<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 January 2, 2000
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)
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
- ------------------------------------------------------ ----------------
(Address of principal executive offices) (Zip Code)
(561) 912-8000
- --------------------------------------------------------------------------------
(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 February 14, 2000, there were 25,169,731 shares of Common Stock, $.01 par
value per share, issued, 2,465,500 treasury shares and 22,704,231 shares
outstanding.
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BLUEGREEN CORPORATION
INDEX TO QUARTERLY REPORT ON FORM 10-Q
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I - FINANCIAL INFORMATION (UNAUDITED)
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS AT
MARCH 28, 1999 AND JANUARY 2, 2000 .......................................... 3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - THREE MONTHS
ENDED DECEMBER 27, 1998 AND JANUARY 2, 2000 ................................. 4
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - NINE MONTHS
ENDED DECEMBER 27, 1998 AND JANUARY 2, 2000 ................................. 5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - NINE MONTHS
ENDED DECEMBER 27, 1998 AND JANUARY 2, 2000 ................................. 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 ............................................................ 30
ITEM 3. DEFAULTS UPON SENIOR SECURITIES .................................................. 30
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS .............................. 30
ITEM 5. OTHER INFORMATION ................................................................ 30
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ................................................. 31
SIGNATURES....................................................................................... 31
</TABLE>
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, JANUARY 2,
1999 2000
--------- ---------
(NOTE) (UNAUDITED)
<S> <C> <C>
ASSETS
Cash and cash equivalents (including restricted cash of
approximately $15.8 million and $18.8 million at
March 28, 1999 and January 2, 2000, respectively) ............ $ 55,557 $ 44,460
Contracts receivable, net ....................................... 20,167 8,630
Notes receivable, net ........................................... 64,380 75,918
Notes receivable from related party ............................. 4,168 --
Inventory, net .................................................. 142,628 190,676
Investments in securities ....................................... 17,106 17,092
Property and equipment, net ..................................... 26,052 32,954
Other assets .................................................... 19,064 30,610
--------- ---------
TOTAL ASSETS ................................................. $ 349,122 $ 400,340
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Accounts payable ................................................ $ 6,207 $ 4,340
Accrued liabilities and other ................................... 25,362 19,395
Deferred income ................................................. 5,792 3,577
Deferred income taxes ........................................... 13,507 19,386
Receivable-backed notes payable ................................. 9,884 12,746
Lines-of-credit and notes payable ............................... 17,615 67,532
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 ............................................ 228,738 277,347
Minority interest ............................................... 1,035 648
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
January 2, 2000, respectively ............................... 251 251
Additional paid-in capital ...................................... 107,206 107,395
Treasury stock, 968 and 2,353 common shares at cost at
March 28, 1999 and January 2, 2000, respectively ............ (4,545) (11,518)
Net unrealized gains on investments available-for-sale, net
of income taxes .............................................. 560 838
Retained earnings ............................................... 15,877 25,379
--------- ---------
TOTAL SHAREHOLDERS' EQUITY ................................... 119,349 122,345
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ................... $ 349,122 $ 400,340
========= =========
</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
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BLUEGREEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
------------------------
December 27, January 2,
1998 2000
----------- ----------
<S> <C> <C>
REVENUES:
Sales ............................................................. $ 55,669 $ 45,246
Other resort and golf operations revenue .......................... 2,946 4,164
Interest income ................................................... 4,112 3,903
Gain on sale of notes receivable .................................. 1,092 693
Other (expense) income ............................................ (39) 199
-------- --------
63,780 54,205
COSTS AND EXPENSES:
Cost of sales ..................................................... 20,779 17,298
Cost of other resort and golf operations .......................... 3,331 3,840
Selling, general and administrative expenses ...................... 28,879 30,214
Interest expense .................................................. 2,920 3,531
Provision for loan losses ......................................... 623 1,055
-------- --------
56,532 55,938
-------- --------
Income (loss) before income taxes .................................... 7,248 (1,733)
Provision (benefit) for income taxes ................................. 2,899 (676)
Minority interest in income (loss) of consolidated subsidiary ........ 76 (272)
-------- --------
NET INCOME (LOSS) .................................................... $ 4,273 $ (785)
======== ========
EARNINGS (LOSS) PER COMMON SHARE:
Basic ................................................................ $ 0.18 $ (0.03)
======== ========
Diluted .............................................................. $ 0.16 $ (0.03)
======== ========
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES:
Basic ................................................................ 23,297 22,924
======== ========
Diluted .............................................................. 29,879 22,924
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements
4
<PAGE> 5
BLUEGREEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
---------------------------
December 27, January 2,
1998 2000
------------ ----------
<S> <C> <C>
REVENUES:
Sales ............................................................. $ 172,730 $ 173,612
Other resort and golf operations revenue .......................... 8,891 12,951
Interest income ................................................... 11,361 11,794
Gain on sale of notes receivable .................................. 3,145 1,577
Other income ...................................................... 340 486
--------- ---------
196,467 200,420
COSTS AND EXPENSES:
Cost of sales ..................................................... 63,187 60,123
Cost of other resort and golf operations .......................... 8,606 11,556
Selling, general and administrative expenses ...................... 87,431 100,259
Interest expense .................................................. 10,028 10,160
Provision for loan losses ......................................... 1,515 3,380
--------- ---------
170,767 185,478
--------- ---------
Income before income taxes ........................................... 25,700 14,942
Provision for income taxes ........................................... 10,280 5,827
Minority interest in loss of consolidated subsidiary ................. (53) (387)
--------- ---------
Income before extraordinary item ..................................... 15,473 9,502
Extraordinary loss on early extinguishment of debt, net of
income taxes ...................................................... (1,682) --
--------- ---------
NET INCOME ........................................................... $ 13,791 $ 9,502
========= =========
EARNINGS PER COMMON SHARE:
Basic:
Income before extraordinary item .................................. $ 0.71 $ 0.41
Extraordinary loss on early extinguishment of debt,
net of income taxes ............................................ (0.08) --
--------- ---------
Net income ........................................................ $ 0.63 $ 0.41
========= =========
Diluted:
Income before extraordinary item .................................. $ 0.59 $ 0.37
Extraordinary loss on early extinguishment of debt,
net of income taxes ............................................ (0.06) --
--------- ---------
Net income ........................................................ $ 0.53 $ 0.37
========= =========
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES:
Basic ................................................................ 21,853 23,188
========= =========
Diluted .............................................................. 28,636 29,509
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements
5
<PAGE> 6
BLUEGREEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
--------------------------
December 27, January 2,
1998 2000
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income ........................................................ $ 13,791 $ 9,502
Adjustments to reconcile net income to net
cash flow used by operating activities:
Extraordinary loss on early extinguishment of debt,
net of taxes ............................................. 1,682 --
Minority interest in loss of consolidated subsidiary ......... (53) (387)
Depreciation and amortization ................................ 1,955 3,323
Gain on sale of notes receivable ............................. (3,145) (1,577)
(Gain) loss on sale of property and equipment ................ (268) 144
Loss on exchange of REMIC certificates ....................... -- 179
Provision for loan losses .................................... 1,515 3,380
Provision for deferred income taxes .......................... 10,280 5,827
Interest accretion on investments in securities .............. (1,572) (1,747)
Proceeds from sale of notes receivable ....................... 44,620 30,492
Proceeds from borrowings collateralized by notes
receivable ............................................... 4,137 13,771
Payments on borrowings collateralized by notes receivable .... (2,573) (10,248)
CHANGE IN OPERATING ASSETS AND LIABILITIES:
Contracts receivable ........................................... 2,224 11,537
Notes receivable ............................................... (43,490) (52,200)
Inventory ...................................................... (22,120) (16,358)
Other assets ................................................... (3,594) (5,810)
Accounts payable, accrued liabilities and other ................ (6,102) (9,780)
--------- ---------
NET CASH USED BY OPERATING ACTIVITIES ................................ (2,713) (19,952)
--------- ---------
INVESTING ACTIVITIES:
Acquisition ....................................................... -- (675)
Purchases of property and equipment ............................... (9,385) (9,713)
Sales of property and equipment ................................... 954 1,433
Cash received from investments in securities ...................... 1,063 2,993
Loan to related party ............................................. -- (256)
Principal payments received on loans to related party ............. -- 459
--------- ---------
NET CASH USED BY INVESTING ACTIVITIES ................................ (7,368) (5,759)
--------- ---------
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 ............................................. -- 27,885
Payments under line-of-credit facilities and other notes payable .. (73,569) (4,586)
Payment of debt issuance costs .................................... (5,574) (1,806)
Proceeds from issuance of Common Stock ............................ 24,298 --
Payments for treasury stock ....................................... (1,402) (6,973)
Proceeds from exercise of employee and director stock options ..... 374 94
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES ............................ 31,978 14,614
--------- ---------
Net increase (decrease) in cash and cash equivalents ................. 21,897 (11,097)
Cash and cash equivalents at beginning of period ..................... 31,065 55,557
--------- ---------
Cash and cash equivalents at end of period ........................... 52,962 44,460
Restricted cash and cash equivalents at end of period ................ (18,000) (18,816)
--------- ---------
Unrestricted cash and cash equivalents at end of period .............. $ 34,962 $ 25,644
========= =========
</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)
<TABLE>
<CAPTION>
Nine Months Ended
--------------------------
December 27, January 2,
1998 2000
------------ -------
<S> <C> <C>
SUPPLEMENTAL SCHEDULE OF NON-CASH OPERATING, INVESTING
AND FINANCING ACTIVITIES
Inventory acquired through financing ................... $ 2,485 $25,867
=========== =======
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 ..................... $ 5,778 $ 5,054
=========== =======
Conversion of 8.25% convertible subordinated
debentures into Common Stock ........................ $ 368 $ --
=========== =======
Sale of notes receivable in exchange for investments
in securities and short-term receivable ............. $ 4,409 $ 7,123
=========== =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
7
<PAGE> 8
BLUEGREEN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 2, 2000
(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 nine-month periods ended January 2, 2000 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 four 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 nine months ended January 2, 2000, 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 nine-month periods ended December 27, 1998 and January 2,
2000 consisted of 39 weeks and 40 weeks, respectively. The three-month periods
ended December 27, 1998 and January 2, 2000 each consisted of 13 weeks.
EARNINGS (LOSS) PER COMMON SHARE
Basic earnings (loss) per common share is computed by dividing net income (loss)
by the weighted average number of common shares outstanding. Diluted earnings
(loss) per common share is computed in the same manner as basic earnings (loss)
per share, but also gives effect to all dilutive stock options using the
treasury stock method and
8
<PAGE> 9
includes an adjustment, if dilutive, to both net income (loss) 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.
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 January 2, 2000. Pursuant to the Stock Agreement,
as amended, subject to certain conditions thereto, the Company had 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 had not offered to sell to the Funds all of the Remaining
Shares and the Company had 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 occurred during the Commitment Period, the Funds could
have had 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 impact of assuming the issuance of the remaining 1.8 million shares would be
antidilutive, these shares have not been included in the Company's
weighted-average shares outstanding for the purpose of computing diluted
earnings (loss) per share for the three and nine months ended December 27, 1998
or January 2, 2000. On February 9, 2000, the Funds acquired the remaining 1.8
million shares for aggregate proceeds of $15.0 million.
The following table sets forth the computation of basic and diluted earnings
(loss) per share:
<TABLE>
<CAPTION>
(in thousands, except per share data) Three Months Ended Nine Months Ended
--------------------------- ---------------------------
December 27, January 2, December 27, January 2,
1998 2000 1998 2000
------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
Basic earnings (loss) per share - numerators:
Income (loss) before extraordinary item .................. $ 4,273 $ (785) $ 15,473 $ 9,502
Extraordinary loss on early extinguishment of debt,
net of income taxes .................................. -- -- (1,682) --
-------- --------- -------- --------
Net income (loss) ........................................ $ 4,273 $ (785) $ 13,791 $ 9,502
======== ========= ======== ========
Diluted earnings (loss) per share - numerators:
Income (loss) before extraordinary item - basic .......... $ 4,273 $ (785) $ 15,473 $ 9,502
Effect of dilutive securities (net of tax effects) ....... 497 -- 1,496 1,543
-------- --------- -------- --------
Income (loss) before extraordinary item - diluted ........ 4,770 (785) 16,969 11,045
Extraordinary loss on early extinguishment of debt,
net of income taxes .................................. -- -- (1,682) --
-------- --------- -------- --------
Net income (loss) - diluted .............................. $ 4,770 $ (785) $ 15,287 $ 11,045
======== ========= ======== ========
Denominator:
Denominator for basic earnings (loss) per share - weighted
average shares ....................................... 23,297 22,924 21,853 23,188
Effect of dilutive securities:
Stock options ......................................... 880 -- 1,070 619
Convertible securities ................................ 5,702 -- 5,713 5,702
-------- --------- -------- --------
Dilutive potential common shares ......................... 6,582 -- 6,783 6,321
-------- --------- -------- --------
Denominator for diluted earnings (loss) per share -
adjusted weighted-average shares and assumed
conversions............................................ 29,879 22,924 28,636 29,509
======== ========= ======== ========
Basic earnings (loss) per common share:
Income (loss) before extraordinary item .................. $ 0.18 $ (0.03) $ 0.71 $ 0.41
Extraordinary loss on early extinguishment of debt,
net of income taxes .................................. -- -- (0.08) --
-------- --------- -------- --------
Net income (loss) ........................................ $ 0.18 $ (0.03) $ 0.63 $ 0.41
======== ========= ======== ========
Diluted earnings (loss) per common share:
Income (loss) before extraordinary item .................. $ 0.16 $ (0.03) $ 0.59 $ 0.37
Extraordinary loss on early extinguishment of debt,
net of income taxes .................................. -- -- (0.06) --
-------- --------- -------- --------
Net income (loss) ........................................ $ 0.16 $ (0.03) $ 0.53 $ 0.37
======== ========= ======== ========
</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 year 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
nine-month periods ended January 2, 2000.
RECLASSIFICATIONS
Certain prior period amounts have been reclassified to conform to the current
period presentation.
2. ACQUISITION
On December 30, 1999, a wholly-owned subsidiary of the Company acquired
substantially all of the assets of Branson That's the Ticket, a ticket reseller
and timeshare marketing company in Branson, Missouri for $1.35 million. The
purchase price consisted of $675,000 in cash and a $675,000, 9% note payable due
December 30, 2000. In connection with the acquisition, the Company recorded
approximately $1.3 million in goodwill, which is included in other assets on the
Company's condensed consolidated balance sheet and is being amortized on a
straight-line basis over an eight-year period.
3. SALE OF NOTES RECEIVABLE
On December 29, 1999, the Company sold approximately $16.7 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 a $693,000 gain
on sale of notes receivable which is included in the condensed consolidated
statement of operations for the three months ended January 2, 2000. On October
1, 1999, the Company sold to BRFC and BRFC sold to the Purchaser approximately
$19.3 million of Receivables pursuant to the Purchase Agreement and recognized
an $884,000 gain on sale of notes receivable. The gain on sale of notes
receivable for the nine months ended January 2, 2000 was approximately $1.6
million.
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
$90.8 million in aggregate principal amount has been sold as of January 2, 2000.
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.
4. 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. The aggregate outstanding principal and interest on the AmClub Notes
and AmClub Loan were allocated to the foreclosed assets based on relative fair
market value. On December 17, 1999, the Company sold the golf course and related
buildings for approximately $1.3 million and recorded a field operating profit
of approximately $510,000. AmClub was owned by the former stockholders of RDI
Group, Inc. ("RDI"), which was acquired by the Company in fiscal 1998.
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<PAGE> 11
5. 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.
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.
6. 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 JANUARY 2, 2000
(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 .............. $ 23,224 $ 11,172 $ 10,064 $ -- $ 44,460
Contracts receivable, net .............. 281 191 8,158 -- 8,630
Intercompany receivable ................ 98,728 -- -- (98,728) --
Notes receivable, net .................. 398 6,809 68,711 -- 75,918
Inventory, net ......................... 20,265 13,759 156,652 -- 190,676
Investments in securities .............. -- 14,592 2,500 -- 17,092
Investments in subsidiaries ............ 7,980 -- -- (7,980) --
Property and equipment, net ............ 8,052 267 24,635 -- 32,954
Other assets ........................... 14,970 8,091 10,549 (3,000) 30,610
--------- --------- --------- --------- ---------
Total assets ........................ $ 173,898 $ 54,881 $ 281,269 $(109,708) $ 400,340
========= ========= ========= ========= =========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Liabilities
Accounts payable, accrued liabilities
and other.......................... $ 9,016 $ 14,543 $ 3,753 $ -- $ 27,312
Intercompany payable ................... -- 17,066 81,662 (98,728) --
Deferred income taxes .................. 1,416 2,583 15,387 -- 19,386
Lines-of-credit and notes payable ...... 111,288 13,724 68,266 (3,000) 190,278
8.00% convertible subordinated notes
payable to related parties ......... 6,000 -- -- -- 6,000
8.25% convertible subordinated
debentures.......................... 34,371 -- -- -- 34,371
--------- --------- --------- --------- ---------
Total liabilities ................... 162,091 47,916 169,068 (101,728) 277,347
Minority interest ...................... -- -- -- 648 648
Shareholders' Equity
Common stock ........................... 251 7 2 (9) 251
Additional paid-in capital ............. 107,395 494 8,002 (8,496) 107,395
Treasury stock ......................... (11,518) -- -- -- (11,518)
Net unrealized gains ................... -- 838 -- -- 838
Retained earnings (accumulated deficit) (84,321) 5,626 104,197 (123) 25,379
--------- --------- --------- --------- ---------
Total shareholders' equity .......... 11,807 6,965 112,201 (8,628) 122,345
--------- --------- --------- --------- ---------
Total liabilities and shareholders'
equity ............................. $ 173,898 $ 54,881 $ 281,269 $(109,708) $ 400,340
========= ========= ========= ========= =========
</TABLE>
12
<PAGE> 13
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 27, 1998
-----------------------------------------------------------------------------
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR SUBSIDIARY
CORPORATION SUBSIDIARIES GUARANTORS ELIMINATIONS CONSOLIDATED
----------- ------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES
Sales .................................. $ 8,589 $ 3,745 $ 43,335 $ -- $ 55,669
Management fee revenue ................. 5,375 -- -- (5,375) --
Other resort and golf operations revenue -- 271 2,675 -- 2,946
Interest income ........................ 394 759 2,959 -- 4,112
Other income (expense) ................. 8 1,068 (23) -- 1,053
-------- -------- -------- -------- --------
14,366 5,843 48,946 (5,375) 63,780
COST AND EXPENSES
Cost of sales .......................... 2,870 1,138 16,771 -- 20,779
Cost of other resort and golf operations -- 252 3,079 -- 3,331
Management fees ........................ -- 478 4,897 (5,375) --
Selling, general and administrative
expenses............................... 8,488 1,926 18,465 -- 28,879
Interest expense ....................... 2,451 469 -- -- 2,920
Provision for loan losses .............. -- 75 548 -- 623
-------- -------- -------- -------- --------
13,809 4,338 43,760 (5,375) 56,532
-------- -------- -------- -------- --------
Income before income taxes ............. 557 1,505 5,186 -- 7,248
Provision for income taxes ............. 223 602 2,074 -- 2,899
Minority interest in income of
consolidated subsidiary................ -- -- -- 76 76
-------- -------- -------- -------- --------
Net income ............................. $ 334 $ 903 $ 3,112 $ (76) $ 4,273
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED JANUARY 2, 2000
-----------------------------------------------------------------------------
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR SUBSIDIARY
CORPORATION SUBSIDIARIES GUARANTORS ELIMINATIONS CONSOLIDATED
----------- ------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES
Sales ................................... $ 6,747 $ 1,692 $ 36,807 $ -- $ 45,246
Management fee revenue .................. 4,630 -- -- (4,630) --
Other resort and golf operations revenue -- 697 3,467 -- 4,164
Interest income ......................... 264 817 2,822 -- 3,903
Other income (expense) .................. 186 733 (27) -- 892
-------- -------- -------- -------- --------
11,827 3,939 43,069 (4,630) 54,205
COST AND EXPENSES
Cost of sales ........................... 1,694 424 15,180 -- 17,298
Cost of other resort and golf operations -- 338 3,502 -- 3,840
Management fees ......................... -- 321 4,309 (4,630) --
Selling, general and administrative
expenses................................ 10,277 1,815 18,122 -- 30,214
Interest expense ........................ 1,826 454 1,251 -- 3,531
Provision for loan losses ............... -- 180 875 -- 1,055
-------- -------- -------- -------- --------
13,797 3,532 43,239 (4,630) 55,938
-------- -------- -------- -------- --------
(Loss) income before income taxes ....... (1,970) 407 (170) -- (1,733)
(Benefit) provision for income taxes .... (768) 158 (66) -- (676)
Minority interest in loss of consolidated
subsidiary .......................... -- -- -- (272) (272)
-------- -------- -------- -------- --------
Net (loss) income ....................... $ (1,202) $ 249 $ (104) $ 272 $ (785)
======== ======== ======== ======== ========
</TABLE>
13
<PAGE> 14
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED DECEMBER 27, 1998
--------------------------------------------------------------------------
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR SUBSIDIARY
CORPORATION SUBSIDIARIES GUARANTORS ELIMINATIONS CONSOLIDATED
----------- -------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES
Sales .................................. $ 26,721 $ 9,612 $ 136,397 $ -- $ 172,730
Management fee revenue ................. 16,460 -- -- (16,460) --
Other resort and golf operations revenue -- 778 8,113 -- 8,891
Interest income ........................ 1,661 2,069 7,631 -- 11,361
Other income ........................... 296 3,121 68 -- 3,485
--------- --------- --------- --------- ---------
45,138 15,580 152,209 (16,460) 196,467
COST AND EXPENSES
Cost of sales .......................... 8,448 2,696 52,043 -- 63,187
Cost of other resort and golf operations -- 771 7,835 -- 8,606
Management fees ........................ -- 1,246 15,214 (16,460) --
Selling, general and administrative
expenses ............................. 25,895 5,655 55,881 -- 87,431
Interest expense ....................... 8,253 1,470 305 -- 10,028
Provision for loan losses .............. -- 227 1,288 -- 1,515
--------- --------- --------- --------- ---------
42,596 12,065 132,566 (16,460) 170,767
--------- --------- --------- --------- ---------
Income before income taxes ............. 2,542 3,515 19,643 -- 25,700
Provision for income taxes ............. 1,017 1,406 7,857 -- 10,280
Minority interest in loss of
consolidated subsidiary............... -- -- -- (53) (53)
--------- --------- --------- --------- ---------
Income before extraordinary item......... 1,525 2,109 11,786 53 15,473
Extraordinary loss on early
extinguishment of debt, net ......... -- -- (1,682) -- (1,682)
--------- --------- --------- --------- ---------
Net income ............................ $ 1,525 $ 2,109 $ 10,104 $ 53 $ 13,791
========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED JANUARY 2, 2000
--------------------------------------------------------------------------
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR SUBSIDIARY
CORPORATION SUBSIDIARIES GUARANTORS ELIMINATIONS CONSOLIDATED
----------- -------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES
Sales ................................... $ 22,391 $ 7,217 $ 144,004 $ -- $ 173,612
Management fee revenue .................. 17,520 -- -- (17,520) --
Other resort and golf operations revenue -- 1,928 11,023 -- 12,951
Interest income ......................... 767 2,602 8,425 -- 11,794
Other income ............................ 339 1,655 69 -- 2,063
--------- --------- --------- --------- ---------
41,017 13,402 163,521 (17,520) 200,420
COST AND EXPENSES
Cost of sales ........................... 6,565 1,890 51,668 -- 60,123
Cost of other resort and golf operations -- 937 10,619 -- 11,556
Management fees ......................... -- 1,175 16,345 (17,520) --
Selling, general and administrative
expenses.............................. 32,428 5,516 62,315 -- 100,259
Interest expense ........................ 7,050 1,573 1,537 -- 10,160
Provision for loan losses ............... -- 270 3,110 -- 3,380
--------- --------- --------- --------- ---------
46,043 11,361 145,594 (17,520) 185,478
--------- --------- --------- --------- ---------
Income (loss) before income taxes ....... (5,026) 2,041 17,927 -- 14,942
Provision (benefit) for income taxes .... (1,960) 796 6,991 -- 5,827
Minority interest in loss of consolidated
subsidiary ........................... -- -- -- (387) (387)
--------- --------- --------- --------- ---------
Net income (loss) ....................... $ (3,066) $ 1,245 $ 10,936 $ 387 $ 9,502
========= ========= ========= ========= =========
</TABLE>
14
<PAGE> 15
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED DECEMBER 27, 1998
----------------------------------------------------------
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR SUBSIDIARY
CORPORATION SUBSIDIARIES GUARANTORS CONSOLIDATED
----------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
NET CASH (USED) PROVIDED BY OPERATING ACTIVITIES .... $ (81,110) $ 7,496 $ 70,901 $ (2,713)
--------- --------- --------- ---------
INVESTING ACTIVITIES:
Purchases of property and equipment ............. (3,878) (54) (5,453) (9,385)
Sales of property and equipment ................. 923 -- 31 954
Cash received from investments in securities .... -- 1,063 -- 1,063
--------- --------- --------- ---------
NET CASH (USED) PROVIDED BY INVESTING ACTIVITIES .... (2,955) 1,009 (5,422) (7,368)
--------- --------- --------- ---------
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 ........................ (29,087) (4,639) (61,992) (95,718)
Payment of debt issuance costs ................... (4,679) (835) (60) (5,574)
Proceeds from issuance of Common Stock ........... 24,298 -- -- 24,298
Proceeds from exercise of employee and
director stock options ......................... 374 -- -- 374
Payments for treasury stock ...................... (1,402) -- -- (1,402)
--------- --------- --------- ---------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES .... 99,504 (5,474) (62,052) 31,978
--------- --------- --------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS ........... 15,439 3,031 3,427 21,897
Cash and cash equivalents at beginning of period .... 16,100 5,186 9,779 31,065
--------- --------- --------- ---------
Cash and cash equivalents at end of period .......... 31,539 8,217 13,206 52,962
Restricted cash and cash equivalents at end of period (2,899) (7,994) (7,107) (18,000)
--------- --------- --------- ---------
Unrestricted cash and cash equivalents at
end of period .................................... $ 28,640 $ 223 $ 6,099 $ 34,962
========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED JANUARY 2, 2000
---------------------------------------------------------
COMBINED COMBINED
BLUEGREEN NON-GUARANTOR SUBSIDIARY
CORPORATION SUBSIDIARIES GUARANTORS CONSOLIDATED
----------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
NET CASH (USED) PROVIDED BY OPERATING ACTIVITIES ........... $ (3,551) $ 1,677 $(18,078) $(19,952)
-------- -------- -------- --------
INVESTING ACTIVITIES:
Acquisition ............................................. -- -- (677) (677)
Purchases of property and equipment ..................... (1,992) (114) (7,605) (9,711)
Sales of property and equipment ......................... -- -- 1,433 1,433
Cash received from investments in securities ............ -- 2,993 -- 2,993
Loan to related party ................................... -- -- (256) (256)
Principal payments received on loans to related party ... -- -- 459 459
-------- -------- -------- --------
NET CASH (USED) PROVIDED BY INVESTING ACTIVITIES ........... (1,992) 2,879 (6,646) (5,759)
-------- -------- -------- --------
FINANCING ACTIVITIES:
Proceeds from borrowings under line-of-credit facilities
and notes payable ..................................... -- -- 27,885 27,885
Payments under line-of-credit facilities
and other notes payable ............................... (104) (1,947) (2,535) (4,586)
Payment of debt issuance costs .......................... (959) (129) (718) (1,806)
Payments for treasury stock ............................. (6,973) -- -- (6,973)
Proceeds from the exercise of employee
and director stock options ............................ 94 -- -- 94
-------- -------- -------- --------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES ........... (7,942) (2,076) 24,632 14,614
-------- -------- -------- --------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ....... (13,485) 2,480 (92) (11,097)
Cash and cash equivalents at beginning of period ........... 36,710 8,690 10,157 55,557
-------- -------- -------- --------
Cash and cash equivalents at end of period ................. 23,225 11,170 10,065 44,460
Restricted cash and cash equivalents at end of period ...... (1,700) (11,170) (5,946) (18,816)
-------- -------- -------- --------
Unrestricted cash and cash equivalents at
end of period ........................................... $ 21,525 $ -- $ 4,119 $ 25,644
======== ======== ======== ========
</TABLE>
15
<PAGE> 16
7. 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.
In September 14, 1999, the Company borrowed approximately $14 million under its
$25 million timeshare acquisition and development facility (the "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. As of
January 2, 2000, the outstanding balance on this loan was $13.1 million. On
December 20, 1999, the Company borrowed approximately $13.9 million under the
Facility (the borrowing capacity of which was increased to $28.0 million to
provide for this loan). 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 Shore Crest II resort are sold,
subject to minimum amortization. The principal must be repaid by January 1,
2006. The loan is secured by the Company's Timeshare Interest inventory at the
Shore Crest II resort in Myrtle Beach, 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 (the "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. As of January 2, 2000, the
outstanding balance on this loan was $12 million.
On October 6, 1999, in connection with the acquisition of 6,996 acres for a new
residential land project in Canyon Lake, Texas, the Company borrowed $11.9
million under the Revolving Credit Facility. 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 the new project are sold. The
principal must be repaid by October 6, 2004. As of January 2, 2000, the
outstanding balance on this loan was $11.9 million.
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. As of January 2, 2000,
the outstanding balance on this loan was $2.0 million.
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 January 2, 2000, no amounts were
outstanding under the Golf Course Loan.
In connection with the sales of Receivables discussed in Note 3, above, the
Company used a portion of the sale proceeds to repay $5.7 million of the
outstanding balance on its timeshare receivables warehouse loan facility. As of
January 2, 2000, the outstanding balance on the warehouse facility was $2.0
million.
8. 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
16
<PAGE> 17
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 DECEMBER 27, 1998
Sales $ 25,024 $30,645 $ 55,669
Other resort and golf operations revenue 2,757 189 2,946
Depreciation expense 170 136 306
Field operating profit 1,272 7,529 8,801
Inventory, net 82,608 54,974 137,582
AS OF AND FOR THE THREE MONTHS ENDED JANUARY 2, 2000
Sales $ 24,043 $21,203 $ 45,246
Other resort and golf operations revenue 3,633 531 4,164
Depreciation expense 339 224 563
Field operating (loss) profit (585) 3,432 2,847
Inventory, net 107,931 82,745 190,676
FOR THE NINE MONTHS ENDED DECEMBER 27, 1998
Sales $ 74,885 $97,845 $172,730
Other resort and golf operations revenue 8,211 680 8,891
Depreciation expense 496 355 851
Field operating profit 7,029 26,191 33,220
FOR THE NINE MONTHS ENDED JANUARY 2, 2000
Sales $ 92,237 $81,375 $173,612
Other resort and golf operations revenue 10,891 2,060 12,951
Depreciation expense 926 642 1,568
Field operating profit 6,973 21,583 28,556
</TABLE>
Field operating profit for reportable segments reconciled to consolidated income
(loss) before income taxes (in thousands) is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------ --------------- ----------------------------
DECEMBER 27, JANUARY 2, DECEMBER 27, JANUARY 2,
1998 2000 1998 2000
------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
Field operating profit for reportable segments $ 8,801 $ 2,847 $33,220 $28,556
Interest income 4,112 3,903 11,361 11,794
Gain on sale of notes receivable 1,092 693 3,145 1,577
Other (expense) income (39) 199 340 486
Corporate general and administrative expenses (3,175) (4,789) (10,823) (13,931)
Interest expense (2,920) (3,531) (10,028) (10,160)
Provision for loan losses (623) (1,055) (1,515) (3,380)
--------- --------- --------- ---------
Consolidated income (loss) before income taxes $ 7,248 $(1,733) $25,700 $14,942
======= ======== ======= =======
</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
17
<PAGE> 18
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.
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.
o) Risks associated with selling Timeshare Interests in foreign countries
including, but not limited to, compliance with legal regulations, labor
relations and vendor relationships.
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<PAGE> 19
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.
