10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-K

þ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Year Ended December 31, 2008

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number
001-31931

WOODBRIDGE HOLDINGS CORPORATION

(Exact name of registrant as specified in its charter)

Florida (State or other jurisdiction of incorporation or organization)	11-3675068 (I.R.S. Employer Identification No.)
2100 West Cypress Creek Road Ft. Lauderdale, Florida (Address of principal executive offices)	33309 (Zip Code)

(954) 940-4950
(Registrant’s telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

Class A Common Stock, Par Value $0.01 Per Share
(Title of each class) Pink Sheet Electronic Quotation Service
(Name of each exchange on which registered)

     Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o     No þ

     Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes o     No þ

     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 þ     No o

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer þ 
Non-accelerated filer o
(Do not check if a smaller reporting company) Smaller reporting company o

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o     No þ

     As of June 30, 2008, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $88.2 million based on the $5.80 closing sale price as reported on the New York Stock Exchange.

The number of shares outstanding for each of the registrant’s classes of common stock, as of March 12, 2009 is as follows:

Class of Common Stock	Shares Outstanding
Class A common stock, $0.01 par value		16,656,525
Class B common stock, $0.01 par value		243,807

DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the registrant’s Proxy Statement relating to the registrant’s 2009 Annual Meeting of Shareholders are incorporated by reference in Part III of this report. The financial statements of Bluegreen Corporation are incorporated by reference in Part II of this report and are filed as an exhibit to this report.

Woodbridge Holdings Corporation
Annual Report on Form 10-K for the year ended December 31, 2008

TABLE OF CONTENTS

PART I
Item 1.	Business	1
Item 1A.	Risk Factors	11
Item 1B.	Unresolved Staff Comments	21
Item 2.	Properties	21
Item 3.	Legal Proceedings	21
Item 4.	Submission of Matters to a Vote of Security Holders	23
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	24
Item 6.	Selected Financial Data	28
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	59
Item 8.	Financial Statements and Supplementary Data	61
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	115
Item 9A.	Controls and Procedures	115
Item 9B.	Other Information	116
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	117
Item 11.	Executive Compensation	117
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters	117
Item 13.	Certain Relationships and Related Transactions, and Director Independence	117
Item 14.	Principal Accounting Fees and Services	117
PART IV
Item 15.	Exhibits, Financial Statement Schedules	118
SIGNATURES		120
EX-10.11 Woodbridge Executive Compensation Program
EX-12.1 Statement re Computation of Ratios
EX-21.1 Subsidiaries of the Registrant
EX-23.1 Consent of PricewaterhouseCoopers LLP
EX-23.2 Consent of Ernst & Young LLP
EX-31.1 Section 302 Certification of CEO
EX-31.2 Section 302 Certification of CFO
EX-32.1 Section 906 Certification of CEO
EX-32.2 Section 906 Certification of CFO
EX-99.1 Audited financial statements of Bluegreen Corporation

PART I

Some of the statements contained or incorporated by reference herein include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act” ), that involve substantial risks and uncertainties. Some of the forward-looking statements can be identified by the use of words such as “anticipate,” “believe,” “estimate,” “may,” “intend,” “expect,” “will,” “should,” “seek” or other similar expressions. Forward-looking statements are based largely on management’s expectations and involve inherent risks and uncertainties described in this report. When considering those forward-looking statements, you should keep in mind the risks, uncertainties and other cautionary statements in this report, including those identified under Item 1A. — Risk Factors. These risks are subject to change based on factors which are, in many instances, beyond the Company’s control. Some factors which may affect the accuracy of the forward-looking statements apply generally to the real estate industry, while other factors apply directly to us. Any number of important factors could cause actual results to differ materially from those in the forward-looking statements including: the impact of economic, competitive and other factors affecting the Company and its operations; the market for real estate in the areas where the Company has developments, including the impact of market conditions on the Company’s margins and the fair value of our real estate inventory; the risk that the value of the property held by Core Communities may decline, including as a result of the current downturn in the residential and commercial real estate and homebuilding industries; the risk that the development of parcels and master-planned communities will not be completed as anticipated; continued declines in the estimated fair value of our real estate inventory and the potential for write-downs or impairment charges; the effects of increases in interest rates and availability of credit to buyers of our inventory; accelerated principal payments on our debt obligations due to re-margining or curtailment payment requirements; the ability to obtain financing and to renew existing credit facilities on acceptable terms, if at all; the Company’s ability to access additional capital on acceptable terms, if at all; the risks associated with the Company’s business strategy, including the Company’s ability to successfully make investments notwithstanding current adverse conditions in the economy and the credit markets; and the Company’s success at managing the risks involved in the foregoing. Many of these factors are beyond our control. The Company cautions that the foregoing factors are not exclusive.

ITEM 1. BUSINESS

General Description of Business

          Woodbridge Holdings Corporation (“Woodbridge,” “we,” “us,” “our,” or the “Company”) (formerly Levitt Corporation), directly and through its wholly owned subsidiaries, historically has been a real estate development company with activities in the Southeastern United States. We were organized in December 1982 under the laws of the State of Florida. Historically, our operations were primarily within the real estate industry; however, our current business strategy includes the pursuit of investments and acquisitions within or outside of the real estate industry, as well as the continued development of master-planned communities. Under this business model, we likely will not generate a consistent earnings stream and the composition of our revenues may vary widely due to factors inherent in a particular investment, including the maturity and cyclical nature of, and market conditions relating to, the business invested in. Net investment gains and other income will be based primarily on the success of our investments as well as overall market conditions.

Business Segments

          In 2008, Woodbridge engaged in business activities through the Land Division, consisting of the operations of Core Communities, LLC (“Core Communities” or “Core”), which develops master-planned communities, and through the Other Operations segment (“Other Operations”), which includes the parent company operations of Woodbridge (the “Parent Company”), the consolidated operations of Pizza Fusion Holdings, Inc. (“Pizza Fusion”), the consolidated operations of Carolina Oak Homes, LLC (“Carolina Oak”), which engaged in homebuilding in South Carolina prior to the suspension of those activities during the fourth quarter of 2008, and other activities through Cypress Creek Capital Holdings, LLC (“Cypress Creek Capital”) and Snapper Creek Equity Management, LLC (“Snapper Creek”). An equity investment in

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Bluegreen Corporation (“Bluegreen”) and an investment in Office Depot, Inc. (“Office Depot”) are also included in the Other Operations segment.

          Until November 9, 2007, the Company also engaged in homebuilding activities through Levitt and Sons, LLC (“Levitt and Sons”) and reported results of operations through two additional reporting segments, Primary Homebuilding and Tennessee Homebuilding. On November 9, 2007, Levitt and Sons filed a voluntary bankruptcy petition and, accordingly, the Company deconsolidated Levitt and Sons as of that date. As a result of the deconsolidation of Levitt and Sons, the results of operations of the Primary Homebuilding segment, with the exception of Carolina Oak, and Tennessee Homebuilding segments were only included as separate segments through November 9, 2007, the date of Woodbridge’s deconsolidation of Levitt and Sons (see Note 24 to our audited consolidated financial statements included in Item 8 for financial information of Levitt and Sons). The presentation and allocation of the assets, liabilities and results of operations of each segment may not reflect the actual economic costs of the segment as a stand-alone business. If a different basis of allocation were utilized, the relative contributions of the segment might differ but, in management’s view, the relative trends in segments would not likely be impacted. See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and (Note 21) to our audited consolidated financial statements contained under Item 8. “Financial Statements and Supplementary Data” for a discussion of trends, results of operations, and other relevant information on each segment.

Land Division

          Core Communities was founded in May 1996 to develop a master—planned community in Port St. Lucie, Florida now known as St. Lucie West. Historically, its activities focused on the development of a master-planned community in Port St. Lucie, Florida called Tradition, Florida and a community outside of Hardeeville, South Carolina called Tradition Hilton Head. Tradition, Florida has been in active development for several years, while Tradition Hilton Head is in the early stage of development. As a master-planned community developer, Core Communities engages in four primary activities: (i) the acquisition of large tracts of raw land; (ii) planning, entitlement and infrastructure development; (iii) the sale of entitled land and/or developed lots to homebuilders and commercial, industrial and institutional end-users; and (iv) the development and leasing of commercial space to commercial, industrial and institutional end-users.

          St. Lucie West is a 4,600 acre master-planned community located in St. Lucie County, Florida. It is bordered by Interstate 95 to the west and Florida’s Turnpike to the east. The community blends residential, commercial and industrial developments where residents have access to commerce, recreation, entertainment, religious, and educational facilities all within the community. St. Lucie West is completely sold out and substantially built out. There are more than 6,000 homes in St. Lucie West housing nearly 15,000 residents.

          Tradition, Florida encompasses more than 8,200 total acres and is planned to include a 4.5-mile long employment corridor along I-95, educational and health care facilities, commercial properties, residential developments and other uses in a series of mixed-use parcels. As part of the employment corridor, a 120-acre research park is being marketed as the Florida Center for Innovation at Tradition (“FCI”), within which the Torrey Pines Institute for Molecular Studies (TPIMS) has built its new headquarters. FCI is planned to consist of just under two million square feet of research and development space, a 300 bed Martin Memorial Health Systems hospital, a 27-acre lake with a 1-mile fitness trail and recreational amenities, state-of-the-art fiber optic cabling, underground electrical power and proximity to high-quality housing, restaurants, hotels and shopping. Mann Research Center also purchased a 22.4 acre parcel within the FCI on which it intends to build a 400,000-square-foot life sciences complex. Oregon Health & Science University’s Vaccine and Gene Therapy Institute also announced plans to locate a 120,000-square-foot facility within FCI. Special assessment bonds are being utilized to provide financing for certain infrastructure developments.

          Tradition Hilton Head encompasses almost 5,400 total acres and is currently entitled for up to 9,500 residential units and 1.5 million square feet of commercial space, in addition to recreational areas, educational facilities and emergency services.

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          Our Land Division recorded $11.3 million in sales in 2008 compared to $16.6 million in 2007 as demand for residential and commercial inventory in Florida remained slow. The overall slowdown in the real estate markets and disruptions in credit markets continue to have a negative effect on demand for residential land in our Land Division which historically was partially mitigated by increased commercial leasing revenue. Traffic at the Tradition, Florida information center remains slow, reflecting the overall state of the Florida real estate market. In response to these market conditions, the Land Division has concentrated on commercial property. In addition to sales of parcels to developers, the Land Division plans to continue to internally develop certain projects for leasing to third parties subject to market demand. Core generated higher revenues in 2008 compared to 2007 due to increased rental income associated with the leasing of certain commercial properties and increased revenues relating to irrigation services provided to homebuilders, commercial users, and the residents of Tradition, Florida. Retailers at Tradition, Florida include nationally branded retail stores such as Target, Babies R Us, Bed, Bath and Beyond, Office Max, The Sports Authority, TJ Maxx, Petsmart, LA Fitness and Old Navy.

          Our Land Division’s land in development and relevant data as of December 31, 2008 were as follows:

									Non-				Third
	Date		Acres		Closed		Current		Saleable		Saleable		Acres		Acres
	Acquired		Acquired		Acres (a)		Inventory		Acres (b)		Acres (b)		Backlog		Available
Currently in Development
Tradition, Florida		1998 – 2004		8,246		1,831		6,415		2,583		3,832		—		3,832
Tradition Hilton Head		2005		5,390		166		5,224		2,417		2,807		10		2,797
Total Currently in Development				13,636		1,997		11,639		5,000		6,639		10		6,629

(a)	Closed acres for Tradition Hilton Head include 150 acres owned by Carolina Oak, a wholly owned subsidiary of Woodbridge. The revenue from this sale was eliminated in consolidation.
(b)	Actual saleable and non-saleable acres may vary over time due to changes in zoning, project design, or other factors. Non-saleable acres include, but are not limited to, areas set aside for roads, parks, schools, utilities, wetlands and other public purposes.

Other Operations

          Other Operations consist of the operations of our Parent Company, Carolina Oak, and Pizza Fusion, other activities through Cypress Creek Capital and Snapper Creek, our equity investment in Bluegreen and an investment in Office Depot.

Investment in Bluegreen Corporation

          We own approximately 9.5 million shares of the outstanding common stock of Bluegreen, which represents approximately 31% of that company’s issued and outstanding common stock. Bluegreen is a leading provider of vacation and residential lifestyle choices through its resorts and residential community businesses. Bluegreen is organized into two divisions: Bluegreen Resorts and Bluegreen Communities.

          Bluegreen Resorts acquires, develops and markets vacation ownership interests (“VOIs”) in resorts generally located in popular high-volume, “drive-to” vacation destinations. Bluegreen Communities acquires, develops and subdivides property and markets residential land homesites, the majority of which are sold directly to retail customers who seek to build a home in a high quality residential setting, in some cases on properties featuring a golf course and related amenities.

          Bluegreen also generates significant interest income through its financing of individual purchasers of VOIs and, to a nominal extent, homesites sold by its Bluegreen Communities division.

          During 2008, we began evaluating our investment in Bluegreen for other-than-temporary impairment in accordance with Financial Accounting Standards Board (“FASB”) Staff Position (“FSP”) FAS 115-1/FAS 124-1, “The Meaning of Other-than-Temporary Impairment and Its Application to Certain Investments” (“FSP FAS 115-1/FAS 124-1”), Accounting Principles Board Opinion No. 18, “The Equity Method of Accounting for Investments in Common Stock”, (“APB No. 18”) and Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin No. 59 (“SAB No. 59”) as the fair value of the Bluegreen stock had fallen below the carrying value of our investment in Bluegreen of approximately $12 per share. We analyzed various quantitative and qualitative factors including our intent and ability to hold the investment, the severity and duration of the impairment and the prospects for the improvement of fair value. On July 21, 2008, Bluegreen’s Board of Directors entered into a non-binding letter of intent for the sale of Bluegreen’s outstanding common stock for $15 per share to a third party, with a due diligence and exclusivity period through September 15, 2008. This due diligence and exclusivity period was subsequently extended through November 15, 2008. In October 2008, Bluegreen disclosed that the third party buyer had been unable to obtain the financing necessary to execute a sale transaction, therefore, no assurances could be provided that a sale would be completed. As of December 31, 2008, the exclusivity period had expired and Bluegreen was not able to consummate a sale.

          At September 30, 2008, our investment in Bluegreen was $119.4 million compared to the $65.8 million trading value (calculated based upon the $6.91 closing price of Bluegreen’s common stock on the New York Stock Exchange on September 30, 2008). We determined that our investment in Bluegreen was other-than-temporarily impaired due to the severity of the decline in the fair value of the investment, the probability that a sale could not be executed by Bluegreen, and due to the deterioration of the debt and equity markets in the third quarter of 2008. Therefore, we recorded an impairment charge of $53.6 million, adjusting the carrying value of our investment in Bluegreen to $65.8 million at September 30, 2008. Additionally, after further evaluation of our investment in Bluegreen as of December 31, 2008, based on, among other things, the continued decline of Bluegreen’s common stock price and the continued deterioration of the equity markets, we determined that an additional impairment of the investment in Bluegreen was appropriate. Accordingly, we recorded a $40.8 million impairment charge (calculated based upon the $3.13 closing price of Bluegreen’s common stock on the New York Stock Exchange on December 31, 2008) and adjusted the carrying value of our investment in Bluegreen to $29.8 million. On March 13, 2009, the closing price of Bluegreen’s common stock was $1.12 per share.

