Investment in securities ................. 2,500 13,217 -- -- 15,717
Investments in subsidiaries .............. 7,980 -- -- (7,980) --
Property and equipment, net .............. 7,660 190 22,682 -- 30,532
Other assets ............................. 15,070 3,391 7,999 (3,000) 23,460
--------- ------- -------- --------- ---------
Total assets .......................... $ 176,270 $45,672 $264,869 $(106,094) $ 380,717
========= ======= ======== ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Accounts payable, accrued liabilities and
other ................................. $ 7,830 $11,333 $ 6,464 $ -- $ 25,627
Intercompany payable ..................... -- 10,886 84,228 (95,114) --
Deferred income taxes .................... 2,191 2,424 15,462 -- 20,077
Lines-of-credit and notes payable ........ 111,320 14,312 46,411 (3,000) 169,043
8.00% convertible subordinated notes
payable to related parties ........... 6,000 -- -- -- 6,000
8.25% convertible subordinated debentures 34,371 -- -- -- 34,371
--------- ------- -------- --------- ---------
Total liabilities ..................... 161,712 38,955 152,565 (98,114) 255,118
Minority interest ........................ -- -- -- 920 920
Shareholders' Equity
Common stock ............................. 251 7 2 (9) 251
Additional paid-in capital ............... 107,390 494 8,002 (8,496) 107,390
Treasury stock ........................... (9,964) -- -- -- (9,964)
Net unrealized gains ..................... -- 838 -- -- 838
Retained earnings (accumulated deficit) .. (83,119) 5,378 104,300 (395) 26,164
--------- ------- -------- --------- ---------
Total shareholders' equity ............ 14,558 6,717 112,304 (8,900) 124,679
--------- ------- -------- --------- ---------
Total liabilities and shareholders'
equity ............................. $ 176,270 $45,672 $264,869 $(106,094) $ 380,717
========= ======= ======== ========= =========
</TABLE>
12
<PAGE> 13
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 27, 1998
--------------------------------------------------------------------------------
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR SUBSIDIARY
CORPORATION SUBSIDIARIES GUARANTORS ELIMINATIONS CONSOLIDATED
------------ --------------- -------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
REVENUES
Sales ................................... $ 9,785 $ 2,582 $ 49,036 $ -- $ 61,403
Management fee revenue .................. 5,767 -- -- (5,767) --
Other resort and golf operations revenue -- 240 3,230 -- 3,470
Interest income ......................... 898 752 1,837 -- 3,487
Other income (expenses) ................. 10 1 (6) -- 5
------- -------- -------- -------- --------
16,460 3,575 54,097 (5,767) 68,365
COST AND EXPENSES
Cost of sales ........................... 3,014 599 17,926 -- 21,539
Cost of other resort and golf operations -- 210 2,815 -- 3,025
Management fees ......................... -- 357 5,410 (5,767) --
Selling, general and administrative
expenses................................ 9,962 2,012 19,011 -- 30,985
Interest expense ........................ 2,769 493 100 -- 3,362
Provision for loan losses ............... -- 37 562 -- 599
------- -------- -------- -------- --------
15,745 3,708 45,824 (5,767) 59,510
------- -------- -------- -------- --------
Income (loss) before income taxes ....... 715 (133) 8,273 -- 8,855
Provision (benefit) for income taxes .... 286 (53) 3,309 -- 3,542
Minority interest in loss of consolidated
subsidiary .......................... -- -- -- (147) (147)
------- -------- -------- -------- --------
Net income (loss) ....................... $ 429 $ (80) $ 4,964 $ 147 $ 5,460
======= ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED OCTOBER 3, 1999
--------------------------------------------------------------------------------
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR SUBSIDIARY
CORPORATION SUBSIDIARIES GUARANTORS ELIMINATIONS CONSOLIDATED
------------ --------------- -------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
REVENUES
--------
Sales ................................... $ 8,438 $ 2,255 $ 54,960 $ -- $ 65,653
Management fee revenue .................. 6,551 -- -- (6,551) --
Other resort and golf operations revenue -- 775 3,626 -- 4,401
Interest income ......................... 211 865 3,023 -- 4,099
Other income ............................ 147 909 56 -- 1,112
-------- ------- -------- -------- --------
15,347 4,804 61,665 (6,551) 75,265
COST AND EXPENSES
Cost of sales ........................... 2,458 607 18,033 -- 21,098
Cost of other resort and golf operations -- 316 3,654 -- 3,970
Management fees ......................... -- 390 6,161 (6,551) --
Selling, general and administrative
expenses ............................... 11,987 1,662 22,069 -- 35,718
Interest expense ........................ 2,864 675 135 -- 3,674
Provision for loan losses ............... -- 127 1,409 -- 1,536
-------- ------- -------- -------- --------
17,309 3,777 51,461 (6,551) 65,996
-------- ------- -------- -------- --------
Income (loss) before income taxes ....... (1,962) 1,027 10,204 -- 9,269
Provision (benefit) for income taxes .... (760) 398 3,939 -- 3,577
Minority interest in loss of consolidated
subsidiary .......................... -- -- -- (170) (170)
-------- ------- -------- -------- --------
Net income (loss) ....................... $ (1,202) $ 629 $ 6,265 $ 170 $ 5,862
======== ======= ======== ======== ========
</TABLE>
13
<PAGE> 14
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 27, 1998
----------------------------------------------------------------------------------
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR SUBSIDIARY
CORPORATION SUBSIDIARIES GUARANTORS ELIMINATIONS CONSOLIDATED
----------- ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES
Sales .................................. $18,132 $ 5,867 $ 93,061 $ -- $ 117,060
Management fee revenue ................. 11,085 -- -- (11,085) --
Other resort and golf operations revenue -- 507 5,439 -- 5,946
Interest income ........................ 1,267 1,310 4,672 -- 7,249
Other income ........................... 288 2,053 90 -- 2,431
------- -------- --------- --------- ---------
30,772 9,737 103,262 (11,085) 132,686
COST AND EXPENSES
Cost of sales .......................... 5,578 1,558 35,271 -- 42,407
Cost of other resort and golf operations -- 519 4,758 -- 5,277
Management fees ........................ -- 768 10,317 (11,085) --
Selling, general and administrative
expenses ............................ 17,407 3,729 37,417 -- 58,553
Interest expense ....................... 5,802 1,001 303 -- 7,106
Provision for loan losses .............. -- 152 740 -- 892
------- -------- --------- --------- ---------
28,787 7,727 88,806 (11,085) 114,235
------- -------- --------- --------- ---------
Income before income taxes ............. 1,985 2,010 14,456 -- 18,451
Provision for income taxes ............. 794 804 5,783 -- 7,381
Minority interest in loss of
consolidated subsidiary .............. -- -- -- (129) (129)
------- -------- --------- --------- ---------
Income before extraordinary item ....... 1,191 1,206 8,673 129 11,199
Extraordinary loss on early
extinguishment of debt, net ......... -- -- (1,682) -- (1,682)
------- -------- --------- --------- ---------
Net income ....................... $ 1,191 $ 1,206 $ 6,991 $ 129 $ 9,517
======= ======== ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED OCTOBER 3, 1999
----------------------------------------------------------------------------------
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR SUBSIDIARY
CORPORATION SUBSIDIARIES GUARANTORS ELIMINATIONS CONSOLIDATED
----------- ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES
Sales ................................... $ 15,644 $ 5,525 $ 107,196 $ -- $ 128,365
Management fee revenue .................. 12,890 -- -- (12,890) --
Other resort and golf operations revenue -- 1,231 7,558 -- 8,789
Interest income ......................... 503 1,785 5,603 -- 7,891
Other income ............................ 153 922 96 -- 1,171
-------- -------- --------- --------- ---------
29,190 9,463 120,453 (12,890) 146,216
COST AND EXPENSES
Cost of sales ........................... 4,871 1,466 36,485 -- 42,822
Cost of other resort and golf operations -- 599 7,119 -- 7,718
Management fees ......................... -- 854 12,036 (12,890) --
Selling, general and administrative
expenses ......................... ..... 22,151 3,701 44,195 -- 70,047
Interest expense ........................ 5,224 1,119 287 -- 6,630
Provision for loan losses ............... -- 90 2,234 -- 2,324
-------- -------- --------- --------- ---------
32,246 7,829 102,356 (12,890) 129,541
-------- -------- --------- --------- ---------
Income (loss) before income taxes ....... (3,056) 1,634 18,097 -- 16,675
Provision (benefit) for income taxes .... (1,192) 637 7,058 -- 6,503
Minority interest in loss of consolidated
subsidiary ........................... -- -- -- (115) (115)
-------- -------- --------- --------- ---------
Net income (loss) ....................... $ (1,864) $ 997 $ 11,039 $ 115 $ 10,287
======== ======== ========= ========= =========
</TABLE>
14
<PAGE> 15
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 27, 1998
-------------------------------------------------------------------
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR SUBSIDIARY
CORPORATION SUBSIDIARIES GUARANTORS CONSOLIDATED
----------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES $ (64,163) $ 6,127 $ 66,507 $ 8,471
--------- ------- -------- ---------
INVESTING ACTIVITIES:
Purchases of property and equipment ........ (3,204) (49) (3,444) (6,697)
Sales of property and equipment ............ 864 -- 34 898
Cash received from investment in securities -- 786 -- 786
--------- ------- -------- ---------
NET CASH (USED) PROVIDED BY INVESTING ACTIVITIES (2,340) 737 (3,410) (5,013)
--------- ------- -------- ---------
FINANCING ACTIVITIES:
Proceeds from borrowings under line-of-
credit facilities and other notes payable 110,000 -- -- 110,000
Payments under line-of-credit facilities
and other notes payable .................. (28,837) (4,098) (60,785) (93,720)
Payment of debt issuance costs .............. (4,653) (495) (35) (5,183)
Proceeds from issuance of common stock ...... 24,345 -- -- 24,345
Proceeds from exercise of employee and
director stock options .................... 355 -- -- 355
--------- ------- -------- ---------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 101,210 (4,593) (60,820) 35,797
--------- ------- -------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS ...... 34,707 2,271 2,277 39,255
Cash and cash equivalents at beginning of period 16,100 5,186 9,779 31,065
--------- ------- -------- ---------
Cash and cash equivalents at end of period ..... 50,807 7,457 12,056 70,320
Restricted cash and cash equivalents at end
of period .................................... (2,317) (6,762) (6,516) (15,595)
--------- ------- -------- ---------
Unrestricted cash and cash equivalents at
end of period ............................... $ 48,490 $ 695 $ 5,540 $ 54,725
========= ======= ======== =========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED OCTOBER 3, 1999
-------------------------------------------------------------------
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR SUBSIDIARY
CORPORATION SUBSIDIARIES GUARANTORS CONSOLIDATED
----------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
NET CASH USED BY OPERATING ACTIVITIES ............... $ (1,219) $(2,760) $ (9,901) $(13,880)
-------- ------- -------- --------
INVESTING ACTIVITIES:
Purchases of property and equipment .............. (1,288) (24) (4,358) (5,670)
Sales of property and equipment .................. -- -- 692 692
Cash received from investment in securities ...... -- 2,699 -- 2,699
Loan to related party ............................ -- -- (256) (256)
Principal payments received on loan to related
party ........................................ -- -- 459 459
Other assets ..................................... (408) -- -- (408)
-------- ------- -------- --------
NET CASH (USED) PROVIDED BY INVESTING ACTIVITIES .... (1,696) 2,675 (3,463) (2,484)
-------- ------- -------- --------
FINANCING ACTIVITIES:
Borrowings under line-of-credit facilities and
notes payable ................................ -- -- 14,025 14,025
Payments under line-of-credit facilities
and other notes payable ..................... (72) (1,359) (1,110) (2,541)
Payment of debt issuance costs ................. (864) (79) (567) (1,510)
Payments for treasury stock .................... (5,419) -- -- (5,419)
Proceeds from the exercise of employee
and director stock options .................... 94 -- -- 94
-------- ------- -------- --------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES .... (6,261) (1,438) 12,348 4,649
-------- ------- -------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS ........... (9,176) (1,523) (1,016) (11,715)
Cash and cash equivalents at beginning of period .... 36,710 8,690 10,157 55,557
-------- ------- -------- --------
Cash and cash equivalents at end of period .......... 27,534 7,167 9,141 43,842
Restricted cash and cash equivalents at end of period (1,430) (7,167) (5,773) (14,370)
-------- ------- -------- --------
Unrestricted cash and cash equivalents at
end of period .................................... $ 26,104 $ -- $ 3,368 $ 29,472
======== ======= ======== ========
</TABLE>
15
<PAGE> 16
6. LINES-OF-CREDIT AND NOTES PAYABLE
On November 3, 1999, the Company increased the borrowing capacity on its
unused, unsecured line-of-credit with a bank from $5.0 million to $10.0
million. Amounts borrowed under the line will bear interest at LIBOR plus
1.75%. Interest is due monthly, with all principal amounts due on December
31, 2000.
On September 14, 1999, the Company borrowed approximately $14 million under
its $25 million timeshare acquisition and development facility with a
financial institution. The loan bears interest at LIBOR plus 3% and interest
is due monthly. Principal payments will be effected through agreed-upon
release prices as Timeshare Interests in the Company's Lodge Alley Inn
resort are sold, subject to minimum required amortization. The principal
must be repaid by November 1, 2005. The loan is secured by the Company's
Timeshare Interest inventory at the Lodge Alley Inn resort in Charleston,
South Carolina.
On September 14, 1999, in connection with the acquisition of 1,766 acres
adjacent to the Company's Lake Ridge residential land project in Dallas,
Texas ("Lake Ridge II"), the Company borrowed approximately $12 million
under its $35 million residential land revolving credit facility with a
financial institution. The loan bears interest at prime plus 1.25% and
interest is due monthly. Principal payments will be effected through
agreed-upon release prices as lots in Lake Ridge II are sold. The principal
must be repaid by September 14, 2004. The loan is secured by the Company's
residential land lot inventory in Lake Ridge II.
On September 24, 1999, the Company obtained two lines-of-credit with a bank
for the purpose of acquiring and developing a new residential land and golf
course community in New Kent County, Virginia, to be known as Brickshire.
The lines-of-credit have an aggregate borrowing capacity of approximately
$15.8 million. On September 27, 1999, the Company borrowed approximately $2
million under one of the lines-of-credit in connection with the acquisition
of the Brickshire property. The outstanding balances under the
lines-of-credit bear interest at prime plus 0.5% and interest is due
monthly. Principal payments will be effected through agreed-upon release
prices as lots in Brickshire are sold, subject to minimum required quarterly
amortization commencing on April 30, 2002. The principal must be repaid by
January 31, 2004. The loan is secured by the Company's residential land lot
inventory in Brickshire.
Concurrent with obtaining the Brickshire lines-of-credit discussed above,
the Company also obtained from the same bank a $4.2 million line-of-credit
for the purpose of developing a golf course on the Brickshire property (the
"Golf Course Loan"). The outstanding balance under this line-of-credit bears
interest at prime plus 0.5% and interest is due monthly. Principal payments
will be payable in equal monthly installments of $35,000 commencing
September 1, 2001. The principal must be repaid by October 1, 2005. The loan
is secured by the Brickshire golf course property. As of October 3, 1999, no
amounts were outstanding under the Golf Course Loan.
In connection with the sale of Receivables discussed in Note 2, above, the
Company used a portion of the sale proceeds to repay $3.9 million of the
outstanding balance on its timeshare receivables warehouse loan facility.
7. BUSINESS SEGMENTS
The Company has two reportable business segments. The Resorts Division
acquires, develops and markets Timeshare Interests at the Company's resorts
and the Residential Land and Golf Division acquires large tracts of real
estate which are subdivided, improved (in some cases to include a golf
course and related amenities on the property) and sold, typically on a
retail basis. The results of operations from sales of remaining
factory-built manufactured home/lot packages and undeveloped lots previously
managed under the Communities Division have been combined with the results
of operations of the Company's Residential Land and Golf Division in the
current and prior periods, due to immateriality.
Required disclosures for the Company's business segments are as follows (in
thousands):
<TABLE>
<CAPTION>
RESIDENTIAL LAND
RESORTS AND GOLF TOTALS
---------------- ------------------ --------------
<S> <C> <C> <C>
AS OF AND FOR THE THREE MONTHS ENDED SEPTEMBER 27, 1998
Sales $25,899 $35,504 $ 61,403
Other resort and golf operations revenue 2,978 492 3,470
Depreciation expense 185 136 321
Field operating profit 2,526 10,396 12,922
Inventory, net 77,428 48,646 126,074
</TABLE>
16
<PAGE> 17
<TABLE>
<CAPTION>
RESIDENTIAL LAND
RESORTS AND GOLF TOTALS
----------------- ------------------ --------------
<S> <C> <C> <C>
AS OF AND FOR THE THREE MONTHS ENDED OCTOBER 3, 1999
- ----------------------------------------------------
Sales $ 35,917 $29,736 $ 65,653
Other resort and golf operations revenue 3,590 811 4,401
Depreciation expense 338 227 565
Field operating profit 4,066 10,060 14,126
Inventory, net 106,074 66,205 172,279
FOR THE SIX MONTHS ENDED SEPTEMBER 27, 1998
- ----------------------------------------------------
Sales $ 49,860 $67,200 $117,060
Other resort and golf operations revenue 5,454 492 5,946
Depreciation expense 325 218 543
Field operating profit 5,758 18,660 24,418
FOR THE SIX MONTHS ENDED OCTOBER 3, 1999
- ----------------------------------------------------
Sales $ 68,194 $60,171 $128,365
Other resort and golf operations revenue 7,258 1,531 8,789
Depreciation expense 587 418 1,005
Field operating profit 7,557 18,152 25,709
</TABLE>
Field operating profit for reportable segments reconciled to consolidated
income before income taxes (in 000's):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
---------------- ---------------- ---------------- --------------
SEPTEMBER 27, OCTOBER 3, SEPTEMBER 27, OCTOBER 3,
1998 1999 1998 1999
---------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
Field operating profit for reportable segments $12,922 $14,126 $24,418 $25,709
Interest income 3,487 4,099 7,249 7,891
Gain on sale of notes receivable -- 884 2,053 884
Other income 5 228 378 287
Corporate general and administrative expenses (3,598) (4,858) (7,649) (9,142)
Interest expense (3,362) (3,674) (7,106) (6,630)
Provision for loan losses (599) (1,536) (892) (2,324)
---------- ---------- ---------- ---------
Consolidated income before income taxes $ 8,855 $ 9,269 $18,451 $16,675
======== ======== ======= =======
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The Company desires to take advantage of the "safe harbor" provisions of the
Private Securities Reform Act of 1995 (the "Act") and is making the following
statements pursuant to the Act in order to do so. Certain statements herein and
elsewhere in this report and the Company's other filings with the Securities
and Exchange Commission constitute "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended. You may identify these statements
by forward-looking words such as "may", "intend", "expect", "anticipate",
"believe", "estimate", "plan" or other comparable terminology. Such
forward-looking statements 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 trends, to
differ materially from any future results, performance, achievements or trends
expressed or implied by such forward-looking statements. Given these
uncertainties, investors are cautioned not to place undue reliance on such
forward-looking statements and no assurance can be given that the plans,
estimates and expectations reflected in such statements will be achieved. The
Company wishes to caution readers that the following important factors, among
others, in some cases have affected, and in the future could affect, the
Company's actual results and could cause the Company's actual consolidated
results to differ materially from those expressed in any forward-looking
statements made by, or on behalf of the Company:
a) Changes in national, international or regional economic conditions that
can affect the real estate market, which is cyclical in nature and highly
sensitive to such changes, including, among other factors, levels of
employment and discretionary disposable income, consumer confidence,
available financing and interest rates.
b) The imposition of additional compliance costs on the Company as the result
of changes in any environmental, zoning or other laws and regulations that
govern the acquisition, subdivision and sale of real estate and various
aspects of the Company's financing operation or the failure of the Company
to comply with any law or regulation.
17
<PAGE> 18
c) Risks associated with a large investment in real estate inventory at any
given time (including risks that real estate 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 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 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 and/or sale 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.
l) An increase or decrease in the number of land or resort properties subject
to percentage-of-completion accounting which requires deferral of profit
recognition on such projects to the extent that development is not
substantially complete.
m) The failure of the Company to satisfy the covenants contained in the
indentures governing certain of its debt instruments and other credit
agreements which, among other things, place certain restrictions on the
Company's ability to incur debt, incur liens and pay dividends.
n) The risk of the Company incurring an unfavorable judgement in any
litigation or audit, and the impact of any related monetary or equity
damages.
The Company does not undertake to update forward-looking statements, even if
the Company's situation may change in the future.
GENERAL
Real estate markets are cyclical in nature and highly sensitive to changes in
national, regional and international 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 income in accordance with the
percentage-of-completion method of accounting. Under this method of income
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 development on more of these larger
projects is begun, and based on the Company's ability and strategy to pre-sell
projects when minimal development has been completed, the amount of income
deferred under the percentage-of-completion method of accounting may increase
significantly.
18
<PAGE> 19
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 are allocated
to cost of real estate sold as the respective revenue is recognized.
The Company has historically experienced and expects to continue to experience
seasonal fluctuations in its gross revenues and net earnings. 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
substantial development (with significant capital requirements).
The Company believes that inflation and changing prices have not had a material
impact on its revenues and results of operations during the six-months ended
September 27, 1998 or October 3, 1999. 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 in the
foreseeable future. To the extent inflationary trends affect short-term
interest rates, a portion of the Company's debt service costs may be affected
as well as the interest rate the Company charges on its new receivables from
its customers.
The Company's real estate operations are managed under two divisions. The
Resorts Division manages the Company's timeshare operations and the Residential
Land and Golf Division acquires large tracts of real estate which are
subdivided, improved (in some cases to include a golf course on the property)
and sold, typically on a retail basis. The results of operations from sales of
remaining factory-built manufactured home/lot packages and undeveloped lots,
previously managed under the Company's Communities Division, have been combined
with the results of operations of the Residential Land and Golf Division in the
current and prior periods, 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.
A portion of the Company's revenues historically has been and is expected to
continue to be comprised of gains on sales of loans. The gains are recorded in
the Company's revenues and retained interests in the portfolio are recorded on
its balance sheet (as investments in securities) at the time of sale. The
amount of gains recorded is based in part on management's estimates of future
prepayment, default and loss severity 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 future when the retained interests are realized, except
for the effect of reduced interest accretion on the Company's retained
interest, which would be recognized each period the retained interests are
held. If actual defaults or other factors discussed above with respect to loans
sold are greater than estimated, charge-offs would exceed previously estimated
amounts and earnings would be charged in the future when the retained interests
are realized. There can be no assurances that the carrying value of the
Company's investment in securities will be fully realized or that future loan
sales will result in gains.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) RESIDENTIAL
RESORTS LAND AND GOLF TOTAL
---------------------- ---------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
THREE MONTHS ENDED SEPTEMBER 27, 1998
Sales ................................... $ 25,899 100.0% $ 35,504 100.0% $ 61,403 100.0%
Cost of sales (1) ....................... (5,970) (23.1)% (15,569) (43.9)% (21,539) (35.1)%
------ ----- ------- ----- ------- -----
Gross profit ............................ 19,929 76.9% 19,935 56.1% 39,864 64.9%
Other resort and golf operations revenue 2,978 11.5% 492 1.4% 3,470 5.7%
Cost of other resort and golf operations (2,415) (9.2)% (610) (1.7)% (3,025) (4.9)%
Field selling, general and administrative
expenses (2) ....................... (17,966) (69.4)% (9,421) (26.5)% (27,387) (44.6)%
------ ----- ------- ----- ------- -----
Field operating profit .................. $ 2,526 9.8% $ 10,396 29.3% $ 12,922 21.1%
====== ===== ======= ===== ======= =====
</TABLE>
19
<PAGE> 20
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) RESIDENTIAL
RESORTS LAND AND GOLF TOTAL
---------------------- ---------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
THREE MONTHS ENDED OCTOBER 3, 1999
Sales $ 35,917 100.0% $ 29,736 100.0% $ 65,653 100.0%
Cost of sales (1) (8,367) (23.3)% (12,731) (42.8)% (21,098) (32.1)%
-------- ----- -------- ----- --------- -----
Gross profit 27,550 76.7% 17,005 57.2% 44,555 67.9%
Other resort and golf operations revenue 3,590 10.0% 811 2.7% 4,401 6.7%
Cost of resort and golf operations (2,927) (8.1)% (1,043) (3.5)% (3,970) (6.0)%
Field selling, general and administrative
expenses (2) (24,147) (67.2)% (6,713) (22.6)% (30,860) (47.0)%
-------- ----- -------- ----- --------- -----
Field operating profit $ 4,066 11.4% $ 10,060 33.8% $ 14,126 21.6%
======== ===== ======== ===== ========= =====
SIX MONTHS ENDED SEPTEMBER 27, 1998
Sales $ 49,860 100.0% $ 67,200 100.0% $ 117,060 100.0%
Cost of sales (1) (12,187) (24.4)% (30,220) (45.0)% (42,407) (36.2)%
-------- ----- -------- ----- --------- -----
Gross profit 37,673 75.6% 36,980 55.0% 74,653 63.8%
Other resort and golf operations revenue 5,454 10.9% 492 0.7% 5,946 5.1%
Cost of other resort and golf operations (4,667) (9.4)% (610) (0.9)% (5,277) (4.5)%
Field selling, general and administrative
expenses (2) (32,702) (65.6)% (18,202) (27.1)% (50,904) (43.5)%
-------- ----- -------- ----- --------- -----
Field operating profit $ 5,758 11.5% $ 18,660 27.7% $ 24,418 20.9%
======== ===== ======== ===== ========= =====
SIX MONTHS ENDED OCTOBER 3, 1999
Sales $ 68,194 100.0% $ 60,171 100.0% $ 128,365 100.0%
Cost of sales (1) (15,914) (23.3)% (26,908) (44.7)% (42,822) (33.4)%
-------- ----- -------- ----- --------- -----
Gross profit 52,280 76.7% 33,263 55.3% 85,543 66.6%
Other resort and golf operations revenue 7,258 10.6% 1,531 2.5% 8,789 6.8%
Cost of resort and golf operations (5,766) (8.5)% (1,952) (3.2)% (7,718) (6.0)%
Field selling, general and administrative
expenses (2) (46,215) (67.8)% (14,690) (24.4)% (60,905) (47.4)%
-------- ----- -------- ----- --------- -----
Field operating profit $ 7,557 11.0% $ 18,152 30.2% $ 25,709 20.0%
======== ===== ======== ===== ========= =====
</TABLE>
(1) Cost of sales represents the cost of inventory including the cost of
improvements, amenities and in certain cases previously capitalized
interest and real estate taxes.
(2) General and administrative expenses attributable to corporate overhead
have been excluded from the tables. Corporate general and administrative
expenses totaled $3.6 million and $4.9 million for the three months ended
September 27, 1998 and October 3, 1999, respectively, and $7.6 million and
$9.1 million for the six months ended September 27, 1998 and October 3,
1999, respectively.
Sales
Consolidated sales increased 6.9% from $61.4 million for the three-month period
ended September 27, 1998 (the "1999 Quarter") to $65.7 million for the
three-month period ended October 3, 1999 (the "2000 Quarter"). Consolidated
sales increased 9.7% from $117.1 million for the six-month period ended
September 27, 1998 (the "1999 Period") to $128.4 million for the six-month
period ended October 3, 1999 (the "2000 Period"). Increases in Resorts Division
sales during the 2000 Quarter and 2000 Period were partially offset by lower
Residential Land and Golf Division sales.
As of October 3, 1999, approximately $3.2 million in estimated income on sales
of $7.8 million was deferred under percentage-of-completion accounting. At
March 28, 1999, approximately $5.0 million in estimated income on sales of
$11.4 million was deferred. All such amounts are included on the Condensed
Consolidated Balance Sheets under the caption Deferred Income.
Resorts Division. During the 1999 Quarter and the 2000 Quarter, sales of
Timeshare Interests contributed $25.9 million or 42.2% and $35.9 million or
54.7%, respectively, of the Company's total consolidated sales. During the 1999
Period and the 2000 Period, sales of Timeshare Interests contributed $49.9
million or 42.6% and $68.2 million or 53.1%, respectively, of the Company's
total consolidated sales.
The table set forth below outlines the number of Timeshare Interests sold and
the average sales price per Timeshare Interest for the Resorts Division for the
periods indicated, before giving effect to the percentage-of-completion method
of accounting.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
----------------------------- ----------------------------
SEPTEMBER 27, OCTOBER 3, SEPTEMBER 27, OCTOBER 3,
1998 1999 1998 1999
------------- ---------- ------------- ----------
<S> <C> <C> <C> <C>
Timeshare Interests sold 3,311 3,873 6,105 7,423
Average sales price per Timeshare Interest $8,650 $9,149 $8,702 $9,044
Gross margin 76.9% 76.7% 75.6% 76.7%
</TABLE>
20
<PAGE> 21
The increase in number of Timeshare Interests sold during the 2000 Quarter and
the 2000 Period was due in part to sales of Timeshare Interests at the new
phase of the Company's Orlando's Sunshine Resort in Orlando, Florida ("OSR
II"). OSR II generated sales of 984 and 1,480 Timeshare Interests during the
2000 Quarter and the 2000 Period, respectively, with no corresponding sales
during the 1999 Quarter and the 1999 Period. Construction on OSR II was
completed in the 2000 Quarter. The new phase consists of 60 two-bedroom
vacation homes and features an outdoor pool, jacuzzi, lighted tennis courts and
a clubhouse. OSR II is estimated to be sold out by the end of fiscal 2000, and
is expected to generate an additional $28.5 million in sales after the 2000
Quarter. There can be no assurances that such sell-out of OSR II will occur or
that such estimated sales will be realized during fiscal 2000.
In addition, the Company reported sales of 449 and 751 Timeshare Interests at
Phase II of the Company's Shore Crest resort in Myrtle Beach, South Carolina
("Shore Crest II") during the 2000 Quarter and Period, respectively, with no
corresponding sales during the 1999 Quarter and Period. Shore Crest II consists
of 114 two-bedroom vacation homes featuring balconies overlooking the creeks
and marshes of the North Myrtle Beach area, an outdoor pool and "lazy river"
amenity and is across the street from the Company's ocean front Shore Crest
Vacation Villas. As of October 3, 1999, estimated remaining life-of-project
sales (aggregate sales of the existing, currently under construction and
planned Timeshare Interests at current retail prices) of Shore Crest II were
$66.5 million. Sales at Phase I of Shore Crest decreased from 513 to 343
Timeshare Interests sold from the 1999 Quarter to the 2000 Quarter,
respectively, as the one sales office at the Shore Crest complex now has an
expanded product offering to sell, with the opening of Shore Crest II.
Sales at the Company's Lodge Alley Inn resort in Charleston, South Carolina,
which was acquired in September 1998, consisted of 99 and 162 Timeshare
Interests during the 2000 Quarter and Period, respectively. The Lodge Alley Inn
is an 89-room resort in the historic district of Charleston and represents the
Company's first "urban" timeshare product.
Sales of the Company's Christmas Mountain Village Resort inventory, located in
Wisconsin Dells, Wisconsin, decreased from 601 to 110 Timeshare Interests sold
in the 1999 Quarter and the 2000 Quarter, respectively, and from 1,090 to 354
Timeshare Interests sold in the 1999 Period and the 2000 Period, respectively.
The decrease was due primarily to the resort's focus on selling the OSR II
Timeshare Interest inventory. The Christmas Mountain sales office generated 406
and 607 OSR II Timeshare Interest sales in the 2000 Quarter and Period,
respectively.
Sales of the Company's Shenandoah Crossings Resort inventory, located in
Gordonsville, Virginia, decreased by 137 Timeshare Interests from the 1999
Quarter to the 2000 Quarter, and decreased by 213 Timeshare Interests from the
1999 Period to the 2000 Period. The Shenandoah Crossings sales office
redirected its marketing efforts toward selling Shore Crest II Timeshare
Interest inventory. The Shenandoah Crossings sales office generated 185 and 390
Shore Crest II Timeshare Interest sales in the 2000 Quarter and Period,
respectively.
Sales at the Company's 50%-owned joint venture at the La Cabana Beach and
Racquet Club, located in Aruba, decreased from 378 Timeshare Interests to 305
Timeshare Interests from the 1999 Quarter to the 2000 Quarter, respectively,
and from 827 to 700 Timeshare Interests sold during the 1999 Period and 2000
Period, respectively. The resort experienced a temporary slowdown in operations
in the 2000 Quarter as a result of transitioning its sales staff from an
employee leasing arrangement to permanent employee status.
Average sales price per Timeshare Interest increased during the 2000 Quarter
and the 2000 Period primarily due to an increase in the average sales prices at
the Company's Falls Village resort, the Lodge Alley Inn resort and Christmas
Mountain Village. The increase at Falls Village is due to increased sales
prices of the Company's Timeshare Interest inventory at the resort in
connection with the introduction of the Company's points-based vacation club
concept during fiscal 1999. The average sales price at Falls Village increased
from $8,998 to $10,266 from the 1999 Quarter to the 2000 Quarter, respectively,
and from $8,906 to $10,479 from the 1999 Period to the 2000 Period,
respectively. Not all of the Company's sales prices per Timeshare Interest
increased as a result of the conversion of Timeshare Interest sales prices to
sales prices per vacation club point. Sales at the Lodge Alley Inn commenced in
the fourth quarter of Fiscal 1999. The average sales price at Lodge Alley Inn
for the 2000 Period was $13,200, representing the highest average price of all
existing resorts. The average sales price at Christmas Mountain Village
increased from $8,392 to $11,182 during the 1999 Period and 2000 Period,
respectively. The increase is primarily due to an increase in the number of
Timeshare Interests in larger units being sold in the 2000 Period, as well as
an overall sales price increase.
21
<PAGE> 22
The Resorts Division's gross margin increased from 75.6% during the 1999 Period
to 76.7% during the 2000 Period primarily due to the increased average sales
prices at the Falls Village resort discussed above and the approximately 80%
gross margin generated by sales of the Company's OSR II inventory. In addition,
the Company recognized approximately $450,000 of fees charged to existing
timeshare owners to convert their fixed-weeks into points-based Timeshare
Interests in the Company's vacation club program ("Conversions"). The costs of
Conversions to the Company are minimal. Also, Bluegreen Properties N.V.
("BPNV"), the Company's 50%-owned joint venture in Aruba, recognized
approximately $353,000 in revenue with no corresponding costs of sales during
the 2000 Period, pursuant to a sales and marketing agreement whereby BPNV sells
Timeshare Interests on behalf of a third party in Aruba.
Other resort revenues and related costs increased 20.6% and 21.2%,
respectively, during the 2000 Quarter, and 33.1% and 23.5%, respectively,
during the 2000 Period, as compared to the comparable prior year periods,
primarily due to the results of the hotel operations at the Company's Lodge
Alley Inn resort. Lodge Alley hotel revenues were $499,000 and $1,496,000 for
the 2000 Quarter and the 2000 Period, respectively. Related costs were $560,000
and $1,255,000 for the 2000 Quarter and the 2000 Period, respectively. There
were no such corresponding revenues or costs in fiscal 1999.
Field selling, general and administrative ("SG&A") expenses decreased as a
percentage of sales for the Resorts Division during the 2000 Quarter and
increased as a percentage of sales for the 2000 Period, from the 1999 Quarter
and Period, respectively. The reduction in the 2000 Quarter reflects the
winding down of operations at the Company's Orlando, Florida sales office. In
July 1999, the Company decided to sell its OSR II Timeshare Interest inventory
exclusively through certain of its other vacation club sales offices in less
competitive markets than Orlando. Marketing costs in Orlando were also
significantly higher than in other markets where the Company operates. The
increase in the 2000 Period was primarily due to a more aggressive marketing
program which was implemented at the Charleston sales office, the start-up of
which generated $1.7 million of SG&A expenses as compared to $2.1 million in
sales generated during the 2000 Period. High operating expenses continued at
the Company's recently opened Jeffersonville, Indiana off-site sales office
(serving the Louisville, Kentucky market) which increased the overall
percentage of field SG&A in relation to total resort sales as compared to the
1999 Period.
Residential Land and Golf Division. During the 1999 Quarter and the 2000
Quarter, residential land and golf sales contributed $35.5 million or 57.8% and
$29.7 million or 45.3%, respectively, of the Company's total consolidated
sales. During the 1999 Period and the 2000 Period, residential land and golf
sales contributed $67.2 million or 57.4% and $60.2 million or 46.9%,
respectively, to the Company's total consolidated sales.
The table set forth below outlines the number of parcels sold and the average
sales price per parcel for the Residential Land and Golf Division for the
periods indicated, before giving effect to the percentage-of -completion method
of accounting and excluding any bulk sales.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
----------------------------- ------------------------------
SEPTEMBER 27, OCTOBER 3, SEPTEMBER 27, OCTOBER 3,
1998 1999 1998 1999
------------- ---------- ------------- ----------
<S> <C> <C> <C> <C>
Number of parcels sold 566 471 1,211 1,005
Average sales price per parcel $47,391 $49,890 $48,512 $50,687
Gross margin 56.1% 57.2% 55.0% 55.3%
</TABLE>
The aggregate number of parcels sold decreased from the 1999 Quarter to the
2000 Quarter and from the 1999 Period to the 2000 Period primarily due to the
following:
o One of the reasons for the decrease in the number of parcels sold during
the 2000 Quarter represented a positive event. The sale of scattered
inventory in areas of the country which are no longer part of the
Company's focused residential land business decreased from 56 sales to 30
22
<PAGE> 23
sales in the 1999 Quarter and 2000 Quarter, respectively, and from 124
sales to 74 sales in the 1999 Period and 2000 Period, respectively. This
reduction in the sales of scattered inventory parcels had a positive
impact on average sales price as these lots are typically sold at reduced
prices to liquidate the inventory.
o The Company's Ranches of Sonterra property in Ruidoso, New Mexico,
generated sales of 22 parcels and 40 parcels during the 1999 Quarter and
Period, respectively. No sales were reported in the 2000 Quarter or
Period, as the remaining inventory was sold out over the second half of
fiscal 1999.
o Sales at the Company's Winding River golf community, located in Southport,
North Carolina, decreased from 76 sales to 42 sales in the 1999 Quarter
and 2000 Quarter, respectively, and from 133 sales to 107 sales in the
1999 Period and 2000 Period, respectively. The decrease in sales was
attributable to lower sales tours of the property resulting from the
impact of Hurricanes Floyd and Dennis, which struck the area in September.
o Lot sales at the Company's North Carolina Land region decreased from 104
sales to 53 sales in the 1999 Period and 2000 Period, respectively. Three
of the North Carolina properties, Hickory Bluffs, Bay Harbour and Seaside
at Winding River, generated 42 aggregate lot sales during the 1999 Period.
All of these properties were sold out during the second half of fiscal
1999.
o Combined sales at the Company's two Tennessee land properties, Crystal
Cove and Woodlake, decreased from 94 parcels sold in the 1999 Period to 58
parcels sold in the 2000 Period. Sales at Crystal Cove have been
temporarily paused in the 2000 Period due to a continuing delay in the
recording of a revised plat on a section of the property. Sales at
Woodlake decreased as the property is approaching the sell-out phase and
less inventory is available.
o Lot sales at the Company's Lake Ridge property located in Texas decreased
from 52 sales to 32 sales in the 1999 Quarter and 2000 Quarter,
respectively. The Company acquired additional acreage at Lake Ridge in the
2000 Quarter, however the closing on this section of the property was
delayed due to zoning matters. Therefore, sales of this new phase did not
commence until after the 2000 Quarter.
The average sales price per parcel increased in both the 2000 Quarter and 2000
Period as compared to the 1999 Quarter and 1999 Period. Average sales price per
parcel at The Landing at Southport project in North Carolina increased from
$69,155 to $96,500 in the 1999 Quarter and 2000 Quarter, respectively, and from
$52,706 to $84,327 in the 1999 Period and 2000 Period, respectively. The 2000
Quarter and Period included sales of larger acreage, waterfront parcels,
compared to lower-priced interior lot sales in the 1999 Quarter and Period.
Average sales prices at the Company's Winding River Plantation project in North
Carolina increased from $54,045 to $86,829 per parcel during the 1999 Quarter
and 2000 Quarter, respectively, and from $58,000 to $77,987 per parcel during
the 1999 Period and 2000 Period, respectively. Average sales price per parcel
at the Lake Ridge property in Texas increased from $72,327 to $98,669 in the
1999 Quarter and 2000 Quarter, respectively, and from $76,522 to $89,211 in the
1999 Period and 2000 Period, respectively. The increase in average sales prices
at both properties is primarily the result of the opening of new higher-priced
phases of existing properties, some of which feature water-access parcels.
Included in both the 2000 Quarter and the 2000 Period is a bulk sale of mineral
rights and related land in Colorado to a developer of oil and gas rights, which
contributed approximately $5.0 million and $4.3 million to Residential Land and
Golf Division sales and field operating profit, respectively.
Interest Income
Interest income was $3.5 million and $4.1 million for the 1999 Quarter and 2000
Quarter, respectively, and was $7.2 million and $7.9 million for the 1999
Period and 2000 Period, respectively. The Company's interest income is earned
from its notes receivable, securities retained pursuant to sales of notes
receivable (including REMIC transactions) and cash and cash equivalents. The
increase in interest income during the 2000 Quarter was primarily due to an
increase in the average notes receivable balance from $61.4 million to $81.7
million during the 1999 Quarter and 2000 Quarter, respectively. The increased
average notes receivable balances in the 2000 Quarter were primarily due to
increased financed sales of Timeshare Interests partially offset by notes
receivable sold. Approximately 95% of all of the Company's Timeshare Interest
buyers finance their purchases with the Company compared to approximately 2% of
residential land and golf buyers.
23
<PAGE> 24
Gain on Sale of Notes Receivable
During the 2000 Quarter, the Company recognized an $884,000 gain on sale of
notes receivable under a timeshare receivables purchase facility more fully
described under "Liquidity and Capital Resources - Credit Facilities for
Timeshare Receivables and Inventories". There were no such sales during the
1999 Quarter, however during the first quarter of fiscal 1999, the Company
recognized a $2.1 million gain on sale of notes receivable.
Selling, General and Administrative Expenses ("S, G & A Expenses")
The Company's S, G & A Expenses consist primarily of marketing costs,
advertising expenses, sales commissions and field and corporate administrative
overhead. S, G & A Expenses totaled $31.0 million and $35.7 million for the
three months ended September 27, 1998 and October 3, 1999, respectively. S, G &
A totaled $58.6 million and $70.0 million for the 1999 Period and 2000 Period,
respectively. As a percentage of total revenues, S, G & A Expenses were 45.3%
and 47.5% for the 1999 Quarter and 2000 Quarter, respectively, and were 44.1%
and 47.9% for the 1999 Period and 2000 Period, respectively.
The increase in S, G & A Expenses as a percentage of revenues in the 2000
Quarter and 2000 Period was the result of the growth of the Resorts Division
(from 43% to 53% of consolidated sales during the 1999 Period and 2000 Period,
respectively), where S, G & A Expenses are typically higher than for the
Residential Land and Golf Division.
Interest Expense
Interest expense totaled $3.4 million and $3.7 million for the 1999 Quarter and
2000 Quarter, respectively, and $7.1 million and $6.6 million for the 1999
Period and 2000 Period, respectively. The 9.3% increase in interest expense for
the 2000 Quarter was primarily due to interest incurred on an $8.9 million
hypothecation of timeshare receivables at the end of the first quarter of
fiscal 2000. The decrease in interest expense during the 2000 Period was
primarily due to an increase in the amount of interest capitalized to inventory
for the Company's resort and residential land and golf projects under
development. Capitalized interest totaled approximately $2.2 million and $2.8
million during the 1999 Period and 2000 Period, respectively. The increase in
interest capitalized was commensurate with the increase in the average
inventory balance during these periods.
Provision for Loan Losses
The Company recorded a provision for loan losses totaling $599,000 and $1.5
million during the 1999 Quarter and 2000 Quarter, respectively, and $892,000
and $2.3 million during the 1999 Period and 2000 Period, respectively. The
increase in the provision was due to an increase in the notes receivable
portfolio during the 2000 Quarter and Period as compared to the 1999 Quarter
and Period, respectively. The increase in the portfolio is due to increased
timeshare loans (where historical default rates exceed those for land loans),
and therefore higher provisions were recorded.
The allowance for loan losses by division as of March 28, 1999 and
October 3, 1999 was (amounts in thousands):
<TABLE>
<CAPTION>
RESIDENTIAL
RESORTS LAND AND GOLF
DIVISION DIVISION OTHER TOTAL
-------- -------------- ------- --------
<S> <C> <C> <C> <C>
MARCH 28, 1999
Notes receivable $ 54,384 $ 11,105 $ 1,209 $ 66,698
Less: allowance for loan losses (1,983) (335) -- (2,318)
-------- -------- ------- --------
Notes receivable, net $ 52,401 $ 10,770 $ 1,209 $ 64,380
======== ======== ======= ========
Allowance as a % of gross notes receivable 3.6% 3.0% --% 3.5%
======== ======== ======= ========
OCTOBER 3, 1999
Notes receivable $ 71,799 $ 13,666 $ 991 $ 86,456
Less: allowance for loan losses (2,540) (477) -- (3,017)
-------- -------- ------- --------
Notes receivable, net $ 69,259 $ 13,189 $ 991 $ 83,439
======== ======== ======= ========
Allowance as a % of gross notes receivable 3.5% 3.5% --% 3.5%
======== ======== ======= ========
</TABLE>
24
<PAGE> 25
The allowance for loan losses as a percentage of the gross notes receivable
balance increased at October 3, 1999, for the Residential Land and Golf
Division, as the Company exchanged its residual investments in a 1994 REMIC
transaction for the underlying mortgages, a significant portion of which were
delinquent. The 1994 REMIC investment was exchanged during the 2000 Quarter in
connection with the termination of the REMIC, as all of the senior 1994 REMIC
security holders had received all of the required cash flows pursuant to the
terms of their REMIC certificates. Although the Company had previously recorded
an unrealized loss of $304,000 on this available-for-sale security, the Company
only realized a $179,000 loss on the exchange.
Other notes receivable primarily include secured promissory notes receivable
from commercial enterprises upon their purchase of bulk parcels from the
Company's Residential Land and Golf Division. The Company monitors the
collectibility of these notes and has deemed them to be collectible based on
various factors, including the value of the underlying collateral.
Provision for Income Taxes
The provision for income taxes decreased as a percentage of income before taxes
from 40.0% to 39.0% during the 1999 Period and 2000 Period, respectively. The
decrease was primarily due to state tax savings generated by a restructuring of
the Company's subsidiaries in a state where the Company has significant
operations.
Extraordinary Item
The Company recognized a $1.7 million extraordinary loss on early
extinguishment of debt, net of taxes, during the 1999 Period in connection with
the Offering of the Notes described in Note 5 of Notes to Condensed
Consolidated Financial Statements, contained elsewhere herein.
Summary
Based on the factors discussed above, the Company's net income increased from
$5.5 million to $5.9 million in the 1999 Quarter and 2000 Quarter,
respectively, and from $9.5 million to $10.3 million in the 1999 Period and
2000 Period, respectively.
CHANGES IN FINANCIAL CONDITION
Consolidated assets of the Company increased $31.6 million from March 28, 1999
to October 3, 1999. This increase is primarily due to a net $29.7 million
increase in inventory, primarily due to the acquisition of additional
properties with purchase prices totaling $25.2 million, and $45.3 million of
development spending on the Company's resort and residential land properties
partially offset by inventory sold during the period. Among the properties
acquired during the 2000 Period was a 1,766 acre tract adjacent to the
Company's successful Lake Ridge at Joe Pool Lake residential land project in
Dallas, Texas. The additional tract was acquired for approximately $11.6
million. Also, Brickshire, a new Bluegreen Golf Community situated on 1,135
acres in New Kent County, Virginia, was acquired for approximately $4.3
million. In addition, as a result of the foreclosure of property securing
certain notes receivable from AmClub, Inc. (see Note 3 of Notes to Condensed
Consolidated Financial Statements), the Company received residential land and
land for future resort development at the Shenandoah Crossing Farm & Club
resort in Gordonsville, Virginia with a carrying value of $3.3 million. The
remaining increase in total assets is due to development spending on the
Company's Carolina National Golf Club (included in property and equipment) and
is partially offset by the decrease in contracts receivable on the Company's
residential land and golf sales due to increased volume of lot closings on
sales recognized in the fourth quarter of fiscal 1999 and lower new sales
volume during the 2000 Quarter. Another significant increase was the $14.9
million increase in the net notes receivable balance, primarily due to new
notes receivable generated from the sale of timeshare interests during the 2000
Period, net of $19.3 million of notes receivable sold pursuant to its timeshare
receivable purchase facility (see "Liquidity and Capital Resources") during the
2000 Quarter.
Consolidated liabilities increased $26.4 million from March 28, 1999 to October
3, 1999. The increase is primarily due to an $8.9 million hypothecation of
timeshare notes receivable and $4.2 million hypothecation of Residential Land
and Golf Division notes receivable under existing receivable financing
facilities (see "Liquidity and Capital Resources"). In addition, the Company
incurred an aggregate $28.0 million in borrowings for the acquisition and
development of its resort, residential land and golf projects. This increase
was partially offset by $6.7 million of payments on receivable-backed notes
payable, the recognition of $1.8 million of income previously deferred due to
the percentage-of-completion method of accounting and a $5.6 million decrease
in accrued interest expense.