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 inventory 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 part. 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 nine months ended
December 27, 1998 or January 2, 2000. 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
19
<PAGE> 20
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 investments 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 DECEMBER 27, 1998
Sales ................................... $ 25,024 100.0 % $ 30,645 100.0 % $ 55,669 100.0 %
Cost of sales (1) ....................... (6,243) (24.9)% (14,536) (47.4)% (20,779) (37.3)%
--------- ----- --------- ----- --------- -----
Gross profit ............................ 18,781 75.1 % 16,109 52.6 % 34,890 62.7 %
Other resort and golf operations revenue 2,757 11.0 % 189 0.4 % 2,946 5.3 %
Cost of other resort and golf operations (2,757) (11.0)% (574) (1.8)% (3,331) (6.0)%
Field selling, general and administrative
expenses(2) ........................... (17,509) (70.0)% (8,195) (26.6)% (25,704) (46.2)%
--------- ----- --------- ----- --------- -----
Field operating profit .................. $ 1,272 5.1 % $ 7,529 24.6 % $ 8,801 15.8 %
========= ===== ========= ===== ========= =====
THREE MONTHS ENDED JANUARY 2, 2000
Sales ................................... $ 24,043 100.0 % $ 21,203 100.0 % $ 45,246 100.0 %
Cost of sales (1) ....................... (5,723) (23.8)% (11,575) (54.6)% (17,298) (38.2)%
--------- ----- --------- ----- --------- -----
Gross profit ............................ 18,320 76.2 % 9,628 45.4 % 27,948 61.8 %
Other resort and golf operations revenue 3,633 15.1 % 531 2.5 % 4,164 9.2 %
Cost of resort and golf operations ...... (2,894) (12.0)% (946) (4.5)% (3,840) (8.5)%
Field selling, general and administrative
expenses(2) ........................... (19,644) (81.7)% (5,781) (27.2)% (25,425) (56.2)%
--------- ----- --------- ----- --------- -----
Field operating (loss) profit ........... $ (585) (2.4)% $ 3,432 16.2 % $ 2,847 6.3 %
========= ===== ========= ===== ========= =====
NINE MONTHS ENDED DECEMBER 27, 1998
Sales ................................... $ 74,885 100.0 % $ 97,845 100.0 % $ 172,730 100.0 %
Cost of sales (1) ....................... (18,433) (24.6)% (44,754) (45.7)% (63,187) (36.6)%
--------- ----- --------- ----- --------- -----
Gross profit ............................ 56,452 75.4 % 53,091 54.3 % 109,543 63.4 %
Other resort and golf operations revenue 8,211 11.0 % 680 0.7 % 8,891 5.1 %
Cost of other resort and golf operations (7,422) (9.9)% (1,184) (1.2)% (8,606) (5.0)%
Field selling, general and administrative
expenses(2) ........................... (50,212) (67.1)% (26,396) (27.0)% (76,608) (44.3)%
--------- ----- --------- ----- --------- -----
Field operating profit .................. $ 7,029 9.4 % $ 26,191 26.8 % $ 33,220 19.2 %
========= ===== ========= ===== ========= =====
NINE MONTHS ENDED JANUARY 2, 2000
Sales ................................... $ 92,237 100.0 % $ 81,375 100.0 % $ 173,612 100.0 %
Cost of sales (1) ....................... (21,638) (23.5)% (38,485) (47.3)% (60,123) (34.6)%
--------- ----- --------- ----- --------- -----
Gross profit ............................ 70,599 76.5 % 42,890 52.7 % 113,489 65.4 %
Other resort and golf operations revenue 10,891 11.8 % 2,060 2.5 % 12,951 7.5 %
Cost of resort and golf operations ...... (8,659) (9.4)% (2,897) (3.6)% (11,556) (6.7)%
Field selling, general and administrative
expenses(2) ........................... (65,858) (71.3)% (20,470) (25.1)% (86,328) (49.8)%
--------- ----- --------- ----- --------- -----
Field operating profit .................. $ 6,973 7.6 % $ 21,583 26.5 % $ 28,556 16.4 %
========= ===== ========= ===== ========= =====
</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 $3.2 MILLION AND $4.8 MILLION FOR THE THREE MONTHS ENDED
DECEMBER 27, 1998 AND JANUARY 2, 2000, RESPECTIVELY, AND $10.8 MILLION AND
$13.9 MILLION FOR THE NINE MONTHS ENDED DECEMBER 27, 1998 AND JANUARY 2,
2000, RESPECTIVELY.
SALES
Consolidated sales decreased 18.7% from $55.7 million for the three-month period
ended December 27, 1998 (the "1999 Quarter") to $45.2 million for the
three-month period ended January 2, 2000 (the "2000 Quarter"). Consolidated
sales increased 0.5% from $172.7 million for the nine-month period ended
December 27, 1998 (the "1999 Period") to $173.6 million for the nine-month
period ended January 2, 2000 (the "2000 Period"). Increases in Resorts Division
sales during the 2000 Period were partially offset by lower Residential Land and
Golf Division sales.
As of January 2, 2000, approximately $2.2 million in estimated income on sales
of $4.7 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.
20
<PAGE> 21
RESORTS DIVISION. During the 1999 Quarter and the 2000 Quarter, sales of
Timeshare Interests contributed $25.0 million or 45.0% and $24.0 million or
53.1%, respectively, of the Company's total consolidated sales. During the 1999
Period and the 2000 Period, sales of Timeshare Interests contributed $74.9
million or 43.4% and $92.2 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 NINE MONTHS ENDED
----------------------------- -----------------------------
DECEMBER 27, JANUARY 2, DECEMBER 27, JANUARY 2,
1998 2000 1998 2000
------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
Timeshare Interests sold 2,969 2,441 9,074 9,864
Average sales price per Timeshare Interest $8,619 $9,086 $8,675 $9,054
Gross margin 75.1% 76.2% 75.4% 76.5%
</TABLE>
The increase in the number of Timeshare Interests sold during 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 2,164 and 683 Timeshare Interests during the 2000 Period and
2000 Quarter, respectively, with no corresponding sales during the 1999 Period.
Construction on OSR II was completed in the 2000 Period. This 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 during the
first quarter of fiscal 2001, and is expected to generate an additional $22.0
million in sales after the 2000 Quarter. There can be no assurances that such
sell-out of OSR II will occur when expected.
In addition, the Company reported sales of 1,158 and 262 Timeshare Interests at
Phase II of the Company's Shore Crest resort in Myrtle Beach, South Carolina
("Shore Crest II") during the 2000 Period and 2000 Quarter, respectively, with
no corresponding sales during the 1999 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 January 2, 2000, 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 $65.2
million. Sales at Phase I of Shore Crest decreased from 1,307 to 689 Timeshare
Interests sold from the 1999 Period to the 2000 Period, respectively, and for
358 to 103 Timeshare Interests sold during the 1999 Quarter and 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 269 and 107 Timeshare
Interests sold during the 2000 Period and 2000 Quarter, respectively, with no
sales during the 1999 Period and 1999 Quarter. 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 1,569 to 356 Timeshare Interests sold
in the 1999 Period and the 2000 Period, respectively, and from 644 to 56
Timeshare Interests sold during the 1999 Quarter and 2000 Quarter, respectively.
The decrease was due primarily to the resort's focus on selling the OSR II
Timeshare Interest inventory (see discussion above).
Sales at the Company's 50%-owned joint venture at the La Cabana Beach and
Racquet Club, located in Aruba, decreased from 527 Timeshare Interests to 181
Timeshare Interests from the 1999 Quarter to the 2000 Quarter, respectively, and
from 1,354 to 881 Timeshare Interests sold during the 1999 Period and 2000
Period, respectively. The resort is experiencing a slowdown in operations during
the 2000 Period and during the fiscal 2000 fourth quarter to date, as a result
of transitioning its sales staff from an employee leasing arrangement to
permanent employee status, which resulted in some attrition among the sales
force.
The Company believes that the remaining decrease during the 2000 Quarter and
partially offsetting decrease during the 2000 Period were primarily due to the
adverse impact of Hurricanes Dennis and Floyd on vacation traffic and therefore
sales tour flow at the Company's resorts in the South Carolina area during the
Company's second and third fiscal quarters, as well as the impact on sales
during a transition period in the 2000 Quarter during which the
21
<PAGE> 22
Company's Resorts Division regional management structure was reorganized to
better position the Company for future growth.
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 La Cabana resort and the commencement of sales at the Lodge Alley Inn
resort. The average sales price at La Cabana increased from $7,107 to $8,398
from the 1999 Quarter to the 2000 Quarter, respectively, and from $7,099 to
$7,596 from the 1999 Period to the 2000 Period, respectively. Sales at the Lodge
Alley Inn resort commenced in the fourth quarter of Fiscal 1999. The average
sales price at Lodge Alley Inn for the 2000 Period was $12,755, representing the
highest average price of all existing resorts.
The Resorts Division's gross margin increased from 75.4% during the 1999 Period
to 76.5% during the 2000 Period primarily due to the increased average sales
prices discussed above and the approximately 80% gross margin generated by sales
of the Company's OSR II inventory. In addition, during the 2000 Period the
Company recognized approximately $655,000 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 $525,000 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 31.8% and 5.0%, respectively,
during the 2000 Quarter, and 32.6% and 16.7%, respectively, during the 2000
Period, as compared to the comparable prior year periods, due to the results of
the hotel operations at the Company's Lodge Alley Inn resort. Lodge Alley hotel
revenues were $855,000 and $1.1 million for the 2000 Quarter and the 2000
Period, respectively. Related costs were $621,000 and $761,000 for the 2000
Quarter and the 2000 Period, respectively. In addition, revenues generated by
Resort Title Agency, Inc. ("Title"), the Company's wholly-owned title company,
increased approximately $1.1 million during the 2000 Period due to the fact that
all of the Company's vacation club sales are now processed through Title (last
year not all sales were vacation club sales). Also, the Company generated
approximately $1.6 million and $500,000 during the 2000 Period and 2000 Quarter,
respectively, of management and reservation fee income earned for services
provided to Vacation Club members. Finally, the Company recognized an additional
$300,000 of commissions during the 2000 Period as compared to the 1999 Period
which were earned by renting Timeshare Interests on behalf of owners.
Field selling, general and administrative ("SG&A") expenses increased as a
percentage of sales for the Resorts Division during the 2000 Quarter and 2000
Period, from the 1999 Quarter and Period, respectively. The increases are due in
part to decreased sales and increased employee costs as a result of the
transition of the sales staff at the La Cabana resort previously discussed. The
La Cabana sales office generated SG&A of $1.9 million and $5.5 million on sales
of $1.7 million and $7.2 million during the 2000 Quarter and 2000 Period,
respectively.
In addition, the Company opened its fourth off-site sales office in Novi,
Michigan (serving the Detroit market) in November 1999. As this new sales site
was still in the start-up phase during the 2000 Quarter, it generated SG&A
expenses totaling $638,000 on sales of $543,000. The Company's more mature
off-site sales offices generated an aggregate field operating profit of $325,000
on sales of $4.2 million during the 2000 Quarter.
The remaining increase in SG&A expenses as a percentage of sales relates to a
decrease in the percentage of marketing tours converted into sales from
approximately 10.6% to 8.3% during the 1999 Period and 2000 Period,
respectively. The Company is refocusing the efforts of its sales force to better
present the Bluegreen Vacation Club program to its marketing tours and, as
previously mentioned, the Company has also restructured its regional and sales
management to better position the Company to sell its points-based vacation club
product and enhance the Company's ability to grow in the future. There can be no
assurances that the Company's efforts in these areas will have a positive impact
on the performance of the Resorts Division in the fourth quarter of fiscal 2000.
RESIDENTIAL LAND AND GOLF DIVISION. During the 1999 Quarter and the 2000
Quarter, residential land and golf sales contributed $30.6 million or 55.0% and
$21.2 million or 46.9%, respectively, of the Company's total consolidated sales.
During the 1999 Period and the 2000 Period, residential land and golf sales
contributed $97.8 million or 56.6% and $81.4 million or 46.9%, respectively, to
the Company's total consolidated sales.
22
<PAGE> 23
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 bulk sales.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------------- ------------------------------
DECEMBER 27, JANUARY 2, DECEMBER 27, JANUARY 2,
1998 2000 1998 2000
------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
Number of parcels sold 588 344 1,799 1,348
Average sales price per parcel $42,859 $50,375 $46,664 $50,441
Gross margin 52.6% 45.4% 54.3% 52.7%
</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 several of
the Company's projects achieving or approaching sell-out with no properties
being made available to replace Residential Land & Golf Division sales in
certain markets. Specifically:
o The Company's Ranches of Sonterra property in Ruidoso, New Mexico,
generated sales of 38 parcels and 78 parcels during the 1999 Quarter and
1999 Period, respectively. No sales were reported in the 2000 Quarter or
2000 Period, as the remaining inventory was sold out over the second half
of Fiscal 1999. The Company has no plans to re-enter the New Mexico market
in the near future.
o Three of the Company's North Carolina properties, Hickory Bluffs, Bay
Harbour and Seaside at Winding River, generated 50 aggregate lot sales
during the 1999 Period. No sales were reported in the 2000 Period, as all
of these properties sold out over the second half of Fiscal 1999. In
addition, lot sales at the Landing at Southport decreased from 25 sales to
2 sales in the 1999 Quarter and the 2000 Quarter, respectively, and from 86
sales to 39 sales in the 1999 Period and the 2000 Period, respectively.
Inventory available for sale decreased as this property approached sell-out
in early Fiscal 2000. While the Company is actively seeking additional
projects in the North Carolina area, management does not expect any such
properties to be acquired until Fiscal 2001. There can be no assurances
that such properties will be acquired.
o Combined sales at the Company's two Tennessee land properties, Crystal Cove
and Woodlake, decreased from 52 parcels sold in the 1999 Quarter to 19
parcels sold in the 2000 Quarter, and from 146 parcels sold in the 1999
Period to 77 parcels sold in the 2000 Period. Sales at these projects
decreased as the properties are approaching the sell-out phase and less
inventory is available. Once these projects are sold out, the Company has
no plans to acquire replacement property in Tennessee in the foreseeable
future.
o The Company's Dean's Reserve property, located in Orlando, Florida,
generated sales of 28 parcels and 37 parcels during the 1999 Quarter and
1999 Period, respectively. No sales were reported in the 2000 Quarter or
2000 Period, as the remaining inventory was sold out in the third quarter
of Fiscal 1999. The Company has no plans to re-enter the Florida market in
the near future.
o Lot sales at the Company's Ranch at Lake Ray Roberts property located in
Mountain Spring, Texas (near Dallas), decreased by 21 parcels from the 1999
Quarter to the 2000 Quarter, and by 57 parcels from the 1999 Period to the
2000 Period, as the property sold out in the first half of Fiscal 2000. The
Company has already acquired additional projects in the vicinity of Dallas,
Texas, with estimated life-of-project sales of $116.2 million, based on
current pricing. These new projects are expected to commence sales in
Fiscal 2001, although there can be no assurances.
o In the 1999 Quarter, 43 parcels were sold at the Lookout at Brushy Creek,
compared to 17 parcels sold in the 2000 Quarter. The property, located
outside of Austin, Texas, held its grand opening in the 1999 Quarter and
generated greater than average sales volume for that quarter.
o 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 70
sales to 22 sales in the 1999 Quarter and 2000 Quarter, respectively, and
from 194 sales to 72 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.
23
<PAGE> 24
The average sales price per parcel increased in both the 2000 Quarter and the
2000 Period as compared to the 1999 Quarter and 1999 Period. Average sales price
per parcel at The Landing at Southport property in North Carolina increased from
$52,706 to $84,327 in the 1999 Quarter and the 2000 Quarter, respectively, and
from $51,499 to $88,308 in the 1999 Period and 2000 Period, respectively. The
2000 Quarter and 2000 Period included sales of larger acreage, waterfront
parcels, compared to lower-priced interior lot sales in the 1999 Quarter and
1999 Period.
The average sales price at Mogollon Ranch, located in Arizona, increased from
$74,021 to $114,988 in the 1999 Quarter and the 2000 Quarter, respectively, and
from $74,021 to $103,199 in the 1999 Period and the 2000 Period, respectively.
The increase in the 2000 Quarter and the 2000 Period reflects a sales price
increase, which coincided with the opening of Phase 2 of the property.
Average sales prices at the Company's Winding River Plantation project in North
Carolina increased from $61,734 to $86,193 per parcel during the 1999 Quarter
and 2000 Quarter, respectively, and from $59,020 to $80,179 per parcel during
the 1999 Period and 2000 Period, respectively. Average sales price per parcel at
the Lake Ridge property in Texas increased from $80,078 to $107,868 in the 1999
Quarter and the 2000 Quarter, respectively, and from $77,456 to $94,327 in the
1999 Period and the 2000 Period, respectively. The increase in average sales 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.
The average gross margin decreased from the 1999 Quarter to the 2000 Quarter and
from the 1999 Period to the 2000 Period primarily due to higher-than-projected
road costs associated with the Crystal Cove property, located in Tennessee. In
addition, certain sections of the Company's Lake Ridge property were impacted by
temporary restrictions on land clearing methods which resulted in significantly
higher costs. Gross margins were also affected in the 2000 Quarter by the
write-off of costs incurred on potential acquisitions located in Colorado and
Arizona, on which the Company has cancelled negotiations.
Included in the 2000 Period is a bulk sale of land and mineral rights 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 $4.1 million and $3.9 million for the 1999 Quarter and 2000
Quarter, respectively, and was $11.4 million and $11.8 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
decrease in interest income during the 2000 Quarter was primarily due to a
decrease in the average cash and cash equivalent balance during the 2000
Quarter, as compared to the 1999 Quarter. The increase in interest during the
2000 Period was primarily due to an increase in the average cash and cash
equivalent balance during the 2000 Period as compared to the 1999 Period.
GAIN ON SALE OF NOTES RECEIVABLE
During the 1999 Quarter and 2000 Quarter, the Company recognized a $1.1 million
and $693,000 gain on sale of notes receivable, respectively, under a timeshare
receivables purchase facility more fully described under "Liquidity and Capital
Resources - Credit Facilities for Timeshare Receivables and Inventories". The
gain on sale of notes receivable was $3.1 million and $1.6 million during the
1999 Period and 2000 Period, respectively.
The gain on sale of notes receivable decreased during the 2000 Quarter and 2000
Period due to an increase in the weighted average term treasury rate during the
2000 Quarter and 2000 Period as compared to the 1999 Quarter and 1999 Period,
respectively. The financial institution to which the Company sells its notes
receivable earns a return on the notes receivable purchased based on the
weighted average term treasury rate plus 1.4%, with remaining interest earned on
the notes being paid to the Company after all servicing, custodial and similar
fees and expenses have been paid and a cash reserve fund account has been
funded. The increase in the rate of return to the financial institution resulted
in a relatively lower residual interest to the Company in the remaining cash
flows from the portfolio sold, and thus a lower gain on sale.
24
<PAGE> 25
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 $28.9 million and $30.2 million for the 1999
Quarter and 2000 Quarter, respectively. S, G & A totaled $87.4 million and
$100.3 million for the 1999 Period and 2000 Period, respectively. As a
percentage of total revenues, S, G & A Expenses were 45.3% and 55.7% for the
1999 Quarter and 2000 Quarter, respectively, and were 44.5% and 50.0% 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. See also discussions of increases in
S, G & A expenses for the Company's Resorts Division, above.
INTEREST EXPENSE
Interest expense totaled $2.9 million and $3.5 million for the 1999 Quarter and
2000 Quarter, respectively, and $10.0 million and $10.2 million for the 1999
Period and 2000 Period, respectively. The 20.9% increase in interest expense for
the 2000 Quarter was primarily due to interest incurred on approximately $28.0
million of acquisition and development borrowings incurred at the end of the
second quarter of fiscal 2000.
PROVISION FOR LOAN LOSSES
The Company recorded a provision for loan losses totaling $623,000 and $1.1
million during the 1999 Quarter and 2000 Quarter, respectively, and $1.5 million
and $3.4 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 an increased
amount of 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 January 2,
2000 was (amounts in thousands):
<TABLE>
<CAPTION>
RESIDENTIAL
LAND AND
RESORTS 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%
====== ======= ====== =======
JANUARY 2, 2000
Notes receivable $65,232 $12,417 $1,169 $78,818
Less: allowance for loan losses (2,441) (459) -- (2,900)
------- -------- ------ -------
Notes receivable, net $62,791 $11,958 $1,169 $75,918
======= ======= ====== =======
Allowance as a % of gross notes receivable 3.7% 3.7% --% 3.7%
======= ======= ====== =======
</TABLE>
The allowance for loan losses as a percentage of the gross notes receivable
balance increased at January 2, 2000, 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 Period 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.
25
<PAGE> 26
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 6 of Notes to Condensed Consolidated Financial
Statements, contained elsewhere herein.
SUMMARY
Based on the factors discussed above, the Company's net income decreased from
$4.3 million to a net loss of $785,000 in the 1999 Quarter and 2000 Quarter,
respectively, and from $13.8 million to $9.5 million in the 1999 Period and 2000
Period, respectively.
CHANGES IN FINANCIAL CONDITION
Consolidated assets of the Company increased $51.2 million from March 28, 1999
to January 2, 2000. This increase is primarily due to a net $48.0 million
increase in inventory, primarily due to the acquisition of additional properties
with purchase prices totaling $36.7 million, and $62.9 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. The Company also acquired a
6,966 acre tract of land for Mystic Shores, a new residential land project in
Canyon Lake, Texas, for approximately $14.9 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 4 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.
Consolidated liabilities increased $48.6 million from March 28, 1999 to January
2, 2000. The increase is primarily due to an aggregate $52.8 million in
borrowings for the acquisition and development of its resort, residential land
and golf projects. This increase was partially offset by $4.6 million of
payments on line-of-credit facilities and other notes payable.
Total shareholders' equity increased $3.0 million during the 2000 Period,
primarily due to net income of $9.5 million and $191,000 of proceeds and related
income tax benefits from the exercise of stock options. These increases were
partially offset by the Company's repurchase of $7.0 million of Common Stock
(1.4 million shares) to be held in treasury. The Company's book value per common
share increased from $4.76 to $4.87 at March 28, 1999 and January 2, 2000,
respectively. The debt-to-equity ratio increased from 1.49:1 to 1.89:1 at March
28, 1999 and January 2, 2000, respectively, primarily due to the treasury stock
purchases and additional borrowings discussed above.
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
26
<PAGE> 27
will continue to require external sources of liquidity to support its
operations, 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, which expires in June 2000. Through
January 2, 2000, the Company sold approximately $90.8 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 January 2, 2000, the outstanding balance on this
facility was $2.0 million, primarily due to $5.7 million of prepayments during
the 2000 Period 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. On December
20, 1999, the Company borrowed approximately $13.9 million under the acquisition
and development facility (the borrowing capacity under this facility was
increased to $28.0 million in order to permit this loan). The principal must be
repaid by January 1, 2006, through agreed-upon release prices as Timeshare
Interests in the Company's Shore Crest II resort are sold, subject to minimum
required amortization. The outstanding balance under the acquisition and
development facility at January 2, 2000 was $27.0 million.
27
<PAGE> 28
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 January 2, 2000,
the outstanding principal balances under the receivables and development
portions of this facility were approximately $7.5 million and $354,000,
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 $35.0 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 $20.0 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 $12.0 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 January 2, 2000, 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.
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
28
<PAGE> 29
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 January
2, 2000, 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
January 2, 2000 is approximately $218.0 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 (as proposed to be amended or any replacement 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 January 2, 2000, and the credit facilities described above, the
Company has approximately $84.3 million of available credit at its disposal,
subject to customary conditions, compliance with covenants and eligible
collateral. This amount does not include the remaining $9.2 million of unused
capacity under the Purchase Facility or the $15.0 million of gross proceeds
received by the Company upon the sale of the remaining 1.8 million shares of
Common Stock to the Funds on February 9, 2000, under the Stock Agreement. The
Company will be required to renew or replace credit facilities scheduled to
expire in 2000. The Company will, in the future, also 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.
29
<PAGE> 30
IMPACT OF YEAR 2000
STATUS
The Company believes it has resolved the potential impact of the year 2000
("Y2K") issue on its processing of date sensitive information in its information
technology and operation and control systems. The Company, to date, has not
experienced any negative effects due to the Y2K problem, either internally or
with its customers or vendors. If the Company encounters Y2K problems during the
year 2000, and if customers or vendors cannot rectify Y2K issues, the Company
could incur additional costs, which may be substantial, to develop alternative
methods of managing its business and replacing non-compliant equipment, and may
experience delays in obtaining goods or services from and making payment to
vendors, and making sales and/or providing service to customers. The Company has
no contingency plans for critical functions in the event of non-compliance by
its customers and vendors.
COST
The Company utilized both internal and external resources to remediate and test
its systems regarding the Y2K issue. The total cost of the Y2K project was
$484,000 of which $421,000 has been capitalized and $63,000 has been expensed.
The Y2K project was funded through operating cash flows. The portion of the
costs which were capitalized related to the purchase of marketing software and
hardware which would have been replaced for reasons other than the Y2K issue.
All internal payroll costs relating to the assessment, remediation and testing
phases of the Y2K project were expensed as incurred and are excluded from the
above amounts.
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.
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
None.
ITEM 5. OTHER INFORMATION
None.
30
<PAGE> 31
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.103- Amended and Restated Sale and Contribution Agreement dated as of
October 1, 1999 by and among Bluegreen Corporation Receivables
Finance Corporation III and BRFC III Deed Corporation.
10.104- Amended and Restated Asset Purchase Agreement dated as of October
1, 1999 by and among Bluegreen Corporation, Bluegreen Receivables
Finance Corporation III, BRFC III Deed Corporation, Heller
Financial, Inc., Vacation Trust, Inc. and U.S. Bank National
Association, as cash administrator, including Definitions Annex.
10.136- Acquisition and Construction Cost Reimbursement Loan Agreement
dated as of December 1, 1999, by and between Bluegreen Vacations
Unlimited, Inc. and Heller Financial, Inc.
10.137- Letter dated December 1, 1999 amending the Master Bluegreen
Resort Facility, dated as of October 20, 1998, between Bluegreen
Corporation and Heller Financial, Inc.
(b) Reports on Form 8-K
None.
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: February 15, 2000 By: /s/ GEORGE F. DONOVAN
-----------------------------------
George F. Donovan
President and
Chief Executive Officer
Date: February 15, 2000 By: /s/ JOHN F. CHISTE
----------------------------------
John F. Chiste
Senior Vice President,
Treasurer and Chief Financial Officer
(Principal Financial Officer)
Date: February 15, 2000 By: /s/ ANTHONY M. PULEO
----------------------------------
Anthony M. Puleo
Vice President and
Chief Accounting Officer
(Principal Accounting Officer)
31
<PAGE> 1
EXHIBIT 10.103
AMENDED AND RESTATED
SALE AND CONTRIBUTION AGREEMENT
DATED AS OF OCTOBER 1, 1999
AMONG
BLUEGREEN CORPORATION
AS SELLER
BLUEGREEN RECEIVABLES FINANCE CORPORATION III,
AS PURCHASER
AND
BRFC III DEED CORPORATION,
AS AGENT AND CUSTODIAN OF CERTAIN DEEDS FOR THE BENEFIT OF
HELLER FINANCIAL, INC.
OR ITS SUCCESSORS AND ASSIGNS
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE I
<S> <C>
DEFINITIONS.............................................................................2
SECTION 1.01. GENERAL.............................................................. 2
SECTION 1.02. OTHER INTERPRETIVE PROVISIONS........................................ 2
ARTICLE II
AGREEMENT TO TRANSFER; ASSIGNMENT OF AGREEMENT..........................................2
SECTION 2.01. CLOSING OF PURCHASES................................................. 2
SECTION 2.02. ASSIGNMENT OF AGREEMENT.............................................. 4
SECTION 2.03. CONVEYANCE OF SUBSEQUENT RECEIVABLES................................. 4
ARTICLE III
REPRESENTATIONS AND WARRANTIES..........................................................5
ARTICLE IIIA
ORIGINATOR AFFIRMATIVE AND NEGATIVE COVENANTS...........................................8
SECTION 3.01A. RECORDS............................................................. .8
SECTION 3.02A. USE OF PURCHASER NAME............................................... .8
SECTION 3.03A. OTHER DOCUMENTS..................................................... .9
SECTION 3.04A. ORIGINATOR'S DUES REQUIREMENT....................................... .9
SECTION 3.05A. CONSOLIDATION AND MERGER............................................ .9
SECTION 3.06A. RECEIVABLES......................................................... .9
SECTION 3.07A COMPLIANCE WITH LAWS................................................ .9
SECTION 3.08A. YEAR 2000........................................................... 10
SECTION 3.09A. AUTHORIZED SIGNATORY................................................ 10
SECTION 3.10A. ENVIRONMENTAL COMPLIANCE............................................ 10
SECTION 3.11A. SHARE TRANSFER...................................................... 11
ARTICLE IV
PERFECTION OF TRANSFER AND PROTECTION OF BACK-UP SECURITY INTERESTS....................11
SECTION 4.01. CUSTODY OF RECEIVABLES............................................... 11
SECTION 4.02. FILING............................................................... 11
SECTION 4.03. NAME CHANGE OR RELOCATION............................................ 12
SECTION 4.04. CHIEF EXECUTIVE OFFICE............................................... 13
SECTION 4.05. COSTS AND EXPENSES................................................... 13
SECTION 4.06. SALE TREATMENT....................................................... 13
ARTICLE V
REMEDIES UPON MISREPRESENTATION........................................................13
SECTION 5.01. REPURCHASES AND SUBSTITUTIONS OF RECEIVABLES FOR BREACH
OF REPRESENTATIONS AND WARRANTIES.................................... 13
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
SECTION 5.02. REASSIGNMENT OF REPURCHASED OR SUBSTITUTED RECEIVABLES............... 13
ARTICLE VI
INDEMNITIES............................................................................14
SECTION 6.01. ORIGINATOR INDEMNIFICATION........................................... 14
SECTION 6.02. LIABILITIES TO OBLIGORS.............................................. 14
ARTICLE VII
MISCELLANEOUS..........................................................................14
SECTION 7.01. MERGER OR CONSOLIDATION...............................................14
SECTION 7.02. TERMINATION...........................................................15
SECTION 7.03. ASSIGNMENT OR DELEGATION BY THE SELLERS...............................15
SECTION 7.04. AMENDMENT.............................................................15
SECTION 7.05. NOTICES...............................................................15
SECTION 7.06. MERGER AND INTEGRATION................................................16
SECTION 7.07. HEADINGS..............................................................16
SECTION 7.08. GOVERNING LAW.........................................................16
SECTION 7.09. NO BANKRUPTCY PETITION................................................16
SECTION 7.10. OMITTED...............................................................16
SECTION 7.11. SEVERABILITY OF PROVISIONS............................................16
SECTION 7.12. NO WAIVER; CUMULATIVE REMEDIES........................................17
SECTION 7.13. COUNTERPARTS..........................................................17
SECTION 7.14. INTENDED CHARACTERIZATION.............................................17
SECTION 7.15. EFFECT OF AMENDMENT AND RESTATEMENT...................................17
EXHIBITS
Exhibit A Form of Sale Assignment
Exhibit B Form of Subsequent Purchase Agreement
Exhibit C Form of Allonge
Exhibit D Form of Master Assignment
Exhibit E Form of Substitute Receivables Purchase Agreement
</TABLE>
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<PAGE> 4
AMENDED AND RESTATED
SALE AND CONTRIBUTION AGREEMENT
This Amended and Restated Sale and Contribution Agreement, dated as of
October 1, 1999, is made by and among Bluegreen Corporation, a Massachusetts
corporation, (together with its permitted successors and assigns, the
"ORIGINATOR"), Bluegreen Receivables Finance Corporation III, a Delaware
corporation (together with its permitted successors and assigns, "FUNDING") and
BRFC III Deed Corporation, as the custodian of certain deeds (together with its
permitted successors and assigns, "DEED CORP").