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          Bluegreen has announced that it is implementing strategic initiatives in order to conserve cash that will significantly reduce sales, eliminate certain marketing programs, and reduce capital spending and overhead by eliminating a significant number of employees, among other things. During the fourth quarter of 2008, Bluegreen recorded $15.6 million in restructuring charges in connection with the implementation of these initiatives and recorded an $8.5 million impairment charge related to its goodwill.

Investment in Office Depot

          During March 2008, we, together with Woodbridge Equity Fund LLLP, a newly formed limited liability limited partnership wholly-owned by us, purchased 3,000,200 shares of Office Depot common stock, which represented approximately one percent of Office Depot’s outstanding stock. These Office Depot shares were acquired at an average price of $11.33 per share for an aggregate purchase price of approximately $34.0 million. During June 2008, we sold 1,565,200 shares of Office Depot common stock at an average price of $12.08 per share for an aggregate sales price of approximately $18.9 million.

          During December 2008, we performed an impairment analysis of our remaining investment in Office Depot common stock in accordance with FSP FAS 115-1/FAS 124-1. As result of the impairment analysis, we concluded that based on deteriorating economic conditions which could negatively impact the future earning potential of Office Depot, the continued decline of the Office Depot stock price, the continued decline in the overall economy and credit markets and the unpredictability of the recovery of the Office Depot stock price, there was an other-than-temporary impairment associated with our investment in Office Depot. As a result, we recorded an other-than-temporary impairment charge of approximately $12.0 million representing the difference of the average cost value of $11.33 per share and the fair value of $2.98 per share as of December 31, 2008, which represented our new basis in this investment. On March 13, 2009, the closing price of Office Depot’s common stock on the New York Stock Exchange was $1.10 per share.

Acquisition of Pizza Fusion

          Pizza Fusion is a restaurant franchise operating in a niche market within the quick service and organic food industries. Founded in 2006, Pizza Fusion was operating 16 locations in Florida and California through December 31, 2008 and entered into franchise agreements to open an additional 14 stores over 2009.

          On September 18, 2008, our wholly-owned subsidiary, Woodbridge Equity Fund II LP, purchased for an aggregate of $3.0 million 2,608,696 shares of Series B Convertible Preferred Stock of Pizza Fusion,

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together with warrants to purchase up to an additional 1,500,000 shares of Series B Convertible Preferred Stock of Pizza Fusion at an exercise price of $1.44 per share. We also have options, exercisable on or prior to September 18, 2009, to purchase up to 521,740 additional shares of Series B Convertible Preferred Stock of Pizza Fusion at a price of $1.15 per share and, upon exercise of such options, will receive warrants to purchase up to 300,000 additional shares of Series B Convertible Preferred Stock of Pizza Fusion at an exercise price of $1.44 per share. The warrants have a 10 year term and are subject to earlier termination under certain circumstances.

          We evaluated our investment in Pizza Fusion under FASB Interpretation No. 46(R), “Consolidation of Variable Interest Entities” (“FIN No. 46(R)”), and determined that Pizza Fusion is a Variable Interest Entity (“VIE”). Furthermore, we concluded that we are the primary beneficiary and as such, consolidated the financial statements of Pizza Fusion as of September 18, 2008. We will continue to review our primary beneficiary status for any potential changes in ownership or capital structure that may cause us to reconsider whether we should continue to consolidate the financial statements of Pizza Fusion. The financial statements of Pizza Fusion at December 31, 2008 were not material. See (Note 3) to our audited consolidated financial statements for further information.

Carolina Oak

          In 2007, we acquired from Levitt and Sons all of the outstanding membership interests in Carolina Oak, a South Carolina limited liability company (formerly known as Levitt and Sons of Jasper County, LLC), for the following consideration: (i) assumption of the outstanding principal balance of a loan in the amount of $34.1 million which is collateralized by a 150 acre parcel of land owned by Carolina Oak located in Tradition Hilton Head, (ii) execution of a promissory note in the amount of $400,000 to serve as a deposit under a purchase agreement between Carolina Oak and Core Communities of South Carolina, LLC and (iii) the assumption of specified payables in the amount of approximately $5.3 million.

          During the fourth quarter of 2008, as a result of, among other things, a further deterioration in consumer confidence, an overall softening of demand for new homes, a decline in the overall economy, increasing unemployment, a deterioration in the credit markets, and the direct and indirect impact of the turmoil in the mortgage loan market, we made a decision to suspend Carolina Oak’s homebuilding activities until the residential housing market improves. Consequently, the purchase agreement between Carolina Oak and Core Communities of South Carolina was canceled and the $400,000 deposit was forfeited. Carolina Oak sold and delivered 8 units during 2008 and, as of December 31, 2008, had 6 completed unsold units. Carolina Oak has an additional 91 lots that are ready and available for home construction. The community was originally planned to consist of approximately 403 additional units. However, there can be no assurance as to when homebuilding activities in this community will be resumed.

          At December 31, 2008, we reviewed Carolina Oak project’s inventory of real estate for impairment in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”). The estimated fair market value of the project was determined based on an appraisal performed by an independent third party. The independent appraisal considered, among other things, general economic conditions, competition in the market where the community is located, alternative product offerings that may impact sales price, the number of homes that can be built on the site, and alternative uses for the property such as the possibility of a sale of the entire community to another builder or the sale of individual home sites. We assessed the fair value of the project based on the appraisal performed by a third party because we believe an independent appraisal is the best estimate in determining fair value under the current circumstances. As a result of the analysis, we recorded an impairment charge of $3.5 million in cost of sales for the year ended December 31, 2008, which is reflected in the Other Operations segment.

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          As previously reported, the results of operations and financial condition of Carolina Oak as of and for the years ended December 31, 2007 and 2006 were included in the Primary Homebuilding segment because its financial metrics were similar in nature to the other homebuilding projects within that segment. However, due to our acquisition of Carolina Oak and the deconsolidation of Levitt and Sons, which comprised our Primary and Tennessee Homebuilding segments, as of November 9, 2007, the results of operations and financial condition of Carolina Oak as of and for the year ended December 31, 2008 are included in the Other Operations segment.

Corporate Headquarters

          Through May 2008, our 80,000 square foot office building served as our corporate office in Fort Lauderdale, Florida. We relocated our corporate headquarters to a smaller space at the BankAtlantic corporate offices pursuant to a sublease agreement with BFC Financial Corporation, our controlling shareholder (“BFC”). Our previous corporate headquarters building is currently 50% occupied by an unaffiliated third party pursuant to a lease which expires in 2010. We will continue to seek to lease the vacated space in our former corporate headquarters to third parties, including our affiliates, in 2009. We evaluated the former corporate headquarters office building for impairment in accordance with SFAS No. 144 and determined that the carrying value approximated fair value and, therefore, no impairment was deemed necessary.

Other Investments and Joint Ventures

          In the past we have sought to mitigate the risks associated with certain real estate projects by entering into joint ventures.

          We entered into an indemnity agreement in April 2004 with a joint venture partner at Altman Longleaf relating to, among other obligations, that partner’s guarantee of the joint venture’s indebtedness. Our liability under the indemnity agreement was limited to the amount of any distributions from the joint venture which exceeds our original capital and other contributions. Levitt Commercial, LLC, our wholly-owned subsidiary (“Levitt Commercial”) owned a 20% interest in Altman Longleaf, LLC, which owned a 20% interest in this joint venture. This joint venture developed a 298-unit apartment complex in Melbourne, Florida, with construction commencing in 2004 and ending in 2006. An affiliate of our joint venture partner was the general contractor. Our original capital contributions totaled approximately $585,000 and we have received approximately $1.2 million in distributions since 2004. In December 2008, our interest in the joint venture was sold and we received approximately $182,000 as a result of the sale and we were released from any potential obligation of indemnity which may have arisen in connection with the joint venture.

Levitt Commercial

          In 2007, our Other Operations segment also consisted of Levitt Commercial, which was formed in 2001 to develop industrial, commercial, retail and residential properties. In 2007, Levitt Commercial ceased development activities after it sold all of its remaining units. Levitt Commercial’s revenues for the year ended December 31, 2007 amounted to $6.6 million which reflected the delivery of the remaining 17 flex warehouse units at its remaining development project.

Homebuilding Division

          Acquired in December 1999, Levitt and Sons was a developer of single family homes and townhome communities for active adults and families in Florida, Georgia, Tennessee and South Carolina. Levitt and Sons operated in two reportable segments, Primary Homebuilding and Tennessee Homebuilding.

          Increased inventory levels combined with weakened consumer demand for housing and tightened credit requirements has negatively affected sales, deliveries and margins throughout the homebuilding industry. In both the Primary Homebuilding and Tennessee Homebuilding segments, Levitt and Sons experienced decreased orders, decreased margins and increased cancellation rates on homes in backlog. Excess supply, particularly in previously strong markets like Florida, in combination with a reduction in

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demand resulting from tightened credit requirements and reductions in credit availability, as well as buyers’ fears about the direction of the market, exerted a continuous cycle of downward pricing pressure for residential homes.

          On November 9, 2007 (the “Petition Date”), Levitt and Sons and substantially all of its subsidiaries (collectively, the “Debtors”) filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States Code (the “Chapter 11 Cases”) in the United States Bankruptcy Court for the Southern District of Florida ( the“Bankruptcy Court”). The Debtors commenced the Chapter 11 Cases in order to preserve the value of their assets and to facilitate an orderly wind-down of their businesses and disposition of their assets in a manner intended to maximize the recoveries of all constituents. See Item 3. “Legal Proceedings” for the current status of the Chapter 11 Cases.

          In connection with the filing of the Chapter 11 Cases, we deconsolidated Levitt and Sons as of November 9, 2007, eliminating all future operations from our financial results of operations. As a result of the deconsolidation of Levitt and Sons, in accordance with Accounting Research Bulletin (“ARB”) No. 51, “Consolidated Financial Statements” (“ARB No. 51”), we recorded our interest in Levitt and Sons under the cost method of accounting. Under cost method accounting, income is recognized only to the extent of cash received in the future or when Levitt and Sons is legally released from its bankruptcy obligations through the approval of the Bankruptcy Court, at which time any recorded loss in excess of the investment in Levitt and Sons can be recognized into income. As of November 9, 2007, Woodbridge had a negative investment in Levitt and Sons of $123.0 million and there were outstanding advances due from Levitt and Sons of $67.8 million at Woodbridge resulting in a net negative investment of $55.2 million. Included in the negative investment was approximately $15.8 million associated with deferred revenue related to intra-segment sales between Levitt and Sons and Core Communities. During the fourth quarter of 2008, the Company identified approximately $2.3 million of deferred revenue on intercompany sales between Core and Carolina Oak that had been misclassified against the negative investment in Levitt and Sons. As a result, the Company recorded a $2.3 million reclassification between inventory of real estate and the loss in excess of investment in subsidiary in the consolidated statements of financial condition. As a result, as of December 31, 2008, the net negative investment was $52.9 million. During the pendency of the Chapter 11 Cases, we also incurred certain administrative costs in the amount of $1.6 million and $748,000 for the years ended December 31, 2008 and 2007, respectively, relating to certain services and benefits provided by us in favor of the Debtors. These costs included the cost of maintaining employee benefit plans, providing accounting services, human resources expenses, general liability and property insurance premiums, payroll processing expenses, licensing and third-party professional fees (collectively, the “Post Petition Services”).

          As previously reported, the results of operations for the year ended December 31, 2007 included the results of operations for the Debtors through November 9, 2007, with the exception of Carolina Oak, which was included for the full year in 2007 as it was not part of the Chapter 11 Cases as discussed above.

Recent Developments

Bankruptcy of Levitt and Sons

          On February 20, 2009, the Bankruptcy Court presiding over Levitt and Sons’ Chapter 11 bankruptcy case entered an order confirming a plan of liquidation jointly proposed by Levitt and Sons and the Official Committee of Unsecured Creditors. That order also approved the settlement pursuant to the settlement agreement we entered into on June 27, 2008 (See Item 3 “Legal Proceedings”). No appeal or rehearing of the court’s order was timely filed by any party, and the settlement was consummated on March 3, 2009, at which time, payment was made in accordance with the terms and conditions of the settlement agreement. The cost of settlement and reversal of the related $52.9 million liability will be recognized into income in the first quarter of 2009. See Item 3. “Legal Proceedings” for further discussion of the Chapter 11 Cases.

Executive Compensation Program

     On September 29, 2008, our Board of Directors approved the terms of incentive programs for certain of our employees including certain of our named executive officers, pursuant to which a portion of their compensation will be based on the cash returns realized by us on our investments. The programs relate to the performance of existing investments and new investments designated by the Board (together, the “Investments”). All of our investments have been or will be held by individual limited partnerships or other legal entities established for such purpose. Participating executives and employees will have interests in the entities, which will be the basis of their incentives under the programs. Our named executive officers may have interests tied both to the performance of a particular investment as well as interests relating to the performance of the portfolio of investments as a whole.

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          Woodbridge, in its capacity as investor in the investment program, will be entitled to receive a return of its invested capital and a specified rate of return on its invested capital prior to our executive officers or employees being entitled to receive any portion of the realized profits (the share to which they may be entitled is referred to as the “Carried Interest”). For existing investments, the amount of invested capital was determined as of September 1, 2008, by our Board of Directors. Once we receive our priority return of our invested capital and the stated return (which accrues from September 1, 2008), we will also generally be entitled to additional amounts that provide it with (i) at least approximately 87% of the aggregate proceeds related to our status as an investor in excess of our invested capital in that investment, plus (ii) at least 35% of all other amounts earned from third parties with respect to that investment (i.e., income not related to our status as an investor, such as management fees charged to third parties). The remaining proceeds will be available under the incentive programs for distribution among those employees directly responsible for the relevant Investments and our executive officers. The compensation committee of our Board of Directors will determine the allocations to our named executive officers. These allocations are identified in advance for each of the executive officers. Although the compensation committee can alter these allocations on a prospective basis, the total amount payable to employees and officers cannot be changed. Management will determine the amounts to be allocated among the other employee participants. The incentive programs relating to both individual investments and the program established for the executive officers with respect to the overall performance of the portfolio of investments contain clawback obligations that are intended to reduce the risk that the participants will be distributed amounts under the programs prior to our receipt of at least a return of our invested capital and the stated return. To the extent that named executive officers participate in the performance of a particular investment, their clawback obligations nevertheless refer to the performance of the portfolio as a whole. The programs contemplate that the clawback obligations will be funded solely from holdback accounts established with respect to each participant. Amounts equal to a portion of Carried Interest distribution to such participant (initially 25% and which can be increased, when appropriate, to as high as 75%) will be deposited into holdback accounts or otherwise made available for our benefit. There are also general vesting and forfeiture provisions applicable to each participant’s right to receive any Carried Interest, the terms of which may vary by individual. Our Board of Directors believes that the above-described incentive plans appropriately align payments to participants with the performance of our investments.