Total stockholders' equity increased $5.3 million during the 2000 Period,
primarily due to net income of $10.3 million and $185,000 of proceeds and
related income tax benefits from the exercise of stock options. These increases
were partially offset by the Company's repurchase of $5.4 million of Common
Stock (1.1 million shares) to be held in treasury. The Company's book value per
common share increased from $4.76 to $4.96 at March 28, 1999 and October 3,
1999, respectively. The debt-to-equity ratio increased from 1.49:1 to 1.67:1 at
March 28, 1999 and October 3, 1999, respectively, primarily due to the treasury
stock purchases and additional borrowings discussed above.
25
<PAGE> 26
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, (ii) down payments on lot and timeshare sales which are
financed, (iii) principal and interest payments on the purchase money mortgage
loans and contracts for deed arising from sales of Timeshare Interests and
residential land lots (collectively "Receivables") and (iv) proceeds from the
sale of, or borrowings collateralized by, notes receivable. 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 Company anticipates that it will continue to require external
sources of liquidity to support its operations and satisfy its debt and other
obligations and to provide funds for future strategic acquisitions, primarily
for the Resorts Division.
Credit Facilities for Timeshare Receivables and Inventories
The Company maintains various credit facilities with financial institutions
that provide for receivable financing for its timeshare projects.
On June 26, 1998, the Company executed a timeshare receivables purchase
facility with a financial institution. Under the purchase facility (the
"Purchase Facility"), a special purpose finance subsidiary of the Company may
sell up to $100 million aggregate principal amount of timeshare receivables to
the financial institution in securitization transactions. The Purchase Facility
has detailed requirements with respect to the eligibility of receivables for
purchase. Under the Purchase Facility, a purchase price equal to approximately
97% (subject to adjustment in certain circumstances) of the principal balance
of the receivables sold is paid at closing in cash, with a portion deferred
until such time as the purchaser has received their portion of principal
payments (as defined in the Purchase Facility agreement), a return equal to the
weighted-average term treasury rate plus 1.4%, all servicing, custodial and
similar fees and expenses have been paid and a cash reserve account has been
funded. If the Company does not sell to such financial institution during the
term of the Purchase Facility notes receivable with a cumulative principal
amount of at least $99 million, the return to the purchaser will increase by
.05% for each $10 million shortfall, to a maximum applicable margin of 1.60%.
Receivables are sold without recourse to the Company or its special purpose
finance subsidiary except for breaches of representations and warranties made
at the time of sale. The financial institution's obligation to purchase under
the Purchase Facility will terminate upon the occurrence of specified events.
The Company acts as servicer under the Purchase Facility for a fee, and is
required to make advances to the financial institution to the extent it
believes such advances will be recoverable. The Purchase Facility includes
various conditions to purchase and other provisions customary for a transaction
of this type. The Purchase Facility has a term of two years. Through October 3,
1999, the Company sold approximately $74.0 million in aggregate principal
amount of timeshare receivables under the Purchase Facility.
The Company has a two-year, $35 million timeshare receivables warehouse loan
facility, which expires in June 2000, with the same financial institution.
Loans under the warehouse facility bear interest at LIBOR plus 2.75%. The
warehouse facility has detailed requirements with respect to the eligibility of
receivables for inclusion and other conditions to funding. The borrowing base
under the warehouse facility is 95% of the outstanding principal balance of
eligible notes arising from the sale of Timeshare Interests. The warehouse
facility includes affirmative, negative and financial covenants and events of
default. On June 30, 1999, the Company borrowed $8.9 million under the
warehouse facility, which will be repaid as principal and interest payments are
collected on the timeshare notes receivable which collateralize the loan, but
in no event later than June 26, 2000. As of October 3, 1999, the outstanding
balance on this facility was $4.2 million, primarily due to a $3.9 million
prepayment during the 2000 Quarter in connection with the sale of some of the
hypothecated receivables through the Purchase Facility. The Company is
currently negotiating an extension of the maturity date on this recent
borrowing. There can be no assurances that such negotiations will be
successful.
In addition, the same financial institution referred to in the preceding
paragraphs has provided the Company with a $25 million acquisition and
development facility for its timeshare inventories. The facility includes a
two-year draw down period, which expires in October 2000, and matures in
November, 2005. Principal will be repaid through agreed-upon release prices as
Timeshare Interests are sold at the financed resort, subject to minimum
required amortization. The indebtedness under the facility bears interest at
the three-month LIBOR plus 3%. With respect to any inventory financed under the
facility, the Company will be required to have provided equity equal to at
least 15% of the approved project costs. On September 14, 1999, the Company
borrowed approximately $14 million under the acquisition and development
facility. The principal must be repaid by November 1, 2005, through agreed-upon
release prices as Timeshare Interests in the Company's Lodge Alley Inn resort
in Charleston, South Carolina are sold, subject to minimum required
amortization.
26
<PAGE> 27
Credit Facilities for Residential Land and Golf Receivables and Inventories
The Company has a $20.0 million revolving credit facility with a financial
institution for the pledge of Residential Land and Golf Division Receivables.
The Company has historically used the facility as a warehouse until it
accumulates a sufficient quantity of residential land and golf receivables to
sell under a private placement REMIC transaction not registered under the
Securities Act. There can be no assurances that the Company will accumulate a
sufficient quantity of receivables to make a REMIC transaction viable. Under
the terms of this facility, the Company is entitled to advances secured by
eligible Residential Land and Golf Division receivables up to 90% of the
outstanding principal balance. 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
October 3, 1999, the outstanding principal balances under the receivables and
development portions of this facility were approximately $7.9 million and
$600,000, respectively. 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 has a $35 million revolving credit facility, which expires in March
2002, with a financial institution. The Company uses this facility to finance
the acquisition and development of residential land projects and, potentially
to finance land receivables. The facility is 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 million.
The interest charged on outstanding borrowings is prime plus 1.25%. On
September 14, 1999, in connection with the acquisition of 1,766 acres adjacent
to the Company's Lake Ridge residential land project in Dallas, Texas ("Lake
Ridge II"), the Company borrowed approximately $12 million under the revolving
credit facility. Principal payments will be effected through agreed-upon
release prices as lots in Lake Ridge II are sold. The principal must be repaid
by September 14, 2004. On October 6, 1999, in connection with the acquisition
of 6,966 acres for a new residential land project in Canyon Lake, Texas, the
Company borrowed $11.9 million under the revolving credit facility. Principal
payments will be effected through agreed-upon release prices as lots in the new
project are sold. The principal must be repaid by October 6, 2004.
On September 24, 1999, the Company obtained two lines-of-credit with a bank for
the purpose of acquiring and developing a new residential land and golf course
community in New Kent County, Virginia, to be known as Brickshire. The
lines-of-credit have an aggregate borrowing capacity of approximately $15.8
million. On September 27, 1999, the Company borrowed approximately $2.0 million
under one of the lines-of-credit in connection with the acquisition of the
Brickshire property. The outstanding balances under the lines-of-credit bear
interest at prime plus 0.5% and interest is due monthly. Principal payments
will be effected through agreed-upon release prices as lots in Brickshire are
sold, subject to minimum required quarterly amortization commencing on April
30, 2002. The principal must be repaid by January 31, 2004. The loan is secured
by the Company's residential land lot inventory in Brickshire.
Concurrent with obtaining the Brickshire lines-of-credit discussed above, the
Company also obtained from the same bank a $4.2 million line-of-credit for the
purpose of developing a golf course on the Brickshire property (the "Golf
Course Loan"). The outstanding balances under the Golf Course Loan will bear
interest at prime plus 0.5% and interest is due monthly. Principal payments
will be payable in equal monthly installments of $35,000 commencing September
1, 2001. The principal must be repaid by October 1, 2005. The loan is secured
by the Brickshire golf course property. As of October 3, 1999, no amounts were
outstanding under the Golf Course Loan.
Over the past three years, the Company has received approximately 85% to 98% of
its land sales proceeds 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.
27
<PAGE> 28
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 and golf properties
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.
Other Credit Facility
On November 3, 1999, the Company increased the borrowing capacity on its
unsecured line-of-credit with a bank from $5 million to $10 million. Amounts
borrowed under the line will bear interest at LIBOR plus 1.75%. Interest is due
monthly and all principal amounts are due on December 31, 2000. Through October
3, 1999, the Company has not borrowed any amounts under the line.
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, 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 and Golf 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 and golf inventory in such regions as existing projects are
sold-out.
The Company estimates that the total cash required to complete preparation for
the sale of its residential land and golf and timeshare property inventory as
of October 3, 1999 is approximately $217.7 million (based on current costs),
expected to be incurred over a five-year period. 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.
The Company believes that its existing cash, anticipated cash generated from
operations, anticipated future permitted borrowings under existing or proposed
credit facilities and anticipated future sales of notes receivable under the
Purchase Facility will be sufficient to meet the Company's working capital,
capital expenditures and debt service requirements for the foreseeable future.
Based on outstanding borrowings at October 3, 1999, and the credit facilities
described above, the Company has approximately $104.2 million of available
credit at its disposal, subject to customary conditions, compliance with
covenants and eligible collateral. This amount does not include the remaining
$26.0 million of unused capacity under the Purchase Facility or the $15.0
million of gross proceeds to the Company upon the sale of the remaining 1.8
million shares of Common Stock to the Funds under the Stock Agreement. 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, bear fixed or variable rate interest and may be subject to such
terms as the lender may require and management deems prudent. There can be no
assurance that sufficient funds will be available from operations or under
existing, proposed or future revolving credit or other borrowing arrangements
or receivables purchase facilities to meet the Company's cash needs, including,
without limitation, its debt service obligations.
The Company's credit facilities and other outstanding debt 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, limits on the payment of
dividends and other restricted payments, the incurrence of liens, transactions
with affiliates, covenants concerning net worth, fixed charge coverage
requirements, debt-to-equity ratios and events of default. 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. 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.
28
<PAGE> 29
IMPACT OF YEAR 2000
The Company is devoting resources to minimize the risk of potential disruption
from the "year 2000 (`Y2K') problem". This problem results from computer
programs having been written using two digits (rather than four) to store date
information. Information technology ("IT") systems that have date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000, which could result in miscalculations and system failures. The problem
also extends to "non-IT" (operation and control) systems that rely on embedded
microchips that may be date sensitive. In addition, like other business
enterprises, the Company has a risk from Y2K failures on the part of its major
business counterparts, including financial institutions, suppliers, contractors
and service providers, as well as potential failures in public and private
infrastructure services, including electricity, water, gas, transportation and
communications.
State of Readiness
The Company's plan to resolve the Y2K issue involves the following three
phases: Assessment, Remediation, and Testing. The Assessment phase includes
identifying all IT and non-IT systems currently being used by the Company and
determining whether the systems are Y2K compliant (based on vendor
representations or system documentation) and if not, identifying the tasks
necessary to address the related issues. The Assessment phase also includes
obtaining information regarding the Y2K state of readiness of third parties
that the Company depends on to provide materials or services, whether or not
the Company's computer systems interface with those of the third party. The
Company has completed its assessment of its IT and non-IT systems. The Company
has completed its assessment of the Y2K readiness of several identified third
parties that, if their own systems are not Y2K compliant, could cause an
interruption in the Company's business. Information about third parties was
obtained by direct written correspondence or by reviewing the Y2K disclosures
of third parties in public filings with the Securities and Exchange Commission,
as applicable. There can be no assurances as to the accuracy of the
representations made to the Company by third parties regarding the Y2K issue
and whether interruptions to the Company's operations caused by the Y2K issue's
impact on a third party's operations would have a material adverse effect on
the Company.
The Remediation phase involves executing the tasks identified during the
Assessment phase as necessary to make the Company's systems Y2K compliant. The
Company has developed a detail project plan, which includes each system
identified during the Assessment phase, a description of the tasks necessary to
achieve Y2K compliance, a projected timetable for completion and an assignment
of responsibility for completing the work. As several of the Company's critical
systems are already Y2K compliant and will require no reprogramming, management
estimates that the Company is approximately 95% complete with the Remediation
phase. Remaining tasks are anticipated to be completed by November 30, 1999,
and primarily include the testing of vendor-supplied software. The Remediation
phase also includes identifying alternative vendors to replace any third
parties who, based on information about Y2K readiness obtained during the
Assessment phase, are estimated to cause a critical interruption to the
Company's business based on the third party's inability to address the Y2K
issue by January 1, 2000. The Company intends to address this portion of the
Remediation phase by November 30, 1999. There can be no assurances that
alternative third parties will be available or that the Company will be able to
modify its existing business relationships to new vendors in a timely manner or
at costs that are not materially higher than current expenses for these
vendors.
The Testing phase involves establishing a test environment, performing system
testing and evaluating the results. The Company intends to test all of its
critical systems, including its sales and marketing systems, financial
accounting systems, customer service systems and payroll systems to ensure that
vendor representations as to Y2K compliance are accurate and that there are no
issues relative to system interfaces. The Company commenced the testing process
in August 1999, with all critical systems anticipated to be tested by November
30, 1999. There can be no assurances that vendor representations regarding the
Y2K compliance of a critical system may not prove to be inaccurate or that new
Y2K issues may not be discovered during the Testing phase.
Cost
The Company will utilize both internal and external resources to remediate and
test its systems regarding the Y2K issue. The total cost of the Y2K project is
estimated to be $460,000 and is being funded through operating cash flows.
Through October 3, 1999, the Company has incurred $298,000, of which $244,000
has been capitalized and $54,000 has been expensed. Of the total remaining
project costs, approximately $156,000 is attributable to the purchase of new
marketing software and hardware, which will be capitalized. Such marketing
software and hardware would have been replaced for reasons other than the Y2K
issue. The remaining $6,000 relates to external costs of repairing existing
software and hardware and testing systems. All internal payroll costs relating
to the assessment, remediation and testing phases of the Y2K project are
expensed as incurred and are excluded from the above amounts.
29
<PAGE> 30
Risk
Management of the Company believes it has an effective program in place to
resolve the Y2K issue in a timely manner. As noted above the Company has not
yet completed all necessary phases of the Y2K project. The most reasonably
likely worst case scenario, in the event that the Company does not complete
certain critical phases or that the testing phase uncovers previously
unforeseen Y2K issues would be an inability (other than by manual means) to
write sales contracts, collect payments, make cash disbursements to employees
or vendors or make reservations for customers. Also, potential disruptions in
the areas in which the Company must rely on third parties whose systems may not
work properly after January 1, 2000 could affect important operations of the
Company, either directly or indirectly, in a significant manner, and have a
material adverse effect on its results of operations and financial condition.
In addition, as is the case for most companies involved in Y2K system
modifications, disruptions in the general economy resulting from Y2K issues
could also materially adversely affect the Company's ability to market and sell
its products. The Company could also be subject to litigation for computer
system failure, equipment shutdown at its resort facilities or failure to
properly date business records. The amount of potential liability and lost
revenue cannot be reasonably estimated at this time.
Contingency Plan
The Company currently has no contingency plans in place in the event it does
not complete all phases of its Y2K program. The Company plans to finalize the
evaluation of the status of completion in November 1999 and, if necessary,
develop contingency plans for any third party relationships that are not
expected to be Y2K compliant by January 1, 2000.
The preceding Y2K discussion contains "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such
statements, including without limitation, anticipated costs and the dates by
which the Company expects to complete certain actions, are based on
management's best current estimates, which were derived utilizing numerous
assumptions about future events, including the continued availability of
certain resources, representations received from third parties 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 ability to identify and remediate all relevant information
technology and non-information technology systems, results of Y2K testing,
adequate resolution of Y2K issues by businesses and other third parties who are
service providers, suppliers or customers of the Company, unanticipated system
costs, the adequacy of and ability to develop and implement contingency plans
and similar uncertainties. The "forward-looking statements" made in the
foregoing Y2K discussion speak only as of the date on which such statement is
made and the Company undertakes no obligation to update any forward-looking
statement to reflect events or circumstances after the date on which such
statement is made or to reflect the occurrence of unanticipated events.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For a complete description of the Company's foreign currency and interest rate
related market risks, see the discussion in the Company's Annual Report on Form
10-K for the year ended March 28, 1999. There has not been a material change in
the Company's exposure to foreign currency and interest rate risks since March
28, 1999.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In the ordinary course of its business, the Company from time to time becomes
subject to claims or proceedings relating to the purchase, subdivision, sale
and/or financing of real estate. Additionally, from time to time, the Company
becomes involved in disputes with existing and former employees. The Company
believes that substantially all of the above are incidental to its business.
30
<PAGE> 31
Certain other litigation involving the Company is described in the Company's
Annual Report on Form 10-K for the year ended March 28, 1999. Subsequent to the
filing of such Form 10-K, no material developments have occurred with respect
to such litigation.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders was held on July 28, 1999, and the results
of that voting were set forth in the Company's Quarterly Report on Form 10-Q
for the period ended July 4, 1999.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.129- Employment Agreement between David D. Philp and the Company
dated August 30, 1999.
10.130- Second Amended and Restated Credit Facility Agreement entered
into as of September 14, 1999, between Finova Capital
Corporation and the Registrant.
10.135- Acquisition Cost Reimbursement Loan Agreement dated as of
September 14, 1999, by and between Bluegreen Vacations
Unlimited, Inc. and Heller Financial, Inc.
10.140- Loan Agreement dated as of September 24, 1999, between Bluegreen
Properties of Virginia, Inc. and Branch Banking and Trust
Company.
10.152- Modification No. 2 to the Loan Agreement dated November 3, 1999,
by and among the Registrant, certain subsidiaries of the
Registrant and First Union National Bank, for the $10 million,
unsecured revolving line-of-credit due December 31, 2000.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K
None.
31
<PAGE> 32
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BLUEGREEN CORPORATION
(Registrant)
Date: November 15, 1999 By: /s/ GEORGE F. DONOVAN
-----------------------------------
George F. Donovan
President and
Chief Executive Officer
Date: November 15, 1999 By: /s/ JOHN F. CHISTE
-----------------------------------
John F. Chiste
Senior Vice President,
Treasurer and Chief Financial Officer
(Principal Financial Officer)
Date: November 15, 1999 By: /s/ ANTHONY M. PULEO
-----------------------------------
Anthony M. Puleo
Vice President and
Chief Accounting Officer
(Principal Accounting Officer)
32
<PAGE> 1
EXHIBIT 10.129
EMPLOYMENT AGREEMENT
AGREEMENT made as of this 30th day of August, 1999, between BLUEGREEN
CORPORATION, a Massachusetts corporation (hereafter "Bluegreen"), having a usual
place of business in Boca Raton, Florida, and David D. Philp (hereafter
"Employee"), an individual and resident of Florida.
1. GENERAL.
The parties desire to enter into this Agreement to ensure the continued service
of Employee to Bluegreen and to ensure Employee of his long-term employment as
the Chief Investment Officer of Bluegreen and Senior Vice President of
Bluegreen.
The Employee represents that he has, and will continue to have, knowledge of the
timeshare development business. The Employee acknowledges that by virtue of his
position as Chief Investment Officer and Senior Vice President he will acquire
information relating to the affairs of Bluegreen, and, by reason of his
position, that this knowledge does and will include proprietary knowledge, trade
secrets and all manner of confidential, proprietary and sensitive information.
NOW, THEREFORE, the parties agree further as follows:
2. TERM.
The term of this Agreement shall be for three (3) years from date hereof,
provided further that this Agreement shall automatically renew itself at the end
of the third year and each year extension for a one year period, unless
terminated as provided in paragraph 10 herein.
3. POSITION.
Employee shall be employed as Chief Investment Officer of Bluegreen and Employee
shall be elected to the position of Senior Vice President of Bluegreen and serve
in that position at the discretion of the board of Directors. Employee shall
also serve as a member of Bluegreen's Investment Committee during the term
herein. The Investment Committee is responsible for the review and approval of
Bluegreen's major investments and acquisitions. As of the date of this
Agreement, the members of the Investment Committee include George F. Donovan,
President and Chief Executive Officer, John F. Chiste, Senior Vice President,
Treasurer and Chief Financial Officer, L. Nicholas Gray, Senior Vice President,
Resorts Division, Daniel C. Koscher, Senior Vice President, Land Division and
Patrick E. Rondeau, Senior Vice President, Director of Corporate Legal Affairs
and Clerk.
<PAGE> 2
4. DUTIES.
Employee shall have and perform the duties customarily assumed by the Chief
Investment Officer of a corporation, which shall include duties over the affairs
of Bluegreen as a Senior Vice President and such other duties as shall be
assigned to him by the Chief Executive Officer. Additionally, Employee shall
have duties, authority and responsibility commensurate with his position and
those of executives of similarly sized companies in the industry of which
Bluegreen is a part.
Employee shall devote all of his business time to the business and affairs of
Bluegreen. Employee shall devote his business time exclusively to the
performance of his duties hereunder and shall carry out his duties in a good and
professional manner. We recognize that Employee has minor outside duties
associated with being a restaurant owner/board member.
Employee shall be subject, and shall report, to the Chief Executive Officer of
Bluegreen.
5. ANNUAL BASE SALARY.
Beginning on the date of the commencement of his employment in the Corporate
office no later than September 30, 1999, Employee's base salary through April 1,
2000, shall be at the rate of $175,000 annually, payable bi-weekly. Thereafter,
Employee's base salary amount will be reviewed annually at the commencement of
each fiscal year. This base salary shall not be reduced below $175,000 annually
during the term of this Agreement, including renewals herein.
6. ANNUAL BONUS.
Employee shall be eligible to receive cash bonuses payable annually (or at such
lesser intervals as may be approved by the Board of Directors), pursuant to the
incentive bonus plan of Bluegreen as approved by the Board of Directors from
time to time. Bluegreen agrees that the Employee shall receive as a bonus in
April 2000 the amount of $125,000. Commencing with Fiscal Year 2001 (April 3,
2000 through April 1, 2001), and for each fiscal year thereafter the annual
bonus amount is subject to periodic review and modification.
For Fiscal Year 2001, Bluegreen agrees to include in the bonus pool for senior
management the sum $225,000 for the Employee which he may earn based on the
contribution made by the Employee and the success of Bluegreen in meeting its
strategic objectives, subject to Board of Director approval, notwithstanding
anything to the contrary. Bluegreen agrees that the Employee's annual cash
compensation (base salary plus annual bonus) during the term of the agreement
shall not go below $300,000 per year.
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7. INITIAL STOCK OPTIONS.
The Employee shall receive as of the day this agreement is executed a Stock
Option Agreement for the 100,000 shares of Bluegreen stock with vesting of
option shares commencing and at a price set as of the close of the stock market
for that day. The stock options shall be granted pursuant to the existing
Employee Incentive Stock Option Plan.
8. OPTION REIMBURSEMENT.
The Employee represents to Bluegreen that he presently holds non-vested options
for stock of his present employer, which currently have a potential value to the
Employee. Bluegreen agrees, as an incentive to the Employee, to compensate the
Employee for the lost opportunity on the non-vested stock options the sum of
$150,000 subject to the approval of the Board of Directors, which will be paid
in the following manner. On the first pay period following the day the Employee
commences work for Bluegreen the Employee shall receive a check for 60% of the
amount set forth above. On the first pay period following the anniversary of his
commencement of work for the next two years the remaining 40% shall be paid in
equal installments.
9. BENEFITS.
(a) Employee shall be entitled, in accordance with Bluegreen's
policies and procedures for senior executive personnel (including
members of Investment Committee) and Plan Documents, to
participation in any pension, savings, 401(k), stock option,
employee stock ownership and profit-sharing plans, health
insurance, leave, vacation and other employment benefits as are
made available from time to time by the Board to or for the
benefit of Company management.
(b) During his term of employment, Employee shall be entitled to
prompt reimbursement of all reasonable expenses incurred in the
course of and pursuant to the performance of his duties hereunder
and in connection with promoting and carrying out the business of
Bluegreen in accordance with Company policy and procedures.
Employee agrees to maintain adequate documentary proof and written
records, in such detail as the Company may reasonably request, of
all fees, costs and expenses to be reimbursed by the Company
hereunder.
(c) Employee shall be eligible beginning in April 2000 to receive
additional stock options as may be approved by the Board of
Directors from time to time.
(d) Employee shall also receive reimbursement for reasonable
relocation expenditures including, but not limited to: (1)
transportation of Employee's household goods from California to
the Boca Raton, Florida area;
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(2) temporary housing in the Boca Raton, Florida area for a period
of up to ninety days; and (3) reimbursement for travel related
expenditures incurred for three (3) househunting trips. Employee
agrees to coordinate all relocation activities through Bluegreen's
Human Resources department. Reimbursed relocation expenditures
will be treated as taxable compensation to Employee as required by
IRS regulations.
9. AUTOMATIC RENEWAL; NOTICE OF NON-RENEWAL.
(a) This Agreement shall automatically renew itself at the end of the
third year and each year thereafter, unless either party shall
give notice to the other of their intention not to renew the
Agreement. Any notice of intention not to renew shall be given at
least sixty (60) days prior to the expiration of the applicable
term.
(b) A notice of non-renewal by Bluegreen shall be deemed a termination
without cause as of the end of the then term, except that if the
determination by Bluegreen not to renew is based upon an event or
action which would permit a for cause termination as defined
herein, it shall be deemed a "for cause" termination.
A notice of non-renewal by Employee shall be deemed a termination
without cause.
(c) Bluegreen may, by written notice to Employee, terminate this
Agreement with or without cause at any time, subject to provisions
as set forth in paragraphs 11 & 15.
9. TERMINATION WITHOUT CAUSE BY BLUEGREEN.
(a) Bluegreen may, by written notice to Employee, terminate Employee's
employment hereunder at any time without cause, or elect not to
renew this Agreement without cause, provided that it delivers to
Employee a sixty (60) day written notice of such termination or
election and provides to Employee the payments required in this
paragraph. Upon termination of Employee's employment pursuant to
this paragraph, Employee shall be paid the base salary and a
minimum bonus amount of $125,000 to which Employee is entitled
under paragraph 5 and 6 herein, at Bluegreen's regular and
customary intervals for such payment, subject to the appropriate
deductions in accordance with federal and state law and such
deductions for continuing benefits, if any.
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Upon the termination of employment, Bluegreen shall further
promptly pay to Employee all other amounts to which Employee is
entitled in accordance with this Agreement and Bluegreen policies
and procedures (e.g. expense accounts, vacation pay, etc.).
(a) Upon termination without cause by Bluegreen, Employee shall, in
addition to the payment of the base salary and minimum bonus above
provided for, and to all other amounts due him from Bluegreen,
receive at the same time as bonus payments are made to other
executive Employees, a pro rata share of any bonus payable for the
fiscal year during which the termination occurred, determined upon
the same basis that his bonus would have been determined had he
continued in employment for the entire fiscal year of termination,
provided that at the time of payment he is not in breach of any of
the continuing obligations imposed upon him in paragraph 17
herein. The Employee shall be entitled to receive a pro rata share
of the bonus amount only if that amount would exceed the minimum
bonus guaranteed by this agreement.
(b) Upon Employee's termination by Bluegreen without cause, all
options theretofore granted to Employee that are not vested shall
immediately vest including any balance due, in whole or in part,
on amounts owed pursuant to paragraph 8 herein will be immediately
paid.
12. TERMINATION BY EMPLOYEE WITHOUT CAUSE.
If Employee terminates this Agreement upon sixty (60) days notice to Bluegreen
without reason or cause as defined in paragraph 16, or gives notice of his
intention not to renew, Employee shall be entitled to receive only those amounts
owing to him as defined in Paragraph 5 herein, as of the time of the termination
of his employment, which amounts shall be paid to him promptly on the
termination of employment in accordance with Bluegreen policies and procedures.
13. DISABILITY.
In the event that Employee shall be incapacitated by reason of mental or
physical disability during the term of his employment hereunder so that he is
substantially prevented from performing his duties and services hereunder for a
period of ninety (90) consecutive days, or for shorter periods aggregating 120
days during any 12-month period, Bluegreen thereafter shall have the right to
terminate Employee's employment under this Agreement by sending written notice
of such termination to Employee or his legal representative and thereupon
Employee's employment hereunder shall immediately terminate. Upon such
termination, Employee shall be entitled to receive and shall be paid by
Bluegreen, all amounts for business related expenses incurred by Employee on
behalf of Bluegreen, and on a bi-weekly basis, his base salary as in effect on
the date of termination for twelve (12) months. At such time, all options
theretofore granted to
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Employee that are not vested shall immediately vest, and any balance due, in
whole or in part, on amounts owed pursuant to paragraph 8 herein will be
immediately paid. Employee shall accept such payments in full discharge and
release of Bluegreen of and from any further obligations under this Agreement.
Such discharge and release shall not affect any rights or remedies which may be
available to Employee otherwise than under this Agreement.
14. DEATH.
In the event of Employee's death during the term of his employment hereunder,
Employee's designated beneficiary or, if no such beneficiary shall have been
designated by Employee, the estate of Employee, shall be entitled to receive and
shall be paid by Bluegreen any and all of Employee's unpaid salary compensation
due as of the date of his death, and any other amounts due to Employee, in each
case through the date of death. In addition, as of date of death, all options
theretofore granted to Employee that are not vested shall immediately vest, and
any balance due, in whole or in part, on amounts owed pursuant to paragraph 8
herein will be immediately paid. Except as otherwise noted herein, Employee
shall be entitled to no payments or benefits following the date of death. Such
payments shall be in full discharge and release of Bluegreen of and from any
further obligations under this Agreement. Such discharge and release shall not
affect any rights or remedies which may be available to Employee (or Employee's
estate) otherwise than under this Agreement.
15. TERMINATION FOR CAUSE BY BLUEGEEN.
(a) Bluegreen shall have the right to terminate the employment of
Employee subject to a thirty (30) day notification period or elect
not to renew this Agreement, for cause, at any time if:
(i) Employee shall be convicted by a court of competent and
final jurisdiction of any crime (whether or not involving
Bluegreen) which constitutes a felony in the jurisdiction
involved or shall be habitually drunk or intoxicated in
public or otherwise commit acts of moral turpitude in such
a manner as to materially and adversely reflect upon the
reputation of Bluegreen or its senior management; or
(ii) Employee shall commit any act of embezzlement, fraud or
similar dishonest and injurious conduct against or with
respect to Bluegreen; or
(iii) Employee shall demonstrate injurious misconduct in
connection with the performance of his duties and
responsibilities under this Agreement (and/or as assigned
to him from time to time by the Chief Executive Officer in
accordance with the provisions herein); or
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(iv) Employee shall demonstrate negligent, reckless or grossly
negligent and injurious conduct in connection with the
performance of, or a gross disregard for, his duties and
responsibilities under this Agreement and as assigned to
him from time to time by the Chief Executive Officer in
accordance with the provisions herein.
(a) Any determination to terminate Employee for cause pursuant to
paragraph 15 (a) herein shall be made in the good faith judgment
of the Chief Executive Officer following a bona fide investigation
conducted by Bluegreen and/or its designee.
(b) In the event that the employment of Employee shall be terminated
by Bluegreen for cause pursuant to this paragraph, Employee shall
be entitled to receive his salary, and any other amounts properly
due from Bluegreen to Employee, through the date of such
termination.
16. TERMINATION BY EMPLOYEE WITH CAUSE.
Employee may, by written notice to Bluegreen, terminate Employee's employment
hereunder, provided that he delivers to Bluegreen not less than sixty (60) days
advance written notice of such termination (the sixty (60) day period between
such notice and termination being referred to herein as the "Termination
Period"). During the Termination Period, so long as Employee performs his duties
and responsibilities as required in accordance with this Agreement (and so long
as Bluegreen is not entitled to terminate Employee for cause pursuant to
paragraph 15 herein, in which case the provisions of paragraph 15, and not this
paragraph 16, shall apply), Employee shall be entitled to the salary, bonus and
benefits (to the extent earned and accrued) described in this Agreement in
Paragraph 11, in each case, payable at Bluegreen's regular and customary
intervals for such payment or benefit.
The following events shall, ipso facto, constitute a termination
with cause:
(i) Employee is assigned to any position, duties or
responsibilities that are significantly diminished when
compared with the position, duties or responsibilities of
the Employee on the date of this Agreement, except when
such action is taken because of Employee's inability to
perform his duties;
(ii) the Employee is requested to engage in conduct that is
reasonably likely to result in a violation of law;
(iii) the failure by Bluegreen to obtain the assumption of, and
agreement to perform, this Agreement by any successor to
its business;
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(iv) repudiation by Bluegreen of any material obligation of
Bluegreen under this Agreement;
(v) the sale of all or substantially all of the business
and/or assets of Bluegreen or the liquidation of
Bluegreen;
(vi) a change in the Employee's direct reporting relationship.
17. RESTRICTION ON EMPLOYEE'S ACTIVITIES FOLLOWING TERMINATION.
Employee agrees that following termination by Bluegeen of his employment for
cause or termination by Employee of his employment without cause as defined
herein, and for a period of six (6) months thereafter:
(a) NON-COMPETITION. Employee shall not, directly or indirectly, for
himself or any other person or entity, engage in or have any
interest in any sole proprietorship, partnership, corporation,
association or business or any other person or entity (whether as
an employee, officer, director, partner, agent, security holder,
creditor, consultant or otherwise) that, directly or indirectly,
engages in competition (as defined herein) with Bluegreen and/or
any subsidiary Employee is involved with, provided, however, that
Employee may acquire, solely as an investment, shares of capital
stock or other equity securities of any company which are traded
on any national securities exchange or are regularly quoted in the
over-the-counter market, so long as the Employee does not control,
acquire a controlling interest in or become a member of a group
which exercises direct or indirect control of, more than five
percent (5%) of any class of capital stock of such corporation.
The Employee acknowledges that Bluegreen would be severely and
adversely affected if the Employee engages in competition with
Bluegreen.
(b) NONDISCLOSURE. Employee will not divulge, communicate, utilize or
exploit in any way other than in performing his duties hereunder,
any material confidential information (as hereinafter defined)
pertaining to the business of Bluegreen. Any material confidential
information or data now or hereafter acquired by the Employee with
respect to the business of Bluegreen (which shall include material
information concerning Bluegreen's sourcing information and
marketing and promotion of Bluegreen's products and services)
shall be deemed a valuable, special and unique asset of Bluegreen
that is received by the Employee in confidence and as a fiduciary,
and Employee shall remain a fiduciary to Bluegreen with respect to
all of such information during the Employee's employment hereunder
and for a period of six (6) months thereafter. In addition, with
respect to specific contractual relationships of Bluegreen,
Employee shall not divulge, communicate or utilize or exploit in
any way other than in performing his duties hereunder and
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shall remain a fiduciary with respect to confidential information
relating to such contractual relationships of Bluegreen for the
longer of (a) the term of such contract, or (b) six (6) months
after the end of the Employee's employment hereunder. For purposes
of this Agreement "confidential information" means information
disclosed to the Employee or known by the Employee as a
consequence of or through his employment by Bluegreen (including
information conceived, originated, discovered or developed by the
Employee) prior to or after the date hereof, and not generally
known, about Bluegreen's products and services. Notwithstanding
the above, any information generally available to the public or
information that has been previously disclosed by another
Bluegreen employee to the public is excluded.
(c) NON-SOLICITATION OF EMPLOYEES. Employee will not, directly or
indirectly, for himself or for any other person, firm, corporation
partnership, association or other entity attempt to recruit,
either directly or indirectly, any present employee of Bluegreen,
unless such employee has not been employed by Bluegreen for a
period in excess of six (6) months.
(d) BOOKS AND RECORDS. All books, records, accounts and similar
tangible repositories of confidential information of Bluegreen,
whether prepared by Employee or otherwise coming into Employee's
possession, shall be the exclusive property of Bluegreen and shall
be returned immediately to Bluegreen on termination of this
Agreement, or at the request of the Chief Executive Officer at any
time.
(e) COMPETITION. Competition, as used herein, shall mean any
organization or persons who are in the business of land
development or time sharing within any state or jurisdiction in
which Bluegreen is, at the time of termination of employment,
itself engaged in land development or time sharing.
18. INJUNCTION.
Employee acknowledges that the services to be rendered by him are of a special,
unique and extraordinary character, that, in connection with such services, he
will have access to confidential, proprietary and/or sensitive competitive
information vital to Bluegreen's business operations and prospects and that
therefore the restrictive covenants set forth in paragraph 17 are fair and
reasonable, are material to this Agreement and have materially induced Bluegreen
to enter into this Agreement and provide the benefits to Employee provided
hereunder. Accordingly, Employee consents and agrees that if he violates or
breaches any of the provisions of paragraph 17, Bluegreen would sustain
irreparable harm and, therefore, in addition to any other remedies which may be
available to it, Bluegreen shall be entitled to apply to any court of competent
jurisdiction, for an injunction restraining Employee from committing or
continuing any such violation of this Agreement, or for such other equitable or
special relief that Bluegreen shall deem
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appropriate in view of such violation. Nothing in this Agreement shall be
construed as prohibiting Bluegreen from pursuing any other remedy or remedies
including, without limitation, recovery of damages, permitted at law or in
equity.
19. MODIFICATION OF RESTRICTIONS.
In the event that any of the provisions continued in this agreement shall be
held to be in any way an unreasonable restriction on Employee or otherwise void
or unenforceable, then the court so holding may reduce the territory and/or
period of time in which such restriction operates, or modify or eliminate any
such restriction, to the extent necessary to render such paragraph enforceable
to the maximum extent permitted by law.
20. ARBITRATION.
Save for the provisions of paragraph 18 with respect to injunctive relief, all
disputes arising under this Agreement shall be subject to arbitration, and
neither party shall bring any action in any court with reference thereto except
to obtain enforcement of any arbitration award. Arbitration shall be in
accordance with and under the rules of the American Arbitration Association as
in effect at the time of the dispute unless the parties shall agree to some
different alternative dispute resolution method. All costs, expenses and awards
under the arbitration or alternative dispute resolution method shall be divided
between the parties as the arbitrator may determine.
The arbitrator's decision shall be final.
21. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the laws of
the State of Florida.
22. NOTICES.
Any notice required or permitted to be given under this Agreement shall be in
writing and shall be deemed to have been given when delivered by hand or when
deposited in the United States mail, by registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to Bluegreen:
Patrick E. Rondeau, Esq.
Bluegreen Corporation
4960 Blue Lake Drive
Boca Raton, FL 33431
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If to Employee:
David D. Philp
Bluegreen Corporation
4960 Blue Lake Drive
Boca Raton, FL 33431
Or to such other addresses as either party hereto may from time to time give
notice of to the other in the aforesaid manner.
23. SEVERABILITY.
The invalidity of any one or more of the words, phrases, sentences, clauses or
sections contained in this Agreement shall not affect the enforceability of the
remaining portions of this Agreement of any part there of all of which are
inserted conditioned on their being valid in law, and, in the event that any one
or more of the words, phrases, sentences, clauses or sections contained in this
Agreement shall be declared invalid, this Agreement shall be construed as if
such invalid word or words, phrase or phrases, sentence or sentences, clause or
clauses or section or sections had not been inserted. If such invalidity is
caused by length of time or size of area, or both the otherwise invalid
provisions will be considered to be reduced to a period or area, which would
cure such invalidity.
24. WAIVERS.
The waiver by either party hereto of a breach or violation of any term or
provision of this Agreement shall not operate as nor be construed as a waiver of
any subsequent breach or violation.
25. DAMAGES.
Subject to the provisions of paragraph 20, nothing contained herein shall be
construed to prevent Bluegreen or the Employee from seeking and recovering from
the other damages sustained by either or both of them as a result of its or his
breach of any term or provision of this Agreement.
26. NO THIRD-PARTY BENEFICIARY.
Nothing expressed or implied in this Agreement is intended, or shall be
construed, to confer upon or give any person (other than the parties hereto and,
in the case of the Employee, his heirs, personal representative(s) and /or legal
representative) any rights or remedies under or by reason of this Agreement.
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27. SUCCESSORS.
This Agreement shall inure to the benefit of and be enforceable by the
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
28. ENTIRE AGREEMENT.
This Agreement constitutes the entire agreement between Bluegreen and the
Employee with respect to its subject matter and supersedes all prior
negotiations, agreements, understandings and arrangements, both oral and
written, between Bluegreen and the Employee with respect to his employment.
29. COUNSEL.
Bluegreen and the Employee represent and agree that each of them have thoroughly
discussed all aspects of this Agreement with their respective attorneys, and
that they have carefully read and fully understand all of the provisions of this
Agreement and have voluntarily entered into it.
30. MISCELLANEOUS.
The captions and headings herein are for convenience of reference only and shall
not be deemed to be a part of the substance of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and year
first above written.
BLUEGREEN CORPORATION
/s/ GEORGE F. DONOVAN /s/ DAVID D. PHILP
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George F. Donovan David D. Philp
Chief Executive Officer Employee
Bluegreen Corporation
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EXHIBIT 10.130
SECOND AMENDED AND RESTATED
CREDIT FACILITY AGREEMENT
THIS SECOND AMENDED AND RESTATED CREDIT FACILITY AGREEMENT
("Agreement") entered into as of September 14, 1999, by FINOVA CAPITAL
CORPORATION, a Delaware corporation, and BLUEGREEN CORPORATION, a Massachusetts
corporation.
RECITALS
A. Lender and Borrower are parties to an Amended and Restated Credit
Facility Agreement dated as of December 14, 1994, as amended by instrument
dated as of April 16, 1998 ("Existing Loan Agreement").
B. Lender and Borrower wish to amend the Existing Loan Agreement and
to restate the Existing Loan Agreement in its entirety, all as more fully set
forth herein.
AGREEMENT
DEFINITIONS.
As used in this Agreement and the other Documents (as defined below)
unless otherwise expressly indicated in this Agreement or the other Documents,
the following terms shall have the following meanings (such meanings to be
applicable equally both to the singular and plural terms defined).
1.1 "Acquisition/Refinancing Advance": with respect to a Loan, an Advance of
the Loan made solely for the purpose of paying, reimbursing Borrower for,
or refinancing the Acquisition Cost of Real Property which is the subject
of the Loan under which the Advance is made.
1.2 "Acquisition/Refinancing Cost": with respect to any Real Property, its
actual purchase price, together with all reasonable and ordinary due
diligence expenses incurred in connection with the acquisition of the Real
Property and all reasonable and ordinary closing costs incurred in
connection of the Real Property in the refinancing of such acquisition.
1.3 "Acquisition/Refinancing Loan": a Loan which is disbursed in a single
Advance and is made solely for the purpose of paying, or reimbursing the
Borrower under the Loan for, the Acquisition Cost of the Real Property
which is the subject of such Loan.
1.4 "Advance": an advance of the proceeds of a Loan by Lender to a Borrower in
accordance with the terms and conditions of this Agreement.
1.5 "Advance Formula for Acquisition/Refinancing Advance": with respect to any
Real Property, an amount equal to eighty percent (80%) of the lesser of
(a) its Acquisition Cost or (b) its Appraised Value; provided that if an
appraisal is not required pursuant to paragraph 4.2(b), then the Advance
Formula shall be an amount equal to eighty percent (80%) of the
Acquisition Cost.
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1.6 "Affidavit of Borrower": a sworn Affidavit of Borrower (and such other
parties as Lender may require) in the form of EXHIBIT G-3, to accompany a
Work-Related Advance Request.
1.7 "Affiliate": with respect to any individual or entity, any other
individual or entity that directly or indirectly, through one or more
intermediaries, controls, is controlled by or is under common control with
such individual or entity.
1.8 "Agreement": this Amended and Restated Credit Facility Agreement, as it
may be from time to time renewed, amended, restated or replaced.
1.9 "Applicable Usury Law": the usury law chosen by the parties pursuant to
the terms of paragraph 8.10 or such other usury law which is applicable if
such usury law is not.
1.10 "Appraised Value": with respect to any Real Property, its fair market
value as reported in the appraisal required pursuant to paragraph 4.2(b)
and approved by Lender.
1.11 "Architect/Engineer": with respect to any Improvements, an architect,
design professional or engineer employed by a Borrower to perform
architectural, design or engineering services in connection with such
Improvements.
1.12 "Architect/Engineer Agreement": with respect to the Improvements being
financed in whole or in part under a Development Loan and the Work related
thereto, a contract (written or oral, now or hereafter in effect) between
the Borrower under the Development Loan and an Architect/Engineer for the
performance of architectural, design or engineering services in connection
with such Improvements, as approved by Lender in writing and modified from
time to time in accordance with the terms of the Documents.
1.13 "Articles of Organization": the charter, articles, operating agreement,
partnership agreement, by-laws and any other written documents evidencing
the formation, organization and continuing existence of an entity.
1.14 "Assignment(s)": with respect to a Loan, collectively, a written
assignment or assignments, as such assignments may be from time to time
renewed, amended, restated or replaced, each of which may be separate from
and/or included within the other Loan Security Documents for the Loan
executed or to be executed and delivered to Lender by the Borrower under
such Loan and creating in favor of Lender, to facilitate Performance of
the Obligations of such Borrower (subject only to the Permitted
Encumbrances), a perfected, direct, first and exclusive assignment of the
following: all leases, sales contracts, rents and sales and other proceeds
pertaining to or arising from the Real Property which is the subject of
such Loan or any business of such Borrower conducted thereon or with
respect thereto; all management, operating and service contract pertaining
to such Real Property; the Developer's Rights with respect to such Real
Property; and all other Contracts, Licenses, Permits and Other Intangibles
related to such Real Property (including, without limitation,
Architect/Engineer Agreements and Construction Contracts if the Loan is a
Development Loan).
1.15 "Bluegreen Entity": Parent or a Subsidiary.
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1.16 "Borrower": with respect to a Loan, the Bluegreen Entity which has
requested the Loan and to whom the Loan is to be or has been made owns the
fee simple interest in the Real Property which is the subject of the Loan
and is the seller of Parcels of such Real Property.
1.17 "Borrowing Term": subject to the provisions of paragraph 2.2, the period
during which a Bluegreen Entity may obtain a Loan, commencing on the date
of this Agreement and ending on March 31, 2002.
1.18 "Business Day": any day other than a Saturday, a Sunday or a day on which
banks in Phoenix, Arizona are required to be closed.
1.19 "Collateral": all Real Property, Personal Property, Insurance Policies and
other property now or hereafter serving as security for the Performance of
any portion of the Obligations, and all products and proceeds thereof.
1.20 "Completion": with respect to the Work being done in connection with the
Improvements being financed in whole or in part under a Development Loan,
the occurrence, after Substantial Completion of such Work, of the
following:
(a) final completion of such Work (including "punch-list" items), in
accordance with the related Plans and Specifications, the related
Construction Contract(s), all applicable Legal Requirements, the Loan
Documents for the Development Loan, sound construction, engineering
and architectural principles and commonly accepted safety-standards,
free of liens and free of defective materials and workmanship;
(b) receipt by Lender of the following in form and substance satisfactory
to it: (i) a certificate of completion from the Borrower under the
Development Loan, from Architect(s)/Engineer(s) for such Improvements
who are designated by Lender, and, if Lender elects, from Lender's
Inspector for such Development Loan to the effect that such Work has
been so completed and final payment is due under all related
Construction Contracts between the Borrower under the Development Loan
and Contractors; (ii) final lien waivers for such Work; and (iii) the
title policy endorsements required in connection with such event
pursuant to the terms of the Loan Documents for such Loan after final
completion of such Work; and
(c) expiration of the statutory period in which mechanics' liens and
similar liens can be filed on account of such Work.
1.21 "Construction Budget": with respect to a Development Loan or the Work
being done in connection with the Improvements being financed in whole or
in part under a Development Loan, a detailed budget cost itemization
prepared by the Borrower under the Development Loan and approved in
writing by Lender, which specifies by item the cost and source of payment
of: (a) all labor, materials and services necessary for Completion of such
Work in accordance with the related Plans and Specifications, the related
Construction Contract(s), the Loan Documents for the Development Loan, all
Legal Requirements, sound construction, engineering and architectural
principles, and commonly accepted safety standards; (b) interest on the
Development Loan; and (c) all other expenses incidental to Completion of
such Work. The Construction Budget for each Development Loan shall include
within the costs of the Work to be paid from the Development Loan a
contingency reserve determined to be adequate by Lender. Without limiting
Lender's discretion in approving the Construction Budget for a Development
Loan, Lender shall be satisfied that any "construction overhead" contained
therein does not constitute a developer fee of any kind.
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1.22 "Construction Contract": with respect to the Work being done in connection
with the Improvements being financed in whole or in part under a
Development Loan, a contract (written or oral, now or hereafter in effect)
between Borrower and a Contractor, between a Contractor and any other
person or entity relating in any way to the construction of such Work,
including the performing of labor and the furnishing of equipment,
materials or services (other than architectural, design or engineering
services), as approved by Lender in writing and modified from time to
time.