WHEREAS, Bluegreen, Deed Corp and Funding are parties to that certain
Sale and Contribution Agreement dated as of June 26, 1998 (as heretofore
amended, restated, supplemented or otherwise modified, the "Prior Sale
Agreement");
WHEREAS, the parties hereto desire to amend and restate the Prior Sale
Agreement for the purpose of accommodating Additional Resorts and the Club and
clarifying the status of the Receivables and related Intervals with respect
thereto, subject to the terms and conditions set forth herein;
WHEREAS, in the regular course of its business, the Originator
originates and purchases Receivables;
WHEREAS, Funding has been established as a wholly-owned
bankruptcy-remote subsidiary of the Originator for the purpose of the
Originator's selling and/or contributing to it from time to time in accordance
with the terms of this Agreement Receivables and related Assets owned by the
Originator;
WHEREAS, Deed Corp has been established as a wholly-owned
bankruptcy-remote subsidiary of the Originator for the purpose of holding deeds
relating to Receivables which are in the form of conditional sales contracts the
Receivables of which are sold to Funding and simultaneously therewith sold to
Heller Financial, Inc. (together with its permitted successors and assigns,
"HFI") under the Asset Purchase Agreement (as hereinafter defined), such deeds
to be held by Deed Corp solely as agent of and custodian for the Purchaser (as
hereinafter defined);
WHEREAS, the Originator and Funding wish to set forth the terms and
conditions pursuant to which Funding will acquire such Receivables (including
Subsequent Receivables) and related Assets (such Receivables, including
Subsequent Receivables, together with such related Assets as more fully
described herein, being the "RECEIVABLES AND RELATED ASSETS" (as hereinafter
defined)); and
WHEREAS, Funding intends concurrently with each transfer of Receivables
and related Assets hereunder to sell, transfer and otherwise absolutely convey
all right, title and interest in and to the Receivables and related Assets to
Purchaser pursuant to the Amended and Restated Asset Purchase Agreement dated as
of the date hereof by and among Funding, as Seller thereunder, HFI, as Purchaser
thereunder (the "PURCHASER"), the Originator, Bluegreen Corporation, in its
separate capacity as Servicer (the "SERVICER"), Deed Corp, as custodian and
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agent for HFI under the Deed Custodian Agreement and the Cash Administrator
named therein (as amended, supplemented or otherwise modified from time to time,
the "ASSET PURCHASE AGREEMENT"), executed concurrently herewith;
WHEREAS, in connection with the execution and delivery of this
Agreement and the Asset Purchase Agreement, the Servicer, the Originator,
Funding, Deed Corp and Purchaser have entered into the Amended and Restated
Servicing Agreement Re Asset Purchase Agreement dated as of the date hereof (as
amended, supplemented or otherwise modified from time to time, the "SERVICING
AGREEMENT"); and
WHEREAS, the Originator, Deed Corp, Funding and HFI wish to set forth
the terms and conditions pursuant to which (i) the Originator will sell,
transfer and otherwise convey all Receivables and related Assets to Funding, and
(ii) the Receivables Files, deeds and other instruments, certificates, books,
records and information of any kind relating to the Receivables and related
Assets referred to in the foregoing clause (i) and from time to time sold and
purchased hereunder and under the Asset Purchase Agreement will be transferred
to the Originator and Deed Corp (as custodian and agent for HFI) under the Deed
Custodian Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth, the Originator and Funding agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. GENERAL. Unless otherwise defined in this Agreement,
capitalized terms used herein (including in the preamble above) have the
meanings assigned to them in the Definitions Annex to the Asset Purchase
Agreement.
SECTION 1.02. OTHER INTERPRETIVE PROVISIONS. Except to the extent
otherwise specified in the particular term or provision at issue, this Agreement
shall be interpreted and construed in accordance with the Document Conventions.
ARTICLE II
AGREEMENT TO TRANSFER; ASSIGNMENT OF AGREEMENT
SECTION 2.01. CLOSING OF PURCHASES. No later than five (5) Business
Days prior to each Purchase Date (or such shorter period to which Funding shall
agree), the Originator will deliver or cause to be delivered to Funding a notice
specifying all outstanding Eligible Receivables currently owned by the
Originator which the Originator wishes to transfer and assign pursuant to this
Agreement, together with the information described in EXHIBIT B to the Asset
Purchase Agreement with respect thereto through such day. On or prior to the
Purchase Date, Funding
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<PAGE> 6
will notify the Originator of the Eligible Receivables it will purchase (the
"PURCHASED RECEIVABLES") on such date and the cash purchase price (the "SALE
PRICE") it will pay for such purchase. To the extent that there is no Sale Price
or the cash portion of the Sale Price for the Purchased Receivables is less than
the fair market value thereof, the difference shall be deemed a capital
contribution by the Originator to Funding. The Originator and Funding shall
enter into a certificate of assignment (the "SALE ASSIGNMENT"), dated as of each
Purchase Date, substantially in the form of EXHIBIT A hereto, identifying all
Purchased Receivables being conveyed on such date and the Originator shall
either execute an Allonge (with respect to notes or instruments) in the form of
EXHIBIT C attached hereto or a Master Assignment (with respect to Receivables
which take the form of conditional sales contracts) in the form of EXHIBIT D
attached hereto. The Sale Price shall be payable by Funding in full by wire
transfer on the Purchase Date to an account designated by the Originator to
Funding on or before the Purchase Date.
Concurrent with the payment of the Sale Price, if any, for Purchased
Receivables and execution of the Sale Assignment, the Originator shall have, and
shall be deemed for all purposes to have, sold, transferred, assigned, set over
and otherwise conveyed to Funding, in consideration therefor, all the
Originator's right, title and interest in and to the following (items (i) -
(vii) below, collectively, being referred to as the "RECEIVABLES AND RELATED
ASSETS"):
(i) the Purchased Receivables identified by Funding
to the Originator as described above, and all Collections
thereon and monies due or to become due in payment of such
Purchased Receivables after the applicable Cutoff Date;
(ii) with respect to Receivables that take the form
of conditional sales contracts, the Intervals related to such
Purchased Receivables subject to the Obligors' rights
thereunder, including all net proceeds from any sale or other
disposition of such Interval;
(iii) with respect to Club Receivables, the Purchase
Money Mortgages related to such Receivables;
(iv) the related Receivable Files;
(v) all payments made or to be made in the future
with respect to such Purchased Receivables or the Obligor
thereunder under any guarantee or similar credit enhancement
with respect to such Purchased Receivables;
(vi) all Insurance Proceeds with respect to each such
Purchased Receivable; and
(vii) all income from and proceeds of the foregoing.
The foregoing sale, transfer, assignment, set-over and conveyance does not
constitute and is not intended to result in a creation or an assumption by
Funding (or any assignee thereof) of any
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<PAGE> 7
obligation of the Originator in connection with the Receivables and related
Assets, or any agreement or instrument relating thereto, including, without
limitation, any obligation to any Obligor or any other Person, or (i) any taxes,
fees, or other charges imposed by any Governmental Authority and (ii) any
insurance premiums which remain owing with respect to any Receivable at the time
such Receivable is sold hereunder; PROVIDED THAT Funding (or any assignee
thereof) shall be required to deliver (or cause to be delivered) to the
applicable Obligor the deed evidencing such Obligor's Interval upon payment in
full of the conditional sales contract, if applicable.
SECTION 2.02. ASSIGNMENT OF AGREEMENT. Funding has the right to assign
its interest under this Agreement to the Purchaser as may be required to effect
the purposes of the Asset Purchase Agreement, without further notice to, or
consent of, the Originator, and the Purchaser shall succeed to such of the
rights of Funding hereunder as shall be so assigned. The Originator acknowledges
that, pursuant to the Asset Purchase Agreement, Funding will assign all of its
right, title and interest in and to the Receivables and related Assets conveyed
hereunder, including but not limited to, its right to exercise the remedies
created by Section 5.01 hereof for breaches of representations and warranties of
the Originator contained in Article III hereof, to the Purchaser as well as any
other covenants or representations or warranties made by the Originator
hereunder. The Originator agrees that, upon such assignment to the Purchaser,
such remedies, covenants and representations will run to and be for the benefit
of the Purchaser and its assignees and the Purchaser or such assignee may
enforce the same directly without joinder of Funding.
SECTION 2.03. CONVEYANCE OF SUBSEQUENT RECEIVABLES. Subject to the
satisfaction of the conditions set forth in Section 2.11 of the Asset Purchase
Agreement, the Originator may at its option (but shall not be obligated to)
sell, transfer, assign, set over and otherwise convey to Funding (by delivery of
an executed Subsequent Purchase Agreement substantially in the form attached as
EXHIBIT B hereto or, in the case of Substitute Receivables, by delivery of an
executed Substitute Receivables Purchase Agreement substantially in the form
attached as EXHIBIT E hereto), without recourse other than as expressly provided
in the Transaction Documents (and in consideration of Funding's concurrent
transfer of property, by exchange of one or more related Receivables released by
the Purchaser to Funding on the Subsequent Transfer Date, in the case of a
Subsequent Receivable which is a Substitute Receivable) all the right, title and
interest of the Originator in and to the following (the property in clauses (i)
- - (vii) below, collectively upon such transfer, becoming part of the
"RECEIVABLES AND RELATED ASSETS"):
(i) the Subsequent Receivables identified in the related
Addition Notice, and all Collections thereon and monies due or to
become due in payment of such Subsequent Receivables after the
applicable Cutoff Date;
(ii) with respect to Receivables that take the form of
conditional sales contracts, the Intervals related to such Subsequent
Receivables, including all net proceeds from any sale or other
disposition of such Interval;
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<PAGE> 8
(iii) with respect to Club Receivables, the Purchase Money
Mortgages related to such Subsequent Receivables;
(iv) the related Receivable Files;
(v) all payments made or to be made in the future with respect
to such Receivables or the Obligor thereunder under any guarantee or
similar credit enhancement with respect to such Receivables;
(vi) all Insurance Proceeds with respect to each such
Subsequent Receivable; and
(vii) all income from and proceeds of the foregoing.
To the extent that the property delivered by Funding to the Originator in
exchange for the Subsequent Receivables and related Receivables and related
Assets being conveyed has a value less than the fair market value of such
Subsequent Receivables and related Receivables and related Assets, the
difference shall be deemed a capital contribution by the Originator to Funding
in respect of such Subsequent Receivables.
Any such sale, transfer, assignment, set-over and conveyance shall not
constitute and is not intended to result in a creation or an assumption by
Funding (or any assignee thereof) of any obligation of the Originator in
connection with such Receivables and related Assets, or any agreement or
instrument relating thereto, including, without limitation, any obligation to
any Obligor or any other Person, or (i) any taxes, fees, or other charges
imposed by any Governmental Authority and (ii) any insurance premiums which
remain owing with respect to any such Receivable at the time such Receivable is
conveyed hereunder; PROVIDED THAT Funding (or any assignee thereof) shall be
required to deliver (or cause to be delivered) to the applicable Obligor the
deed evidencing such Obligor's Interval upon payment in full of the conditional
sales contract, if applicable.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Pursuant to each Sale Assignment, the Originator will make, and upon
execution of each Subsequent Purchase Agreement will be deemed to remake, the
representations and warranties set forth in Sections 5.1 and 5.2 of the Asset
Purchase Agreement for the benefit of Funding; provided, however, with respect
to the representations and warranties relating to the Receivables, such
representation and warranty shall be made only on their date of purchase
hereunder. Such representations and warranties are incorporated by reference in
this Article III, and Funding may rely thereon as if such representations and
warranties were fully set forth herein. It is understood and agreed that the
representations and warranties incorporated by reference in this Article III
shall survive the conveyance of the Purchased Receivables to Funding and any
conveyance of the Purchased Receivables by Funding to Purchaser and shall
continue so long as any Purchased
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<PAGE> 9
Receivable shall remain outstanding. The repurchase (or, in the alternative,
substitution) obligation of the Originator set forth in Section 5.01 below and
in Section 6.3 of the Asset Purchase Agreement constitutes the sole remedy
available for a breach of a representation or warranty of the Originator
incorporated by reference through this Article III. The Originator is not
responsible for and shall have no obligation with respect to the Obligors'
payment obligations under the Purchased Receivables, except with respect to
Servicer Advances and obligations hereunder with respect to breaches of
representations and warranties relating to the Receivables; provided, however,
this sentence shall not be construed to limit, in any manner, any other
Originator obligation under the Transaction Documents.
In addition, on the Closing Date, and upon the effectiveness of each
conveyance of Receivables and related Assets hereunder the Originator makes, and
upon each conveyance of Subsequent Receivables under a Subsequent Purchase
Agreement the Originator will be deemed to remake, the following representations
and warranties:
(a) ORGANIZATION AND GOOD STANDING. The Originator is a
corporation duly organized and validly existing in good standing under
the laws of the State of Massachusetts, and has full corporate power,
authority and legal right to own its properties and conduct its
business as such properties are presently owned and such business is
presently conducted, and to execute, deliver and perform its
obligations under this Agreement and each other Transaction Document to
which it is a party.
(b) DUE QUALIFICATION. The Originator is duly qualified to do
business and is in good standing as a foreign corporation (or is exempt
from such requirements), and has obtained or will obtain all necessary
licenses and approvals, in each jurisdiction in which failure to so
qualify or to obtain such licenses and approvals would have a material
adverse effect on its ability to perform its obligations hereunder.
(c) DUE AUTHORIZATION. The execution and delivery of this
Agreement and each other Transaction Document to which it is a party,
and the consummation of the transactions provided for herein and
therein, have been duly authorized by the Originator by all necessary
corporate action on the part of the Originator.
(d) NO CONFLICT. The execution and delivery of this Agreement
and each other Transaction Document to which it is a party, the
performance of the transactions contemplated hereby and thereby and the
fulfillment of the terms hereof and thereof will not conflict with,
result in any breach of any of the material terms and provisions of, or
constitute (with or without notice or lapse of time or both) a material
default under, any material indenture, contract, agreement, mortgage,
deed of trust, or other instrument to which the Originator is a party
(or by which it or any of its property is bound).
(e) NO VIOLATION. The execution and delivery by the Originator
of this Agreement and each other Transaction Document to which it is a
party, the performance of the transactions contemplated hereby and
thereby and the fulfillment of the terms hereof and thereof (including,
without limitation, the sale of Receivables and related
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Assets by the Originator in accordance with the provisions of this
Agreement) will not conflict with or violate, in any material respect,
any Requirements of Law applicable to the Originator.
(f) NO PROCEEDINGS. There are no proceedings or investigations
pending or, to the best knowledge of the Originator, threatened against
the Originator, before any court, regulatory body, administrative
agency, or other tribunal or governmental instrumentality (i) asserting
the invalidity of this Agreement or any other Transaction Document,
(ii) seeking to prevent the consummation of any of the transactions
contemplated by this Agreement or any other Transaction Document or
(iii) seeking any determination or ruling that could reasonably be
expected to be adversely determined, and if adversely determined, would
materially and adversely affect the performance by the Originator of
its obligations under this Agreement or any other Transaction Document.
(g) ALL CONSENTS REQUIRED. All approvals, authorizations,
consents, orders or other actions of any Person or of any Governmental
Authority required in connection with the Originator's execution and
delivery of this Agreement and the other Transaction Documents to which
it is a party, the performance of the transactions contemplated hereby
and thereby, and the fulfillment of the terms hereof and thereof, have
been obtained.
(h) BULK SALES. The execution, delivery and performance of
this Agreement do not require compliance with any "bulk sales" law by
the Originator.
(i) SOLVENCY. After giving effect to the transactions under
this Agreement, the Originator will be Solvent.
(j) SELECTION PROCEDURES. No selection procedures believed by
the Originator to be materially adverse to the interests of Funding or
the Purchaser were utilized by the Originator in selecting the
Receivables constituting part of the Receivables and related Assets
being sold hereunder.
(k) TAXES. The Originator has filed or caused to be filed all
tax returns which, to its knowledge, are required to be filed and has
paid all taxes shown to be due and payable on such returns or on any
assessments made against it or any of its or its subsidiaries property
and all other taxes, fees or other charges imposed on it or any of its
property by any Governmental Authority (other than any amount of tax
due the validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which reserves in
accordance with generally accepted accounting principles have been
provided on the books of the Originator); no tax lien has been filed
and, to the Originator's knowledge, no claim is being asserted, with
respect to any such tax, fee or other charge.
(l) AGREEMENTS ENFORCEABLE. This Agreement and the other
Transaction Documents to which the Originator is a party constitute the
legal, valid and binding
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<PAGE> 11
obligation of the Originator enforceable against the Originator in
accordance with their respective terms, except as such enforceability
may be limited by (i) applicable Insolvency Laws and (ii) general
principles of equity (whether considered as a suit at law or in
equity).
(m) EXCHANGE ACT COMPLIANCE. No proceeds of any conveyance
hereunder will be used by the Originator to acquire any security in any
transaction which is subject to Section 13 or 14 of the Securities
Exchange Act of 1934, as amended.
(n) TITLE; PRIOR LIENS WITH RESPECT TO THE RESORTS AND
ADDITIONAL RESORTS. Originator and its Subsidiaries have good and
marketable title to the Resorts or Additional Resorts (excluding sold
Intervals and any equitable rights of Obligors under applicable state
law to the Units under any conditional land sales contracts which are
the subject of any Receivables and related Assets).
(o) ACCESS. The Resorts and Additional Resorts relating to the
Receivables and related Assets, have direct access to a publicly
dedicated road over a recorded easement and all roadways, if any,
inside the Resorts and Additional Resorts are or will be common areas
under the declaration after the first purchase of Receivables
originated at such Resort or Additional Resort.
(p) UTILITIES. Electric, gas, sewer, water facilities and
other necessary utilities are lawfully available in sufficient capacity
to service the Units relating to the Intervals in the Resorts and
Additional Resorts relating to the Receivables and any easements
necessary to the furnishing of such utility service have been obtained
and duly recorded.
(q) AMENITIES. All amenities described in the sales prospectus
and the "PUBLIC REPORTS" for the Resorts and Additional Resorts
relating to the Receivables are completed, or will be completed, in the
time periods described in the "PUBLIC REPORTS", or a bond insuring
their completion has been posted. Each Obligor has or will have in the
time period described in the Public Reports access to and the use of
all of the amenities and public utilities of the Resorts and the
Additional Resorts relating to the Receivables as and to the extent
provided in the Declaration and the "PUBLIC REPORTS".
ARTICLE IIIA
ORIGINATOR AFFIRMATIVE AND NEGATIVE COVENANTS
SECTION 3.01A. RECORDS. Originator shall keep adequate records and
books of account reflecting all financial transactions of Originator and (to the
extent available to the Originator) the Time Share Associations, including sales
of Intervals, in which complete entries will be made in accordance with GAAP.
SECTION 3.02A. USE OF PURCHASER NAME. Originator will not, and will not
permit any Affiliate to, without the prior written consent of Purchaser, use the
name of Purchaser or the
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name of any affiliates of Purchaser in connection with any of their respective
businesses or activities, except in connection with internal business matters,
administration of the Purchase Agreement and as required in dealings with
governmental agencies including any reports required to be filed with the
Securities and Exchange Commission.
SECTION 3.03A. OTHER DOCUMENTS. To the extent not maintained by the
Custodian or Servicer, Originator will maintain accurate and complete files
relating to the Receivables and the related Assets to the satisfaction of
Funding and Purchaser, and such files (to the extent not computerized) will
contain copies of each Originator Receivable and the related Assets together
with the purchase agreements, truth-in-lending statements, all relevant credit
memoranda and all collection information and correspondence relating to such
Receivables.
SECTION 3.04A. ORIGINATOR'S DUES REQUIREMENT. The Originator shall be
obligated to pay the Time Share Association dues relating to Intervals which are
owned by the Originator or one of its Affiliates and do not relate to
Receivables and for as long as the Originator or one of its Subsidiaries
controls the Resorts or Additional Resorts, shall provide such monies as are
necessary to maintain services for a Resort or an Additional Resort which is
equal to or greater than one hundred percent (100%) of such Resorts or
Additional Resorts total operating expenses, taxes, utilities and associated
reserve fund requirements.
SECTION 3.05A. CONSOLIDATION AND MERGER. The Originator will not
consolidate with or merge into any other Person or permit any other Person to
consolidate with or merge into it or convey all or substantially all of its
assets to any Person, unless (i) either the Originator shall be the continuing
corporation or the successor corporation or the person which acquires by sale or
conveyance substantially all the assets of the Originator 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 performance and observance of
all of the covenants and conditions of this Agreement to be performed or
observed by the Originator , by an amendment hereto in form satisfactory to the
Purchaser, and (ii) the Originator or such successor corporation, as the case
may be, shall not, immediately after such merger or consolidation, or such sale
or conveyance, be in breach in the performance of any such covenant or
condition.
SECTION 3.06A. RECEIVABLES. The Originator shall not take any action
(nor permit or consent to the taking of any action) which might reasonably be
anticipated to impair the value of the Receivables or related Assets or any of
the rights of Purchaser in the Receivables or related Assets; provided, however,
nothing contained in this Section 3.06A shall be construed as requiring the
Originator to guarantee or otherwise become liable for the payment of the
Obligors' payments under the Receivables.
SECTION 3.07A. COMPLIANCE WITH LAWS. Originator, and each of the Units
in which Intervals are being sold, shall comply with, conform to and obey each
and every judgment, law, statute, rule and governmental regulation applicable to
it and each indenture, order, instrument, agreement or document to which it is a
party or by which it is bound except where the failure to comply would not have
a material adverse effect on the Receivables.
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<PAGE> 13
SECTION 3.08A. YEAR 2000. Originator has made an assessment of the
microchip and computer-based systems and the software used in its businesses and
based upon such assessment believes that it will be "YEAR 2000 COMPLIANT" by
January 1, 2000. For purposes of this Section 3.08A, "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 Originator 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. From
time to time, at the request of the Purchaser, Originator shall provide to
Purchaser such updated information as is requested regarding the status of its
effort to become Year 2000 Compliant.
SECTION 3.09A. AUTHORIZED SIGNATORY. Any person signing an Advance
Request on behalf of Originator, as provided in Schedule 3.24A hereof shall have
the requisite power and authority to sign the same on behalf of such Originator.
SECTION 3.10A. ENVIRONMENTAL COMPLIANCE.
(a) The operations of Originator comply in all material
respects with all applicable Environmental Laws.
(b) There are no claims, investigations, litigation,
administrative proceedings, whether pending or, to Originator's best
knowledge, threatened, or judgments or orders, relating to any
Hazardous Materials or alleging the violation of any Environmental Laws
(collectively "ENVIRONMENTAL MATTERS") relating in any way to any
operations of Originator on any real property leased or owned by
Originator or to the operations of Originator the result of which, if
adversely determined, would have a Material Adverse Effect.
(c) To Originators' knowledge, no Hazardous Materials are
presently stored or otherwise located on, in or under any real property
leased, owned or operated by Originator except in material compliance
with all applicable Environmental Laws, and, no part of any real
property leased, owned or operated by Originator or to Originators'
best knowledge, adjacent parcels, including the groundwater located
thereon, is presently contaminated by any such Hazardous Material.
(d) Originator has not filed any notice under any
international, federal, state, regional, provincial or local law
indicating past or present treatment, storage or disposal of a
Hazardous Material or reporting a spill or release of a Hazardous
Material into the environment the result of which, if adversely
determined, would have a material adverse effect.
(e) Originator does not have any known material liability,
contingent or otherwise, in connection with any release of any
Hazardous Material into the environment.
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(f) Originator hereby indemnifies Funding and agrees to hold
Funding harmless from and against any and all losses, liabilities,
damages, injuries, costs, expenses and claims of any and every kind
whatsoever (including, without limitation, court costs and reasonable
attorneys' fees and legal expenses) which at any time or from time to
time may be paid, incurred or suffered by, or asserted against, Funding
arising directly or indirectly from the violation by the Originator of
any Environmental Law with respect to any Resort or Additional Resort;
or with respect to, or as a direct or indirect result of the presence
on or under, or the escape, seepage, leakage, spillage, discharge,
emission or release from, properties utilized, owned or operated by
Originator in the conduct of its business into or upon any land, the
atmosphere, or any watercourse, body of water or wetland, of any
Hazardous Material (including, without limitation, any losses,
liabilities, damages, injuries, costs, expenses or claims asserted or
arising under the Environmental Laws); PROVIDED that to the extent that
Originator is strictly liable under any Environmental Laws, the
Originator's obligations to indemnify Funding hereunder shall likewise
be without regard to fault on the part of Originator and with respect
to the violation of law which results in liability to Originator;
PROVIDED, FURTHER, that this Section 3.10A shall not apply with respect
to any liability, release, violation or other matter that arises solely
from Originator's gross negligence or wilful misconduct after
Originator loses possession of any property due to foreclosure or other
exercises of remedies by Funding. To the extent that the undertaking to
indemnify, pay and hold harmless set forth in this Section 3.10A may be
unenforceable because it is violative of any law or public policy,
Originator shall contribute the maximum portion that it is permitted to
pay and satisfy under applicable law to the payment and satisfaction of
all indemnifications set forth in this Section 3.10A.
SECTION 3.11A. SHARE TRANSFER. Funding shall not transfer any shares of
capital stock of Deed Corp.
ARTICLE IV
PERFECTION OF TRANSFER AND PROTECTION
OF BACK-UP SECURITY INTERESTS
SECTION 4.01. CUSTODY OF RECEIVABLES. Subject to the terms and
conditions of this Section 4.01, and except as provided in the Custodial
Agreement (i) the contents of each Receivable File shall be held in the custody
of the Originator in its capacity as Servicer under the Servicing Agreement for
the benefit of the owner thereof and (ii) each deed relating to any Interval
subject to a contract for deed included in the Receivables and related Assets
shall be transferred to Deed Corp, in its capacity as Deed Custodian. The
Originator agrees to cooperate with the Servicer in its efforts to comply with
its respective obligations under the Asset Purchase Agreement and the Servicing
Agreement in respect of the Receivables and related Assets, and acknowledges and
consents to the transactions contemplated therein.
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<PAGE> 15
SECTION 4.02. FILING.
(a) On or as soon as practicable following each Purchase Date,
the Originator shall cause the UCC financing statement(s) referred to
in Section 5.1(x) of the Asset Purchase Agreement to be filed and from
time to time the Originator shall take and cause to be taken such
actions and execute such documents as are necessary or desirable or as
Funding or HFI may reasonably request to perfect and protect
Purchaser's ownership interest in the Receivables and related Assets
against all other persons, including, without limitation, the filing of
financing statements, amendments thereto and continuation statements,
the execution of transfer instruments and the making of notations on or
taking possession of all records or documents of title.
(b) On or as soon as practicable following each Purchase Date,
the Originator will deliver an assignment of the Deed in recordable
form, endorse and transfer to Deed Corp, as custodian and agent for
HFI, all deeds, as well as transfer to the Custodian the Receivables
File relating to the Purchased Receivables or Subsequent Receivables
(as the case may be) transferred on such Purchase Date. Pursuant to the
Servicing Agreement, Servicer will record all deeds included within the
Receivables and related Assets in the appropriate records depository in
the jurisdictions in which the real property conveyed by such deeds are
located. Each deed so recorded shall state that it has been transferred
and conveyed to Deed Corp of the Obligor on the Purchased Receivable
relating to such deed and the Purchaser of the related Receivable and
shall further state that Deed Corp shall hold such deed solely as agent
and custodian for the Purchaser.
SECTION 4.03. NAME CHANGE OR RELOCATION.
(a) During the term of this Agreement, the Originator agrees
not to change its name, identity or structure or relocate its chief
executive office, or relocate or establish a new location where
Receivable Files are maintained, without first giving at least 30 days'
prior written notice to Funding and HFI.
(b) If any change in the Originator's name, identity or
structure or other action would make any financing or continuation
statement or notice of ownership interest or lien filed under this
Agreement seriously misleading within the meaning of applicable
provisions of the UCC or any title statute, the Originator, no later
than five days after the effective date of such change, shall file such
amendments as may be required to preserve and protect the Purchaser's
interests in the Receivables and related Assets and proceeds thereof.
In addition, the Originator agrees not to change its principal place of
business or its chief executive office (within the meaning of Article 9
of the UCC) from the location specified in Section 12.2 of the Asset
Purchase Agreement, or relocate or establish a location where it
maintains Receivable Files which is other than in one of the UCC Filing
Locations, unless it has first taken such action as is advisable or
necessary to preserve and protect Funding's and HFI's interest in the
Receivables and related Assets. Promptly after taking any of the
foregoing actions, the Originator shall deliver to Funding and HFI an
Opinion of Counsel stating that, in the opinion of such counsel, all
financing statements or amendments necessary to preserve and protect
the interests of HFI in the Receivables and related Assets have been
filed, and reciting the details of such filing.
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<PAGE> 16
SECTION 4.04. CHIEF EXECUTIVE OFFICE. During the term of this
Agreement, and subject to the other terms and provisions herein relating to
changes in location, the Originator will maintain its chief executive office in
one of the States of the United States, except Louisiana, Tennessee, Colorado,
Kansas, New Mexico, Oklahoma, Utah or Wyoming.
SECTION 4.05. COSTS AND EXPENSES. The Originator agrees to pay all
reasonable costs and disbursements in connection with the perfection and the
maintenance of perfection, as against all third parties, of Funding's and the
Purchaser's right, title and interest in and to the Receivables and related
Assets (including, without limitation, the interest in the Interval related
thereto).
SECTION 4.06. SALE TREATMENT. The Originator and Funding each shall
treat the transfer of Receivables and related Assets made hereunder for
financial accounting purposes as a sale and purchase on all of its relevant
books, records, financial statements and other applicable documents.
ARTICLE V
REMEDIES UPON MISREPRESENTATION
SECTION 5.01. REPURCHASES AND SUBSTITUTIONS OF RECEIVABLES FOR BREACH
OF REPRESENTATIONS AND WARRANTIES. The Originator hereby agrees, for the benefit
of Funding and its assignees including the Purchaser, that it shall repurchase
an Ineligible Receivable and any Receivable with respect to which there has been
a breach of a representation or warranty under Article III of this Agreement
(together with all related Receivables and related Assets), at a repurchase
price equal to the Transfer Deposit Amount, not later than the next
Determination Date which is at most thirty (30) days after the earlier of (i)
the date the Originator becomes aware of, or (ii) receives written notice from
the Purchaser, the Servicer or Funding of, the related breach or inaccuracy of
representation. Originator's obligation hereunder shall relate solely to a
breach or inaccurate representation which materially adversely affects a
Receivable or with respect to Receivables for which the breach of a
representation or warranty in the aggregate materially adversely affects the
Purchaser. If the Originator is able to effect a substitution for any such
Ineligible Receivable in compliance with Section 2.03, the Originator may, in
lieu of repurchasing such Receivable, effect a substitution for such affected
Receivable with a Substitute Receivable not later than the date a repurchase of
such Ineligible Receivable would be required hereunder; provided further, in the
event the Originator can cure, and in fact cures, the condition which created
the "Ineligible Receivable" in the above described 30 day period the Originator
shall not be obligated to substitute or repurchase such Receivable.
SECTION 5.02. REASSIGNMENT OF REPURCHASED OR SUBSTITUTED RECEIVABLES.
Upon receipt by the Cash Administrator for deposit in the Collection Account of
the repurchase price as described in Section 5.01 (or upon the Subsequent
Transfer Date related to a Substitute Receivable described in Section 5.01),
Funding shall assign to the Originator all of Funding's right, title and
interest in the repurchased or Replaced Receivable and related Assets, in each
case received by release from the Purchaser in accordance with Section 6.2 of
the Asset Purchase Agreement, without recourse, representation or warranty.