          The “Executive Incentive Plan” which set forth the terms of the Carried Interests of certain executive officers in the performance of the overall investments of Woodbridge and the “Investment Programs” entered into to date which set forth the Carried Interests of employees and certain executive officers in the performance of particular individual investments are included as exhibits to this Annual Report. These exhibits (rather than the general descriptions contained herein) embody the legally binding terms of the incentive arrangements, which were executed on March 13, 2009.

Acquisition of Pizza Fusion

          On September 18, 2008, our wholly-owned subsidiary, Woodbridge Equity Fund II LP, purchased for an aggregate of $3.0 million 2,608,696 shares of Series B Convertible Preferred Stock of Pizza Fusion, together with warrants to purchase up to an additional 1,500,000 shares of Series B Convertible Preferred Stock of Pizza Fusion at an exercise price of $1.44 per share. See (Note 3) to our audited consolidated financial statements for further details regarding the acquisition of Pizza Fusion.

Reclassification of Discontinued Operations

          In June 2007, Core Communities began soliciting bids from several potential buyers to purchase assets associated with two of Core’s commercial leasing projects (the “Projects”). As the criteria for assets held for sale had been met in accordance with SFAS No. 144, the assets were reclassified to assets held for sale and the liabilities related to those assets were reclassified to liabilities related to assets held for sale in prior periods. The results of operations for these assets were reclassified as discontinued operations in the third quarter of 2007 and we ceased recording depreciation expense on these Projects. During the fourth quarter of 2008, we determined that given the difficulty in predicting the timing or probability of a sale of these assets associated with the Projects as a result of, among other things, the economic downturn and disruptions in credit markets, the requirements of SFAS No. 144 necessary to classify these assets held for sale and to be included in discontinued operations were no longer met and management could not assert the Projects can be sold within a year. Therefore, the results of operations for these Projects were reclassified for the three years ending December 31, 2008 back into continuing operations in the consolidated statements of operations. In accordance with SFAS No. 144, we recorded a depreciation recapture of $3.2 million at December 31, 2008 to account for the depreciation not recorded while the assets were classified as discontinued operations. Total assets and liabilities related to the Projects were $92.7 million and $76.1 million, respectively, for the year ended December 31, 2008, and $96.2 million and 80.1 million,

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respectively, for the year ended December 31, 2007. In addition, total revenues related to the Projects for the years ended December 31, 2008, 2007 and 2006 were $8.7 million, $4.7 million and $1.8 million, respectively, while income (loss) related to the assets for the same periods in 2008, 2007 and 2006 was $6.0 million, $1.8 million and $(21,000), respectively.

Business Strategy

          Our business strategy involves the following principal goals:

          Continue to develop master-planned communities. While The Land Division’s strategy has generally been focused on the development of its master-planned communities in Florida and South Carolina, current economic conditions have required that development activities be reduced to a minimum. As supply and demand for both commercial and residential development approach a more reasonable balance, Core will further evaluate its position to determine when it may be economically feasible to once again initiate more expansive development activities than currently exist. Nevertheless, Core continues to market parcels to homebuilders, and the Land Division continues to focus on its commercial operations through sales to developers and through its efforts to internally develop projects for leasing to third parties. A major component of Core’s long term strategy is the development of communities that will responsibly serve its residents and businesses. The overall goal of its developments is to facilitate a regional roadway network and establish model communities that will set an example for future development. Core has established a series of community design standards which have been incorporated into the overall planning effort of master-planned communities including: utilizing a mix of housing types, including single-family neighborhoods and a variety of higher density communities; and having a neighborhood Town Center, Community School parcels, a workplace environment and community parks. The intent is to establish well-planned, innovative communities that are sustainable for the long-term.

          We view our commercial projects opportunistically and intend to periodically evaluate the short and long term benefits of retention or disposition. Margins on land sales and the many factors which impact the margin have and may continue to fall below historical levels given the current downturn in the real estate markets. Recent trends in home sales may require us to continue to hold our land inventory longer than originally projected. We intend to review each parcel ready for development to determine whether to market the parcel to third parties, to internally develop the parcel for leasing, or hold the parcel and determine later whether to pursue third party sales or internal development opportunities. Our decision will be based, in part, on the condition of the commercial real estate market and our evaluation of future prospects. Our land development activities in our master-planned communities offer a source of land for future homebuilding by others. Much of our master-planned community acreage is under varying development orders and is not immediately available for construction or sale to third parties at prices that maximize value. Third-party homebuilder sales remain an important part of our ongoing strategy to generate cash flow, maximize returns and diversify risk, as well as to create appropriate housing alternatives for different market segments in our master-planned communities.

          Operate efficiently and effectively. We raised a significant amount of capital in 2007 through a rights offering and have implemented significant reductions in workforce levels. We intend to continue our focus on aligning our staffing levels with business goals and current and anticipated future market conditions. We also intend to continue to focus on expense management initiatives throughout the organization.

          Pursue investment opportunities. We intend to pursue acquisitions and investments, using a combination of our cash and stock and third party equity and debt financing. These investments may be within or outside of the real estate industry and may also include investments with affiliated entities. We also intend to explore a variety of funding structures which might leverage or capitalize on our available cash and other assets currently owned by us. We may acquire entire businesses, or majority or minority, non-controlling interests in companies. Investing on this basis will present additional risks, including the risks inherent in the industries in which we invest and potential integration risks if we seek to integrate the acquired operations into our operations.

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Seasonality

          We have historically experienced volatility, but not necessarily seasonality, in our results of operations from quarter-to-quarter due to the nature of the real estate business. Historically, land sale revenues have been sporadic and have fluctuated dramatically. In addition, margins on land sales and the many factors which impact margins may remain below historical levels given the current downturn in the real estate markets where we own properties. We are focusing on maximizing our sales efforts with homebuilders at our master-planned communities. However, due to the uncertainty in the real estate market, we expect to continue to experience a high level of volatility in our Land Division and Other Operations segment.

Competition

          The real estate development industry is highly competitive and fragmented. We compete with third parties in our efforts to sell land to homebuilders. We compete with other local, regional and national real estate companies and homebuilders, often within larger subdivisions designed, planned and developed by such competitors. Some of our competitors have greater financial, marketing, sales and other resources than we do.

          In addition, there are relatively low barriers to entry into the real estate market. There are no required technologies that would preclude or inhibit competitors from entering our markets. Our competitors may independently develop land. A substantial portion of our operations are in Florida and South Carolina, and we expect to continue to face additional competition from new entrants into our markets.

Employees

          As of December 31, 2008, we employed a total of 84 individuals, of which 55 were part of our Land Division and 29 were part of our Other Operations segment. Our employees are not represented by any collective bargaining agreements and we have never experienced a work stoppage. We believe our employee relations are satisfactory. In January 2009, as part of our continuing efforts to align our staffing levels with our current operations, 14 employees were terminated in our Land Division.

Additional Information

          Our Internet website address is www.woodbridgeholdings.com. Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports are available free of charge through our website, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. Our Internet website and the information contained in or connected to our website are not incorporated into this Annual Report on Form 10-K.

          Our website also includes printable versions of our Corporate Governance Guidelines, our Code of Business Conduct and Ethics and the charters for each of the Audit, Compensation and Nominating/Corporate Governance Committees of our Board of Directors.

Executive Officers of the Registrant

Name	Position	Age
Alan B. Levan	Chairman of the Board and Chief Executive Officer (Principal Executive Officer)		64
John E. Abdo	Vice-Chairman of the Board		65
Seth M. Wise	President		39
John K. Grelle	Chief Financial Officer (Principal Accounting Officer)		65

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          Alan B. Levan has been the Chairman and Chief Executive Officer of Woodbridge Holdings Corporation and its predecessors, and has held the same roles at BFC Financial Corporation since 1978. Mr. Levan is also Chairman, President and CEO of BankAtlantic Bancorp. He possesses extensive experience in the management of portfolio companies and serves on the board of directors of several BFC and Woodbridge-related companies, including Bluegreen.

          John E. Abdo has been the Vice Chairman of Woodbridge Holdings Corporation and its predecessors since its inception and of BFC Financial Corporation since 1993, while serving as a BFC board member since 1988. He has been the Vice Chairman of the Board of Directors and Chairman of the Executive Committee of BankAtlantic Bancorp, Inc. since 1987. He is also Vice Chairman of the Board of Directors of Bluegreen Corporation, and a member of the Board of Directors of Benihana, Inc.

          Seth M. Wise, President of Woodbridge Holdings Corporation has worked in the real estate industry for over twenty years. He also serves as President of Woodbridge subsidiary Core Communities. He began his career in commercial lending as a credit analyst at BankAtlantic. Mr. Wise spent 5 years in retail leasing as a Senior Leasing Executive with the Washington, D.C. based Targoff and Company and then joined the Abdo Companies as a development partner in 1996. In 2001, he joined Woodbridge Holdings Corporation as President of the commercial development subsidiary, Levitt Commercial. He then became Executive Vice President of Woodbridge Holdings Corporation in 2003 and ultimately named its President in 2005.

          John K. Grelle has been the Chief Financial Officer of Woodbridge Holdings Corporation since 2007. From 2003 through October 2007, when Mr. Grelle joined Tatum, LLC, Mr. Grelle was the founder and principal of a business formation and strategic development consulting firm. From 1996 through 2003, Mr.Grelle served as Senior Vice President and Chief Financial Officer of ULLICO Inc., a financial services conglomerate with assets in excess of $4 billion and, from 1993 through 1995, he served as Managing Director of DCG Consulting.

ITEM 1A. RISK FACTORS

RISKS RELATING TO OUR REAL ESTATE OPERATIONS

Through Core Communities and Carolina Oak, we engage in real estate activities which are speculative and involve a high degree of risk.

          The real estate industry is highly cyclical by nature. The current market is experiencing a significant decline, and future market conditions are uncertain. There are many factors which affect the real estate industry, and many of these factors are beyond our control, including:

• overbuilding or decreases in demand to acquire land;

• the availability and cost of financing;

• unfavorable interest rates and increases in inflation;

• changes in national, regional and local economic conditions;

• cost overruns, inclement weather, and labor and material shortages;

• the impact of present or future environmental legislation, zoning laws and other regulations;

• availability, delays and costs associated with obtaining permits, approvals or licenses necessary to develop property; and

• increases in real estate taxes, insurance and other local government fees.

The real estate market has experienced a significant downturn, and the duration and ultimate severity of the downturn is uncertain. A continued deterioration of economic conditions will adversely affect our operating results and financial condition.

          The downturn in the real estate market, which is now in its fourth year, has become one of the most severe in U.S. history. This downturn, which resulted from a decline in consumer confidence, decline in real estate prices and an oversupply of real estate available for sale, has been exacerbated by, among other things, a decline in the overall economy, increasing unemployment, fear of job loss and a decline in

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the securities and credit markets. The government’s legislative and administrative measures aimed at restoring liquidity to the credit markets and improving conditions in the real estate markets has only recently begun and there is no indication yet whether these measures have or will effectively stabilize prices and real estate values or restore consumer confidence and increase demand in the real estate markets.

          As a result of this downturn, and specifically the adverse impact that the combination of the lower demand and higher inventories has had on the amount of land that we are able to develop and sell and the prices at which we are able to sell the land, our operating results and financial condition have been adversely affected. We cannot predict the duration or ultimate severity of the current challenging conditions, nor can we provide assurance that our responses to the current downturn or the government’s attempts to address the troubles in the economy will be successful. If these conditions persist or continue to worsen, they will further adversely affect our operating results and financial condition.

Because real estate investments are illiquid, the downturn in the real estate market and in the economy in general has had, and may continue to have, an adverse impact on our business and cash flow.

          Real estate investments are generally illiquid. Like other companies that invest in real estate, we have a limited ability to vary our portfolio of real estate investments in response to changes in economic and other conditions. In addition, as a result of the sustained downturn in the real estate market, and in the economy in general, the estimated market value of our real estate properties has decreased and may continue to decrease in the future. Moreover, we may not be able to timely dispose of properties when we find dispositions advantageous or necessary, or complete the disposition of properties under contract to be sold, and any such dispositions may not provide proceeds in excess of the amount of our investment in the property or even in excess of the amount of any indebtedness secured by the property. As a result, we are susceptible to the risks associated with further declines in real estate values, including the risk that we may be required to record additional impairment write-downs with respect to our real estate inventory in the future if the current real estate environment does not improve or if the market value of our real estate properties otherwise continues to decline. We had $241.3 million of real estate inventory at December 31, 2008.

The commercial real estate market has been adversely affected by the current economic and credit environment.

          Economic conditions may make it more difficult to achieve projected rental and occupancy rates on Core’s commercial leasing projects, which may adversely impact the net operating income of the projects. The risks relating to Core’s commercial leasing projects include, without limitation:

• the risk that a significant tenant or a number of tenants may file for bankruptcy protection, creating the possibility that past due rents may never be recovered;

• the risk that leases with certain existing tenants may become overly burdensome to the lessee due to reduced business activity, and lease concessions and modifications may be necessary to avoid defaults;

• the risk that the current adverse economic conditions and limited availability of credit may continue or deteriorate further, causing market capitalization rates on commercial properties to increase beyond present levels, thus reducing the value at which commercial projects can be sold;

• the risk that net operating income at the commercial leasing projects may not be sufficient to meet certain debt service coverage ratio requirements, which would result in requirements for additional principal curtailment payments in order to bring the loans into compliance; and

• the risk that vacant space will take longer to lease and that rental rates will be lower than projected or necessary to operate the project profitably.

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Commercial leasing projects may not yield anticipated returns, which could harm our operating results, reduce cash flow, or the ability to sell commercial assets.

          A component of our business strategy is the development of commercial properties and assets for sale. These developments may not be as successful as expected due to the commercial leasing related risks discussed herein, as well as the risks associated with real estate development generally.

          Additionally, development of commercial projects involves the risk associated with the significant time lag between commencement and completion of the project. This time lag subjects us to greater risks relating to fluctuations in the general economy, our ability to obtain construction or permanent financing on favorable terms, if at all, our ability to achieve projected rental rates, the pace that we will be able to lease new tenants, higher than estimated construction costs (including labor and material costs), and delays in the completion of projects because of, among other factors, inclement weather, labor disruptions, construction delays or delays in receiving zoning or other regulatory approvals, or man-made or natural disasters.

We utilize community development district and special assessment district bonds to fund development costs, and we will be responsible for assessments until the underlying property is sold.

          We establish community development district and special assessment district bonds to access tax-exempt bond financing to fund infrastructure development at Core’s master-planned communities. We are responsible for any assessed amounts until the underlying property is sold. Accordingly, if we continue to hold certain of our properties longer than originally projected (as a result of a continued downturn in the real estate markets or otherwise), we may be required to pay a higher portion of annual assessments on such properties. In addition, we could be required to pay down a portion of the bonds in the event our entitlements were to decrease as to the number of residential units and/or commercial space that can be built on the properties encumbered by the bonds. Moreover, Core has guaranteed payments for assessments under the district bonds in Tradition, Florida which would require funding if future assessments to be allocated to property owners are insufficient to repay the bonds.

          The availability of tax-exempt bond financing to fund infrastructure development at Core’s master-planned communities may be adversely impacted by recent disruptions in credit markets, including the municipal bond market, by general economic conditions and by fluctuations in the real estate market. If we are not able to access this type of financing, we would be forced to obtain substitute financing, and there is no assurance that we would be able to obtain substitute financing on acceptable terms, if at all. If we are not able to obtain financing for infrastructure development, Core would be forced to use its own funds or delay development activity at its master-planned communities.