1.23 "Contractor": with respect to the Work being done in connection with the
Improvements being financed in whole or in part under a Development Loan,
a contractor employed by a Borrower to provide labor and/or to furnish
equipment, materials or services (other than architectural, design or
engineering services) for any portion of such Work.
1.24 "Contracts, Licenses, Permits and Other Intangibles": with respect to any
Real Property, the property so described in EXHIBIT A.
1.25 "Credit Facility": the credit facility made available pursuant to this
Agreement.
1.26 "Default Rate": with respect to Loan Obligations under the Loan Documents
for a Loan, the meaning given to it in the Note evidencing such Loan; and
otherwise the highest Default Rate under the Notes.
1.27 "Developer's Rights": with respect to any Real Property which is the
subject of a Loan, all special rights and privileges of the Borrower under
the Loan under any declaration of covenants, conditions and restrictions
and/or other documents governing the Real Property which are not enjoyed
by all other owners of portions of the Real Property.
1.28 "Development Loan": a Loan made for the purpose of paying or reimbursing a
Borrower the Loan for the costs of constructing Improvements on the Real
Property which is the subject of the Loan and otherwise performing Work
with respect to such Improvements; provided, however, that a Development
Loan may also include an Acquisition/Refinancing Advance.
1.29 "Development Loan Advance": an Advance of a Development Loan.
1.30 "Development Loan Borrowing Term": with respect to a Development Loan, the
period during which the Borrower under the Development Loan may obtain
Development Loan Advances under such Development Loan, which period shall
commence when all conditions precedent to the initial Development Loan
Advance under such Development Loan have been satisfied and terminating on
the Required Completion Date for the Improvements being financed in whole
or in part under such Development Loan.
1.31 "Documents": the Loan Documents for all Loans.
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1.32 "Environmental Certificate": with respect to a Loan, a certificate
executed by the Borrower under the Loan in form and substance satisfactory
to Lender, and containing representations, warranties and covenants
regarding the environmental condition of the Real Property which is the
subject of the Loan.
1.33 "Event of Default": the meaning set forth in paragraph 7.1.
1.34 "Force Majeure Event": with respect to the Work being done in connection
with Improvements being financed in whole or in part under a Development
Loan, an "act of God," a fire, a strike, a governmental order and/or
injunction which is issued by a court of competent jurisdiction for
reasons other than for the acts or omissions or omissions of the Borrower
under the Development Loan which would constitute a default under this
Agreement, or a similar event beyond the reasonable control of the
Borrower under the Development Loan.
1.35 "Guaranty": with respect to a Loan made to a Subsidiary, a primary, joint
and several guaranty made by Parent guarantying the repayment of the Loan,
together with interest thereon as provided in the Note evidencing the
Loan, and the payment and performance of all other Loan Obligations under
the related Loan Documents.
1.36 "Improvements": with respect to a Development Loan, the infrastructure
improvements (on-site or off-site) to be constructed upon, added to or
made to or for the benefit of the Real Property which is the subject of
the Development Loan, all as more fully set forth in the related Plans and
Specifications and the related Construction Budget.
1.37 "Incipient Default": an event which after notice and/or lapse of time
would constitute an Event of Default.
1.38 "Insurance Policies": the insurance policies that a Borrower is required
to maintain and deliver pursuant to paragraph 6.5.
1.39 "Interest Reserve Advance": with respect to a Development Loan, an Advance
of the Development Loan made to pay accrued and unpaid interest on any
portion of the Development Loan.
1.40 "Interest Reserve Fund": with respect to a Development Loan, that portion
of the Development Loan which is allocated within the related Construction
Budget for the monthly payment of interest on the Development Loan.
1.41 "Legal Requirements": with respect to the Borrower under a Loan, the Loan
Collateral for such Loan, the Improvements (if any) being financed in
whole or in part under such Loan, the Work being done in connection with
the Loan, or otherwise with respect to such Loan: (a) all present and
future judicial decisions, statutes, regulations, permits or certificates
of any governmental authority in any way applicable to the Borrower or the
Loan Collateral; (b) all covenants, conditions and restrictions contained
in any document by which the Loan Collateral is bound; (c) all business
association agreements forming, or granting and/or limiting the powers of,
the Borrower; and (d) all contracts or agreements (written or oral) by
which the Borrower is bound or, if compliance therewith would otherwise be
in conflict with any of the Loan Documents for the Loan, by which the
Borrower becomes bound with Lender's prior written consent.
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1.42 "Lender": FINOVA Capital Corporation, a Delaware corporation, and its
successors and assigns.
1.43 "Lender's Inspector": with respect to a Development Loan, the
architectural or engineering firm retained by Lender pursuant to paragraph
9.1 in connection with such Loan.
1.44 "Loan": an Acquisition/Refinancing Loan or a Development Loan.
1.45 "Loan Collateral": with respect to a Loan, the Real Property which is the
subject of such Loan, the Personal Property related thereto, and the other
property now or hereafter as security for the Performance of the Loan
Collateral, except for property which is security for the performance of
the Loan obligations solely by virtue of paragraph 10.1 or a similar
paragraph.
1.46 "Loan Documents": with respect to a Loan, this Agreement and all Request
for Advance, Note, Mortgage, Security Agreement, Assignments,
Environmental Certificate, and other documents now or hereafter executed
in connection with the Loan, as they may be from time to time renewed,
amended, restated or replaced.
1.47 "Loan Obligations": with respect to a Loan, all obligations, agreements,
duties, covenants and conditions that the Borrower under the Loan is
required to perform under the Loan Documents for such Loan.
1.48 Loan Security Documents": with respect to a Loan, the Mortgage, Security
Agreement and other documents from time to time delivered to Lender to
create or perfect a Security Interest in the Loan Collateral, as they may
be from time to time renewed, amended, restated or replaced.
1.49 "Maturity Date": with respect to a Loan, the date determined by Lender
prior to the initial Advance of the Loan and so identified in the Note
evidencing the Loan, but in no event later than the date forty-eight (48)
months after the initial Advance of the Loan unless agreed to by Lender
and set forth in the Note evidencing the Loan.
1.50 "Maximum Credit Facility Amount": at anytime, the positive difference
between Thirty-Five Million Dollars ($35,000,000).
1.51 "Maximum Loan Amount": (a) with respect to an Acquisition/Refinancing
Loan, an amount equal to the lesser of (i) the amount requested by the
Borrower under the Acquisition/Refinancing Loan or (ii) the Advance
Formula of the Real Property which is the subject of the
Acquisition/Refinancing Loan; and (b) with respect to a Development Loan,
an amount determined by Lender prior to the initial Development Loan
Advance, but in no event to exceed the least of (i) the amount requested
by the Borrower under the Development Loan, (ii) (A) eighty percent (80%)
of the cost, as shown on the original related Construction Budget, of
Completion of the Work being done in connection with the Work being
financed in whole or in part under the Development Loan plus (B) if there
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is an Acquisition/Refinancing Advance, an amount determined in accordance
with the Advance Formula for Acquisition/Refinancing Advance with respect
to the Real Property which is the subject of the Development Loan, or
(iii) eighty percent (80%) of the Appraised Value of the Real Property
which is the subject of the Development Loan, determined as if Completion
of the Work being financed in whole or in part under the Development Loan
had occurred.
1.52 "Mortgage": with respect to a Loan, a mortgage, deed of trust or deed to
secure debt, as required by Lender, executed by the Borrower under the
Loan and under the terms of which the Borrower has conveyed or granted in
favor of Lender, as security for Performance of the Loan Obligations under
the Loan Documents for such Loan (subject only to the Permitted
Encumbrances), a perfected, direct, first and exclusive priority lien,
upon the Real Property which is the subject of the Loan, as it may be from
time to time renewed, amended, restated or replaced.
1.53 "Note": with respect to a Loan, the promissory note issued in the form of
EXHIBIT B by the Borrower under the Loan to evidence the Advance(s) of the
Loan which has been obtained by or committed to such Borrower, as it may
be from time to time renewed, amended, restated or replaced.
1.54 "Obligations": the Loan Obligations under the Documents.
1.55 "Parcels": the meaning given to it in paragraph 3.2(a).
1.56 "Parent": Bluegreen Corporation, a Massachusetts corporation.
1.57 "Partial Release": the meaning given to it in paragraph 3.2(a).
1.58 "Partial Release Payment": the meaning give to it in paragraph 3.3.
1.59 "Performance" or "Perform": full, timely and faithful performance.
1.60 "Permitted Encumbrances": with respect to any Property, rights,
restrictions, reservations, easements and liens of record which do not
materially adversely lessen the value or affect the use of such Property
for purposes approved by Lender and Lender has agreed in writing to
accept, but excluding monetary liens other than liens for taxes and
assessments not yet due and payable and inchoate artisans' liens and
mechanics' liens for amounts not yet due and payable.
1.61 "Personal Property": with respect to the Real Property which is the
subject of a Loan, the property described in EXHIBIT A.
1.62 "Plans and Specifications": with respect to the Improvements being
financed in whole or in part under a Development Loan, the architectural,
structural, mechanical, electrical and other plans and specifications for
the construction of such Improvements and the completion of the rest of
the Work related thereto prepared by Architect(s)/Engineer(s) engaged by
the Borrower under the Development Loan to do so, as approved by Lender as
modified from time to time with Lender's prior written consent.
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1.63 "Principal Work-Related Items": with respect to the Improvements being
financed in whole or in part under a Development Loan and related Work,
the related Plans and Specifications and all agreements between the
Borrower under the Development Loan and third parties pertaining to such
Improvements and Work, as approved by Lender in writing and modified from
time to time in accordance with the terms of the Loan Documents for such
Development Loan, including, without limitation, the related Construction
Contract(s) and Architect/Engineer Agreement(s).
1.64 "Property": with respect to a Loan, the Real Property which is the subject
of the Loan and the Personal Property related to such Real Property.
1.65 "Qualified Real Property": real property which meets the criteria set
forth in EXHIBIT C.
"Real Property": with respect to a Loan, the real property which is the
subject of the Loan.
1.66 "Request for Advance": with respect to an Acquisition/Refinancing Advance,
the request for the Advance executed by the Borrower under the Loan
pursuant to which the Acquisition/Refinancing Advance is being made and in
form and substance identical to EXHIBIT D-1 OR D-2, as applicable; and
with respect to a Work-Related Advance, a Work-Related Advance Request.
1.67 "Required Completion Assurance Deposit": with respect to the Uncovered
Cost of Work being done in connection with the Improvements being financed
in whole or in part under a Development Loan, a cash deposit (to be made
by the Borrower under the Development Loan and held by Lender) in an
amount equal to such Uncovered Cost of Work.
1.68 "Required Completion Date": with respect to the Work being done in
connection with Improvements being financed in whole or in part under a
Development Loan, the date determined by Lender prior to the initial
Advance of the Development Loan and so identified in the Request for
Advance executed in connection with such Advance, plus such additional
time which is necessary to achieve Completion of such Work and results
solely from the occurrence of one or more Force Majeure Events.
1.69 "Resolution": a resolution of a corporation certified as true and correct
by an authorized officer of such corporation, a certificate signed by the
manager of a limited liability company and/or such members whose approval
is required under the applicable Articles of Organization, or a
partnership certificate signed by all of the general partners of such
partnership and such other partners whose approval is required under the
applicable Articles of Organization.
1.70 "Security Agreement": with respect to a Loan, collectively, a written
security agreement or security agreements which may be separate from
and/or included within the Mortgage for the Loan or this Agreement,
executed and delivered (or to be executed and delivered) by the Borrower
under the Loan and creating in favor of Lender, as security for the
Performance of the Loan Obligations under the Loan Documents for the Loan
(subject only to the Permitted Encumbrances), a perfected, direct, first
and exclusive security interest, in the Personal Property related to the
Real Property which is the subject of the Loan, as it may be from time to
time renewed, amended, restated or replaced.
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1.71 "Security Documents": the Loan Security Documents for all Loans.
1.72 "Security Interest": with respect to any property, a perfected, direct and
exclusive first priority lien on, security interest in, assignment of or
other charge , as the case may be, subject only to the Permitted
Encumbrances.
1.73 "Subsidiary": a wholly-owned subsidiary of Parent.
1.74 "Substantial Completion": with respect to the Work being done in
connection with Improvements being financed in whole or in part under a
Development Loan, the occurrence of:
(a) substantial completion (as defined in AIA Document A201, most current
version) of such Work, in accordance with the related Plans and
Specifications, the related Construction Contract(s), all applicable
Legal Requirements, the Loan Documents for the Development Loan, sound
construction, engineering and architectural principles and commonly
accepted safety-standards, free of liens and free of defective
materials and workmanship;
(b) receipt by Lender of the following in form and substance satisfactory
to it: (i) a certificate of substantial completion from the Borrower
under such Loan, from the Architect(s)/ Engineer(s) for the
Improvements who are designated by Lender and, if Lender elects, from
Lender's Inspector for such Development Loan to the effect that such
Work has been so completed, and final payment is due under all related
Construction Contracts between the Borrower under the Development Loan
and Contractors (subject only to retention for "punch-list" items);
(ii) a certificate of completion or acceptance (or its equivalent)
from the appropriate governmental authority having jurisdiction over
such Work which has the effect of allowing the use of the Improvements
constructed as part of such Work for the intended purposes, to the
extent such a certificate is customarily issued or available; (iii) if
applicable Legal Requirements provide that the recording of a notice
of completion will cause the expiration upon a date certain of the
statutory period within which mechanics' and similar liens can be
filed, verification of the recording of such notice in the manner
prescribed by such Legal Requirements; (iv) final lien waivers, other
than lien waivers for that portion of such Work remaining to be
performed prior to Completion and for which Lender is still holding
Basic Retainage [as defined in paragraph 2.1(a)] or Additional
Retainage [as defined in paragraph 2.1(a)] sufficient to cover such
Work; (v) the as-built survey required in connection with such event
pursuant to the terms of the Loan Documents for the Development Loan;
(vi) the title policy endorsements required in connection with such
event pursuant to the terms of the Loan Documents for the Development
Loan; and (vii) if such Improvements were intended to be dedicated to
a governmental authority, evidence that such dedication has occurred
and that the governmental authority has accepted such Improvements,
subject only to customary warranty obligations on the part of the
Borrower under the Development Loan.
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1.75 "Tangible Personal Property": with respect to any Real Property, that
portion of the related Personal Property described in paragraph 3 of
EXHIBIT A.
1.76 "Term": the duration of this Agreement, commencing on the date as of which
this Agreement is entered into and ending when all of the Obligations
shall have been Performed.
1.77 "Third Party Consents": with respect to a Loan, those consents which
Lender requires the Borrower under such Loan to obtain, or which such
Borrower or (if not the Borrower) Parent is contractually or legally
obligated to obtain, from others in connection with the making of the Loan
or the Performance of such entity's Loan Obligations under the Loan
Documents for the Loan.
1.78 "Threshold Amount": with respect to Parent, Two Hundred Fifty Thousand
Dollars ($250,000); and with respect to any Subsidiary, Fifty Thousand
Dollars ($50,000).
1.79 "Title Insurer": with respect to a Title Policy, the title insurance
company which has issued it.
1.80 "Title Policy": with respect to a Loan, a policy of title insurance which
is in an amount not less than the Loan; insures Lender's interest in the
Mortgage executed in connection with the Loan as a perfected, direct,
first and exclusive lien on the Real Property which is the subject of the
Loan, subject only to the Permitted Encumbrances for such Real Property;
and is issued by a title insurance company acceptable to Lender.
1.81 "Uncovered Cost of the Work" or "Uncovered Cost": with respect to the Work
being done in connection with Improvements being financed in whole or in
part under a Development Loan, the amount equal to the excess (if any) of
(a) the remaining unpaid cost of Completion of the Work over (b) the
undisbursed portion of the Development Loan committed for such Work and
the remaining balance of any Required Completion Assurance Deposits held
by Lender under the Development Loan for such Work.
1.82 "Work": with respect to a Development Loan, the construction of the
Improvements being financed in whole or in part under the Development
Loan, as shown on or described in the related Plans and Specifications or
the related Construction Contract(s).
1.83 "Work Progress Schedule": with respect to the Work being done in
connection with the Improvements being financed in whole or in part under
a Development Loan, the schedule for the Completion of the Work and parts
thereof, as approved by Lender in writing.
1.84 "Work-Related Advance": a Development Loan Advance made for the purpose of
paying or reimbursing the Borrower under the Development Loan for costs of
any portion of the Work being done in connection with the Improvements
being financed in whole or in part under the Development Loan, excluding
interest on the Development Loan.
1.85 "Work-Related Advance Request": with respect to a Development Loan, the
written application of the Borrower under the Development Loan made on
Lender's standard forms by such Borrower and such other parties as Lender
may require specifying by name and amount all parties to whom such
Borrower is obligated for labor, materials, equipment or services supplied
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for the performance of related Work and all other expenses incidental to
the Development Loan, the Real Property which is the subject of the
Development Loan and the Completion of the related Work, and requesting a
Development Loan Advance for payment of such items, accompanied by an
Affidavit of Borrower, certificates of the Architect/Engineers and the
Contractors for such Work who are designated by Lender and such schedules,
affidavits, certificates, releases, waivers, statements, invoices, bills
and other documents as Lender may reasonably request.
II. CREDIT FACILITY COMMITMENT; USE OF PROCEEDS.
2.1 Credit Facility Commitment. Lender hereby agrees, if all of the
Obligations then due to be Performed have been Performed, to make Loans
and Advances of such Loans to Bluegreen Entities. Each
Acquisition/Refinancing Advance shall be in an amount equal to the lesser
of (a) the amount requested by the Borrower under the Loan under which the
Acquisition Advance is being made or (b) the Advance Formula of the Real
Property which is the subject of the Advance. Subject to the provisions of
paragraph 4.7, the amount of each Interest Reserve Advance under a
Development Loan shall be in the amount of interest then accrued and
unpaid on the portion of the Development Loan for which payment of
interest is allocated within the related Construction Budget. The amount
of each Work-Related Advance under a Development Loan shall be equal to
the costs of the Work covered by the applicable Work-Related Advance
Request and allocated within the related Construction Budget for payment
out of the Development Loan less an amount equal to the sum of (a) an
amount ("Basic Retainage") equal to ten percent (10%) of the "hard" costs
of such Work and (b) any additional retainage in excess of the amount of
the Basic Retainage ("Additional Retainage") required under the related
Construction Contract(s); provided, however, that Work-Related Advances
shall not be made under a Development Loan for stored or ordered materials
not yet incorporated into the Improvements being financed in whole or in
part under the Development Loan. The Basic Retainage from a Work-Related
Advance Request shall apply only to "hard" costs of the Work covered by
such Work-Related Advance Request. The Additional Retainage from
Work-Related Advance Requests under a Development Loan shall be disbursed
as part of the next Advance under the Development Loan occurring after
Lender has reasonably determined that a Contractor is entitled to it under
a related Construction Contract. The Basic Retainage Work-Related Advances
under a Development Loan shall be disbursed at the time of Substantial
Completion of the Work being done in connection with the Improvements
being financed in whole or in part under the Development Loan to the
extent Contractor(s) who have performed such Work are then entitled to it
under the related Construction Contract(s), subject to Lender's right to
keep such portion of the Basic Retainage under the Development Loan as it
may determine to be necessary to ensure Completion of such Work being done
in whole or in part in connection with the Improvements being financed in
whole or in part under the Construction Loan, with such retained portion
to be disbursed promptly after Completion of the such Work. Lender shall
have no obligation to make a Development Loan Advance if, after giving
effect to such Development Loan Advance, the sum of (a) the unpaid
principal balance of the Development Loan under which the Development Loan
Advance is to be made, (b) the committed and undisbursed portion of such
Development Loan, and (c) the Uncovered Cost of the Work being done in
connection with the Improvements being financed under such Development
Loan exceeds the Maximum Loan Amount for such Development Loan. Lender
shall have no obligation to make an Advance of a Loan if, after giving
effect to such Advance, the sum of (a) the unpaid principal balance of the
Loans, (b) the committed and undisbursed portion of the Loans, and (c) the
Uncovered Cost of the Work being financed in whole or in part under all
Development Loans exceeds the Maximum Credit Facility Amount.
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2.2 Revolving Credit Facility. Subject to the terms of the following sentence,
the Credit Facility is a revolving line of credit (i.e., Advances may be
obtained against Real Property; and as those Advances are repaid, other
Advances may be obtained). Only one Advance may be obtained under the
Credit Facility for the purpose of paying or reimbursing any Bluegreen
Entity for the Acquisition/Refinancing Cost of the same Real Property;
only one Development Loan may be obtained under the Credit Facility for
the purposes of paying or reimbursing any Borrower for "hard" and "soft"
costs of the Work performed on the same Real Property; and the total
Advances under a Loan may not exceed the Maximum Loan Amount for such
Loan. Each Loan shall be viewed as a separate loan. Bluegreen Entities
shall not be entitled to obtain Loans after the expiration of the
Borrowing Term unless Lender agrees in writing with Parent to make Loans
thereafter on terms and conditions satisfactory to Lender. Subject to the
provisions of paragraph 4.7, a Borrower under a Development Loan may not
obtain a Development Loan Advance under the Development Loan after the
Development Loan Borrowing Term for such Development Loan has expired
unless Lender agrees in writing with such Borrower to do so.
2.3 Use of Advances. Parent will use the proceeds of each Advance made to it
as a Borrower, and will cause each Subsidiary which is a Borrower, to use
the proceeds of each Advance made to such Subsidiary only for the
following purposes: if an Acquisition/Refinancing Advance, to pay (or
reimburse the Borrower for) the Acquisition Cost of the related Real
Property which is the subject of the Loan under which the Advance is made;
and if a Development Advance, to pay (or reimburse the Borrower for)
"hard" and "soft" costs of the related Work; provided, however, that
proceeds of a Loan disbursed to the Borrower under the Loan in
reimbursement of costs paid to it may be used by the Borrower for any
lawful purpose. If the amount needed by the Borrower under a Development
Loan for any line-item expense set forth in the Construction Budget for
the Development Loan is less than the budgeted amount to be paid from such
Development Loan for the line-item expense, such excess may be reallocated
to other line items in such Construction Budget, as approved by Lender in
writing. Notwithstanding anything herein to the contrary, Lender shall
have no obligation to approve an Interest Reserve Fund for a Development
Loan and may approve or disapprove an Interest Reserve Fund for a
Development Loan in its discretion.
2.4 Outstanding Loans. Lender and Borrower acknowledge that there is no
principal or interest currently outstanding under any Loan.
III. SECURITY.
3.1 (a) Maintenance of Security; Cross Collateralization. Parent will and will
cause each Subsidiary which is a Borrower under a Loan: to deliver to
Lender at the times required pursuant to Article IV, the Guaranties
required pursuant to paragraph 4.2 in connection with the Loan, the
subordination agreements required pursuant to paragraph 4.2, the Loan
Security Documents required pursuant to paragraph 4.2 and all other
security required to be given to Lender by such entity pursuant to the
terms of this Agreement; and, subject to the provisions of the last
sentence of this paragraph, to maintain such Loan Documents in full force
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and effect until Borrower has Performed all Loan Obligations under the
Loan Documents for the Loan (except as otherwise expressly provided in
such Loan Documents or this Agreement). The Loan Security Documents
executed by a Borrower in connection with a Loan shall, at Lender's
option, secure the repayment of all other Loans made to such Borrower and
the payment and Performance of all other Obligations of such Borrower
under the Loan Documents for such other Loans; and in the case of Parent
shall secure the other Obligations described in paragraph 9.1. However, if
neither an Event of Default nor an Incipient Default then exists under any
Document executed by such Borrower, the Loan Security Documents executed
by a Borrower in connection with a Loan shall be released when the Loan
Obligations (other than those arising from a cross-collateralization
provision) under the Loan Documents for the Loan have been paid and
Performed in full and no default exists under any other obligation owing
to Lender which is secured under such Loan Security Documents.
3.2 (a) Sale of Parcels; Partial Release of Parcels. The Borrower under a Loan
may enter into a contract for the sale of portions ("Parcels") of the Real
Property which is the subject of the Loan so long as the contract is
entered into in good faith in the ordinary course of such Borrower's
business when no Event of Default exists, the transaction complies with
applicable laws and, until closing of the contract, the contract is
subject to the terms and conditions of the Loan Security Documents for
such Loan. Such Borrower shall be entitled to close a contract entered
into satisfying the conditions of the preceding sentence and to have the
Parcel being sold and other Loan Collateral exclusively-related to such
Parcel released from the effect of the Mortgage for the Loan and other
applicable Loan Security Documents encumbering such Property if (but only
if):
(i) neither an Event of Default nor Incipient Default exists at the time
of such partial release ("Partial Release");
(ii) the Parcel requested to be released ("Release Parcel") is a legally
subdivided parcel and Lender has received adequate evidence thereof;
(iii) the Borrower shall have delivered to Lender a written request for a
partial release of the Release Parcel from the Mortgage, which request shall
specify a date for the consummation of the proposed Partial Release ("Partial
Release Date");
(iv) the Borrower shall have delivered to Lender for execution by Lender a
partial release/deed of release and reconveyance of the Mortgage which is in
recordable form, contains an appropriate legal description of the proposed
Release Parcel and is otherwise in form and substance satisfactory to Lender;
(v) unless (i) waived in writing by Lender or (ii) the Release Parcel is a
platted single-family residential lot and a copy of the plat for the
subdivision in which such Release Parcel is located has been delivered to and
approved by Lender (such approval not to be unreasonably withheld), the
Borrower shall have delivered to Lender a 1992 ALTA/ACSM survey certified to
Lender and prepared by a land surveyor reasonably satisfactory to Lender
showing the Release Parcel and the Real Property remaining subject to the lien
of the Mortgage immediately after giving effect to the Partial Release;
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(vi) the Partial Release shall not impair or adversely affect Lender's
security in the Real Property remaining subject to the lien of the Mortgage
immediately after giving effect to the Partial Release or any provision of the
Mortgage as it pertains to the remaining Real Property; and without limiting
the generality of the foregoing, unless the Release Parcel is a platted
single-family residential lot and a copy of the plat for which such Release
Parcel is located has been delivered to and approved by Lender (such approval
not to be unreasonably withheld), Lender shall be entitled at the time of the
Partial Release to have the Release Parcel made subject to such easements and
restrictive covenants as Lender may reasonably determine to be necessary for
the benefit of the Real Property remaining subject to the Mortgage;
(vii) unless it has previously delivered the items to Lender, the Borrower
shall have delivered to Lender and Lender shall have approved in writing a
written plan with respect to the development of the Real Property, the size and
anticipated sales prices of Parcels to be released, and the pattern in which
Partial Releases of Parcels is to occur; and
(viii) the Borrower has paid, or simultaneously with the Partial Release
will pay, the applicable Partial Release Payment and all recording and escrow
fees and other reasonable out-of-pocket expenses of Lender incurred in
connection with the Partial Release of the Release Parcel and any other
exclusively-related Property.
If the preceding sentence does not specify another date by which items
must be delivered to Lender, such items shall be delivered to Lender at least
five (5) Business Days prior to the Partial Release Date. Notwithstanding
anything herein to the contrary, Lender shall not be obligated to partially
release Parcels more than once per week.
(b) Partial Release of Related Property. Notwithstanding anything in the
Documents to the contrary, if a partial release document is executed
for a Release Parcel by Lender and recorded in the real estate records
where the Mortgage encumbering it is recorded and Lender receives the
applicable Partial Release Payment, there shall ipso facto be released
from the lien, assignment and security interest of the Security
Documents: (a) so long as no Event of Default then exists, any
contract for the sale of such Release Parcel by the Borrower entitled
to the Partial Release of the Release Parcel, all instruments, chattel
paper and general intangibles evidencing or representing purchase
money indebtedness owing to the Borrower in connection with the sale
of such Release Parcel, and any and all proceeds paid or payable
thereunder; (b) any tangible Personal Property exclusively related to
such Release Parcel; and (c) any other property expressly described in
the recorded partial release. However, if requested by the Borrower
entitled to the Partial Release of the Release Parcel, Lender shall
from time to time execute amendments to UCC financing statements and
other documents which have been prepared and delivered by the Borrower
to Lender, are reasonably necessary to effectuate the release of such
additional Property from the Security Documents, and are in form and
substance satisfactory to Lender.
3.3 Determination of Partial Release Payments. As used in this Agreement, the
term "Partial Release Payment" means an amount to be paid with respect to
a Loan in consideration of the Partial Release of a Release Parcel and
exclusively-related Personal Property from the Loan Security Documents for
such Loan. Partial Release Payments for Parcels which are part of the Real
Property which is the subject of a Loan shall be determined by Lender at
the time of the first Advance which is made under the Loan for the purpose
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of paying (or reimbursing the Borrower under the Loan for) the costs of
acquiring or improving the Real Property of which the Parcel is a part. In
making its determination regarding the amount of Partial Release Payments
for Parcels which are part of the Real Property which is the subject of a
Loan, Lender may consider the projected revenues from the sales of such
Parcels and the number of such Parcels; provided, however, that the
minimum Partial Release Payment for any such Parcel which is a
single-family residential lot shall be equal to the greater of (assuming
all single-family residential lots are of approximately comparable value):
(a) the quotient determined by dividing (i) the Maximum Loan Amount for
such Loan by (ii) the product of (A) 0.80 times (B) the number of
single-family residential lots into which such Real Property has been
subdivided; or
(b) the quotient determined by dividing (i) the Maximum Loan Amount for
such Loan by (ii) the product of (A) 0.80 times (B) the projected
gross revenues from the sales of single-family residential lots into
which the Real Property has been subdivided.
3.4 Other Developmental Matters Affecting Security. If the Borrower under a
Loan desires Lender to give its consent to or take any other action
concerning a matter affecting the zoning, platting, development or sale of
or title to any of the Real Property which is the subject of the Loan, it
shall comply with the procedures set forth in EXHIBIT K. The provisions of
the preceding sentence shall not apply to Borrower's desire to obtain
Partial Releases or to obtain Advances, the procedures for which are set
forth elsewhere in this Agreement.
IV. CONDITIONS PRECEDENT TO THIS AGREEMENT AND TO ADVANCES.
4.1 Conditions Precedent to Loan Agreement. Lender's obligation to enter into
this Agreement shall be subject to and conditioned upon Parent having
delivered to Lender the Articles of Organization of Parent and following
Documents, duly executed, delivered and in form and substance satisfactory
to Lender:
(a) the Resolutions of Parent;
(b) a favorable opinion from independent counsel for Parent in form and
substance satisfactory to Lender;
(c) this Agreement;
(d) the Third Party Consents required with respect to Parent's execution
of the Documents and Performance of its Obligations; and
(e) such other documents as Lender may reasonably require.
4.2 Conditions Precedent to First Advance of Loan. If a Bluegreen Entity
wishes to obtain a Loan, Lender's obligation to make the first Advance of
the Loan to a Bluegreen Entity shall be subject to and conditioned upon
the terms and conditions set forth in the following subparagraphs and
elsewhere in this Agreement being satisfied at the time of such Advance:
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(a) Documents. The Bluegreen Entity shall have delivered to Lender the
following Loan Documents, duly executed, delivered, recorded/filed, if
applicable, and otherwise in form and substance satisfactory to
Lender:
I. a Note in the amount of the Loan;
II. a Mortgage encumbering the Real Property which is the subject of
the Loan;
III. a Security Agreement covering the Personal Property related to
the Real Property which is the subject of the Loan;
IV. the Assignments covering property related to the Real Property
which is the subject of the Loan;
V. UCC financing statements for filing and/or recording, as
appropriate, where necessary to perfect the Security Interest in
the Loan Collateral covered by the Loan Security Documents;
VI. an Environmental Certificate pertaining to the Real Property
which is the subject of the Loan;
VII. if the Loan is a Development Loan, a Certificate and Agreement
of Borrower Regarding Construction-Related Matters in form and
substance identical to EXHIBIT I;
VIII. if the Bluegreen Entity is a Subsidiary, a Certificate and
Agreement of a Subsidiary Borrower (Basic) in form and substance
identical to EXHIBIT J;
IX. if Bluegreen Entity is a Subsidiary, a Guaranty;
X. if the Bluegreen Entity is a Subsidiary, the subordination
agreement, if any, required pursuant to paragraph 6.8(b);
XI. a Title Policy insuring the Mortgage required to be delivered to
Lender in connection with the Loan (or an unconditional
commitment for the delivery of the Title Policy promptly after
delivery of the Loan);
XII. a favorable opinion from independent counsel for the Bluegreen
Entity and, if the Bluegreen Entity is a Subsidiary, from Parent
with respect to the matters described in EXHIBIT E; and
XIII. a Request for Advance in the applicable form.
(b) Organizational Project and Other Due Diligence Documents. Unless
waived in writing by Lender in its discretion, the Bluegreen Entity
shall have delivered to Lender at least fifteen (15) Business Days
prior to the date of the first Advance of the Loan in form and
substance satisfactory to Lender:
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<PAGE> 17
I. if the Bluegreen Entity is a Subsidiary, the Articles of
Organization of such Borrower;
II. if the Bluegreen Entity is a Subsidiary, the Resolutions of such
Bluegreen Entity;
III. current certificates of good standing for the Bluegreen Entity
and, if the Bluegreen Entity is a Subsidiary, for Parent from
their respective states of incorporation; and, in the case of
the Bluegreen Entity, in the state where the Real Property which
is the subject of the Loan is located;
IV. a Level I environmental assessment of the Real Property which is
the subject of the Loan and a "Haz Map Report" for such Real
Property;
V. evidence that taxes and assessments on the Real Property which
is the subject of the Loan and related Personal Property have
been paid;
VI. evidence that the Bluegreen Entity has good and marketable title
to an undivided fee simple interest in the Real Property which
is the subject of the Loan, together with a title commitment or
preliminary title report for the issuance of the required Title
Policy, together with copies of all documents referred to
therein;
VII. a survey of the Real Property which is the subject of the Loan
meeting 1992 ALTA/ACSM standards (or, at Lender's option
exercisable in connection with each Loan, such lesser standards
as Lender may expressly approve) certified to Lender and
prepared by a licensed land surveyor acceptable to Lender,
showing such Real Property, all easements necessary to the
appropriate use of such Real Property and such other details as
Lender may reasonably require;
VIII. a written plan for the proposed use, development and sale of the
Real Property which is the subject of the Loan (including,
without limitation, sales projections and a detailed list of
remaining development/construction items, with a breakdown of
costs and completion schedules and bonds for completion and
maintenance of improvements) and demonstrating that the gross
profit margin of such Real Property (as developed in accordance
with such plan) will be at least fifty percent (50%); and unless
deferred or waived by Lender in writing, evidence that the Real
Property has been platted or otherwise subdivided (or, at
Lender's option exercisable in connection with each Loan, is
capable of being promptly platted or otherwise subdivided
without undue expense) in accordance with applicable Legal
Requirements into not less than fifty (50) single-family
residential lots in accordance with such plan, and all licenses
and certificates (exclusive of licenses and certificates
dependent upon completion of improvements to be constructed by
the purchasers of Parcels) for the intended use of such Real
Property, including environmental permits (or, at Lender's
option exercisable in connection with each Loan, evidence that
said licenses and certificates may be promptly obtained without
undue expense;
IX. unless deferred or waived by Lender in writing, evidence that
the Real Property which is the subject of the Loan is zoned for
the intended uses and that all approvals under applicable Legal
Requirements have been obtained (or, at Lender's option,
exercisable in connection with each Loan, is capable of being
promptly zoned for the intended uses without undue expense);
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<PAGE> 18
X. unless deferred or waived by Lender in writing, evidence that
the Bluegreen Entity has complied with all applicable Legal
Requirements and obtained all permits and approvals needed by
it to sell the Parcels into which the Real Property which is
the subject of the Loan has been or will be subdivided,
including, without limitation, a copy of the
registrations/consents to sell and the final subdivision
public reports/public offering statements and/or prospectuses
and approvals thereof required to be issued by or used in the
state where the Real Property is located;
XI. unless deferred or waived by Lender in writing, a copy of the
form of the purchase contract, deed, promissory note, real
property security document, credit applications and
disclosures which will be used by the Bluegreen Entity in
connection with the sale of Parcels into which the Real
Property has been or will be subdivided, together with
restrictive covenants, conditions, restrictions and easements
governing or intended in the future to govern the Parcels, the
management agreement (if any) for the project and advertising
materials for the sale of the Parcels;
XII. unless deferred or waived by Lender in writing, budgets for
any owners' association in which the owners of Parcels are or
will be members, if applicable, and information required by
Lender regarding such other owners' association information;
XIII. the Insurance Policies;
XIV. evidence that the Real Property which is the subject of the
Loan is not located within a flood prone area, except for such
portion thereof which does not materially adversely affect the
development, use or value of the Real Property (taken as a
whole) which is the subject of the Advance;
XV. evidence of the current and continued availability of adequate
utilities to serve the Real Property which is the subject of
the Loan for the intended use of such Real Property;
XVI. evidence of access to the Real Property which is the subject
of the Loan, which is adequate to serve such Real Property for
its intended use;
XVII. if the Loan includes an Acquisition/Refinancing Advance, a
copy of the purchase contract pursuant to which the Bluegreen
Entity desiring the Loan purchased or is to purchase the Real
Property which is the subject of the Loan, closing settlement
statements, paid invoices, canceled checks and other items
reasonably satisfactory to Lender to verify the
Acquisition/Refinancing Cost of such Real Property;
XVIII. evidence that the Bluegreen Entity desiring the Loan continues
to have invested in the Real Property which is the subject of
the Loan cash in an amount determined as follows: (A) not less
than twenty percent (20%) of the Acquisition/Refinancing Cost
of such Real Property, if the Loan is an
Acquisition/Refinancing Loan; or (B) not less than twenty
percent (20%) of the sum of the Acquisition/Refinancing Cost
of such Real Property plus, if the Loan is a Development Loan,
the cost, as shown in the Construction Budget for the Loan, of
Completion of the Work to be done in connection with the
Improvements being financed in whole or in part under the
Loan;
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<PAGE> 19
XIX. a geological and soils test report or other evidence with
respect to the suitability of the soils on the Real Property
which is the subject of the Loan for the intended use;
XX. if the Loan exceeds Two Million Dollars ($2,000,000) and
otherwise if required by Lender in writing, an MAI appraisal
of the Real Property which is the subject of the Loan
reflecting a fair market value in an amount satisfactory to
Lender;
XXI. unless deferred or waived by Lender in writing, a hydrological
study with respect to the Real Property which is the subject
of the Loan;
XXII. unless deferred or waived by Lender in writing, an
archaeological study with respect to the Real Property which
is the subject of the Loan;
XXIII. market data with respect to the Real Property which is the
subject of the Loan, including data or the price and
absorption of lots or parcels of land in competing projects
within such market;
XXIV. if the Loan is a Development Loan, the items listed in EXHIBIT
F; and
XXV. such other items as Lender requests which are reasonably
necessary to evaluate the request for the Advance and the
satisfaction of the conditions precedent to the Advance.
(c) Litigation and Judgment Searches. Lender shall have received the
following in form and substance satisfactory to Lender:
(I) the results of current UCC, lien, litigation, judgment and
bankruptcy searches for the Bluegreen Entity desiring the Loan
and, if such Bluegreen Entity is a Subsidiary, Parent conducted
in such jurisdictions as Lender deems appropriate; and
(II) the results of a site inspection of the Real Property which is
the subject of the Loan made by Lender's employees.
4.3 Conditions Precedent to Subsequent Advances of Development Loan. For each
Development Loan Advance other than an Interest Reserve Advance, Lender's
obligation to make such Advance shall be subject to the terms and
conditions set forth in EXHIBIT G, including delivery to Lender of the
items called for therein at least ten (10) Business Days prior to the date
of such Advance.
4.4 General Conditions Precedent to All Advances. Lender's obligation to fund
an Advance is subject to and conditioned upon the additional terms and
conditions set forth in the following subparagraphs remaining satisfied at
the time of such Advance:
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(a) No Change in Collateral, Borrower or Parent. No material, adverse
change shall have occurred in the Collateral or in the business or
financial condition of Parent or any Subsidiary which is a Borrower
since the date of the latest financial and operating statements given
to Lender by or on behalf of Parent or any Subsidiary which is a
Borrower.
(b) No Change in Representations and Warranties. There shall have been no
material, adverse change in the warranties and representations made in
the Documents by Parent or any Subsidiary which is a Borrower.
(c) No Event of Default or Incipient Default. Neither an Event of Default
nor Incipient Default shall have occurred and be continuing.
(d) Interest Rate Not Usurious. The interest rate applicable to the
Advance (before giving effect to any savings clause) will not exceed
the maximum rate permitted by the Applicable Usury Law.
(e) Payment of Fees. Lender has received all fees required to be paid at
the time of the Advance.
4.5 Disbursement of Advances. Advances under a Loan may be disbursed to the
Borrower under such Loan; or if requested by such Borrower and approved in
writing by Lender or if required by Lender in connection with a
Work-Related Advance under a Development Loan, to others, either severally
or jointly with such Borrower, for the credit or benefit of such Borrower.
Advances under a Loan shall be disbursed by wire transfer or, at the
option of the Borrower under such Loan exercised by written request to
Lender, by check or drafts. A Borrower of an Advance made by wire transfer
will pay Lender's charge in connection with such wire transfer, which is
currently Twenty-Five Dollars ($25). Lender may, at its option, withhold
from an Advance under a Loan any sum (including costs and expenses) then
due to it from the Borrower under the Loan pursuant to the terms of any of
the Documents or for which such Borrower would be obligated to reimburse
Lender pursuant to the terms of any of the Documents if the sum was first
paid directly by Lender. Lender reserves the right to require that
Work-Related Advances under Development Loans be disbursed through a
"control escrow."
4.6 No Waiver. Although Lender shall have no obligation to make an Advance
unless and until all of the conditions precedent to the Advance have been
satisfied, Lender may, at its sole discretion, make the Advance prior to
that time without waiving or releasing any of the Obligations.
4.7 Interest Reserve Advances. If neither an Event of Default nor an Incipient
Default exists and subject to the terms and conditions applicable to
Interest Reserve Advances under a Development Loan, during the Borrowing
Term of a Development Loan and, in Lender's discretion, after expiration
of such Borrowing Term to the extent the Interest Reserve Fund under such
Development Loan has not been exhausted, Lender will charge the Interest
Reserve Fund, if any, under such Development Loan until it has been
exhausted for monthly interest billings on such Development Loan. If the
Interest Reserve Fund, if any, under a Development Loan is exhausted or is
not otherwise available for such use, the Borrower under such Development
Loan will pay to Lender the monthly installments of interest due in
connection with such Development Loan in accordance with the terms of the
related Note and this Agreement.
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V. NOTES, PAYMENTS; SALES AND PARTIAL RELEASES.
5.1 Repayment of Loans. Each Loan shall be evidenced by a separate Note and
shall be repaid in immediately available funds with interest according to
the terms of the form of the Note executed in connection with such Loan.
Each Note executed in connection with a Loan on or after September 14,
1999, shall be in form and substance substantially identical to EXHIBIT B;
provided, however, that in addition to the principal payments required
pursuant to paragraph 5.2, Lender may require that the Borrower under such
Loan make principal payments on each anniversary of the initial Advance of
such Loan in amounts which are established in writing by Lender prior to
such Advance and are specified in the Note evidencing such Loan.
5.2 Partial Release Principal Payments. Until a Note has been paid in full,
the Borrower obligated thereunder will make to Lender at the time of each
Partial Release of a Release Parcel from the Mortgage encumbering the Note
a principal payment equal to the Partial Release Payment for such Release
Parcel, and the Partial Release Payment shall be applied to such Note.
5.3 Prepayments. Each Loan and Note shall be entitled to be prepaid in whole
or in part at any time.
5.4 Application of Proceeds. Notwithstanding anything in the Loan Documents
for such Loan to the contrary other than the provisions of paragraph 3.2
or 5.2 hereof pertaining to the application of Partial Release Payments,
the amount of all payments or amounts received by Lender with respect to a
Loan shall be applied to the extent applicable under the Loan Documents
for such Loan: (a) first, to any past due payments of interest on such
Loan and to accrued interest on such Loan through the date of such
payment, including any default interest; (b) then, to any interest on
delinquent interest, late fees, overdue risk assessments, examination fees
and expenses, collection fees and expenses and any other fees and expenses
due to Lender under the Loan Documents for such Loan; and (c) last, the
remaining balance, if any, to the unpaid principal balance of such Loan;
provided, however, while an Event of Default or Incipient Default exists,
each payment with respect to such Loan shall be applied to such amounts
owed to Lender by the applicable Borrower in respect of when the payment
was received as Lender in its discretion may determine. In calculating
interest and applying payments as set forth above: (a) interest on a Loan
shall be calculated and collected through the date payment is actually
received by Lender; (b) interest on the outstanding balance of a Loan
shall be charged during any grace period permitted under the Loan
Documents for such Loan; (c) on each annual anniversary of the closing
date of a Loan, all past due interest and other past due charges provided
for under the Loan Documents for such Loan shall be added to the principal
balance of such Loan; and (iv) to the extent that the Borrower under the
Loan makes a payment or Lender receives any payment or proceeds of the
Collateral for such Borrower's benefit that is subsequently invalidated,
set aside or required to be repaid to any other person or entity, then, to
such extent, the applicable Loan Obligations intended to be satisfied
shall be revived and continue as if such payment or proceeds had not been
received by Lender and Lender may adjust the balance of such Loan as
Lender, in its discretion, deems appropriate under the circumstances.
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5.5 Borrower's Unconditional Obligation to Make Payments. Whether or not the
proceeds from the Loan Collateral for a Loan shall be sufficient for that
purpose, the Borrower under a Loan will pay when due all payments required
to be made by it pursuant to any of the Loan Documents for the Loan, and
such obligation to make such payments is absolute and unconditional.
VI. BORROWER'S REPRESENTATIONS, WARRANTIES AND COVENANTS.
6.1 (a) Good Standing. Parent is and will remain, and will cause each
Subsidiary which is a Borrower to be and remain, duly organized,
validly existing and in good standing under the laws of their
respective states of organization and qualified to do business and in
good standing in each jurisdiction in which the location or nature of
their respective properties or their respective businesses makes such
qualification necessary. Parent has, and will cause each Subsidiary
which is a Borrower to have, full authority to Perform their
respective Obligations and to carry on their respective business and
own their respective property.
(b) Power and Authority; Enforceability. Parent has and will maintain, and
will cause each Subsidiary which is a Borrower to have and maintain,
full power and authority to grant the Security Interest, to execute
and deliver the Loan Documents required of it in connection with the
Loans; and to Perform their respective Obligations. All action
necessary and required by the Articles of Organization of Parent and
all applicable laws for the obtaining of the Credit Facility and for
the execution and delivery of the Loan Documents which have been or
will be executed and delivered by it in connection with the Credit
Facility has been duly and effectively taken. The Loan Documents which
have been or will be executed by any Bluegreen Entity are and shall be
legal, valid, binding and enforceable against it and do not and will
not constitute a default or result in the imposition of a lien under
the terms or provisions of any agreement to which it is a party. No
consent of any governmental agency or any other person not a party to
such Document is or will be required as a condition to the execution,
delivery or enforceability of any Documents required of it hereunder
by or against Parent or any Subsidiary which is a Borrower.
6.2 (a) No Litigation. There is no action, litigation or other proceeding
pending or, to Parent's knowledge, threatened before any arbitration
tribunal, court, governmental agency or administrative body against
Parent, which might materially adversely affect the Collateral, the
Performance of its Obligations, the business or financial condition of
Parent, or the ability of Parent to Perform its Obligations. Parent
will promptly notify Lender if any action, litigation or proceeding is
pending or threatened against Parent or any Subsidiary which is a
Borrower, which might materially, adversely affect the Collateral, the
business or financial condition of Parent or any such Subsidiary, or
the ability of Parent or any such Subsidiary to Perform its
Obligations.
6.3 (a) Compliance with Laws. Parent has complied, and will comply and cause
each Subsidiary which is a Borrower to comply, with all Legal
Requirements where the failure to do so might materially, adversely
affect the Collateral, the business or financial condition of Parent
or any such Subsidiary, or the ability of Parent or any such
Subsidiary to Perform its Obligations.
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6.4 (a) Restrictions on Transfers, Liens and Change of Control . Unless
expressly permitted in this Agreement or in any of the Security
Documents, without the prior written consent of Lender, Parent will
not, and will not permit any Subsidiary which is a Borrower, to do any
of the following: (a) except for sales and transfers of damaged,
obsolete or worn-out items of tangible Personal Property or other
non-material items of tangible Personal Property in accordance with
the terms of the Security Documents, sell, convey, pledge,
hypothecate, encumber or otherwise transfer any Collateral; (b) permit
or suffer to exist any liens, security interests or other encumbrances
on any Collateral, except for the Permitted Encumbrances and liens and
security interests expressly granted to Lender; (c) permit or suffer
the sale, lease, transfer or disposal of all or substantially all of
their respective assets to another entity; or (d) only in the case of
a Subsidiary, permit or suffer to exist any transfer of ownership
interests in or control of such entity.