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<PAGE> 17
ARTICLE VI
INDEMNITIES
SECTION 6.01. ORIGINATOR INDEMNIFICATION. The Originator will defend
and indemnify Funding and its assignees (including the Purchaser) (any of which,
an "INDEMNIFIED PARTY") against any and all costs, expenses, losses, damages,
claims and liabilities, joint or several, including reasonable fees and expenses
of counsel and expenses of litigation (collectively, "COSTS") arising out of or
resulting from any acts, omissions or alleged acts or omissions of the
Originator arising out of or relating to this Agreement or any other Transaction
Document which are in violation or contravention of the terms of this Agreement
or any other Transaction Document or the use, ownership or operation of any
Interval by the Originator or the Servicer or any Affiliate of either or any
representation or warranty or covenant made by the Originator in this Agreement
being untrue or incorrect (subject to the third sentence of the preamble to
Article III of this Agreement above); PROVIDED, HOWEVER, that the Originator
shall not be required to so indemnify any such Indemnified Party for such Costs
to the extent that such Cost shall be due to or arise from the willful
misfeasance, bad faith or gross negligence of such Indemnified Party, or the
failure of such Indemnified Party to comply with any express undertaking,
agreement or covenant made by such Indemnified Party in a Transaction Document
to which it is a party; PROVIDED FURTHER that nothing contained in this Section
6.01 shall be construed to obligate the Originator to indemnify an Indemnified
Party with respect to losses, claims, damages and liabilities incurred solely as
a result of the payment performance of the Receivables and the related Assets.
Notwithstanding any other provision of this Agreement, the obligations of the
Originator under this Section 6.01 shall not terminate upon a Service Transfer
pursuant to Section 3.3 of the Servicing Agreement and shall survive any
termination of that agreement, the Asset Purchase Agreement or this Agreement.
SECTION 6.02. LIABILITIES TO OBLIGORS. No obligation or liability to
any Obligor under any of the Receivables is intended to be assumed by Funding or
the Purchaser under or as a result of this Agreement and the transactions
contemplated hereby except the obligation to deliver the deed upon payment in
full.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. MERGER OR CONSOLIDATION.
(a) Except as otherwise provided in this Section 7.01, the
Originator will keep in full force and effect its existence, rights and
franchises as a Massachusetts corporation, and the Originator will
obtain and preserve its qualification to do business as a foreign
corporation in each jurisdiction in which such qualification is or
shall be necessary to protect the validity and enforceability of this
Agreement and of any of the Receivables and to perform its duties under
this Agreement.
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<PAGE> 18
(b) Any person into which the Originator may be merged or
consolidated, or any corporation resulting from such merger or
consolidation to which the Originator is a party, or any person
succeeding to the business of the Originator, shall be the successor to
the Originator hereunder, without the execution or filing of any paper
or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding.
SECTION 7.02. TERMINATION. This Agreement shall terminate (after
distribution of all amounts distributable pursuant to Section 2.7 of the Asset
Purchase Agreement) on the Payment Date on which the Aggregate Unpaids have been
reduced to zero; PROVIDED, that the Originator's indemnities by the Originator
shall survive termination.
SECTION 7.03. ASSIGNMENT OR DELEGATION BY THE SELLERS. Except as
specifically authorized hereunder, the Originator may not convey and assign or
delegate any of its rights or obligations hereunder absent the prior written
consent of Funding and the Purchaser, and any attempt to do so without such
consent shall be void.
SECTION 7.04. AMENDMENT. This Agreement may not be amended without the
prior written consent of the Purchaser. Any such amendment shall be in writing
and executed by the parties hereto (including in counterparts). Upon the
execution of any amendment in compliance with this Section 7.04, this Agreement
shall be modified in accordance therewith, and such amendment shall form a part
of this Agreement for all purposes.
SECTION 7.05. NOTICES. All notices, demands, certificates, requests and
communications hereunder ("NOTICES") shall be in writing and shall be effective
(a) upon receipt when sent through the U.S. mails, registered or certified mail,
return receipt requested, postage prepaid, with such receipt to be effective the
date of delivery indicated on the return receipt, or (b) one Business Day after
delivery to an overnight courier, or (c) on the date personally delivered to an
Authorized Officer of the party to which sent, or (d) on the date transmitted by
legible telefax transmission with a confirmation of receipt, in all cases
addressed to the recipient as follows:
If to the Originator/Servicer: Bluegreen Corporation
4960 Blue Lake Drive
Boca Raton, Florida 33431
Attn: Patrick E. Rondeau, Esq.
Telephone No.: (561) 912-8005
Telecopy: (561) 912-8100
If to Funding: Bluegreen Receivables Finance
Corporation III
4960 Blue Lake Drive
Boca Raton, Florida 33431
Attn: Patrick E. Rondeau, Esq.
Telephone No.: (561) 912-8005
Telecopy: (561) 912-8100
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<PAGE> 19
If to Deed Corp: Bluegreen Corporation
4960 Blue Lake Drive
Boca Raton, Florida 33431
Attn: Patrick E. Rondeau, Esq.
Telephone No.: (561) 912-8005
Telecopy: (561) 912-8100
If to Purchaser: Heller Financial, Inc.
28th Floor - Heller Sales
Finance
500 W. Monroe Street
Chicago, Illinois 60661
Attn: Portfolio Manager,
Vacation Ownership
Facsimile: (312) 441-7924
with a copy to: Heller Financial, Inc.
28th Floor - Heller Sales
Finance
500 W. Monroe Street
Chicago, Illinois 60661
Attn: Group General Counsel -
Vacation Ownership
Facsimile: (312) 441-7872
Each party hereto may, by notice given in accordance herewith to each of the
other parties hereto, designate any further or different address to which
subsequent notices shall be sent.
SECTION 7.06. MERGER AND INTEGRATION. Except as specifically stated
otherwise herein, this Agreement sets forth the entire understanding of the
parties relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement. This Agreement may not be
modified, amended, waived, or supplemented except as provided herein.
SECTION 7.07. HEADINGS. The headings herein are for purposes of
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.
SECTION 7.08. GOVERNING LAW. This Agreement shall be governed by, and
construed and enforced in accordance with, the internal laws of the State of
Illinois.
SECTION 7.09. NO BANKRUPTCY PETITION. The Originator covenants and
agrees that, prior to the date that is one year and one day after the payment in
full of all Aggregate Unpaids, it will not institute against Funding, or join
any other Person in instituting against Funding, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other similar proceedings
under the laws of the United States or any state of the United States, or take
any action in contemplation or furtherance of any of the foregoing. This Section
7.09 will survive the termination of this Agreement.
SECTION 7.10. OMITTED.
SECTION 7.11. SEVERABILITY OF PROVISIONS. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall for any
reason whatsoever be held invalid, then such covenants, agreement, provisions or
terms shall be deemed severable from the
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<PAGE> 20
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other provisions of this
Agreement.
SECTION 7.12. NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise
and no delay in exercising, on the part of Funding (or any assignee thereof) or
the Originator, any right, remedy, power or privilege hereunder, shall operate
as a waiver thereof; nor shall any single or partial exercise of any right,
remedy, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, remedy, power or privilege. The
rights, remedies, powers and privileges herein provided are cumulative and not
exhaustive (except to the extent specifically provided herein) of any other
rights, remedies, powers or privileges provided by law.
SECTION 7.13. COUNTERPARTS. This Agreement may be executed in two or
more counterparts including by telefax transmission thereof (and by different
parties on separate counterparts), each of which shall be an original, but all
of which together shall constitute one and the same instrument.
SECTION 7.14. INTENDED CHARACTERIZATION. The Originator, Funding and
the Purchaser agree that any conveyance hereunder or under the Asset Purchase
Agreement is intended to be a sale and conveyance of ownership of the
Receivables and related Assets, rather than the mere granting of a security
interest to secure a borrowing. If, notwithstanding such expressed interest, any
such transfer is deemed to be of a mere security interest to secure
indebtedness, the Originator shall be deemed to have granted (and hereby grants
to) each of Funding and the Custodian, as agent for Funding, a perfected first
priority security interest in such Receivables and related Assets and this
Agreement shall constitute a security agreement under applicable law, securing
the repayment of the purchase price paid hereunder and the obligations and/or
interests provided for in this Agreement and in the order and priorities, and
subject to the other terms and conditions of, the Asset Purchase Agreement,
together with such other obligations or interests as may arise hereunder and
thereunder in favor of the parties hereto and thereto. If such transfer is
deemed to be the mere granting of a security interest to secure a borrowing,
Funding may, to secure Funding's own obtainment of funds under the Asset
Purchase Agreement (to the extent that the conveyance of the Receivables and
related Assets thereunder is deemed to be a mere granting of a security interest
to secure a borrowing) repledge and reassign (i) all or a portion of the
Receivables and related Assets pledged to Funding and not released from the
security interest of this Agreement at the time of such pledge and assignment,
and (ii) all proceeds thereof. Such repledge and reassignment may be made by
Funding with or without a repledge and reassignment by Funding of its rights
under this Agreement, and without further notice to or acknowledgment from the
Originator. The Originator waives, to the extent permitted by applicable law,
all claims, causes of action and remedies, whether legal or equitable (including
any right of setoff), against Funding or any assignee of Funding relating to
such action by Funding in connection with the transactions contemplated by the
Asset Purchase Agreement.
SECTION 7.15. EFFECT OF AMENDMENT AND RESTATEMENT. This Agreement
amends and restates in its entirety the Prior Sale Agreement and, upon
effectiveness of this Agreement, the terms and provisions of the Prior Sale
Agreement shall, subject to this SECTION 7.15, be
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<PAGE> 21
superseded hereby. All references to "Sale and Contribution Agreement" contained
in the Transaction Documents shall be deemed to refer to this Agreement.
Notwithstanding the amendment and restatement of the Prior Sale Agreement by
this Agreement, the obligations and indemnities outstanding under the Prior Sale
Agreement as of the Closing Date shall remain outstanding and constitute
continuing obligations hereunder. Such outstanding obligations shall in all
respects be continuing, and this Agreement shall not be deemed to evidence or
result in a novation of such obligations. In furtherance of and without limiting
the foregoing, from and after the Closing Date and except as expressly specified
herein, the terms, conditions, and covenants governing the rights and
obligations outstanding under the Prior Sale Agreement shall be solely as set
forth in this Agreement, which shall supersede the Prior Sale Agreement in its
entirety.
[remainder of page intentionally blank]
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<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first written above.
BLUEGREEN RECEIVABLES FINANCE
CORPORATION III
By: /s/ JOHN F. CHISTE
-------------------------------------------
Printed Name: JOHN F. CHISTE
Title: TREASURER
BLUEGREEN CORPORATION
By: /s/ JOHN F. CHISTE
-------------------------------------------
Printed Name: JOHN F. CHISTE
Title: SR. VICE PRESIDENT, TREASURER & CFO
BRFC III DEED CORPORATION
By: /s/ JOHN F. CHISTE
-------------------------------------------
Printed Name: JOHN F. CHISTE
Title: TREASURER
Acknowledged and Agreed to:
HELLER FINANCIAL, INC.
By: /s/ Lisa J. Hansen
-----------------------------------------
Printed Name: Lisa J. Hansen
-------------------------
Title: Vice President
---------------------------------
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<PAGE> 1
EXHIBIT 10.104
AMENDED AND RESTATED
ASSET PURCHASE AGREEMENT
Dated as of October 1, 1999
among
BLUEGREEN RECEIVABLES FINANCE CORPORATION III,
as Seller
BRFC III DEED CORPORATION,
as agent and custodian of certain deeds for the benefit of the Purchaser
HELLER FINANCIAL, INC.,
as the Purchaser
BLUEGREEN CORPORATION,
as the Originator and the Servicer
VACATION TRUST, INC.,
as Club Trustee
and
U.S. BANK NATIONAL ASSOCIATION,
as Cash Administrator
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE I DEFINITIONS.............................................................................................2
Section 1.1 CERTAIN DEFINED TERMS..................................................................2
Section 1.2 OTHER INTERPRETIVE PROVISIONS..........................................................3
ARTICLE II THE PURCHASE FACILITY..................................................................................3
Section 2.1 SALE AND PURCHASE OF ASSETS............................................................3
Section 2.2 PROCEDURES FOR PURCHASES...............................................................4
Section 2.3 ESTABLISHMENT OF ACCOUNTS; RESERVE ACCOUNT.............................................5
Section 2.4 [OMITTED]..............................................................................6
Section 2.5 DEPOSITS TO ACCOUNTS...................................................................6
Section 2.6 NON-LIQUIDATION SETTLEMENT PROCEDURES..................................................6
Section 2.7 LIQUIDATION SETTLEMENT PROCEDURES......................................................8
Section 2.8 INVESTMENT OF ACCOUNTS.................................................................9
Section 2.9 PAYMENTS AND COMPUTATIONS; FUNDING INDEMNITY FOR FAILED PURCHASE.......................9
Section 2.10 [OMITTED].............................................................................10
Section 2.11 ADDITION/SUBSTITUTION OF RECEIVABLES..................................................10
Section 2.12 EXTENSION OF PROGRAM TERMINATION DATE; INCREASE IN COMMITMENT.........................12
Section 2.13 EFFECT OF AMENDMENT AND RESTATEMENT. This Agreement amends and restates in its
entirety the Prior Purchase Agreement and, upon effectiveness of this Agreement, the
terms and provisions of the Prior Purchase Agreement shall, subject to this SECTION
2.13, be superseded hereby. All references to "Asset Purchase Agreement"or
"Agreement" contained in..............................................................12
Section 2.13 the Transaction Documents delivered in connection with the Prior Purchase Agreement
shall be deemed to refer to this Agreement. Notwithstanding the amendment and
restatement of the Prior Purchase Agreement by this Agreement, the obligations and
indemnities outstanding under the Prior Purchase Agreement as of the Closing Date
shall remain outstanding and constitute continuing obligations hereunder. Such
outstanding rights and obligations shall in all respects be continuing, and this
Agreement shall not be deemed to evidence or result in a novation of such rights and
obligations. In furtherance of and without limiting the foregoing, from and after the
Closing Date and except as expressly specified herein, the terms, conditions, and
covenants governing the rights and obligations outstanding under the Prior Purchase
Agreement shall be solely as set forth in this Agreement, which shall supersede the
Prior Purchase Agreement in its entirety..............................................12
ARTICLE III [RESERVED]...........................................................................................13
ARTICLE IV CONDITIONS OF PURCHASES...............................................................................13
Section 4.1 CONDITIONS PRECEDENT TO INITIAL PURCHASE..............................................13
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
Section 4.2 CONDITIONS PRECEDENT TO ALL PURCHASES..................................................13
ARTICLE V REPRESENTATIONS AND WARRANTIES..........................................................................15
Section 5.1 REPRESENTATIONS AND WARRANTIES OF THE SELLER...........................................15
Section 5.2 REPRESENTATIONS AND WARRANTIES OF SELLER RELATING TO THE AGREEMENT
AND THE RECEIVABLES..................................................................19
Section 5.3 REPRESENTATIONS AND WARRANTIES OF THE CLUB AND THE CLUB TRUSTEE........................22
ARTICLE VI GENERAL COVENANTS......................................................................................24
Section 6.1 GENERAL COVENANTS OF THE SELLER........................................................24
Section 6.1A GENERAL COVENANTS OF THE CLUB TRUST AND CLUB TRUSTEE...................................27
Section 6.2 RELEASE OF INTEREST IN INTERVAL........................................................30
Section 6.3 RETRANSFER OF INELIGIBLE RECEIVABLES...................................................30
ARTICLE VII SPECIAL PROVISION RELATING TO CLUB RECEIVABLES........................................................32
Section 7.1 RIGHTS SUBJECT TO TRUST AGREEMENT. Notwithstanding anything to the contrary set forth
herein or in any other Transaction Documents, all references to the rights of the
Purchaser with respect to Club Receivables shall be subject at all times to the
provisions of the Trust Agreement and the other agreements executed by the
Beneficiaries in connection therewith..................................................32
ARTICLE VIII EVENTS OF TERMINATION................................................................................32
Section 8.1 EVENTS OF TERMINATION..................................................................32
ARTICLE IX........................................................................................................34
Section 9.1 FURTHER ASSURANCES. The Purchaser, Originator and Seller agree that from time to time
the Purchaser will sell the Assets or cash flows therein to various third parties.
Originator and Seller agree to use their best efforts to cooperate with the Purchaser
in connection with the Purchaser's sale of the Assets or the cash flows therein to
such third parties; provided, however, Originator and Seller are not obligated to pay
any of the Purchaser's fees or expenses associated with such sale. In the event
Originator and Seller incur out of pocket expenses associated with the sale of the
Assets or the cash flows therein to a third party (I.E., the creation of new software
to service the Receivables and the related Assets or the cash flows therein, change in
servicing requirements, etc.) Purchaser shall reimburse the Originator or Seller for
such expense...........................................................................34
ARTICLE X [RESERVED]..............................................................................................34
ARTICLE XI ASSIGNMENTS; PARTICIPATIONS; RELEASE OF ASSETS.........................................................34
Section 11.1 ASSIGNMENTS............................................................................34
Section 11.2 PARTICIPATIONS.........................................................................35
Section 11.3 INFORMATION TO ASSIGNEES/PARTICIPANTS; CONFIDENTIALITY.................................35
Section 11.4 SELLER'S REPURCHASE OPTION.............................................................36
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE XII MISCELLANEOUS........................................................................................36
Section 12.1 AMENDMENTS AND WAIVERS................................................................36
Section 12.2 NOTICES, ETC..........................................................................36
Section 12.3 [RESERVED]............................................................................38
Section 12.4 NO WAIVER; REMEDIES...................................................................38
Section 12.5 BINDING EFFECT........................................................................38
Section 12.6 TERM OF THIS AGREEMENT................................................................38
Section 12.7 GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF OBJECTION TO VENUE..................38
Section 12.8 WAIVER OF JURY TRIAL..................................................................39
Section 12.9 COSTS, EXPENSES AND TAXES.............................................................39
Section 12.10 NO BANKRUPTCY COVENANT................................................................40
Section 12.11 PROTECTION OF OWNERSHIP INTERESTS OF THE PURCHASER; INTENT OF PARTIES; BACK-UP
SECURITY INTEREST...................................................................40
Section 12.12 EXECUTION IN COUNTERPARTS; SEVERABILITY; INTEGRATION..................................41
Section 12.13 PURCHASER RIGHT OF FIRST REFUSAL......................................................41
Section 12.14 PURCHASE CESSATION EVENTS.............................................................41
Section 12.15 COOPERATION OF PARTIES TO CLUB CONVERSION.............................................42
</TABLE>
SCHEDULES
SCHEDULE I Condition Precedent Documents
SCHEDULE II [Reserved]
SCHEDULE III Tradenames, Fictitious Names and "Doing Business As" Names
SCHEDULE IV Cash Administrator Fees
SCHEDULE V Location of Receivables Files
SCHEDULE VI Insurance
EXHIBITS
EXHIBIT A Form of Request Notice For Initial and Incremental
Purchases
EXHIBIT B Form of List of Deliveries for all Advances
EXHIBIT C List of Resorts
EXHIBIT D Form of Monthly Report
EXHIBIT E Trust Agreement
EXHIBIT F Provisions of Seller's Certificate of Incorporation
EXHIBIT G [Reserved]
EXHIBIT H Form of Assignment
EXHIBIT I Form of Subsequent Transfer Agreement
EXHIBIT J Form of Substitute Receivables Transfer Agreement
ANNEXES
Definitions Annex
<PAGE> 5
AMENDED AND RESTATED
ASSET PURCHASE AGREEMENT
This Amended and Restated Asset Purchase Agreement (this "AGREEMENT")
is made as of October 1, 1999, among:
(1) Bluegreen Receivables Finance Corporation III, a Delaware
corporation ("FUNDING CORP"), as Seller (in such capacity, the
"SELLER");
(2) Bluegreen Corporation, a Massachusetts corporation
("BLUEGREEN"), as originator and owner of the Receivables
prior to their conveyance to Funding Corp under the Sale and
Contribution Agreement (in such capacity, together with its
permitted successors and assigns, the "ORIGINATOR") and in its
separate capacity as Servicer (in such capacity, together with
its permitted successors and assigns, the "SERVICER");
(3) U.S. Bank National Association, as Cash Administrator (the
"CASH ADMINISTRATOR");
(4) BRFC III Deed Corporation, a Delaware corporation ("DEED
CORP"), solely as the agent and custodian for the benefit of
the Purchaser of certain deeds relating to certain Receivables
represented by conditional sales contracts (in such capacity,
the "DEED CUSTODIAN");
(5) Heller Financial, Inc., a Delaware corporation ("HFI"), as
Purchaser (in such capacity, together with its successors and
assigns, the "PURCHASER"); and
(6) Vacation Trust, Inc., a Florida corporation, as Club Trustee
under the Trust Agreement (in such capacity, the "CLUB
TRUSTEE").
W I T N E S S E T H:
WHEREAS, the Seller, Deed Corp, Bluegreen, as Servicer and Originator,
the Cash Administrator and the Purchaser are parties to that certain Asset
Purchase Agreement dated as of June 26, 1998 (as heretofore amended, restated,
supplemented or otherwise modified, the "Prior Purchase Agreement");
WHEREAS, the parties hereto desire to amend and restate the Prior
Purchase Agreement for the purpose of accommodating Additional Resorts and the
Club, clarifying the status of the Receivables (including Club Receivables) and
related Intervals with respect thereto and adding the Club Trustee as
signatories hereto, subject to the terms and conditions set forth herein;
WHEREAS, the Seller is a wholly-owned, special-purpose
bankruptcy-remote subsidiary of the Originator;
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WHEREAS, the Seller has been formed for the sole purpose of purchasing
and selling certain Receivables and related Assets originated or otherwise
acquired and owned by the Originator in the ordinary course of the Originator's
business and sold or contributed to the Seller from time to time pursuant to the
Sale and Contribution Agreement by and between the Originator and the Seller;
WHEREAS, the Seller wishes to sell the Receivables and related Assets,
and the Purchaser wishes to purchase the Receivables and the related Assets
pursuant to the terms and conditions contained herein;
WHEREAS, the Deed Custodian is a wholly-owned, special-purpose
subsidiary of the Seller;
WHEREAS, the Deed Custodian has been formed for the sole purpose of
holding certain Deeds relating to Receivables sold pursuant to this Agreement
that are in the form of conditional sales contracts as agent and custodian for
the benefit of the Purchaser;
WHEREAS, the Club Trustee is a limited purpose entity which, on behalf
of the Beneficiaries, holds title to certain Intervals and Deeds relating to
Club Receivables sold pursuant to this Agreement;
WHEREAS, the Cash Administrator has been requested and is willing to
provide certain administrative services on behalf of the Purchaser with respect
to Collections and associated investments, payments and distributions thereof in
accordance with the terms hereof;
WHEREAS, Bluegreen and Deed Corp are willing and have agreed pursuant
hereto and to the Servicing Agreement and the Deed Custodian Agreement,
respectively, executed contemporaneously herewith, to act as Servicer and Deed
Custodian, respectively, for the Assets and the Deeds and to perform the
Servicer's and Deed Custodian's respective obligations and responsibilities
under the Servicing Agreement, the Deed Custodian Agreement and hereunder; and
WHEREAS, it is the intention of the Seller and the Purchaser that the
transactions contemplated by this Agreement constitute a sale and absolute
transfer of ownership of the Assets.
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 CERTAIN DEFINED TERMS.
All capitalized terms used and not expressly defined herein, shall have
the meaning specified in the Definitions Annex attached to this Agreement (the
"DEFINITIONS ANNEX").
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Section 1.2 OTHER INTERPRETIVE PROVISIONS.
Except to the extent otherwise specified in the particular term or
provision at issue, this Agreement (including the Definitions Annex hereto)
shall be interpreted and construed in accordance with the Document Conventions.
ARTICLE II
THE PURCHASE FACILITY
Section 2.1 SALE AND PURCHASE OF ASSETS.
(a) Subject to the terms and conditions of this Agreement, the
Seller may, at its option, sell and assign to the Purchaser the Assets
from time to time designated and identified for purchase in accordance
with Section 2.2 hereof, and the Purchaser agrees to make such
purchases from time to time (the first such date, the "INITIAL PURCHASE
DATE") during the period from the Closing Date to but not including the
Termination Date or the Program Termination Date (the first such sale
and purchase to be effected hereunder, the "INITIAL PURCHASE"; each
subsequent sale and purchase, an "INCREMENTAL PURCHASE"; and any such
sale and purchase, a "PURCHASE"). Under no circumstances, however,
shall the Purchaser be obligated to make any Purchase if, after giving
effect to the payment of the Cash Purchase Price relating to such
Purchase, either (i) the aggregate Capital Payout hereunder would
exceed the Purchase Limit, or (ii) the aggregate Capital outstanding
would exceed the Capital Limit. Upon the payment of the related Cash
Purchase Price for the Initial Purchase or any Incremental Purchase,
the Seller shall have, and shall be deemed hereunder to have,
irrevocably sold, assigned, transferred and conveyed to the Purchaser,
without recourse, representation or warranty, express or implied,
except as provided in the Transaction Documents, all right, title and
interest of the Seller in and to the Assets relating to such Initial
Purchase or Incremental Purchase, as the case may be.
(b) The purchase price ("PURCHASE PRICE") for the Purchased
Receivables in each Asset Pool Portion shall consist of the Cash
Purchase Price plus the Deferred Payment. The "CASH PURCHASE PRICE"
shall be an amount equal to the product of (i) the Receivable Balance
as of the Cutoff Date of the Eligible Receivables to be purchased,
multiplied by (ii) the Credit Enhancement Factor. Subject to the
satisfaction of the conditions and on the terms set forth herein, the
Purchaser shall pay to the Seller the Cash Purchase Price for the
Purchased Receivable on the related Purchase Date in accordance with
the provisions of Section 2.2(b). The Deferred Payment with respect to
the
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<PAGE> 8
Purchased Receivables shall be determined and paid in accordance with
the provisions of Sections 2.6(xiii) and 2.7(xiii).
(c) Upon payment of the Cash Purchase Price by the Purchaser
in the amount determined in accordance with Section 2.1(b) and Section
2.2(b) with respect to all Assets purchased on a Purchase Date, the
ownership of all such Assets will be solely vested in the Purchaser.
None of the Originator, Servicer, Seller, Club Trustee nor Deed Corp
shall take any action inconsistent with such ownership and shall not
claim any ownership interest in any Purchased Receivable or related
Asset. The Seller, Originator, Servicer, Club Trustee and Deed
Custodian shall each indicate in their respective books and records
that ownership of each Purchased Receivable and related Asset is held
by the Purchaser. In addition, the Seller shall respond to any
inquiries with respect to ownership of the Assets by stating that it is
no longer the owner of the Assets and that ownership of the Assets is
held by the Purchaser. Any documents, including Deeds, (other than
Deeds relating to Club Receivables) relating to the Purchased
Receivables retained by the Seller, the Originator, Club Trustee or the
Deed Custodian shall be held in trust by the Seller, the Originator (in
its capacity as the Servicer), the Club Trustee and the Deed Custodian
(as agent and custodian for the Purchaser), for the benefit of the
Purchaser, and possession of any incident of ownership relating to the
Purchased Receivables so retained is for the sole purpose of
facilitating the servicing of the Purchased Receivables and, in the
case of the Deed Custodian, for administrative ease of transfer of
deeds upon payment in full by the Obligor of the Receivables in the
form of conditional sales contracts, or otherwise at the direction of
the Purchaser. Such retention and possession (other than retention by
the Club Trustee of Deeds relating to Club Receivables as to which the
rights of the Purchaser, as an Interest Holder Beneficiary, shall be as
set forth in the Trust Agreement) is at the will of the Purchaser and
in a custodial capacity for the benefit of the Purchaser and its
assignees only. The Purchaser may direct the Deed Custodian at any time
to transfer any Deed(s) held by the Deed Custodian relating to any
Receivable purchased hereunder to Purchaser or its nominee; PROVIDED
that any such transfer will be made subject to the conditional sales
contract relating thereto, if any. Subject to the rights of the
Beneficiaries and the other provisions of the Trust Agreement, the
Purchaser may direct the Club Trustee at any time to transfer any
Deed(s) relating to any Club Receivable purchased hereunder to
Purchaser or its nominee; PROVIDED that any such transfer will be made
subject to the Purchase Money Mortgage relating thereto, if any.
Section 2.2 PROCEDURES FOR PURCHASES.
(a) No later than 10:00 a.m. (Chicago, Illinois time) on a
date which is at least five (5) Business Days before any intended
Purchase Date, the Seller will deliver or cause to be delivered to the
Purchaser a Request Notice substantially in the form of EXHIBIT A
hereto; provided, however, if the Purchase relates to Receivables and
related Assets which are financed through a source other than the
Warehouse Facility, such Request Notice shall be provided at least ten
(10) Business Days prior to the intended Purchase
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<PAGE> 9
Date. In the event that the Seller does not provide a properly
completed Request Notice (and subject to all other terms and conditions
to such Purchase hereunder), the Purchaser will not be obligated to
purchase Eligible Receivables on such intended Purchase Date until such
time as such terms and conditions are met. Each such Request Notice
shall specify, among other things, (i) the aggregate amount of such
Purchase, which shall be in a minimum amount equal to $10,000,000, or
such lesser amount as may be equal to the then unused portion of the
Purchase Limit, (ii) the intended Purchase Date for such Purchase, and
(iii) the aggregate Capital Payout, Capital outstanding, and the
Capital Limit, both immediately preceding and after giving effect to
such Purchase.
(b) On each Purchase Date, and subject to the satisfaction of
the conditions of Article IV, the Servicer will prepare and deliver an
Assignment to the Seller and Purchaser in the form of EXHIBIT H hereto
with respect to the Purchased Receivables being purchased on such
Purchase Date by the Purchaser. The Seller shall thereupon execute such
Assignment and deliver executed copies thereof to the Servicer who will
in turn cause a fully executed copy of such Assignment to be delivered
to the Purchaser and the Custodian. The Purchaser shall thereupon pay
to the Seller for such Purchased Receivables the Cash Purchase Price,
by wire transfer in same day funds in accordance with the wire transfer
instructions specified in the related Request Notice. The Seller shall
be solely responsible for obtaining ownership of the Purchased
Receivables from the Originator, pursuant to the Sale and Contribution
Agreement, prior to transfer of ownership of such Purchased Receivables
to the Purchaser under this Agreement.
Section 2.3 ESTABLISHMENT OF ACCOUNTS; RESERVE ACCOUNT.
(a) Prior to or simultaneously with the execution and delivery
of this Agreement, the Purchaser and the Servicer shall (i) establish
an Eligible Deposit Account in the name of the Purchaser, titled
"HELLER LOCKBOX ACCOUNT RE BLUEGREEN RECEIVABLES ASSET PURCHASE
AGREEMENT" (the "LOCKBOX ACCOUNT"), and (ii) enter into the Lockbox
Agreement.
(b) Prior to or simultaneously with the execution and delivery
of this Agreement, the Purchaser and the Cash Administrator shall
establish an Eligible Deposit Account in the name of the Purchaser
titled "HELLER FACILITY COLLECTION ACCOUNT RE BLUEGREEN RECEIVABLES
ASSET PURCHASE AGREEMENT" (the "COLLECTION ACCOUNT").
(c) Each of the Originator, Seller and the Servicer shall
deposit all Collections it may receive in respect of Purchased
Receivables into the Lockbox Account no later than the second Business
Day following the date of receipt thereof. Any collections in respect
of Purchased Receivables held by the Originator, Seller or Servicer
pending transfer to the Lockbox Account shall be held in trust for the
benefit of the Purchaser until such amounts are deposited into the
Lockbox Account.
(d) Prior to or simultaneously with the execution and delivery
of this Agreement, the Purchaser and the Cash Administrator shall
establish an Eligible Deposit
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Account in the name of the Purchaser titled "HELLER/BLUEGREEN FACILITY
RESERVE ACCOUNT" (the "RESERVE ACCOUNT").
(e) Prior to the Termination Date, on or prior to each Payment
Date (and in anticipation of allocations and distributions to be made
on such Payment Date pursuant to Section 2.6), the Servicer in
consultation with the Purchaser, and based upon information provided in
the Monthly Report delivered by the Servicer to the Purchaser two (2)
Business Days prior to the related Payment Date unless the Receivables
or the cash flows therein shall be sold to a third party in which case
the Servicer shall provide such Monthly Report three (3) Business Days
prior to the related Payment Date, shall determine the extent to which
Available Amounts in the Collection Account (including proceeds of any
Servicer Advance deposited therein in accordance with Section 5.18 of
the Servicing Agreement) are insufficient to pay Cash Administrator
Fees, Lockbox Fees, Back-Up Servicer Fees, Custodian Fees, Unreimbursed
Servicer Advances, Protective Advances, Servicing Fees (to the extent
applicable) as well as the Yield and Capital Payment Amount
distributions required on such Payment Date. To the extent of such
insufficiency, amounts held in the Reserve Account shall be transferred
to the Collection Account, treated as Available Amounts for such
Payment Date and thereafter applied in order for any of such payments
or allocations to be made pursuant to Section 2.6. In addition, to the
extent that after giving effect to the payments and allocations to be
made pursuant to Section 2.6, amounts held in the Reserve Account will
exceed the then-applicable Reserve Account Required Amount, such excess
shall be transferred to the Collection Account and applied and
allocated as Available Amounts on the Payment Date with respect to the
related Collection Period under Section 2.6.