Core’s results are subject to significant volatility.

          Due to the nature and size of Core’s individual land transactions, Core’s results and our consolidated results have historically been subject to significant volatility. Land sale revenues have been sporadic and have fluctuated dramatically based upon, among other factors, changing sales prices and costs attributable to the land sold. Due to the current downturn in the real estate market, margins on land sales may continue to decline and there is no assurance that they will return to prior levels. If the real estate markets deteriorate further or if the current downturn is prolonged, we may not be able to sell land at prices above our carrying cost or even in amounts necessary to repay our indebtedness. In addition to the impact of economic and market factors, the sales price and margin of land sold varies depending upon: the location; the parcel size; whether the parcel is sold as raw land, partially developed land or individually developed lots; the degree to which the land is entitled; and whether the designated use of land is residential or commercial.

          In addition, our ability to realize margins may be affected by circumstances beyond our control, including:

• shortages or increases in prices of construction materials;

• natural disasters in the areas in which we operate;

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• lack of availability of adequate utility infrastructure and services; and

• our need to rely on local subcontractors who may not be adequately capitalized or insured.

          Any of these circumstances could give rise to delays in the start or completion of development at, or increase the cost of developing, Core’s master-planned communities. We compete with other real estate developers, both regionally and nationally, for labor as well as raw materials, and the competition for materials has recently become global. Increased costs in labor and materials could cause increases in construction costs. In addition, the cost of sales of real estate is dependent upon the original cost of the land acquired, the timing of the acquisition of the land, and the amount of land development, interest and real estate tax costs capitalized to the particular land parcel during active development. Future margins will continue to vary based on these and other market factors.

We are dependent upon certain key tenants in our commercial developments, and decisions made by these tenants or adverse developments in the business of these tenants could have a negative impact on our financial condition.

          Our commercial real estate centers are supported by anchor tenants which, due to size, reputation or other factors, are particularly responsible for drawing other tenants and shoppers to our centers in certain cases. We are subject to the risk that certain of these anchor tenants may be unable to make their lease payments or may decline to extend a lease upon its expiration.

          In addition, an anchor tenant may decide that a particular store is unprofitable and close its operations, and, while the anchor tenant may continue to make rental payments, its failure to occupy its premises could have an adverse effect on the property. A lease termination by an anchor tenant or a failure by that anchor tenant to occupy the premises could result in lease terminations or reductions in rent by other tenants in the same shopping center. Vacated anchor tenant space also tends to adversely affect the entire shopping center because of the loss of the departed anchor tenant’s power to draw customers to the center. We may not be able to quickly re-lease vacant space on favorable terms, if at all. Any of these developments could adversely affect our financial condition or results of operations.

It may be difficult and costly to rent vacant space and space which may become vacant in future periods.

          Our goal is to improve the performance of our properties by leasing available space and re-leasing vacated space. However, we may not be able to maintain our overall occupancy levels. Our ability to continue to lease or re-lease vacant space in our commercial properties will be affected by many factors, including our properties’ locations, current market conditions and the provisions of the leases we enter into with the tenants at our properties. In fact, many of the factors which could cause our current tenants to vacate their space could also make it more difficult for us to re-lease that space. The failure to lease or to re-lease vacant space on satisfactory terms could harm our operating results.

          If we are able to re-lease vacated space, there is no assurance that rental rates will be equal to or in excess of current rental rates. In addition, we may incur substantial costs in obtaining new tenants, including brokerage commission fees paid by us in connection with new leases or lease renewals, and the cost of leasehold improvements.

Additional adverse changes in economic conditions where we conduct our operations could further reduce the demand for real estate and, as a result, could further adversely impact our results of operations and financial condition.

          Adverse changes in national, regional and local economic conditions, especially in Florida and to a lesser extent South Carolina where our operations are concentrated, have had and may continue to have a negative impact on our business. Continued adverse changes in, among other things, employment levels, job growth, consumer confidence, interest rates and population growth, or a continued oversupply of land for sale may further reduce demand and depress real estate prices, which, in turn, could adversely impact our results of operations and financial condition.

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If prospective purchasers of our inventory and tenants are not able to obtain suitable financing, our results of operations may further decline.

          Our results of operations are dependent in part on the ability of prospective purchasers of our real estate inventory and prospective commercial tenants to secure financing. The recent deterioration of the credit markets and the related tightening of credit standards may impact the ability of prospective purchasers and tenants to secure financing on acceptable terms, if at all. This may, in turn, negatively impact land sales and long-term rental and occupancy rates as well as the value of Core’s commercial properties.

Natural disasters could have an adverse effect on our real estate operations.

          The Florida and South Carolina markets in which we operate are subject to the risks of natural disasters such as hurricanes and tropical storms. These natural disasters could have a material adverse effect on our business by causing the incurrence of uninsured losses, increased insurance rates, including homebuyer insurance rates, delays in construction, and shortages and increased costs of labor and building materials.

          In addition to property damage, hurricanes may cause disruptions to our business operations. Approaching storms may require that operations be suspended in favor of storm preparation activities. After a storm has passed, construction-related resources such as sub-contracted labor and building materials are likely to be redeployed to hurricane recovery efforts. Governmental permitting and inspection activities may similarly be focused primarily on returning displaced residents to homes damaged by the storms rather than on new construction activity. Depending on the severity of the damage caused by the storms, disruptions such as these could last for several months.

A portion of our revenues from land sales in Core’s master-planned communities are recognized for accounting purposes under the percentage of completion method. Therefore, if our actual results differ from our assumptions, our profitability may be reduced.

          Under the percentage of completion method of accounting for recognizing revenue, we record revenue and cost of sales as work on the project progresses based on the percentage of actual work incurred compared to the total estimated costs. This method relies on estimates of total expected project costs. Revenue and cost estimates are reviewed and revised periodically as the work progresses. Adjustments are reflected in sales of real estate and cost of sales in the period when such estimates are revised. Variation of actual results compared to our estimated costs in Core’s master-planned communities could cause material changes to our net margins.

Product liability litigation and claims that arise in the ordinary course of business may be costly.

          Our commercial real estate development business is subject to construction defect and product liability claims arising in the ordinary course of business. These claims are common in the commercial real estate industries and can be costly. We have, and many of our subcontractors have, general liability, property, errors and omissions, workers compensation and other business insurance. However, these insurance policies only protect us against a portion of our risk of loss from claims. In addition, because of the uncertainties inherent in these matters, we cannot provide reasonable assurance that our insurance coverage or our subcontractor arrangements will be adequate to address all warranty, construction defect and liability claims in the future. In addition, the costs of insuring against construction defect and product liability claims, if applicable, are substantial and the amount of coverage offered by insurance companies is also currently limited. There can be no assurance that this coverage will not be further restricted and become more costly. If we are not able to obtain adequate insurance against these claims, we may experience losses that could negatively impact our operating results.

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We are subject to governmental regulations that may limit our operations, increase our expenses or subject us to liability.

          We are subject to laws, ordinances and regulations of various federal, state and local governmental entities and agencies concerning, among other things:

• environmental matters, including the presence of hazardous or toxic substances;

• wetland preservation;

• health and safety;

• zoning, land use and other entitlements;

• building design; and

• density levels.

          In developing a project and building commercial properties, we may be required to obtain the approval of numerous governmental authorities regulating matters such as:

• the installation of utility services such as gas, electric, water and waste disposal;

• the dedication of acreage for open space, parks and schools;

• permitted land uses; and

• the construction design, methods and materials used.

          These laws or regulations could, among other things:

• establish building moratoriums;

• limit the number of commercial properties that may be built;

• change building codes and construction requirements affecting property under construction;

• increase the cost of development and construction; and

• delay development and construction.

          We may also at times not be in compliance with all regulatory requirements. If we are not in compliance with regulatory requirements, we may be subject to penalties or we may be forced to incur significant expenses to cure any noncompliance. In addition, some of our land has not yet received planning approvals or entitlements necessary for development. Failure to obtain entitlements necessary for land development on a timely basis or to the extent desired may adversely affect our operating results.

          Several governmental authorities have also imposed impact fees as a means of defraying the cost of providing governmental services to developing areas, and many of these fees have increased significantly during recent years.

Building moratoriums and changes in governmental regulations may subject us to delays or increased costs of construction or prohibit development of our properties.

          We may be subject to delays or may be precluded from developing in certain communities because of building moratoriums or changes in statutes or rules that could be imposed in the future. The State of Florida and various counties have in the past and may in the future continue to declare moratoriums on the issuance of building permits and impose restrictions in areas where the infrastructure, such as roads, schools, parks, water and sewage treatment facilities and other public facilities, does not reach minimum standards. Additionally, certain counties in Florida, including counties where we are developing projects, have enacted more stringent building codes which have resulted in increased costs of construction. As a consequence, we may incur significant expenses in connection with complying with new regulatory requirements that we may not be able to pass on to purchasers or tenants.

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We are subject to environmental laws and the cost of compliance could adversely affect our business.

          As a current or previous owner or operator of real property, we may be liable under federal, state, and local environmental laws, ordinances and regulations for the costs of removal or remediation of hazardous or toxic substances on, under or in the property. These laws often impose liability whether or not we knew of, or were responsible for, the presence of such hazardous or toxic substances. The cost of investigating, remediating or removing such hazardous or toxic substances may be substantial. The presence of any such substance, or the failure to promptly remediate any such substance, may adversely affect our ability to sell or lease the property, to use the property for its intended purpose, or, if we deem necessary or desirable in the future, to borrow funds using the property as collateral.

Increased insurance risk could negatively affect our business.

          Insurance and surety companies may take actions that could negatively affect our business, including increasing insurance premiums, requiring higher self-insured retentions and deductibles, requiring additional collateral or covenants on surety bonds, reducing limits, restricting coverages, imposing exclusions, and refusing to underwrite certain risks and classes of business. Any of these actions may adversely affect our ability to obtain appropriate insurance coverage at reasonable costs which could have a material adverse effect on our business.

Our results may vary.

          Like other companies engaged in real estate activities, we historically have experienced, and expect to continue to experience, variability in operating results on a quarterly basis and from year to year. Factors expected to contribute to this variability include:

• the cyclical nature of the real estate industry;

• prevailing interest rates and the availability of financing;

• weather;

• cost and availability of materials and labor;

• competitive conditions;

• timing of sales of land;

• the timing of receipt of regulatory and other governmental approvals for land development projects; and

• the timing of the sale of our commercial leasing operations.

Levitt and Sons had surety bonds on most of their projects, some of which were subject to indemnity by Woodbridge.

          Levitt and Sons had $33.3 million in surety bonds relating to its ongoing projects at the time of the filing of the Chapter 11 Cases. In the event that these obligations are drawn and paid by the surety, Woodbridge could be responsible for up to $11.7 million plus costs and expenses in accordance with the surety indemnity agreement for these instruments. As of December 31, 2008, we had a $1.1 million in surety bonds accrual at Woodbridge related to certain bonds where management considers it probable that the Company will be required to reimburse the surety under the indemnity agreement. It is unclear given the uncertainty involved in the Chapter 11 Cases whether and to what extent the outstanding surety bonds of Levitt and Sons will be drawn and the extent to which Woodbridge may be responsible for additional amounts beyond this accrual. It is unlikely that Woodbridge would have the ability to receive any repayment, assets or other consideration as recovery of any amount it is required to pay. If losses on additional surety bonds are identified, we will need to take additional charges associated with Woodbridge’s exposure under our indemnities, and this may have a material adverse effect on our results of operations and financial condition.

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RISKS RELATING TO OUR OTHER ACTIVITIES AND TO OUR COMPANY, GENERALLY

Our outstanding debt instruments impose restrictions on our operations and activities and could adversely affect our financial condition.

          At December 31, 2008, our consolidated debt was approximately $350.0 million, of which $215.3 million related to Core Communities.

          Certain loans which provide the primary financing for Tradition, Florida and Tradition Hilton Head have annual appraisal and re-margining requirements. These provisions may require Core Communities, in circumstances where the value of its real estate securing these loans declines, to pay down a portion of the principal amount of the loans to bring the loans within specified minimum loan-to-value ratios. Accordingly, should land prices decline to the point at which the loans fall below their specified minimum loan-to-value ratios, reappraisals could result in significant future re-margining payments. In addition, all of our outstanding debt instruments require us to comply with certain financial covenants. Further, one of our debt instruments contains cross-default provisions, which could cause a default on this debt instrument if we default on other debt instruments. If we fail to comply with any of these restrictions or covenants, the holders of the applicable debt could cause our debt to become due and payable prior to maturity. These accelerations or significant re-margining payments could require us to dedicate a substantial portion of our cash and cash flow from operations to payment of or on our debt and reduce our ability to use our cash for other purposes.

          Core’s loan agreements generally require repayment of specified amounts upon a sale of a portion of the property collateralizing the debt. Core also is subject to provisions in some of its loan agreements that may require additional principal payments, known as curtailment payments. Core made curtailment payments totaling approximately $19.9 million during 2008. Additional curtailment payments may be required in the future if the unfavorable current trends in the real estate market continue.

          For 2009, our anticipated minimum principal debt payment obligations total approximately $3.6 million, assuming the exercise of all loan extensions available at our discretion, in each case exclusive of any re-margining payments that could be required in the event that property serving as collateral becomes impaired, curtailment payments which may be required in the event sales are below contractual minimums and any additional amounts which may become due upon a sale of the property securing the loan. Our business may not generate sufficient cash flow from operations, and future borrowings may not be available under our existing credit facilities or any other financing sources in an amount sufficient, to enable us to service our indebtedness or fund our other liquidity needs. We may need to refinance all or a portion of our debt on or before maturity, which, due to, among other factors, the recent disruptions in the credit and capital markets, we may not be able to do on favorable terms or at all.

          Core is engaging a restructuring firm to review its cash flow models and analyze the terms of its outstanding indebtedness, and, where appropriate, to enter into discussions with its lenders relating to a restructuring of Core’s debt. If Core is not successful in restructuring its debt, it may not have sufficient resources to timely meet its obligations.

          Core’s obligations are independent of Woodbridge and Woodbridge is not legally obligated to support Core. There is no assurance that Woodbridge will provide additional resources to Core in the event that Core requires additional funds in order to meet its obligations as they become due. If Core is not able to meet its obligations as they become due, the lenders under the defaulted loans could foreclose on any property which serves as collateral for the defaulted loan and Core could be forced to cease or significantly curtail its operations, which would likely result in significant impairment charges and losses at Woodbridge.

Our current business strategy may require us to obtain additional capital, which may not be available on favorable terms, if at all.

          There is no assurance that we will be able to continue to develop our real estate projects and pursue new investments as currently contemplated using solely our capital on hand. As a result, we may in the future need to obtain additional financing in an effort to successfully implement our business strategy. These funds may be obtained through public or private debt or equity financings, additional bank borrowings or from strategic alliances. We may not be successful in obtaining additional funds in a timely manner, on favorable terms or at all, especially in light of the current adverse conditions in the capital and credit markets and, with respect to funding of Core’s master-planned communities, the adverse conditions

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in municipal bond markets which may impact our ability to access tax-exempt bond financing. Moreover, certain of our bank financing agreements contain provisions that limit the type and amount of debt we may incur in the future without our lenders’ consent. If we are unable to obtain any additional capital necessary to fund our real estate operations or pursue or consummate new investments, we may be required to delay, scale back or abandon some or all of our land development activities, or liquidate certain of our assets, and we may not be able to successfully implement our business strategy with respect to new investments. The occurrence of any of the above events may adversely impact our operating results and financial condition.