6.5 (a) Insurance. Parent will pay the cost of, will maintain, or cause to be
maintained, and will deliver or cause to be delivered to Lender
evidence of insurance policies required by Lender, and written by
insurers and in amounts and on forms satisfactory to Lender.
6.6 (a) No Misrepresentations. The Documents and all certificates,
financial statements and written materials furnished to Lender by or
on behalf of Parent or any Subsidiary which is a Borrower in
connection with the Credit Facility do not and will not contain any
untrue statement of a material fact or omit to state a fact which
materially adversely affects or in the future may materially adversely
affect the Collateral, the business or financial condition of Parent
or any Subsidiary which is a Borrower, or the ability of Parent or any
such Subsidiary to perform its Obligations.
(b) Reliance. Lender's examination, inspection or receipt of information
pertaining to Parent, any Subsidiary which is a Borrower, or the
Collateral shall not in any way be deemed to reduce the full scope and
protection of the warranties, representations and Obligations
contained in the Documents.
6.7 (a) Financial Information. Parent will furnish or cause to be furnished to
Lender, within one hundred twenty (120) days after the end of each
fiscal year of Parent, a copy of the current annual consolidated
financial statements of Parent; and will furnish to Lender, within
forty-five (45) days after the end of each interim quarterly fiscal
period of Parent, a copy of the current consolidated financial
statements of Parent for the period commencing with the first day of
the fiscal year and concluding with such quarter end. Such financial
statements shall contain a balance sheet as of the end of the relevant
fiscal period and statements of income and of cash flow for such
fiscal period (together, in each case, with the comparable figures for
the corresponding period of the previous fiscal year), all in
reasonable detail. All financial statements shall be prepared in
accordance with generally accepted accounting principles, consistently
applied. All financial statements required pursuant to this paragraph
shall be certified by the chief financial officer of Parent. Annual
statements shall be audited and certified by a recognized firm of
certified public accountants reasonably satisfactory to Lender. Lender
acknowledges that, as of the date hereof, the firm of Ernst & Young is
acceptable to it. Together with such financial statements, Parent will
deliver to Lender a certificate signed by Parent's chief financial
officer stating that there exists no Event of Default or Incipient
Default or, if any such Event of Default or Incipient Default exists,
specifying the nature and period of its existence and what action
Parent and any pertinent Subsidiary proposes to take with respect to
it.
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<PAGE> 24
(b) Right to Inspect. Parent will permit, and will cause each Subsidiary
which is a Borrower to permit, Lender and its representatives at all
reasonable times to inspect, audit and copy, as appropriate, the
Collateral, and their respective records.
(c) Additional Information. Parent will make available, and will cause
each Subsidiary which is a Borrower to make available, to Lender such
further information as Lender may from time to time reasonably
request.
6.8 Subordination of Indebtedness.
(a) All obligations of Parent to Lender are intended to, and do,
constitute "Senior Indebtedness" as such term is defined in and for
purposes of the Indenture dated as of May 15, 1987 ("Indenture")
between Parent and Shawmut Bank, N.A., as trustee, pursuant to which
the Borrower's eight and one-quarter percent (8 1/4%) Convertible
Subordinated Debentures due 2012 ("Debentures") were issued, and will
be entitled to all the benefits associated with being "Senior
Indebtedness" under the Indenture, including, without limitation,
ranking senior to the Debentures.
(b) Parent will cause each Borrower which is a Subsidiary to cause any and
all indebtedness owing by such Subsidiary to its shareholders,
directors or officers, Parent, or the Affiliates of such Borrower or
the foregoing and all liens, security interests and other charges on
the assets of such Borrower in respect of such indebtedness,
including, without limitation, the Collateral, to be fully
subordinated in all aspects to the Obligations of such Borrower
pursuant to written agreements satisfactory to Lender; provided,
however, that such subordination shall not extend to reasonable
salaries and fees at normal and customary rates for services actually
rendered or, if neither an Event of Default nor an Incipient Default
is outstanding, to payments or distributions of any kind to Parent.
Any such creditor shall execute a subordination agreement in form and
substance satisfactory to Lender.
6.9 No Default for Third Party Obligations. Parent is not in default under any
other agreement evidencing, guaranteeing or securing borrowed money or a
receivables purchase financing involving an obligation in excess of the
Threshold Amount to make a payment of principal or interest or to
repurchase receivables or any other material default by Parent permitting
the acceleration of the payment or repurchase obligations of Parent, which
payment or repurchase obligations entitled to be accelerated are in excess
of the Threshold Amount in the aggregate. Parent is not in violation of or
in default under any material term in any other material agreement,
instrument, order, decree or judgment of any court, arbitration or
governmental authority to which it is a party or by which it is bound.
6.10 Net Worth Maintenance. Parent will at all times maintain an Adjusted
Tangible Net Worth, determined in accordance with generally accepted
accounting principles, in an amount not less than Eighty-Five Million
Dollars ($85,000,000). As used herein, the term "Adjusted Tangible Net
Worth" shall mean net worth less goodwill, determined in accordance with
generally accepted accounting principles, consistently applied, plus the
principal balance outstanding under the Indenture and other debt
subordinated to the Obligations pursuant to agreements satisfactory to
Lender (collectively, "Subordinated Debt").
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6.11 Intentionally Left Blank.
6.12 Adjusted Leverage Ratio. Parent will not permit the ratio of its Adjusted
Total Liabilities to Adjusted Tangible Net Worth at any time to be greater
than 3.0 to 1.0. As used herein, the term "Total Liabilities" shall mean
the aggregate of Parent's current liabilities and non-current liabilities;
and the term "Adjusted Total Liabilities" shall mean Total Liabilities
less Subordinated Debt.
6.13 Limitation on Marketing and G&A Expenses. Parent will not incur, and will
not permit any consolidated subsidiary to incur, combined selling, general
and administrative expenses that exceed sixty percent (60%) of net sales
of the real estate owned by them and time-share interests created from
such real estate, calculated as of the end of each calendar quarter on a
twelve (12) month rolling basis. As used herein, the term "selling,
general and administrative expenses" shall mean selling, general and
administrative expenses properly allocable to real estate calculated in
accordance with generally accepted accounting principles, consistently
applied as previously reflected in the financial statements of Parent
provided to Lender.
6.14 Payment of Taxes. Parent has filed or will file and cause each Subsidiary
which is a Borrower to file all tax returns required to be filed by such
entity, and Parent has paid or will pay and will cause each Subsidiary
which is a Borrower to pay all taxes, assessments, levies and penalties,
if any, required to be paid by such entity, to any governmental or
quasi-governmental authority or subdivision, including real estate taxes
and assessments relating to the Collateral, unless and only to the extent
the item shall be contested in good faith and by appropriate proceedings
by such entity, such entity shall set aside and cause on its books
adequate reserves with respect to the contested item and, in connection
with any tax assessment, levy or penalty levied against the Collateral,
the entity granting the Security Interest in such Collateral shall comply
with the terms of Security Documents pertaining to such contest.
6.15 Credit Facility Fees and Expenses. Lender acknowledges that all fees
required to be paid to Lender in connection with the Credit Facility prior
to the date of its execution hereof have been paid. In addition to such
fees paid prior to the date hereof, Parent will pay to Lender on April 1,
2000, a fee equal to one percent (1%) of the excess of (a) Twenty Million
Dollars ($20,000,000) over (b) the aggregate principal amount of Advances
made during the twelve (12) month period ending on March 31, 2000.
Borrower will also pay to Lender on April 1, 2001 and April 1, 2002, a fee
equal to one and one-half percent (1-1/2%) of the excess of (a) Twenty
Million Dollars ($20,000,000) over (b) the average daily outstanding
principal balance of the Credit Facility for the twelve (12) month period
ending on the preceding day (i.e. March 31). For purposes hereof, the
daily principal balance of a Loan shall be determined in the same manner
as Lender determines the daily principal balance for purposes of computing
interest accrued on the Loan. Parent will also pay on demand any and all
reasonable costs and expenses incurred by Lender in connection with the
initiation, documentation, closing and modification of the Credit Facility
and the Loans, the making of Advances, the administration of the Loans,
the full or partial release of the Collateral, the protection of the
Collateral, and the enforcement of the Obligations, including, without
limitation: all reasonable attorneys' and other professionals' fees and
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charges (including, without limitation, normal charges for photocopy,
telecopy and computer services); the costs of credit reports and UCC,
lien, litigation, judgment and bankruptcy searches, and revenue,
documentary stamp and intangible taxes; and Parent will cause each
Subsidiary which is a Borrower to pay such of those costs and expenses
incurred in connection with any and all Loans made to such Subsidiary.
Without limiting the generality of the foregoing, if a bankruptcy
proceeding is commenced by or against a Borrower or otherwise involving
any Collateral for the Obligations of a Borrower, Lender shall, to the
extent not already provided for herein, be entitled to recover, and such
Borrower and, if it is not the Borrower, Parent shall be obligated to pay,
Lender's reasonable attorneys' fees incurred in connection with: (i) any
determination of the applicability of the bankruptcy laws to the terms of
this Agreement and the other Documents executed by the Borrower or, if it
is not the Borrower, by Parent or to Lender's rights thereunder; (ii) any
attempt by Lender to enforce or preserve its rights under the bankruptcy
laws or to prevent Borrower or any other person from seeking to deny
Lender its rights thereunder; (iii) any effort by Lender to protect,
preserve or enforce its rights against any Collateral for the Obligations
of such Borrower or seeking authority to modify the automatic stay of 11
U.S.C. Section 362 or otherwise seeking to engage in such protection,
preservation or enforcement; or (iv) any proceeding(s) arising under the
bankruptcy laws or arising in or related to a case under bankruptcy laws.
6.16 Indemnification. Parent will INDEMNIFY, PROTECT, HOLD HARMLESS, and defend
Lender, its successors, assigns and shareholders (including corporate
shareholders), and the directors, officers, employees, agents and servants
of the foregoing, for, from and against, except to the extent arising from
the indemnitee's gross negligence or willful misconduct, any and all
losses, costs, expenses (including, without limitation, court costs and
attorneys' fees), demands, claims, suits, proceedings (whether civil or
criminal), orders, judgments, penalties, fines and other sanctions arising
from or brought in connection with (a) any of the Collateral, the terms of
the Documents or the transactions related thereto, or any act or omission
of Parent or any Subsidiary which is a Borrower or their respective
employees or agents, whether actual or alleged, and (b) any and all
brokers' commissions or finders' fees or other costs of similar type by
any party engaged by Parent or any Subsidiary which is a Borrower in
connection with the Credit Facility. On written request by a person or
other entity covered by the above agreement of indemnity, Parent will
undertake, at its own cost and expense, on behalf of such indemnitee,
using counsel satisfactory to the indemnitee, the defense of any legal
action or proceeding to which such person or entity shall be a party and
for which such indemnitee is entitled to be indemnified pursuant to this
paragraph 6.16. At Lender's option, Lender may prosecute or defend any
action involving the priority, validity or enforceability of the Security
Interests at the expense of Parent and the Borrower granting the Security
Interests.
6.17 Perfection of Security Interests. Parent will execute or cause to be
executed all documents, and do or cause to be done all acts, reasonably
necessary for Lender to perfect and to continue the perfection of Security
Interests or otherwise to effect the intent and purposes of the Documents.
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6.18 Survival and Additional Representations, Warranties and Covenants. The
representations, warranties and covenants contained in this Article VI are
in addition to, and not in derogation of, the representations and
warranties contained elsewhere in the Documents and shall be deemed to be
made and reaffirmed prior to the making of each Advance.
VII. DEFAULT.
7.1 Events of Default. The occurrence of any of the following events or
conditions shall constitute an Event of Default under the Documents:
(a) failure of Lender to receive within five (5) Business Days of the date
when due and payable (i) any amount payable under a Note or (ii) any
other payment due from Parent or any Subsidiary which is a Borrower,
except for the payment due at the Maturity Date of a Note for which no
grace period is allowed;
(b) any representation or warranty which is made by a person other than
Lender and is contained in the Documents or in any certificate
furnished to Lender under the Documents by or on behalf of Parent or
any Subsidiary which is a Borrower proves to be, in any material,
adverse respect, false or misleading as of the date deemed made;
(c) a default in the Performance of the Obligations set forth in paragraph
6.4(a), 6.4(c), 6.4(d), 6.5, 6.8, 6.10, 6.12 or 6.13;
(d) a default by Parent or any Subsidiary which is a Borrower in the
Performance of its Obligations or a violation of any term, covenant or
provision of the Documents (other than a default or violation referred
to elsewhere in this paragraph 7.1) which continues unremedied (i) for
a period of five (5) Business Days after notice of such default or
violation given by Lender to such Borrower in the case of a default
under or violation of paragraph 6.4(b) or any other default or
violation which can be cured by the payment of money alone or (ii) for
a period of thirty (30) days after notice to such Borrower in the case
of any other default or violation;
(e) an "Event of Default", as defined elsewhere in any of the Documents;
(f) any default by Parent or any Subsidiary which is a Borrower under any
other agreement evidencing, guaranteeing or securing borrowed money or
a receivables purchase financing involving an obligation in excess of
the applicable Threshold Amount to make a payment of principal or
interest or to repurchase receivables or any other material default by
such entity under any such agreement permitting the acceleration of
their payment or repurchase obligations, which accelerated repayment
or repurchase obligations are in the aggregate in excess of the
Threshold Amount applicable to such entity;
(g) any final, non-appealable judgment, decree or award for money damages
or for a fine or penalty against Parent or any Subsidiary which is a
Borrower which is not paid and discharged or stayed within thirty (30)
days thereafter and when aggregated with all other judgment(s) or
decree(s) against such entity that have remained unpaid and
undischarged or stayed for such period is in excess of the applicable
Threshold Amount;
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(h) subject to any provisions of the Security Documents permitting the
contest of such liens or security interests, any party holding a lien
or security interest in any of the Collateral commences foreclosure or
similar sale thereof;
(i) Parent or any Subsidiary which is a Borrower shall (i) generally not
be paying its debts as they become due, (ii) file, or consent by
answer or otherwise to the filing against it of, a petition for relief
or reorganization, arrangement or liquidation or any other petition in
bankruptcy or insolvency under the laws of any jurisdiction, (iii)
make an assignment for the benefit of its creditors, (iv) consent to
the appointment of a custodian, receiver, trustee or other officer
with similar powers for itself, any of the Collateral or any
substantial part of its property, (v) be adjudicated insolvent, (vi)
dissolve or commence to wind-up its affairs or (vii) take any action
for purposes of the foregoing; or a petition for relief or
reorganization, arrangement or liquidation or any other petition in
bankruptcy or insolvency or the appointment of a custodian under the
laws of any jurisdiction is filed against Parent or any Subsidiary
which is a Borrower or a custodian is appointed for any of the
Collateral or any substantial part of the property of Parent or any
Subsidiary which is a Borrower, and such proceeding is not dismissed
and appointment vacated within ninety (90) days thereafter;
(j) a material, adverse change in the Collateral or the business or
financial condition of Parent or any Subsidiary which is a Borrower,
which change is not enumerated in this paragraph 7.1 as the result of
which Lender in good faith deems the prospect of Performance of the
Obligations of such entity materially impaired or the Collateral
materially imperiled;
(k) failure of Lender to receive, within twenty (20) days of the date
Parent or any Subsidiary which is a Borrower knows or should have
known of such change, notice of any material, adverse change in any
representations or warranties in the Documents or otherwise made in
connection with the Credit Facility; or
(l) at any time prior to Completion of the Work related to a Development
Loan under which it is a Borrower, Parent or any Subsidiary (i)
abandons the Work or (ii) delays construction or suffers construction
to be delayed for any period of time, for any reason whatsoever not
covered by item (i) of this paragraph 7.1(l) so that Completion of the
Work cannot be accomplished in the ordinary course of construction, in
the reasonable judgment of Lender, on or before the Required
Completion Date.
7.2 Remedies. At any time after an Event of Default has occurred and while it
is continuing, Lender may but without obligation, in addition to the
rights and powers granted elsewhere in the Documents and not in limitation
thereof, do any one or more of the following:
(a) cease to make further Advances;
(b) declare the Notes, or any of them, together with any applicable
prepayment premium and all other sums owing to Lender by Parent and/or
any Subsidiaries which are Borrowers in connection with the Documents,
immediately due and payable without notice (including, without
limitation, notice of acceleration or intention to accelerate),
presentment, demand or protest;
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(c) apply the then balance of the Required Completion Assurance Deposits
given to Lender by or on behalf of any Borrower to the satisfaction of
the Obligations of such Borrower in such order and manner as Lender
may determine;
(d) with respect to any Work financed under a Development Loan, to the
extent Completion of such Work has not occurred: (i) continue and/or
cause Completion of the Work; (ii) take exclusive possession of the
Property or any part thereof which is security for such Development
Loan; (iii) expend such funds as Lender may deem appropriate,
including the Required Completion Assurance Deposit(s) (if any) given
to Lender by the Borrower under the Development Loan, any other funds
held by Lender as security therefor and any sums which may remain
unadvanced hereunder, to continue and/or cause Completion of such
Work; (iv) demand and receive performances due under the related
Principal Work-Related Items and the other related Contracts,
Licenses, Permits and Other Intangibles; (v) make such changes to the
scope of such Work and to the related Principal Work-Related Items and
other related Contracts, Licenses, Permits and Other Intangibles as
may be necessary or desirable in Lender's judgment; (vi) file claims,
institute enforcement actions and otherwise prosecute and defend all
actions or proceedings relating to such Work, the related Principal
Work-Related Items and the other related Contracts, Licenses, Permits
and other Intangibles as Lender may determine to be necessary or
desirable; (vii) pay, settle or compromise all existing bills and
claims which are or may be liens against any of the Property which is
security for such Development Loan or as Lender may deem to be
necessary or desirable in Lender's judgment for the continuance or
Completion of such Work or the clearance of title, all without notice
to Borrower; (viii) execute in the name of the Borrower under such
Development Loan all applications, certificates, notices and other
instruments and give all instructions and communications which may be
required or permitted by the related Principal Work-Related Items and
other related Contracts, Licenses, Permits and Other Intangibles as
determined by Lender; (ix) cancel or surrender any of the related
Principal Work-Related Items and the other related Contracts,
Licenses, Permits and Other Intangibles and enter into new contracts
for the Completion of such Work and any changes to the scope of such
Work; (x) do any and every act with respect to the Completion of such
Work, the related Principal Work-Related Items and the other related
Contracts, Licenses, Permits and Other Intangibles which the Borrower
under such Development Loan may do in its behalf; (xi) employ such
contractors, subcontractors, suppliers, agents, attorneys, architects,
accountants, appraisers, security guards and inspectors as Lender may
in its judgment deem necessary or desirable to accomplish any of the
above purposes; and (xii) receive, collect, open and read all mail of
the Borrower under such Development Loan for the purpose of obtaining
all items pertaining to such Work, the related Principal Work-Related
Items and the other related Contracts, Licenses, Permits and Other
Intangibles; and
(e) proceed to protect and enforce its rights and remedies under the
Documents and to foreclose or otherwise realize upon the Collateral,
or to exercise any other rights and remedies available to it at law,
in equity or by statute.
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7.3 Application of Proceeds During an Event of Default. Notwithstanding
anything in the Documents to the contrary, while an Event of Default
exists, any cash (including Required Completion Assurance Deposits)
received and retained by Lender as part of the Collateral given by a
Borrower may be applied to payment of the Obligations of such Borrower
(and in the case of Parent, the Obligations of its Subsidiaries) in such
order and manner as Lender may determine.
7.4 Lender's Right to Perform. Lender may, at its option, and without any
obligation to do so, pay, perform and discharge any and all Obligations
(including, without limitation, the Obligations to maintain insurance)
agreed to be paid or performed in the Documents by Parent, any Subsidiary
which is a Borrower, or any other person liable for the Performance of the
Obligations if such person has failed to do so and either (a) an Event of
Default exists or (b) Lender in good faith deems such action necessary to
protect any of the Collateral or its value. For such purposes Lender may
use the proceeds of the Collateral. All amounts expended by Lender in so
doing or in exercising its remedies under the Documents following an Event
of Default shall become part of the Obligations, shall be immediately due
and payable to Lender upon demand by Parent and (if any) the Subsidiary
failing to perform, and shall bear interest at the Default Rate from the
dates of such expenditures until paid.
7.5 Non-Exclusive Remedies. No remedy in any Document conferred on or reserved
to Lender is intended to be exclusive of any other remedy or remedies, but
each and every such remedy shall be cumulative and shall be in addition to
every other remedy given under any Document or now or hereafter existing
at law or in equity. No delay or omission to exercise any right or power
shall be construed to be a waiver of or acquiescence to any default or a
waiver of any right or power; and every such right and power may be
exercised from time to time and as often as may be deemed expedient.
Without limiting the generality of the foregoing, Lender shall be entitled
to seek specific performance of the Obligations of Parent and each
Borrower under the Documents without the necessity to prove that
irrepairable harm will occur without the granting of such remedy or that
an adequate remedy does not exist at law.
VIII. CONSTRUCTION AND GENERAL TERMS.
8.1 Payment Location. All monies payable under the Documents shall be paid to
Lender at its address set forth in paragraph 8.5 in lawful monies of the
United States of America, unless otherwise designated in the Documents or
by Lender by notice.
8.2 Entire Agreement. The Documents executed from time to time shall
exclusively and completely state the rights and obligations of Lender,
Parent and Subsidiaries with respect to the Credit Facility. No
modification, variation, termination, discharge, abandonment, or waiver of
any of the terms or conditions of the Documents shall be valid unless in
writing and signed by duly authorized representatives of the party sought
to be bound by such action. The Documents supersede any and all prior
representations, warranties and/or inducements, written or oral,
heretofore made by Lender concerning this transaction, including any
commitment for financing.
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8.3 Powers Coupled With an Interest. The powers and agency granted to Lender
by Parent or any Subsidiary which is a Borrower are coupled with an
interest and are irrevocable until the Obligations of such entity have
been performed and are granted as cumulative to Lender's other remedies
for collection and enforcement of the Obligations.
8.4 Counterparts. Any Document may be executed simultaneously in any number of
identical copies, each of which shall constitute an original for all
purposes.
8.5 Notices. All notices, requests or demands required or permitted to be
given under the Documents shall be in writing, and shall be deemed
effective (a) upon hand delivery, if hand delivered; (b) one (1) Business
Day after such are deposited for delivery via Federal Express or other
nationally recognized overnight courier service; or (c) three (3) Business
Days after such are deposited in the United States mails, certified or
registered mail, all with delivery charges and/or postage prepaid, and
addressed as shown below, or to such other address as either party may,
from time to time, designate in writing. Written notice may be given by
telecopy to the telecopier number shown below or to such other telecopier
number as either party may designate, from time to time, in writing,
provided that such notice shall not be deemed effective unless it is
confirmed within twenty-four (24) hours by hand delivery, courier delivery
or mailing of a copy of such notice in accordance with the requirements
set forth above.
If to Lender: FINOVA CAPITAL CORPORATION
7272 East Indian School Road, Suite 410
Scottsdale, Arizona 85251
Attn: Vice President-Resort Finance
Telecopy: (480) 874-6444
with a copy to:
FINOVA CAPITAL CORPORATION
7272 East Indian School Road, Suite 410
Scottsdale, Arizona 85251
Attn: Vice President-Associate General Counsel
Telecopy: (480) 874-6445
If to Parent or BLUEGREEN CORPORATION
any Borrower: 460 Blue Lake Drive
Boca Raton, Florida 33431
Attention: Patrick Rondeau, Esq.
Telecopy: (561) 912-8299
(provided that notice to any Borrower
which is a Subsidiary shall be addressed
to it c/o Parent)
8.6 Successors and Assigns. All the covenants of Parent and the Subsidiaries
which are Borrowers and all the rights and remedies of the Lender
contained in the Documents shall bind Parent and such Subsidiaries, and,
subject to the restrictions on merger, consolidation and assignment
contained in the Documents, their respective successors and assigns, and
shall inure to the benefit of Lender, its successors and assigns, whether
so expressed or not. Neither Parent nor any Borrower may assign its rights
in the Documents in whole or in part. Except as may be expressly provided
in a Document, no person or other entity shall be deemed a third party
beneficiary of any provision of the Documents. Furthermore, no Subsidiary
shall be deemed be a third party beneficiary of Lender's obligations under
this Agreement to make Loans; but after the initial Advance of a Loan to a
Subsidiary, such Subsidiary, and not Parent, shall be deemed the real
party in interest with respect to the enforcement against Lender of the
terms and conditions of this Agreement and the other Loan Documents,
excluding any Guaranty, for the Loan.
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8.7 Severability. If any one or more of the provisions contained in any
Document shall be held invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions
contained in the Document shall not in any way be affected or impaired
thereby. In lieu of each such enforceable provision, there shall be added
automatically as a part of such Document a provision that is legal, valid,
binding and enforceable and is as similar in terms to such unenforceable
provision as may be possible.
8.8 Time of the Essence. Time is of the essence in the Performance of the
Obligations.
8.9 Miscellaneous. All headings are inserted for convenience only and shall
not affect any construction or interpretation of the Documents. Unless
otherwise indicated, all references in a Document to clauses and other
subdivisions refer to the corresponding paragraphs, clauses and other
subdivisions of the Document; the words "herein," "hereof," "hereto,"
hereunder" and words of similar import refer to the Document as a whole
and not to any particular paragraph, clause or other subdivision; and
reference to a numbered or lettered subdivision of an Article, or
paragraph shall include relevant matter within the Article or paragraph
which is applicable to but not within such numbered or lettered
subdivision. All Schedules and Exhibits referred to in this Agreement are
incorporated in this Agreement by reference.
8.10 CHOICE OF LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED THEREIN, THE
DOCUMENTS AND THE RIGHTS, DUTIES AND OBLIGATIONS OF THE PARTIES THERETO
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF
THE STATE OF ARIZONA (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS)
AND TO THE EXTENT THEY PREEMPT THE LAWS OF SUCH STATE, THE LAWS OF THE
UNITED STATES, PROVIDED, HOWEVER, THAT THE INTERNAL LAWS OF THE STATE
WHERE REAL PROPERTY IS LOCATED (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS
OF LAWS) SHALL GOVERN THE PROCEDURES CONTROLLING THE CREATION, PERFECTION
AND FORECLOSURE OF THE LIEN, SECURITY INTERESTS, ASSIGNMENT AND OTHER
CHARGES INTENDED TO BE CREATED THE SECURITY DOCUMENT ENCUMBERING SUCH REAL
PROPERTY.
(b) CHOICE OF JURISDICTION AND VENUE. EACH OF PARENT AND LENDER: (A) HEREBY
IRREVOCABLY SUBMITS ITSELF TO THE PROCESS, JURISDICTION AND VENUE OF THE
COURTS OF THE STATE OF ARIZONA, MARICOPA COUNTY, AND TO THE PROCESS,
JURISDICTION, AND VENUE OF THE UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF ARIZONA, FOR THE PURPOSES OF SUIT, ACTION OR OTHER PROCEEDINGS
ARISING OUT OF OR RELATING TO THE DOCUMENTS OR THE SUBJECT MATTER THEREOF
(EXCEPT AS MAY BE SPECIFICALLY PROVIDED TO THE CONTRARY IN THE SECURITY
DOCUMENTS), AND, IF LENDER INITIATES SUCH ACTION, ANY COURT IN WHICH
LENDER SHALL INITIATE SUCH ACTION, AND THE CHOICE OF SUCH VENUE SHALL IN
ALL INSTANCES BE AT THE LENDER'S ELECTION; AND (B) WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, HEREBY WAIVES AND AGREES NOT TO ASSERT BY WAY
OF MOTION, DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION OR PROCEEDING ANY
CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF THE
ABOVE-NAMED COURTS, THAT SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN
INCONVENIENT FORUM OR THAT THE VENUE OF SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER. EACH OF PARENT AND LENDER HEREBY WAIVES THE RIGHT TO
COLLATERALLY ATTACK ANY JUDGMENT OR ACTION IN ANY OTHER FORUM.
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(c) WAIVER OF JURY TRIAL. LENDER AND PARENT ACKNOWLEDGE AND AGREE THAT ANY
CONTROVERSY WHICH MAY ARISE UNDER ANY OF THE DOCUMENTS WOULD BE BASED UPON
DIFFICULT AND COMPLEX ISSUES; AND, THEREFORE, THEY AGREE THAT ANY LAWSUIT
ARISING OUT OF ANY SUCH CONTROVERSY SHALL BE TRIED BY A JUDGE SITTING
WITHOUT A JURY, AND KNOWINGLY AND VOLUNTARILY WAIVE TRIAL BY JURY IN ANY
SUCH PROCEEDING.
(d) BORROWER CONSENTS AND WAIVERS. PARENT WILL CAUSE EACH SUBSIDIARY WHICH IS
A BORROWER TO GRANT CONSENTS AND WAIVERS WHICH ARE APPLICABLE TO IT
SUBSTANTIALLY IDENTICAL TO THOSE SET FORTH IN THIS PARAGRAPH 8.10.
(e) INDUCEMENT TO LENDER. ALL OF THE PROVISIONS SET FORTH IN THIS PARAGRAPH
ARE MATERIAL INDUCEMENTS FOR LENDER'S EXTENDING THE CREDIT FACILITY TO
PARENT AND MAKING ADVANCES TO BORROWERS.
Parent's initials ______ ]
Lender's initials ______ ]
8.11 Compliance Applicable Usury Law. It is the intent of the parties hereto to
comply with the Applicable Usury Law. Accordingly, notwithstanding any
provisions to the contrary in the Documents, in no event shall this
Agreement or the Documents require the payment or permit the collection of
interest in excess of the maximum contract rate permitted by the
Applicable Usury Law.
8.12 Attorneys' Fees. Without limitation of the generality of any other
provision in the Documents, if Lender, Parent or any Subsidiary which is a
Borrower shall commence litigation to enforce the Documents or otherwise
related to the Credit Facility, the prevailing party shall be entitled to
its reasonable attorneys' fees and costs, to be determined by a court and
not by a jury.
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8.13 NO PARTNERSHIP OR JOINT VENTURE. THE RELATIONSHIP OF EACH BORROWER AND
LENDER WILL BE THAT OF DEBTOR AND CREDITOR. IT IS NOT THE INTENTION OF
EITHER OF PARENT OR LENDER BY ANY DOCUMENT BEING EXECUTED IN CONNECTION
WITH THE CREDIT FACILITY TO ESTABLISH A PARTNERSHIP BETWEEN ANY BORROWER
AND LENDER, AND THE BORROWERS AND LENDER SHALL NOT UNDER ANY CIRCUMSTANCES
BE CONSTRUED TO BE PARTNERS OR JOINT VENTURERS.
8.14 Standards Applied to Lender's Action. Unless otherwise specifically
stipulated elsewhere in the Documents, if a matter is left in the
Documents to the decision, right, requirement, request, determination,
judgment, opinion, approval, consent, waiver, satisfaction, acceptance,
agreement, option, election or discretion of Lender, its employees,
Lender's counsel or any agent for or contractor of Lender, such action
shall be deemed to be exercisable by Lender or such other person in its
sole, absolute and unlimited discretion and according to standards
established in its sole and absolute discretion. Without limiting the
generality of the foregoing, "option" and "discretion" shall be implied by
use of the words "if" or "may." However, whenever this Security Document
contains the terms "reasonably satisfactory to Lender," "reasonably
determined by Lender," "reasonably acceptable to Lender," "reasonable
consent of Lender," "Lender shall reasonably elect," "Lender shall
reasonably request," "reasonably approved by Lender" or similar terms
wherein the word reasonable or a derivative thereof is used with regard to
an action of Lender: (a) such terms shall mean satisfactory to, at the
election of, determined by, acceptable to or requested by, as applicable,
Lender in its sole (but reasonably exercised) discretion under standards
applicable to commercial lenders under the laws of the State of Arizona;
and (b) it is the intention of the parties to permit Lender a broad
latitude in which to exercise its discretion, acknowledging that, while
such discretion may not be exercised arbitrarily or capriciously, it may
be exercised conservatively for Lender's protection and benefit. By way of
illustration, and not of limitation, it shall not be unreasonable for
Lender, in exercising its discretion, to make conservative assumptions
regarding the possible outcome of future events.
8.15 Meaning of Subordination. Any subordinations required to be given under
the Documents by third parties to Lender shall include the subordination
of and the deferral of the right to receive payments on the subordinated
obligations except to the extent expressly permitted in this Agreement;
the remittances to Lender of all prohibited payments received by the third
party; the subordination of all liens, security interests, assignments and
other encumbrances and claims held by a third party on or against any of
property of the person owing the indebtedness which is being subordinated,
except for Permitted Encumbrances, to Lender's interest (whenever
acquired) in such property; and an agreement on the part of the third
party not to exercise any remedies against Borrower so long as all
obligations under the Documents have not been fully satisfied.
8.16 Publicity. Lender routinely advertises the transactions to which it is a
party in newspapers, industry periodicals, and other miscellaneous print
and electronic literature. Borrower consents to such advertising and
authorizes Lender to use Borrower's name, logo, insignia, descriptive art
work, trade name, trademark, or other similar material, whether or not
protected by copyright (or otherwise), in any such advertisement.
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IX. LENDER'S INSPECTOR.
9.1 Retention of Lender's Inspector. Lender may retain an
architectural/engineering firm ("Lender's Inspector") to do the following
in connection with Work being done in connection with Improvements being
financed in whole or in part under a Development Loan: (a) until
Completion of such Work and the making of the last Work-Related Advance
(including the disbursement of the Basic Retainage and Additional
Retainage) with respect to such Work, review the related Principal
Work-Related Items, the other related Contracts, Licenses, Permits and
Other Intangibles and the budget proposed to be the Construction Budget
for such Work and any changes to such items; (b) inspect the Real Property
prior to commencement of such Work for purposes of determining the
condition of the Real Property and any existing improvements; (c) until
Completion of such Work and the making of the last Work-Related Advance
(including the disbursement of the Basic Retainage and Additional
Retainage) with respect to such Work, make monthly inspections of the
related Real Property and such Work (whether or not Development Loan
proceeds are to be used to pay or reimburse Borrower for the costs of the
portion of such Work which has been completed) so that Lender may monitor
whether Borrower is in compliance with the terms and conditions of this
Agreement, and certifying that each Work-Related Advance Request under the
Development Loan is not in excess of the portion of such Work completed
and the amount to which the Borrower under the Development Loan is
entitled under the terms and conditions of this Agreement; and (d) provide
evidence satisfactory to Lender prior to the funding of any Work-Related
Advance under the Development Loan that (subject to completion thereof as
part of such Work as contemplated by this Agreement), all necessary
street, easements and utilities are available to the boundary of the Real
Property and that the respective lines and treatment or generator plants
are of adequate capacity and size for the intended use of the related
Property. Furthermore, Lender may require an inspection by Lender's
Inspector of Work which is being done in connection with Improvements
being financed under a Development Loan: (a) prior to each Work-Related
Advance under the Development Loan; (b) at least once each month during
the course of Completion of such Work; (c) upon Substantial Completion of
such Work; (d) upon Completion of such Work; and (e) until Completion of
such Work and the making of the last Work-Related Advance (including the
disbursement of the related Basic Retainage and Additional Retainage) with
respect to such Work, at such other times as Lender may, in its judgment,
deem necessary due to actual or suspected non-compliance with the related
Plans and Specifications, the related Construction Contract(s), the Loan
Documents for the Loan, applicable Legal Requirements, engineering or
construction principles or commonly accepted safety standards, or failure
of the Borrower under the Loan to satisfy the requirements of the
Documents. Any Work which is completed and funded from sources other than
a Development Loan Advance shall be subject to inspection by and the
approval of Lender's Inspector.
9.2 No Duty of Lender to Supervise, Etc. Lender shall have no duty to
supervise or to review and inspect, in connection with any Work, any of
the related Principal Work-Related Items, any of the other related
Contracts, Licenses, Permits and Other Intangibles, any budget proposed to
be a Construction Budget for such Work, any books and records pertaining
thereto or any changes to such items or the construction of such Work. Any
inspection made by Lender shall be for the sole purpose of determining
whether the Obligations are being Performed and preserving Lender's rights
under these Documents. If Lender, or Lender's Inspector acting on behalf
of Lender, should review or inspect any Principal Work-Related Item, any
of the other Contracts, Licenses, Permits and Other Intangibles, any
Construction Budget, any books and records pertaining thereto or any
changes to such items or the construction of any Work, Lender and Lender's
Inspector shall have no liability or obligation to Parent, any Subsidiary
which is a Borrower, Borrower or any third person arising out of such
inspection; and neither any Parent, any Subsidiary which is a Borrower nor
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<PAGE> 36
any third person shall be entitled to rely upon any such inspection or
review. Inspection not followed by notice of an Event of Default shall not
constitute (a) waiver of any Event of Default then existing; (b) an
acknowledgment or representation by Lender or Lender's Inspector that
there has been or will be compliance with any Principal Work-Related Item,
any of the other Contracts, Licenses, Permits and Other Intangibles, any
Construction Budget, Legal Requirements, sound construction, engineering
or architectural principles or commonly accepted safety standards, or that
the construction is lien free or free from defective materials or
workmanship; or (c) a waiver of Lender's right thereafter to insist that
Completion of the Work being financed in whole or in part under a
Development Loan occur in accordance with the related Principal
Work-Related Items, the other related Contracts, Licenses, Permits and
Other Intangibles, the related Construction Budget, the Documents, Legal
Requirements, sound construction, engineering or architectural principles
or commonly-accepted safety standards and free from defective materials
and workmanship. Lender and Lender's Inspector owe no duty of care to any
Borrower under a Development Loan or any third person to protect against,
or inform such Borrower or any third person of, the existence of
negligence, faulty, inadequate or defective design or construction of the
Work being financed in whole or in part under such Development Loan.
Without limiting the generality of the foregoing, Lender will deliver or
cause to be delivered to Borrower, within a reasonable time after their
delivery to Lender, copies of any written reports of Lender's Inspector.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in their respective name, personally or by their duly authorized
representatives as of the date above written.
PARENT: BLUEGREEN CORPORATION, a
Massachusetts corporation
By: /s/ PATRICK E. RONDEAU
---------------------------------
Type/Print Name: Patrick E. Rondeau
Title: Sr. Vice President
LENDER: FINOVA CAPITAL CORPORATION, a
Delaware corporation
By: /s/ SUSAN BABBITT
---------------------------------
Type/Print Name: Susan Babbitt
Title: Vice President
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<PAGE> 1
EXHIBIT 10.135
Loan No.98-087
ACQUISITION COST REIMBURSEMENT LOAN AGREEMENT
---------------------------------------------
THIS ACQUISITION COST REIMBURSEMENT LOAN AGREEMENT (as amended and
supplemented from time to time, this "AGREEMENT"), dated as of September 14,
1999, is made by and between HELLER FINANCIAL, INC., a Delaware corporation
("LENDER"), whose address is 31st Floor, 500 West Monroe Street, Chicago,
Illinois 60661, and BLUEGREEN VACATIONS UNLIMITED, INC., a Florida corporation
("BORROWER"), whose address is 4960 Blue Lake Drive, Boca Raton, Florida 33431.
RECITALS:
A. Borrower desires Lender to extend a secured loan to Borrower in
accordance with the terms of this Agreement and that certain Master Agreement,
dated as of October 15, 1998, between Lender and Bluegreen Corporation
("GUARANTOR"), a Massachusetts corporation (as amended and supplemented from
time to time, the "MASTER AGREEMENT"), for the purpose of reimbursing Borrower
for certain acquisition costs incurred in connection with the acquisition and
renovation of the Lodge Alley Resort (as defined herein).
B. Borrower's obligations hereunder and under the other Lodge Alley
Loan Documents (as defined herein) will be secured, INTER ALIA, by liens with
the priority specified herein on certain real property, the improvements
thereon, and related personal property and receivables owned or to be owned by
Borrower in respect thereof (other than Lodge Alley Note Receivables).
NOW, THEREFORE, in consideration of the foregoing premises and the
agreements, provisions and covenants herein contained, Borrower and Lender agree
as follows:
ARTICLE 1 - DEFINITIONS
1.1 DEFINED TERMS. All capitalized terms used herein, unless otherwise
defined, shall have the meanings ascribed thereto in the appendix attached
hereto and made a part hereof by this reference.
ARTICLE 2 - LOAN
2.1 DISBURSEMENT OF LODGE ALLEY LOAN. On the date of this Agreement,
and subject to the satisfaction of the conditions precedent specified in Section
2.2 of this Agreement, Lender shall disburse Fourteen Million Twenty-Five
Thousand and 00/100 Dollars ($14,025,000.00), the entire amount of the Lodge
Alley Loan, directly to or for the account of Borrower, less any costs and fees
set forth herein. The proceeds of the Lodge Alley Loan shall be used to
reimburse the Borrower for the costs and out-of-pocket disbursements paid by the
Borrower in connection with the acquisition of the Lodge Alley Resort, as more
particularly detailed on Schedule 1 hereto, and to pay closing costs incurred in
connection with the making of the Lodge Alley Loan. The Lodge Alley Resort shall
be free and clear of all liens and encumbrances except for the liens
<PAGE> 2
created herein or in any of the other Lodge Alley Loan Documents and except for
any other Lodge Alley Permitted Exceptions. There shall be no further advances
or loans hereunder. The Lodge Alley Loan shall be deemed to be, and shall be, a
"Resort Loan" under, and as defined in, the Master Agreement.
2.2 TERM. The Lodge Alley Loan shall mature and be due and payable on
the Lodge Alley Loan Maturity Date.
2.3 INTEREST RATE. The outstanding principal balance of the Lodge Alley
Loan shall bear interest at the Interest Rate; PROVIDED, HOWEVER, that upon the
occurrence and during the continuance of an Event of Default the Lodge Alley
Loan will bear interest at the Default Rate. Interest on the Lodge Alley Loan
shall be paid by Borrower to Lender monthly in arrears, commencing on the 1st
day of the first month following the date hereof, and continuing on the first
day of each month thereafter until payment of the Lodge Alley Loan in full.
2.4 PREPAYMENTS. The Lodge Alley Loan may be prepaid in whole, but not
in part, at any time upon five (5) days prior written notice to Lender. Any
prepayment under this Section 2.4 shall be accompanied by all accrued and unpaid
interest, if any, then due with respect to the Lodge Alley Loan and all Costs
and expenses then outstanding, and shall be applied in the following order:
first to the payment of Costs and other expenses payable to Lender pursuant to
this Agreement; second, to the payment of accrued but unpaid interest on the
Lodge Alley Loan; and thereafter to the reduction of the principal balance of
the Lodge Alley Loan. For the avoidance of doubt, no prepayment premium shall be
due and payable under this Section 2.4.
2.5 GRANT OF SECURITY INTEREST. To secure the payment and performance
of all of the Indebtedness and all of the obligations of Borrower under this
Agreement and/or under any of the other Lodge Alley Loan Documents and the
Borrower's undertakings hereunder and under the other Lodge Alley Loan Documents
and the payment and performance of the obligations of Borrower or any other
borrower under the Master Agreement in respect of any Resort Loan (as such term
is defined in the Master Agreement) owing to Lender under any other Resort Loan
Documents (as such term is defined in the Master Agreement) and the payment and
performance of the obligations of the Borrower and/or the Guarantor under the
Warehouse Facility, Borrower does hereby unconditionally and irrevocably assign,
pledge and grant to Lender a continuing security interest and lien in and to all
of the right, title and interest of Borrower in the following property of
Borrower, whether now owned or existing or hereafter acquired regardless of
where located (collectively, the "LODGE ALLEY COLLATERAL"):
(a) all franchises, licenses, permits, trade names, trademarks
(and goodwill associated therewith)(provided that no lien is intended
to be granted in the trade name or trademark "Bluegreen" or any logo
used in connection therewith), approvals, leasehold interests (whether
as lessor or lessee or sublessor or sublessee), management contracts,
marketing contracts, maintenance contracts, utility contracts, security
contracts, other servicing contracts, licensing contracts or other
similar contracts and all guaranties of any of the foregoing relating,
in each case, to the Lodge Alley Resort, the Lodge Alley
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Intervals, the Lodge Alley Commercial Condominium Units and/or the
Common Elements or Limited Common Elements (as such terms are defined
in the Lodge Alley Inn Master Deed);
(b) all other accounts, contract rights, general intangibles,
documents, instruments, chattel paper and proceeds of Borrower related
to the Lodge Alley Resort or otherwise connected with, or related to,
the operation and/or renovation, management and use of the Lodge Alley
Resort (other than the Lodge Alley Note Receivables);
(c) all fixtures, inventory, supplies, fittings, machinery,
appliances, equipment, apparatus, furnishings, and personal Property of
every nature found on or used in connection with the Lodge Alley
Resort, including, without limitation, guest room furnishings, linens,
dishware, blinds, floor coverings, hall and lobby equipment, security
systems, sprinkler systems, other fire prevention and extinguishing
apparatus, reservation system computer and related equipment, artwork,
paintings, prints, sculpture, and office furnishings and equipment;
(d) (i) the Lodge Alley Resort, including, without limitation,
all Lodge Alley Intervals, Lodge Alley Residential Condominium Units
and Lodge Alley Commercial Condominium Units (now existing or hereafter
created)(whether sold or unsold), (ii) the Lodge Alley Inn Master Deed
(including, without limitation, Borrower's development and declarant's
rights (but not obligations) under applicable law), the Lodge Alley
Master Deed and the Lodge Alley Courtyard Restrictive Covenants, (iii)
all building materials, supplies and other Property now or hereafter
stored at or delivered to the Lodge Alley Resort or any other location
for installation in or on the Lodge Alley Resort, (iv) any and all
plans, specifications, drawings, books, records, marketing materials
and similar items now or hereafter relating to the Lodge Alley Resort,
the operation and use thereof, any rights of Borrower thereto or any
interest therein, (v) the renovation construction contract for Lodge
Alley Resort and the architect and engineering contracts entered into
or to be entered into by Borrower in connection with such renovations
and (vi) any payment, performance or other surety bonds obtained by any
contractor or subcontractor in connection with such refurbishing;
(e) all judgments, settlements, claims, awards, insurance
proceeds and other proceeds and compensation, and any interest thereon
(collectively, "COMPENSATION"), now or hereafter made or payable in
connection with (i) any casualty or other damage to all or any part of
the Lodge Alley Resort, (ii) any condemnation proceedings affecting all
or any part of any of the Lodge Alley Resort or any rights thereto or
any interest therein, (iii) any damage to or taking of all or any part
of the Lodge Alley Resort, or any rights thereto or any interest
therein arising from or otherwise relating to any exercise of the power
of eminent domain (including, without limitation, any and all
Compensation for change of grade of streets or any other injury to or
decrease in the value of any of the Lodge Alley Resort), or any
conveyance in lieu of or under threat of any such taking, (iv) any and
all proceeds of any sale, assignment or other disposition of all or any
part of
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the Lodge Alley Resort or any rights thereto or any interest therein,
(v) any and all proceeds of any other conversion (whether voluntary or
involuntary) of all or any part of the Lodge Alley Resort or any rights
thereto or any interest therein or to cash or any liquidated claim, and
(vi) any and all refunds and rebates of or with respect to any
insurance premium, any imposition or any other charge for utilities
relating to all or any part of the Lodge Alley Resort (including,
without limitation, any and all refunds and rebates of or with respect
to any deposit or prepayment relating to any such insurance premium,
imposition or charge), and any and all interest thereon, whether now or
hereafter payable or accruing; and
(f) All cash and other monies and property of Borrower in the
possession or under the control of Lender or any agent thereof;
(g) All books, records, ledger cards, files, correspondence,
computer tapes, disks and software relating to the Lodge Alley Resort
or any other Lodge Alley Collateral described herein;
(h) all of the collateral granted to Lender in the Lodge Alley
Mortgage;
(i) all of the collateral granted to Lender in the Lodge Alley
Assignment of Leases and Rents and in any other Lodge Alley Loan
Document; and
(j) All proceeds, extensions, amendments, additions,
improvements, betterments, renewals, substitutions and replacements of
the foregoing.
This Agreement shall be deemed a security agreement as defined in the Code, and
the remedies for any violation of the covenants, terms and conditions of the
agreements herein contained shall be cumulative and be as prescribed herein, or
by general law, or as to such part of the Collateral which is also reflected in
any filed financing statement, by the specific provisions of the Code now or
hereafter enacted, all at Lender's sole election. All terms defined used herein
and defined in the UCC shall have the meanings provided for therein, as the same
may be amended from time to time.