(f) On the Payment Date first occurring on or after the
occurrence of the Termination Date, all amounts held in the Reserve
Account shall be transferred to the Collection Account, treated as
Available Amounts on such Payment Date and applied to payments or
allocations required to be made pursuant to Section 2.7.
Section 2.4 [OMITTED].
Section 2.5 DEPOSITS TO ACCOUNTS.
On each Monday, Wednesday, and Friday (or, if any Monday, Wednesday or
Friday is not a Business Day, then on the next succeeding Business Day) pursuant
to the Lockbox Agreement, all Collections in the Lockbox Account shall be
transferred by automated wire by the Lockbox Bank to the Collection Account. In
addition, the proceeds of Servicer Advances made pursuant to Section 5.18 of the
Servicing Agreement, transfers from the Reserve Account made pursuant to Section
2.3(e) or (f), and payments of any Transfer Deposit Amount received from the
Originator or Seller shall be deposited to the Collection Account.
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Section 2.6 NON-LIQUIDATION SETTLEMENT PROCEDURES.
Prior to the Termination Date, on each Payment Date, the Cash
Administrator shall pay to the following Persons, from the Collection Account,
to the extent of Available Amounts on deposit in the Collection Account with
respect to the related Collection Period (and after giving effect to any
transfers into the Collection Account contemplated in Section 2.3(e)), the
following amounts in the following order of priority:
(i) first, to the Cash Administrator, any accrued and unpaid
Cash Administrator Fees and to the Lockbox Bank, any accrued and unpaid
Lockbox Fees;
(ii) second, to the Back-up Servicer, any accrued and unpaid
Back-up Servicer Fees and to the Custodian, any accrued and unpaid
Custodian Fees;
(iii) third, to the Servicer, any Unreimbursed Servicer
Advances (which reimbursement shall be applicable to any Predecessor
Servicer);
(iv) fourth, to the Deed Custodian to allow the Deed Custodian
to make Protective Advances;
(v) fifth, to any Servicer which is the Servicer by virtue of
a Servicer Transfer, and which Servicer is not Bluegreen or any
Affiliate thereof, to such Servicer, any accrued and unpaid Servicing
Fees;
(vi) sixth, to any Servicer or any subservicer (if applicable)
which is the Servicer by virtue of a Servicer Transfer, and which
Servicer or subservicer is not Bluegreen or any Affiliate thereof, to
such Servicer or subservicer any accrued and unpaid Remarketing Fees;
(vii) seventh, to the Purchaser, an amount equal to the
accrued and unpaid Yield, Yield on Yield and Volume Yield;
(viii) eighth, to the Purchaser, an amount equal to the
Capital Payment Amount;
(ix) ninth, to the Servicer, any accrued and unpaid Servicing
Fees (to the extent not paid under clause (v) above);
(x) tenth, to the Servicer for accrued and unpaid Remarketing
Fees;
(xi) eleventh, to the Cash Administrator, for deposit into the
Reserve Account, an amount up to that required to cause the amounts on
deposit in the Reserve Account to equal the Reserve Account Required
Amount;
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(xii) twelfth, to the Purchaser, any amounts due and owing
under Section 12.9 hereof and not paid by the Seller pursuant to such
Section; and
(xiii) thirteenth, any remaining amounts to the Seller, as a
deferred payment for the Assets in the Asset Pool as of or prior to the
end of the related Collection Period (each such payment, a "DEFERRED
PAYMENT").
Section 2.7 LIQUIDATION SETTLEMENT PROCEDURES.
On or after the occurrence of the Termination Date, on each Payment
Date, the Cash Administrator shall pay to the following Persons, from the
Collection Account, to the extent of Available Funds on deposit in the
Collection Account (and after giving effect to the transfers into the Collection
Account contemplated in Section 2.3(f)), the following amounts in the following
order of priority:
(i) first, to the Cash Administrator, any accrued and unpaid
Cash Administrator Fees and to the Lockbox Bank, any accrued and unpaid
Lockbox Fees;
(ii) second, to the Back-up Servicer, any accrued and unpaid
Back-up Servicer Fees and Audit Expenses incurred by the Back-up
Servicer and to the Custodian, any accrued and unpaid Custodian Fees;
(iii) third, to the Servicer, any Unreimbursed Servicer
Advances (which reimbursement shall be applicable to any Predecessor
Servicer);
(iv) fourth, to the Deed Custodian to allow the Deed Custodian
to make Protective Advances;
(v) fifth, to any Servicer which is the Servicer by virtue of
a Servicer Transfer and which Servicer is not Bluegreen or any
Affiliate thereof, to such Servicer, any accrued and unpaid Servicing
Fees;
(vi) sixth, to any Servicer or any subservicer (if applicable)
which is the Servicer by virtue of a Servicer Transfer, and which
Servicer or subservicer is not Bluegreen or any Affiliate thereof, to
such Servicer or subservicer any accrued and unpaid Remarketing Fees;
(vii) seventh, to the Purchaser, an amount equal to the
accrued and unpaid Yield, Yield on Yield and Volume Yield;
(viii) eighth, to the Purchaser, an amount equal to the
Capital Payment Amount;
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(ix) ninth, to the Servicer, any accrued and unpaid Servicing
Fees (to the extent not paid under clause (v) above);
(x) tenth, to the Servicer for accrued and unpaid Remarketing
Fees;
(xi) eleventh, to the Purchaser, any and all remaining
Available Amounts until such time as Capital is reduced to zero (0) as
well as any other amounts outstanding and unpaid hereunder;
(xii) twelfth, to the Purchaser, any amounts due and owing
under Section 12.9 hereof and not paid by the Seller pursuant to such
Section; and
(xiii) thirteenth, any remaining amounts to the Seller as a
final Deferred Payment.
Section 2.8 INVESTMENT OF ACCOUNTS.
Subject to the provisions of this Section 2.8, amounts on deposit in
any Trust Account shall be invested in Permitted Investments. Until the
Termination Date, the Cash Administrator shall invest all such amounts in
Permitted Investments selected by the Purchaser by written notice to the Cash
Administrator, that mature no later than the immediately succeeding Payment
Date. On and after the Termination Date, any investment of such amounts in
Permitted Investments shall be solely at the discretion of the Purchaser. All
Investment Earnings shall be deposited into the Collection Account as and when
received and shall be applied and disbursed in the same manner and priority as
all other amounts in the Collection Account.
Section 2.9 PAYMENTS AND COMPUTATIONS; FUNDING INDEMNITY FOR
FAILED PURCHASE.
(a) All amounts to be paid or deposited by the Originator,
Seller, Servicer or any other applicable payor referred to hereunder
shall be paid or deposited in accordance with the terms hereof no later
than 1:00 p.m. (Chicago, Illinois time) on the day when due in lawful
money of the United States in immediately available funds, and if not
so timely deposited, shall be deemed to have been received on the
following Business Day.
(b) Whenever any payment hereunder shall be stated to be due
on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day, and such extension of time shall in such
case be included in the computation of payment of Yield, Yield on Yield
or any fee payable hereunder, as the case may be.
(c) If any Purchase requested by the Seller pursuant to
Section 2.2 is not for any reason whatsoever made or effectuated, as
the case may be, on the date specified therefor, the Seller and
Originator, jointly and severally, shall be obligated to indemnify the
Purchaser against any loss, cost or expense incurred by such Purchaser,
including,
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without limitation, any loss, cost or expense incurred by such
Purchaser (as reasonably determined by such Purchaser) as a result of
the liquidation or redeployment of deposits or other funds acquired by
such Purchaser to fund or maintain such Purchase, as the case may be;
PROVIDED, that no such indemnification shall be required if any
Purchase is not made or effectuated as a result of any action or
inaction by the Purchaser, other than a failure by such Purchaser to
make any Purchase due to a failure of any condition precedent to such
purchase set forth herein.
Section 2.10 [OMITTED].
Section 2.11 ADDITION/SUBSTITUTION OF RECEIVABLES.
(a) On any day prior to the Termination Date provided it is
done no more than once each Collection Period, and subject to the terms
and conditions hereof, the Seller may at its option replace a Purchased
Receivable currently in the Asset Pool (a "REPLACED RECEIVABLE") with
one or more Subsequent Receivables; provided, that the aggregate
Receivable Balances of all Replaced Receivables since the Initial
Cutoff Date shall not, at any date of determination, exceed an amount
equal to ten percent (10.00%) of the aggregate Receivable Balance of
all Receivables sold by the Seller to the Purchaser pursuant to this
Agreement as of such date. Subject to the conditions set forth in
paragraph (b) below, the Seller if exercising such option shall sell,
transfer, assign, set over and otherwise convey to the Purchaser,
without recourse other than as expressly provided in the Transaction
Documents, (i) all the Seller's right, title and interest in and to the
Subsequent Receivables listed on the related Subsequent List of
Receivables (including, without limitation, all Collections and rights
to receive Collections with respect thereto on or after the related
Subsequent Cutoff Date, but excluding any collections or rights to
receive payments which were collected pursuant thereto prior to such
Subsequent Cutoff Date), and (ii) all other rights and property
interests consisting of Assets related to such Subsequent Receivables
(the property in clauses (i)-(ii) above, upon such transfer, becoming
part of the Asset Pool).
(b) The Seller may transfer to the Purchaser the Subsequent
Receivables and the other property and rights related thereto described
in paragraph (a) above only upon the satisfaction of each of the
following conditions on or prior to the related Subsequent Transfer
Date (and the delivery of a related Addition Notice by the Seller shall
be deemed a representation and warranty by the Seller, that such
conditions have been or will be, as of the related Subsequent Transfer
Date, satisfied):
(i) The Seller shall have provided the Purchaser with
a timely Addition Notice complying with the definition
thereof;
(ii) the Subsequent Receivable(s) being conveyed to
the Purchaser, satisfy the Subsequent Receivable Qualification
Conditions;
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(iii) after giving effect to such conveyance, the
Subsequent Receivable Transfer Conditions shall remain
satisfied;
(iv) the Seller shall have delivered to the Purchaser
a duly executed written assignment, in substantially the form
of EXHIBIT I hereto (the "SUBSEQUENT TRANSFER AGREEMENT" or,
in the case of Substitute Receivables, substantially in the
form of EXHIBIT J hereto (the "SUBSTITUTE RECEIVABLES TRANSFER
AGREEMENT"), which shall include a Subsequent List of
Receivables listing the Subsequent Receivables;
(v) the Seller shall have deposited or caused to be
deposited in the Collection Account all Collections received
with respect to the Subsequent Receivables on or after the
related Subsequent Cutoff Date;
(vi) as of each Subsequent Transfer Date, both the
Originator and the Seller were Solvent and the conveyance
would not have the effect of rendering either no longer
Solvent;
(vii) no selection procedures believed by the
Originator or the Seller to be adverse to the interests of the
Purchaser shall have been utilized in selecting the Subsequent
Receivables;
(viii) each of the representations and warranties
made by the Originator pursuant to Article III of the Sale and
Contribution Agreement applicable to the Subsequent
Receivables shall be true and correct as of the related
Subsequent Transfer Date, and the Originator shall have
performed all obligations to be performed by it hereunder or
thereunder on or prior to such Subsequent Transfer Date; and
(ix) the Originator shall, at its own expense, on or
prior to the Subsequent Transfer Date, have indicated in its
Computer Disk and Records that the Subsequent Receivables
identified on the Subsequent List of Receivables in the
Subsequent Transfer Agreement have been sold to the Purchaser
through the Seller pursuant to this Agreement and the Sale and
Contribution Agreement.
(c) In connection with any replacement of existing Receivables
in the Asset Pool with Subsequent Receivables effected in accordance
with the terms hereof, the Purchaser shall, automatically and without
further action, be deemed to transfer to the Seller, free and clear of
any Lien created pursuant to this Agreement, all of the right, title
and interest of the Purchaser in, to and under the related Replaced
Receivable (including any Collections received with respect thereto on
or after the related Subsequent Cutoff Date), and the Purchaser shall
be deemed to represent and warrant that it has the corporate authority
and has taken all necessary corporate action to accomplish such
transfer, but without any other recourse, representation or warranty,
express or implied.
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Section 2.12 EXTENSION OF PROGRAM TERMINATION DATE; INCREASE
IN COMMITMENT.
(a) The Seller may, within 180 days, but no later than 120
days, prior to the then applicable Program Termination Date, by written
notice to the Purchaser, make written request for the Purchaser to
extend the Program Termination Date for an additional period of 364
days. The Purchaser shall make a determination, in its sole discretion
and after a full credit review, not less than 90 days prior to the then
applicable Program Termination Date as to whether or not it will agree
to extend the Program Termination Date; PROVIDED, HOWEVER, that the
failure of the Purchaser to make a timely response to the Seller's
request for extension of the Program Termination Date shall be deemed
to constitute a refusal by the Purchaser to extend the Program
Termination Date. The Program Termination Date shall only be extended
upon the written consent of the Purchaser.
(b) At any time after the Closing Date, the Seller may, by
written notice to the Purchaser delivered at least 20 Business Days
prior to a Purchase Date, request an increase in the Purchase Limit;
PROVIDED that any such increase must be in a minimum amount of U.S.
$50,000,000. The Purchaser in its sole discretion may approve such
request for an increase in the Purchase Limit, which increase shall
become effective only upon receipt by the Seller of written
confirmation of the Purchaser's consent to such increase, which
specifies the Purchase Limit as so increased.
Section 2.13 EFFECT OF AMENDMENT AND RESTATEMENT. This Agreement amends
and restates in its entirety the Prior Purchase Agreement and, upon
effectiveness of this Agreement, the terms and provisions of the Prior Purchase
Agreement shall, subject to this SECTION 2.13, be superseded hereby. All
references to "Asset Purchase Agreement" or "Agreement" contained in the
Transaction Documents delivered in connection with the Prior Purchase Agreement
shall be deemed to refer to this Agreement. Notwithstanding the amendment and
restatement of the Prior Purchase Agreement by this Agreement, the obligations
and indemnities outstanding under the Prior Purchase Agreement as of the Closing
Date shall remain outstanding and constitute continuing obligations hereunder.
Such outstanding rights and obligations shall in all respects be continuing, and
this Agreement shall not be deemed to evidence or result in a novation of such
rights and obligations. In furtherance of and without limiting the foregoing,
from and after the Closing Date and except as expressly specified herein, the
terms, conditions, and covenants governing the rights and obligations
outstanding under the Prior Purchase Agreement shall be solely as set forth in
this Agreement, which shall supersede the Prior Purchase Agreement in its
entirety.
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ARTICLE III
[RESERVED]
ARTICLE IV
CONDITIONS OF PURCHASES
Section 4.1 CONDITIONS PRECEDENT TO INITIAL PURCHASE.
The Initial Purchase hereunder is subject to the condition precedent
that the Purchaser shall have received on or before the date of such purchase
the items listed in SCHEDULE I, each (unless otherwise indicated) dated such
date, in form and substance satisfactory to the Purchaser.
Section 4.2 CONDITIONS PRECEDENT TO ALL PURCHASES.
The Initial Purchase and each Incremental Purchase from the Seller by
the Purchaser shall be subject to the further conditions precedent that:
(a) with respect to any such Purchase (other than the Initial
Purchase) prior to the date of such Purchase,
(i) the Servicer shall have delivered to the
Purchaser (A) a completed Asset Report, in form and substance
reasonably satisfactory to the Purchaser, substantially in the
form of the Asset Report referred to in Schedule I with
respect to the Initial Purchase, dated within five (5)
Business Days prior to the date of such Incremental Purchase
and containing such additional information as may be
reasonably requested by the Purchaser, and (B) a Subsequent
List of Receivables relating to such Incremental Purchase, and
(c) executed Assignments (under both the Sale and Contribution
Agreement and this Agreement) relating thereto; and
(ii) the Receivables File with respect to such Asset
Pool Portion being purchased shall have been delivered into
the custody of the Purchaser (or arrangements for custody
thereof otherwise satisfactory to the Purchaser shall have
been implemented); and
(iii) all actions or additional actions necessary, in
the reasonable judgment of the Purchaser, to obtain an
absolute ownership interest in favor of the Purchaser in the
Asset Pool Portion being purchased shall have been taken (and
Purchaser may in its discretion require, as a condition to
such determination, the delivery of an Opinion of Counsel to
such effect);
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<PAGE> 18
(b) on the date of such Purchase the following statements
shall be true and the Seller by accepting the amount of such Purchase
shall be deemed to have certified that:
(i) the representations and warranties contained in
Sections 5.1 and 5.2 are true and correct on and as of such
day as though made on and as of such date,
(ii) no event has occurred and is continuing, or
would result from such Purchase which constitutes an Event of
Termination,
(iii) on and as of such day, after giving effect to
such Purchase, the Capital Payout will not exceed the Purchase
Limit, and the outstanding Capital will not exceed the Capital
Limit, and
(iv) on and as of such day, the Seller and the
Servicer each has performed all of the agreements contained in
this Agreement and the other Transaction Documents to be
performed by such Person at or prior to such day;
(c) no law, rule or regulation shall prohibit, and no order,
judgment or decree of any federal, state or local court or government
body, agency or instrumentality shall prohibit or enjoin any of the
activities of the Purchaser contemplated by this Agreement;
(d) (i) no event has occurred under the Warehouse Facility
that would relieve Heller Financial, Inc. from making advances under
the Warehouse Facility and (ii) no Increased Cost Event shall have
occurred and be continuing;
(e) the Deed Custodian shall have received with respect to
Receivables either an original note/instrument and related Allonge or
the original conditional sales contract;
(f) the Deed Custodian shall have received either a Master
Deed or Deeds relating to the Intervals if the related Receivable is a
conditional sales contract;
(g) in the event the condition requiring the application of
the Interest Rate Environment Modifier exists, the Purchaser and Seller
shall have agreed to the Interest Rate Environment Modifier; and
(h) the Purchaser shall have received such other approvals,
opinions or documents as the Purchaser may reasonably request.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
Section 5.1 REPRESENTATIONS AND WARRANTIES OF THE SELLER.
The Seller represents and warrants, as of the Closing Date, each
Purchase Date and each Subsequent Transfer Date, as follows:
(a) ORGANIZATION AND GOOD STANDING. The Seller is a
corporation duly organized and validly existing in good standing under
the laws of the State of Delaware, and has full corporate power,
authority and legal right to own its properties and conduct its
business as such properties are presently owned and such business is
presently conducted, and to execute, deliver and perform its
obligations under this Agreement and each other Transaction Document to
which it is a party.
(b) DUE QUALIFICATION. The Seller is duly qualified to do
business and is in good standing as a foreign corporation (or is exempt
from such requirements), and has obtained or will obtain all necessary
licenses and approvals, in each jurisdiction in which failure to so
qualify or to obtain such licenses and approvals would have a material
adverse effect on its ability to perform its obligations hereunder.
(c) DUE AUTHORIZATION. The execution and delivery of this
Agreement and each other Transaction Document to which it is a party,
and the consummation of the transactions provided for herein and
therein have been duly authorized by the Seller by all necessary
corporate action on the part of the Seller.
(d) NO CONFLICT. The execution and delivery of this Agreement
and each other Transaction Document to which it is a party, the
performance of the transactions contemplated hereby and thereby and the
fulfillment of the terms hereof and thereof will not conflict with,
result in any breach of any of the material terms and provisions of, or
constitute (with or without notice or lapse of time or both) a material
default under, any material indenture, receivable, agreement, mortgage,
deed of trust, or other instrument to which the Seller is a party (or
by which it or any of its property is bound).
(e) NO VIOLATION. The execution and delivery of this Agreement
and each other Transaction Document to which it is a party, the
performance of the transactions contemplated hereby and thereby and the
fulfillment of the terms hereof and thereof (including, without
limitation, the sale of Assets by the Seller or remittance of
Collections in accordance with the provisions of this Agreement) will
not conflict with or violate, in any material respect, any Requirements
of Law applicable to the Seller.
(f) NO PROCEEDINGS. There are no proceedings or investigations
pending or, to the best knowledge of the Seller, threatened against the
Seller, before any court,
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<PAGE> 20
regulatory body, administrative agency, or other tribunal or
governmental instrumentality (i) asserting the invalidity of this
Agreement or any other Transaction Document, (ii) seeking to prevent
the consummation of any of the transactions contemplated by this
Agreement or any other Transaction Document or (iii) seeking any
determination or ruling that could reasonably be expected to be
adversely determined, and if adversely determined, would materially and
adversely affect the performance by the Seller of its obligations under
this Agreement or any Transaction Document.
(g) ALL CONSENTS REQUIRED. All approvals, authorizations,
consents, orders or other actions of any Person or of any Governmental
Authority required in connection with the Seller's execution and
delivery of this Agreement and the other Transaction Documents to which
it is a party, the performance of the transactions contemplated hereby
and thereby, and the fulfillment of the terms hereof and thereof, have
been obtained.
(h) BULK SALES. The execution, delivery and performance of
this Agreement do not require compliance with any "BULK SALES" law by
the Seller.
(i) SOLVENCY. After giving effect to the transactions under
this Agreement, the Seller will be Solvent.
(j) SELECTION PROCEDURES. No selection procedures believed by
the Seller to be materially adverse to the interests of the Purchaser
were utilized by the Seller in selecting the Receivables in the Asset
Pool.
(k) TAXES. The Seller has filed or caused to be filed all tax
returns which, to its knowledge, are required to be filed and has paid
when due all taxes shown to be due and payable on such returns or on
any assessments made against it or any of its property and all other
taxes, fees or other charges imposed on it or any of its property by
any Governmental Authority (other than any amount of tax due the
validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which reserves in
accordance with generally accepted accounting principles have been
provided on the books of the Seller); no tax lien has been filed and,
to the Seller's knowledge, no claim is being asserted, with respect to
any such tax, fee or other charge.
(l) AGREEMENTS ENFORCEABLE. This Agreement and the other
Transaction Documents to which the Seller is a party constitute the
legal, valid and binding obligation of the Seller enforceable against
the Seller in accordance with their respective terms, except as such
enforceability may be limited by (i) applicable Insolvency Laws and
(ii) general principles of equity (whether considered as a suit at law
or in equity) or implied covenants of good faith and fair dealing.
(m) EXCHANGE ACT COMPLIANCE. No proceeds of any Purchase will
be used by the Seller or the Originator to acquire any security in any
transaction which is subject to Section 13 or 14 of the Securities
Exchange Act of 1934, as amended.
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<PAGE> 21
(n) NO LIENS. Each Asset, together with the Receivable related
thereto, shall, immediately prior to its sale hereunder, be owned by
the Seller free and clear of any Lien (except Permitted Liens), and
upon each Purchase, the Purchaser shall acquire an undivided ownership
interest in each Asset and in the Collections with respect thereto,
free and clear of any Lien (except Permitted Liens). No effective
financing statement or other instrument similar in effect covering any
Asset or the Collections with respect thereto shall at any time be on
file in any recording office except such as may be filed in favor of
the Purchaser relating to this Agreement, or in favor of the Seller as
assignee of the Originator.
(o) PURCHASE LIMIT AND CAPITAL LIMIT. The Capital Payout
(after giving effect to any current Purchase or conveyance of
Receivables) does not exceed the Purchase Limit; and the aggregate
Capital outstanding (after giving effect to any current Purchase or
conveyance of Receivables) does not exceed the Capital Limit.
(p) REPORTS ACCURATE. No Asset Report, exhibit, financial
statement, document, book, record or report furnished or to be
furnished by the Seller to the Purchaser in connection with this
Agreement is or will be inaccurate in any material respect as of the
date it is or shall be dated or (except as otherwise disclosed to the
Purchaser, as the case may be, at such time) as of the date so
furnished, and no such document contains or will contain any material
misstatement of fact or omits or shall omit to state a material fact or
any fact necessary in light of the circumstances under which made, to
make the statements contained therein not misleading.
(q) LOCATION OF OFFICES. The principal place of business and
chief executive office of the Seller and the Originator, and the office
where the Seller and Originator keep all the Records, are located at
the addresses of the Seller and Originator, respectively, referred to
in Section 12.2 hereof (or at such other locations as to which the
notice and other requirements specified herein shall have been
satisfied).
(r) TRADENAMES. Except as described in SCHEDULE III, neither
the Seller nor the Originator has trade names, fictitious names,
assumed names or "DOING BUSINESS AS" names or other names under which
either has done or is doing business.
(s) SALE AND CONTRIBUTION AGREEMENT. The Sale and Contribution
Agreement is the only agreement pursuant to which the Seller acquires
ownership of the Receivables and related Assets.
(t) VALUE GIVEN. The Seller shall have given reasonably
equivalent value to the Originator in consideration for the transfer to
the Seller of the Assets under the Sale and Contribution Agreement, no
such transfer shall have been made for or on account of an antecedent
debt owed by such Originator to the Seller, and no such transfer is or
may be voidable or subject to avoidance under any section of the
Bankruptcy Code.
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<PAGE> 22
(u) SPECIAL PURPOSE ENTITY. The Certificate of Incorporation
of the Seller includes substantially the provisions set forth on
EXHIBIT F hereto, and the Originator has confirmed in writing to the
Seller that, so long as the Seller is not "INSOLVENT" within the
meaning of the Bankruptcy Code, the Originator has covenanted in the
Sale and Contribution Agreement that it will not cause the Seller to
file a voluntary petition under the Bankruptcy Code or any other
bankruptcy or insolvency laws.
(v) ACCOUNTING. The Originator and Seller each account for the
transfer from the Originator of interests in Assets and Collections
under the Sale and Contribution Agreement as sales of such Assets in
its books, records and financial statements, in each case consistent
with GAAP and with the requirements set forth herein.
(w) SEPARATE ENTITY. The Seller is operated as an entity with
assets and liabilities distinct from those of the Originator and any
Affiliates thereof (other than the Seller), and the Seller and
Originator hereby acknowledge that the Purchaser is entering into the
transactions contemplated by this Agreement in reliance upon the
Seller's identity as a separate legal entity from the Originator and
from each such other Affiliate of the Originator.
(x) BACK-UP SECURITY INTEREST. It is the intention of the
Originator and Seller that the transactions contemplated by the Sale
and Contribution Agreement and this Agreement constitute an irrevocable
sale, assignment and transfer of ownership of the Receivables and
related Assets transferred thereunder. Nevertheless, in the event a
court of competent jurisdiction were to ever determine that the
transactions contemplated by the Sale and Contribution Agreement and
the this Agreement were secured financings rather than "TRUE SALES",
the Originator has granted (and hereby grants to) the Seller in the
Sale and Contribution Agreement and the Seller by assignment of its
rights hereunder has granted (and hereby grants to) the Purchaser a
"SECURITY INTEREST" (the term security interest, as used throughout
this Agreement, is used as defined in the UCC) in the Receivables and
related Assets being conveyed hereunder, which is enforceable in
accordance with the UCC upon execution and delivery of this Agreement.
Upon the filing of UCC-1 financing statements naming the Purchaser as
secured party and buyer and the Seller as debtor and seller, the
Purchaser shall have a first priority perfected security interest in
the Assets and Collections. All filings (including, without limitation,
such UCC filings) as are necessary in any jurisdiction to perfect the
interest of the Purchaser in the Assets and Collections have been (or
prior to the applicable Purchase will be) made.
(y) INVESTMENT COMPANY AND PUBLIC UTILITY HOLDING COMPANY.
Neither the Originator nor the Seller is an "INVESTMENT COMPANY" within
the meaning of and subject to regulation under the Investment Company
Act of 1940, as amended, or a "HOLDING COMPANY" or a "SUBSIDIARY
COMPANY" of a "HOLDING COMPANY," within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
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<PAGE> 23
(z) ACCURACY OF REPRESENTATIONS AND WARRANTIES. Each
representation or warranty by the Seller contained herein or in any
certificate or other document furnished by the Seller pursuant hereto
or in connection herewith is when furnished true and correct in all
material respects; provided, however, Purchaser acknowledges that with
respect to the condition of a Receivable as an "ELIGIBLE RECEIVABLE" as
of their date of Purchase hereunder, Purchaser's remedy for a breach of
a representation or warranty relating to their status as an Eligible
Receivable is provided by Section 6.3 hereof.
(aa) YEAR 2000. Seller 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 it will be "YEAR 2000
COMPLIANT" by January 1, 2000. For purposes of this Section 5.1, "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 Seller 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. From time to
time, at the request of the Purchaser, Seller shall provide to
Purchaser such updated information as is requested regarding the status
of its effort to become Year 2000 Compliant.
(bb) RESERVATION SYSTEM. The Reservation System is owned by
the Club Managing Entity free and clear of any liens or security
interests, but subject to the provisions of the Club Management
Agreement and the Trust Agreement, and the Club has the right to
utilize such system under and pursuant to Club Management Agreement.
The Club Management Agreement is in full force and effect and no
default on the part of the Club Trustee or the Club Managing Entity
exists thereunder. The Servicer owns 100% of the equity capital of the
Club Managing Entity. An assessment of the microchip and computer-based
systems and the software used in the Reservation System has been made
and based upon such assessment, the Servicer and the Managing Entity
believe it will be Year 2000 Compliant by January 1, 2000.
(cc) TRUST AGREEMENT. The Trust Agreement, of which a true and
correct copy is attached hereto as EXHIBIT E, is in full force and
effect.
The representations and warranties set forth in this section shall survive the
transfer of the Assets to the Purchaser, and termination of the rights and
obligations of the Servicer pursuant to the Servicing Agreement. Upon discovery
by the Seller, the Servicer or the Purchaser of a breach of any of the foregoing
representations and warranties, the party discovering such breach shall give
prompt written notice to the others.
Section 5.2 REPRESENTATIONS AND WARRANTIES OF SELLER RELATING TO THE
AGREEMENT AND THE RECEIVABLES.
The Seller hereby represents and warrants to the Purchaser that, as of
the Closing Date, each Purchase Date and as of each Subsequent Transfer Date:
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<PAGE> 24
(a) Binding Obligation; Valid Sale and Transfer of Ownership;
Precautionary Grant of Security Interest.
(i) This Agreement and each other Transaction Document to
which the Seller is a party constitutes a legal, valid and binding
obligation of the Seller, enforceable against the Seller in accordance
with its terms, except as such enforceability may be limited by
Insolvency Laws and except as such enforceability may be limited by
general principles of equity (whether considered in a suit at law or in
equity).
(ii) It is the expressed intention of Seller and Purchaser
that this Agreement constitutes an irrevocable true sale and transfer
of ownership from Seller to the Purchaser of all right, title and
interest of Seller in, to and under the Assets, and that such transfer
be free and clear of any Lien of any Person claiming through or under
the Seller or its Affiliates, except for Permitted Liens. Nevertheless,
in the event a court of competent jurisdiction were to determine that
the transactions contemplated by this Agreement constitute a secured
financing rather than a true sale, Seller hereby grants, as a
precautionary measure, a security interest in such Assets to the
Purchaser. Upon the filing of the financing statements described in
Section 5.1(x) and, in the case of Incremental Purchases or Subsequent
Receivables on the applicable Incremental Purchase Date or Subsequent
Transfer Date, as applicable, the Purchaser shall have a first priority
perfected security interest in such property, subject only to Permitted
Liens. Neither the Seller nor any Person claiming through or under
Seller shall have any claim to or interest in the Collection Account,
except to the extent set forth in Sections 2.6 and 2.7, as applicable,
and, if, notwithstanding the expressed intention of the parties hereto,
this Agreement constitutes the grant of a security interest (for
collateral purposes) in such property, except for the interest of
Seller in such property as a debtor for purposes of the UCC.