We are subject to the risks of the businesses that we currently hold investments in, and our future acquisitions may reduce our earnings, require us to obtain additional financing, and expose us to additional risks.

          We currently hold investments in Bluegreen, Office Depot and Pizza Fusion, and, as a result, we are subject to the risks faced by those companies in their respective industries. Each has been adversely affected by a downturn in the economy, loss of consumer confidence and disruptions in the credit markets. In addition, our business strategy includes the possibility of making material investments in other industries. While we will seek investments and acquisitions primarily in companies that provide opportunities for growth with seasoned and experienced management teams, we may not be successful in identifying these opportunities. Further, investments or acquisitions that we do complete may not prove to be successful. Acquisitions may expose us to additional risks, including the risks faced by the acquired businesses, and may have a material adverse effect on our results of operations if, among other things, the acquired businesses do not perform as expected or the acquisitions do not otherwise accomplish our strategic objectives.

          In addition, we will likely face competition in making investments or acquisitions which could increase the costs associated with the investment or acquisition. Our investments or acquisitions could initially reduce our per share earnings and add significant amortization expense or intangible asset charges. Since our acquisition strategy involves holding investments for the foreseeable future and because we do not expect to generate significant excess cash flow from operations, we may rely on additional debt or equity financing to implement our acquisition strategy. The issuance of debt will result in additional leverage which could limit our operating flexibility, and the issuance of equity could result in additional dilution to our then-current shareholders. In addition, such financing could consist of equity securities which have rights, preferences or privileges senior to our Class A or Class B Common Stock. We do not intend to seek shareholder approval of any investments or acquisitions unless required by law or regulation.

If current economic and credit market conditions do not improve and the book value of our investments continue to exceed the trading value of the shares we own, we may incur additional impairment charges in the future relating to those investments, which would adversely impact our financial condition and operating results.

          We own approximately 9.5 million shares of Bluegreen common stock, representing approximately 31% of Bluegreen’s outstanding common stock. During 2008, we evaluated our investment in Bluegreen for impairment and determined that there was an other-than-temporary impairment associated with such investment at September 30, 2008. As a result, we recorded an impairment charge of $53.6 million and adjusted the carrying value of our investment in Bluegreen as of September 30, 2008 from $119.4 million to $65.8 million. Additionally, after further evaluation of our investment in Bluegreen as of December 31, 2008, we determined that an additional impairment of our investment in Bluegreen was appropriate. Accordingly, we recorded a $40.8 million impairment charge (calculated based upon the $3.13 closing price of Bluegreen’s common stock on the New York Stock Exchange on December 31, 2008). The carrying value of our investment in Bluegreen as of December 31, 2008 was $29.8 million. There can be no assurance that we will not be required to record a further impairment charge in the future relating to our investment in Bluegreen. On March 13, 2009, the closing price of Bluegreen’s common stock on the New York Stock Exhange was $1.12 per share.

          We also own approximately 1.4 million shares of Office Depot common stock, representing less than 1% of Office Depot’s outstanding common stock. These shares are accounted for as available-for-sale securities and are carried at fair value. During 2008, we evaluated our investment in Office Depot for impairment and determined that an impairment charge was necessary. Accordingly, we recorded an other-

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than-temporary impairment of $12.0 million associated with our investment in Office Depot. As of December 31, 2008, the cost of our investment in Office Depot was $16.3 million while the carrying value of such investment, recorded at fair value, was $4.3 million. If current market conditions do not improve or if the trading price of Office Depot’s common stock does not otherwise increase, then we may be required to record future other-than-temporary impairment adjustments. On March 13, 2009, the closing price of Office Depot’s common stock on the New York Stock Exchange was $1.10 per share.

          In the event we record impairments in the future with respect to our current or future investments, then the cost of the investment determined to be impaired will be written down to its fair value with a corresponding charge to earnings, which would adversely impact our financial condition and operating results.

We are subject to certain additional risks relating to our investment in Bluegreen.

          Although Bluegreen’s common stock is traded on the New York Stock Exchange, the shares of Bluegreen common stock we own may be deemed restricted stock, which would limit our ability to liquidate our investment in Bluegreen if we choose to do so. In addition, while we have made a significant investment in Bluegreen, we do not expect to receive any dividends from the company in the foreseeable future.

          For the year ended December 31, 2008, our earnings from our investment in Bluegreen were $9.0 million (after the amortization of approximately $9.2 million related to the change in the basis as a result of the impairment charge at September 30, 2008), compared to $10.3 million in 2007, and $9.7 million in 2006. At December 31, 2008, the carrying value of our investment in Bluegreen was $29.8 million. A significant portion of our earnings and book value are dependent upon Bluegreen’s ability to operate its business plan successfully, which may be difficult given the current economic environment.

The loss of the services of our key management and personnel could adversely affect our business.

          Our ability to successfully implement our business strategy will depend on our ability to attract and retain experienced and knowledgeable management and other professional staff. There is no assurance that we will be successful in attracting and retaining key management personnel.

Our controlling shareholders have the voting power to control the outcome of any shareholder vote, except in limited circumstances.

          As of December 31, 2008, BFC Financial Corporation owned all of the issued and outstanding shares of our Class B Common Stock, and 3,735,391 shares, or approximately 22.4%, of our issued and outstanding Class A Common Stock. In the aggregate, these shares represent approximately 23.6% of our total equity and approximately 59% of our total voting power. Since our Class A Common Stock and Class B Common Stock vote as a single group on most matters, BFC is in a position to control our Company and elect a majority of our Board of Directors. Additionally, Alan B. Levan, our Chairman and Chief Executive Officer, and John E. Abdo, our Vice Chairman, collectively beneficially own shares of BFC’s Class A and Class B Common Stock representing approximately 73.8% of BFC’s total voting power. As a result, Alan B. Levan and John E. Abdo effectively have the voting power to control the outcome of any vote of our shareholders, except in those limited circumstances where Florida law mandates that the holders of our Class A Common Stock vote as a separate class. BFC’s interests may conflict with the interests of our other shareholders.

Our net operating loss carryforwards could be substantially limited if we experience an ownership change as defined in the Internal Revenue Code.

          We have experienced and continue to experience net operating losses. Under the Internal Revenue Code, we may utilize our net operating loss carryforwards in certain circumstances to offset future taxable income and to reduce federal income tax liability, subject to certain requirements and restrictions. However, if we experience an “ownership change,” as defined in Section 382 of the Internal Revenue Code, then our ability to use our net operating loss carryforwards could be substantially limited, which could have

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a negative impact on our financial position and results of operations. Generally, there is an “ownership change” if, at any time, one or more shareholders owning 5% or more of a company’s common stock have aggregate increases in their ownership of such stock of more than 50 percentage points over the prior three-year period.

          In September 2008, our Board of Directors adopted a shareholder rights plan designed to preserve shareholder value and protect our ability to use our net operating loss carryforwards by providing a deterrent to holders of less than 5% of our Class A Common Stock from acquiring a 5% or greater ownership interest in our Class A Common Stock. However, there can be no assurance that the shareholder rights plan will successfully prevent against an “ownership change” or otherwise preserve our ability to utilize our net operating loss carryforwards to offset any future taxable income, nor can there be any assurance that we will be in a position to utilize our net operating loss carryforwards in the future even if we do not experience an “ownership change.”

In the event that the Company chooses to de-register its securities from registration with the Securities and Exchange Commission, it would no longer file reports with the Securities and Exchange Commission and this could result in lower prices and more limited trading of the Company’s securities as well as adversely impact the Company’s ability to raise capital.

     In order to further reduce costs, the Company may choose to de-register its securities from the Securities and Exchange Commission, which would result in less information about the Company being publicly available to investors and could result in a lower trading price of the Company’s Class A common stock.

     During 2008, the Company failed to meet the minimum continued listing requirements of the New York Stock Exchange necessary to cause the Company’s Class A common stock to maintain its listing on the New York Stock Exchange and, consequently, the Company’s Class A common stock was de-listed. The Company’s Class A common stock is now quoted on the Pink Sheets. In order to further reduce costs, the Company may choose to de-register its securities from the Securities and Exchange Commission, as the cost of public reporting is significant. Pursuant to the rules of the Securities and Exchange Commission, if at any time the number of record holders of the Company’s Class A common stock falls below 300, including accounts held through depositories and institutional custodians, then the Company would be permitted to elect to de-register its securities, which de-registration would be effective 90 days after making the appropriate filing with the Securities and Exchange Commission. If the Company de-registers its securities from the Securities and Exchange Commission, then the Company would cease filing periodic reports with the Securities and Exchange Commission, including current reports on Form 8-K, quarterly reports on Form 10-Q and annual reports on Form 10-K, which would result in less information about the Company being publicly available to investors. Accordingly, this could result in a lower trading price of the Company’s Class A common stock, may make it more difficult for the holders of the Company’s Class A common stock to sell or purchase shares of the Company’s Class A common stock, and may cause it to be more difficult for the Company to raise capital, which, in the event additional capital is required to operate the Company’s business, could materially and adversely impact the Company’s business, prospects, financial condition and results of operations.

ITEM 1B. UNRESOLVED STAFF COMMENTS

          None.

ITEM 2. PROPERTIES

          Our principal and executive offices are located at the Corporate Headquarters of BankAtlantic, 2100 West Cypress Creek Road, Fort Lauderdale, Florida 33309. Woodbridge utilizes space pursuant to a sublease agreement with BFC. We own an office building located at 2200 West Cypress Creek Road, Fort Lauderdale, Florida 33309. Two floors of this office building are currently leased to a third party and we will continue to seek to lease to third parties, including our affiliates, the remaining space available at this office building. Core Communities owns its executive office building in Port St. Lucie, Florida. We also have various month-to-month leases on the trailers we occupy in Tradition Hilton Head. In addition to our properties used for offices, we additionally own commercial space in Florida that is leased to third parties. Because of the nature of our real estate operations, significant amounts of property are held as inventory and property and equipment in the ordinary course of our business.

ITEM 3. LEGAL PROCEEDINGS

In re: Levitt and Sons, LLC, et al., No. 07-19845-BKC-RBR, U.S. Bankruptcy Court Southern District of Florida

          On November 9, 2007, the Debtors filed voluntary petitions for relief under the Chapter 11 Cases in the Bankruptcy Court. The Debtors commenced the Chapter 11 Cases in order to preserve the value of their assets and to facilitate an orderly wind-down of their businesses and disposition of their assets in a manner intended to maximize the recoveries of all constituents.

          On November 27, 2007, the Office of the United States Trustee (the “U.S. Trustee), appointed an official committee of unsecured creditors in the Chapter 11 Cases (the “Creditors’ Committee”). On January 22, 2008, the U.S. Trustee appointed a Joint Home Purchase Deposit Creditors Committee of Creditors Holding Unsecured Claims (the “Deposit Holders Committee”, and together with the Creditors Committee, the “Committees”) The Committees have a right to appear and be heard in the Chapter 11 Cases.

          On November 27, 2007, the Bankruptcy Court granted the Debtors’ Motion for Authority to Incur Chapter 11 Administrative Expense Claim (“Chapter 11 Admin. Expense Motion”) thereby authorizing the Debtors to incur a post petition administrative expense claim in favor of Woodbridge for Post Petition Services. While the Bankruptcy Court approved the incurrence of the amounts as unsecured post petition administrative expense claims, the cash payments of such claims was subject to additional court approval. In addition to the unsecured administrative expense claims, we had pre-petition secured and unsecured claims against the Debtors. The Debtors scheduled the amounts due to us in the Chapter 11 Cases. Our

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unsecured pre-petition claims scheduled by Levitt and Sons were approximately $67.3 million and the secured pre-petition claim scheduled by Levitt and Sons is approximately $460,000. We also filed contingent claims with respect to any liability we may have arising out of disputed indemnification obligations under certain surety bonds. Lastly, we implemented an employee severance fund in favor of certain employees of the Debtors. Employees who received funds as part of this program as of December 31, 2008, which totaled approximately $3.9 million paid as of that date, have assigned their unsecured claims to Woodbridge.

          In 2008, the Debtors asserted certain claims against Woodbridge, including an entitlement to a portion of the $29.7 million federal tax refund which Woodbridge received as a consequence of losses incurred at Levitt and Sons in prior periods; however, the parties entered into the Settlement Agreement described below.

          On June 27, 2008, Woodbridge entered into a settlement agreement (the “Settlement Agreement”) with the Debtors and the Joint Committee of Unsecured Creditors (the “Joint Committee”) appointed in the Chapter 11 Cases. Pursuant to the Settlement Agreement, among other things, (i) Woodbridge agreed to pay to the Debtors’ bankruptcy estates the sum of $12.5 million plus accrued interest from May 22, 2008 through the date of payment, (ii) Woodbridge agreed to waive and release substantially all of the claims it had against the Debtors, including its administrative expense claims through July 2008, and (iii) the Debtors (joined by the Joint Committee) agreed to waive and release any claims they had against Woodbridge and its affiliates. After certain of Levitt and Sons’ creditors indicated that they objected to the terms of the Settlement Agreement and stated a desire to pursue claims against Woodbridge, Woodbridge, the Debtors and the Joint Committee entered into an amendment to the Settlement Agreement, pursuant to which Woodbridge would, in lieu of the $12.5 million payment previously agreed to, pay $8 million to the Debtors’ bankruptcy estates and place $4.5 million in a release fund to be disbursed to third party creditors in exchange for a third party release and injunction. The amendment also provided for an additional $300,000 payment by Woodbridge to a deposit holders fund. The Settlement Agreement, as amended, was subject to a number of conditions, including the approval of the Bankruptcy Court. On February 20, 2009, the Bankruptcy Court presiding over Levitt and Sons’ Chapter 11 bankruptcy case entered an order confirming a plan of liquidation jointly proposed by Levitt and Sons and the Official Committee of Unsecured Creditors. That order also approved the settlement pursuant to the Settlement Agreement, as amended. No appeal or rehearing of the court’s order was timely filed by any party, and the settlement was consummated on March 3, 2009.

Robert D. Dance, individually and on behalf of all others similarly situated v. Woodbridge Holdings Corp. (formerly known as Levitt Corp.), Alan B. Levan, and George P. Scanlon, Case No. 08-60111-Civ-Graham/O’Sullivan, Southern District of Florida

          On January 25, 2008, plaintiff Robert D. Dance filed a purported class action complaint as a putative purchaser of our securities against us and certain of our officers and directors, asserting claims under the federal securities law and seeking damages. This action was filed in the United States District Court for the Southern District of Florida and is captioned Dance v. Levitt Corp. et al., No. 08-CV-60111-DLG. The securities litigation purports to be brought on behalf of all purchasers of our securities beginning on January 31, 2007 and ending on August 14, 2007. The complaint alleges that the defendants violated Sections 10(b) and 20(a) of the Exchange Act, and Rule 10b-5 promulgated thereunder by issuing a series of false and/or misleading statements concerning our financial results, prospects and condition.