2.6 LODGE ALLEY RELEASES. Notwithstanding any provision of this
Agreement or any other Lodge Alley Loan Document to the contrary, the lien of
the Lodge Alley Mortgage, the Lodge Alley Assignment of Leases and Rents and any
and all related fixture filing(s) or other UCC-1 financing statements recorded
in the real property records in favor of Lender in connection with the Lodge
Alley Loan shall be released upon the conveyance by the Borrower of fee title to
a Purchaser of a Lodge Alley Interval in the ordinary course of Borrower's
business or to the purchaser of a Lodge Alley Commercial Condominium Unit in the
ordinary course of Borrower's business if, but only if, (a) Lender receives a
written request from Borrower not less than three (3) Business Days prior to the
requested date of release together with all release documentation (including,
without limitation, a partial release of the Lodge Alley Mortgage) in form and
substance reasonably satisfactory to Lender, (b) no Event of Default or event or
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<PAGE> 5
circumstance that, with the giving of notice or passage of time or both, could
give rise to an Event of Default has occurred and is continuing, (c) the
applicable Lodge Alley Release Price is paid to Lender in connection therewith
and (d) all Costs and expenses of Lender in respect of any such releases, the
filing of the same and any escrow conditions applicable in respect thereof shall
have been paid by Borrower. For the avoidance of doubt, the Lender shall have no
lien or security interest in any Lodge Alley Note Receivable and no Lodge Alley
Note Receivable shall be included, or be deemed to be included, in any of the
Lodge Alley Collateral provided for herein or in any other Lodge Alley Loan
Documents.
2.7 CONDITIONS PRECEDENT TO DISBURSEMENT OF LODGE ALLEY LOAN. The
following conditions precedent to the disbursement of the Lodge Alley Loan
hereunder must be satisfied prior to the disbursement of the Lodge Alley Loan:
(a) Borrower shall have executed and delivered to, procured
for and deposited with, and, if appropriate, recorded in the proper
records with all filing and recording fees and stamp and intangibles
taxes paid, the Lodge Alley Mortgage, the Lodge Alley Assignment of
Leases and Rents and the Lodge Alley UCC Financing Statements and such
other documents, instruments, and certificates as Lender or Title
Company may require.
(b) The Title Company shall have issued or committed in
writing to issue to Lender the Title Insurance with satisfactory
insurance coverage over mechanics' liens arising from any renovation at
the Lodge Alley Resort together with such other coverage and
endorsements as Lender may reasonably require subject to the Lodge
Alley Permitted Exceptions. Borrower shall disclose to Lender any
indemnity or other arrangement or agreement between Borrower and Title
Company entered into in order to induce Title Company to issue the
Title Insurance as required by this Agreement. Lender shall have also
received satisfactory evidence that all security interests and liens
granted to Lender pursuant to this Agreement or the other Lodge Alley
Loan Documents have been duly perfected and constitute first priority
liens on the Collateral.
(c) The Borrower shall have executed and delivered to Lender a
collateral assignment of all contracts and agreements in respect of the
Lodge Alley Resort.
(d) The Borrower shall have executed and delivered to Lender a
collateral assignment of all permits, licenses, and parking rights and
passes in respect of the Lodge Alley Resort.
(e) The Borrower shall have executed and delivered to Lender a
collateral assignment of all of its rights as developer and/or
declarant (but not its obligations) under the Phase I of the Lodge
Alley Inn Master Deed and the Lodge Alley Master Deed.
(f) Lender shall have been paid the portion of the Commitment
Fee, as defined in the Master Agreement, as required by the Master
Agreement. Borrower and
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<PAGE> 6
Lender agree that the portion of said Commitment Fee due on the funding
of the Lodge Alley Loan is $140,025. Borrower hereby requests and
authorizes Lender to deduct said fee from the proceeds of the Lodge
Alley Loan to be funded to Borrower hereunder.
(g) The Guarantor shall have executed and delivered to Lender
the Lodge Alley Guaranty Agreement and the Lodge Alley Completion
Guaranty Agreement.
(h) Lender shall have received all documents, instruments and
information identified on Schedule 2, including, without limitation,
the Appraisal, provided that the items on Schedule 2 denoted with an
asterisk shall be delivered by the Borrower not later than 10 days
after the date hereof and such delivery shall be, and is hereby made,
an undertaking of the Borrower, the violation of which shall be
immediate Event of Default hereunder.
(i) Lender shall have received, in form and substance
satisfactory to Lender, an executed legal opinion, issued by counsel
to Borrower and Guarantor acceptable to Lender, in form and content
acceptable to Lender, with respect to this Agreement and the other
Lodge Alley Loan Documents and the Lodge Alley Resort.
(j) The representations and warranties contained herein and
in the other Lodge Alley Loan Documents shall be true, correct and
complete in all material respects on and as of the date of funding of
the Lodge Alley Loan.
(k) Borrower shall have performed in all material respects
all agreements, paid all fees, Costs and expenses and satisfied all
conditions which any Lodge Alley Loan Document or the Master Agreement
provides shall be paid or performed by it as a condition to the making
of the Lodge Alley Loan.
(l) Borrower shall have obtained all approvals, licenses,
permits and consents for Borrower's acquisition, renovation,
timesharing, use and operating of the Lodge Alley Resort.
(m) There shall then exist no Event of Default or event that
with the giving of notice or passage of time would constitute an Event
of Default.
(n) There shall then exist no Termination Event, as such term
is defined in the Master Agreement, or event that with the giving of
notice or passage of time would constitute a Termination Event.
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES OF BORROWER
Borrower hereby represents and warrants as follows:
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<PAGE> 7
3.1 EXISTENCE. Borrower is in good standing under the laws of the State
of Florida and is authorized to transact business in the State of South
Carolina. The Guarantor owns 100% of the issued and outstanding stock of
Borrower.
3.2 AUTHORIZATION AND ENFORCEABILITY.
(a) EXECUTION. The Lodge Alley Loan Documents have been duly
authorized, executed and delivered and constitute the duly authorized,
valid and legally binding obligations of Borrower, enforceable against
Borrower in accordance with their respective terms.
(b) OTHER AGREEMENTS. The execution, delivery and compliance
with the terms and provisions of the Lodge Alley Loan Documents will
not (i) to the best of Borrower's knowledge, violate any provisions of
law or any applicable regulation, order or other decree of any court or
governmental entity, or (ii) conflict or be inconsistent with, or
result in any default under, any contract, agreement or commitment to
which Borrower is bound.
3.3 FINANCIAL STATEMENTS AND BUSINESS CONDITION. The financial
statements of the Borrower and the Guarantor and the other consolidated
companies therein fairly present the financial conditions and results of
operations of such Persons as of the date or dates thereof and for the periods
covered thereby. All such financial statements were prepared in accordance with
GAAP. Except for any such changes heretofore expressly disclosed in writing to
Lender, there has been no material adverse change in the financial condition of
the Borrower, the Guarantor or any of its consolidated subsidiaries from the
financial condition shown in such consolidated financial statements. Borrower is
able to pay all of its debts as they become due, and Borrower shall maintain
such solvent financial condition, giving effect to all obligations, absolute and
contingent, of Borrower. Borrower's obligations under this Agreement will not
render it unable to pay its debts as they become due. The present fair market
value of Borrower's assets is greater than the amount required to pay its total
liabilities.
3.4 TAXES. All ad valorem taxes and other taxes and assessments against
the Lodge Alley Resort have been paid and Borrower knows of no basis for any
additional taxes or assessments against such property. Borrower has filed all
required tax returns and has paid all taxes shown to be due and payable on such
returns, including interest and penalties, and all other taxes which are payable
by it, to the extent the same have become due and payable. Borrower shall
collect and pay, or shall use commercially reasonable efforts to cause the Lodge
Alley Inn Association and/or the Lodge Alley Association to collect and pay, any
applicable sales or rental tax respecting the sale or rental of any Lodge Alley
Intervals, Lodge Alley Residential Condominium units, Lodge Alley Commercial
Condominium Units and the condominium units subject to the Lodge Alley Master
Deed, in each case, owned by Borrower.
3.5 LITIGATION AND PROCEEDINGS. Except as set forth on Schedule 3
hereto, there are no actions, suits, proceedings, orders or injunctions pending
or, to the best of Borrower's knowledge, threatened against or affecting
Borrower, at law or in equity, or before or by any
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<PAGE> 8
governmental entity which, if adversely determined, could have, either
individually or in the aggregate, a Material Adverse Effect. Borrower has not
received any notice from any court or governmental entity alleging that Borrower
has violated any applicable Governmental Regulation, any of the rules or
regulations thereunder, or any other applicable laws, the result of which, if
adversely determined, would have, individually or in the aggregate, a Material
Adverse Effect.
3.6 VALID AND BINDING OBLIGATION, NO BREACH OR DEFAULT. All of the
Lodge Alley Loan Documents, and all other documents referred to herein to which
Borrower is a party, upon execution and delivery will constitute valid and
binding obligations of Borrower, enforceable in accordance with their terms
except as limited by Debtor Relief Laws. The consummation of the transactions
contemplated hereby, and the performance of any of the terms and conditions
hereof and of the other Lodge Alley Loan Documents, will not result in a breach
of, or constitute a default in Borrower's organizational documents or in any
mortgage, deed of trust, lease, promissory note, loan agreement, credit
agreement, partnership agreement, or other agreement to which Borrower is a
party or by which Borrower may be bound or affected. To the best of its
knowledge, the Borrower is not in default of any order of any court or any
requirement of any governmental entity that would result in a Material Adverse
Effect.
3.7 TITLE; LICENSES AND PERMITS. Borrower has good and marketable fee
simple title to the real property constituting the Lodge Alley Resort free and
clear of all liens except for the Lodge Alley Permitted Exceptions and good
title to all personal property constituting the Lodge Alley Resort free and
clear of all liens except for the Lodge Alley Permitted Exceptions. Borrower
possesses all requisite franchises, certificates of convenience and necessity,
operating rights, licenses, permits, consents, authorizations, exemptions and
orders as are necessary to carry on its business as now being conducted, except
where the failure to possess the same would not, individually or in the
aggregate, have a Material Adverse Effect. There are no pending or threatened
proceedings or actions to revoke, attack, invalidate, rescind or modify such
franchises, certificates of convenience and necessity, operating rights,
licenses, permits, consents, authorizations, exemptions and orders or any zoning
in respect of the Lodge Alley Resort or asserting that such zoning does not
permit the occupancy, use or operation of the Lodge Alley Resort as currently
and proposed to be operated.
3.8 DISCLOSURE. There is no fact of which Borrower is aware that
Borrower has not disclosed to Lender in writing that could materially adversely
affect the property, business or financial condition of Borrower. Borrower has
furnished Lender with a true and complete copy of all documents relating to the
renovation and timesharing of the Lodge Alley Resort.
3.9 EMPLOYEE BENEFIT PLANS. Borrower is in compliance in all material
respects with all applicable provisions of the Employee Retirement Income
Security Act, the Internal Revenue Code and all other applicable laws and the
regulations and interpretations thereof with respect to all employee benefit
plans adopted by Borrower for the benefit of its employees. No material
liability has been incurred by Borrower which remains unsatisfied for any
funding obligation, taxes or penalties with respect to any such employee benefit
plan.
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3.10 SYSTEM COMPLIANCE AND ADEQUACY. To the best of Borrower's
knowledge, the storm and sanitary sewer system, water system and all mechanical
systems of the Lodge Alley Resort comply with all applicable environmental,
pollution control and ecological laws, ordinances, rules and regulations, and
all governmental entities having jurisdiction over Lodge Alley Resort have
issued all necessary permits, licenses or other authorizations for the use and
operation of such property. To the best of Borrower's knowledge, the Lodge Alley
Resort has adequate storm and sanitary sewage facilities, water and electrical
supply, and other required public utilities.
3.11 SUBMITTALS. The Lodge Alley Loan Documents and all financial
statements, refurbishing plans, budgets, schedules, opinions, certificates,
confirmations, contractor's statements, applications, rent rolls, affidavits,
agreements, and other materials submitted to the Lender in connection with or in
furtherance of the Lodge Alley Loan Documents by or on behalf of the Borrower
fully and fairly state in all material respects the matters with which they
purport to deal, and neither misstate any material fact, nor, separately or in
the aggregate, fail to state any material fact necessary to make the statements
made not misleading; PROVIDED, HOWEVER, that such representation and warranty is
made to the best of Borrower's knowledge with respect to such materials
submitted to Lender which were prepared by parties other than Borrower, the
Guarantor or their respective employees.
3.12 GOVERNMENTAL REQUIREMENTS. The Lodge Alley Resort is and at all
times during the Lodge Alley Loan will be used, operated and sold in compliance
with all zoning requirements (including parking and density requirements or
limitations), building codes, subdivision improvement agreements, licensing
requirements, all covenants, conditions and restrictions of record, and all
other Governmental Requirements and there are no Governmental Requirements
prohibiting the use and operation of such Resort for timeshare purposes
(including, without limitation, the zoning code of the City of Charleston, South
Carolina). The zoning and subdivision approval of the Lodge Alley Resort and the
right and ability to use or operate such Resort are not in any way dependent on
or related to any real estate other than such Resort. To Borrower's knowledge,
there are no, nor are there any alleged or asserted, violations of Governmental
Requirements, law, regulations, ordinances, codes, permits, licenses,
declarations, covenants, conditions, or restrictions of record, or other
agreements relating to the Lodge Alley Resort or any part thereof. Borrower has
obtained or is not aware of reasons why it cannot obtain all necessary permits,
licenses, consents and approvals (including obtaining sufficient parking spaces
and meeting all applicable density requirements) to use and operate the Lodge
Alley Resort as a vacation time sharing ownership plan, condominium and hotel in
accordance with the requirements of this Agreement and applicable law and to
sell the Lodge Alley Intervals, Lodge Alley Residential Condominium Units and
Lodge Alley Commercial Condominium Units therein in full compliance with
applicable law.
3.13 PROPERTY ACCESS. Lodge Alley Resort has adequate direct access to
improved publicly dedicated roads.
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3.14 FLOOD HAZARDS/WETLANDS. Except as disclosed in the Survey, the
Lodge Alley Resort is not located in a flood zone as defined in the Flood
Disaster Protection Act of 1973, as amended, and such Resort is not located
within a wetlands as defined by any Governmental Authority.
3.15 CONTRACTS WITH AFFILIATES. Except for the relationships and
transactions (the "APPROVED TRANSACTIONS") disclosed to Lender in writing and
set forth on Schedule 4, Borrower does not own any stock or interest in any
other Person or have any affiliates which have any involvement or interest in
the Lodge Alley Resort in any way. All Approved Transactions were negotiated in
good faith, are arms-length transactions and all terms, covenants and conditions
which govern the Approved Transactions are at market rate.
3.16 ENVIRONMENTAL LAWS. Except as set forth on Schedule 5 hereto, the
Lodge Alley Resort is free of presence of all potentially unhealthy, harmful or
unlawful Hazardous Material. Except as set forth on Schedule 5 hereto, neither
Borrower nor Guarantor, or to Borrower's knowledge, any other Person has ever
caused or permitted any Hazardous Materials to be used, handled, placed, held,
stored, located, discharged, released, manufactured, treated, processed,
produced, generated, transported or otherwise managed on, under or at the Lodge
Alley Resort or any part thereof.
3.17 INDEBTEDNESS OF BORROWER OR GUARANTOR. Neither Borrower nor
Guarantor has incurred any indebtedness which is secured, wholly or in part, by
the Lodge Alley Resort or any part thereof (other than the Lodge Alley Loan).
3.18 STATUS OF THE PHASE I BUILDINGS. Each of the Knapp building
(denoted as Tract C-1 on the Survey) and Griffith building (denoted as Tract C-6
on the Survey) in Phase I is a condominium with the number of Lodge Alley
Residential Condominium Units and Lodge Alley Commercial Condominium Units set
forth in Schedule 6 hereto and each such Residential Condominium Unit is subject
to a timeshare regimen pursuant to which fifty-two (52) fee timeshare intervals
have been created in each such Residential Condominium Unit, all as provided for
in the Lodge Alley Inn Master Deed. Borrower holds good and marketable title to
each of the Lodge Alley Residential Condominium Units, Lodge Alley Commercial
Condominium Units and Lodge Alley Intervals in Phase I, and such Residential
Condominium Units, Commercial Condominium Units and Intervals are not encumbered
by, or subject to, a lien, security interest, mortgage, deed of trust,
installment contract, agreement for deed, option agreement, lease or other
similar instrument except for the Lodge Alley Permitted Exceptions.
3.19 CONSTRUCTION OF THE BUILDINGS. The Borrower has obtained
permanent, unconditional certificates of occupancy (or their equivalent) for the
Lodge Alley Residential Condominium Units and the Lodge Alley Commercial
Condominium Units in Phase I, and such certificates of occupancy (or their
equivalent) remain in full force and effect.
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3.20 PURCHASE DOCUMENTS. Borrower has furnished Lender with a true and
complete copy of all documents relating to the acquisition of the Lodge Alley
Resort. The Borrower has no obligations existing thereunder.
3.21 LODGE ALLEY RESORT DOCUMENTS. Borrower has furnished to the Lender
true and correct copies of all Lodge Alley Resort Documents in respect of Phase
I and all filings and/or recordations in order to establish the condominium and
the timeshare ownership regimens in respect of Phase I of the Lodge Alley Resort
have been done and all applicable laws and statutes in connection therewith have
been complied with. Borrower has furnished to the Lender true and correct copies
of the Lodge Alley Master Deed and all documents related thereto. Borrower has
furnished to the Lender true and correct copies of the Lodge Alley Courtyard
Restrictive Covenants and all documents related thereto. The Borrower is in
control of the Lodge Alley Inn Association, the Lodge Alley Association and the
Lodge Alley Courtyard Association.
3.22 SALE OF LODGE ALLEY INTERVALS . The sale and offering of sale of
Lodge Alley Intervals in Phase I (together with any Owner Beneficiary Rights in
and to the Club) (i) do not and will not constitute the sale, or the offering of
sale, of Securities subject to the registration requirements of the Securities
Act of 1933, as amended, or the blue-sky securities laws of South Carolina, (ii)
are done and will only be done in South Carolina or such other states where any
solicitation and/or sale thereof would not be in violation of applicable law,
(iii) do not violate and will not violate any applicable federal, state or local
consumer credit or sale rescission statute, including, without limitation, any
such statute of any State in which a Purchaser may reside, (iv) do not violate
and will not violate any other applicable federal, state or local law, statute
or regulation and (v) do not violate any conservation easement or agreement
listed in the Lodge Alley Permitted Exceptions.
ARTICLE 4 - COVENANTS AND AGREEMENTS OF BORROWER
So long as any portion of the Lodge Alley Loan remains unpaid, Borrower
hereby covenants and agrees with Lender as follows:
4.1 RELEASE PAYMENTS. At the time of the sale of any Lodge Alley
Interval and/or any Lodge Alley Commercial Condominium Unit, Borrower shall pay
Lender the applicable Lodge Alley Release Payment, which payment shall be
applied under the Lodge Alley Loan as follows: (a) first, to any unpaid Costs
and expenses owing to Lender hereunder or under any other Lodge Alley Loan
Document, (b) second, to all accrued and unpaid interest in respect of the Lodge
Alley Loan then due and payable, (c) third, to any other accrued and unpaid
interest in respect of the Lodge Alley Loan, (d) fourth, to outstanding
principal balance of the Lodge Alley Loan, (e) fifth, to any other Indebtedness
or obligations then outstanding and secured by the Lodge Alley Collateral
hereunder and (f) lastly, to the Borrower. Borrower agrees only to sell Lodge
Alley Intervals and not to sell Lodge Alley Residential Condominium Units as
"whole" condominium units.
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4.2 MANDATORY PREPAYMENTS. If the outstanding principal balance of the
Lodge Alley Loan shall exceed the amount set forth below on the date
corresponding to such amount as set forth below, then Borrower shall prepay to
the Lender the amount of such excess not later than five (5) Business Days after
such date and the same shall be applied to the then outstanding principal amount
of the Lodge Alley Loan.
- ------------------------------------- ---------------------------------------
DATE MAXIMUM OUTSTANDING AMOUNT OF LODGE
ALLEY LOAN
- ------------------------------------- ---------------------------------------
December 1, 1999 $13,395,672
- ------------------------------------- ---------------------------------------
March 1, 2000 $12,640,478
- ------------------------------------- ---------------------------------------
June 1, 2000 $12,304,836
- ------------------------------------- ---------------------------------------
September 1, 2000 $11,927,239
- ------------------------------------- ---------------------------------------
December 1, 2000 $11,269,142
- ------------------------------------- ---------------------------------------
March 1, 2001 $10,479,425
- ------------------------------------- ---------------------------------------
June 1, 2001 $10,128,440
- ------------------------------------- ---------------------------------------
September 1, 2001 $9,733,582
- ------------------------------------- ---------------------------------------
December 1, 2001 $9,044,018
- ------------------------------------- ---------------------------------------
March 1, 2002 $8,216,542
- ------------------------------------- ---------------------------------------
June 1, 2002 $7,848,775
- ------------------------------------- ---------------------------------------
September 1, 2002 $7,435,037
- ------------------------------------- ---------------------------------------
December 1, 2002 $6,711,310
- ------------------------------------- ---------------------------------------
March 1, 2003 $5,842,837
- ------------------------------------- ---------------------------------------
June 1, 2003 $5,456,849
- ------------------------------------- ---------------------------------------
September 1, 2003 $5,022,613
- ------------------------------------- ---------------------------------------
December 1, 2003 4,262,924
- ------------------------------------- ---------------------------------------
March 1, 2004 3,351,297
- ------------------------------------- ---------------------------------------
June 1, 2004 2,946,130
- ------------------------------------- ---------------------------------------
September 1, 2004 2,490,317
- ------------------------------------- ---------------------------------------
December 1, 2004 1,743,215
- ------------------------------------- ---------------------------------------
March 1, 2005 846,692
- ------------------------------------- ---------------------------------------
June 1, 2005 448,237
- ------------------------------------- ---------------------------------------
September 1, 2005 0
- ------------------------------------- ---------------------------------------
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4.3 COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS, NOTICE OF GOVERNMENTAL
AUTHORITY. Borrower shall timely comply with all Governmental Requirements
applicable to the Borrower, Phase I and the Lodge Alley Resort, including,
without limitation, maintaining an adequate number of parking spaces and
complying with all zoning requirements. Borrower shall timely comply with and
promptly furnish to Lender true and complete copies of any notice or claim by
any governmental entity pertaining to the Lodge Alley Resort.
4.4 CORRECTION OF DEFECTS. Borrower shall correct or cause to be
corrected (a) any material defect in the Knapp building, the Griffith building
or elsewhere in the Lodge Alley Resort, (b) any material adverse departure in
the renovation of the Lodge Alley Resort from the plans and specifications
therefor, as delivered to the Lender, (c) any violation of any Governmental
Requirements, or any violation of any covenants, conditions and restrictions
affecting the Lodge Alley Resort, if applicable, and (d) any encroachment by any
part of the buildings on any easement, property line, or restricted area, or any
encroachment by any such structure on any building setback line except for Lodge
Alley Permitted Exceptions. Borrower shall defend, indemnify and save Lender
harmless from all claims, losses, costs, damages and expenses asserted or proven
against Lender by any Person as a result of the presence of any such defects,
materials, substances or pests and any removal or compliance with applicable
laws (including, without limitation, Environmental Laws), regardless of whether
such claims, costs, losses, damages and expenses are actual or contingent,
currently existing or arising in the future. The foregoing indemnification shall
survive the payment in full of the Lodge Alley Loan and all other indebtedness
secured by the Lodge Alley Mortgage and the other Lodge Alley Loan Documents and
the release of the Lodge Alley Mortgage and the other Lodge Alley Loan Documents
as to events occurring and causes of action arising before such payment and
release. Without limiting the scope of this Section 4.4 and in addition to the
foregoing, Borrower agrees to cause the eradication of any termites or similar
pests currently located in the Inn building within 60 days of the date hereof;
if Borrower shall fail to do so within said 60 day period, Lender may declare an
immediate Event of Default hereunder and/or do whatever is necessary to
eliminate said pests, and the costs thereof shall be added to the Lodge Alley
Loan and shall be secured by the Lodge Alley Collateral. Without limiting the
scope of this Section 4.4 and in addition to the foregoing, Borrower agrees to,
contemporaneously with the closing of the Lodge Alley Loan or as soon as
practicable thereafter (and in any case no later than 60 days from the date
hereof), submit to Lender, at the sole cost of Borrower, a written operations
and management plan outlining the nature and extent of the presence of asbestos,
if any, at the Lodge Alley Resort, whether such asbestos is friable or otherwise
creating or likely to create indoor air or other conditions that are in
violation of applicable laws and the management options that Borrower intends to
use in dealing with such asbestos and such conditions, the cost of such options
and the projected timelines for the implementation of the same.
4.5 RECORDS. Borrower shall keep adequate records and books of account
reflecting all financial transactions of Borrower and the Lodge Alley Inn
Association and the Lodge Alley Association, in which complete entries will be
made in accordance with GAAP.
4.6 MANAGEMENT. Borrower agrees that the manager and management
contract in respect of the Lodge Alley Resort shall at all times be satisfactory
to Lender and the Borrower
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shall not agree to any amendments or changes in respect thereof without the
prior written consent of Lender.
4.7 INSPECTION OF THE RESORT AND BOOKS AND RECORDS. Borrower shall, at
such reasonable times during normal business hours and as often as may be
reasonably requested, permit any agents or representatives of Lender to inspect
any portion of the Lodge Alley Resort and any assets (including financial and
accounting books and records) of Borrower, to examine and make copies of and
abstracts from the records and books of account of any of such Persons and to
discuss their affairs, finances and accounts with any of their respective
officers, employees or independent public accountants. Borrower acknowledges
that Lender intends to conduct such audits and inspections on at least an annual
basis. All audits and property inspections shall be at the expense of Borrower;
PROVIDED, HOWEVER, that except with respect to any audits and inspections
conducted after an Event of Default hereunder, Borrower shall not be required to
pay in the aggregate hereunder, under the Master Agreement and any Resort
Documents thereunder or under the Warehouse Facility in excess of Ten Thousand
Dollars ($10,000) in any calendar year for inspections and audits performed
during such year.
4.8 CASUALTY, CONDEMNATION. Borrower shall promptly notify Lender of
any fire or other casualty or any notice of taking or eminent domain action or
proceeding affecting the Lodge Alley Resort, or the threat of any such action or
proceeding of which Borrower becomes aware. Provided no Event of Default then
exists and Borrower certifies as to same, the net insurance proceeds shall be
paid to Lender but shall be made available by Lender for the restoration or
repair of the Lodge Alley Resort if: (i) in Lender's reasonable judgment (a)
restoration or repair and the continued operation of the Lodge Alley Resort is
economically feasible, and (b) the value of Lender's security is not reduced;
(ii) the cost of restoration or repair does not exceed the net insurance
proceeds or Borrower; (iii) the loss does not occur in the six (6) month period
preceding the Lodge Alley Loan Maturity Date; (iv) Borrower has sufficient
business interruption insurance to provide alternative accommodations for all
owners or users of Lodge Alley Intervals affected by such casualty loss; and (v)
Lender's architect/engineers certify that the restoration of the Lodge Alley
Resort can be completed at least ninety (90) days prior to the Lodge Alley Loan
Maturity Date. Borrower shall pay all amounts, in addition to the net insurance
proceeds, necessary to pay in full the cost of the restoration or repair.
Notwithstanding the foregoing, it shall be a condition precedent to any
disbursement of insurance proceeds held by Lender hereunder that Lender (or, in
Lender's discretion, an architect, engineer or other construction expert
acceptable to Lender) shall have approved (x) all plans and specifications for
any proposed repair or restoration; (y) the construction schedule; and (z) the
architect's and general contractor's contracts for restoration; all costs of any
architect, engineer or construction expert retained by Lender shall be for the
account of Borrower and, upon demand by Lender, shall be promptly paid by
Borrower. Lender may establish other conditions it deems reasonably necessary to
assure the work is fully completed in a good and workmanlike manner free of all
liens or claims by reason thereof, and in compliance with all applicable laws,
rules and regulations. At Lender's option, the net insurance proceeds shall be
disbursed pursuant to a construction escrow acceptable to Lender. If an Event of
Default then exists, or any of the conditions set forth in this subsection have
not been met or satisfied, the net insurance proceeds
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<PAGE> 15
(after deduction of Lender's reasonable costs and expenses, if any, in
collecting same) shall be applied to the Lodge Alley Loan in such order and
manner as Lender may elect, whether or not due and payable, with any excess paid
to Borrower.
The proceeds of any award, payment or claim for damages, direct or
consequential, in connection with any condemnation or other taking of any
portion or all of the Lodge Alley Resort, or for conveyances in lieu of
condemnation, are hereby assigned to and shall be paid to Lender. Lender is
authorized (but is under no obligation) to collect any such proceeds. The
proceeds of any such award shall be made available by Lender for repair or
restorations of the Property in the same manner and upon the same conditions as
those set forth above for net insurance proceeds.
Anything to the contrary herein notwithstanding, for so long as any
part of the Lodge Alley Resort is subject to the Lodge Alley Resort Documents,
the Lodge Alley Master Deed or the Lodge Alley Courtyard Restrictive Covenants
(1) any and all insurance proceeds arising from any damage or destruction to the
Lodge Alley Resort subject to such documents, such Deed or such Covenants and
any and all awards and payments with respect to condemnation or conveyances in
lieu thereof received by Lender shall be applied and used in accordance with the
provisions of such Documents, Deed or Covenants and (2) the obligations of
Borrower under this Section 4.5 and the rights of Lender under this Section 4.5
shall be subject to the rights and obligations of the Lodge Alley Inn
Association under the Lodge Alley Resort Documents, the Lodge Alley Association
under the Lodge Alley Master Deed, the Lodge Alley Courtyard Association under
the Lodge Alley Courtyard Restrictive Covenants and applicable South Carolina
law, as the case may be.
4.9 APPLICATION OF LOAN PROCEEDS. Borrower shall apply the proceeds of
the Lodge Alley Loan for reimbursement of up to 85% of the purchase price of the
Lodge Alley Resort and Phase 1, as set forth on Schedule 1 hereto.
4.10 ADDITIONAL DOCUMENTS. Borrower shall execute and deliver to
Lender, from time to time as requested by Lender, such other documents as shall
reasonably be necessary to provide the rights and remedies to Lender granted or
provided for by the Lodge Alley Loan Documents.
4.11 DEFENSE OF ACTIONS. Lender may (but shall not be obligated to)
commence, appear, in, or defend any action or proceeding purporting to affect
the Lodge Alley Loan, the Lodge Alley Resort, or the respective rights and
obligations of Lender and Borrower pursuant to this Agreement. Lender may (but
shall not be obligated to) pay all reasonable necessary expenses, including
reasonable attorneys' fees and expenses incurred in connection with such
proceedings or action, which Borrower agrees to repay to Lender on demand.
4.12 PAYMENT OF CHARGES. Borrower shall promptly pay or cause to be
paid when due all costs and expenses incurred in connection with the Lodge Alley
Resort, and Borrower shall keep the Property free and clear of any lien, tax,
judgment, charge, assessment or claim (the "CHARGES") other than the
encumbrances of the Lodge Alley Mortgage, the Lodge Alley Permitted Exceptions,
and other liens approved in writing by Lender. Notwithstanding anything to the
contrary contained in this Agreement, Borrower may (a) discharge in accordance
with
15
<PAGE> 16
applicable law any such Charge or contest the validity or amount of any claim of
any contractor, consultant, architect, or other Person providing labor,
materials, or services with respect to the Property, (b) contest any tax or
special assessments levied by any governmental entity, and (c) contest the
enforcement of or compliance with any Governmental Requirements. Any such
contest on the part of Borrower shall not be an Event of Default hereunder
provided that (i) during the pendency of any such contest Borrower shall, if
requested by Lender, furnish to Lender and Title Company an indemnity bond from
a corporate surety satisfactory to Lender and Title Company in an amount equal
to one hundred fifty percent (150%) of the amount being contested or other
security reasonably acceptable to them; and (ii) Borrower shall pay any amount
adjudged by a court of competent jurisdiction (including appellate courts) to be
due, with all costs, interest, and penalties thereon, before such judgment
becomes a lien on the Lodge Alley Resort or any part thereof; and (iii) Borrower
fulfills all of its obligations under this Agreement during the pendency of any
such contest.
4.13 RESERVE STUDY. Borrower agrees to complete a reserve study in
respect of the Lodge Alley Inn Association and the Lodge Alley Resort and to
submit the same to Lender on or prior to the second anniversary of the date
hereof. Such reserve study shall be satisfactory to Lender in its reasonable
discretion.
4.14 CURRENT FINANCIAL REPORTS. So long as any portion of the Loan
remains outstanding, Borrower shall furnish the following to Lender:
(a) MONTHLY SALES ACTIVITY REPORTS. Within fifteen (15) days after the
end of each month, a summary of sales activity at the Lodge Alley Resort
for such month, in form, content and detail acceptable to Lender in
Lender's sole discretion.
(b) QUARTERLY FINANCIAL REPORTS. Within forty-five (45) days after the
end of each fiscal quarterly period, unaudited financial statements of
each of the Borrower and the Guarantor, certified by the chief financial
officer of each such Person to be true and correct.
(a) YEAR-END FINANCIAL REPORTS. As soon as available and in any event
within one hundred and twenty (120) days after the end of each fiscal
year of each of the Guarantor and Borrower: (i) the consolidated and
consolidating balance sheets of the Guarantor and its consolidated
subsidiaries and the balance sheet of the Borrower as of the end of
such year and the related consolidated and consolidating statements of
income and cash flow for such fiscal year for the Guarantor and its
consolidated subsidiaries and the related statements of income and cash
flow for such fiscal year for Borrower; (ii) a schedule of all
outstanding indebtedness of the Guarantor and the Borrower describing
in reasonable detail each such debt or loan outstanding and the
principal amount and amount of accrued and unpaid interest with respect
to each such debt or loan; (iii) in the case of the Guarantor, copies
of reports and any management letters from a firm of independent
certified public accountants, selected by the Guarantor, which reports
shall be unqualified as to going concern and scope of audit and shall
state that such financial statements present fairly the financial
position of the Guarantor and its consolidated subsidiaries, as of the
dates indicated and the results of the Guarantor's operations and cash
flow for the periods
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<PAGE> 17
indicated in conformity with GAAP; and (iv) in the case of the
Borrower, a certificate from the chief financial officer of the
Borrower certifying that such financial statements present fairly the
financial position of the Borrower, as of the dates indicated and the
results of the Borrower's operations and cash flow for the periods
indicated in conformity with GAAP;
(d) AUDIT REPORTS. Promptly upon receipt thereof, one (1) copy of each
other report or management letter submitted to the Guarantor or the
Borrower by independent public accountants in connection with any
annual, interim or special audit made by them of the books of the
Guarantor and/or the Borrower.
(e) OTHER REPORTS. Such other reports, statements, notices or written
communications relating to the Guarantor and/or the Borrower, as Lender
may require, in its reasonable discretion.
(f) SEC REPORTS. Promptly upon their becoming available one (1) copy of
each financial statement, report, notice or proxy statement sent by the
Guarantor to security holders generally, and of each regular or periodic
report and any registration statement, prospectus or written
communication (other than transmittal letters) in respect thereof filed
by the Guarantor with, or received by the Guarantor in connection
therewith from, any securities exchange or the Securities and Exchange
Commission or any successor agency.
(g) TAX RECEIPTS. To the extent reasonably requested by the Lender, the
Borrower, for so long as it shall be in control of the Lodge Alley
Resort, shall furnish Lender with copies of receipts or tax statements
marked "Paid" to evidence the payment of all taxes levied on or in
respect of each such Resort prior to the date such taxes become
delinquent.
(h) NOTICE OF LITIGATION, CLAIMS, AND FINANCIAL CHANGE. Notice of (i)
any litigation against the Guarantor or the Borrower or affecting the
Lodge Alley Resort, which, if determined adversely, might have a
material adverse effect upon the financial condition of the Guarantor or
the Borrower or upon the Lodge Alley Resort, (ii) any claim or
controversy which might become the subject of such litigation, and (iii)
any material adverse change in the financial condition of the Guarantor
or the Borrower.
(i) SEMI-ANNUAL RESORT ASSOCIATION REPORTS. If reasonably requested by
Lender, as soon as available and in any event within ninety (90) days
after the end of each semiannual fiscal period of the Lodge Alley Inn
Association and the Lodge Alley Association: (I) the balance sheet of
each such Association as of the end of such semiannual period and the
related statement of income and cash flow for such semiannual period,
prepared in accordance with GAAP and subject to normal year-end
adjustments; and (II) a schedule of all outstanding indebtedness of each
such Association describing in reasonable detail each such debt or loan
outstanding and the principal amount and amount of accrued and unpaid
interest with respect to each such debt or loan.
(j) YEAR-END RESORT ASSOCIATION REPORTS. As soon as available and in
any event within one hundred and twenty (120) days after the end of each
fiscal year of the Lodge
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Alley Inn Association and the Lodge Alley Association: (I) the balance
sheet of each such Association as of the end of such year and the
related statement of income and cash flow for such fiscal year; (II) a
schedule of all outstanding indebtedness of each such Association
describing in reasonable detail each such debt or loan outstanding and
the principal amount and amount of accrued and unpaid interest with
respect to each such debt or loan; and (III) copies of reports from a
firm of independent certified public accountants, which report shall be
unqualified as to going concern and scope of audit and shall state that
such financial statements present fairly the financial position of each
such Association as of the dates indicated and the results of its
operations and cash flow for the periods indicated in conformity with
GAAP.
4.15 INSURANCE POLICIES. Borrower shall obtain or cause to be obtained
the Insurance Policies and shall keep the Insurance Policies, or shall cause the
Insurance Policies to be kept, in full force and effect at all times while the
Lodge Alley Loan is outstanding. Borrower shall, in connection with any renewal
of the Insurance Policies, submit, or use commercially reasonable efforts to
cause the Lodge Alley Inn Association and/or the Lodge Alley Association to
submit, to the Lender insurance certificates showing the type and amounts of
such Insurance Policies and the payment of premiums in respect thereof. Borrower
shall give prompt written notice to Lender of any changes in the coverage of any
of the Insurance Policies.
4.16 BORROWER'S FINANCIAL MAINTENANCE REQUIREMENT. Borrower agrees to
pay the Lodge Alley Inn Association all dues and other moneys owing to it under
the Lodge Alley Resort Documents and any other obligation of the Borrower to pay
dues and assessments or make whole any shortfall in the same.
4.17 HOLD HARMLESS. Borrower shall indemnify Lender and hold Lender
harmless from and against any and all liabilities, indebtedness, losses,
damages, penalties, actions, judgments, suits, claims, costs, expenses, and
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by or asserted against Lender, in any way relating to or arising out of (a) this
Agreement and/or the Lodge Alley Loan Documents and/or (b) any of the
transactions contemplated therein or thereby (including those in any way
relating to or arising out of the violation by Borrower of any federal or state
laws) other than liabilities, indebtedness, losses, damages, penalties, actions,
judgments, suits, claims, costs, expenses and disbursements which are caused by
the Lender's material breach of, or gross negligence or willful misconduct with
respect to, its actions or inactions under this Agreement and the other Lodge
Alley Loan Documents. Upon receiving knowledge of any suit, claim or demand
asserted by a third party that Lender believes is covered by this indemnity, and
subject to the condition that no Event of Default under this Agreement shall
then exist, Lender shall give Borrower notice of the matter and an opportunity
to defend it, at Borrower's sole cost and expense, with legal counsel
satisfactory to Lender. Notwithstanding any defense by Borrower of any such
suit, claim or demand, Lender shall have the right to participate in any
material decision affecting the conduct or settlement of any dispute or
proceeding for which indemnification may be claimed. The provisions of this
Section shall survive the payment in full of the Lodge Alley Loan and all other
indebtedness secured by the Lodge Alley Mortgage and the other Lodge Alley Loan
Documents
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and the release of the Lodge Alley Mortgage and the other Lodge Alley Loan
Documents as to events occurring and causes of action arising before such
payment and release.
4.18 CROSS DEFAULT, CROSS COLLATERALIZATION. The documents and
instruments evidencing and securing the Lodge Alley Loan shall also secure each
of the other Resort Loans, under and as defined in the Master Agreement, and the
obligations of the Guarantor and the Borrower under the Warehouse Facility. Any
event of default under any of such Resort Loans or under the Warehouse Facility
shall be an Event of Default hereunder.
4.19 NET WORTH; COVERAGE RATIO; LEVERAGE RATIO. Borrower covenants that
on and after the date hereof and so long as the Lodge Alley Loan shall be
outstanding or there are any outstanding obligations of Guarantor under the
Lodge Alley Guarantee, Borrower and Guarantor will comply with the covenants set
forth in Sections 5.7, 5.8 and 5.9 of the Warehouse Facility (as in effect on
the date hereof and notwithstanding any termination or expiration of said
Warehouse Facility after the date hereof), and such covenants and the
definitions used therein are hereby incorporated herein in their entirety as if
set forth at length herein.
4.20 SUBORDINATED OBLIGATIONS. Borrower will not, directly or
indirectly, (A) permit any payment to be made in respect of any indebtedness,
liabilities or obligations, direct or contingent, to any Affiliates (excluding
trade payables incurred in the ordinary course of business), or (B) permit the
amendment, rescission or other modification of any of such indebtedness,
liabilities or obligations in such a manner as to affect adversely the lien
priority of any of the Lodge Alley Collateral granted to Lender or to cause a
Material Adverse Effect.
4.21 CONSOLIDATION AND MERGER. Borrower will not consolidate with or
merge into any other Person or permit any other Person to consolidate with or
merge into it unless (a) the Borrower shall be the continuing corporation or the
successor corporation shall be a corporation organized under the laws of the
United States of America or any State thereof and shall expressly assume the due
and punctual payment of the Lodge Alley Loan and all Indebtedness in respect
thereof and shall further assume the due and punctual performance and observance
of all of the covenants and conditions of this Agreement, the other Lodge Alley
Loan Documents and the Lodge Alley Resort Documents to be performed and observed
by the Borrower, in each case, pursuant to an amendment hereto or other form of
assumption agreement in form satisfactory to the Lender, in its sole discretion,
and (b) the Borrower shall not be in default of any covenant, representation,
warranty or condition hereunder or under any of the other Lodge Alley Loan
Documents or any of the Lodge Alley Resort Documents either prior thereto or
after giving effect to such assumption.
4.22 RESTRICTIONS ON TRANSFERS. Borrower shall not, without obtaining
the prior written consent of Lender, which may be granted or withheld in
Lender's sole discretion, (a) transfer, sell, pledge, convey, assign or encumber
any interest in the Lodge Alley Resort, except for the sale of Lodge Alley
Intervals or Lodge Alley Commercial Condominium Units to Purchasers or other
third-party purchasers on an arm's-length basis, the sale of Owner Beneficiary
Rights on an arm's-length basis and the encumbrance of the Lodge Alley Mortgage
and the Lodge Alley Assignment of Leases and Rents in connection herewith; (b)
permit any sale, assignment,
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encumbrance, dilution or other disposition of any ownership interests in
Borrower except to Guarantor; or (C) permit the creation of any new ownership
interests in Borrower, except to the extent such new ownership interests are
owned or controlled by the Guarantor.
4.23 RESTRICTIONS. Other than the Lodge Alley Permitted Exceptions or
the Lodge Alley Resort Documents, Borrower shall not impose any covenants,
easements or other encumbrances upon the Lodge Alley Resort or execute or file
any subdivision plat affecting the Lodge Alley Resort without the prior written
consent of Lender, which shall not be unreasonably withheld.
4.24 MODIFICATION OF RESORT DOCUMENTS. Without Lender's prior written
consent, Borrower shall not amend, modify or terminate any of the Lodge Alley
Resort Documents, the Lodge Alley Master Deed or the Lodge Alley Courtyard
Restrictive Covenants or any other covenants, conditions, easements or
restrictions affecting the Lodge Alley Resort (or any portion thereof) or
relinquish any developer or declarant control that it currently possesses,
except that if any amendment or modification is required either (A) to cause
additional phases to be annexed into the timeshare regimen of the Lodge Alley
Resort Documents, as currently contemplated therein, (B) by law, Borrower shall
implement the same. Borrower shall deliver to Lender copies of each such
amendment or modification promptly, and in any case within ten (10) days, after
the execution thereof or (C) to correct minor errors or to otherwise make
ministerial additions or deletions, none of which (either individually or in the
aggregate) would have a Material Adverse Effect. Without limiting the scope of
the immediately preceding sentence, Borrower shall not materially amend, modify
or assign to any Person any management, marketing, servicing, maintenance or
other similar contract for or in respect of the Lodge Alley Resort except as
provided for herein or in the other Lodge Alley Loan Documents.
4.25 RENOVATIONS. Borrower shall complete all renovations to the Lodge
Alley Resort by the date set forth in such Schedule 7 hereto.
4.26 YEAR 2000. Borrower has made an assessment of the microchip and
computer-based systems and the software used in its business and based upon such
assessment believes that they will be "Year 2000 Compliant" by or before January
1, 2000, except where the failure to be so "Year 2000 Compliant" would not have
a Material Adverse Effect. "Year 2000 Compliant" means that all software,
embedded microchips and other processing capabilities utilized by, and material
to the business operations or financial condition of, the Borrower are able to
interpret, store, transmit, receive and manipulate data on and involving all
calendar dates correctly and without causing any abnormal ending scenarios in
relation to dates in and after the Year 2000.
4.27 ENVIRONMENTAL. Borrower will not, and will not permit any Person
to, use, generate, treat, store or dispose of any Hazardous Materials in or on
the Lodge Alley Resort except where the same is in compliance with all
applicable Environmental Laws or would not have or produce a Material Adverse
Effect. If the Lender, at any time, has a reasonable basis to believe that the
Borrower or the Lodge Alley Resort may be in violation of any Environmental Law,
then Borrower agrees, upon request from the Lender, to provide the Lender with
such reports, certificates, engineering studies or other written materials or
data as the Lender may
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require, in its reasonable discretion, so as to satisfy the Lender that the
Borrower and/or the Lodge Alley Resort are in compliance with all applicable
Environmental Laws and that the marketability and value of the Lodge Alley
Resort is adequately maintained. The Borrower's undertakings under this Section
4.27 are in addition to its undertakings under Section 4.4 hereof.
4.28 VOTING. Notwithstanding the terms of the By-Laws of the Lodge
Alley Inn Association, the Lodge Alley Association and/or the Lodge Alley
Courtyard Association, Borrower agrees not to vote in respect of any of the
following without the prior written consent of the Lender: (a) in connection
with any material casualty, taking or condemnation of the condominiums or common
elements established by the Lodge Alley Inn Master Deed (or any part thereof),
the Lodge Alley Master Deed (or any part thereof) or the Lodge Alley Courtyard
Restrictive Covenants (or any part thereof), (b) pertaining to the amendment of
the articles of incorporation or bylaws of the Lodge Alley Inn Condominium
Association, the Lodge Alley Condominium Association and/or the Lodge Alley
Courtyard Association, (c) pertaining to the amendment of the Lodge Alley Inn
Master Deed, the Lodge Alley Master Deed and/or the Lodge Alley Courtyard
Restrictive Covenants (other than as permitted under Section 4.24 hereof) or (d)
any other matter upon which a vote may be taken if an Event of Default shall
have occurred and be continuing. In the case of the exercise of its rights and
remedies in respect of the Lodge Alley Intervals, the Lodge Alley Residential
Condominium Units and/or the Lodge Alley Commercial Condominium Units under the
Lodge Alley Mortgage, the Borrower will, at the written request of Lender,
obtain the resignations of each of the directors elected and/or appointed by the
Borrower to the Board of Directors of each of Lodge Alley Inn Association, the
Lodge Alley Association and/or the Lodge Alley Courtyard Association and will
deliver them to Lender.
ARTICLE 5 - DEFAULT
An "Event of Default" shall exist if any of the following shall occur:
5.1 PAYMENTS. Any Indebtedness is not paid within five (5) business
days of the date when due, whether by acceleration or otherwise.
5.2 FINANCIAL COVENANT DEFAULTS; OTHER DEFAULTS. Any failure by the
Guarantor or the Borrower to comply with the financial covenants set forth in
Section 4.19 hereof or the existence of any default or event of default under
the Lodge Alley Mortgage or any other Lodge Alley Loan Document.
5.3 OTHER COVENANT DEFAULTS. Borrower shall fail to perform or observe
any covenant, agreement or obligation contained in this Agreement or in any of
the Lodge Alley Loan Documents (other than as contemplated in Sections 5.1 or
5.2 above), and such failure shall continue for thirty (30) days after Lender
delivers written notice thereof to Borrower, PROVIDED, HOWEVER, if the failure
is incapable of cure within such thirty (30) day period and Borrower shall be
diligently pursuing a cure, such thirty (30) day cure period shall be extended
by an additional period not to exceed sixty (60) days.
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5.4 WARRANTIES OR REPRESENTATIONS. Any statement, representation or
warranty in this Agreement, any of the other Lodge Alley Loan Documents, any
financial statement or any other writing delivered by Guarantor or Borrower to
Lender in connection with this Agreement is false, misleading or incorrect in
any material respect as of the date made.