(b) ELIGIBILITY OF RECEIVABLES. As of the initial Cutoff Date,
(i) the List of Receivables and the Asset Report delivered in
connection therewith is an accurate and complete listing in all
material respects of all the Receivables in and to become part of the
Asset Pool as of the Cutoff Date and the information contained therein
(including with respect to the identity of such Receivables, Obligors
thereon, and the amounts owing thereunder) is true and correct in all
material respects as of the Cutoff Date, and
(ii) each such Receivable is an Eligible Receivable,
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<PAGE> 25
(iii) each such Receivable and the related Assets has been
transferred to the Purchaser free and clear of any Lien of any Person
(other than Permitted Liens) and in compliance, in all material
respects, with all Requirements of Law applicable to the Seller, and
(iv) with respect to each such Receivable, all material
consents, licenses, approvals or authorizations of or registrations or
declarations with any Governmental Authority required to be obtained,
effected or given by Seller in connection with the transfer of such
Receivable and the related Assets to the Purchaser have been duly
obtained, effected or given and are in full force and effect.
On each Incremental Purchase Date or Subsequent Transfer Date, the
Seller shall be deemed to represent and warrant to the Purchaser that
(I) the Subsequent List of Receivables and the Asset
Report delivered in connection therewith is an
accurate and complete listing in all material
respects of all the Receivables then in, and as a
result of such Incremental Purchaser or Subsequent
Transfer to become part of, the Asset Pool as of the
applicable Cutoff Date and the information contained
therein (including with respect to the identity of
such Receivables, Obligors thereon, and the amounts
owing thereunder) is true and correct in all material
respects as of the applicable Cutoff Date,
(II) each Receivable transferred on such day is an
Eligible Receivable,
(III) each such Receivable and the related Assets has been
transferred to the Purchaser free and clear of any
Lien of any Person (other than Permitted Liens) and
in compliance, in all material respects, with all
Requirements of Law applicable to Seller or the
Originator thereof, and
(IV) with respect to each such Receivable and related
Assets, all material consents, licenses, approvals or
authorizations of or registrations or declarations
with any Governmental Authority required to be
obtained, effected or given by the Seller in
connection with the transfer of such Receivable and
related Assets to the Purchaser have been duly
obtained, effected or given and are in full force and
effect.
(c) NOTICE OF BREACH. The representations and warranties set
forth in this Section 5.2 shall survive the transfer of the respective
Receivables and related Assets, or
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<PAGE> 26
interests therein, to the Purchaser. Upon discovery by the Seller, the
Servicer or the Purchaser of a breach of any of the foregoing
representations and warranties, the party discovering such breach shall
give prompt written notice to the others.
Section 5.3 REPRESENTATIONS AND WARRANTIES OF THE CLUB AND THE
CLUB TRUSTEE.
(a) The Bluegreen Vacation Club Trust is a trust duly
established in accordance with the Trust Agreement under the laws of
the State of Florida for the purpose of holding and preserving certain
property for the benefit of the beneficiaries referred to in the Trust
Agreement. The Club Trustee has all necessary trust and other
authorizations and powers required to carry out its obligations under
the Trust Agreement in the State of Florida and in all other states in
which it owns Resort Interests. The Bluegreen Vacation Club Trust is
not a corporation or business trust under the laws of the State of
Florida. The Bluegreen Vacation Club Trust is not taxable as an
association, corporation or business trust under federal law or the
laws of the State of Florida.
(b) The Club Trustee is a corporation duly formed, validly
existing and in good standing under the laws of the State of Florida.
The Club Trustee is authorized to transact business in no other state.
The Club Trustee is not an affiliate of the Servicer and is in
compliance with the requirements of Chapter 721, Florida Statutes, that
it be independent of the Servicer.
(c) The Club Trustee had all necessary corporate power to
execute and deliver, and has all necessary corporate power to perform
its obligations under this Agreement, the other Transaction Documents
to which it is a party, the Trust Agreement and the Club Management
Agreement. The Club Trustee possesses all requisite franchises,
operating rights, licenses, permits, consents, authorizations,
exemptions and orders as are necessary to discharge its obligations
under the Trust Agreement.
(d) A certified copy of the Trust Agreement has been delivered
to the Purchaser together with all amendments and supplements in
respect thereof.
(e) The Club Trustee holds all right, title and interest in
and to all of the Resort Interests related to the Club Receivables
solely for the benefit of the Beneficiaries referred to in, and subject
in each case to the provisions of, the Trust Agreement and the other
documents and agreements related thereto. Except with respect to the
Purchase Money Mortgages, the Club Trustee has permitted none of such
Resort Interests to be made subject to any lien or encumbrance during
the time it has been a part of the trust estate under the Trust
Agreement.
(f) There are no actions, suits, proceedings, orders or
injunctions pending against the Club Trust or the Club Trustee, at law
or in equity, or before or by any governmental authority.
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<PAGE> 27
(g) Neither the Club Trust nor the Club Trustee has incurred
any indebtedness for borrowed money (directly, by guarantee, or
otherwise).
(h) All ad valorem taxes and other taxes and assessments
against the Bluegreen Vacation Club Trust and/or its trust estate have
been paid and neither the Servicer nor the Club Trustee knows of any
basis for any additional taxes or assessments against any such
property. The Club Trust has filed all required tax returns and has
paid all taxes shown to be due and payable on such returns, including
all taxes in respect of sales of Owner Beneficiary Rights (as defined
in the Trust Agreement) and Vacation Points.
(i) The Club Trust and the Club Trustee are in compliance with
all applicable laws, statutes, rules and governmental regulations
applicable to it and in compliance with each instrument, agreement or
document to which it is a party or by which it is bound, including,
without limitation, the Trust Agreement.
(j) Except as expressly permitted in the Trust Agreement, the
Club Trustee has maintained the One-to-One Beneficiary to Accommodation
Ratio (as such terms are defined in the Trust Agreement).
(k) Except as disclosed to the Purchaser in writing, none of
the Obligors under the Club Receivables has had its rights under the
Club Trust suspended.
(l) Bluegreen Vacation Club, Inc. is a non-stock corporation
duly formed, validly existing and in good standing under the laws of
the State of Florida.
(m) Upon purchase of the Club Receivables and related Assets
hereunder, the Purchaser is an "Interest Holder Beneficiary" under the
Trust Agreement and each of the Club Receivables constitutes "Lien
Debt", "Purchase Money Lien Debt" and "Owner Beneficiary Obligations"
under the Trust Agreement.
(n) Except as disclosed to the Purchaser in writing, each
Purchase Money Mortgage associated with a Club Receivable and granted
by the Club Trustee or the Obligor on the related Club Receivable, as
applicable, has been duly executed, delivered and recorded (or will be
recorded) by or pursuant to the instructions of the Club Trustee under
the Trust Agreement and such Purchase Money Mortgage is valid and
binding and effective to create the lien and security interests it
purports to create. Each of such Purchase Money Mortgages was granted
in connection with the financing of a sale of a Resort Interest.
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<PAGE> 28
ARTICLE VI
GENERAL COVENANTS
Section 6.1 GENERAL COVENANTS OF THE SELLER.
Until the date on which all Aggregate Unpaids following the Termination
Date or Program Termination Date have been indefeasibly paid in full, the Seller
hereby covenants that:
(a) COMPLIANCE WITH LAWS; PRESERVATION OF CORPORATE EXISTENCE.
The Seller will comply in all material respects with all applicable
laws, rules, regulations and orders and preserve and maintain its
corporate existence, rights, franchises, qualifications and privileges.
(b) [OMITTED].
(c) SECURITY INTERESTS. Except for the transfers hereunder,
the Seller will not sell, pledge, assign or transfer to any other
Person, or grant, create, incur, assume or suffer to exist any Lien on
any Receivable in the Asset Pool or related Interval, whether now
existing or hereafter transferred hereunder, or any interest therein,
and the Seller will not sell, pledge, assign or suffer to exist any
Lien on its interest, if any, hereunder. The Seller will immediately
notify the Purchaser of the existence of any such Lien on any
Receivable in the Asset Pool or related Interval; and the Seller shall
defend the right, title and interest of the Purchaser in, to and under
the Receivables in the Asset Pool and the related Interval, against all
claims of third parties; PROVIDED, HOWEVER, that nothing in this
Section 6.l (c) shall prevent or be deemed to prohibit the Seller from
suffering to exist Permitted Liens upon any of the Receivables in the
Asset Pool or any related Interval.
(d) COMPLIANCE WITH LAW. The Seller hereby agrees to comply in
all material respects with all Requirements of Law applicable to the
Seller, the Receivables and the Intervals.
(e) ACTIVITIES OF SELLER. The Seller shall not engage in any
business or activity of any kind, or enter into any transaction or
indenture, mortgage, instrument, agreement, receivable, lease or other
undertaking, which is not directly related to the transactions
contemplated and authorized by this Agreement, the other Transaction
Documents and its Certificate of Incorporation.
(f) AGREEMENTS. The Seller shall not become a party to, or
permit any of its properties to be bound by, any indenture, mortgage,
instrument, receivable, agreement, lease or other undertaking, except
this Agreement and the other Transaction Documents, or amend or modify
the provisions of its Certificate of Incorporation, or issue any power
of attorney except to the Purchaser or the Servicer.
(g) SEPARATE CORPORATE EXISTENCE. The Seller shall:
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(i) Maintain its own deposit account or accounts,
separate from those of any Affiliate, with commercial banking
institutions. The funds of the Seller will not be diverted to
any other Person or for other than corporate uses of the
Seller.
(ii) Ensure that, to the extent that it shares the
same officers or other employees as any of its stockholders or
Affiliates, the salaries of and the expenses related to
providing benefits to such officers and other employees shall
be fairly allocated among such entities, and each such entity
shall bear its fair share of the salary and benefit costs
associated with all such common officers and employees.
(iii) Ensure that, to the extent that it and
Originator (together with their respective stockholders or
Affiliates) jointly does business with vendors or service
providers or share overhead expenses, the costs incurred in so
doing shall be allocated fairly among such entities, and each
such entity shall bear its fair share of such costs. To the
extent that it and the Originator (together with their
respective stockholders or Affiliates) does business with
vendors or service providers when the goods and services
provided are partially for the benefit of any other Person,
the costs incurred in so doing shall be fairly allocated to or
among such entities for whose benefit the goods and services
are provided, and each such entity shall bear its fair share
of such costs. All material transactions between Seller and
any of its Affiliates shall be only on an arm's length basis.
(iv) To the extent that Seller and any of its
stockholders or Affiliates have offices the same location,
there shall be a fair and appropriate allocation of overhead
costs among them, and each such entity shall bear its fair
share of such expenses.
(v) Conduct its affairs strictly in accordance with
its Certificate of Incorporation and observe all necessary,
appropriate and customary corporate formalities, including,
but not limited to, holding all regular and special
stockholders' and directors' meetings appropriate to authorize
all corporate action, keeping separate and accurate minutes of
its meetings, passing all resolutions or consents necessary to
authorize actions taken or to be taken, and maintaining
accurate and separate books, records and accounts, including,
but not limited to, payroll and intercompany transaction
accounts.
(h) LOCATION OF SELLER, RECORDS; INSTRUMENTS. The Seller (x)
shall not move outside the State of Florida, the location of its chief
executive office, without 30 days' prior written notice to the
Purchaser and (y) shall not move or permit the Servicer to
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move the location of the Receivable Files, other than to the Custodian,
from the locations thereof on the Initial Purchase Date, without 30
days' prior written notice to the Purchaser and (z) will promptly take
all actions required (including, but not limited to, all filings and
other acts necessary or advisable under the UCC of each relevant
jurisdiction in order to evidence the Purchaser's ownership interest
(and back-up grant of a first priority perfected security interest to
the Purchaser) in all Receivables in the Asset Pool. The Seller will
give the Purchaser prompt notice of a change within the State of Florida
of the location of its chief executive office.
(i) ACCOUNTING FOR PURCHASES. The Seller will not account for
or treat (whether in financial statements or otherwise) the
transactions contemplated hereby or by the Sale and Contribution
Agreements in any manner other than the sale of Assets by the Seller to
a Purchaser or the sale or contribution of the Receivables and related
Assets by the Originator to the Seller, as the case may be.
(j) ERISA MATTERS. The Seller will not (a) engage in any
prohibited transaction for which an exemption is not available or has
not previously been obtained from the United States Department of
Labor; (b) permit to exist any accumulated funding deficiency, as
defined in Section 302(a) of ERISA and Section 412(a) of the Code, or
funding deficiency with respect to any Benefit Plan other than a
Multiemployer Plan; (c) fail to make any payments to a Multiemployer
Plan that the Seller may be required to make under the agreement
relating to such Multiemployer Plan or any law pertaining thereto; (d)
terminate any Benefit Plan so as to result in any liability; or (e)
permit to exist any occurrence of any reportable event described in
Title IV of ERISA which represents a material risk of a liability of
the Seller under ERISA or the Code.
(k) NATURE OF BUSINESS. The Seller will engage in no business
other than the purchase of Assets from the Originator, the sale of
Assets to the Purchaser and the other transactions permitted or
contemplated by this Agreement.
(l) ORIGINATOR ASSETS. With respect to each Asset acquired by
the Seller from the Originator, the Seller will (i) acquire such Asset
pursuant to and in accordance with the terms of the Sale and
Contribution Agreement, (ii) take all action necessary to perfect,
protect and more fully evidence the Seller's ownership of such Asset,
including, without limitation, (A) filing and maintaining effective
financing statements (Form UCC-1) against the Originator in all
necessary or appropriate filing offices, and filing continuation
statements, amendments or assignments with respect thereto in such
filing offices, and (B) executing or causing to be executed such other
instruments or notices as may be necessary or appropriate, and (iii)
take all additional action that the Purchaser may reasonably request to
perfect, protect and more fully evidence the respective interests of
the parties to this Agreement in the Assets.
(m) TRANSACTIONS WITH AFFILIATES. The Seller will not enter
into, or be a party to, any transaction with any of its Affiliates,
except (i) the transactions permitted or
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contemplated by this Agreement and the other Transaction Documents, and
(ii) other transactions (including, without limitation, the lease of
office space or computer hardware or software by the Seller to or from
an Affiliate) (A) in the ordinary course of business, (B) pursuant to
the reasonable requirements of the Seller's business, and (C) upon fair
and reasonable terms that are no less favorable to the Seller than could
be obtained in a comparable arms-length transaction with a Person not an
Affiliate of the Seller. It is understood that any compensation
arrangement for officers shall be permitted under clause (ii)(A) through
(C) above if such arrangement has been expressly approved by the board
of directors of the Seller.
(n) INDEBTEDNESS; INVESTMENTS. The Seller will not incur any
Indebtedness other than Indebtedness arising hereunder or under the
other Transaction Documents and (ii) Indebtedness owing to the
Originator evidenced by subordinated promissory notes in form and
substance reasonably satisfactory to the Purchaser. The Seller will
not make any Investments other than Permitted Investments.
(o) CHANGE IN THE SALE AND CONTRIBUTION AGREEMENT. The Seller
will not amend, modify, waive or terminate any terms or conditions of
the Sale and Contribution Agreement.
(p) AMENDMENT TO CERTIFICATE OF INCORPORATION. The Seller will
not amend, modify or otherwise make any change to its Certificate of
Incorporation to delete or otherwise nullify or circumvent the
provisions set forth on EXHIBIT F hereto.
(q) AUTHORIZED SIGNATORY. Any person signing a Request Notice
on behalf of Seller, as provided in EXHIBIT A hereto shall have the
requisite power and authority to sign the same on behalf of the Seller.
(r) RESORTS. Neither the Seller nor the Servicer shall permit
the number of Resorts within the Club to be less than 20; provided that
for purposes of this clause (r), a "Resort" shall include all phases,
subdivisions and/or developments at the same or substantially the same
geographic location.
(s) TERMINATION OF CLUB MANAGING ENTITY. The Servicer shall
not permit the Club Managing Entity to terminate the Club Management
Agreement without the prior written consent of the Purchaser, such
consent not to be unreasonably withheld.
Section 6.1A GENERAL COVENANTS OF THE CLUB TRUST AND CLUB TRUSTEE.
(a) NO CONVEYANCE. The Club Trustee agrees not to convey any
Resort Interest in the Club relating to a Club Receivable which has
been sold and assigned to the Purchaser unless the Purchaser shall have
issued an instruction to the Club Trustee pursuant to Section 8.07(c)
of the Trust Agreement in connection with its exercise of its rights as
an Interest Holder Beneficiary (as defined in the Trust Agreement)
under Section 7.02 of the Trust Agreement.
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(b) SEPARATE CORPORATE EXISTENCE. The Club Trustee shall:
(i) Maintain its own deposit account or accounts,
separate from those of any Affiliate, with commercial banking
institutions. The funds of the Club Trustee will not be
diverted to any other Person or for other than trust or
corporate uses of the Club Trustee, as applicable.
(ii) Ensure that, to the extent that it shares the
same officers or other employees as any of its stockholders,
beneficiaries or Affiliates, the salaries of and the expenses
related to providing benefits to such officers and other
employees shall be fairly allocated among such entities, and
each such entity shall bear its fair share of the salary and
benefit costs associated with all such common officers and
employees.
(iii) Ensure that, to the extent that the Club
Trustee and the Servicer (together with their respective
stockholders or Affiliates) jointly do business with vendors
or service providers or share overhead expenses, the costs
incurred in so doing shall be allocated fairly among such
entities, and each such entity shall bear its fair share of
such costs. To the extent that the Club Trustee and the
Servicer (together with their respective stockholders or
Affiliates) do business with vendors or service providers when
the goods and services provided are partially for the benefit
of any other Person, the costs incurred in so doing shall be
fairly allocated to or among such entities for whose benefit
the goods and services are provided, and each such entity
shall bear its fair share of such costs. All material
transactions between Seller and any of its Affiliates shall be
only on an arm's length basis.
(iv) To the extent that the Club Trustee and any of
its stockholders, beneficiaries or Affiliates have offices in
the same location, there shall be a fair and appropriate
allocation of overhead costs among them, and each such entity
shall bear its fair share of such expenses.
(v) Conduct its affairs strictly in accordance with
the Trust Agreement or Articles of Incorporation, as
applicable, and observe all necessary, appropriate and
customary corporate formalities, including, but not limited
to, holding all regular and special stockholders', trustees'
and directors' meetings appropriate to authorize all trust and
corporate action, keeping separate and accurate minutes of its
meetings, passing all resolutions or consents necessary to
authorize actions taken or to be taken, and maintaining
accurate and separate books, records and accounts, including,
but not limited to, payroll and intercompany transaction
accounts.
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(c) MERGER OR CONSOLIDATION. The Club Trustee shall not
consolidate with or merge into any other corporation or convey,
transfer or lease substantially all of its assets as an entirety to any
Person unless the corporation formed by such consolidation or into
which the Club Trustee, as the case may be, has merged or the Person
which acquires by conveyance, transfer or lease substantially all the
assets of the Club Trustee, as the case may be, as an entirety, can
lawfully perform the obligations of the Club Trustee hereunder and
executes and delivers to the Purchaser an agreement in form and
substance reasonably satisfactory to the Purchaser which contains an
assumption by such successor entity of the due and punctual performance
and observance of each covenant and condition to be performed or
observed by the Club Trustee under this Agreement.
(d) CORPORATE MATTERS. Notwithstanding any other provision of
this Section and any provision of law, the Club Trustee shall not do
any of the following:
(i) engage in any business or activity other than as
set forth herein or in or as contemplated by the Trust
Agreement or its Amended and Restated Articles of
Incorporation, as applicable;
(ii) without the affirmative vote of a majority of
the members of the Directors (or Persons performing similar
functions) of the Club Trustee (which must include the
affirmative vote of at least one duly appointed Independent
director), (A) dissolve or liquidate, in whole or in part, or
institute proceedings to be adjudicated bankrupt or insolvent,
(B) consent to the institution of bankruptcy or insolvency
proceedings against it, (C) file a petition seeking or consent
to reorganization or relief under any applicable federal or
state law relating to bankruptcy, (D) consent to the
appointment of a receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of the corporation or
a substantial part of its property, (E) make a general
assignment for the benefit of creditors, (F) admit in writing
its inability to pay its debts generally as they become due,
(G) terminate the Club Managing Entity as manager under the
Club Management Agreement or (H) take any corporate action in
furtherance of the actions set forth in clauses (A) through
(G) above; PROVIDED, HOWEVER, that no director may be required
by any shareholder or beneficiary of the Club Trustee to
consent to the institution of bankruptcy or insolvency
proceedings against the Club Trustee so long as it is solvent;
(iii) merge or consolidate with any other
corporation, company or entity or sell all or substantially
all of its assets or acquire all or substantially all of the
assets or capital stock or other ownership interest of any
other corporation, company or entity; or
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(iv) with respect to the Club Trustee, amend or
otherwise modify its Articles of Incorporation or any
definitions contained therein without the prior written
consent of the Purchaser.
(e) The Club Trustee shall not incur any Indebtedness other
than (i) trade payables and operating expenses (including taxes)
incurred in the ordinary course of business or (ii) in connection with
servicing Resort Interests included in the Club's trust estate in the
ordinary course of business consistent with past practices; provided,
that in no event shall the Club Trustee incur Indebtedness for borrowed
money.
Section 6.2 RELEASE OF INTEREST IN INTERVAL.
At the same time as (i) any Receivable becomes a Prepaid Receivable and
in connection therewith the Interval related to such Prepaid Receivable is sold,
(ii) any Receivable matures, or (iii) the Seller through the Servicer,
substitutes or replaces any Receivable as contemplated in Section 2.11 hereof,
the Purchaser will release its interest in the Interval (whether Purchaser's
interest in such Interval is in the form of a lien through a Purchase Money
Mortgage or an interest in the Deed through the Deed Custodian) relating to such
Prepaid Receivable or such Replaced Interval, as the case may be; PROVIDED, that
such release will not constitute a release of the respective interests of
Purchaser and Seller in the proceeds of such sale. In connection with any of the
events described in the preceding sentence, the Purchaser will execute and
deliver (at the expense of the Seller) to the Servicer any assignments, bills of
sale, termination statements and any other releases and instruments as the
Servicer may reasonably request in order to effect such release and transfer,
and the Purchaser shall be deemed to have transferred to the Obligor all of the
Purchaser's right, title and interest in such Interval and shall be deemed to
have represented to the Obligor that the Purchaser has the authority to so
transfer, has completed all corporate action required by it to effect such
transfer and has transferred such interest free and clear of any interest
created by the Purchaser hereunder, but without any other recourse,
representation or warranty, express or implied. Nothing in this Section shall
diminish the Servicer's obligations pursuant to Sections 5.1, 5.5 and 5.6 of the
Servicing Agreement with respect to the proceeds of any such sale.
Section 6.3 RETRANSFER OF INELIGIBLE RECEIVABLES.
Upon discovery by the Servicer, Seller or Purchaser of a breach of a
representation or warranty of the Seller set forth in Section 5.2 with respect
to a Receivable in the Asset Pool which materially adversely affects the
Receivable or with respect to Receivables for which the breach of a
representation or warranty in the aggregate materially adversely affects the
Purchaser (an "INELIGIBLE RECEIVABLE"), the party discovering such breach shall
give prompt written notice to the other parties. Not later than the
Determination Date which is at most thirty (30) days after the earlier to occur
of the discovery of such breach by the Seller or receipt by the Seller of
written notice of such breach given by the Purchaser or the Servicer, the Seller
shall, at its option, either cure the breach within the above described time
period or repurchase and the Purchaser shall convey, free and clear of any Lien
created by pursuant to this Agreement, all of its right, title and interest in
such Ineligible Receivable, and the Purchaser shall, in connection
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with such conveyance and without further action, be deemed to represent and
warrant that it has the corporate authority and has taken all necessary
corporate action to accomplish such conveyance, but without any other recourse,
representation or warranty, express or implied. In any of the foregoing
instances, the Seller shall accept a retransfer of each such Ineligible
Receivable, and there shall be deducted from the Receivable Balance of the Asset
Pool, the Receivable Balance of each such Ineligible Receivable. On and after
the date of such retransfer, each Ineligible Receivable so retransferred shall
not be included in the Asset Pool. In consideration of such retransfer the
Seller shall, on the date of retransfer of such Ineligible Receivable, make or
cause to be made a deposit in the Collection Account (for allocation pursuant to
Section 2.6 or 2.7, as applicable) in immediately available funds in an amount
equal to the Transfer Deposit Amount for such Ineligible Receivable. Upon each
retransfer to the Seller of such Ineligible Receivable in accordance herewith,
the Purchaser shall automatically and without further action be deemed to
transfer, assign and set-over to the Seller, free and clear of any Lien created
pursuant to this Agreement, all the right, title and interest of the Purchaser
in, to and under such Receivable and all monies due or to become due with
respect thereto, the related Interval and all proceeds of such Receivable,
Recoveries and Insurance Proceeds relating thereto, all rights to security for
any such Receivable, the deed relating to any such Receivable and all proceeds
and products of the foregoing, and the Purchaser shall, in connection with such
transfer, assignment and set-over and without further action, be deemed to
represent and warrant that it has the corporate authority and has taken all
necessary corporate action to accomplish such transfer, assignment and set-over,
but without any other recourse, representation or warranty, express or implied.
The Purchaser shall, at the sole expense of the Servicer, execute such documents
and instruments of transfer as may be prepared by the Servicer on behalf of the
Seller and take such other actions as shall reasonably be requested by the
Seller to effect the transfer of such Ineligible Receivable pursuant to this
Section 6.3.
Notwithstanding the foregoing, in lieu of repurchasing an Ineligible
Receivable as described above the Seller may, subject to the conditions and
requirements of Section 2.11 of this Agreement, effect a replacement of such
Receivable with a Substitute Receivable, such replacement to be effected not
later than the date that a repurchase would have been required hereunder. Upon
any such substitution, the Ineligible Receivable (and Deed relating thereto)
will be retransferred to Seller as provided above.
The obligation of the Seller to repurchase and accept retransfer of any
Ineligible Receivable (or in the alternative, effect a valid replacement of such
Receivable as described above) shall constitute the sole remedy respecting any
breach of the representations and warranties set forth in Section 5.2 with
respect to such Receivable available to the Purchaser. Notwithstanding anything
to the contrary contained herein, in the event the Seller, prior to the
applicable Determination Date, remedies the condition which rendered the
Receivable an "INELIGIBLE RECEIVABLE" during the previously described 30 day
period, the Seller is not obligated to repurchase or replace such Receivable. It
is understood and agreed by the parties hereto that the payment obligations of
the Obligors' in respect of the Receivables purchased hereunder shall not be the
obligation of the Originator, the Seller or the Deed Custodian, except with
respect to Servicer Advances and remedies associated with breaches of
representations and warranties.
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ARTICLE VII
SPECIAL PROVISION RELATING TO CLUB RECEIVABLES
Section 7.1 RIGHTS SUBJECT TO TRUST AGREEMENT. Notwithstanding anything to the
contrary set forth herein or in any other Transaction Documents, all references
to the rights of the Purchaser with respect to Club Receivables shall be subject
at all times to the provisions of the Trust Agreement and the other agreements
executed by the Beneficiaries in connection therewith.
ARTICLE VIII
EVENTS OF TERMINATION
Section 8.1 EVENTS OF TERMINATION.
If any of the following events ("EVENTS OF TERMINATION") shall occur:
(a) (i) failure on the part of Originator, the Club Trustee or
the Seller to make or cause to be made any payment or deposit (or in
the alternative, Receivable substitution) required by the terms of this
Agreement or any Transaction Document on the day such payment or
deposit (or substitution) is required to be made by Originator, the
Club Trustee or the Seller (giving effect to any applicable grace
period) or (ii) failure on the part of Originator, the Club Trustee,
the Managing Entity or the Seller to observe or perform any of its
other covenants or agreements set forth in this Agreement or any
Transaction Document, which failure continues unremedied for a period
of 30 days after written notice; PROVIDED, that only a 10 day cure
period shall apply in the case of a failure by Originator or the Seller
to observe its covenant not to grant a security interest or otherwise
intentionally create a Lien on the Receivables;
(b) any representation or warranty made by Originator, the
Club Trustee or the Seller in this Agreement or any Transaction
Document or any information required to be given by Originator, the
Club Trustee or the Seller to the Purchaser to identify the Receivables
pursuant to this Agreement or any Transaction Document, shall prove to
have been incorrect in any material respect when made or when
delivered, which continues to be incorrect in any material respect for
a period of 30 days after written notice; provided, that this clause
(b) shall not apply to any representation and warranty which relates
solely to the condition of a Receivable on the date of Purchase and for
which either a substitution, repurchase or cure right under Section 6.3
hereof applies and for which such remedies are being pursued by the
Seller and Originator consistent with such Section;
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(c) the occurrence of an Insolvency Event relating to
Bluegreen, the Seller, the Servicer, the Club Trustee, the Managing
Entity or the Deed Custodian;
(d) the Seller shall become an "INVESTMENT COMPANY" within the
meaning of the Investment Company Act of 1940, as amended (the "Act")
or the arrangements contemplated by this Agreement shall require
registration as an "INVESTMENT COMPANY" within the meaning of the Act;
(e) as of any Determination Date, the Lifetime Cumulative
Default Rate shall exceed the Lifetime Cumulative Default Threshold;
(f) as of any Determination Date, the Trailing Six Month
Default Rate exceeds 6.00%; provided, however, if such Determination
Date is after the Program Termination Date and the Asset Pool aggregate
Receivable Balance is less than 7.50% of the Capital Payout, such test
shall no longer be applicable.
(g) at the time of any sale of a Resort Interest to a
customer, the Vacation Points related thereto shall be greater than the
Vacation Points required for a customer to utilize the Accommodations
appurtenant to such Vacation Points;
(h) as of any Determination Date, the Trailing Three Month (31
to 59) and (60 to 89) Day Delinquency Rates exceed 6.0% and 4.0%
respectively;
(i) as of any Determination Date, the Weighted Average Spread
is less than 5.50%;
(j) as of the end of any fiscal quarter of the Servicer, the
Fulfillment Rate for the Resorts listed on Exhibit C shall be less than
75.0%;
(k) as of any Determination Date, the Trailing Three Month
Gross Recoveries are less than 85%;
(l) Bluegreen shall cease to own (whether directly or
indirectly) 100% of the issued and outstanding stock of the Seller and
the Managing Entity or the Seller shall cease to own (whether directly
or indirectly) 100% of the issued and outstanding stock of Deed Corp;
(m) a Servicer Termination Event shall occur under the
Servicing Agreement;
then, and in any such event, the Purchaser may, by written notice to the Seller,
declare the Termination Date to have occurred, except that, in the case of any
event described in Section 8.1(c) above, the Termination Date shall be deemed to
have occurred automatically upon the occurrence of such event. Upon any such
declaration or automatic occurrence of the Termination Date, the Purchaser shall
have, to the extent the transaction is recharacterized as a secured loan rather
than a sale of Receivables notwithstanding the parties intent to have the
transaction characterized as a sale of the Receivables and related Assets, in
addition to all other
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rights and remedies under this Agreement or otherwise, all other rights and
remedies provided under the UCC of the applicable jurisdiction and other
applicable laws, which rights shall be cumulative. Notwithstanding anything to
the contrary contained in this Section 8.1, the Events of Termination described
in clauses (e), (h), (i) and (k) may be cured and Purchases may resume hereunder
if such condition shall not exist for three (3) consecutive Collection Periods
after the date the Purchaser ceased making Purchases hereunder; provided,
however, the ability to cure the Event of Termination in clause (k) shall only
be applicable if the trigger level which caused such Event of Termination was
above 80%.
ARTICLE IX
Section 9.1 FURTHER ASSURANCES. The Purchaser, Originator and Seller
agree that from time to time the Purchaser will sell the Assets or cash flows
therein to various third parties. Originator and Seller agree to use their best
efforts to cooperate with the Purchaser in connection with the Purchaser's sale
of the Assets or the cash flows therein to such third parties; provided,
however, Originator and Seller are not obligated to pay any of the Purchaser's
fees or expenses associated with such sale. In the event Originator and Seller
incur out of pocket expenses associated with the sale of the Assets or the cash
flows therein to a third party (I.E., the creation of new software to service
the Receivables and the related Assets or the cash flows therein, change in
servicing requirements, etc.) Purchaser shall reimburse the Originator or Seller
for such expense.