Westchester Fire Insurance Company vs. City of Brooksville Case No. 8: CA-09-486

          On February 9, 2009, the City of Brooksville, Florida filed a complaint in the Circuit Court of the Fifth Judicial Circuit in and for Hernando County, Florida. Woodbridge was named as one of the defendants. The lawsuit alleged that Levitt Corporation failed to construct certain public works projects in the City as it was required to do under a Plat Approval granted by the City for the Cascades at Southern Hills project. The lawsuit sought recovery from Westchester Fire Insurance Company, which provided surety bonds for Levitt’s performance of the public works. Although Woodbridge was named as a defendant, no cause of action was asserted against Woodbridge. The case was subsequently voluntarily dismissed without prejudice. Separately, on January 16, 2009, a federal declaratory action was filed by Westchester Fire against the City of Brooksville, Florida in the Federal District Curt for the Middle District

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of Florida. Woodbridge is not a party in that litigation. However, it is anticipated that the federal court declaratory action will resolve the dispute between all parties in its entirety. Based on the claim made by the City on the bonds, at the surety’s request, Woodbridge posted a $4.0 million letter of credit as security while the matter is litigated with the City.

          We are party to additional various claims and lawsuits which arise in the ordinary course of business. We do not believe that the ultimate resolution of these claims or lawsuits will have a material adverse effect on our business, financial position, results of operations or cash flows.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None submitted.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

          On November 20, 2008, our Class A common stock was de-listed from the New York Stock Exchange (“NYSE”), where it was previously listed and traded under the symbol “WDG”. Our Class A common stock is currently being quoted on the Pink Sheets Electronic Quotation Service (“Pink Sheets”) under the symbol “WDGH.PK.” BFC is the sole holder of our Class B common stock and there is no trading market for our Class B common stock. The Class B common stock may only be owned by BFC or its affiliates and is convertible into Class A common stock at the discretion of the holder on a share-for-share basis.

          The following table sets forth the high and low per share sales prices of our Class A common stock for each quarter during 2007 and 2008. Prices for 2007 and through November 19, 2008 are as reported on the New York Stock Exchange. Prices for the period beginning on November 20, 2008 and ending on December 31, 2008 are as quoted on the Pink Sheets.

	2007				2008
	High		Low		High		Low
First Quarter	$	77.20	$	45.95	$	13.15	$	7.00
Second Quarter	$	59.10	$	42.35	$	11.50	$	5.50
Third Quarter	$	53.10	$	10.00	$	6.60	$	0.78
Fourth Quarter	$	20.00	$	7.70	$	3.25	$	0.02

          The stock prices do not include retail mark-ups, mark-downs or commissions. On March 13, 2009, the closing quoted price of our Class A common stock as reported on the Pink Sheets was $0.65 per share.

Shareholder Return Performance Graph

          Set forth below is a graph comparing the cumulative total returns (assuming reinvestment of dividends) for the Class A common stock, the Dow Jones U.S. Total Home Construction Index and the Russell 2000 Index and assumes $100 was invested on January 2, 2004.

	Symbol	1/2/04		12/31/04		12/31/05		12/31/06		12/31/07		12/31/08
Woodbridge Class A common stock	WDGH.PK		100.00		152.48		113.60		61.31		11.04		0.60
Dow Jones US Total Home Construction Index	DJUSHB		100.00		140.43		161.22		127.99		56.58		38.48
Russell 2000 Index	RTY		100.00		116.18		120.04		140.44		136.58		89.05

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Holders

          On March 16, 2009, there were approximately 653 record holders of our Class A Common Stock and 16,656,525 shares of our Class A Common Stock were issued and outstanding. Our controlling shareholder, BFC, holds all of the 243,807 shares of our Class B common stock issued and outstanding.

Dividends

          On January 22, 2007 our Board of Directors declared a cash dividend of $0.10 per share on our Class A common stock and Class B common stock, which was paid in February 2007. There were no other dividends declared during the years ended December 31, 2008 or 2007.

          The Board has not adopted a policy of regular dividend payments. The payment of dividends in the future is subject to approval by our Board of Directors and will depend upon, among other factors, our results of operations and financial condition. We do not expect to pay dividends to shareholders for the foreseeable future.

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Stock Repurchases

          In November 2008, our Board of Directors approved a stock repurchase program which authorized us to repurchase up to 5 million shares of our Class A Common Stock from time to time on the open market or in private transactions. There can be no assurance that we will repurchase all of the shares authorized for repurchase under the program, and the actual number of shares repurchased will depend on a number of factors, including levels of cash generated from operations, cash requirements for acquisitions and investment opportunities, repayment of debt, current stock price, and other factors. The stock repurchase program does not have an expiration date and may be modified or discontinued at any time. In the fourth quarter of 2008, the Company repurchased 2,385,624 shares at a cost of $1.4 million which have been recorded as treasury stock in the Statements of Financial Condition. These treasury stock shares repurchased by the Company were canceled and retired on February 25, 2009 subsequent to December 31, 2008. At December 31, 2008, 2,614,376 shares remained available for repurchase under the stock repurchase program.

          The following table provides a summary of the stock repurchase activity under the stock repurchase program during the fourth quarter of 2008:

					Total number of		Maximum number of
					shares repurchased		shares that may yet
	Total number of		Average price paid		as part of publicly		be repurchased
Period	shares repurchased		per share		announced program		under the program
November 1 - November 30, 2008		13,220	$	0.4603		13,220		4,986,780
December 1 - December 31, 2008		2,372,404	$	0.6038		2,372,404		2,614,376
Total		2,385,624	$	0.6030		2,385,624		2,614,376

Reverse Stock Split

          On September 26, 2008, we effected a one-for-five reverse stock split. As a result of the reverse stock split, each five shares of our Class A Common Stock outstanding at the time of the reverse stock split automatically converted into one share of Class A Common Stock and each five shares of our Class B Common Stock outstanding at the time of the reverse stock split automatically converted into one share of Class B Common Stock. As a result, the number of outstanding shares of Class A Common Stock decreased from 95,197,445 to 19,042,149, and the number of outstanding shares of Class B Common Stock decreased from 1,219,031 to 243,807. The number of authorized shares of our Class A and Class B Common Stock as well as the number of shares of Class A Common Stock available for issuance under our equity compensation plans and the number of shares of Class A Common Stock underlying stock options and other exercisable or convertible instruments were also ratably decreased in connection with the reverse split. All share and per share data presented in this report for prior periods have been retroactively adjusted to reflect the reverse stock split.

Shareholder Rights Plan

          As previously reported, in September 2008, we adopted a shareholder rights plan aimed at preserving our ability to utilize our net operating loss carryforwards to offset future taxable income. Under Section 382 of the Internal Revenue Code, if we experience an “ownership change” (as defined in Section 382), then our ability to use the net operating loss carryforwards would be substantially limited. Accordingly, we adopted the rights plan to deter shareholders from acquiring a 5.0% or greater ownership interest in our Class A Common Stock, as any such acquisition might qualify as an “ownership change” under Section 382. Shareholders who owned more than 5.0% of our Class A Common Stock as of October 9, 2008 were not required to divest any of their shares.

          As part of the adoption of the rights plan, our Board of Directors declared a dividend of one right for each share of our Class A Common Stock and Class B Common Stock held of record as of the close of

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business on October 9, 2008. These rights are not exercisable and are not transferable apart from our Class A Common Stock or Class B Common Stock until the earlier of (i) the 10^th business day after such time as a person or group acquires beneficial ownership of 5.0% or more of our Class A Common Stock and (ii) the tenth business day after a person or group commences a tender or exchange offer, the consummation of which would result in beneficial ownership by a person or group of 5.0% or more of our Class A Common Stock. Upon such time, if any, as the rights become exercisable, each rights holder (other than the shareholder whose acquisition triggered the exercisability of the rights and such shareholder’s associates and affiliates) may, for $12.00 per right, purchase shares of our Class A Common Stock with a market value of $24.00. As a result, the rights plan will generally cause substantial dilution to any person or group that acquires beneficial ownership of 5.0% or more of the outstanding shares of our Class A Common Stock without the approval of our Board of Directors.

          The rights plan will expire on September 29, 2018 unless the rights are earlier redeemed or exchanged in accordance with the rights plan or the rights plan is earlier terminated by our Board of Directors.

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ITEM 6. SELECTED FINANCIAL DATA

          The following table sets forth selected consolidated financial data as of and for the years ended December 31, 2004 through 2008. Certain selected financial data presented below as of and for the years ended December 31, 2004 through 2008, are derived from our audited consolidated financial statements. In connection with the filing of the Chapter 11 Cases, Woodbridge deconsolidated Levitt and Sons as of November 9, 2007, eliminating all future operations of Levitt and Sons from Woodbridge’s financial results of operations (See Note 24 to our audited consolidated financial statements included in Item 8 for financial information of Levitt and Sons). As a result of the deconsolidation, the consolidated financial condition data for the year ended December 31, 2007 does not include the Primary and Tennessee Homebuilding segments other than the results of Carolina Oak, which was acquired by Woodbridge from Levitt and Sons in 2007. In 2008, the results of operations of Core’s commercial leasing projects were reclassified from discontinued operations back into continuing operations. Therefore, the results of operations for these projects were reclassified for all periods presented in the table below. See (Note 2) to our audited consolidated financial statements for further discussion. This table is a summary and should be read in conjunction with the audited consolidated financial statements and related notes thereto which are included elsewhere in this report.

	As of and for the Year Ended December 31,
	2008			2007			2006			2005		2004
	(Dollars in thousands, except per share, unit and average price data)
Consolidated Operations:
Revenues from sales of real estate	$	13,837			410,115			566,086			558,112		549,652
Cost of sales of real estate (a)		12,728			573,241			482,961			408,082		406,274
Margin (a)		1,109			(163,126	)		83,125			150,030		143,378
Earnings from Bluegreen Corporation		8,996			10,275			9,684			12,714		13,068
Selling, general & administrative expenses		50,754			117,924			121,151			87,639		71,001
Impairment of investment in Bluegreen Corporation		(94,426	)		—			—			—		—
Impairment of other investments		(14,120	)		—			—			—		—
Net (loss) income	$	(140,331	)		(234,620	)		(9,164	)		54,911		57,415
Basic (loss) earnings per common share (e)	$	(7.35	)		(30.00	)		(2.27	)		13.58		15.19
Diluted (loss) earnings per common share (e)	$	(7.35	)		(30.00	)		(2.29	)		13.15		14.64
Basic weighted average common shares outstanding (thousands) (c) (e)		19,088			7,821			4,045			4,044		3,779
Diluted weighted average common shares outstanding (thousands) (c) (e)		19,088			7,821			4,045			4,156		3,861
Dividends declared per common share (e)	$	—			0.10			0.40			0.40		0.20
Consolidated Financial Condition Data:
Cash	$	114,798			195,181			48,391			113,562		125,522
Inventory of real estate	$	241,318			227,290			822,040			611,260		413,471
Investment in Bluegreen Corporation	$	29,789			116,014			107,063			95,828		80,572
Total assets	$	559,254			712,851			1,090,666			895,673		678,467
Total debt	$	349,952			353,790			615,703			407,970		268,226
Total liabilities	$	439,724			451,745			747,427			545,887		383,678
Shareholders’ equity	$	119,530			261,106			343,239			349,786		294,789
Book value per share (d)	$	7.07			13.56			86.50			88.17		74.33

(a)

Margin is calculated as sales of real estate minus cost of sales of real estate. Included in cost of sales of real estate for the year ended December 31, 2008 is an impairment charge associated with the Carolina Oak homebuilding project in the amount of $3.5 million. Additionally, included in cost of sales of real estate for the years ended December 31, 2007 and 2006 are homebuilding inventory impairment charges and write-offs of deposits and pre-acquisition costs of $206.4 million and $31.1 million, respectively, in our Primary Homebuilding segment. In our Tennessee Homebuilding segment, impairment charges amounted to $11.2 million and $5.7 million in the years ended December 31, 2007 and 2006, respectively, which were included in cost of sales.

(b)

Diluted (loss) earnings per share takes into account the dilutive effect of our stock options and restricted stock using the treasury stock method and the dilution in earnings we recognize as a result of outstanding Bluegreen securities that entitle the holders thereof to acquire

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	shares of Bluegreen’s common stock.
(c)	The weighted average number of common shares outstanding in basic and diluted (loss) earnings per common share for 2006, 2005 and 2004 were retroactively adjusted for the number of shares representing the bonus element arising from the rights offering that closed on October 1, 2007. Under the rights offering, shares of our Class A common stock were issued on October 1, 2007 at a purchase price below the market price of such shares on that date resulting in the bonus element of 1.97%. The number of weighted average shares of Class A common stock was retroactively increased by this percentage for 2006, 2005 and 2004.
(d)	Book value per share is calculated as shareholders equity divided by total number of shares issued and outstanding as of December 31 of each year.
(e)	On September 26, 2008, we effected a one-for-five reverse stock split. As a result of the reverse stock split, each five shares of our Class A Common Stock outstanding at the time of the reverse stock split automatically converted into one share of Class A Common Stock and each five shares of our Class B Common Stock outstanding at the time of the reverse stock split automatically converted into one share of Class B Common Stock. Accordingly, all share and per share data presented in this report for prior periods have been retroactively adjusted to reflect the reverse stock split.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Executive Overview

          We continue to focus on managing our real estate holdings during this challenging period for the real estate industry, and on efforts to bring costs in line with our strategic objectives. We have taken steps to align our staffing levels and compensation with these objectives. Our goal is to pursue acquisitions and investments in diverse industries, including investments in affiliates, using a combination of our cash and stock and third party equity and debt financing. This business strategy may result in acquisitions and investments both within and outside of the real estate industry. We may acquire entire businesses or majority or minority, non-controlling interests in companies. Under this business model, we likely will not generate a consistent earnings stream and the composition of our revenues may vary widely due to factors inherent in a particular investment, including the maturity and cyclical nature of, and market conditions relating to, the business invested in. We expect that net investment gains and other income will depend on the success of our investments as well as overall market conditions. We also intend to pursue strategic initiatives with a view to enhancing liquidity. These initiatives may include pursuing alternatives to monetize a portion of our interests in certain of Core’s assets through sale, possible joint ventures or other strategic relationships.

          Our operations have historically been concentrated in the real estate industry which is cyclical in nature. Our largest subsidiary is Core Communities, a developer of master-planned communities, which sells land to residential builders as well as to commercial developers, and internally develops, constructs and leases income producing commercial real estate. In addition, our Other Operations segment consists of an equity investment in Bluegreen, a NYSE-listed company, which represents approximately 31% of Bluegreen’s outstanding common stock, a consolidated investment in Pizza Fusion, a private company in which we made a $3.0 million investment in the third quarter of 2008 which represents approximately 41% of Pizza Fusion’s outstanding stock, and a cost method investment in Office Depot, a NYSE- listed company in which we own less than 1% of the outstanding common stock. Bluegreen is engaged in the acquisition, development, marketing and sale of ownership interests in primarily “drive-to” vacation resorts, and the development and sale of golf communities and residential land. Our Other Operations segment also includes the activities of our consolidated subsidiary, Carolina Oak, which engaged in homebuilding activities at Tradition Hilton Head prior to the suspension of those activities during the fourth quarter of 2008. As previously reported, the results of operations and financial condition of Carolina Oak as of and for the years ended December 31, 2007 and 2006 were included in the Primary Homebuilding segment because its financial metrics were similar in nature to the other homebuilding projects within that segment. However, due to our acquisition of Carolina Oak and the deconsolidation of Levitt and Sons as of November 9, 2007, which comprised our Primary Homebuilding and Tennessee Homebuilding segments, the results of operations and financial condition of Carolina Oak as of and for the year ended December 31, 2008 are included in the Other Operations segment.