5.5 DEFAULT IN OTHER RESORT LOANS OR THE WAREHOUSE FACILITY OR OTHER
INDEBTEDNESS. Any default by the Guarantor, the Borrower or any Affiliate in the
payment of indebtedness for borrowed money in an aggregate principal amount in
excess of $1,000,000 (including, without limitation, any default by the
Guarantor, the Borrower or any Affiliate in the payment of indebtedness for
borrowed money owing to Lender under the Warehouse Facility or any other
agreement) after the expiration of any applicable grace or cure period; any
other default under such indebtedness which accelerates or permits the
acceleration (after the giving of notice or passage of time, or both) of the
maturity of such indebtedness or any default under such indebtedness which
permits the holders of such indebtedness to elect a majority of the Board of
Directors of the Guarantor; or the occurrence and continuance of any default
(after the expiration of any applicable grace or cure period) or any event of
default under any of the Resort Loan Documents, as defined in the Master
Agreement. For the avoidance of doubt, a default or the occurrence and
continuance of an Event of Termination under the Purchase Facility shall not
constitute an Event of Termination under Section 6(e) of the Master Agreement.
5.6 PURCHASE FACILITY. Purchases of receivables under the Purchase
Facility shall have been suspended, deferred or terminated or the Purchase
Facility shall have been terminated, PROVIDED that this Section 5.6 shall not be
deemed to have been activated if, but only if, (a) receivables cannot be
purchased under the Purchase Facility by virtue of the maximum limitation on the
amount of purchases set forth in the Purchase Facility having been reached, or
because any Eligible Resort under the Master Agreement shall not have been
approved by Lender as an "Additional Resort" under the Purchase Facility, or
because Lender shall have reviewed and rejected receivables associated with the
Club or (b) because the "seller" thereunder shall have voluntarily elected not
to use the Purchase Facility or not to renew the "program" provided by the
Purchase Facility on and after the date of its scheduled expiration.
5.7 JUDGEMENTS. The issuance, filing or levy against the Guarantor or
the Borrower of one or more attachments, injunctions, executions, tax liens or
judgments for the payment of money cumulatively in excess of $1,000,000, which
is not discharged in full or stayed within thirty (30) days after issuance or
filing.
5.8 BANKRUPTCY. Guarantor or Borrower:
(a) does not pay its debts as they become due or admits in writing its
inability to pay its debts or makes a general assignment for the benefit
of creditors; or
(b) commences any case, proceeding or other action seeking
reorganization, arrangement, adjustment, liquidation, dissolution or
composition of it or its debts under any Debtor Relief Laws; or
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(c) in any involuntary case, proceeding or other action commenced
against it which seeks to have an order for relief entered against it,
as debtor, or seeks reorganization, arrangement, liquidation,
dissolution or composition of it or its debts under any Debtor Relief
Laws, (i) fails to obtain a dismissal of such case, proceeding or other
action within sixty (60) days of its commencement, or (ii) converts the
case from one chapter of the Federal Bankruptcy Code to another chapter,
or (iii) is the subject of an order for relief; or
(d) conceals, removes, or permits to be concealed or removed any part
of its property, with intent to hinder, delay or defraud its creditors
or any of them, or makes or suffers a transfer of any of its property
which may be fraudulent under any bankruptcy, fraudulent conveyance or
similar law; or makes any transfer of its property to or for the benefit
of a creditor at a time when other creditors similarly situated have not
been paid; or suffers or permits, while insolvent, any creditor to
obtain a lien upon any of its property through legal proceedings which
is not vacated within sixty (60) days from the date thereof; or
(e) has a trustee, receiver, custodian or other similar official
appointed for, or take possession of, all or any part of its property or
has any court take jurisdiction of any other of its property which
continues for a period of sixty (60) days; or
(f) fails to have discharged within a period of thirty (30) days any
attachment, sequestration, or similar writ levied upon any property of
such owner.
5.9 GUARANTY. Failure by the Guarantor to comply with the terms of the
Lodge Alley Guaranty or the Lodge Alley Completion Guaranty or any other
document executed by the Guarantor in connection with the Lodge Alley Loan,
after the expiration of any applicable notice and cure periods, or the Lodge
Alley Guaranty or the Lodge Alley Completion Guaranty shall have been
terminated, revoked or declared invalid.
5.10 STAY. The issuance of any stay order, cease and desist order or
similar judicial or nonjudicial sanction limiting or otherwise affecting the
sale of Lodge Alley Intervals or Lodge Alley Commercial Condominium Units and
any such order or sanction shall have been outstanding for more than 60 days
from the date of its entry and shall not have been discharged in full or stayed
by appeal, bond or otherwise; or
5.11 ZONING AND LICENSES. The revocation of any license, parking rights
or assignment, zoning authorizations, certificate or certificates of occupancy
or other permits, approvals or authorizations granted by any applicable
governmental entity which would have a Material Adverse Effect.
5.12 TERMINATION EVENT. The existence and continuance of a Termination
Event under, and as defined in, the Master Agreement, PROVIDED that the
Termination Event set forth in Section 6(f) of the Master Agreement shall be
qualified to the same extent as set forth in Section 5.6 above .
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ARTICLE 6 - RIGHTS AND REMEDIES OF LENDER
6.1 REMEDIES UPON DEFAULT. Upon the occurrence and during the
continuance of an Event of Default, Lender may take any one or more of the
following actions, all without notice to Borrower:
(a) ACCELERATION. Declare the unpaid principal balance of the Lodge
Alley Loan and all other Indebtedness, or any part thereof, immediately
due and payable, whereupon the same shall be due and payable.
(b) JUDGMENT. Reduce Lender's claim to judgment, foreclose or otherwise
enforce Lender's security interest in all or any part of the Lodge
Alley Collateral by any available judicial procedure.
(c) SALE OF COLLATERAL. Exercise all the rights and remedies of a
secured party on default under the Code (whether or not the Code
applies to the affected Lodge Alley Collateral) including (I) require
Borrower to, and Borrower hereby agrees that it will, at its expense
and upon request of Lender forthwith, assemble all or part of the Lodge
Alley Collateral as directed by Lender and make it available to Lender
at a place to be designated by Lender which is reasonably convenient to
both parties; (II) enter upon any premises of Borrower and take
possession of the Lodge Alley Collateral; and (III) sell the Lodge
Alley Collateral or any part thereof in one or more parcels at public
or private sale, at any of the Lender's offices or elsewhere, at such
time or times, for cash, on credit or for future delivery, and at such
price or prices and upon such other terms as Lender may deem
commercially reasonable. Borrower agrees that, to the extent notice of
sale shall be required by law, ten (10) days notice of the time and
place of any sale shall constitute reasonable notification. At any sale
of the Lodge Alley Collateral, if permitted by law, Lender may bid
(which bid may be, in whole or in part, in the form of cancellation of
indebtedness) for the purchase of the Lodge Alley Collateral or any
portion thereof for the account of Lender. Borrower shall remain liable
for any deficiency. Lender shall not be required to proceed against any
Lodge Alley Collateral but may proceed against Borrower and/or the
Guarantor directly. To the extent permitted by law, Borrower hereby
specifically waives all rights of redemption, stay or appraisal which
it has or may have under any law now existing or hereafter enacted.
(d) RECEIVER. Apply by appropriate judicial proceedings for appointment
of a receiver for the Lodge Alley Collateral, or any part thereof, and
Borrower hereby consents to any such appointment.
(e) OPERATION. Take possession of and operate the Lodge Alley Resort
(including, without limitation, any part thereof operating as a hotel
or transient lodging facility), collect all receivables and other
revenues in respect thereof and do any and every act which Borrower
might do on its own behalf, and Borrower hereby irrevocably appoints
and constitutes Lender its lawful attorney-in-fact, with full power of
substitution for the
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purposes aforesaid, it being understood that the foregoing power of
attorney shall be a power coupled with an interest and cannot be
revoked.
(f) ACCOUNTS RECEIVABLE. Lender may, in its sole discretion,
communicate at any time and from time to time with any account debtor
or other obligor in respect of any account, receivable or general
intangible constituting a part of the Lodge Alley Collateral with
regard to the lien of Lender thereon and any other matter relating
thereto. Lender shall have the right to (i) require that all payments
on all accounts, receivables and general intangibles constituting, in
each case, a part of the Lodge Alley Collateral be paid directly to
Lender or to such Person as Lender may designate and to receive,
collect, hold and apply the same in accordance with this Agreement and
the other Lodge Alley Loan Documents. Borrower hereby further
irrevocably authorizes, directs and empowers Lender to collect and
receive all checks and drafts evidencing such payments and to endorse
such checks and drafts in the name of Borrower and upon such
endorsement to collect and receive the money therefor.
(g) EXERCISE OF OTHER RIGHTS. Exercise any and all other rights or
remedies afforded by any applicable laws or by the Lodge Alley Loan
Documents as Lender shall deem appropriate, at law, in equity or
otherwise, including the right to bring suit or other proceeding,
either for specific performance of any covenant or condition contained
in the Lodge Alley Loan Documents or in aid of the exercise of any
right or remedy granted to Lender in the Lodge Alley Loan Documents.
6.2 OFFSETS; APPLICATION OF COLLATERAL. Upon the occurrence and during
the continuance of an Event of Default, Lender may apply and offset against the
Indebtedness (a) any and all of the Lodge Alley Collateral in its possession,
any and all balances, credits, deposits, accounts, reserves, indebtedness or
other moneys of Borrower (whether or not then due or owing to Borrower) held by
Lender or any agent of Lender hereunder or under any other financing agreement
or any Lodge Alley Loan Document or otherwise and (b) all other property at any
time held or owing by the Lender to or for the account of the Borrower.
6.3 WAIVERS. No waiver by Lender of any Event of Default shall be
deemed to be a waiver of any other or subsequent Event of Default. No delay or
omission by Lender in exercising any right or remedy under the Lodge Alley Loan
Documents shall impair such right or remedy or be construed as a waiver thereof
or an acquiescence therein, nor shall any single or partial exercise of any such
right or remedy preclude other or further exercise thereof, or the exercise of
any other right or remedy under the Lodge Alley Loan Documents or otherwise.
Further, Borrower and Guarantor each severally waive notice of the occurrence
and continuance of any Event of Default, presentment and demand for payment,
protest, and notice of protest, notice of intention to accelerate, acceleration
and nonpayment, and agree that their respective liability shall not be affected
by any renewal or extension in the time of payment of the Indebtedness, or by
any release or change in any security for the payment or performance of the
Indebtedness, regardless of the number of such renewals, extensions, releases or
changes. Borrower also hereby waives the right to assert any statute of
limitations as a bar to the enforcement of the lien created by any of the Lodge
Alley Loan Documents or to any action
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brought to enforce the Lodge Alley Note or any other obligation secured by the
Lodge Alley Loan Documents.
6.4 CUMULATIVE RIGHTS. All rights and remedies available to Lender
under the Lodge Alley Loan Documents shall be cumulative and in addition to all
other rights and remedies granted to Lender at law or in equity, whether or not
the Indebtedness is due and payable and whether or not Lender shall have
instituted any suit for collection or other action in connection with the Lodge
Alley Loan Documents.
6.5 MARSHALLING WAIVER. Borrower waives any and all rights to require
the marshalling of assets in connection with the exercise of any of the remedies
hereunder.
6.6 APPLICATION OF PROCEEDS. The proceeds of any exercise of rights
with respect to the Lodge Alley Collateral or any part thereof shall be paid to
and applied as follows:
FIRST, to the payment of
(i) all Costs in connection therewith, including, without
limitation, (1) attorneys' fees for advice, counsel or other
legal services, (2) costs and expenses incurred as a result of
pursuing, reclaiming, seeking to reclaim, taking, keeping,
removing, storing, advertising for sale, selling and
foreclosing on the Lodge Alley Collateral and any and all other
charges and expenses in connection therewith, and (3) any costs
and expenses (including, without limitation, costs and expenses
in the management and operation of the Lodge Alley Resort)
provided for in the Lodge Alley Assignment of Leases and Rents,
the Lodge Alley Mortgage or any other Lodge Alley Loan
Document,
(ii) all taxes, assessments or liens superior to the lien of
this Agreement or the other Lodge Alley Loan Documents, except
any taxes, assessments or other superior liens subject to which
any sale of Lodge Alley Collateral may have been made, and
(iii) all other fees, costs and expenses otherwise payable
hereunder;
SECOND, towards the payment of accrued and unpaid interest then due and
payable, if any, at the Default Rate in respect of the Lodge Alley
Loan,
THIRD, towards the payment of all other accrued and unpaid interest, if
any, then due and payable in respect of the Lodge Alley Loan,
FOURTH, to the payment of the principal amount of the Lodge Alley Loan
and all other Indebtedness, and
FIFTH, to the payment of any other obligations secured by the Lodge
Alley Collateral, and
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SIXTH, to the payment of the surplus, if any, to the Borrower, its
successors and assigns, or to whomsoever may be lawfully entitled to
receive the same, PROVIDED that if any Indebtedness or other
obligations secured by the Lodge Alley Collateral then due and payable
shall not have been paid in full, any such surplus shall continue to be
held as Lodge Alley Collateral hereunder and shall continue to be
subject to the terms and conditions hereof until such Indebtedness and
obligations then due and payable shall have been paid in full.
The Borrower shall remain liable hereunder for payment of any
deficiency owing on the Indebtedness after application of such
proceeds.
ARTICLE 7 - GENERAL TERMS AND CONDITIONS
7.1 NOTICES. Any notice or other communication required or permitted
to be given shall be in writing addressed to the respective party as set forth
below and may be personally served, telecopied, or sent by overnight courier, or
sent by registered or certified U.S. Mail return receipt requested, and shall be
deemed given: (a) if served in person, when served; (b) if telecopied, on the
date of transmission if before 3:00 p.m. (Chicago time) on a business day
otherwise, on the next business day; PROVIDED that a confirmation of the receipt
of any such telecopy is obtained and retained by the sending party and that a
hard copy of such notice is also sent pursuant to (c) or (d) below; (c) if by
overnight courier, on the first business day after delivery to the courier; or
(d) if by certified or registered U.S. Mail, return receipt requested, on the
fourth (4th) day after deposit in the mail postage prepaid.
Notices to Borrower or Guarantor: Bluegreen Corporation
4960 Blue Lake Drive
Boca Raton, Florida 33431
Attn: Patrick Rondeau, Esq.
Telephone No.: (561) 912-8005
Telecopy: (561) 912-8299
Notices to Lender: Heller Financial, Inc.
Attn: Portfolio Manager, Vacation
Ownership
HSF Loan No. 98-087
500 West Monroe St., 31st Fl.
Chicago, Illinois 60661
Telecopy: (312) 441-7924
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With a copy to: Heller Financial, Inc.
Attn: Vacation Ownership Legal
Representative
HSF Loan No. 98-087
500 West Monroe St. 31st Fl.
Chicago, Illinois 60661
Telecopy: (312) 441-7924
7.2 ENTIRE AGREEMENT AND MODIFICATIONS. This Agreement and the Lodge
Alley Loan Documents constitute the entire understanding and agreement between
the Borrower, the Lender and the Guarantor with respect to the transactions
arising in connection with the Lodge Alley Loan and supersede all prior written
or oral understandings and agreements between the undersigned in connection
therewith. No provision of this Agreement or the other Lodge Alley Loan
Documents may be modified, waived, terminated, supplemented, changed or amended
except by a written instrument executed by all parties hereto or thereto.
7.3 SEVERABILITY. In case any of the provisions of this Agreement
shall for any reason be held to be invalid, illegal, or unenforceable, such
invalidity, illegality, or unenforceability shall not affect any other provision
hereof, and this Agreement shall be construed as if such invalid, illegal, or
unenforceable provision had never been contained herein.
7.4 ELECTION OF REMEDIES. Lender shall have all of the rights and
remedies granted herein and in the Lodge Alley Documents and available at law or
in equity, and these same rights and remedies shall be cumulative and may be
pursued separately, successively, or concurrently against the Guarantor, the
Borrower or any property encumbered by the Lodge Alley Loan Documents, at the
sole discretion of Lender. The exercise or failure to exercise any of the same
shall not constitute a waiver or release thereof or of any other right or
remedy, and the same shall be nonexclusive.
7.5 FORM AND SUBSTANCE. All documents, certificates, insurance
policies, evidence, and other items required under this Agreement to be executed
and/or delivered to Lender shall be in form and substance satisfactory to Lender
in Lender's sole discretion.
7.6 NO THIRD PARTY BENEFICIARY. This Agreement is for the sole benefit
of Lender and Bluegreen and is not for the benefit of any third party.
7.7 BLUEGREEN IN CONTROL. In no event shall Lender's rights and
interests under the Lodge Alley Loan Documents be construed to give Lender the
right to, or be deemed to indicate that Lender is in control of the business,
management or properties of Guarantor or Borrower or has power over the daily
management functions and operating decisions made by the Guarantor or Borrower.
The execution and delivery of the Lodge Alley Loan Documents and the granting of
the liens in and to the Lodge Alley Collateral shall not subject the Lender to,
or transfer or pass to the Lender or in any way affect or modify, the liability
of the Borrower under any or all of its contracts, receivables, general
intangibles, Lodge Alley Resort Documents, the Lodge Alley Master Deed and the
Lodge Alley Courtyard Restrictive Covenants, it being understood and
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agreed that notwithstanding this Agreement and the other Lodge Alley Loan
Documents, and the granting of the liens in and to the Lodge Alley Collateral,
all of the obligations of the Borrower (whether as owner, chattel lessee,
vendor, mortgagee, declarant, Lodge Alley Residential or Commercial Condominium
Unit owner, Lodge Alley Club Interval owner or otherwise) to each and every
other party under each and every one of the contracts, accounts, general
intangibles, Lodge Alley Resort Documents, Lodge Alley Master Deed and Lodge
Alley Courtyard Restrictive Covenants shall be and remain enforceable by such
other party, its successors and assigns, only against the Borrower or Persons
other than the Lender, and the Lender has not assumed any of the obligations or
duties of the Borrower under or with respect to any of the foregoing.
7.8 NUMBER AND GENDER. Whenever used herein, the singular number shall
include the plural and the plural the singular, and the use of any gender shall
be applicable to all genders.
7.9 CAPTIONS. The captions, headings, and arrangements used in this
Agreement are for convenience only and do not in any way affect, limit, amplify,
or modify the terms and provisions hereof.
7.10 APPLICABLE LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Illinois (without regard to
conflicts of law principles) and the laws of the United States applicable to
transactions within such state.
7.11 VENUE. EACH OF BORROWER AND GUARANTOR HEREBY CONSENTS TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF COOK,
STATE OF ILLINOIS AND IRREVOCABLY AGREES THAT, SUBJECT TO LENDER*S ELECTION, ALL
ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE
LITIGATED IN SUCH COURTS. EACH OF BORROWER AND GUARANTOR EXPRESSLY SUBMITS AND
CONSENTS TO THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS. EACH OF BORROWER AND GUARANTOR HEREBY WAIVES PERSONAL
SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY
BE MADE UPON SUCH PERSON BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT
REQUESTED, ADDRESSED TO SUCH PERSON, AT THE ADDRESS SET FORTH IN THIS AGREEMENT
AND SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN
POSTED.
7.12 JURY TRIAL WAIVER. BORROWER, GUARANTOR AND LENDER HEREBY WAIVE
THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF THIS AGREEMENT. BORROWER, GUARANTOR AND LENDER
ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS
RELATIONSHIP, THAT EACH HAS RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT
AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE
DEALINGS. BORROWER, GUARANTOR AND LENDER WARRANT AND REPRESENT THAT EACH HAS HAD
THE OPPORTUNITY OF REVIEWING THIS JURY WAIVER WITH LEGAL COUNSEL, AND THAT EACH
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.
7.13 COSTS. Borrower agrees to promptly pay all Costs and all such
Costs shall be included as additional Indebtedness bearing interest at the
Default Rate until paid. Without limiting the generality of the foregoing, in
any action hereunder between the parties hereto, the prevailing party shall be
entitled to attorneys' fees and costs including those for pretrial, trial and
appellate proceedings.
7.14 COUNTERPARTS. This Agreement may be signed in multiple
counterparts which taken together shall constitute the entire agreement between
the parties.
7.15 CONSENT TO ADVERTISING AND PUBLICITY. Lender may issue and
disseminate to the public press releases and other information describing the
credit accommodations entered into pursuant to this Agreement, PROVIDED that
Guarantor shall approve the description of such credit accommodation, which
approval shall not be unreasonably withheld.
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7.16 SURVIVAL. All representations, warranties, covenants and
agreements made by Borrower herein, in the other Lodge Alley Loan Documents or
in any other agreement, document, instrument or certificate delivered by or on
behalf of Borrower under or pursuant to the Lodge Alley Loan Documents shall be
considered to have been relied upon by Lender and shall survive the delivery to
Lender of such Lodge Alley Loan Documents and the extension of the Indebtedness
(and each part thereof), regardless of any investigation made by or on behalf of
Lender.
7.17 PROTECTION OF COLLATERAL. Lender may at any time and from time to
time take such actions as Lender deems necessary or appropriate to protect
Lender's liens and security interests in and to preserve the Lodge Alley
Collateral. Borrower agrees to cooperate fully with all of Lender's efforts to
preserve the Lodge Alley Collateral and Lender's liens and security interests
therein.
7.18 PERFORMANCE BY LENDER. If Borrower fails to perform any agreement
contained herein or in any other Lodge Alley Loan Document, Lender may, but
shall not be obligated to, cause the performance of such agreement, and the
expenses of Lender incurred in connection therewith shall be payable by Borrower
pursuant to Section 7.13 hereof.
7.19 POWER OF ATTORNEY. Borrower does hereby irrevocably constitute
and appoint Lender as Borrower's true and lawful agent and attorney-in-fact,
with full power of substitution, for Borrower and in Borrower's name, place and
stead, or otherwise, to (a) endorse any checks or drafts payable to Borrower in
the name of Borrower and in favor of Lender as provided in Section 6.1(f) above;
(b) to demand and receive from time to time any and all property, rights,
titles, interests and liens hereby sold, assigned and transferred, or intended
so to be, and to give receipts for same; and (c) upon the occurrence and during
the continuance of any Event of Default hereunder, (i) to institute and
prosecute in the name of Borrower or otherwise, but for the benefit of Lender,
any and all proceedings at law, in equity, or otherwise, that Lender may deem
proper in order to collect, assert or enforce any claim, right or title, of any
kind, in and to the property, rights, titles, interests and liens hereby sold,
assigned or transferred, or intended so to be, and to defend and compromise any
and all actions, suits or proceedings in respect of any of the said property,
rights, titles, interests and liens, and (ii) generally to do all and any such
acts and things in relation to the Lodge Alley Collateral as Lender shall in
good faith deem advisable. Borrower hereby declares that the appointment made
and the powers granted pursuant to this Section are coupled with an interest and
are and shall be irrevocable by Borrower in any manner, or for any reason,
unless and until all obligations of Borrower to Lender have been satisfied.
30
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IN WITNESS WHEREOF, the parties set their hands as of the date above first
written.
BLUEGREEN VACATIONS UNLIMITED, INC.
By: /s/ PATRICK E. RONDEAU
-------------------------------
Name: Patrick E. Rondeau
Its: President
CONSENTED AND AGREED TO:
BLUEGREEN CORPORATION
By: /s/ PATRICK E. RONDEAU
-------------------------------
Name: Patrick E. Rondeau
Title: Senior Vice President
HELLER FINANCIAL, INC.
By: /s/ JANICE K. NOCITA
-------------------------------
Name: JANICE K. NOCITA
Its: VICE PRESIDENT
31
<PAGE> 1
EXHIBIT 10.140
LOAN AGREEMENT
DATED AS OF SEPTEMBER 24, 1999
BETWEEN
BLUEGREEN PROPERTIES OF VIRGINIA, INC.,
A DELAWARE CORPORATION;
AND
BRANCH BANKING AND TRUST COMPANY,
A NORTH CAROLINA BANKING CORPORATION
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 1. (a) Definitions and Terms..............................................................................1
1.1 "Acquisition and Phase I Development Loan"................................................................1
1.2 "Acquisition and Phase I Development Note"................................................................1
1.3 "Agreement"...............................................................................................1
1.4 "Architects"..............................................................................................1
1.5 "Architects' Collateral Assignment".......................................................................1
1.6 "Business Day"............................................................................................1
1.7 "Closing Date"............................................................................................1
1.8 "Clubhouse Architect".....................................................................................1
1.9 "Code"....................................................................................................1
1.10 "Collateral".............................................................................................2
1.11 "Collateral Assignment"..................................................................................2
1.12 "Cost Breakdown".........................................................................................2
1.13 "Consistent Basis".......................................................................................2
1.14 "Contractors' Collateral Assignment".....................................................................2
1.15 "Deed of Trust"..........................................................................................2
1.16 "Default"................................................................................................2
1.17 "Development"............................................................................................2
1.18 "Environmental Laws".....................................................................................2
1.19 "ERISA"..................................................................................................3
1.20 "Event of Default".......................................................................................3
1.21 "Guarantor"..............................................................................................3
1.22 "Guaranty Agreement".....................................................................................3
1.23 "Generally Accepted Accounting Principles"...............................................................3
1.24 "Golf Course Architect"..................................................................................3
1.25 "Golf Course Improvements"...............................................................................3
1.26 "Golf Course Loan".......................................................................................3
1.27 "Golf Course Note".......................................................................................3
1.28 "Golf Course Plans and Specifications"...................................................................3
1.29 "Hazardous Materials"....................................................................................4
1.30 "Improvements"...........................................................................................4
1.31 "Indebtedness"...........................................................................................4
1.32 "Indebtedness for Money Borrowed"........................................................................4
1.33 "Land Development Architect".............................................................................4
1.34 "Land Development Improvements"..........................................................................4
1.35 "Land Development Plans and Specifications"..............................................................4
1.36 "Loan Documents".........................................................................................5
1.37 "Notes"..................................................................................................5
1.38 "Obligations"............................................................................................5
1.39 "Permitted Encumbrances".................................................................................5
1.40 "Person".................................................................................................6
1.41 "Phase I"................................................................................................6
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
1.42 "Phase II"...............................................................................................6
1.43 "Phase II Development Loan"..............................................................................6
1.44 "Phase II Development Note"..............................................................................6
1.45 "Plans and Specifications"...............................................................................6
1.46 "Prime Rate".............................................................................................6
1.47 "Property"...............................................................................................6
1.48 "Security Agreement".....................................................................................6
SECTION 2. The Loans..............................................................................................7
2.1 The Development...........................................................................................7
2.2 Acquisition and Phase I Development Loan and Phase II Development Loan....................................7
2.3 Conditions of Lender's Obligations to Make Disbursements under the Acquisition and
Phase I Development Loan and the Phase II Development Loan...............................................10
2.4 Golf Course Loan.........................................................................................13
2.5 Conditions of Lender's Obligations to Make Disbursements under the Golf Course Loan......................13
2.6 Manner of Payment For All Loans..........................................................................15
2.7 Non-Conforming Payment...................................................................................15
2.8 Payments on Business Days................................................................................16
2.9 Computation of Interest..................................................................................16
2.10 Release of Lots and Application of Net Sales Proceeds...................................................16
2.11 Prepayment..............................................................................................17
SECTION 3. Security.............................................................................................17
SECTION 4. Representations and Warranties.......................................................................18
4.1 Organization, etc........................................................................................18
4.2 Power and Authority......................................................................................18
4.3 Financial Condition......................................................................................18
4.4 Title to Assets..........................................................................................18
4.5 Litigation...............................................................................................19
4.6 Locations................................................................................................19
4.7 Taxes....................................................................................................19
4.8 Contract or Restriction Affecting the Borrower...........................................................19
4.9 Trademarks, Franchises and Licenses......................................................................19
4.10 No Default..............................................................................................19
4.11 Governmental Authority..................................................................................20
4.12 Regulation U............................................................................................20
4.13 ERISA Requirements......................................................................................20
4.14 No Untrue Statements....................................................................................20
4.15 Hazardous Materials.....................................................................................21
4.16 Sufficiency of Loans....................................................................................21
4.17 Utilities and Access....................................................................................21
4.18 Restrictive Covenants...................................................................................21
4.19 Year 2000 Compliant.....................................................................................22
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
SECTION 5 Conditions of Closing..................................................................................22
5.1 Legal Opinions...........................................................................................22
5.2 Closing Documents........................................................................................22
SECTION 6. Affirmative Covenants.................................................................................27
6.2 Taxes and Liens..........................................................................................27
6.3 Business and Existence...................................................................................27
6.4 Insurance................................................................................................28
6.5 Maintain Property........................................................................................29
6.6 True Books...............................................................................................29
6.7 Inspection Rights........................................................................................29
6.8 The Borrower's Knowledge of Certain Events...............................................................29
6.9 Other Notices............................................................................................29
6.10 Further Assurances......................................................................................30
6.11 Observe All Laws........................................................................................30
6.12 ERISA...................................................................................................30
6.13 Payment of Obligations..................................................................................30
6.14 Continued Operations....................................................................................31
6.15 Principal Banking Relationship..........................................................................31
6.16 Hazardous Waste Indemnity...............................................................................31
6.17 Use of Loan Proceeds....................................................................................32
6.18 Water and Sewer Capacity................................................................................32
6.19 Commencement of Construction............................................................................32
6.20 Contractors.............................................................................................32
6.21 Inspection, Plans and Receipts..........................................................................33
6.22 Surveys.................................................................................................33
6.23 Payment of Cost Overruns................................................................................33
6.24 Year 2000 Compliance....................................................................................33
SECTION 7. Negative Covenants of the Borrower....................................................................33
7.1 Indebtedness.............................................................................................33
7.2 Limitations on Liens.....................................................................................34
7.3 Transfer of Assets.......................................................................................34
7.4 Insider Transactions.....................................................................................34
7.5 Change Orders............................................................................................34
7.6 Distributions, Redemptions and Other Payments............................................................34
7.7 Loans and Investments....................................................................................35
7.8 No Mining................................................................................................35
SECTION 8. Events of Default and Remedies.......................................................................35
8.1 Payment of Notes.........................................................................................35
8.2 Payment of Other Indebtedness............................................................................35
8.3 Representation, Warranty, Etc............................................................................36
8.4 Certain Covenants........................................................................................36
8.5 Other Covenants..........................................................................................36
8.6 Other Documents..........................................................................................36
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
8.7 Liquidation or Dissolution...............................................................................36
8.8 Bankruptcy, Etc..........................................................................................37
8.9 Judgment.................................................................................................37
8.10 Transfer or Encumbrance.................................................................................37
8.11 Security Interest.......................................................................................37
8.12 Option to Pay Contractors...............................................................................38
SECTION 9. Miscellaneous........................................................................................38
9.1 Waivers, Amendments, Etc.................................................................................38
9.2 Waiver of Default........................................................................................38
9.3 Lien.....................................................................................................39
9.4 Notices..................................................................................................39
9.5 Survival of Agreements...................................................................................40
9.6 Governing Law and Jurisdiction...........................................................................40
9.7 Enforceability of Agreement..............................................................................40
9.8 Counterparts and Effectiveness...........................................................................40
9.9 Fees and Expenses........................................................................................40
9.10 Liens; Set Off by Lender................................................................................40
9.11 Assignment..............................................................................................41
9.12 Indemnity...............................................................................................41
9.13 Entire Agreement........................................................................................41
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
EXHIBIT 1 Improvements..........................................................................................43
EXHIBIT 2 Acquisition and Phase I Development Note..............................................................44
EXHIBIT 3 Phase II Development Note.............................................................................45
EXHIBIT 4 Golf Course Note......................................................................................46
EXHIBIT 5 Phase I and Phase II..................................................................................47
EXHIBIT 6 Form of Opinion of Counsel for Borrower...............................................................48
Schedule 2.10 Minimum Release Fee Schedule......................................................................52
Schedule 4.18 Conditions of Title...............................................................................53
</TABLE>
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LOAN AGREEMENT
THIS LOAN AGREEMENT made and entered into as of this 24th day of
September, 1999, by and between BLUEGREEN PROPERTIES OF VIRGINIA, INC., a
Delaware corporation (the "Borrower") and BRANCH BANKING AND TRUST COMPANY, a
North Carolina banking corporation (the "Lender");
W I T N E S S E T H:
SECTION 1. (a) DEFINITIONS AND TERMS. For purposes of this Agreement,
the following terms shall have the following meanings:
1.1 "Acquisition and Phase I Development Loan" shall have the meaning
set forth in Section 2.2.
1.2 "Acquisition and Phase I Development Note" means the promissory
note of the Borrower of even date herewith in the original principal amount of
$9,200,000 substantially in the form of EXHIBIT 2 attached hereto and
incorporated herein by this reference.
1.3 "Agreement" means this Loan Agreement, including all exhibits
hereto, as the same may from time to time be modified, amended or supplemented.
1.4 "Architects" means collectively the Land Development Architect, the
Clubhouse Architect and the Golf Course Architect.
1.5 "Architects' Collateral Assignment" means the Assignment of the
Land Development Architect's Agreement, the Clubhouse Architect's Agreement and
the Golf Course Architect's Agreement from the Borrower to the Lender, and all
amendments thereof.
1.6 "Business Day" means a day upon which commercial banks are open for
the transaction of business of the nature contemplated by this Agreement in
Wilmington, North Carolina.
1.7 "Closing Date" means the date this Agreement is signed by the
parties hereto and the conditions of Section 5 are fulfilled to the satisfaction
of the Lender.
1.8 "Clubhouse Architect" means the architect selected by the Borrower
and approved by the Lender who shall design the clubhouse set forth in the Golf
Course Plans and Specifications.
1.9 "Code" means the Internal Revenue Code of 1986, as amended from
time to time, including any rules and regulations (whether final or temporary)
promulgated thereunder.
1
<PAGE> 8
1.10 "Collateral" means, collectively, (i) the real and personal
property covered by the Deed of Trust, Security Agreement, the Collateral
Assignment and other Loan Documents and (ii) the products and proceeds of the
foregoing, including, without limitation, insurance proceeds and condemnation
awards relating thereto.
1.11 "Collateral Assignment" means the Collateral Assignment of Rents
and Income from the Borrower to the Lender covering rents, golf course income
and other rents and income relating to the Development, and all supplements and
amendments thereto.
1.12 "Cost Breakdown" means the comprehensive list of all costs to be
incurred in constructing the Improvements and all other uses of all proceeds of
the Acquisition and Phase I Development Loan, the Phase II Development Loan and
the Golf Course Loan under this Agreement in connection with the Development.
1.13 "Consistent Basis" means in reference to the application of
Generally Accepted Accounting Principles, that the accounting principles
observed in the current period are comparable in all material respects to those
applied in the preceding period, except as otherwise permitted by this Agreement
or as may be different as a result of a change in Generally Accepted Accounting
Principles (except there shall be no instance allowing upward revaluation of
assets).
1.14 "Contractors' Collateral Assignment" means the Assignment of
Contractor's Contracts from the Borrower to the Lender relating to the
construction of the Improvements, and all amendments thereof.
1.15 "Deed of Trust" means that certain deed of trust of even date
herewith from the Borrower in favor of the Lender covering the Property.
1.16 "Default" means any event which constitutes an Event of Default or
which, with the giving of notice, lapse of time permitted by an applicable grace
period, or both, would become an Event of Default.
1.17 "Development" means that certain residential golf community
located on those tracts of land covered by the Deed of Trust known as Brickshire
and all improvements now or hereafter located thereon. The Development is
located on the Property.
1.18 "Environmental Laws" means and includes the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act, the Superfund Amendments and Reauthorization Act
of 1986, any other "Superfund" or "Superlien" law, or any other federal, state
or local statute, law, ordinance, code, rule, regulation, order or decree
regulating, relating to,
2
<PAGE> 9
or imposing liability or standards of conduct concerning any Hazardous
Materials, as now or at any time hereafter in effect.
1.19 "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, including any rules and regulations promulgated
thereunder.
1.20 "Event of Default" has the meaning given such term in Section 8
hereof.
1.21 "Guarantor" means Bluegreen Corporation, a Massachusetts
corporation, and its successors and assigns.
1.22 "Guaranty Agreement" means the Guaranty Agreement between the
Guarantor and the Lender of even date herewith, and all amendments and
supplements thereto.
1.23 "Generally Accepted Accounting Principles" means those principles
of accounting set forth in statements of the Financial Accounting Standards
Board or which have other substantial authoritative support and are applicable
in the circumstances as of the date of a report, as such principles are from
time to time supplemented and amended.
1.24 "Golf Course Architect" means the architect selected by the
Borrower and approved by the Lender, who shall design the golf course, as well
as other Golf Course Improvements set forth in the Golf Course Plans and
Specifications.
1.25 "Golf Course Improvements" means the golf course, clubhouse,
amenities and other golf course related improvements to be constructed in the
Development and furniture and fixtures to be incorporated or used in such
improvements, as described on EXHIBIT 1 attached hereto and incorporated by this
reference.
1.26 "Golf Course Loan" shall have the meaning set forth in Section
2.4.
1.27 "Golf Course Note" means the promissory note of the Borrower of
even date herewith in the original principal amount of $4,200,000 substantially
in the form of EXHIBIT 3 attached hereto and incorporated herein by this
reference.
1.28 "Golf Course Plans and Specifications" means the final plans and
specifications for the construction of the Golf Course Improvements prepared by
the Golf Course Architect and Clubhouse Architect, as applicable, and all
amendments and modifications thereto.
3
<PAGE> 10
1.29 "Hazardous Materials" means and includes any hazardous, toxic or
dangerous waste, substance or material (including without limitation any
materials containing asbestos) defined as such in (or for purposes of) any
Environmental Laws.
1.30 "Improvements" means collectively the Golf Course Improvements and
the Land Development Improvements.
1.31 "Indebtedness" means, with respect to any Person, without
duplication, (a) all obligations of such Person for borrowed money or with
respect to deposits or advances of any kind, (b) all obligations of such Person
evidenced by bonds, debentures, notes or similar instruments, (c) all
obligations of such Person upon which interest charges are customarily paid, (d)
all obligations of such Person under conditional sale or other title retention
agreements relating to property or assets purchased by such Person, (e) all
obligations of such Person incurred or assumed as the deferred purchase price of
property or services, (f) all indebtedness of others secured by (or for which
the holder of such indebtedness has an existing right, contingent or otherwise,
to be secured by) any lien on property owned or acquired by such Person, whether
or not the obligations secured thereby have been assumed, (g) all guaranties by
such Person of indebtedness of others, (h) all capital lease obligations of such
person, (i) all obligations of such Person in respect of interest rate
protection agreements, foreign currency exchange agreements or other interest or
exchange rate hedging arrangements and (j) all obligations of such Person as an
account party in respect of letters of credit and bankers' acceptances. The
Indebtedness of any Person shall include the Indebtedness of any partnership in
which such Person is a general partner. Indebtedness does not include trade debt
incurred by such Person in the ordinary course of business.
1.32 "Indebtedness for Money Borrowed" means indebtedness of the
Borrower for money borrowed; including without limitation the deferred purchase
price of any property or asset and all liabilities guaranteed or assumed,
directly or indirectly, in any manner, or endorsed (otherwise than for
collection or deposit in the ordinary course of business) or discounted with
recourse.
1.33 "Land Development Architect" means the architect selected by the
Borrower and approved by the Lender, who shall design the Land Improvements as
set forth in the Land Development Plans and Specifications.
1.34 "Land Development Improvements" means the streets, sidewalks,
water and sewer lines and other improvements to be constructed in the
Development to permit residential lots to be sold to third parties for single
family homes and to develop the Development and certain off-site improvements
for the entry road and the water and sewer system to serve the Development.
1.35 "Land Development Plans and Specifications" means the final plans
and specifications for the construction of the Land Development Improvements
prepared
4
<PAGE> 11
by the Land Development Architect and other professionals retained by the
Borrower, and all amendments and modifications thereto.
1.36 "Loan Documents" means this Agreement, the Notes, the Deed of
Trust, the Security Agreement, the Collateral Assignment, the Architects'
Collateral Assignment, the Contractors' Collateral Assignment, the Guaranty
Agreement and all other documents related thereto.
1.37 "Notes" means collectively the Acquisition and Phase I Development
Note, the Phase II Development Note and the Golf Course Note, and all amendments
and supplements thereto.
1.38 "Obligations" means all of the undertakings and promises of the
Borrower in the Loan Documents including, without limitation, all agreements,
representations, warranties and covenants.
1.39 "Permitted Encumbrances" means and includes:
(i) liens for taxes, assessments and other
governmental charges due but not yet payable or being actively
contested in good faith by appropriate proceedings effectively
staying any action or proceeding to foreclose any such lien;
(ii) landlord's, warehouseman's, carrier's,
worker's, vendor's, mechanic's and materialmen's liens and
similar liens incurred in the ordinary course of business
remaining undischarged (or not bonded off such that the
related liens no longer attach to any Collateral) for not
longer than 60 days from the filing thereof or being contested
in good faith by appropriate proceedings effectively staying
any action or proceeding to foreclose any such lien;
(iii) attachments remaining undischarged for not
longer than 60 days from the making thereof or being contested
in good faith by appropriate proceedings effectively staying
any action or proceeding to foreclose any such lien;
(iv) liens in respect of judgments or awards which
have become final and unappealable and remain undischarged for
not longer than 60 days from the date of attachment thereof to
any Collateral;
(v) liens in respect of pledges or deposits under
worker's compensation laws, unemployment insurance or similar
legislation and in respect of pledges or deposits to secure
bids, tenders, contracts (other than contracts for the payment
of money), leases or statutory
5
<PAGE> 12
obligations, or in connection with surety, appeal and similar
bonds incidental to the conduct of litigation;
(vi) the liens created by the Loan Documents or
otherwise in favor of the Lender.
1.40 "Person" means any individual, joint venture, corporation,
company, voluntary association, partnership, trust, joint stock company,
unincorporated organization, association, government, or any agency,
instrumentality, or political subdivision thereof, or any other form of entity.
1.41 "Phase I" means that portion of the Development, as more
particularly described in EXHIBIT 5.
1.42 "Phase II" means that portion of the Development, including all
land and improvements, as more particularly described in EXHIBIT 5.
1.43 "Phase II Development Loan" shall have the meaning set forth in
Section 2.2.
1.44 "Phase II Development Note" means the promissory note of the
Borrower of even date herewith in the original principal amount of $6,550,000
substantially in the form of EXHIBIT 4 attached hereto and incorporated herein
by this reference.
1.45 "Plans and Specifications" means collectively the Golf Course
Plans and Specifications and the Land Development Plans and Specifications.
1.46 "Prime Rate" means that rate of interest announced by the Lender
from time to time to be its Prime Rate, any change in such rate to become
effective on the date of such change in such Prime Rate.
1.47 "Property" means collectively those tracts of real property
located in New Kent County, Virginia and covered by the Deed of Trust of which
the Development is a part containing approximately 1,135 acres and described on
EXHIBIT 5.
1.48 "Security Agreement" means the Security Agreement of even date
herewith between the Borrower and the Lender pursuant to which Borrower grants a
security interest to the Lender in the accounts receivables, inventory,
machinery, equipment, furniture, fixtures and other property described therein
and any amendments or supplements permitted thereto.
6
<PAGE> 13
(b) ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise specified or
provided herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all financial statements and certificates and reports as to financial matters
required to be delivered hereunder shall be prepared, in accordance with
Generally Accepted Accounting Principles as in effect from time to time, applied
on a Consistent Basis.
(c) TERMS IN LOAN DOCUMENTS. All of the terms defined in this Agreement
shall have such defined meanings when used in the Notes, the other Loan
Documents, and any certificates, reports or other documents issued under or
delivered pursuant to this Agreement unless the context shall require otherwise.
SECTION 2. THE LOANS.
2.1 THE DEVELOPMENT. The Borrower proposes to develop a residential
golf course community known as Brickshire. The Development will consist of an 18
hole golf course, related clubhouse and amenities, water and sewer system to be
dedicated to New Kent County and road improvements to be dedicated to the
Commonwealth of Virginia and all residential lots developed or to be developed.
2.2 ACQUISITION AND PHASE I DEVELOPMENT LOAN AND PHASE II DEVELOPMENT
LOAN.
I. ACQUISITION AND PHASE I DEVELOPMENT LOAN.
(a) AMOUNT. Subject to the terms and conditions of this Agreement, the
Lender hereby agrees to lend ("Acquisition and Phase I Development Loan") to the
Borrower up to $9,200,000. Subject to the terms hereof, an initial amount equal
to 50% of the actual direct purchase price of the Property (but not in excess of
$1,981,880) will be available for advance at the closing of the purchase by the
Borrower of the Property. The Borrower shall provide the other 50% of the
purchase price of the Property at closing. No further advances of the
Acquisition and Phase I Development Loan shall be made until the Borrower has
advanced from its own funds no less than an additional $1,980,880 towards Land
Development Costs for Phase I or Golf Course Improvements so that the total
equity of the Borrower in the Development is at least $3,963,760 (the "Minimum
Equity Requirement"). Notwithstanding anything to the contrary contained herein,
the amount available to be borrowed by Borrower at any time after the initial
advance at closing under the Acquisition and Phase I Development Loan will be
determined by Lender from time to time based upon advance requests by the
Borrower and the terms and conditions hereof.
(b) ACQUISITION AND PHASE I DEVELOPMENT NOTE AND PURPOSE. The
Acquisition and Phase I Development Loan shall be evidenced by the Acquisition
and Phase I Development Note. The proceeds of the Acquisition and Phase I
7
<PAGE> 14
Development Note shall be used by the Borrower solely for the purpose of (i)
financing the Land Development Improvements and (ii) financing of up to 50% (but
not in excess of $1,981,800) of the costs of land acquisition for the Property.
The Borrower will make payments on the Acquisition and Phase I Development Note
as provided in (e) below and Section 2.10.
(c) RATE OF INTEREST. The principal balance outstanding under the
Acquisition and Phase I Development Note shall bear interest at the per annum
interest rate of the Lender's Prime Rate, as adjusted daily, plus one-half
percent (.5%), to be adjusted effective as of the date of each change in the
Prime Rate.
(d) ORIGINATION FEE. The Borrower shall pay to the Lender on or prior
to the date hereof an origination fee in connection with the Acquisition and
Phase I Development Loan and Phase II Development Loan equal to $110,000.
(e) REPAYMENT. Interest on the outstanding principal balance of the
Acquisition and Phase I Development Note shall be due and payable monthly,
commencing on October 24, 1999 and on the same day of each month thereafter,
until the unpaid principal balance has been paid in full. The entire principal
balance and all accrued unpaid interest under the Acquisition and Phase I
Development Note shall be due and payable in full on January 31, 2004. The
principal indebtedness evidenced by the Acquisition and Phase I Development Note
shall be repayable as provided in Section 2.10 from (i) the proceeds of the sale
of real estate in the Development and (ii) other funds provided by Borrower;
provided that on or before the end of each calendar quarter, beginning the
three-month calendar quarter ending April 30, 2002, principal on the Acquisition
and Land Development Note shall be repaid on the Acquisition and Phase I
Development Loan (the "Acquisition and Phase I Development Loan Minimum
Installment") such that the outstanding principal balance of the Acquisition and
Phase I Development Loan shall not exceed the following amounts at the following
dates:
-------------------------- ---------------------------
DATE MAXIMUM PRINCIPAL BALANCE
-------------------------- ---------------------------
4/30/02 $8,050,000
-------------------------- ---------------------------
7/31/02 $6,900,000
-------------------------- ---------------------------
10/30/02 $5,750,000
-------------------------- ---------------------------
1/31/03 $3,275,000
-------------------------- ---------------------------
4/30/03 $2,456,250
-------------------------- ---------------------------
7/31/03 $1,637,500
-------------------------- ---------------------------
10/30/03 $ 818,750
-------------------------- ---------------------------
1/31/04 $ 0
-------------------------- ---------------------------
8
<PAGE> 15
In the event the Acquisition and Phase I Development Loan Minimum Installment
shall not have been paid for any calendar quarter, the Lender shall, in its sole
discretion and following expiration of any applicable cure period, have the
right to declare an Event of Default.
II. PHASE II DEVELOPMENT LOAN.
(a) AMOUNT. Subject to the terms and conditions of this Agreement, the
Lender hereby agrees to lend ("Phase II Development Loan") to the Borrower up to
$6,550,000. Notwithstanding anything to the contrary contained herein, the
amount available to be borrowed by Borrower at any time under the Phase II
Development Loan will be determined by Lender from time to time based upon
advance requests by the Borrower and the terms and conditions hereof.
(b) PHASE II DEVELOPMENT NOTE AND PURPOSE. The Phase II Development
Loan shall be evidenced by the Phase II Development Note. The proceeds of the
Phase II Development Note shall be used by the Borrower solely for the purpose
of financing the Land Development Improvements to Phase II. The Borrower will
make payments on the Phase II Development Note as provided in (e) below and
Section 2.10.