ARTICLE X
[RESERVED]
ARTICLE XI
ASSIGNMENTS; PARTICIPATIONS; RELEASE OF ASSETS
Section 11.1 ASSIGNMENTS.
(a) The Purchaser may at any time assign to one or more
assignees, all, or any ratable part of, its interest in the Asset Pool
as in effect from time to time hereunder, PROVIDED, (i) the Purchaser's
obligations under this Agreement and any other Transaction Document
shall remain unchanged, (ii) the Purchaser shall remain solely
responsible for the performance of such obligations, and (iii) the
Seller, Originator, the Servicer, the Club Trustee and Deed Corp shall
continue to deal solely and directly with the Purchaser in connection
with the rights and obligations under this Agreement and the other
Transaction Documents.
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(b) In addition, the Purchaser may both assign and delegate to
one or more assignees, all, or any ratable part of, its interest in the
Asset Pool as in effect from time to time hereunder, its commitment to
purchase Receivables and related Assets, and the other rights and
obligations of the Purchaser hereunder and under the other Transaction
Documents; PROVIDED, HOWEVER, the Seller, Originator, the Club Trustee
and the Servicer shall, at their election, have the right to continue
to deal solely and directly with the Purchaser in connection with the
rights and obligations under this Agreement and the other Transaction
Documents; and PROVIDED, FURTHER, that if any assignee fails to satisfy
its obligations hereunder, HFI shall perform such obligations. The
Seller and Originator agree to cooperate in good faith with the
Purchaser in connection with effecting any such assignments and
delegations, including execution of any amendments or supplements to
this Agreement or any other Transaction Document which the Purchaser
reasonably deems necessary in order to effect such assignment and
delegation.
Section 11.2 PARTICIPATIONS.
The Purchaser may at any time sell to one or more commercial financial
institutions or other Persons not Affiliates of the Originator, participating
interests in its interest in the Asset Pool as in effect from time to time
hereunder, its commitment to purchase Receivables, and the other rights and
obligations of the Purchaser hereunder and under the other Transaction
Documents; PROVIDED, HOWEVER, that (i) the Purchaser's obligations under this
Agreement and any other Transaction Document shall remain unchanged, (ii) the
Purchaser shall remain solely responsible for the performance of such
obligations, and (iii) the Seller, Originator, the Club Trustee and Servicer
shall continue to deal solely and directly with the Purchaser in connection with
the rights and obligations under this Agreement and the other Transaction
Documents.
Section 11.3 INFORMATION TO ASSIGNEES/PARTICIPANTS; CONFIDENTIALITY.
The Purchaser may furnish any information concerning the Seller,
Originator, the Club Trustee and Servicer in possession of the Purchaser from
time to time to assignees and participants (including prospective assignees and
participants). Purchaser agrees to take and to cause its Affiliates to take
normal and reasonable precautions and exercise due care to maintain the
confidentiality of all information identified as "CONFIDENTIAL" or "SECRET" by
the Seller and provided to it by the Seller, or by the Purchaser on the Seller's
behalf, under this Agreement or any other Transaction Document, and neither it,
the Club Trustee nor any of their Affiliates shall use any such information
other than in connection with or in enforcement of this Agreement and the other
Transaction Documents or in connection with other business now or hereafter
existing or contemplated with the Seller; except to the extent such information
(i) was or becomes generally available to the public other than as a result of
disclosure by the Purchaser or one of its Affiliates, or (ii) was or becomes
available on a non-confidential basis from a source other than the Seller,
provided that such source is not bound by a confidentiality agreement with the
Seller known to the Purchaser; PROVIDED, HOWEVER, that the Purchaser or any
assignee (including any assignee thereof) may disclose such information (A) at
the request of, or pursuant to any requirement of any Purchaser, or in
connection with, an examination of such Purchaser by any regulatory authority;
(B) pursuant to subpoena or other court process; (C) when required to do so
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in accordance with the provisions of any applicable requirement of law; (D) to
the extent reasonably required in connection with any litigation or proceeding
to which the Purchaser or any Affiliates may be party; (E) to the extent
reasonably required in connection with the exercise of any remedy hereunder or
under any other Transaction Document; (F) to the Purchaser's independent
auditors and other professional advisors; (G) to any participant or Eligible
Assignee, actual or potential, provided that such Person agrees in writing to
keep such information confidential to the same extent required of the Purchaser
hereunder; (H) as to the Purchaser or its Affiliate, as expressly permitted
under the terms of any other document or agreement regarding confidentiality to
which the Seller is party or is deemed party with the Purchaser as its
Affiliates; (I) to its Affiliates; PROVIDED such Affiliate is bound by the
confidentiality provisions; (J) to any rating agency or regulatory body
overseeing the Purchaser or any assignee and (K) to any party providing
liquidity or credit support to the Purchaser or any assignee.
Section 11.4 SELLER'S REPURCHASE OPTION.
Following Seller's written notice to the Purchaser at least twenty (20)
days prior to a Payment Date, and provided that the Receivable Balance of all
Receivables in the Asset Pool is then less than 5.00% of the aggregate
Receivable Balances of the Receivables purchased hereunder when so purchased,
the Seller may (but is not required to) repurchase from the Purchaser on that
Payment Date all outstanding Receivables and related Assets at a price equal to
the Aggregate Unpaids. Such price is to be deposited in the Collection Account
one Business Day before such Payment Date, against the Purchaser's retransfer
and release of the Receivables, related Assets and the Receivable Files to the
Seller.
ARTICLE XII
MISCELLANEOUS
Section 12.1 AMENDMENTS AND WAIVERS.
No amendment or modification of any provision of this Agreement shall
be effective without the written agreement of the Seller and the Purchaser or
any assignee and no termination or waiver of any provision of this Agreement or
consent to any departure therefrom by the Seller shall be effective without the
written concurrence of the Purchaser. Any waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
Section 12.2 NOTICES, ETC.
All notices, demands, certificates, requests and communications
hereunder ("NOTICES") shall be in writing and shall be effective (a) upon
receipt when sent through the U.S. mails, registered or certified mail, return
receipt requested, postage prepaid, with such receipt to be effective the date
of delivery indicated on the return receipt, or (b) one Business Day after
delivery to an overnight courier, or (c) on the date personally delivered to an
Authorized Officer of the party to which sent, or (d) on the date transmitted by
legible telefax transmission with a
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<PAGE> 41
verbal confirmation of receipt (except that notices and communications pursuant
to Article II shall not be effective until received with respect to any notice
sent by mail or telex), in all cases addressed to the recipient as follows:
If to the Originator/Servicer: Bluegreen Corporation
4960 Blue Lake Drive
Boca Raton, Florida 33431
Attn: Patrick E. Rondeau, Esq.
Telephone No.: (561) 912-8005
Telecopy: (561) 912-8299
If to the Seller: Bluegreen Receivables Finance
Corporation III
4960 Blue Lake Drive
Boca Raton, Florida 33431
Attn: Patrick E. Rondeau, Esq.
Telephone No.: (561) 912-8005
Telecopy: (561) 912-8299
If to Deed Corp: BRFC III Deed Corporation
4960 Blue Lake Drive
Boca Raton, Florida 33431
Attn: Patrick E. Rondeau, Esq.
Telephone No.: (561) 912-8005
Telecopy: (561) 912-8100
If to Purchaser: Heller Financial, Inc.
30th Floor - HREF/VO
500 W. Monroe Street
Chicago, Illinois 60661
Attn: Portfolio Manager, Vacation
Ownership
Facsimile: (312) 441-7924
with a copy to: Heller Financial, Inc.
30th Floor - HREF/VO
500 W. Monroe Street
Chicago, Illinois 60661
Attn: Group General Counsel -
Vacation Ownership
Facsimile: (312) 441-7872
If to the Cash Administrator: U.S. Bank National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Attn: Sheryl Christopherson
Fax No.: (612) 244-1797
Tel. No.: (612) 244-0739
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<PAGE> 42
If to the Club Trustee: 4950 Blue Lake Drive
Suite 400
Boca Raton, Florida 33431
Telephone No.: (561) 912-7988
Telecopy: (561) 912-7999
Each party hereto may, by notice given in accordance herewith to each of the
other parties hereto, designate any further or different address to which
subsequent notices shall be sent.
Section 12.3 [RESERVED].
Section 12.4 NO WAIVER; REMEDIES.
No failure on the part of the Purchaser to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
Section 12.5 BINDING EFFECT.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
Section 12.6 TERM OF THIS AGREEMENT.
This Agreement, including, without limitation, the Seller's obligation
to observe its covenants set forth in Article VI, shall remain in full force and
effect until there are no Aggregate Unpaids; PROVIDED, HOWEVER, that the
provisions of Section 12.9 and Section 12.10 shall be continuing and shall
survive any termination of this Agreement.
Section 12.7 GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF
OBJECTION TO VENUE.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF ILLINOIS. EACH OF THE PURCHASER, THE SELLER, THE CLUB
TRUSTEE AND THE SERVICER HEREBY AGREES TO THE NON-EXCLUSIVE JURISDICTION OF ANY
FEDERAL COURT LOCATED WITHIN THE STATE OF ILLINOIS. EACH OF THE PARTIES HERETO
HEREBY WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS, AND ANY OBJECTION TO
VENUE OF ANY ACTION INSTITUTED HEREUNDER IN ANY OF THE AFOREMENTIONED COURTS AND
CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY SUCH COURT.
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<PAGE> 43
Section 12.8 WAIVER OF JURY TRIAL.
TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PURCHASER, THE
SELLER, THE CLUB TRUSTEE AND THE SERVICER WAIVES ANY RIGHT TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR
OTHERWISE BETWEEN THE PARTIES HERETO ARISING OUT OF, CONNECTED WITH, RELATED TO,
OR INCIDENTAL TO THE RELATIONSHIP BETWEEN ANY OF THEM IN CONNECTION WITH THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. INSTEAD, ANY SUCH DISPUTE
RESOLVED IN COURT WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY.
Section 12.9 COSTS, EXPENSES AND TAXES.
(a) The Originator and the Seller agree to pay or cause to be
paid on demand all costs and expenses of the Purchaser incurred in
connection with the preparation, execution, delivery, administration
(including periodic auditing), amendment or modification of, or any
waiver or consent issued in connection with, this Agreement and the
other documents to be delivered hereunder or in connection herewith,
including, without limitation, the reasonable fees and out-of-pocket
expenses of counsel for the Purchaser with respect thereto and with
respect to advising the Purchaser as to its respective rights and
remedies under this Agreement and the other documents to be delivered
hereunder or in connection herewith, and all costs and out-of-pocket
expenses, if any (including reasonable counsel fees and expenses),
incurred by the Purchaser in connection with the enforcement of this
Agreement and the other documents to be delivered hereunder or in
connection herewith; PROVIDED, HOWEVER, Originators and Sellers
obligations under this Section 12.9(a) hereof shall not extend to costs
and expenses associated with the exercise of the Purchaser's rights
under Sections 11.1 and 11.2 hereof.
(b) The Originator and the Seller shall pay or cause to be
paid on demand any and all damages, losses, claims, liabilities, fees
and related costs and expenses, including attorney's fees and expenses,
incurred by or awarded against the Purchaser or any of its respective
Affiliates (each, an "INDEMNIFIED PARTY") arising out of or as a result
of any acts, omissions or alleged acts or omissions of the Originator
or Seller in violation or in contravention of this Agreement or other
Transaction Documents and owed by such Indemnified Party to any other
Person; PROVIDED that the Seller shall not be liable for the payment of
any portion of such damages, losses, claims, liabilities, fees or
related costs or expenses resulting from the gross negligence or
willful misconduct of an Indemnified Party or the breach of a
Requirement of Law by an Indemnified Party; PROVIDED, HOWEVER, that
nothing contained in this paragraph shall be construed to obligate the
Originator or the Seller to indemnify an Indemnified Party with respect
to losses, claims, damages and liabilities incurred as a result of the
payment performance of the Receivables and related Assets.
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<PAGE> 44
Section 12.10 NO BANKRUPTCY COVENANT.
The parties hereto (other than the Purchaser) hereby covenant and agree
that they will not institute against, or join any other Person in instituting
against, the Seller, the Club Trustee or Deed Corp any involuntary Insolvency
Proceedings or take any action in contemplation or furtherance thereof.
Section 12.11 PROTECTION OF OWNERSHIP INTERESTS OF THE PURCHASER; INTENT
OF PARTIES; BACK-UP SECURITY INTEREST.
(a) The Seller agrees that from time to time, at its expense,
it will or will cause the Servicer to promptly execute and deliver all
instruments and documents, and take all actions, that may reasonably be
necessary or desirable, or that the Purchaser may reasonably request,
to perfect, protect or more fully evidence its ownership of and
interest in the Assets, or to enable the Purchaser to exercise and
enforce its rights and remedies hereunder.
(b) If the Seller or the Servicer fails to perform any of its
obligations hereunder after ten (10) days' notice from the Purchaser,
the Purchaser may (but shall not be required to) perform, or cause
performance of, such obligation; and the Purchaser's costs and expenses
incurred in connection therewith shall be payable by the Seller (if the
Servicer that fails to so perform is the Seller or an Affiliate
thereof) as provided in Section 12.9, as applicable. The Seller
irrevocably authorizes the Purchaser and appoints the Purchaser as its
attorney-in-fact to act on behalf of the Seller (i) to execute on
behalf of the Seller as debtor and to file financing statements
necessary or desirable in the Purchaser's sole discretion to perfect
and to maintain the perfection and priority of the interest of the
Purchaser in the Assets and (ii) to file a carbon, photographic or
other reproduction of this Agreement or any financing statement with
respect to the Assets as a financing statement in such offices as the
Purchaser in its sole discretion deems necessary or desirable to
perfect and to maintain the perfection and priority of the interests of
the Purchaser in the Assets.
(c) The parties hereto intend that the conveyance of Assets by
the Seller to the Purchaser shall be treated as sales for all purposes.
If, despite such intention, a determination is made that such
transactions shall not be treated as sales, then this Agreement shall
be interpreted to constitute a security agreement and the transactions
effected hereby shall be deemed to constitute secured loans by the
Purchaser to the Seller under applicable law, with recourse of the
Purchaser being limited to the Assets, and as otherwise expressly
contemplated by the provisions of the Transaction Documents. For such
purpose, the Seller hereby transfers, conveys, assigns and grants to
the Purchaser, a continuing security interest in all Assets, all
Collections and the proceeds of the foregoing to secure the repayment
of all Capital, all payments at any time due or accrued in respect of
the Yield and all other payments at any time due (whether accrued or
due) by the
- 40 -
<PAGE> 45
Seller hereunder (including without limit any fee owing to the
Purchaser or amount owing under Section 12.9 hereof).
Section 12.12 EXECUTION IN COUNTERPARTS; SEVERABILITY; INTEGRATION.
This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which when taken together
shall constitute one and the same agreement. In case any provision in or
obligation under this Agreement shall be invalid, illegal or unenforceable in
any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby. This
Agreement contains the final and complete integration of all prior expressions
by the parties hereto with respect to the subject matter hereof and shall
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof, superseding all prior oral or written understandings.
Section 12.13 PURCHASER RIGHT OF FIRST REFUSAL.
Originator and Seller hereby covenant with Purchaser that, from the
date hereof until the first to occur of (a) the Program Termination Date, (b)
the date on which an event occurs which relieves the Purchaser from making
Purchases hereunder and the Purchaser is not making Purchases hereunder, (c) the
date on which an event occurs which relieves Heller Financial, Inc. from making
Advances under the Warehouse Facility and Heller Financial, Inc. is not making
Advances thereunder, or (d) an Event of Termination under Section 8.1 of this
Agreement, Purchaser shall have, and Purchaser is hereby granted, the right and
option, subject to the terms set forth below (the "PURCHASE OPTION") to purchase
Receivables and related Assets (which for this purpose shall obligate the
Originator and Seller, as well as any Affiliate thereof, to disclose to
Purchaser all resorts developed by the Originator and Seller or any Affiliate
thereof in order to provide Purchaser the opportunity to make a determination
whether such resort may be an Additional Resort). Purchaser shall notify the
Originator and Seller within forty-five days of its receipt of satisfactory
information with respect to a resort whether such resort qualifies as an
Additional Resort.
The Purchase Option may be exercised or not exercised in Purchaser's
sole discretion. If Purchaser declines to exercise the Purchase Option,
Purchaser shall have no further Purchase Option with respect to the Receivables.
Notwithstanding anything contained herein to the contrary, it is expressly
agreed and understood that any purchase pursuant to the Purchase Option shall be
subject to approval by Purchaser's credit committee in accordance with
Purchaser's standard credit guidelines and it is further expressly understood
and agreed that Purchaser is under no obligation to exercise the Purchase Option
and that nothing in this Section 12.13 shall be deemed or construed to create
any such obligation.
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<PAGE> 46
Section 12.14 PURCHASE CESSATION EVENTS.
In the event Heller Financial, Inc. is no longer making Advances under
the Warehouse Facility or an Increased Cost Event shall have occurred and is
continuing, Collections shall be applied consistent with Section 2.6 hereof.
Section 12.15 COOPERATION OF PARTIES TO CLUB CONVERSION.
The parties hereto agree that they will cooperate to effectuate the
conversion of the Receivables relating to the Resorts, which are in the form of
conditional sales contracts, into notes and related mortgages in order to
convert the Obligors of such Receivables into the Club as well as preserving the
Purchaser's economic and ownership interest in the Receivables purchased
hereunder.
[signature page follows]
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<PAGE> 47
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
THE SELLER: BLUEGREEN RECEIVABLES FINANCE CORPORATION III
By: /s/ JOHN F. CHISTE
--------------------------------------
Printed Name: John F. Chiste
----------------------------
Title: Treasurer
-----------------------------------
THE CUSTODIAN OF BRFC III DEED CORPORATION
CERTAIN DEEDS:
By: /s/ JOHN F. CHISTE
--------------------------------------
Printed Name: John F. Chiste
----------------------------
Title: Treasurer
-----------------------------------
THE ORIGINATOR/SERVICER: BLUEGREEN CORPORATION
By: /s/ JOHN F. CHISTE
--------------------------------------
Printed Name: John F. Chiste
----------------------------
Title: Sr. Vice President, Treasurer & CFO
-----------------------------------
THE PURCHASER: HELLER FINANCIAL, INC.
By: /s/ LISA J. HANSEN
--------------------------------------
Printed Name: Lisa J. Hansen
----------------------------
Title: Vice President
-----------------------------------
THE CASH ADMINISTRATOR: U.S. BANK NATIONAL ASSOCIATION
By:
--------------------------------------
Printed Name:
----------------------------
Title:
-----------------------------------
THE CLUB TRUSTEE: VACATION TRUST, INC., for itself and as Club
Trustee under the Trust Agreement
By: /s/ SHARI A. BAYSE
--------------------------------------
Printed Name: Shari A. Bayse
----------------------------
Title: Secretary & Treasurer
-----------------------------------
<PAGE> 1
EXHIBIT 10.136
ACQUISITION AND CONSTRUCTION COST REIMBURSEMENT LOAN AGREEMENT
THIS ACQUISITION AND CONSTRUCTION COST REIMBURSEMENT LOAN AGREEMENT (as
amended and supplemented from time to time, this "AGREEMENT"), dated as of
December 1, 1999, is made by and between HELLER FINANCIAL, INC., a Delaware
corporation ("LENDER"), whose address is 30th 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 and construction costs incurred in connection with the
acquisition and construction of the Shore Crest Phase II Resort (as defined
herein).
B. Borrower's obligations hereunder and under the other Shore Crest
Phase II 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 Shore Crest Phase II 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 SHORE CREST PHASE II 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 Thirteen Million Eight
Hundred Sixty Thousand and 00/100 Dollars ($13,860,000), the entire amount of
the Shore Crest Phase II Loan, directly to or for the account of Borrower, less
any costs and fees set forth herein. The proceeds of the Shore Crest Phase II
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 and
construction of the Shore Crest Phase II Resort, and
<PAGE> 2
to pay closing costs incurred in connection with the making of the Shore Crest
Phase II Loan. Shore Crest Phase II Resort shall be free and clear of all liens
and encumbrances except for the liens created herein or in any of the other
Shore Crest Phase II Loan Documents and except for any other Shore Crest Phase
II Permitted Exceptions. There shall be no further advances or loans hereunder.
The Shore Crest Phase II Loan shall be deemed to be, and shall be, a "Resort
Loan" under, and as defined in, the Master Agreement.
2.2 TERM. The Shore Crest Phase II Loan shall mature and be due and
payable on the Shore Crest Phase II Loan Maturity Date.
2.3 INTEREST RATE. The outstanding principal balance of the Shore Crest
Phase II Loan shall bear interest at the Interest Rate; PROVIDED, HOWEVER, that
upon the occurrence and during the continuance of an Event of Default the Shore
Crest Phase II Loan will bear interest at the Default Rate. Interest on the
Shore Crest Phase II 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
Shore Crest Phase II Loan in full.
2.4 PREPAYMENTS. The Shore Crest Phase II 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 Shore Crest Phase II 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 Shore Crest Phase II Loan; and thereafter to the reduction of
the principal balance of the Shore Crest Phase II 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 Shore Crest Phase II Loan Documents and
the Borrower's undertakings hereunder and under the other Shore Crest Phase II
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 "SHORE CREST PHASE II
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
2
<PAGE> 3
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 Shore Crest Phase
II Resort, the Shore Crest Phase II Intervals and/or the Common
Elements or Limited Common Elements (as such terms are defined in the
Shore Crest Phase II Master Deed);
(b) all other accounts, contract rights, general intangibles,
documents, instruments, chattel paper and proceeds of Borrower related
to the Shore Crest Phase II Resort or otherwise connected with, or
related to, the operation, management and use of the Shore Crest Phase
II Resort (other than the Shore Crest Phase II 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 Shore Crest Phase
II 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 Shore Crest Phase II Resort, including, without
limitation, all Shore Crest Phase II Intervals and Shore Crest Phase II
Residential Condominium Units (now existing or hereafter
created)(whether sold or unsold) and (ii) the Shore Crest Phase II
Master Deed (including, without limitation, Borrower's development and
declarant's rights (but not obligations) under applicable law);
(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 Shore Crest Phase II Resort, (ii) any condemnation proceedings
affecting all or any part of any of the Shore Crest Phase II Resort or
any rights thereto or any interest therein, (iii) any damage to or
taking of all or any part of the Shore Crest Phase II 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
Shore Crest Phase II 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 the Shore Crest
Phase II 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 Shore Crest Phase II 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 Shore Crest Phase II Resort
(including, without limitation, any and all refunds and rebates
3
<PAGE> 4
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 Shore Crest Phase II
Resort or any other Shore Crest Phase II Collateral described herein;
(h) all of the collateral granted to Lender in the Shore Crest
Phase II Mortgage;;
(i) all of the collateral granted to Lender in the Shore Crest
Phase II Assignment of Leases and Rents and in any other Shore Crest
Phase II 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 SHORE CREST PHASE II RELEASES. Notwithstanding any provision of
this Agreement or any other Shore Crest Phase II Loan Document to the contrary,
the lien of the Shore Crest Phase II Mortgage, the Shore Crest Phase II
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 Shore Crest Phase II Loan shall be released
contemporaneously with the conveyance by the Borrower of fee title to, or on
behalf of, a Purchaser of a Shore Crest Phase II Interval 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 Shore Crest Phase II Mortgage) in form and
substance reasonably satisfactory to Lender, (b) no Event of Default or event or
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 Shore Crest Phase II Interval Release Payment 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 Shore Crest Phase II
Note Receivable and no Shore Crest Phase II Note Receivable shall be included,
or be deemed to be included, in any of the Shore Crest
4
<PAGE> 5
Phase II Collateral provided for herein or in any other Shore Crest Phase II
Loan Documents. Borrower agrees to only sell Shore Crest Phase II Intervals and
not Shore Crest Phase II Residential Units as "residential units."
2.7 CONDITIONS PRECEDENT TO DISBURSEMENT OF SHORE CREST PHASE II LOAN.
The following conditions precedent to the disbursement of the Shore Crest Phase
II Loan hereunder must be satisfied prior to the disbursement of the Shore Crest
Phase II 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 Shore Crest Phase II Mortgage, the Shore Crest Phase II
Assignment of Leases and Rents and the Shore Crest Phase II 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 construction
at the Shore Crest Phase II Resort together with such other coverage
and endorsements as Lender may reasonably require subject to the Shore
Crest 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 Shore Crest
Phase II 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
Shore Crest Phase II 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 Shore Crest Phase II 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 Shore Crest Phase II
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 Lender agree that the portion of said
Commitment Fee due on the funding of the Shore Crest Phase II Loan is
$39,750. Borrower hereby requests and authorizes Lender to deduct said
fee from the proceeds of the Shore Crest Phase II Loan to be funded to
Borrower hereunder.
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(g) The Guarantor shall have executed and delivered to Lender
the Shore Crest Phase II 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 30 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 an
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
Shore Crest Phase II Loan Documents and the Shore Crest Phase II
Resort.
(j) The representations and warranties contained herein and in
the other Shore Crest Phase II Loan Documents shall be true, correct
and complete in all material respects on and as of the date of funding
of the Shore Crest Phase II Loan.
(k) Borrower shall have performed in all material respects all
agreements, paid all fees, Costs and expenses and satisfied all
conditions which any Shore Crest Phase II Loan Document or the Master
Agreement provides shall be paid or performed by it as a condition to
the making of the Shore Crest Phase II Loan.
(l) Borrower shall have obtained all approvals, licenses,
permits and consents for Borrower's acquisition, construction,
timesharing, use and operation of the Shore Crest Phase II 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:
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
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<PAGE> 8
issued and outstanding stock of BG/RDI Acquisition Corp. and BG/RDI Acquisition
Corp. owns 100% of the issued and outstanding stock of the Borrower.
3.2 AUTHORIZATION AND ENFORCEABILITY.
(a) EXECUTION. The Shore Crest Phase II 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 Shore Crest Phase II 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 Shore Crest Phase II 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 Shore Crest Phase II Association to collect and pay, any applicable
sales or rental tax respecting the sale or rental of any Shore Crest Phase II
Intervals, and Shore Crest Phase II Residential Condominium units, 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 governmental entity
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<PAGE> 9
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
Shore Crest Phase II 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 Shore Crest Phase II 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 Shore Crest Phase II Resort
free and clear of all liens except for the Shore Crest Phase II Permitted
Exceptions and good title to all personal property constituting the Shore Crest
Phase II Resort free and clear of all liens except for the Shore Crest Phase II
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 Shore Crest Phase II Resort or asserting
that such zoning does not permit the occupancy, use or operation of the Shore
Crest Phase II 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
timesharing of the Shore Crest Phase II 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 Shore Crest Phase II Resort comply with all applicable
environmental, pollution control and ecological laws, ordinances, rules and
regulations, and all governmental entities having jurisdiction over Shore Crest
Phase II 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 Shore Crest Phase II Resort has adequate storm and
sanitary sewage facilities, water and electrical supply, and other required
public utilities.
3.11 SUBMITTALS. The Shore Crest Phase II 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 Shore Crest Phase II 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 Shore Crest Phase II Resort is and
at all times during the Shore Crest Phase II 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. The zoning and subdivision approval of the Shore Crest Phase II 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 and its sister
resort, Shore Crest Vacations Villas 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 Shore Crest Phase II 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 Shore Crest Phase II Resort as a vacation time sharing
ownership plan and condominium in accordance with the requirements of this
Agreement and applicable law and to sell the Shore Crest Phase II Intervals and
Shore Crest Phase II Residential Condominium Units therein in full compliance
with applicable law.
3.13 PROPERTY ACCESS. Shore Crest Phase II 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
Shore Crest Phase II 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 Shore Crest Phase II 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
Shore Crest Phase II 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 Shore Crest Phase II 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 Shore Crest Phase II Resort or any part thereof (other than the Shore Crest
Phase II Loan).
3.18 STATUS OF THE RESORT. The Shore Crest Phase II Resort is a
condominium with the number of Shore Crest Phase II Residential 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 Shore Crest Phase II Master Deed. Borrower holds good and
marketable title to each of the Shore Crest Phase II Residential Condominium
Units set forth on Schedule 6 hereto and to the each of the Shore Crest Phase II
Intervals listed on said Schedule, and such Residential 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 Shore Crest Phase II
Permitted Exceptions.
3.19 CONSTRUCTION OF THE BUILDINGS. The Borrower has obtained
permanent, unconditional certificates of occupancy (or their equivalent) for the
Shore Crest Phase II Residential Condominium Units and such certificates of
occupancy (or their equivalent) remain in full force and effect.
3.20 SHORE CREST PHASE II RESORT DOCUMENTS. Borrower has furnished to
the Lender true and correct copies of all Shore Crest Phase II Resort Documents
and all filings and/or recordations in order to establish the condominium and
the timeshare ownership regimens in respect of Shore Crest Phase II Resort have
been done and all applicable laws and statutes in connection therewith
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have been complied with. Borrower has furnished to the Lender true and correct
copies of the Shore Crest Phase II Master Deed and all documents related
thereto. The Borrower is in control of the Shore Crest Phase II Association.
3.22 SALE OF SHORE CREST PHASE II INTERVALS. The sale and offering of
sale of Shore Crest Phase II Intervals (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 and (iv) do not violate and will not violate any other applicable
federal, state or local law, statute or regulation.
ARTICLE 4 - COVENANTS AND AGREEMENTS
OF BORROWER
So long as any portion of the Shore Crest Phase II Loan remains unpaid,
Borrower hereby covenants and agrees with Lender as follows:
4.1 RELEASE PAYMENTS. At the time of the sale of any Shore Crest Phase
II Interval, Borrower shall pay Lender the applicable Shore Crest Phase II
Interval Release Payment, which payment shall be applied under the Shore Crest
Phase II Loan as follows: (a) first, to any unpaid Costs and expenses owing to
Lender hereunder or under any other Shore Crest Phase II Loan Document, (b)
second, to all accrued and unpaid interest in respect of the Shore Crest Phase
II Loan then due and payable, (c) third, to any other accrued and unpaid
interest in respect of the Shore Crest Phase II Loan, (d) fourth, to outstanding
principal balance of the Shore Crest Phase II Loan, (e) fifth, to any other
Indebtedness or obligations then outstanding and secured by the Shore Crest
Phase II Collateral hereunder and (f) lastly, to the Borrower. Borrower agrees
only to sell Shore Crest Phase II Intervals and not to sell Shore Crest Phase II
Residential Condominium Units as "whole" condominium units.
4.2 MANDATORY PREPAYMENTS. If the outstanding principal balance of the
Shore Crest Phase II 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 Shore Crest Phase II Loan.
- ----------------------------------- --------------------------------------------
DATE MAXIMUM OUTSTANDING AMOUNT OF SHORE
CREST PHASE II LOAN
- ----------------------------------- --------------------------------------------
April 1, 2000 $13,572,244
- ----------------------------------- --------------------------------------------
July 1, 2000 $12,952,461
- ----------------------------------- --------------------------------------------
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- ----------------------------------- --------------------------------------------
DATE MAXIMUM OUTSTANDING AMOUNT OF SHORE
CREST PHASE II LOAN
- ----------------------------------- --------------------------------------------
October 1, 2000 $12,089,192
- ----------------------------------- --------------------------------------------
January 1, 2001 $11,646,490
- ----------------------------------- --------------------------------------------
April 1, 2001 $11,299,069
- ----------------------------------- --------------------------------------------
July 1, 2001 $10,550,778
- ----------------------------------- --------------------------------------------
October 1, 2001 $ 9,508,516
- ----------------------------------- --------------------------------------------
January 1, 2002 $ 8,974,023
- ----------------------------------- --------------------------------------------
April 1, 2002 $ 8,626,602
- ----------------------------------- --------------------------------------------
July 1, 2002 $ 7,878,311
- ----------------------------------- --------------------------------------------
October 1, 2002 $ 6,836,049
- ----------------------------------- --------------------------------------------
January 1, 2003 $ 6,301,556
- ----------------------------------- --------------------------------------------
April 1, 2003 $ 5,954,135
- ----------------------------------- --------------------------------------------
July 1, 2003 $ 5,205,844
- ----------------------------------- --------------------------------------------
October 1, 2003 $ 4,163,582
- ----------------------------------- --------------------------------------------
January 1, 2004 $ 3,629,089
- ----------------------------------- --------------------------------------------
April 1, 2004 $ 3,281,668
- ----------------------------------- --------------------------------------------
July 1, 2004 $ 2,533,377
- ----------------------------------- --------------------------------------------
October 1, 2004 $ 1,491,115
- ----------------------------------- --------------------------------------------
January 1, 2005 $ 956,622
- ----------------------------------- --------------------------------------------
April 1, 2005 $ 832,632
- ----------------------------------- --------------------------------------------
July 1, 2005 $ 565,577
- ----------------------------------- --------------------------------------------
October 1, 2005 $ 193,607
- ----------------------------------- --------------------------------------------
4.3 COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS, NOTICE OF GOVERNMENTAL
AUTHORITY. Borrower shall timely comply with all Governmental Requirements
applicable to the Borrower and the Shore Crest Phase II Resort, including,
without limitation, maintaining an adequate number of parking spaces and
complying with all zoning requirements. Borrower
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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 Shore Crest
Phase II Resort.