Financial and Non-Financial Metrics

          Performance and prospects are evaluated using a variety of financial and non-financial metrics. The key financial metrics utilized to evaluate historical operating performance include revenues from sales of real estate, margin (which we measure as revenues from sales of real estate minus cost of sales of real estate), margin percentage (which we measure as margin divided by revenues from sales of real estate), net (loss) income and return on equity. We also continue to evaluate and monitor selling, general and administrative expenses as a percentage of revenue, our ratios of debt to shareholders’ equity and debt to total capitalization and our cash requirements. Non-financial metrics used to evaluate historical performance include saleable acres in our Land Division and the number of acres in our backlog. In evaluating future prospects, management considers financial results as well as non-financial information such as acres in backlog (measured as land subject to an executed sales contract). The ratio of debt to shareholders’ equity and cash requirements are also considered when evaluating future prospects, as are general economic factors and interest rate trends. These metrics are not an exhaustive list, and management may from time to time utilize different financial and non-financial information or may not use all of the metrics mentioned above.

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Critical Accounting Policies and Estimates

          Management views critical accounting policies as accounting policies that are important to the understanding of our financial statements and also involve estimates and judgments about inherently uncertain matters. In preparing financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated statements of financial condition and assumptions that affect the recognition of revenues and expenses on the consolidated statements of operations for the periods presented. These estimates require the exercise of judgment, as future events cannot be determined with certainty. Material estimates that are particularly susceptible to significant change in subsequent periods relate to revenue and cost recognition on percent complete projects, reserves and accruals, impairment reserves of assets, valuation of real estate, estimated costs to complete construction, reserves for litigation and contingencies and deferred tax valuation allowances. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ significantly from these estimates if conditions change or if certain key assumptions used in making these estimates ultimately prove to be materially incorrect.

          We have identified the following accounting policies that management views as critical to the accurate portrayal of our financial condition and results of operations.

Loss in excess of investment in Levitt and Sons

          Under ARB No. 51, consolidation of a majority-owned subsidiary is precluded where control does not rest with the majority owners. Under these rules, legal reorganization or bankruptcy represents conditions which can preclude consolidation or equity method accounting as control rests with the Bankruptcy Court, rather than the majority owner. As described elsewhere in this report, Levitt and Sons, our wholly-owned subsidiary, filed a petition for bankruptcy on November 9, 2007. Accordingly, we deconsolidated Levitt and Sons as of November 9, 2007, eliminating all future operations from our financial results of operations. In accordance with ARB No. 51, we follow the cost method of accounting to record our interest in Levitt and Sons. Under cost method accounting, income may be recognized to the extent only cash is received in the future or when Levitt and Sons is legally released from its bankruptcy obligations through the approval of the Bankruptcy Court, at which time any loss in excess of the investment in Levitt and Sons will be recognized into income. See (Note 24) to our audited consolidated financial statements for further discussion.

Fair Value Measurements

          Effective January 1, 2008, we partially adopted the provisions of SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”), which requires us to disclose the fair value of our investments in unconsolidated trusts and equity securities, including our investments in Bluegreen and Office Depot. Under this standard, fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). In determining fair value, we are sometimes required to use various valuation techniques. SFAS No. 157 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. As a basis for considering such assumptions, SFAS No. 157 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

• Level 1. Observable inputs such as quoted prices in active markets for identical assets or liabilities;

• Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

• Level 3. Unobservable inputs, when there is little or no market data, which require the reporting entity to develop its own assumptions.

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          When valuation techniques, other than those described as Level 1 are utilized, management must make estimations and judgments in determining the fair value for its investments. The degree to which management’s estimation and judgment is required is generally dependent upon the market pricing available for the investments, the availability of observable inputs, the frequency of trading in the investments and the investment’s complexity. If we make different judgments regarding unobservable inputs, we could potentially reach different conclusions regarding the fair value of our investments.

Investments

     We determine the appropriate classifications of investments in equity securities at the acquisition date and re-evaluate the classifications at each balance sheet date. For entities where we are not deemed to be the primary beneficiary under FIN No. 46(R) or in which we have less than a controlling financial interest evaluated under AICPA Statement of Position 78-9, “Accounting for Investments in Real Estate Ventures” or Emerging Issues Task Force No. 04-5, “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights”, these entities are accounted for using the equity or cost method of accounting. Typically, the cost method is used if we own less than 20% of the investee’s stock and the equity method is used if we own more than 20% of the investee’s stock. However, we have concluded that the percentage ownership of stock is not the sole determinant in applying the equity or the cost method, but the significant factor is whether the investor has the ability to significantly influence the operating and financial policies of the investee.

Equity Method

          We follow the equity method of accounting to record our interests in entities in which we do not own the majority of the voting stock or record our investment in VIEs in which we are not the primary beneficiary. These entities consist of Bluegreen Corporation and statutory business trusts. The statutory business trusts are VIEs in which we are not the primary beneficiary. Under the equity method, the initial investment in a joint venture is recorded at cost and is subsequently adjusted to recognize our share of the joint venture’s earnings or losses. Distributions received and other-than-temporary impairments reduce the carrying amount of the investment.

Cost Method

          We use the cost method for investments where we own less than a 20% interest and do not have the ability to significantly influence the operating and financial policies of the investee in accordance with relative accounting guidance. SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities”, requires us to designate our securities as held to maturity, available for sale, or trading, depending on our intent with regard to our investments at the time of purchase. There are currently no securities classified as held to maturity or trading.

Impairment

          Securities classified as available-for-sale are carried at fair value with net unrealized gains or losses reported as a component of accumulated other comprehensive income (loss), but do not impact our results of operations. Changes in fair value are taken to income when a decline in value is considered other-than-temporary.

          We review our equity and cost method investments quarterly for indicators of other-than-temporary impairment in accordance with FSP FAS 115-1/FAS 124-1 and SAB No. 59. This determination requires significant judgment in which we evaluate, among other factors, the fair market value of the investments, general market conditions, the duration and extent to which the fair value of the investment is less than cost, and our intent and ability to hold the investment until it recovers. We also consider specific adverse conditions related to the financial health of, and business outlook for, the investee, including industry and sector performance, rating agency actions, changes in operational and financing cash flow factors. If a decline in the fair value of the investment is determined to be other-than-temporary, an impairment charge is recorded to reduce the investment to its fair value and a new cost basis in the investment is established.

Goodwill and Intangible Assets

          We recorded certain intangible assets in connection with our acquisition of Pizza Fusion. Intangible assets consist primarily of franchise contracts which were valued using a discounted cash flow

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methodology and are amortized over the average life of the franchise contracts. The estimates of useful lives and expected cash flows require us to make significant judgments regarding future periods that are subject to outside factors. In accordance with SFAS No. 144, we evaluate when events and circumstances indicate that assets may be impaired and when the undiscounted cash flows estimated to be generated by those assets are less than their carrying amounts. The carrying value of these assets is dependent upon estimates of future earnings that we expect to generate. If cash flows decrease significantly, intangible assets may be impaired and would be written down to their fair value.

          On at least an annual basis, we conduct a review of our goodwill in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”), to determine whether the carrying value of goodwill exceeds the fair market value using a discounted cash flow methodology. In the year ended December 31, 2006, we conducted an impairment review of the goodwill related to our Tennessee Homebuilding segment, the operations of which were comprised of the activities of Bowden Building Corporation, which we acquired in 2004. We used a discounted cash flow methodology to determine the amount of impairment resulting in completely writing off goodwill of approximately $1.3 million in the year ended December 31, 2006. The write-off is included in other expenses in the consolidated statements of operations.

Revenue Recognition

          Revenue and all related costs and expenses from house and land sales are recognized at the time that closing has occurred, when title and possession of the property and the risks and rewards of ownership transfer to the buyer, and when we do not have a substantial continuing involvement in accordance with SFAS No. 66, “Accounting for Sales of Real Estate” (“SFAS 66”). In order to properly match revenues with expenses, we estimate construction and land development costs incurred and to be incurred, but not paid at the time of closing. Estimated costs to complete are determined for each closed home and land sale based upon historical data with respect to similar product types and geographical areas and allocated to closings along with actual costs incurred based on a relative sales value approach. To the extent the estimated costs to complete have significantly changed, we will adjust cost of sales in the current period for the impact on cost of sales of previously sold homes and land to ensure a consistent margin of sales is maintained.

          Revenue is recognized for certain land sales on the percentage-of-completion method when the land sale takes place prior to all contracted work being completed. Pursuant to the requirements of SFAS 66, if the seller has a continuing involvement with the property and does not transfer substantially all of the risks and rewards of ownership, profit is recognized based on the nature and extent of the seller’s continuing involvement. In the case of our land sales, this involvement typically consists of final development activities. We recognize revenue and related costs as work progresses using the percentage-of-completion method, which relies on estimates of total expected costs to complete required work. Revenue is recognized in proportion to the percentage of total costs incurred in relation to estimated total costs at the time of sale. Actual revenues and costs to complete construction in the future could differ from our current estimates. If our estimates of development costs remaining to be completed and relative sales values are significantly different from actual amounts, then our revenues, related cumulative profits and costs of sales may be revised in the period that estimates change.

          Other revenues consist primarily of rental property income, marketing revenues, irrigation service fees, and title and mortgage revenue. Irrigation service connection fees are deferred and recognized systematically over the life of the irrigation plant. Irrigation usage fees are recognized when billed as the service is performed. Rental property income consists of rent revenue from long-term leases of commercial property. We review all new leases in accordance with SFAS No. 13 “Accounting for Leases”. If the lease contains fixed escalations for rent, free-rent periods or upfront incentives, rental revenue is recognized on a straight-line basis over the life of the lease.

          Effective January 1, 2006, Bluegreen adopted AICPA Statement of Position 04-02, “Accounting for Real Estate Time-Sharing Transactions” (“SOP 04-02”). This Statement amends FASB Statement No. 67, “Accounting for Costs and Initial Rental Operations of Real Estate Projects” (“FAS No. 67”), to state that the guidance for incidental operations and costs incurred to sell real estate projects does not apply to real estate time-sharing transactions. The accounting for those operations and costs is subject to the

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guidance in SOP 04-02. Bluegreen’s adoption of SOP 04-02 resulted in a one-time, non-cash, cumulative effect of change in accounting principle charge of $4.5 million to Bluegreen for the year ended December 31, 2006, and accordingly reduced the earnings in Bluegreen recorded by us by approximately $1.4 million for the same period.

Income Taxes

          We record income taxes using the liability method of accounting for deferred income taxes. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequence of temporary differences between the financial statement and income tax basis of our assets and liabilities. We estimate our income taxes in each of the jurisdictions in which we operate. This process involves estimating our tax exposure together with assessing temporary differences resulting from differing treatment of items, such as deferred revenue, for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within our consolidated statements of financial condition. The recording of a net deferred tax asset assumes the realization of such asset in the future. Otherwise, a valuation allowance must be recorded to reduce this asset to its net realizable value. We consider future pretax income and ongoing prudent and feasible tax strategies in assessing the need for such a valuation allowance. In the event that we determine that we may not be able to realize all or part of the net deferred tax asset in the future, a valuation allowance for the deferred tax asset is charged against income in the period such determination is made. See Item 1. “Business — Recent Developments” for a description of the shareholder rights plan we adopted in September 2008 which is aimed at preserving our ability to use our net operating loss carryforwards to offset future taxable income.

          We file a consolidated Federal and Florida income tax return. Separate state returns are filed by subsidiaries that operate outside the state of Florida. Even though Levitt and Sons and its subsidiaries have been deconsolidated from Woodbridge for financial statement purposes, they continue to be included in our Federal and Florida consolidated tax returns until the discharge of Levitt and Sons from bankruptcy. See (Note 21) for information regarding the bankruptcy filing of Levitt and Sons. As a result of the deconsolidation of Levitt and Sons, all of Levitt and Sons’ net deferred tax assets are no longer presented in the consolidated statement of financial condition at December 31, 2008 but remain a part of Levitt and Sons’ condensed consolidated financial statements at December 31, 2008 and accordingly will be part of the tax return.

          We adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB No. 109” (“FIN 48”), on January 1, 2007. FIN 48 provides guidance on recognition, measurement, presentation and disclosure in financial statements of uncertain tax positions that a company has taken or expects to take on a tax return. FIN 48 substantially changes the accounting policy for uncertain tax positions. As a result of the implementation of FIN 48, we recognized a decrease of $260,000 in the liability for unrecognized tax benefits, which was accounted for as an increase to the January 1, 2007 balance of retained earnings. At December 31, 2008 and 2007, we had gross tax-affected unrecognized tax benefits of $2.4 million, of which $0.2 million, if recognized, would affect the effective tax rate.

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Consolidated Results of Operations

										2008			2007
	Year Ended December 31,									vs. 2007			vs. 2006
	2008			2007			2006			Change			Change
	(In thousands, except per share data)
Revenues
Sales of real estate	$	13,837			410,115			566,086			(396,278	)		(155,971	)
Other revenues		11,701			10,458			9,241			1,243			1,217
Total revenues		25,538			420,573			575,327			(395,035	)		(154,754	)
Costs and expenses
Cost of sales of real estate		12,728			573,241			482,961			(560,513	)		90,280
Selling, general and administrative expenses		50,754			117,924			121,151			(67,170	)		(3,227	)
Interest expense		10,867			3,807			—			7,060			3,807
Other expenses		—			3,929			3,677			(3,929	)		252
Total costs and expenses		74,349			698,901			607,789			(624,552	)		91,112
Earnings from Bluegreen Corporation		8,996			10,275			9,684			(1,279	)		591
Impairment of investment in Bluegreen Corporation		(94,426	)		—			—			(94,426	)		—
Impairment of other investments		(14,120	)		—			—			(14,120	)		—
Interest and other income		8,030			11,264			7,844			(3,234	)		3,420
Loss before income taxes		(140,331	)		(256,789	)		(14,934	)		116,458			(241,855	)
Benefit for income taxes		—			22,169			5,770			(22,169	)		16,399
Net loss	$	(140,331	)		(234,620	)		(9,164	)		94,289			(225,456	)
Basic loss per share (c)	$	(7.35	)		(30.00	)		(2.27	)		22.65			(27.73	)
Total diluted loss per share (a) (c)	$	(7.35	)		(30.00	)		(2.29	)		22.65			(27.71	)
Basic weighted average shares outstanding (b) (c)		19,088			7,821			4,045			11,267			3,776
Diluted weighted average shares outstanding (b) (c)		19,088			7,821			4,045			11,267			3,776

(a)	Diluted loss per share takes into account (i) the dilution in earnings we recognize from Bluegreen as a result of outstanding securities issued by Bluegreen that enable the holders thereof to acquire shares of Bluegreen’s common stock and (ii) the dilutive effect of our stock options and restricted stock using the treasury stock method.
(b)	The weighted average number of common shares outstanding in basic and diluted loss per common share for 2006 were retroactively adjusted for a number of shares representing the bonus element arising from the rights offering that closed on October 1, 2007. Under the rights offering, shares of our Class A common stock were issued on October 1, 2007 at a purchase price below the market price of such shares on that date resulting in the bonus element of 1.97%. The number of weighted average shares of Class A common stock was retroactively increased by this percentage for 2006.
(c)	On September 26, 2008, we effected a one-for-five reverse stock split. As a result of the reverse stock split, each five shares of our Class A Common Stock outstanding at the time of the reverse stock split automatically converted into one share of Class A Common Stock and each five shares of our Class B Common Stock outstanding at the time of the reverse stock split automatically converted into one share of Class B Common Stock. Accordingly, all share and per share data presented in this report for prior periods have been retroactively adjusted to reflect the reverse stock split.