(c) RATE OF INTEREST. The principal balance outstanding under the Phase
II Development Note shall bear interest at the per annum interest rate of the
Lender's Prime Rate, as adjusted daily, plus one-half percent (.5%), to be
adjusted effective as of the date of each change in the Prime Rate.
(d) REPAYMENT. Interest on the outstanding principal balance of the
Phase II Development Note shall be due and payable monthly, commencing on the
date 30 days following the first advance under the Phase II Development Note and
on the same day of each month thereafter, until the unpaid principal balance has
been paid in full. The entire principal balance and all accrued unpaid interest
under the Phase II Development Note shall be due and payable in full on January
31, 2004. The principal indebtedness evidenced by the Phase II Development Note
shall be repayable as provided in Section 2.10 from (i) the proceeds of the sale
of real estate in the Development and (ii) other funds provided by Borrower;
provided that on or before the end of each calendar quarter, beginning the
three-month calendar quarter ending April 30, 2002, principal on the Phase II
Development Note shall be repaid on the Phase II Development Loan (the "Phase II
Development Loan Minimum Installment") such that the outstanding principal
balance of the Phase II Development Loan shall not exceed the following amounts
on the following dates:
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<PAGE> 16
------------------ ------------------------------
DATE MAXIMUM PRINCIPAL BALANCE
------------------ ------------------------------
4/30/02 $5,731,250
------------------ ------------------------------
7/31/02 $4,912,500
------------------ ------------------------------
10/30/02 $4,093,750
------------------ ------------------------------
1/31/03 $3,275,000
------------------ ------------------------------
4/30/03 $2,456,250
------------------ ------------------------------
7/31/03 $1,637,500
------------------ ------------------------------
10/31/03 $ 818,750
------------------ ------------------------------
1/31/04 $ 0
------------------ ------------------------------
In the event the Phase II Development Loan Minimum Installment shall not have
been paid for any calendar quarter, the Lender shall, in its sole discretion and
following the expiration of any applicable cure period, have the right to
declare an Event of Default.
2.3 CONDITIONS OF LENDER'S OBLIGATIONS TO MAKE DISBURSEMENTS UNDER THE
ACQUISITION AND PHASE I DEVELOPMENT LOAN AND THE PHASE II DEVELOPMENT LOAN.
(a) OBLIGATIONS TO MAKE ADVANCES. The Lender shall not be obligated to
make loan disbursements until the conditions set forth in Section 5, and the
following further conditions, shall have been satisfied:
(1) The representations and warranties made in Section 4
hereof shall be true and correct in all material respects on and as of
the date of the disbursement with the same effect as if made on such
date and shall be so certified by the certification contained in the
form of disbursement (the "Disbursement Request");
(2) No disbursements, after the first disbursement, of the
Acquisition and Phase I Development Loan shall be made until the
Borrower has used its own funds to pay at least $1,981,880 in costs of
Land Development Improvements and Golf Course Improvements and Lender
shall have received and approved a final detailed cost budget for Phase
I;
(3) No advances under the Phase II Development Loan shall be
made until (i) at least 50% of the lots in Phase I have been sold, (ii)
the outstanding principal balance of the Acquisition and Phase I
Development Note has been reduced to $5,000,000 or less and (iii)
Lender shall have received and approved based on its customary
underwriting standards a detailed cost budget for Phase II. A lot will
be deemed sold if the purchaser
10
<PAGE> 17
has deposited in escrow at least 10% of the sales price and executed
the Borrower's standard purchase contract in the form delivered and
approved by Lender or, if the standard contract is not so executed,
Borrower has delivered a signed contract accepted by Borrower and the
Lender has reviewed and approved such contract;
(4) As of the date of such disbursement, there shall be no
Default under any of the Loan Documents or this Agreement;
(5) The Lender shall have received a Disbursement Request
signed by Borrower accompanied by such other documentation as the
Lender may request with respect to the Land Development Improvements,
including an endorsement to the mortgage title insurance policy, or
assurance satisfactory to Lender that such an endorsement will be
issued, increasing the coverage to give effect to amount covered by the
Disbursement Request and otherwise acceptable to Lender;
(6) At the time of each disbursement the Lender is satisfied,
based upon information from the inspection by Lender or its inspecting
representative, with the progress of construction in accordance with
the preliminary site plan or such other development plans satisfactory
(based on its customary underwriting standards) to the Lender;
(7) The Lender shall not be required to make more than one
disbursement each month;
(8) No disbursements under the Acquisition and Phase I
Development Loan shall be made by the Lender after January 31, 2002. No
disbursements under the Phase II Development Loan shall be made after
the earlier of (x) the date 24 months following the first advance under
the Phase II Development Loan or (y) January 31, 2003; and
(9) The Lender shall have reviewed and approved (such approval
not to be unreasonably withheld) all easements, restrictions, planned
development restrictions and any agreements or conditions relating to
the Development or Property.
(b) DISBURSEMENT AMOUNT. Following receipt of a Disbursement Request,
the Lender shall determine the amount of the disbursement it will make in
accordance with the Cost Breakdown and in accordance with the following
standards:
(1) CONSTRUCTION WORK: As to construction work:
(A) Loan disbursements for approved construction
costs related to the Land Development Improvements in Phase I
and Phase II
11
<PAGE> 18
will be made on the basis of 100% of the approved cost, as
shown on applications for payment from Borrower reviewed and
approved by the Lender, minus the amount of previous loan
disbursements with respect to Phase I or Phase II, as the case
may be, and any required equity contributions therefor.
(B) Unless otherwise approved by the Lender, the
foregoing is subject to the proviso that disbursements will be
made for costs incurred only up to the amount for such costs
listed in the Cost Breakdown for the Phase I and Phase II, as
the case may be. The Borrower shall be responsible for all
costs and overruns associated with the Land Development
Improvements.
(2) MATERIALS: The Lender will not make loan disbursements
based on the cost of materials to be incorporated into Improvements
whether or not such materials are stored on the Development.
(e) EXPENDITURES BY BORROWER RESPECTING DEVELOPMENT LOAN. If Lender at
any time determines that the proceeds remaining to be disbursed in respect of
the Land Development Improvements to be constructed are not sufficient to pay
the cost of completion of the Land Development Improvements to be constructed
with advances hereunder in accordance with the preliminary site plan or other
development plan for such Land Development Improvements, Lender shall have the
right to require Borrower to expend for the construction of such Land
Development Improvements funds from some source other than Acquisition and Phase
I Development Loan or Phase II Development Loan, as the case may be, or any
other loan from Lender to cover the deficit before Lender will disburse any
additional Acquisition and Phase I Development Loan proceeds or Phase II
Development Loan proceeds, as the case may be.
(f) PAYMENTS TO GENERAL CONTRACTOR, ETC. RESPECTING DEVELOPMENT LOAN.
Lender, on request of Borrower or upon the occurrence of an Event of Default
hereunder, may make any and all disbursements under the Acquisition and Phase I
Development Loan and Phase II Development Loan, as the case may be, directly to
any general contractor or to any unpaid subcontractor, laborer or material
supplier providing services, labor or materials in connection with construction
of the Improvements. Upon the occurrence of an Event of Default, no further
direction or authorization from Borrower shall be necessary to warrant such
direct disbursements, and all such disbursements shall be secured by the Deed of
Trust and other Loan Documents as fully as if made to Borrower and regardless of
the disposition thereof by such general contractor, subcontractor, laborer or
material supplier so paid. Borrower gives each general contractor,
subcontractor, laborer and material supplier so paid the authority, at Lender's
request and on behalf of Borrower, to sign a receipt for such disbursements
stating that such disbursements are secured by the Deed of Trust and other Loan
Documents.
12
<PAGE> 19
2.4 GOLF COURSE LOAN.
(a) AMOUNT. Subject to the terms and conditions of this Agreement, the
Lender hereby agrees to lend ("Golf Course Loan") to the Borrower up to
$4,200,000. Notwithstanding anything to the contrary contained herein, the
amount available to be borrowed by Borrower at any time under the Golf Course
Loan will be determined by Lender from time to time based upon advance requests
by the Borrower and the terms and conditions hereof.
(b) NOTE AND PURPOSE. The Golf Course Loan shall be evidenced by the
Golf Course Note. The proceeds of the Golf Course Note shall be used by the
Borrower solely for the purpose of financing the Golf Course Improvements,
including the costs of constructing an 18 hole golf course, clubhouse and
related amenities, all as further described in the Golf Course Plans and
Specifications, to be owned by the Borrower and located in the Development.
(c) RATE OF INTEREST. The principal balance outstanding under the Golf
Course Note shall bear interest at the per annum interest rate of the Lender's
Prime Rate, as adjusted daily, plus one-half percent (.5%), to be adjusted
effective as of the date of each change in the Prime Rate.
(d) REPAYMENT. Interest on the outstanding principal balance of the
Golf Course Note shall be due and payable monthly on the 1st day of each month,
commencing on November 1, 1999, and on the same day of each month thereafter,
until the unpaid principal balance has been paid in full. The principal
indebtedness evidenced by the Golf Course Note shall be repayable in equal
monthly installments of $35,000 commencing September 1, 2001 and on the same day
of each month thereafter. The entire principal balance and all accrued unpaid
interest under the Golf Course Note shall be due and payable in full on October
1, 2005.
(e) ORIGINATION FEE. The Borrower shall pay on or prior to the date
hereof to Lender an origination fee in connection with the Golf Course Loan
equal to $40,000.
2.5 CONDITIONS OF LENDER'S OBLIGATIONS TO MAKE DISBURSEMENTS UNDER THE
GOLF COURSE LOAN.
(a) OBLIGATIONS TO MAKE ADVANCES. The Lender shall not be obligated to
make loan disbursements until the conditions set forth in Section 5, and the
following further conditions, shall have been satisfied:
(1) The representations and warranties made in Section 4
hereof shall be true and correct in all material respects on and as of
the date of the disbursement with the same effect as if made on such
date and shall be so
13
<PAGE> 20
certified by the certification contained in the form of disbursement
(the "Disbursement Request");
(2) Lender shall have received and approved based upon its
customary underwriting standards a detailed cost budget for the Golf
Course Improvements.
(3) As of the date of such disbursement, there shall be no
Default under any of the Loan Documents or this Agreement;
(4) The Lender shall have received a Disbursement Request
signed by Borrower accompanied, as applicable, with Architectural
Documents G702 and G703;
(5) At the time of each disbursement the Lender is satisfied,
based upon information from the Architects and inspection by Lender or
its inspecting representative, with the progress of construction in
accordance with the Golf Course Plans and Specifications;
(6) The Lender shall not be required to make more than one
disbursement each month;
(7) No disbursements under the Golf Course Loan shall be made
until the Borrower has met the Minimum Equity Requirement of Section
2.2 I(a).
(8) No disbursements shall be made by the Lender after
December 31, 2001.
(b) DISBURSEMENT AMOUNT. Following receipt of a Disbursement Request,
the Lender shall determine the amount of the disbursement it will make in
accordance with the Cost Breakdown for the Golf Course Improvements and in
accordance with the following standards:
(1) CONSTRUCTION WORK: As to construction work:
(A) Loan disbursements for approved construction
costs and other costs related to the Golf Course Improvements
will be made on the basis of 100% of the approved cost, as
shown on applications for payment from Borrower reviewed and
approved by the Lender, of work on the Golf Course
Improvements, minus the amount of previous Golf Course Loan
disbursements and any equity contributions therefor.
(B) Unless otherwise approved by the Lender, the
foregoing is subject to the proviso that disbursements will be
made for costs
14
<PAGE> 21
incurred only up to the amount for such costs listed in the
Cost Breakdown for the Golf Course Improvements.
(2) MATERIALS: The Lender will not make Golf Course Loan
disbursements based on the cost of materials to be incorporated into
Improvements whether or not such materials are stored on the
Development.
(e) EXPENDITURES BY BORROWER RESPECTING GOLF COURSE LOAN. If Lender at
any time determines that the Golf Course Loan proceeds remaining to be disbursed
in respect of the Golf Course Improvements to be constructed are not sufficient
to pay the cost of completion of the Golf Course Improvements to be constructed
with advances hereunder in accordance with the Golf Course Plans and
Specifications for such improvements, Lender shall have the right to require
Borrower to expend for the construction of such improvements funds from some
source other than Golf Course Loan or any other loan from Lender to cover the
deficit before Lender will disburse any additional Golf Course Loan proceeds.
(f) PAYMENTS TO GENERAL CONTRACTOR, ETC. RESPECTING GOLF COURSE LOAN.
Lender, on request of Borrower or upon the occurrence of an Event of Default
hereunder, may make any and all Golf Course Loan disbursements directly to any
general contractor or to any unpaid subcontractor, laborer or material supplier
providing services, labor or materials in connection with construction of the
Improvements. Upon the occurrence of an Event of Default, no further direction
or authorization from Borrower shall be necessary to warrant such direct
disbursements, and all such disbursements shall be secured by the Deed of Trust
and other Loan Documents as fully as if made to Borrower and regardless of the
disposition thereof by such general contractor, subcontractor, laborer or
material supplier so paid. Borrower gives each general contractor,
subcontractor, laborer and material supplier so paid the authority, at Lender's
request and on behalf of Borrower, to sign a receipt for such disbursements
stating that such disbursements are secured by the Deed of Trust and other Loan
Documents.
2.6 MANNER OF PAYMENT FOR ALL LOANS. Each payment of interest,
principal (including any prepayment) and any other amount required to be paid to
the Lender with respect to this Agreement, the Notes or pursuant to the Loan
Documents, shall be made to the Lender at its principal office in Wilmington,
North Carolina in dollars and in immediately available funds on or before 2:00
p.m., Wilmington, North Carolina time on the date such payment is due. In case
any such payment is not so made when due, the Lender may, but shall not be
obligated to, debit the amount of such payment from any one or more ordinary
deposit accounts of Borrower with the Lender.
2.7 NON-CONFORMING PAYMENT. In the event that any payment of interest,
principal of, prepayment or other fee, or other amount owing hereunder with
respect to this Agreement, any of the Notes or pursuant to the Loan Documents,
is not made
15
<PAGE> 22
when due such amount shall continue as an obligation of the Borrower hereunder
and shall bear interest from the due date thereof until paid in full in the
manner provided in the immediately preceding paragraph at a rate of interest per
annum equal to the Lender's Prime Rate plus four percent (4%) or the maximum
rate permitted by applicable law, whichever shall be lower, from the date such
amount was due until paid in full. Notwithstanding the foregoing, failure to
make any payment when due following any applicable cure periods in the manner
provided in the immediately preceding paragraph shall constitute an Event of
Default hereunder.
2.8 PAYMENTS ON BUSINESS DAYS. In the event that any payment hereunder
or under any of the Notes becomes due and payable on a day other than a Business
Day, then such due date shall be extended to the next succeeding Business Day;
provided that interest shall continue to accrue during the period of any such
extension.
2.9 COMPUTATION OF INTEREST. Interest on the Notes shall be computed
on the basis of a year of 360 days. Any change in the interest rate on the Notes
resulting from a change in the Lender's Prime Rate shall become effective as of
the opening of business on the date on which such change in the Lender's Prime
Rate shall occur.
2.10 RELEASE OF LOTS AND APPLICATION OF NET SALES PROCEEDS. In
connection with the sale of lots in the Development, the Lender shall receive,
to be applied as provided herein, a percentage of the net proceeds from such
sale received. The release of lots and application of proceeds shall be as
follows:
(a) LOT RELEASE. In connection with the sale of lots to
persons not affiliated with the Borrower, the Lender shall grant a
release of property from the lien of the Deed of Trust upon the
delivery to the Lender of an amount (the "Release Payment") equal to
the Minimum Release Payment as shown on SCHEDULE 2.10 for such lots.
In connection with the sale of lots to persons affiliated with
the Borrower, the terms upon which the Lender will release the lien of
the Deed of Trust will be determined by the Lender at the time of such
sale.
Release Payments relating to lots in Phase I shall be applied
to the Acquisition and Phase I Development Loan until such loan is paid
in full. Release Payments relating to lots in Phase II shall be applied
to the Phase II Development Loan until such loan is paid in full. After
the Acquisition and Phase I Development Loan is paid in full, Release
Payments relating to Phase I lots shall be applied to the Phase II
Loan. After the Phase II Loan is paid in full, Release Payments
relating to Phase II lots shall be applied to the Acquisition and Phase
I Development Loan. After both such loans have been paid in full,
Release Payments shall be applied as mutually agreed upon between
Borrower and Lender. Release Payments received prior to April 30,
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<PAGE> 23
2002 shall be applied cumulatively towards the required quarterly
minimum installments set forth in Sections 2.2 I(e) and 2.2 II(d).
(b) COMMON AREA RELEASE. Subject to the Lender's prior
approval of the location of the property to be released, the Lender
will grant a release of property from the lien of the Deed of Trust,
without monetary consideration, for any Common Property conveyed by the
Borrower to any homeowner's association related to the Development and
for roadway and water and sewer improvements which are dedicated to New
Kent County, Virginia or the Commonwealth of Virginia. For purposes of
this paragraph, Common Property shall include any property shown on a
recorded plat of the Development as "common area" or "common property"
or "public streets" or designated as such in any other document and
conveyed to a homeowner's association consisting of owners of property
in the Development.
2.11 PREPAYMENT. The Borrower may prepay the indebtedness evidenced by
any of the Note in whole or in part at any time and from time to time without
penalty.
SECTION 3. SECURITY. As security for the full and timely payment of the
principal of and interest on the Notes and all other Obligations, whether now
existing or hereafter arising under the Loan Documents or otherwise, the
Borrower shall:
(a) on the Closing Date or prior to any disbursements under the
Acquisition and Phase I Development Loan:
(i) deliver to the Lender the Security Agreement,
Deed of Trust and the other Loan Documents; and
(ii) deliver to the Lender Uniform Commercial Code
Financing Statements properly executed for filing in the
appropriate places to perfect the Lender's security interest
under the Security Agreement, Deed of Trust and other Loan
Documents; and
(b) prior to any disbursements under the Golf Course Loan for Golf
Course Improvements:
(i) deliver to the Lender the Architects' Collateral
Assignment and Contractor's Collateral Assignment; and
(ii) deliver to the Lender Uniform Commercial Code
Financing Statements properly executed for filing in the
appropriate places to perfect the Lender's security interest
under the Loan Documents.
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<PAGE> 24
SECTION 4. REPRESENTATIONS AND WARRANTIES. In order to induce the
Lender to enter into this Agreement and to make the loans herein provided for,
Borrower represents and warrants to the Lender as follows:
4.1 ORGANIZATION, ETC. Borrower is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and a wholly owned subsidiary of Guarantor; the Borrower is in good standing and
duly qualified to transact business in the State of Virginia and has the
requisite power to own its properties and to carry on its business as now being
conducted.
4.2 POWER AND AUTHORITY. Borrower is duly authorized under all
applicable provisions of law to execute, deliver and perform this Agreement, the
Notes and the other Loan Documents, and all corporate action on the part of the
Borrower required for the lawful execution, delivery and performance thereof has
been duly taken; and each of the Loan Documents upon the due execution and
delivery thereof, will be the valid and enforceable instrument, obligation or
agreement of the Borrower, in accordance with its respective terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting generally the enforcement
of creditor's rights and by such principles of equity as may generally affect
the availability of equitable remedies. Neither the execution of the Loan
Documents, nor the fulfillment of or compliance with their provisions and terms,
will constitute a violation of or default under, or conflict with or result in a
breach of, the terms, conditions or provisions of any agreement or instrument to
which Borrower is a party or the Bylaws or Articles of Incorporation of Borrower
or any law, regulation, writ or decree applicable to Borrower, or create any
lien, charge or encumbrance upon any of the property or assets of Borrower
pursuant to the terms of any agreement or instrument to which Borrower is a
party or by which it is bound.
4.3 FINANCIAL CONDITION. The financial information, including
financial statements, of the Borrower delivered to the Lender, present fairly
the financial condition of the Borrower as at the date of said information.
Borrower has no direct or contingent liabilities as of the date of this
Agreement of a nature required by Generally Accepted Accounting Principles to be
reflected or provided for in financial statements which are not provided for or
reflected in such financial statements. Since the date of said financial
information, there has been no material adverse change in the business,
properties or condition, financial or otherwise, of Borrower.
4.4 TITLE TO ASSETS. Borrower has good and, with respect to real
property insurable, title to its properties and assets, including the properties
and assets reflected in the financial statements and notes thereto described in
Section 4.3, except for such assets as have been disposed of in the ordinary
course of business, and all such properties and assets are free and clear of all
liens, mortgages, pledges, encumbrances or charges of any kind except as
described in such financial statements and notes thereto, Permitted Encumbrances
and the exceptions contained in the title insurance
18
<PAGE> 25
policy delivered to Lender in connection with this Agreement (the "Permitted
Exceptions").
4.5 LITIGATION. There are no pending or, to the knowledge of Borrower,
threatened actions or proceedings before any court, arbitrator or governmental
or administrative body or agency which may reasonably be expected to materially
adversely affect the properties, business or condition, financial or otherwise,
of Borrower, the completion of the Improvements or the sale of lots or acreage
in the Development, or in any way adversely affect or call into question the
power or authority of Borrower to enter into or perform any of the Loan
Documents to which it is a party.
4.6 LOCATIONS. The address of Borrower's principal place of business,
is set forth below. All the equipment and other personal property covered by the
Security Agreement will be located at the following Collateral location. All
records and other information with respect to accounts, inventory, equipment and
other personal property (including computer programs and printouts) covered by
the Security Agreement are maintained by the Borrower at the following
Collateral location:
BORROWER'S PRINCIPAL PLACES OF BUSINESS LOCATIONS OF COLLATERAL
--------------------------------------- -----------------------
6201 N. Courthouse Road New Kent County, Virginia
New Kent, Virginia 23124 Richmond County, Virginia
or Palm Beach County, Florida
4960 Blue Lake Drive
Boca Raton, Florida 33431
4.7 TAXES. Borrower has filed all income tax returns required to be
filed by it and all taxes shown thereon have been paid, and no controversy in
respect of additional income taxes, state, federal or foreign, of Borrower is
pending, or, to the knowledge of Borrower, threatened.
4.8 CONTRACT OR RESTRICTION AFFECTING THE BORROWER. Borrower is not a
party to or bound by any contract or agreement or subject to any provisions of
its Bylaws or Articles of Incorporation or other corporate restrictions, which
materially adversely affect the business, properties or condition, financial or
otherwise, of Borrower.
4.9 TRADEMARKS, FRANCHISES AND LICENSES. Borrower owns, possesses, or
has the right to use all necessary patents, licenses, franchises, trademarks,
trademark rights, trade names, trade name rights and copyrights to conduct its
business as now conducted, without known conflict with any patent, license,
franchise, trademark, trade name, or copyright of any other Person.
4.10 NO DEFAULT. Borrower is not in default in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in any
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<PAGE> 26
agreement or instrument to which it is a party relating to any Indebtedness for
Money Borrowed, the effect of which default would cause such obligation under
the agreement or instrument to become due prior to its stated maturity.
4.11 GOVERNMENTAL AUTHORITY. No written approval of any foreign,
federal, state or local governmental authorities is necessary to enter into and
to carry out the terms of the Loan Documents except for customary development
approvals, and no consents or approvals are required in connection with the
making or Borrower's performance of the Loan Documents. The Borrower has
received or will obtain the written approval or permits from all federal, state
and local governmental authorities necessary to construct the Improvements, to
conduct its operations as presently conducted and to operate the Development as
a golf course and residential development. All laws, regulations and procedures
applicable to the Borrower with respect to the Development, including, without
limitation, environmental, licensing, wetlands, endangered species and
environmental and all notification and approval procedures, have been or will be
complied with at all times.
4.12 REGULATION U. No part of the proceeds of the loans made pursuant
to this Agreement will be or has been used to purchase or carry or to reduce or
retire any loan incurred to purchase or carry, any margin stocks (within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System)
or to extend credit to others for the purpose of purchasing or carrying any such
margin stocks. Borrower is not engaged as one of its important activities in
extending credit for the purpose of purchasing or carrying such margin stocks.
If requested by the Lender, the Borrower will furnish to the Lender in
connection with the loans hereunder, a statement in conformance with the
requirements of Federal Reserve Form U-1 referred to in said Regulation. No part
of the proceeds of the loans provided for hereunder will be used for the
purchase of commodity future contracts (or margins therefor for short sales) or
for any commodity not required for the normal raw materials inventory of
Borrower.
4.13 ERISA REQUIREMENTS. Borrower has not incurred any material
accumulated funding deficiency within the meaning of ERISA, or incurred any
material liability to the Pension Benefit Guaranty Corporation established under
ERISA (or any successor thereto under ERISA) in connection with any employee
pension benefit plan established by it or by any Person under common control
with it (within the meaning of the Code or Section 4001(b) of ERISA), or in any
plan in which its employees are entitled to participate. No Reportable Event (as
defined in ERISA) in connection with any such plan has occurred or is occurring.
4.14 NO UNTRUE STATEMENTS. Neither this Agreement nor any other Loan
Documents, agreements, reports, schedules, certificates or instruments
heretofore or simultaneously with the execution of this Agreement delivered to
the Lender by or on behalf of Borrower contains any misrepresentation or untrue
statement of a material fact or omits to state any material fact necessary to
make any of such agreements,
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reports, schedules, certificates or instruments, in the light of the
circumstances under which they were made or delivered, not misleading.
4.15 HAZARDOUS MATERIALS. (i) Neither the Borrower nor, to its
knowledge, any other Person has ever caused or permitted any Hazardous Materials
to be placed, held, located or disposed of on, under or at the Property, nor has
the Property or any part thereof ever been used (whether by the Borrower or, to
its knowledge, by any Person) as a dump site or storage site (whether permanent
or temporary) for any Hazardous Materials (except for storage of Hazardous
Materials for on site use in accordance with applicable Environmental Laws, if
any); (ii) the Borrower has fully disclosed to Lender in writing the existence,
extent and nature of any Hazardous Materials which the Borrower is legally
authorized and empowered to maintain on, in or under the Property or use in
connection therewith, and the Borrower has obtained and will maintain all
licenses, permits and approvals required with respect thereto, and is in full
compliance with all of the terms, conditions and requirements of such licenses,
permits and approvals; and (iii) to the Borrower's knowledge, the Property is
now in full compliance with all Environmental Laws in effect on the date hereof.
As used herein "knowledge" means actual knowledge of Tom Goss or Ron Foster or
knowledge derived from environmental reports and studies provided to Borrower.
4.16 SUFFICIENCY OF LOANS. The Acquisition and Phase I Development Loan
will be sufficient, together with any funds to be provided by the Borrower as
shown in the Cost Breakdown, to complete the Improvements in accordance with the
Plans and Specifications for Phase I and development plans for Phase I provided
by Borrower to Lender. The Phase II Development Loan will be sufficient,
together with any funds to be provided by the Borrower as shown in the Cost
Breakdown, to complete the Improvements in accordance with the Plans and
Specifications for Phase II and development plans for Phase II provided by
Borrower to Lender. The Golf Course Loan will be sufficient, together with any
funds to be provided by the Borrower as shown on the Cost Breakdown, to complete
the Golf Course Improvements in accordance with the Golf Course Plans and
Specifications provided by Borrower to Lender.
4.17 UTILITIES AND ACCESS. There are sufficient water, sewer,
electricity and other utilities available to be provided to the Development to
permit its operation as a residential real estate community with amenities such
as the Improvements and each owner of a lot or other acreage will have access
via public streets which will be Common Property to a public right of way.
4.18 RESTRICTIVE COVENANTS. There are no existing covenants, conditions
and restrictions affecting the Development except as shown on SCHEDULE 4.18. The
Borrower believes that such covenants, conditions and restrictions will not, in
the aggregate, materially adversely affect the Borrower's proposed development
of the Property.
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4.19 YEAR 2000 COMPLIANT. The Borrower has (i) initiated a review and
assessment of all areas within its business and operations that could be
adversely affected by the "Year 2000 Problem" (that is, the risk that computer
applications used by the Borrower may be unable to recognize and perform
properly date-sensitive functions involving certain dates prior to and any date
after December 31, 1999), (ii) developed a plan and time line for addressing the
Year 2000 Problem on a timely basis, and (iii) to date, implemented that plan in
accordance with that timetable. Based on the foregoing, the Borrower believes
that all computer applications that are material to its business and operations
are reasonably expected on a timely basis to be able to perform properly
date-sensitive functions for all dates before and after January 1, 2000 (that
is, be "Year 2000 Compliant"), except to the extent that a failure to do so
could not reasonably be expected to have material adverse effect on the
Borrower's business, operations or financial condition.
SECTION 5. CONDITIONS OF CLOSING. The obligation of the Lender to make
the loans hereunder is subject to the continuing accuracy of all representations
and warranties with respect to the Borrower contained herein and in the other
Loan Documents and the performance of all agreements by the Borrower contained
herein and therein, including the following:
5.1 LEGAL OPINIONS. On the Closing Date, the Lender shall have
received the favorable opinion addressed to the Lender, in form and substance
satisfactory to the Lender and special counsel for the Lender, of Hirschler,
Fleischer, Weinberg, Cox & Allen and in-house counsel for the Guarantor, as
counsel for the Borrower and Guarantor, as to the legal matters specified in
EXHIBIT 6 hereto.
5.2 CLOSING DOCUMENTS. The Borrower shall deliver to Lender, in form
and substance satisfaction to the Lender, on or prior to the date of the first
advance under the Acquisition and Phase I Development Loan or the date otherwise
specified below:
(a) LOAN DOCUMENTS. Fully executed copies of this Agreement,
the Notes, each of the other Loan Documents and UCC-1 Financing
Statements relating to fixtures and personal property covered by the
Loan Documents. If it shall so request, the Lender shall have received
evidence of the filing of financing statements or other filings
relating to any fixtures covered by the Loan Documents;
(b) RESOLUTIONS. Resolutions, certified by the Secretary of
Borrower as of the Closing Date, of Borrower's Board of Directors and
Shareholders and the Guarantor's Board of Directors authorizing and
approving the execution and delivery of the Loan Documents to which
each is a party and the performance of the transactions contemplated
thereby;
(c) ARTICLES OF INCORPORATION AND BYLAWS. A copy of Borrower's
and Guarantor's Articles of Incorporation (certified by the Secretary
of State of its
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incorporating jurisdiction) and Bylaws certified by the Secretary or
Assistant Secretary of Borrower and Guarantor to be true and correct
copies as currently in effect;
(d) CERTIFICATE OF GOOD STANDING. Certificate of the Secretary
of State of Massachusetts (as to Guarantor), Virginia (as to Borrower)
and Delaware (as to Borrower) issued as of a recent date as to the
existence and good standing of Borrower, as applicable;
(e) INSURANCE. Evidence of insurance in form and amounts
satisfactory to the Lender, and meeting the requirements of Section 6.4
hereof and the Loan Documents;
(f) APPRAISALS. On or prior to the second advance under the
Acquisition and Phase I Development Loan and prior to any advance under
the Phase II Development Loan and Golf Course Loan, appraisals
(excluding the Golf Course) which meet all applicable banking law
requirements and are from an appraiser satisfactory to the Lender and
which indicate (i) an appraised value, on a discounted cash flow basis,
of no less than $20,000,000 with respect to the Development (excluding
the Golf Course) and (ii) an appraised value, as built, of no less than
$5,250,000 with respect to the Golf Course;
(g) SURVEY AND FLOOD PLAIN CERTIFICATION. A survey of the
Development and the real property on which Phase I, Phase II and the
Golf Course will be located, each in form and substance satisfactory to
the Lender. The Borrower will also provide a survey and legal
description of the Property. Such survey shall show all boundaries of
such tract, together with all easements, with all courses and distances
indicated so as to provide a metes and bounds description, and shall
show dimensions and locations of all existing improvements. The
surveyor shall provide a certification as to the location of the tract
on which the Improvements are to be located within any "special flood
hazard" area within the meaning of the Federal Flood Disaster
Protection Act of 1973;
(h) ENVIRONMENTAL SURVEYS. A phase-1 level environmental
assessment with respect to the Property acceptable in form, scope,
detail, analysis and results to the Lender and from an environmental
engineering firm acceptable to the Lender, indicating no environmental
conditions not acceptable to the Lender;
(i) WETLANDS AND ENDANGERED SPECIES CERTIFICATION. By November
1, 1999 and, in any event, on or prior to the second advance under the
Acquisition and Phase I Development Loan and prior to any advance under
the Phase II Development Loan and Golf Course Loan, the Borrower shall
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have provided the Lender with an environmental assessment from the Army
Corps of Engineers and all required approvals from the appropriate
state and local environmental authorities in form, scope, detail,
analysis and results satisfactory to the Lender or the Lender shall
have received satisfaction that there are no "endangered species"
concerns affecting the location and construction of the Improvements
and that the location of the Improvements will not violate, or require
any consent under, any applicable wetlands laws and regulations;
(j) TITLE INSURANCE POLICY. A mortgagee title insurance policy
from a title insurance company satisfactory to the Lender, indicating
the lien of the Deed of Trust is of first lien priority (insuring all
easements), providing coverage for the full principal amount of the
Notes, containing endorsements to coverage acceptable to the Lender and
containing no title exceptions not approved by the Lender;
(k) COST BREAKDOWN; PROJECTIONS. On or prior to the second
advance under the Acquisition and Phase I Development Loan and prior to
any advance under the Phase II Development Loan and Golf Course Loan, a
copy of the Cost Breakdown for each of Phase I and Phase II Land
Improvements and the Golf Course certified by an officer of Borrower
showing all costs, including interest and fees, required to construct
and complete such improvements in form satisfactory to the Lender and
Final Projections for the Development (including golf course
operations, lot sales and timing of cash flows) certified by an officer
of Borrower and satisfactory to Lender;
(l) COMPLIANCE WITH LAWS. If requested by Lender, a
Certificate of Borrower that the Development and Improvements, and the
intended uses of the Development and all Improvements, are in
compliance with all applicable laws, regulations and ordinances. The
laws, regulations and ordinances with which compliance should be
evidenced include, without limitation, the following: health and
environmental protection laws, erosion control ordinance, doing
business and/or licensing laws and zoning laws (the evidence submitted
as to zoning should include the zoning designation made for the
Development, the permitted uses of the Development under such zoning
designations and zoning requirements as to parking, lot size, ingress,
egress and building setbacks);
(m) REPRESENTATIONS AND WARRANTIES. With each disbursement
request, a statement, which may be contained in the written
disbursement form, to the effect that all representations and
warranties of the Borrower contained herein or in any document or
certificate furnished to the Lender in connection herewith shall be
true and correct;
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(n) NO DEFAULT. Evidence that no uncured Event of Default, as
hereafter defined, nor any event which, upon notice or lapse of time,
or both, would constitute an Event of Default, exists;
(o) TRANSACTION COSTS. Payment or arrangements satisfactory to
the Lender for the payment, to the Lender (or the person or entity owed
an amount in connection with this transaction) of all costs and
expenses, including Lender's attorneys' fees, and taxes relating to the
execution and delivery of this Agreement and the transactions
contemplated thereby and the arrangements therefor;
(p) UTILITIES. On or prior to the second advance under the
Acquisition and Phase I Development Loan and prior to any advance under
the Phase II Development Loan and Golf Course Loan, evidence of the
availability and suitability of electric, water, sewer and other
utilities needed to properly service the Development and Improvements
for their intended use;
(q) CONSTRUCTION AND PERFORMANCE BONDS. On or prior to the
second advance under the Acquisition and Phase I Development Loan and
prior to any advance under the Phase II Development Loan and Golf
Course Loan, the Lender shall have approved the general contractor and,
if required by Lender, all subcontractors involved in the Development
and, if reasonably deemed necessary by Lender, the Lender shall receive
evidence that the Borrower has been provided with performance bonds and
labor and material bonds as to such contractors as may be required by
the Lender in such amounts sufficient in the discretion of the Lender
to cover the amounts of the construction contracts for the construction
of their respective portions of the Improvements, and the surety
issuing such bonds must also be acceptable to the Lender. The Lender
shall be named as additional obligee on such bonds;
(r) PLANS AND SPECIFICATIONS. On or prior to the second
advance under the Acquisition and Phase I Development Loan a copy of
the Plans and Specifications and preliminary site plan or other
development plan for the Improvements for Phase I and prior to any
advance under the Phase II Development Loan and Golf Course Loan, a
copy of the Plans and Specifications and preliminary site plan or other
development plan for the Improvements for Phase II or the Golf Course
Improvements, as the case may be, each in form satisfactory to the
Lender, based upon Lender's customary underwriting standards (and the
Borrower agrees that no material changes will be made in the Plans and
Specifications without the prior written consent of the Lender) and
which have been approved in writing by the Borrower either by
initialing same or by other written approval identifying all pages and
dates, including revision dates. Such plans and specifications shall
include architectural, structural, mechanical, plumbing, electrical and
site development
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(including storm drainage, utility lines, erosion control and
landscaping) plans and specifications;
(s) PERMITS. On or prior to the second advance under the
Acquisition and Phase I Development Loan and prior to any advance under
the Phase II Development Loan and Golf Course Loan, copies of all
material permits required to complete construction of the Improvements
respectively Phase I, Phase II or the Golf Course, as the case may be;
(t) CONSTRUCTION AND MANAGEMENT AGREEMENTS. On or prior to the
second advance under the Acquisition and Phase I Development Loan and
prior to any advance under the Phase II Development Loan and Golf
Course Loan, certified copies of all agreements entered into by the
Borrower in connection with the design, construction, development and
management of the Improvements to be financed by each of such loans, as
the case may be;
(u) REVIEW OF LENDER'S COUNSEL. Evidence that Lender's Counsel
has reviewed the master covenants, restrictions and declarations and
planned unit development documents, all other documents affecting the
Development and such other documents relating to the Development as
required by Lender, and that Lender is satisfied with the findings by
its counsel;
(v) BUILDER'S RISK INSURANCE; FLOOD INSURANCE. On or prior to
any advance under the Acquisition and Phase I Development Loan, the
Phase II Development Loan and Golf Course Loan for structural
Improvements, a policy of builder's risk insurance written by a company
satisfactory to Lender insuring the structural Improvements to be
constructed with advances under the Notes and all property and
materials to be used in the construction thereof against such losses as
normally are insured against under standard builder's risk policies in
an amount of no less than the maximum amount to be advanced hereunder
in respect of the Notes, together with evidence of payment of the
premium therefor, and that Lender is named as a mortgagee or loss payee
as its interest may appear. In addition, if any Improvements are to be
located in an area designated as a special flood hazard area, Borrower
shall deliver to Lender evidence that flood hazard insurance is in
effect from a company and in such amounts as is acceptable to Lender
and that such insurance names the Lender as loss payee;
(w) OTHER MATTERS. The Lender shall have received from the
Borrower such other documents and information as the Lender shall
reasonably request, including without limitation satisfactory payoff
letters with respect to any existing indebtedness encumbering the
Property.
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SECTION 6. AFFIRMATIVE COVENANTS. Borrower covenants that, from the
date hereof until payment in full of the principal and interest on the Notes,
unless the Lender otherwise consents in writing, as follows:
6.1 FINANCIAL REPORTS AND OTHER DATA.
(a) As soon as practicable and in any event within one hundred
twenty (120) days after the end of each fiscal year, deliver, or cause
to be delivered to the Lender an unaudited Borrower prepared balance
sheet of the Borrower and related statements of income and retained
earnings and cash flow for such fiscal year, setting forth in each case
in comparative form corresponding figures for the preceding year, all
satisfactory to the Lender. Borrower shall also submit, at Lender's
request, copies of annually updated year end financial statements on
any partnership or corporation in which it has an ownership interest.
(b) As soon as practical and in any event within forty-five
(45) days after the end of each fiscal quarter, submit to Lender copies
of Borrower prepared financial statements, including a balance sheet
and related statements of income and retained earnings and cash flow in
form and substance satisfactory to the Lender.
(c) With reasonable promptness, deliver such additional
financial or other data as the Lender may reasonably request regarding
Borrower's operations, business affairs and financial condition,
including lot sales, remaining lot inventory and golf course
operations. The Lender is hereby authorized by the Borrower to deliver
a copy of any financial statements made available by the Borrower to
any regulatory authority having jurisdiction over the Lender.
6.2 TAXES AND LIENS. Promptly pay, or cause to be paid, all taxes,
assessments or other governmental charges which may lawfully be levied or
assessed upon the income or profits of the Borrower, or upon any property, real,
personal or mixed, belonging to the Borrower, or upon any part thereof, and also
any lawful claims for labor, material and supplies which, if unpaid, might
become a lien or charge against any such property; provided Borrower may in good
faith contest any such item so long as no lien attaches to any of the
Collateral.
6.3 BUSINESS AND EXISTENCE. Do or cause to be done all things
necessary (i) to preserve and to keep in full force and effect its corporate
existence; and (ii) to keep in full force and effect its rights and franchises,
trade names, patents, trademarks, permits, licenses, copyrights and other
proprietary information to the extent material and necessary to the business of
the Borrower; and (iii) to continue to engage principally in such business as
now conducted by Borrower.
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6.4 INSURANCE. Keep its businesses and properties insured at all times
in responsible insurance companies against the risks and to the extent that
provision for such insurance is usually made by other companies engaged in
similar businesses similarly situated and consistent with its past practices,
and carry such other types and amounts of insurance as are usually carried by
companies engaged in the same or a similar business similarly situated and
consistent with its past practices, including without limitation:
(a) during construction of the structural Improvements for
which builder's risk insurance is available, builder risk insurance in
an amount not less than 100% of the full replacement cost and, after
completion of the Improvements, casualty insurance in an amount not
less than the actual cash value (replacement cost at time of loss less
depreciation), on all insurable real and personal property serving as
collateral for the Notes (except as may be otherwise agreed to by the
Lender) against loss or damage by fire and lightning and other hazards
ordinarily included under uniform standard extended coverage policies,
limited only as may be provided in the standard form of extended
coverage endorsement at the time in use in the State of Virginia;
(b) general public liability insurance against claims for
bodily injury, death or property damage occurring on, in or about the
Development in an amount not less than $1,000,000 with respect to
bodily injury, death or property damage on a combined single limit
basis in any one accident and with an aggregate coverage amount of not
less than $2,000,000 during any one policy year;
(c) liability insurance with respect to the Development if
required under the workers' compensation laws of the State of Virginia;
provided, however, that the insurance so required may be provided by
blanket policies now or hereafter maintained by the Borrower; and
(d) if at any time any portion of the structural Improvements
on any of the real property providing collateral for the Notes is in an
area that has been identified by the Secretary of Housing and Urban
Development as having special flood and mudslide hazards and for which
flood insurance is required to be obtained by Lender, a policy of flood
insurance covering such improvements with amounts and coverage
satisfactory to the Lender.
Each insurance policy obtained in satisfaction of the requirements of
subsections (a) through (d) above shall be by such insurer (or insurers) as
shall be financially responsible, qualified to do business in Virginia or the
jurisdiction of incorporation of the insured, and of recognized standing, shall
prohibit cancellation, non-renewal or lapse in coverage by the insurer without
at least 30 days' prior written notice to the Lender, shall provide (with
respect to insurance under (a) and (d) only)
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that, except as otherwise provided in the Security Agreement or Deed of Trust,
or upon the occurrence of an Event of Default hereunder, losses thereunder shall
be adjusted with the insurer by the Borrower at Borrower' expense, and if
requested by the Lender, the Lender, on behalf of the insured parties and the
decision of such persons as to any adjustment shall be final and conclusive.
Each such policy shall name the Lender as mortgagee and loss payee and
additional insured thereunder, as its interests may appear. Not later than 30
days prior to the termination or expiration of any such policy then in effect
and upon any further request, the Borrower shall deliver or cause to be
delivered to the Lender an officer's certificate setting forth the nature of the
risks covered by such insurance, the amount carried with respect to each risk,
and the name of the insurer.
6.5 MAINTAIN PROPERTY. Maintain its properties in good order and
repair, normal wear and tear excepted, and, from time to time, make all needful
and proper repairs, renewals, replacements, additions and improvements thereto.
6.6 TRUE BOOKS. Keep books of record and account in which full entries
will be made of all of dealings and transactions which fairly and accurately
represent such dealings and transactions. Furnish from time to time, whenever
requested, statements showing itemization of prospective expenditures,
expenditures to date, items due and unpaid, and items necessary for completion,
and support such statements with receipted bills, affidavits, waivers of liens,
and other evidence satisfactory to Lender;
6.7 INSPECTION RIGHTS. Permit any Person designated by Lender to visit
and inspect any of the properties, company books and financial and other reports
of Borrower and to discuss its affairs, finances and accounts with its
accountants and principal officers, all at such reasonable times and as often as
the Lender may reasonably request following reasonable notice to Borrower by
Lender. Permit the Lender, or its representatives, and an architect or inspector
selected by the Lender, to enter upon the Development, inspect the Improvements
and all materials to be used in the construction thereof and to examine all
detailed plans and shop drawings which are or may be kept at the construction
site and cooperate with any such architect or inspector to enable him to perform
his functions hereunder and pay to the Lender an inspection fee of $500 for each
such inspection.
6.8 THE BORROWER'S KNOWLEDGE OF CERTAIN EVENTS. Upon Borrower
obtaining knowledge of the occurrence of any Default or Event of Default
hereunder, or an event which would constitute such an Event of Default or
Default hereunder, or any material adverse change in Borrower's condition,
financial or otherwise, cause to be delivered to the Lender, within fifteen (15)
business days of such officer obtaining such knowledge, an officer's certificate
specifying the nature thereof, the period of existence thereof and what action
the Borrower proposes to take with respect thereto.
6.9 OTHER NOTICES. Notify the Lender in writing within fifteen (15)
business days of the occurrence of any of the following with respect to the
Borrower:
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(i) the service upon Borrower of any material action, suit or
proceeding at law or in equity (as used herein, the term "material"
refers to any action, suit or proceeding involving a potential
liability in excess of $50,000 which is not fully covered by
insurance);
(ii) any event or condition which shall constitute an event of
default under any other agreement for borrowed money or any known or
potential material change in this or any other contractual agreement,
provided such other agreement for borrowed money or other contractual
agreement relates to an actual or potential obligation in excess of
$50,000;
(iii) any levy of an attachment, execution or other process
against the assets of Borrower; and
(iv) any change in any existing agreement or contract which
may materially adversely affect any of the business affairs, financial
or otherwise, of Borrower at the Development.
6.10 FURTHER ASSURANCES. Upon request of the Lender, duly execute and
deliver or cause to be duly executed and delivered to the Lender such further
instruments and do and cause to be done such further acts that may be reasonably
necessary or proper in the opinion of the Lender to carry out more effectively
the provisions and purposes of the Loan Documents.
6.11 OBSERVE ALL LAWS. Conform to and duly observe all laws,
regulations and other valid requirements of any regulatory authority with
respect to the conduct of its businesses, the failure of which would have a
material adverse affect on Borrower, or its business and operations.
6.12 ERISA. Comply with all requirements of ERISA applicable to it
(including the payment of all obligations and liabilities arising under ERISA)
and furnish to the Lender as soon as possible and in any event within 30 days
after it or any duly appointed administrator of any employee pension benefit
plan (as defined in ERISA) knows or has reason to know that any Reportable Event
(as defined in ERISA) with respect to any such plan has occurred, a statement
describing in reasonable detail such Reportable Event and any action which the
Borrower proposes to take with respect thereto, together with a copy of the
notice of such Reportable Event given to the Pension Benefit Guaranty
Corporation or a statement that said notice will be filed with the annual report
to the United States Department of Labor with respect to such plan if such
filing has been authorized.
6.13 PAYMENT OF OBLIGATIONS. Pay when due (including any applicable
grace period) all obligations and liabilities, except where the same (other than
Indebtedness for Money Borrowed and final judgments) may be contested in good
faith and
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appropriate reserves for the accrual of same in amounts satisfactory to the
Lender are maintained.
6.14 CONTINUED OPERATIONS. Continue at all times (a) to maintain its
principal place of business with respect to the Development at the addresses set
forth in Section 4.6 hereof, (b) to maintain its accounts, records, equipment
and other personal property at the addresses specified in Section 4.6 and (c) to
conduct its operations under their current name.
6.15 PRINCIPAL BANKING RELATIONSHIP. Maintain at all times such
Borrower's principal banking and deposit accounts with the Lender.