4.4 CORRECTION OF DEFECTS. Borrower shall correct or cause to be
corrected (a) any material defect in the Shore Crest Phase II Resort and (b) any
violation of any Governmental Requirements or any violation of any covenants,
conditions and restrictions affecting the Shore Crest Phase II Resort, if
applicable. 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 and any
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 Shore Crest
Phase II Loan and all other indebtedness secured by the Shore Crest Phase II
Mortgage and the other Shore Crest Phase II Loan Documents and the release of
the Shore Crest Phase II Mortgage and the other Shore Crest Phase II Loan
Documents as to events occurring and causes of action arising before such
payment and release.
4.5 RECORDS. Borrower shall keep adequate records and books of account
reflecting all financial transactions of Borrower and the Shore Crest Phase II
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 Shore Crest Phase II Resort shall at all times be
satisfactory to Lender and the Borrower 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 Shore Crest Phase II 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 Shore Crest Phase II Resort, or the threat of any such
action or proceeding of which Borrower becomes aware.
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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 Shore Crest Phase II Resort if: (i)
in Lender's reasonable judgment (a) restoration or repair and the continued
operation of the Shore Crest Phase II 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 Shore Crest Phase II
Loan Maturity Date; and (iv) Lender's architect/engineers certify that the
restoration of the Shore Crest Phase II Resort can be completed at least ninety
(90) days prior to the Shore Crest Phase II 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 (after deduction of
Lender's reasonable costs and expenses, if any, in collecting same) shall be
applied to the Shore Crest Phase II 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 Shore Crest Phase II 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 Shore Crest Phase II Resort is subject to the Shore Crest Phase II
Resort Documents (1) any and all insurance proceeds arising from any damage or
destruction to the Shore Crest Phase II Resort subject to such documents 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 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 Shore Crest Phase II Association under the
Shore Crest Phase II Resort Documents and applicable South Carolina law, as the
case may be.
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4.9 APPLICATION OF LOAN PROCEEDS. Borrower shall apply the proceeds of
the Shore Crest Phase II Loan for reimbursement of up to 85% of the purchase
price and construction costs of the Shore Crest Phase II Resort.
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 Shore Crest Phase II 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 Shore Crest Phase II Loan, the Shore Crest Phase II 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 Shore Crest
Phase II 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 Shore Crest Phase II Mortgage, the Shore Crest Phase II
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 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 Shore Crest Phase II 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 Shore Crest Phase II Association and the Shore Crest Phase II
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:
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<PAGE> 17
(a) MONTHLY SALES ACTIVITY REPORTS. Within fifteen (15) days
after the end of each month, a summary of sales activity at the Shore
Crest Phase II 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.
(c) 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 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.
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(g) TAX RECEIPTS. To the extent reasonably requested by the
Lender, the Borrower, for so long as it shall be in control of the
Shore Crest Phase II 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 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 Shore Crest Phase II Resort, which, if determined
adversely, might have a material adverse effect upon the financial
condition of the Guarantor or the Borrower or upon the Shore Crest
Phase II 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
Shore Crest Phase II Association: (I) the balance sheet of 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 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 Shore Crest Phase II Association: (i) the
balance sheet of 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 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 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
Shore Crest Phase II Loan is outstanding. Borrower shall, in connection with any
renewal of the Insurance Policies, submit, or use commercially reasonable
efforts to cause the Shore Crest Phase II 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.
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4.16 BORROWER'S FINANCIAL MAINTENANCE REQUIREMENT. Borrower agrees to
pay the Shore Crest Phase II Association all dues and other moneys owing to it
under the Shore Crest Phase II 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 Shore Crest Phase II 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 Shore
Crest Phase II 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 Shore Crest Phase II Loan and
all other indebtedness secured by the Shore Crest Phase II Mortgage and the
other Shore Crest Phase II Loan Documents and the release of the Shore Crest
Phase II Mortgage and the other Shore Crest Phase II 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 Shore Crest Phase II 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 Shore Crest Phase II Loan shall
be outstanding or there are any outstanding obligations of Guarantor under the
Shore Crest Phase II 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
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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 Shore Crest Phase II 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 Shore Crest Phase II 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
Shore Crest Phase II Loan Documents and the Shore Crest Phase II 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 Shore Crest Phase II Loan Documents or any
of the Shore Crest Phase II 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 Shore Crest Phase II Resort, except for the sale of Shore
Crest Phase II Intervals 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 Shore Crest Phase II Mortgage and the Shore
Crest Phase II Assignment of Leases and Rents in connection herewith; (b) permit
any sale, assignment, 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 Shore Crest Phase II Permitted
Exceptions or the Shore Crest Phase II Resort Documents, Borrower shall not
impose any covenants, easements or other encumbrances upon the Shore Crest Phase
II Resort or execute or file any subdivision plat affecting the Shore Crest
Phase II 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 Shore Crest
Phase II Resort Documents or any other covenants, conditions, easements or
restrictions affecting the Shore Crest Phase II 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 Shore Crest
Phase II Resort Documents, as currently contemplated therein, (b) by law,
Borrower shall implement the same. Borrower shall deliver to
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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 Shore
Crest Phase II Resort except as provided for herein or in the other Shore Crest
Phase II Loan Documents.
4.25 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.
4.26 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 Shore Crest Phase II 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 Shore Crest Phase II 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 require, in its reasonable
discretion, so as to satisfy the Lender that the Borrower and/or the Shore Crest
Phase II Resort are in compliance with all applicable Environmental Laws and
that the marketability and value of the Shore Crest Phase II Resort is
adequately maintained. The Borrower's undertakings under this Section 4.26 are
in addition to its undertakings under Section 4.4 hereof.
4.27 VOTING. Notwithstanding the terms of the By-Laws of the Shore
Crest Phase II 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 Shore Crest Phase II Master Deed (or any part
thereof), (b) pertaining to the amendment of the articles of incorporation or
bylaws of the Shore Crest Phase II Association, (c) pertaining to the amendment
of the Shore Crest Phase II Master Deed (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 Shore Crest Phase II Intervals and/or
the Shore Crest Phase II Residential Condominium Units under the Shore Crest
Phase II 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 Shore Crest Phase II Association
and will deliver them to Lender.
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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 Shore Crest Phase II Mortgage or any other Shore Crest Phase II 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 Shore Crest Phase II 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.
5.4 WARRANTIES OR REPRESENTATIONS. Any statement, representation or
warranty in this Agreement, any of the other Shore Crest Phase II 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
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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
(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
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(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
Shore Crest Phase II Guaranty or any other document executed by the Guarantor in
connection with the Shore Crest Phase II Loan, after the expiration of any
applicable notice and cure periods, or the Shore Crest Phase II Guaranty or the
Shore Crest Phase II 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 Shore Crest Phase II Intervals 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.
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 Shore
Crest Phase II 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 Shore
Crest Phase II 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 Shore Crest Phase II 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 Shore Crest Phase II 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
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Borrower and take possession of the Shore Crest Phase II Collateral;
and (iii) sell the Shore Crest Phase II 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 Shore Crest Phase II
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 Shore Crest Phase II 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 Shore
Crest Phase II 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 Shore Crest Phase II Collateral, or any part
thereof, and Borrower hereby consents to any such appointment.
(e) OPERATION. Take possession of and operate Phase II of the Shore
Crest Phase II 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 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 Shore Crest Phase II 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 Shore Crest Phase II 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 Shore Crest Phase II 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 Shore Crest Phase II
Loan Documents as Lender shall deem appropriate, at law, in equity or
otherwise, including the right to bring suit or other
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proceeding, either for specific performance of any covenant or
condition contained in the Shore Crest Phase II Loan Documents or in
aid of the exercise of any right or remedy granted to Lender in the
Shore Crest Phase II 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 Shore Crest Phase II 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 Shore Crest Phase II 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 Shore Crest Phase
II 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 Shore Crest Phase II 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 Shore Crest Phase II Loan Documents or to any action
brought to enforce the Shore Crest Phase II Note or any other obligation secured
by the Shore Crest Phase II Loan Documents.
6.4 CUMULATIVE RIGHTS. All rights and remedies available to Lender
under the Shore Crest Phase II 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 Shore Crest Phase II 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 Shore Crest Phase II Collateral or any part thereof shall be
paid to and applied as follows:
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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 Shore Crest Phase II 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
Shore Crest Phase II Resort) provided for in the Shore Crest
Phase II Assignment of Leases and Rents, the Shore Crest Phase
II Mortgage or any other Shore Crest Phase II Loan Document,
(ii) all taxes, assessments or liens superior to the
lien of this Agreement or the other Shore Crest Phase II Loan
Documents, except any taxes, assessments or other superior
liens subject to which any sale of Shore Crest Phase II
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
Shore Crest Phase II Loan,
THIRD, towards the payment of all other accrued and unpaid
interest, if any, then due and payable in respect of the Shore Crest
Phase II Loan,
FOURTH, to the payment of the principal amount of the Shore
Crest Phase II Loan and all other Indebtedness, and
FIFTH, to the payment of any other obligations secured by the
Shore Crest Phase II Collateral, and
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 Shore Crest Phase II Collateral then due
and payable shall not have been paid in full, any such surplus shall
continue to be held as Shore Crest Phase II 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.
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<PAGE> 28
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
HREF Loan No. 98-087-0202
500 West Monroe St.
Chicago, Illinois 60661
Telecopy: (312) 441-7924
With a copy to: Heller Financial, Inc.
Attn: Vacation Ownership Legal
Representative
HREF Loan No. 98-087-0202
500 West Monroe St.
Chicago, Illinois 60661
Telecopy: (312) 441-7924
7.2 ENTIRE AGREEMENT AND MODIFICATIONS. This Agreement and the Shore
Crest Phase II 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 Shore Crest Phase II 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
Shore Crest Phase II Loan Documents may be modified, waived, terminated,
supplemented, changed or amended except by a written instrument executed by all
parties hereto or thereto.
27
<PAGE> 29
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 Shore Crest Phase II Loan 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 Shore Crest Phase
II 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 Shore Crest Phase II 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 Shore Crest Phase II Loan Documents
and the granting of the liens in and to the Shore Crest Phase II 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 and/or Shore Crest Phase II Resort
Documents, it being understood and agreed that notwithstanding this Agreement
and the other Shore Crest Phase II Loan Documents, and the granting of the liens
in and to the Shore Crest Phase II Collateral, all of the obligations of the
Borrower (whether as owner, chattel lessee, vendor, mortgagee, declarant, Shore
Crest Phase II Residential Condominium Unit owner, Shore Crest Phase II Interval
owner or otherwise) to each and every other party under each and every one of
the contracts, accounts, general intangibles and/or Shore Crest Phase II Resort
Documents 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.
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<PAGE> 30
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.
29
<PAGE> 31
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.
7.16 SURVIVAL. All representations, warranties, covenants and
agreements made by Borrower herein, in the other Shore Crest Phase II Loan
Documents or in any other agreement, document, instrument or certificate
delivered by or on behalf of Borrower under or pursuant to the Shore Crest Phase
II Loan Documents shall be considered to have been relied upon by Lender and
shall survive the delivery to Lender of such Shore Crest Phase II 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 Shore Crest Phase
II Collateral. Borrower agrees to cooperate fully with all of Lender's efforts
to preserve the Shore Crest Phase II 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 Shore Crest Phase II 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 Shore Crest Phase II 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
<PAGE> 32
IN WITNESS WHEREOF, the parties set their hands as of the date above first
written.
BLUEGREEN VACATIONS UNLIMITED, INC.
By: /s/ ALLAN J. HERZ
---------------------------------
Name: Allan J. Herz
Its: Vice President
CONSENTED AND AGREED TO:
BLUEGREEN CORPORATION
By: /s/ ALLAN J. HERZ
------------------------------
Name: Allan J. Herz
Its: Vice President
31
<PAGE> 33
HELLER FINANCIAL, INC.
By: /s/ Dennis K. Holland
------------------------------------
Name: Dennis K. Holland
Its: Senior Vice President
<PAGE> 34
APPENDIX A
DEFINITION OF TERMS
AFFILIATE. Any individual, trust, estate, partnership, limited liability
company, corporation or any other incorporated or unincorporated organization or
Person that directly or indirectly, through one or more intermediaries, controls
or is controlled by or is under common control with Borrower or Guarantor; any
officer, director, partner or shareholder of Borrower or Guarantor; or any
relative of any of the foregoing. The term "control" means possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
AGREEMENT. As defined in the first paragraph hereof.
APPRAISAL. An appraisal of the value of the Shore Crest Phase II Resort
performed by an appraiser approved by Lender who is neither employed by nor is
an Affiliate of Borrower, the form and substance of which appraisal shall be
satisfactory to the Lender.
APPROVED TRANSACTIONS. As defined in Section 3.15 hereof.
BORROWER. As defined in the first paragraph hereof.
BUSINESS DAY. Any day which is not a Saturday or Sunday or a legal holiday under
the laws of the State of Illinois, State of Florida or the United States.
CHARGES. As defined in Section 4.12 hereof.
CLUB. The Bluegreen Vacation Club Trust, as established pursuant to that certain
Bluegreen Amended and Restated Vacation Club Trust Agreement (the "CLUB TRUST
AGREEMENT") dated as of May 18, 1994 by and among Borrower, Guarantor, Vacation
Trust, Inc. and the other parties thereto, as amended and supplemented from time
to time.
CODE. The Uniform Commercial Code as adopted and in force in the State of
Illinois as the same may be amended from time to time.
COMPENSATION. As defined in Section 2.5(f) hereof.
COSTS. All expenditures and expenses which may be paid or incurred by or on
behalf of Lender in connection with the documentation, modification, workout,
collection or enforcement of the Shore Crest Phase II Loan or any of the Shore
Crest Phase II Loan Documents. Notwithstanding the foregoing, Costs payable on
the date of the making of the Shore Crest Phase II Loan shall be limited to
(i) the fees and costs of Lender's attorneys (including Lender's inside counsel)
in connection with
Appendix A - 1
<PAGE> 35
the documentation of the Shore Crest Phase II Loan and the due diligence review
of Borrower's deliveries; and (iii) all applicable title, filing and recording
fees and other closing costs. During the term of the Shore Crest Phase II Loan,
Costs payable by Borrower shall include: payments to remove or protect against
liens; attorneys' fees (including fees of Lender's inside counsel); receivers'
fees; engineers' fees; accountants' fees; independent consultants' fees
(including environmental consultants); all costs and expenses incurred in
connection with any of the foregoing; outlays for documentary and expert
evidence; stenographers' charges; stamp taxes; publication costs; and costs
(which may be estimates as to items to be expended after entry of an order or
judgment) for procuring all such abstracts of title, title and UCC searches, and
examination, title insurance policies, and similar data and assurances with
respect to title as Lender may deem reasonably necessary either to prosecute any
action or to evidence to bidders at any foreclosure sale a true condition of the
title to, or the value of, the Shore Crest Phase II Collateral.
DEBTOR RELIEF LAWS. Any applicable liquidation, conservatorship, bankruptcy,
moratorium, rearrangement, insolvency, reorganization, or similar laws affecting
the rights or remedies of creditors generally, as in effect from time to time.
DEFAULT RATE. A floating rate per annum equal to (i) the Interest Rate in effect
from time to time for such principal amount PLUS (ii) two percent (2%).
ENVIRONMENTAL LAWS. Each federal, state, county, regional or local law, statute,
or regulation enacted in connection with or relating to the protection or
regulation of the environment, including, without limitation, those laws,
statutes, and regulations regulating the disposal, removal, production, storing,
refining, handling, transferring, processing, or transporting of Hazardous
Materials, and any regulations issued or promulgated in connection with such
statutes by any governmental authority and any orders, decrees or judgments
issued by any court of competent jurisdiction in connection with any of the
foregoing.
EVENT OF DEFAULT. The events set forth in Section 5 of this the Shore Crest
Phase II Loan Agreement.
GAAP. Generally accepted accounting principles, applied on a consistent basis,
set forth in Opinions of the Accounting Principles Board of the American
Institute of Certified Public Accountants and/or in statements of the Financial
Accounting Standards Board which are applicable in the circumstances as of the
date in question; and the requisite that such principles be applied on a
consistent basis means that the accounting principles in a current period are
comparable in all material respects to those applied in a preceding period, with
any exceptions thereto noted.
GOVERNMENTAL REGULATIONS. All Federal, State and local rules, regulations,
ordinances, laws and statutes which affect the Shore Crest Phase II Resort or
the Borrower.
GUARANTOR. As defined in Recital A herein.
Appendix A - 2
<PAGE> 36
HAZARDOUS MATERIALS. Any hazardous, dangerous or toxic substance or material
within the meaning of any federal, state or local law, regulation or ordinance.
INDEBTEDNESS. All payment obligations of Borrower to Lender under the Shore
Crest Phase II Loan Documents.
INSURANCE POLICIES. The following insurance policies:
(a) All-risk insurance on the Shore Crest Phase II Resort
until the Shore Crest Phase II Loan is paid in full, as determined by
Lender, at least in the amount of 100% of the replacement cost of the
Shore Crest Phase II Resort or in such amounts as Lender may
reasonably require, providing all-risk coverage on the Property, and
covering all perils of flood, and, if requested by Lender, covering
all perils of earthquake, business interruption and other risks;
(b) Comprehensive General Liability Insurance for owners and
contractors, including blanket contractual liability, products and
completed operations, personal injury (including employees),
independent contractors and explosion, hazards in an amount
acceptable to Lender;
(c) Workers' Compensation Insurance for contractors for
statutory limits; and
(d) Such other insurance, including but not limited to
business interruption insurance, as Lender may reasonably require.
All Insurance Policies shall be issued on forms and by companies reasonably
satisfactory to Lender and shall be delivered to Lender or in the alternative,
certificates of such insurance shall be delivered to Lender if such insurance is
obtained through blanket policies of Borrower. All-risk Insurance Policies shall
have loss made payable to Lender as mortgagee together with the standard
mortgage clause in a form satisfactory to Lender. Comprehensive General
Liability, Comprehensive Automobile Liability and Workers' Compensation
coverages shall have a provision giving Lender thirty (30) days, prior notice of
cancellation or material change of the coverage. The provisions set forth in
this definition shall be subject to the requirements concerning insurance set
forth in the Shore Crest Phase II Resort Documents, in the Shore Crest Phase II
Master Deed and under applicable South Carolina law.
INTEREST RATE. Floating rate per annum equal to the Base Rate plus three percent
(3.00%). "Base Rate" shall mean the rate published each business day in THE WALL
STREET JOURNAL for deposits maturing three (3) months after issuance under the
caption "Money Rates, London Interbank Offered Rates (LIBOR)" as the same may be
adjusted by the Statutory Reserve Rate (as such term is defined in the Warehouse
Facility). The Interest Rate for each calendar month shall be fixed based upon
the Interest Rate published prior to and in effect on the first (1st) business
day of such month. Interest shall be calculated based on a 360 day year and
charged for the actual number of days elapsed.
Appendix A - 3
<PAGE> 37
LENDER. As defined in the first paragraph hereof.
MATERIAL ADVERSE EFFECT. With respect to any event or circumstance, a material
adverse effect on:
(a) the business, assets, financial condition or operations of
the Borrower;
(b) the ability of the Borrower to perform its obligations
under this Agreement or any of the Shore Crest Phase II Loan Document
to which it is a party;
(c) the validity, enforceability or collectibility against the
Borrower of this Agreement or any of the Shore Crest Phase II Loan
Document to which it is a party; or
(d) the status, existence, perfection or priority of Lender's
security interest and lien in the Shore Crest Phase II Collateral
securing the Shore Crest Phase II Loan.
MASTER AGREEMENT. As defined in Recital A herein.
OWNER BENEFICIARY RIGHTS. As defined in the Club Trust Agreement.
PERSON. Natural persons, corporations, limited partnerships, general
partnerships, limited liability companies, joint stock companies, joint
ventures, associations, companies, trusts, banks, trust companies, land trusts,
business trusts or other organizations, whether or not legal entities, and
governments and agencies and political subdivisions thereof.
PURCHASE DOCUMENTS. Any purchase agreement and related sale and escrow documents
executed and delivered by a Purchaser to Borrower with respect to the purchase
of an Interval.
PURCHASE FACILITY. That certain Asset Purchase Agreement, dated as of June 26,
1998, among Bluegreen Receivables Finance Corporation III, as seller, Lender, as
the purchaser, Guarantor, as the originator and servicer, and the other parties
thereto, as amended and supplemented from time to time.
PURCHASER. Any Person who purchases one or more Shore Crest Phase II Intervals
in the ordinary course of the Borrower's business.
SHORE CREST PHASE II ASSIGNMENT OF LEASES AND RENTS. Assignment of Leases and
Rents from Borrower to Lender dated of even date, as amended and supplemented
from time to time, herewith securing the payment of the Shore Crest Phase II
Note, and the payment and performance of all obligations specified herein, in
said Assignment and in the other Shore Crest Phase II Loan Documents, which
Assignment shall be in the form of Exhibit A attached hereto and made a part
hereof.
Appendix A - 4
<PAGE> 38
SHORE CREST PHASE II ASSOCIATION. The Shore Crest Vacation Villas Owners
Association, Inc. a corporation not for profit organized under the laws of South
Carolina in connection with the Shore Crest Phase II Master Deed.
SHORE CREST PHASE II COLLATERAL. As defined in Section 3 of this Agreement.
SHORE CREST PHASE II CONTRACT. Any contract between a Purchaser and the Borrower
pursuant to which and subject to the terms and conditions thereof the Purchaser
will purchase and the Borrower will sell a Shore Crest Phase II Interval.
SHORE CREST PHASE II GUARANTY. The Guaranty Agreement executed by Guarantor in
favor of Lender of even date herewith, as amended and supplemented from time to
time, substantially in the form of Exhibit C hereto.
SHORE CREST PHASE II INTERVAL. An undivided fee simple ownership interest as
tenants in common with all other Purchasers with respect to any Shore Crest
Phase II Residential Condominium Unit with a right to use such Unit, or a Unit
of such type, for one week annually, together with all appurtenant rights and
interests as more particularly described in the Shore Crest Phase II Resort
Documents.
SHORE CREST PHASE II INTERVAL RELEASE PAYMENT. With respect to each sale in the
ordinary course of business of the Borrower to a Purchaser of a Shore Crest
Phase II Interval, the greatest of (a) $2,988, (b) 80% of the Resort Development
Costs, as such term is defined in the Master Agreement, in respect of the Shore
Crest Phase II Resort, as allocated to such Shore Crest Phase II Interval and
(c) the amount necessary to repay the Shore Crest Phase II Loan solely through
interval release payments of 80% of the then remaining unsold Shore Crest Phase
II Intervals in Phase II. The determination of the Shore Crest Phase II Interval
Release Payment shall be made by Borrower in good faith.
SHORE CREST PHASE II LOAN. The loan by Lender to Borrower hereunder, to be
extended in a single advance, in the total amount of $13,860,000.
SHORE CREST PHASE II LOAN DOCUMENTS. This Agreement, the Shore Crest Phase II
Mortgage, the Shore Crest Phase II Acquisition Note, the Shore Crest Phase II
Assignment of Leases and Rents, the Shore Crest Phase II Guaranty, the Shore
Crest Phase II Subordination Agreement, any debt or lien subordination
agreements or instruments that Lender may require with respect to any
indebtedness of Borrower to any person, and such other instruments evidencing,
securing, or pertaining to the Shore Crest Phase II Loan as shall, from time to
time, be executed and delivered by Borrower or Guarantor, as any or all of the
foregoing may be amended, renewed, extended, restated or supplemented from time
to time.
Appendix A - 5
<PAGE> 39
SHORE CREST PHASE II MASTER DEED. The Master Deed for Shore Crest Vacation
Villas II Horizontal Property Regime dated __________, 19___ and recorded on
__________, 19__ in Book _____, Page ____ in the RMC Office for Horry County,
South Carolina, as amended and supplemented from time to time.
SHORE CREST PHASE II LOAN MATURITY DATE. January 1, 2006.
SHORE CREST PHASE II MORTGAGE. Mortgage, Assignment of Rents and Security
Agreement from Borrower to Lender dated of even date herewith securing the
payment of the Shore Crest Phase II Note, and the payment and performance of all
obligations specified herein, in said Mortgage and in the other Shore Crest
Phase II Loan Documents, and evidencing a valid and enforceable lien on Phase II
of the Shore Crest Phase II Resort, which Mortgage shall be in the form of
Exhibit D attached hereto and made a part hereof.
SHORE CREST PHASE II NOTE. The Promissory Note of even date herewith from
Borrower to Lender in the original principal amount of Thirteen Million Eight
Hundred Sixty Thousand Dollars ($13,860,000), which Note evidences the Shore
Crest Phase II Loan and which Note shall be in the form of Exhibit E attached
hereto and made a part hereof.
SHORE CREST PHASE II NOTE RECEIVABLE. Any promissory note executed by a
Purchaser that is secured by a mortgage in and to the Shore Crest Phase II
Interval being purchased and financed by such Purchaser with such promissory
note.
SHORE CREST PHASE II PERMITTED EXCEPTIONS. The exceptions to title listed on
Schedule 8 to this Agreement.
SHORE CREST PHASE II RESORT. That certain timeshare vacation resort located in
North Myrtle Beach, South Carolina, on the land more particularly described in
Exhibit F commonly known as the Shore Crest Vacation Villas II Horizontal
Property Regime, including all related common elements, limited common elements,
parking areas and other amenities, as established by the Shore Crest Phase II
Master Deed. The Shore Crest Phase II Resort is described on Schedule 6 hereto
and consists of a 12 story building with 126 two bedroom Residential Condominium
Units and three stories of parking.
SHORE CREST PHASE II RESORT DOCUMENTS. The Shore Crest Phase II Master Deed
establishing a horizontal property regime and a vacation time sharing ownership
plan under and in accordance with applicable South Carolina law in respect of
the Property described in Exhibit F together with (a) the plans and plot plans
in respect thereof, as the same have been recorded in the office of the RMC of
Horry County, South Carolina, (b) the By-Laws of the Shore Crest Phase II Owners
Association, Inc. ("SHORE CREST PHASE II ASSOCIATION"), a corporation organized
not for profit under the laws of South Carolina and (c) the rules and
regulations of such Association. To the extent that other buildings at the Shore
Crest Phase II Resort are added as an additional phases to the Shore Crest Phase
II Master Deed in accordance with applicable South Carolina law and said Master
Deed, "Shore Crest Phase II Resort Documents" shall include the supplemental
master deeds in respect thereof.
Appendix A - 6
<PAGE> 40
SHORE CREST PHASE II UCC FINANCING STATEMENTS. Each of the UCC-1 Financing
Statements set forth on Schedule 9 to be recorded in the recording offices
described on said Schedule.
SUBORDINATION AGREEMENT. The Subordination Agreement attached hereto as
Exhibit G.
SURVEY. An as-built survey of the Shore Crest Phase II Resort (styled Plat of
Shore Crest Phase II) dated August 13, 1999 by Powell Associates of NMB, Inc.,
as certified to Lender as of date not more than 30 days prior to or after the
date hereof.
TITLE COMPANY. First America Title Insurance Company.
TITLE INSURANCE. An ALTA lender's title insurance policy issued by the Title
Company to the Lender, with such endorsements as requested by Lender (including
a comprehensive endorsement, a usury endorsement, a zoning endorsement (also
covering parking), a survey endorsement, an access endorsement, encroachment
endorsements, and a condominium endorsement), in the amount of $13,860,000
insuring that the Shore Crest Phase II Mortgage constitutes a valid first
priority lien covering the Shore Crest Phase II Resort and subject only to the
Shore Crest Phase II Permitted Exceptions; such policy shall also provide
extended coverage over standard exceptions, matters which would be shown by an
inspection or an accurate survey, rights of parties in possession, easements not
of record and past due real estate taxes and assessment.
WAREHOUSE FACILITY. The Loan and Security Agreement, dated as of October 20,
1998 among Lender, Guarantor and Borrower, as amended and supplemented from time
to time.
Appendix A - 7
<PAGE> 1
Exhibit 10.137
December 1, 1999
Heller Financial, Inc.
Attn: Portfolio Manager, Vacation Ownership
500 West Monroe St., 30th Fl.
Chicago, IL 60661
Re: Master Bluegreen Resort Loan Facility, dated as of October 20, 1998,
Between Bluegreen Corporation and Heller Financial, Inc. (the
"Existing Master Loan Facility")
Dear Ladies and Gentlemen:
We refer to the Existing Master Loan Facility. In connection with the
closing of the Resort Loan, as such term is defined in the Existing Master Loan
Facility, in respect of Shore Crest Vacation Villas II Horizontal Property
Regime in North Myrtle Beach, South Carolina, we hereby request that you agree
to the following modifications to the Existing Master Loan Facility:
1. The reference in Section 1.1(a) of the Existing Master Loan
Facility and the reference in the defined term "Resort Loan Limit" in
the Existing Master Loan Facility to "$25,000,000" shall be increased
to "$28,000,000."
2. The reference in Section 1.5 of the Existing Master Loan
Facility to "$250,000" shall be increased to "$280,000" and the
reference in said Section to "$150,000" shall be increased to
"$180,000."
It is the intention of the undersigned, with your agreement to the same,
to increase the overall amount of the Existing Master Loan Facility to
$28,000,000, and to, contemporaneously with your agreement to the same, pay to
you the full 1% commitment fee in respect thereof of $30,000.
Except as explicitly amended by this letter, the Existing Master Loan
Facility remains in full force and effect under its terms as in effect
immediately prior to the effectiveness of this letter agreement.
If you are in agreement with the above, please execute the copy of the
letter attached hereto, whereupon this letter shall become an agreement between
us and shall modify the Existing Master Loan Facility as set forth above.
BLUEGREEN CORPORATION
By: /s/ ALLAN J. HERZ
-----------------------------
Name: Allan J. Herz
Title: Vice President
AGREED TO:
HELLER FINANCIAL, INC.
By: /s/ DENNIS K. HOLLAND
----------------------------
Name: Dennis K. Holland
Title: Senior Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-02-2000
<PERIOD-START> MAR-29-1999
<PERIOD-END> JAN-02-2000
<CASH> 44,460
<SECURITIES> 17,092
<RECEIVABLES> 87,714
<ALLOWANCES> 3,166
<INVENTORY> 190,676
<CURRENT-ASSETS> 0<F1>
<PP&E> 41,159
<DEPRECIATION> 8,205
<TOTAL-ASSETS> 400,340
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 230,649
0
0
<COMMON> 251
<OTHER-SE> 122,094
<TOTAL-LIABILITY-AND-EQUITY> 400,340
<SALES> 173,612
<TOTAL-REVENUES> 200,420
<CGS> 60,123
<TOTAL-COSTS> 71,679
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 3,380
<INTEREST-EXPENSE> 10,160
<INCOME-PRETAX> 14,942
<INCOME-TAX> 5,827
<INCOME-CONTINUING> 9,502
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,502
<EPS-BASIC> 0.41
<EPS-DILUTED> 0.37
<FN>
<F1>THE COMPANY HAS AN UNCLASSIFIED BALANCE SHEET
</FN>
</TABLE>