6.16 HAZARDOUS WASTE INDEMNITY.
(a) Indemnify the Lender and hold the Lender harmless from and
against any and all losses, liabilities, judgments, damages, penalties,
fines, liens, suits, injuries, costs (including cleanup costs),
expenses (including attorneys', consultants', or experts' fees and
expenses) and claims of any and every kind whatsoever paid, incurred or
suffered by, or asserted against the Lender for, with respect to, or as
a direct or indirect result of, (i) the presence on or under, or the
escape, seepage, leakage, spillage, discharge, emission, discharging or
release from, the Development or any Collateral of any Hazardous
Materials (including, without limitation, any losses, liabilities,
judgments, damages, penalties, fines, liens, suits, injuries, costs
(including cleanup costs), expenses (including attorneys',
consultants', or experts' fees and expenses) or claims asserted or
arising under any Environmental Laws, which may require the elimination
or removal of such Hazardous Materials by Borrower or the Lender or any
successors or assigns thereof, regardless of whether or not caused by,
or within the control of, Borrower or (ii) any representation or
warranty by Borrower contained in Section 4.15 being false or untrue in
any material respect; PROVIDED the foregoing indemnity shall not be
available to Lender to the extent caused by Lender or its agents or
employees;
(b) If Borrower receives any notice of (i) the happening of
any event involving the generation, use, spill, discharge or storage,
disposal or cleanup of any Hazardous Materials (a "Hazardous
Discharge") affecting Borrower or the Development or any Collateral in
violation of any Environmental Law or (ii) any complaint, order,
citation or notice with regard to air emissions, water discharges,
surface contaminations, noise emissions or any other environmental,
health or safety matter affecting Borrower or the Development or any
Collateral (an "Environmental Complaint") from any person or entity,
including, without limitation, the United States Environmental
Protection Agency ("EPA") or any agency, department or authority of the
State of North Carolina, then the Borrower will give, within
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seven (7) Business Days, oral and written notice of same to the Lender.
The Borrower will also give the Lender oral and written notice of any
change in any material respect in the nature or extent of any Hazardous
Materials maintained on, in or under the Development within seven (7)
Business Days of such change;
(c) Without limitation of its rights under this Agreement, the
Lender shall have the right, but not the obligation, to enter onto the
Development or any Collateral or to take such other actions as it deems
necessary or advisable to cleanup, remove, resolve or minimize the
impact of, or otherwise deal with, or participate in such actions with
respect to any such Hazardous Discharge or Environmental Complaint upon
its receipt of any notice from any Person or entity, including, without
limitation, the EPA, asserting the existence of any Hazardous Discharge
or Environmental Complaint on or pertaining to the Development or any
Collateral which, if true, could result in an order, suit or other
action against Borrower affecting any part of the Development or any
Collateral by any governmental agency or otherwise which, in the sole
opinion of the Lender, as the case may be, could jeopardize the
Lender's security under the Loan Documents. All reasonable costs and
expenses incurred by the Lender in the exercise of any such rights
shall be secured by the Loan Documents and shall be payable by the
Borrower upon demand, together with interest thereon at a rate equal to
the interest rate payable under the Golf Course Note;
(d) The indemnity obligations of the Borrower under this
Section 6.16 shall survive payment of the Notes.
6.17 USE OF LOAN PROCEEDS. Use the proceeds of the loans made hereby
solely for the purposes set forth in Section 2 hereof.
6.18 WATER AND SEWER CAPACITY. Take all steps necessary to ensure
adequate water and sewer capacity availability to the Development.
6.19 COMMENCEMENT OF CONSTRUCTION. Begin construction of the
Improvements to be constructed with advances hereunder as soon as practicable;
to prosecute diligently the construction of such Improvements; to not
discontinue or permit the discontinuance of construction thereof for as much as
ten (10) days unless weather or some other factor beyond the control of Borrower
intervenes; and, in any event, to complete the construction of such Improvements
in strict compliance with the Plans and Specifications and free and clear of
liens and claims of liens for services and labor performed or materials supplied
in connection therewith on or before the date established by Lender and Borrower
for completion of such Improvements.
6.20 CONTRACTORS. To deliver to Lender, upon request, the names of all
persons with whom Borrower have contracted or intend to contract for services,
labor
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or materials in connection with the construction of the Improvements to be
constructed with advances hereunder.
6.21 INSPECTION, PLANS AND RECEIPTS. To permit Lender and Lender's
authorized agents to enter upon the Property during normal working hours and as
often as Lender desires for the purpose of inspecting the construction of the
Improvements to be constructed with advances hereunder. Upon request, Borrower
will furnish to Lender detailed plans, shop drawings and specifications which
relate to such Improvements. Failure of Lender or its authorized agents to
discover any defects or to reject materials or workmanship shall not make Lender
liable to Borrower or to any other person and no prior failure shall constitute
a waiver by Lender of Lender's right to reject subsequently any such workmanship
or materials. When requested by Lender, Borrower will furnish to Lender proof
that all bills for services, labor and materials for such Improvements have been
paid except those which will be paid from the next succeeding request for
disbursement.
6.22 SURVEYS. Prior to any advance for construction of the Golf
Course, provide to Lender a routing plan of the golf course layout acceptable to
the Lender and prior to any advance for construction of any structure, a
foundation survey acceptable to the Lender.
6.23 PAYMENT OF COST OVERRUNS. Pay with its own funds, and not
Acquisition and Phase I Development Loan, Phase II Development Loan or Golf
Course Loan proceeds, all cost overruns associated with the Development.
6.24 YEAR 2000 COMPLIANCE. Make such inquiries as necessary to
determine whether any computer application of the Borrower's suppliers, vendors
and customers that is material to the Borrower's business and operations is
"Year 2000 Compliant", and promptly notify the Lender in the event the Borrower
discovers or determines that any computer application (including those of its
suppliers, vendors and customers) that is material to its business and
operations will not be "Year 2000 Compliant" and take all such action as is
necessary to remedy such situation, except to the extent that such failure could
not reasonably be expected to have a material adverse effect on the business,
operations and financial condition of the Borrower.
SECTION 7. NEGATIVE COVENANTS OF THE BORROWER. Borrower covenants and
agrees that from the date hereof until payment in full of the principal and
interest on the Notes, unless the Lender shall otherwise have consented prior
thereto in writing, it will not either directly or indirectly:
7.1 INDEBTEDNESS. Incur, create, guarantee, assume or permit to exist
any Indebtedness (including guaranties or contingent obligations relating to
Indebtedness) however evidenced, except
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(i) Indebtedness existing on the date hereof and described in
the financial statements delivered to the Lender pursuant to Section
6.1 hereof or the notes thereto, which Indebtedness shall be repaid in
accordance with the terms relating thereto existing as of the date
hereof (including the terms thereof permitting prepayment);
(ii) Indebtedness to the Lender arising under this Agreement;
or
(iii) Indebtedness related to the Development, but only as
long as such Indebtedness is NOT secured by any lien, pledge or
security interest on any real or personal property on which the Lender
has a lien, pledge or security interest which secures the Notes.
7.2 LIMITATIONS ON LIENS. Incur, create, assume or permit to exist any
mortgage, pledge, security interest, encumbrance, lien or charge of any kind
upon any property or assets now owned or hereafter acquired of any character
relating to the Development, including those arising under conditional sales or
other title retention agreements, except Permitted Encumbrances.
7.3 TRANSFER OF ASSETS. Sell, assign, lease, transfer or otherwise
dispose of all or substantially all of its assets relating to the Development
except for sales of lots in the ordinary course of business and the transfer of
Common Property and dedication of water and sewer improvements and roadway
improvements contemplated by Section 2.10(b).
7.4 INSIDER TRANSACTIONS. Directly or indirectly purchase, acquire or
lease any property or asset from, or purchase, sell, dispose of, exchange or
lease any property or assets to, or render service to, or otherwise deal with,
in the ordinary course of business or otherwise, any affiliate, except pursuant
to reasonable requirements and upon fair and reasonable terms and conditions not
less favorable to Borrower than if it were a comparable arm's length transaction
and no such relationship existed.
7.5 CHANGE ORDERS. Authorize, request, allow or otherwise make change
orders in excess of $10,000 in the Plans and Specifications for the Improvements
to be financed without the Lender's prior approval, which will not be
unreasonably withheld or delayed.
7.6 DISTRIBUTIONS, REDEMPTIONS AND OTHER PAYMENTS. (a) Declare or make
any distributions or dividends on any ownership interest of Borrower now or
hereafter outstanding, or (b) purchase, redeem or otherwise retire any such
ownership interest, or apply or set apart any of its assets therefor or make any
other distribution (by reduction of capital or otherwise) in respect of any such
ownership interest, or (c) agree to do any of the foregoing.
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7.7 LOANS AND INVESTMENTS. Lend or advance money, credit or property to
any Person, or invest in (by capital contribution or otherwise), or purchase or
repurchase the stock or indebtedness, or all or a substantial part of the assets
or properties of any Person, or agree to do any of the foregoing, except for
(i) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States
of America and which mature within one year from the date of
acquisition thereof;
(ii) investments in commercial paper of any corporation with a
maturity not in excess of thirty days from the date of acquisition
thereof and rated P-1 or better by Moody's Investors Services, Inc., or
A-1 or better by Standard & Poor's Corporation;
(iii) investments in certificates of deposit with a maturity
not in excess of ninety days from the date of acquisition thereof,
issued by (a) the Lender or (b) any commercial bank organized and
existing under the laws of the United States of America or under any
state of the United States of America and having a combined capital and
undivided surplus of not less than $50,000,000, provided, however, that
certificates of deposit at any one bank shall at no time exceed ten
percent (10%) of the undivided capital and surplus of such bank; and
(iv) purchase money loans to purchasers of lots in the
Development (or other developments owned by Borrower).
7.8 NO MINING. Permit or allow any form of mining or other mineral
excavation to occur on the Property.
SECTION 8. EVENTS OF DEFAULT AND REMEDIES.
(a) An Event of Default shall exist if any of the following shall
occur:
8.1 PAYMENT OF NOTES. If Borrower defaults in the payment of any
principal of or interest on the Notes when due, or the payment of any other
amount payable hereunder or under any of the other Loan Documents, either by the
terms hereof or thereof or otherwise as herein or therein provided, and such
default continues for a period of 10 days after the date such payment was due;
or
8.2 PAYMENT OF OTHER INDEBTEDNESS. If Borrower defaults in the payment
of principal of, by acceleration or otherwise, or interest on any Indebtedness
for Money Borrowed (including guaranties or contingent obligations relating to
Indebtedness for Money Borrowed and including all Indebtedness for Money
Borrowed owing to the Lender) beyond any period of grace provided with respect
thereto, or in the performance of any other agreement, term or condition
contained in any agreement
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under which any such obligation is created, if the effect of such default is to
cause, or permit the holder or holders of such obligation (or a trustee in
behalf of such holder or holders) to cause, such obligation to become due prior
to its stated maturity; or
8.3 REPRESENTATION, WARRANTY, ETC. If any representation or warranty
made by Borrower herein, or in any writing furnished in connection with or
pursuant to this Agreement or any of the other Loan Documents, or if any report,
certificate, financial statement or other instrument or document delivered to
the Lender by or on behalf of Borrower, shall be false or misleading in any
material respect on the date as of which made; or
8.4 CERTAIN COVENANTS. If Borrower defaults in the performance or
observance of any agreement or covenant contained in Sections 6 and 7 hereof;
provided if such default is a "non-monetary" default, as determined by the
Lender in its sole discretion, such Borrower shall not have cured such
non-monetary default within thirty (30) days after receipt of written notice;
provided if such default reasonably cannot be cured in 30 days such 30 day
period will be extended for such additional time (not to exceed 60 days) as is
reasonably necessary to cure such default provided that Borrower commences and
diligently pursues such cure; or
8.5 OTHER COVENANTS. If Borrower defaults in the performance or
observance of any other agreement, covenant, term or condition binding on it
contained herein (other than those referred to in Sections 8.1 through 8.4
hereof) and such default shall not have been remedied within thirty (30) days
after written notice thereof shall have been received by Borrower from the
Lender; provided if such default reasonably cannot be cured in 30 days such 30
day period will be extended for such additional time (not to exceed 60 days) as
is reasonably necessary to cure such default provided that Borrower commences
and diligently pursues such cure; or
8.6 OTHER DOCUMENTS. If there shall occur any "Default" or "Event of
Default" (beyond any grace periods applicable to such Default or Event of
Default) as specified in any of the other Loan Documents; or
8.7 LIQUIDATION OR DISSOLUTION. Liquidation or dissolution of
Borrower, or suspension of the business of Borrower or filing by Borrower of a
voluntary petition in bankruptcy or a voluntary petition or an answer seeking
reorganization, arrangement, readjustment of its debts or for any other relief
under the United States Bankruptcy Code, as amended, or under any other
insolvency act or law, state or federal, now or hereafter existing, or any other
action of Borrower indicating its consent to, approval of, or acquiescence in
any petition or proceedings; the application by or for, or the appointment by
consent or acquiescence of, a receiver, a trustee or a custodian of Borrower or
an assignment for the benefit of creditors, the inability of Borrower or the
admission by Borrower in writing of inability to pay its debts as they mature;
or
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8.8 BANKRUPTCY, ETC. Filing of an involuntary petition against
Borrower in bankruptcy or seeking reorganization, arrangement, readjustment of
its debts or for any other relief under the United States Bankruptcy Code, as
amended, or under any other insolvency act or law, state or federal, now or
hereafter existing; or the involuntary appointment of a receiver, a trustee or a
custodian of Borrower or for all or a substantial part of its property; the
issuance of a warrant of attachment, execution or similar process against any
substantial part of the property of Borrower and the continuance of any of the
events referred to in this Section 8.8 for sixty (60) days undismissed or
undischarged; or
8.9 JUDGMENT. If a judgment which has become final and nonappealable,
which with other outstanding judgments against Borrower or any subsidiary
exceeds an aggregate of $50,000 in excess of applicable insurance coverage and
which the Lender reasonably believes would impair the financial condition of the
Borrower, shall be rendered against Borrower and if within thirty (30) days
after entry thereof such judgment shall not have been discharged or stayed; or
8.10 TRANSFER OR ENCUMBRANCE. The sale, transfer or encumbrance
(except liens in favor of Lender) of all or any part of the property securing
the Obligations or any interest therein (except for the sale of lots in the
Development in the ordinary course of business and transfer of Common Property
and dedication of water and sewer improvements and roadways contemplated by
Section 2.10(b)), without Lender's prior written consent.
(b) REMEDIES. If an Event of Default has occurred and has not been
waived or cured within applicable cure periods, the Lender shall have no further
obligation to make advances under the Acquisition and Phase I Development Loan,
the Phase II Development Loan or Golf Course Loan, the Lender may exercise any
right, power or remedy permitted it by law, and shall have, in particular,
without limiting the generality of the foregoing, the right to declare the
entire principal and all interest accrued on the Notes then outstanding to be,
and such Notes shall thereupon become, forthwith due and payable, without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived, anything contained herein or in the Notes or the other
Loan Documents to the contrary notwithstanding and the Borrower will forthwith
pay to the holder of the Notes the entire principal of and interest accrued on
such Notes. Notwithstanding the foregoing, upon the occurrence of an Event of
Default described in Sections 8.7 and 8.8 the entire amount owing hereunder
shall become immediately due and payable without declaration or demand. In
addition, the Lender shall be entitled to immediately proceed to foreclose on
its liens and security interests in the Collateral, and to exercise all rights
and remedies provided for by law or contained in and afforded by any of the Loan
Documents.
8.11 SECURITY INTEREST. Lender shall have and hereby is granted a lien
and a security interest in any and all reserves, deferred payments, undisbursed
loan
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proceeds, insurance refunds, impound accounts, refunds for overpayment of any
kind, and any surplus funds of Borrower whether the same arise out of or occur
in connection with the Development, Acquisition and Phase I Development Loan,
the Phase II Development Loan or Golf Course Loan made hereunder, and such lien
and security interest shall constitute additional security for the loans. Upon
the occurrence of an Event of Default under this Agreement, Lender shall have
and possess any and all remedies of a secured party provided by law with respect
to enforcement of and recovery on its lien and security interest on such items
and amounts.
8.12 OPTION TO PAY CONTRACTORS. If an Event of Default shall exist, at
its option, the Lender may make Acquisition and Phase I Development Loan, Phase
II Development Loan or Golf Course Loan disbursements directly to any unpaid
contractor, subcontractor, laborer or material supplier providing labor,
services or materials in connection with the construction of the Improvements,
and the execution of this Agreement by the Borrower shall, and hereby does,
constitute an irrevocable direction and authorization to so disburse the funds.
No further direction or authorization from the Borrower shall be necessary to
warrant such direct disbursements and all such disbursements shall be secured by
the Deed of Trust and other Loan Documents as fully as if made to the Borrower,
regardless of the disposition thereof by any subcontractor, laborer or material
supplier so paid.
SECTION 9. MISCELLANEOUS.
9.1 WAIVERS, AMENDMENTS, ETC. The provisions of this Agreement and the
other Loan Documents may, subject to the provisions of this Section 9, from time
to time be amended, modified or waived, provided such amendment, modification or
waiver is in writing and consented to by the Borrower and the Lender. No failure
or delay on the part of the Lender in exercising any power or right under this
Agreement or the other Loan Documents shall operate as a waiver thereof, nor
shall any single or partial exercise of any such power or right preclude any
other or further exercise thereof or the exercise of any other power or right.
No notice to or demand on the Borrower in any case shall entitle it to any
notice or demand in similar or other circumstances. No waiver or approval
hereunder shall require any similar or dissimilar waiver or approval thereafter
to be granted hereunder.
9.2 WAIVER OF DEFAULT. The Lender may, by written notice to the
Borrower, at any time and from time to time, waive any default in the
performance or observance of any condition, covenant or other term hereof or any
Event of Default which shall have occurred hereunder and its consequences. Any
such waiver shall be for such period and subject to such conditions as shall be
specified in any such notice. In the case of any such waiver, the Borrower and
the Lender shall be restored to their former position and rights hereunder,
under the Notes issued hereunder, and under the other Loan Documents, and any
Event of Default so waived shall be deemed to be
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cured and not continuing; but no such waiver shall extend to any subsequent or
other Event of Default, or impair any right consequent thereon.
9.3 LIEN. It is understood and agreed that the Lender shall have and
enjoy and is hereby granted a lien on and a security interest in, any and all
materials (stored on-site or off-site), reserves, deferred payments, deposits or
advance payments for materials (stored on-site or off-site), undisbursed loan
proceeds, insurance refunds, impound accounts, refunds for overpayment of any
kind, and any surplus of withheld funds resulting from the invalidity of "stop
notice" claims or the failure of claimants to prosecute their claims to
judgment, to the extent the same arise out of or occur in connection with the
construction of the Improvements, and such lien and security interest shall
constitute additional security for the indebtedness of the Borrower evidenced by
the Notes, and the Lender shall have and possess any and all rights and remedies
of a secured party provided by law with respect to enforcement of and recovery
on its security interest on such items and amounts.
9.4 NOTICES. All notices, requests and demands to or upon the
respective parties hereto shall be deemed to have been given or made when (i)
hand delivered, (ii) on the third day following deposit in the mail, postage
prepaid by registered or certified mail, return receipt requested, (iii) in the
case of telegraphic notice, when received from the telegraph company, or (iv) in
the case of transmission by telefacsimile device, when such telefacsimile is
received, in each case addressed as follows or to such other address as may be
hereafter designated in writing by the respective parties hereto:
The Borrower: Bluegreen Properties of Virginia, Inc.
c/o Bluegreen Corporation
4960 Blue Lake Drive
Boca Raton, Florida 33431
Attn: President
with a copy (the delivery of which shall not be a condition to any
effectiveness of such notice to Borrower) to:
Charles H. Rothenberg, Esq.
Hirschler, Fleischer, Weinberg, Cox & Allen
701 East Byrd Street, 16th Floor
Richmond, Virginia 23219
Telefacsimile: (804) 644-0957
The Lender: Branch Banking and Trust Company
Post Office Box 1727
Wilmington, North Carolina 28402
Attention: Mark Cayton
Telefacsimile: (910) 815-2799
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except in cases where it is expressly herein provided that such notice, request
or demand is not effective until received by the party to whom it is addressed.
9.5 SURVIVAL OF AGREEMENTS. All agreements, representations and
warranties made herein shall survive the delivery of the Notes.
9.6 GOVERNING LAW AND JURISDICTION. This Agreement, the Notes and
other Loan Documents shall be governed in all respects by the laws of North
Carolina. Borrower hereby submits to the jurisdiction of the state and federal
courts located in North Carolina and agree that the Lender may, at its option,
enforce its rights under the Loan Documents in such courts.
9.7 ENFORCEABILITY OF AGREEMENT. Should any one or more of the
provisions of this Agreement or other Loan Documents be determined to be illegal
or unenforceable as to one or more of the parties, all other provisions
nevertheless shall remain effective and binding on the parties hereto.
9.8 COUNTERPARTS AND EFFECTIVENESS. This Agreement may be executed by
the parties hereto in any number of counterparts and each counterpart shall be
deemed to be an original but all shall constitute together but one and the same
Agreement.
9.9 FEES AND EXPENSES. Whether or not the loan is made hereunder,
Borrower agrees to pay, or reimburse the Lender, for actual out-of-pocket
expenses, including reasonable counsel fees (including without limitation
attorneys' fees incurred in the trial court and upon any appeal), incurred by
the Lender in connection with the preparation, negotiation, delivery and
enforcement of this Agreement and the other Loan Documents, and the preservation
of any rights under this Agreement and the other Loan Documents.
9.10 LIENS; SET OFF BY LENDER. Borrower hereby grants to the Lender a
continuing lien for the Notes and all other Obligations upon any and all monies,
securities and other property of the Borrower and the proceeds thereof, now or
hereafter held or received by or in transit to, the Lender from or for the
Borrower, and also upon any and all deposits (general or special) (other than
trust accounts or any other accounts for which Borrower is acting as a fiduciary
for third parties) and credits of the Borrower, if any, against the Lender, at
any time existing. Upon the occurrence of any Event of Default as specified
above, the Lender is hereby authorized at any time and from time to time,
without notice to Borrower, to set off, appropriate and apply any or all items
hereinabove referred to against all indebtedness of the Borrower to the Lender,
whether under this Agreement, the Notes or otherwise, whether now existing or
hereafter arising. The Lender undertakes to give Borrower notice of exercise by
the Lender of its rights under this SECTION 9.10 subsequent to
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taking such action, but the failure to give such notice shall not affect the
validity of such action by Lender.
9.11 ASSIGNMENT. The terms hereof shall be binding upon and inure to
the benefit of the successors and assigns of the parties hereto; provided,
however, that the Borrower shall not assign this Agreement or any of its rights,
interests, duties or obligations hereunder or any loan proceeds or other moneys
to be advanced hereunder in whole or in part without the prior written consent
of the Lender and that any such assignment (whether voluntary or by operation of
law) without said consent shall be void.
9.12 INDEMNITY. Borrower agrees to defend, protect, indemnify and hold
harmless the Lender, all directors, officers, employees, attorneys, and agents
of Lender, from and against all claims, actions, liabilities, damages, costs and
expenses (including, without limitation, all reasonable attorneys', legal
assistants', and experts' fees, costs and expenses incurred in the investigation
or defense of any matter) asserted against, imposed upon or incurred by Lender
or any of such other persons, whether direct, indirect or consequential and
whether based on any federal or state laws or other statutes or regulations
(including, without limitation, securities, commercial and environmental laws
and regulations), under common law or on equitable cause, or on contract or
otherwise, as a result of or arising from or relating to this Agreement, the
Loan Documents or the transactions contemplated hereby or any credit extended or
used hereunder or any act done or omitted by any person, or any event occurring,
in connection therewith, or the exercise of any rights or remedies thereunder,
including without limitation the acquisition of the property securing any loans
by the Lender by way of foreclosure of the lien thereof, deed in lieu of such
foreclosure or otherwise resulting, directly or indirectly, from any action or
inaction on the part of Borrower, except only the recklessness or willful
misconduct of the person otherwise to be indemnified hereunder. In the event
this indemnity is unenforceable as a matter of law as to a particular matter or
consequence referred to herein, it shall be enforceable to the full extent
permitted by law. The obligations under this paragraph are independent of all
other rights and obligations set forth herein and shall survive the consummation
and payment of the loans evidenced by the Notes.
9.13 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties pertaining to its subject matter and supersedes all prior
and contemporaneous agreements and understandings of the parties in connection
with it.
[signatures follow]
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IN WITNESS WHEREOF, the Borrower and the Lender have caused this
Agreement to be duly executed by their duly authorized officers, all on the day
and year first above written.
BLUEGREEN PROPERTIES OF VIRGINIA, INC.
By: /s/ THOMAS W. GOSS
-----------------------------------
Name: Thomas W. Goss
Title: Vice President
BRANCH BANKING AND TRUST COMPANY
By: /s/ MARK CAYTON
-----------------------------------
Name: Vice President
Title: Vice President
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<PAGE> 1
EXHIBIT 10.152
MODIFICATION NUMBER TWO
TO THE LOAN AGREEMENT
(Amended and Restated)
First Union National Bank
214 North Hogan Street - FL0070
Jacksonville, Florida 32202
(Hereinafter referred to as the "Bank")
Bluegreen Corporation
4960 Blue Lake Drive
Boca Raton, Florida 33431
Bluegreen Resorts Management, Inc.
f/k/a RDI Resort Services Corporation
4960 Blue Lake Drive
Boca Raton, Florida 33431
Bluegreen Vacations Unlimited, Inc.
Successor by merger to Bluegreen Resorts, Inc.
And Dellona Enterprises, Inc.
4960 Blue Lake Drive
Boca Raton, Florida 33431
Bluegreen Holding Corporation (Texas)
4960 Blue Lake Drive
Boca Raton, Florida 33431
Properties of the Southwest One, Inc.
4960 Blue Lake Drive
Boca Raton, Florida 33431
Bluegreen Southwest One, L.P.
f/k/a Properties of the Southwest, L.P.
4960 Blue Lake Drive
Boca Raton, Florida 33431
Bluegreen Asset Management Corporation
Successor by merger to Bluegreen Corporation of Montana
4960 Blue Lake Drive
Boca Raton, Florida 33431
Bluegreen Carolina Lands, LLC,
Successor by merger to Bluegreen Carolina Land, Inc.
4960 Blue Lake Drive
Boca Raton, Florida 33431
Bluegreen Corporation of Tennessee
4960 Blue Lake Drive
Boca Raton, Florida 33431
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<PAGE> 2
Bluegreen Corporation of the Rockies
4960 Blue Lake Drive
Boca Raton, Florida 33431
Bluegreen Properties of Virginia, Inc.
4960 Blue Lake Drive
Boca Raton, Florida 33431
Bluegreen Resorts International, Inc.
4960 Blue Lake Drive
Boca Raton, Florida 33431
Carolina National Golf Club, Inc.
4960 Blue Lake Drive
Boca Raton, Florida 33431
Leisure Capital Corporation
4960 Blue Lake Drive
Boca Raton, Florida 33431
Bluegreen West Corporation
f/k/a Bluegreen Properties of the West, Inc.,
4960 Blue Lake Drive
Boca Raton, Florida 33431
BG/RDI Acquisition Corp.
4960 Blue Lake Drive
Boca Raton, Florida 33431
Bluegreen Corporation Great Lakes (WI)
4960 Blue Lake Drive
Boca Raton, Florida 33431
Bluegreen Corporation of Canada
4960 Blue Lake Drive
Boca Raton, Florida 33431
Bluegreen Golf Clubs, Inc.
4960 Blue Lake Drive
Boca Raton, Florida 33431
Bluegreen Interiors, LLC
4960 Blue Lake Drive
Boca Raton, Florida 33431
Bluegreen Southwest Land, Inc.
4960 Blue Lake Drive
Boca Raton, Florida 33431
New England Advertising Corp.
4960 Blue Lake Drive
Boca Raton, Florida 33431
South Florida Aviation, Inc.
4960 Blue Lake Drive
Boca Raton, Florida 33431
Winding River Realty, Inc.
4960 Blue Lake Drive
Boca Raton, Florida 33431
THIS AGREEMENT is entered into as of November 3, 1999 by and between Bank and
Borrower.
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<PAGE> 3
RECITALS
Bank is the holder of a Renewal Promissory Note executed and delivered by
Borrower, dated August 1, 1999, in the original principal amount of
$5,000,000.00 (the "Note"); and certain other Loan Documents (the "Line of
Credit"), including a Loan Agreement, dated September 23, 1998 as modified by
Modification Number One to Loan Agreement dated August 1, 1999 (the "Loan
Agreement"); and
Borrower and Bank have agreed to modify the terms of the Note and the Loan
Agreement and increase the amount of the Line of Credit to $10,000,000.00.
In consideration of Bank's continued extension of credit and the agreements
contained herein, the parties agree as follows:
AGREEMENT
OUTSTANDING BALANCE. Borrower acknowledges that the most recent Commercial Loan
Invoice sent to Borrower with respect to the Obligations under the Line of
Credit is correct.
MODIFICATIONS. Relying upon the covenants, agreements, representations and
warranties contained herein, the Loan Agreement is hereby amended and restated
as follows:
INCREASE LINE OF CREDIT - The Bank and the Borrower hereby increase the Line of
Credit to the principal amount of $10,000,000.00 which shall be evidenced by a
Consolidated Promissory Note dated as of November 3, 1999 in the principal
amount of $10,000,000.00 (the "Consolidated Note"), under which Borrower may
borrow, repay, and reborrow, from time to time, so long as the total
indebtedness outstanding at any one time does not exceed the principal amount
minus the sum of (i) the amount available to be drawn plus (ii) the amount of
unreimbursed drawings under all letters of credit issued by Bank for the
account of Borrower. The Loan proceeds are to be used by Borrower solely for
short term working capital and to issue letters of credit from time to time.
The total amount of letters of credit to be issued under the Line of Credit
shall not exceed $1,000,000.00 at any time nor have expirations after December
31, 2000. Bank's obligation to advance or readvance under the Consolidated Note
shall terminate if Borrower is in Default under the Consolidated Note. Borrower
shall pay Bank an Availability Fee for the Line of Credit more particularly
described in the Consolidated Promissory Note.
REPRESENTATIONS. Borrower represents that from the date of this Agreement and
until final payment in full of the Obligations: Accurate Information. All
information now and hereafter furnished to Bank is and will be true, correct
and complete. Any such information relating to Borrower's financial condition
will accurately reflect Borrower's financial condition as of the date(s)
thereof, (including all contingent liabilities of every type), and Borrower
further represents that its financial condition has not changed materially or
adversely since the date(s) of such documents. Authorization;
Non-Contravention. The execution, delivery and performance by Borrower and any
guarantor, as applicable, of this Agreement and other Loan Documents to which
it is a party are within its power, have been duly authorized by all necessary
action taken by the duly authorized officers of Borrower and any guarantors
and, if necessary, by making appropriate filings with any governmental agency
or unit and are the legal, binding, valid and enforceable obligations of
Borrower and any guarantors; and do not (i) contravene, or constitute (with or
without the giving of notice or lapse of time or both) a violation of any
provision of applicable law, a violation of the organizational documents of
Borrower or any guarantor, or a default under any agreement, judgment,
injunction, order, decree or other instrument binding upon or affecting
Borrower or any guarantor, (ii) result in the creation or imposition of any
3
<PAGE> 4
lien (other than the lien(s) created by the Loan Documents) on any of
Borrower's or guarantor's assets, or (iii) give cause for the acceleration of
any obligations of Borrower or any guarantor to any other creditor. Asset
Ownership. Borrower has good and marketable title to all of the properties and
assets reflected on the balance sheets and financial statements supplied Bank
by Borrower, and all such properties and assets are free and clear of
mortgages, security deeds, pledges, liens, charges, and all other encumbrances,
except as otherwise disclosed to Bank by Borrower in writing ("Permitted
Liens"). To Borrower's knowledge, no default has occurred under any Permitted
Liens and no claims or interests adverse to Borrower's present rights in its
properties and assets have arisen. Discharge of Liens and Taxes. Borrower has
duly filed, paid and/or discharged all taxes or other claims which may become a
lien on any of its property or assets, except to the extent that such items are
being appropriately contested in good faith and an adequate reserve for the
payment thereof is being maintained. Sufficiency of Capital. Borrower is not,
and after consummation of this Agreement and after giving effect to all
indebtedness incurred and liens created by Borrower in connection with the
Loan, will not be, insolvent within the meaning of 11 U.S.C. ss. 101(32).
Compliance with Laws. Borrower is in compliance in all respects with all
federal, state and local laws, rules and regulations applicable to its
properties, operations, business, and finances, including, without limitation,
any federal or state laws relating to liquor (including 18 U.S.C. ss. 3617, et
seq.) or narcotics (including 21 U.S.C.ss. 801, et seq.) and/or any commercial
crimes; all applicable federal, state and local laws and regulations intended
to protect the environment; and the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), if applicable. Organization and Authority. Each
corporate or limited liability company Borrower and any guarantor, as
applicable, is duly created, validly existing and in good standing under the
laws of the state of its organization, and has all powers, governmental
licenses, authorizations, consents and approvals required to operate its
business as now conducted. Each corporate or limited liability company Borrower
and any guarantor, if any, is duly qualified, licensed and in good standing in
each jurisdiction where qualification or licensing is required by the nature of
its business or the character and location of its property, business or
customers, and in which the failure to so qualify or be licensed, as the case
may be, in the aggregate, could have a material adverse effect on the business,
financial position, results of operations, properties or prospects of Borrower
or any such guarantor. No Litigation. There are no pending or threatened suits,
claims or demands against Borrower or any guarantor that have not been
disclosed to Bank by Borrower in writing. ERISA. Each employee pension benefit
plan, as defined in ERISA, maintained by Borrower meets, as of the date hereof,
the minimum funding standards of ERISA and all applicable regulations thereto
and requirements thereof, and of the Internal Revenue Code of 1954, as amended.
No "Prohibited Transaction" or "Reportable Event" (as both terms are defined by
ERISA) has occurred with respect to any such plan.
AFFIRMATIVE COVENANTS. Borrower agrees that from the date of this Agreement and
until final payment in full of the Obligations, unless Bank shall otherwise
consent in writing, Borrower will: Business Continuity. Conduct its business in
substantially the same manner and locations as such business is now and has
previously been conducted. Maintain Properties. Maintain, preserve and keep its
property in good repair, working order and condition, making all needed
replacements, additions and improvements thereto, to the extent allowed by this
Agreement. Access to Books & Records. Allow Bank, or its agents, during normal
business hours, access to the books, records and such other documents of
Borrower as Bank shall reasonably require, and allow Bank to make copies
thereof at Bank's expense. Insurance. Maintain adequate insurance coverage with
respect to its properties and business against loss or damage of the kinds and
in the amounts customarily insured against by companies of established
reputation engaged in the same or similar businesses including, without
limitation, commercial general liability insurance, workers compensation
insurance, and business interruption insurance; all acquired in such amounts
and from such companies as Bank may reasonably require. Notice of Default and
Other Notices. (a) Notice of Default. Furnish to Bank immediately upon becoming
aware of the existence of any condition or event which constitutes a Default
(as defined in the Loan Documents) or any event which, upon the giving of
notice or lapse of time or both, may become a Default, written notice
specifying the nature and period of existence thereof and the action which
Borrower is taking or proposes to take with respect thereto. (b) Other Notices.
Promptly notify Bank in writing of (i) any material adverse change in its
financial condition or its business; (ii) any default under any material
agreement, contract or other instrument to which it is a party or by which any
of its properties are bound, or any acceleration of the maturity of any
indebtedness owing by Borrower; (iii) any material adverse claim against or
affecting Borrower or any part of its properties; (iv) the commencement of, and
any material determination in, any litigation with any third party or any
4
<PAGE> 5
proceeding before any governmental agency or unit affecting Borrower; and (v)
at least 30 days prior thereto, any change in Borrower's name or address as
shown above, and/or any change in Borrower's structure. Compliance with Other
Agreements. Comply with all terms and conditions contained in this Agreement,
and any other Loan Documents, and swap agreements, if applicable, as defined in
the Note. Payment of Debts. Pay and discharge when due, and before subject to
penalty or further charge, and otherwise satisfy before maturity or
delinquency, all obligations, debts, taxes, and liabilities of whatever nature
or amount, except those which Borrower in good faith disputes. Reports and
Proxies. Deliver to Bank, promptly, a copy of all financial statements,
reports, notices, and proxy statements, sent by Borrower to stockholders, and
all regular or periodic reports required to be filed by Borrower with any
governmental agency or authority. Other Financial Information. Deliver promptly
such other information regarding the operation, business affairs, and financial
condition of Borrower which Bank may reasonably request. Non-Default
Certificate From Borrower. Deliver to Bank, with the Financial Statements
required herein, a certificate signed by Borrower, if Borrower is an
individual, or by a principal financial officer of Borrower warranting that no
"Default" as specified in the Loan Documents nor any event which, upon the
giving of notice or lapse of time or both, would constitute such a Default, has
occurred. Estoppel Certificate. Furnish, within 15 days after request by Bank,
a written statement duly acknowledged of the amount due under the Loan and
whether offsets or defenses exist against the Obligations.
NEGATIVE COVENANTS. Borrower agrees that from the date of this Agreement and
until final payment in full of the Obligations, unless Bank shall otherwise
consent in writing, Borrower will not: Default on Other Contracts or
Obligations. Default on any material contract with or obligation when due to a
third party or default in the performance of any obligation to a third party
incurred for money borrowed. Judgment Entered. Permit the entry of any monetary
judgment or the assessment against, the filing of any tax lien against, or the
issuance of any writ of garnishment or attachment against any property of or
debts due Borrower. Government Intervention. Permit the assertion or making of
any seizure, vesting or intervention by or under authority of any government by
which the management of Borrower or any guarantor is displaced of its authority
in the conduct of its respective business or such business is curtailed or
materially impaired. Prepayment of Other Debt. Retire any long-term debt
entered into prior to the date of this Agreement in advance of its legal
obligation to do so. Retire or Repurchase Capital Stock. Retire or otherwise
acquire any of its capital stock, except as permitted by waiver letter from
Bank to Borrower dated May 13, 1999 authorizing the repurchase of up to two
million shares of capital stock under the Borrower's existing share repurchase
plan.
FINANCIAL COVENANTS. Borrower agrees to the following provisions from the date
hereof until final payment in full of the Obligations, unless Bank shall
otherwise consent in writing: Adjusted Tangible Net Worth. Borrower shall, at
all times, maintain an Adjusted Tangible Net Worth of at least $145,000,000.00.
"Adjusted Tangible Net Worth" shall mean the total assets minus total
liabilities. For purposes of this computation, the aggregate amount of any
intangible assets of Borrower including, without limitation, goodwill,
franchises, licenses, patents, trademarks, trade names, copyrights, service
marks, and brand names, shall be subtracted from total assets, and total
liabilities shall exclude debt subordinated. Adjusted Total Liabilities to
Adjusted Tangible Net Worth Ratio. Borrower shall, at all times, maintain a
ratio of Adjusted Total Liabilities to Adjusted Tangible Net Worth of not more
than 2.00 to 1.00. For purposes of this computation, "Adjusted Total
Liabilities" shall mean the sum of total liabilities, including capitalized
leases and all reserves for deferred taxes and other deferred sums appearing on
the liabilities side of a balance sheet, in accordance with generally accepted
accounting principles applied on a consistent basis, excluding debt
subordinated. Liquidity Requirement. Borrower shall at all times, maintain
unrestricted cash and unencumbered timeshare receivables of not less than
$20,000,000.00. Deposit Relationship. Borrower shall maintain its primary
depository account with Bank. Compliance Certificate. Borrower shall furnish
Bank with a quarterly covenant compliance certificate demonstrating Borrower's
compliance with the above Financial Covenants.
ANNUAL FINANCIAL STATEMENTS. Borrower shall deliver to Bank, within 90 days
after the close of each fiscal year, audited financial statements reflecting
its operations during such fiscal year, including, without limitation, a
balance sheet, profit and loss statement and statement of cash flows, with
supporting schedules; all on a consolidated and consolidating basis and in
reasonable detail, prepared in conformity with generally accepted accounting
principles, applied on a basis consistent with that of the preceding year. All
such statements shall be examined by an independent certified public accountant
acceptable to Bank. The opinion of such independent certified public accountant
5
<PAGE> 6
shall not be acceptable to Bank if qualified due to any limitations in scope
imposed by Borrower or its Subsidiaries, if any. Any other qualification of the
opinion by the accountant shall render the acceptability of the financial
statements subject to Bank's approval.
PERIODIC FINANCIAL STATEMENTS. Borrower shall deliver to Bank unaudited
management-prepared quarterly financial statements, including, without
limitation, a balance sheet, profit and loss statement and statement of cash
flows, with supporting schedules, as soon as available and in any event within
45 days after the close of each such period; all in reasonable detail and
prepared in conformity with generally accepted accounting principles, applied
on a basis consistent with that of the preceding year. Such statements shall be
certified as to their correctness by a principal financial officer of Borrower
and in each case, if audited statements are required, subject to audit and
year-end adjustments.
FINANCIAL AND OTHER INFORMATION. Borrower shall deliver to Bank such
information as Bank may reasonably request from time to time, including without
limitation, financial statements and information pertaining to Borrower's
financial condition. Such information shall be true, complete, and accurate.
YEAR 2000 COMPATIBILITY. Borrower shall take all action necessary to assure
that Borrower's computer based systems are able to operate and effectively
process data including dates on and after January 1, 2000. At the request of
Bank, Borrower shall provide Bank assurance acceptable to Bank of Borrower's
Year 2000 compatibility.
ACKNOWLEDGMENTS. Borrower acknowledges and represents that the Note and other
Loan Documents, as amended hereby, are in full force and effect without any
defense, counterclaim, right or claim of set-off; that, after giving effect to
this Agreement, no default or event that with the passage of time or giving of
notice would constitute a default under the Loan Documents has occurred; that
all representations and warranties contained in the Loan Documents are true and
correct as of this date; that Borrower has taken all necessary action to
authorize the execution and delivery of this Agreement; and that this Agreement
is a modification of an existing obligation and is not a novation.
MISCELLANEOUS. This Agreement applies to the Loan, Line of Credit and all Loan
Documents. The terms "Loan Documents" and "Obligations," as used in this
Agreement, are defined in the Note. The term "Borrower" shall include its
Subsidiaries and Affiliates. As used in this Agreement as to Borrower,
"Subsidiary" shall mean any corporation of which more than 50% of the issued
and outstanding voting stock is owned directly or indirectly by Borrower. As to
Borrower, "Affiliate" shall have the meaning as defined in 11 U.S.C. ss. 101,
except that the term "debtor" therein shall be substituted by the term
"Borrower" herein. This Agreement shall be construed in accordance with and
governed by the laws of the applicable state as originally provided in the Loan
Documents, without reference to that state's conflicts of laws principles. This
Agreement and the other Loan Documents constitute the sole agreement of the
parties with respect to the subject matter thereof and supersede all oral
negotiations and prior writings with respect to the subject matter thereof. No
amendment of this Agreement, and no waiver of any one or more of the provisions
hereof shall be effective unless set forth in writing and signed by the parties
hereto. The illegality, unenforceability or inconsistency of any provision of
this Agreement shall not in any way affect or impair the legality,
enforceability or consistency of the remaining provisions of this Agreement or
the other Loan Documents. This Agreement and the other Loan Documents are
intended to be consistent. However, in the event of any inconsistencies among
this Agreement and any of the Loan Documents, the terms of this Agreement, and
then the Note, shall control. This Agreement may be executed in any number of
counterparts and by the different parties on separate counterparts. Each such
counterpart shall be deemed an original, but all such counterparts shall
together constitute one and the same agreement. Terms used in this Agreement
which are capitalized and not otherwise defined herein shall have the meanings
ascribed to such terms in the Loan Documents.
CONDITIONS SUBSEQUENT TO CLOSING FOR LOAN ADVANCES. The obligation to the Bank
to make any loan advanes under the Line of Credit subsequent to closing are
subject to the following post closing conditions which must be received,
reviewed and be satisfactory to Bank: Certificates of Good Standing and
Borrowing Authorizations. Each Borrower shall provide Bank with an original
certificate of good standing issued by the state of its organization and
provide Bank with a written corporate or partnership borrowing resolutions in a
form satisfactory to Bank.
IN WITNESS WHEREOF, the undersigned have signed and sealed this Agreement the
day and year first above written.
6
<PAGE> 7
Bluegreen Corporation
Taxpayer Identification Number: 03-0300793
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ---------------------------------------
Patrick E. Rondeau, Senior Vice President
Bluegreen Resorts Management, Inc.
Taxpayer Identification Number: 65-0520217
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ---------------------------------------
Patrick E. Rondeau, President
Bluegreen Vacations Unlimited, Inc.
Successor by merger to Bluegreen Resorts, Inc.
And Dellona Enterprises, Inc.
Taxpayer Identification Number: 65-0433722
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ---------------------------------------
Patrick E. Rondeau, President
Bluegreen Holding Corporation (Texas)
Taxpayer Identification Number: 65-0796382
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ---------------------------------------
Patrick E. Rondeau, President
Properties of the Southwest One, Inc.
Taxpayer Identification Number: 03-0315835
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ---------------------------------------
Patrick E. Rondeau, Executive Vice President
Bluegreen Southwest One, L.P.,
f/k/a Properties of the Southwest, L.P.
By: Bluegreen Southwest Land, Inc.,
its: General Partner
Taxpayer Identification Number: 65-0910609
7
<PAGE> 8
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ---------------------------------------
Patrick E. Rondeau, Executive Vice President
Bluegreen Asset Management Corporation
Successor by merger to Bluegreen Corporation of Montana
Taxpayer Identification Number: 03-0325365
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ---------------------------------------
Patrick E. Rondeau, President
Bluegreen Carolina Lands, LLC
Successor by merger to Bluegreen Carolina Land, Inc.
Taxpayer Identification Number: 65-0941345
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ---------------------------------------
Patrick E. Rondeau, President
Bluegreen Corporation of Tennessee
Taxpayer Identification Number: 03-0316460
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ---------------------------------------
Patrick E. Rondeau, President
Bluegreen Corporation of the Rockies
Taxpayer Identification Number: 65-0349373
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ---------------------------------------
Patrick E. Rondeau, President
Bluegreen Corporation of Virginia, Inc.
Taxpayer Identification Number: 52-1752664
8
<PAGE> 9
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ---------------------------------------
Patrick E. Rondeau, President
Bluegreen Resorts International, Inc.
Taxpayer Identification Number: 65-0803615
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ---------------------------------------
Patrick E. Rondeau, President
Carolina National Golf Club, Inc.
Taxpayer Identification Number: 62-1667685
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ---------------------------------------
Patrick E. Rondeau, President
Leisure Capital Corporation
Taxpayer Identification Number: 03-0327285
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ---------------------------------------
Patrick E. Rondeau, President
Bluegreen West Corporation
f/k/a Bluegreen Properties of the West, Inc.
Taxpayer Identification Number: 59-3300205
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ---------------------------------------
Patrick E. Rondeau, President
BG/RDI Acquisition Corp.
Taxpayer Identification Number: 65-0776572
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ---------------------------------------
Patrick E. Rondeau, President
Bluegreen Corporation Great Lakes (WI)
Taxpayer Identification Number: 36-3520208
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ---------------------------------------
Patrick E. Rondeau, Secretary
Bluegreen Corporation of Canada
Taxpayer Identification Number: 03-0311034
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ---------------------------------------
Patrick E. Rondeau, Secretary
Bluegreen Golf Clubs, Inc.
Taxpayer Identification Number: 65-0912659
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ---------------------------------------
Patrick E. Rondeau, Secretary
Bluegreen Interiors, LLC
Taxpayer Identification Number: 65-0929952
9
<PAGE> 10
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ---------------------------------------
Patrick E. Rondeau, President
Bluegreen Southwest Land, Inc.
Taxpayer Identification Number: 65-0910609
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ---------------------------------------
Patrick E. Rondeau, President
New England Advertising Corp.
Taxpayer Identification Number: 03-0295158
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ---------------------------------------
Patrick E. Rondeau, President
South Florida Aviation, Inc.
Taxpayer Identification Number: 65-0341038
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ---------------------------------------
Patrick E. Rondeau, President
Winding River Realty, Inc.
Taxpayer Identification Number: 56-2095309
CORPORATE By: /s/ PATRICK E. RONDEAU
SEAL ---------------------------------------
Patrick E. Rondeau, President
Frist Union National Bank
CORPORATE By: /s/ JACQUELINE LEDEA
SEAL ---------------------------------------
Jacqueline Ledea, Vice President
10
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-02-2000
<PERIOD-START> MAR-29-1999
<PERIOD-END> OCT-03-1999
<CASH> 43,842
<SECURITIES> 15,717
<RECEIVABLES> 98,358
<ALLOWANCES> 3,471
<INVENTORY> 172,279
<CURRENT-ASSETS> 0<F1>
<PP&E> 37,968
<DEPRECIATION> 7,436
<TOTAL-ASSETS> 380,717
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 209,415
0
0
<COMMON> 251
<OTHER-SE> 124,428
<TOTAL-LIABILITY-AND-EQUITY> 380,717
<SALES> 128,365
<TOTAL-REVENUES> 146,216
<CGS> 42,822
<TOTAL-COSTS> 50,540
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,324
<INTEREST-EXPENSE> 6,630
<INCOME-PRETAX> 16,675
<INCOME-TAX> 6,503
<INCOME-CONTINUING> 10,287
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,287
<EPS-BASIC> 0.44
<EPS-DILUTED> 0.38
<FN>
<F1>THE COMPANY HAS AN UNCLASSIFIED BALANCE SHEET.
</FN>
</TABLE>