          As of November 9, 2007, the accounts of Levitt and Sons were deconsolidated from our consolidated statements of financial condition and statements of operations. Therefore, the financial data and comparative analysis in the preceding table reflected operations through November 9, 2007 related to the Primary Homebuilding and Tennessee Homebuilding segments compared to full year results of operations in 2006, with the exception of Carolina Oak which was included in the above table for the full year in 2007 since this subsidiary was not part of the Chapter 11 Cases.

For the Year Ended December 31, 2008 Compared to the Year Ended December 31, 2007

          We incurred a consolidated net loss of $140.3 million for the year ended December 31, 2008 as compared to a consolidated net loss of $234.6 million for the year ended December 31, 2007. During 2008,

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we recorded impairment charges of $112.0 million, of which $108.5 million related to our investments and $3.5 million related to Carolina Oak’s inventory of real estate, compared to impairment charges of $226.9 million related to Levitt and Sons’ inventory of real estate recorded during 2007 in cost of sales. Levitt and Sons incurred a net loss of $231.4 million for the year ended December 31, 2007, which represented 98.6% of our consolidated net loss for that period. As previously disclosed, we deconsolidated Levitt and Sons as of November 9, 2007. Excluding the results of Levitt and Sons, the net loss increased by $135.0 million for the year ended December 31, 2008, primarily due to impairment charges recorded in 2008 relating to our investments in Bluegreen, Office Depot and unconsolidated trusts, and impairment charges relating to Carolina Oak’s inventory of real estate. No impairment charges related to these items were recorded in 2007. In addition, our total revenues decreased in both the Land Division and Other Operations segment during 2008 as sales of real estate decreased reflecting a further deterioration of the real estate markets, interest expense increased because less assets qualified for interest capitalization, our earnings from Bluegreen decreased as Bluegreen’s net income decreased in 2008 compared to 2007 and the benefit for income taxes decreased as our effective tax rate for 2008 was 0.0% compared to 8.6% in 2007.

          Revenues from sales of real estate decreased to $13.8 million for the year ended December 31, 2008 from $410.1 million for the year ended December 31, 2007. This decrease was primarily attributable to the deconsolidation of Levitt and Sons at November 9, 2007 as well as a decrease in sales of real estate in the Land Division and Other Operations. Levitt and Sons’ revenues from sales of real estate amounted to $387.7 million in 2007. Revenues from sales of real estate for the year ended December 31, 2008 in the Land Division decreased to $11.3 million, from $16.6 million in 2007 reflecting the sale of approximately 35 acres in 2008 compared to 40 acres in 2007. In Other Operations, revenues from sales of real estate for the year ended December 31, 2008 were $2.5 million reflecting the delivery of 8 units in Carolina Oak, compared to revenues from sales of real estate of $6.6 million in Levitt Commercial reflecting the delivery of 17 units in 2007.

          Other revenues increased $1.2 million to $11.7 million for the year ended December 31, 2008, compared to $10.5 million during the year ended December 31, 2007. Other revenues increased primarily as a result of higher leasing revenues due to the opening of the Landing at Tradition retail power center in late 2007. The increase was offset in part by decreased title and mortgage operations revenues associated with Levitt and Sons as it was not included in the consolidated results of operations for the year ended December 31, 2008. In addition, there was decreased marketing income associated with Tradition, Florida.

          Cost of sales of real estate decreased to $12.7 million during the year ended December 31, 2008, as compared to $20.7 million (excluding cost of sales, which included impairment provisions, associated with Levitt and Sons) for the year ended December 31, 2007 as sales of real estate decreased in the Land Division and Other Operations. Cost of sales of real estate in the Land Division decreased as we sold approximately 35 acres in the year ended December 31, 2008, compared to approximately 40 acres in 2007. In Other Operations, we delivered 8 units in Carolina Oak in the year ended December 31, 2008, compared to the delivery of 17 units in Levitt Commercial in 2007. In addition, we recorded $3.5 million of impairment charges related to Carolina Oak’s inventory of real estate in 2008, compared to $9.3 million in impairment charges related to capitalized interest in Other Operations recorded in 2007.

          Selling, general and administrative expenses decreased $67.2 million to $50.8 million during the year ended December 31, 2008 compared to $117.9 million during the year ended December 31, 2007. This decrease was primarily related to the deconsolidation of Levitt and Sons at November 9, 2007. Selling, general and administrative expenses attributable to Levitt and Sons in the year ended December 31, 2007 were $66.6 million. Consolidated selling, general and administrative expenses, excluding those attributable to Levitt and Sons, remained relatively unchanged in 2008 compared to 2007 totaling $50.8 million in the year ended December 31, 2008, and $51.3 million in 2007. We incurred higher property management expenses related to our commercial leasing activities, higher property tax expense due to less acreage in active development and higher expenses related to the support of community and commercial associations in our master-planned communities in the Land Division as well as higher other administrative expenses associated with marketing activities in South Carolina in 2008 compared to 2007. In addition, depreciation expenses were higher in 2008 mainly as a result of a depreciation recapture related to the reclassification of discontinued operations, and insurance costs were higher due to the absorption of certain of Levitt and Sons’ insurance costs. The above increases were offset by lower office related expenses, decreased severance charges and decreased employee compensation, benefits and incentives expense reflecting a

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lower associate headcount in the year ended December 31, 2008 compared to 2007 as a result of staff reductions. The number of employees decreased to 84 employees at December 31, 2008 from 125 employees at December 31, 2007.

          Interest expense consists of interest incurred minus interest capitalized. Interest incurred for the years ended December 31, 2008 and 2007 totaled $22.4 million and $50.8 million, respectively, while interest capitalized totaled $11.5 million for the year ended December 31, 2008 compared to $47.0 million in 2007. Interest expense for the year ended December 31, 2008 was $10.9 million compared to $3.8 million in 2007. The increase in interest expense was due to the completion of certain phases of development associated with our real estate inventory late in 2007, which resulted in a decreased amount of assets which qualified for interest capitalization and, therefore, the expensing of the related interest was only recorded in the fourth quarter of 2007 compared to the full year of 2008. Interest incurred was lower mainly due to decreases in the average interest rates on our debt and lower outstanding balances of notes and mortgage notes payable primarily due to the deconsolidation of Levitt and Sons at November 9, 2007. At the time of land or home sales, the capitalized interest allocated to inventory is charged to cost of sales. Cost of sales of real estate for the years ended December 31, 2008 and 2007 included previously capitalized interest of approximately $326,000 and $17.9 million, respectively.

          We did not incur other expenses in the year ended December 31, 2008, compared to $3.9 million in 2007, which consisted of a surety bond accrual, a write-off of leasehold improvements and title and mortgage operations expense. Due to the cessation of most development activity at Levitt and Sons’ projects, we evaluated Woodbridge’s exposure on the surety bonds and letters of credit supporting any Levitt and Sons projects based on indemnities Woodbridge provided to the bond holders and recorded $1.8 million in surety bonds accrual related to certain bonds where management considered it probable that reimbursement of the surety under the applicable indemnity agreement would be required. In addition to the surety bond accrual, the Other Operations segment also recorded a write-off of leasehold improvements. As part of reductions in workforce, we vacated certain leased space. Leasehold improvements in the amount of $564,000 related to the vacated space will not be recovered and were written-off in the year ended December 31, 2007. In addition, title and mortgage operations expense related to Levitt and Sons was $1.5 million.

          Bluegreen reported a net loss for the year ended December 31, 2008 of $516,000, compared to net income of $31.9 million in 2007. For the year ended December 31, 2008, our interest in Bluegreen’s earnings was $9.0 million (after the amortization of approximately $9.2 million related to the change in the basis as a result of the impairment charge on this investment at September 30, 2008), compared to $10.3 million in 2007. We review our investment in Bluegreen for impairment on a quarterly basis or as events or circumstances warrant for other-than-temporary declines in value. Based on the evaluations performed, we recorded an other-than-temporary impairment charge of $53.6 million at September 30, 2008 and an additional other-than-temporary impairment charge of $40.8 million at December 31, 2008. See (Note 10) to our audited consolidated financial statements included in Item 8 for further details of the impairment analysis of our investment in Bluegreen.

          Interest and other income decreased to $8.0 million in the year ended December 31, 2008, from $11.3 million in 2007. This decrease was related to a $5.8 million decrease in forfeited deposits in 2008 due to the deconsolidation of Levitt and Sons at November 9, 2007. The decrease was partially offset by a $2.5 million gain on sale of property and equipment and a $1.2 million gain on sale of equity securities during 2008.

          We had an effective tax rate of 0.0% in the year ended December 31, 2008 compared to 8.6% in the year ended December 31, 2007. The decrease in the effective tax rate is a result of recording a valuation allowance for those deferred tax assets that are not expected to be recovered in the future. Due to large taxable losses in 2007 and 2008 and expected taxable losses in the foreseeable future, we may not have sufficient taxable income of the appropriate character in the future and prior carryback years to realize any portion of the net deferred tax asset. At December 31, 2008, we had $155.6 million in gross deferred tax assets. After consideration of $2.3 million of deferred tax liabilities, a valuation allowance of $154.1 million was recorded. The increase in the valuation allowance from December 31, 2007 is $75.5 million. See Item 1. “Business — Recent Developments” for a description of the shareholder rights plan we adopted

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during September 2008 which is aimed at preserving our ability to use our net operating loss carryforwards to offset future taxable income.

For the Year Ended December 31, 2007 Compared to the Year Ended December 31, 2006

          We had a consolidated net loss of $234.6 million for the year ended December 31, 2007 as compared to a net loss of $9.2 million for the year ended December 31, 2006. The significant loss in the year ended December 31, 2007 was the result of $226.9 million of impairment charges recorded relating to inventory of real estate of which $217.6 million was recorded in the Homebuilding Division and $9.3 million was recorded in the Other Operations segment related to capitalized interest. This compares to $36.8 million of impairment charges recorded in the year ended December 31, 2006. In addition, there were decreased sales of real estate and margins on sales of real estate by all segments, and higher selling, general and administrative expenses in the Other Operations segment and our Land Division. Interest expense was $3.8 million for the year ended December 31, 2007 while there was no interest expense in 2006. These increased expenses and lower sales of real estate were slightly offset by higher interest and other income as a result of higher interest income and forfeited deposits, and an increase in other revenues related to increased commercial lease activity generating higher rental revenues.

          Revenues from sales of real estate decreased to $410.1 million for the year ended December 31, 2007 from $566.1 million for the year ended December 31, 2006. This decrease was attributable to fewer homes delivered in the Homebuilding Division, and fewer sales in both Other Operations and the Land Division. The Homebuilding Division had lower revenue despite the average sales price of units delivered increasing to $321,000 in 2007 compared to $302,000 in the same period in 2006 due to the number of deliveries decreasing to 1,144 homes as compared to 1,660 homes during the same period in 2006. In Other Operations, Levitt Commercial delivered 17 units during the year ended December 31, 2007 recording $6.6 million in revenues compared to 29 units during the year ended December 31, 2006 and $11.0 million in revenues. The Land Division sold approximately 40 acres in the year ended December 31, 2007 as compared to 371 acres in 2006. These decreases were slightly offset by an increase in land sales recorded by the Homebuilding Division which totaled $20.1 million for the year ended December 31, 2007 while there were no comparable sales in 2006.

          Other revenues increased $1.2 million to $10.5 million for the year ended December 31, 2007, from $9.2 million during the year ended December 31, 2006, due to increased commercial lease activity generating higher rental revenues, offset in part by lower title and mortgage operations revenues due to fewer closings.

          Cost of sales of real estate increased $90.3 million to $573.2 million during the year ended December 31, 2007, as compared to $483.0 million for the year ended December 31, 2006. The increase in cost of sales was due to increased impairment charges in an aggregate amount of $226.9 million recorded in 2007 compared to $36.8 million recorded in 2006. In addition, included in cost of sales was approximately $18.8 million associated with sales by both segments of the Homebuilding Division of land that management decided not to develop further, while there were no similar sales or costs in 2006. These increases were offset by lower cost of sales due to fewer land sales recorded by the Land Division and the Other Operations segment and fewer units delivered by both segments of the Homebuilding Division.

          Consolidated margin percentage declined during the year ended December 31, 2007 to a negative margin of 39.8% compared to a margin of 14.7% in the year ended December 31, 2006 primarily related to the impairment charges recorded in the Homebuilding Division and Other Operations segment. Consolidated gross margin excluding impairment charges was 15.5% in the year ended December 31, 2007 compared to a gross margin of 21.2% in 2006. The decline was associated with significant discounts offered in 2007 in an attempt to reduce cancellations and encourage buyers to close, aggressive pricing discounts on “spec units” and a lower margin being earned on land sales.

          Selling, general and administrative expenses decreased $3.2 million to $117.9 million during the year ended December 31, 2007 compared to $121.2 million during the year ended December 31, 2006 primarily as a result of decreased employee compensation and benefits and other general and administrative charges in the Homebuilding Division and Other Operations as a result of the multiple reductions in force that occurred in 2007. In addition, annual incentive compensation recorded in 2007 was significantly less

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throughout all segments of the business compared to the year ended December 31, 2006 due to the significant reductions in force in the Homebuilding Division and significant operating losses in 2007. In addition, Levitt and Sons was deconsolidated as of November 9, 2007 and the selling, general and administrative expenses of Levitt and Sons were reflected through November 9, 2007 compared to a full year of selling, general and administrative expenses in 2006. These decreases were slightly offset by increased selling, general and administrative expenses in the Land Division segment related to operating costs associated with the commercial leasing business and increasing activity in the master-planned community in Tradition Hilton Head and restructuring related expenses recorded in Other Operations and the Homebuilding Division in the amount of $7.4 million which included severance related expenses, facilities expenses, and independent contractor expenses. As a percentage of total revenues, selling, general and administrative expenses increased to 28.0% during the year ended December 31, 2007, from 21.1% during 2006 as a result of decreased revenues.

          Interest incurred totaled $50.8 million and $42.0 million for the years ended December 31, 2007 and 2006, respectively. While all interest was capitalized in the year ended December 31, 2006, only $47.0 million was capitalized in 2007. This resulted in interest expense of $3.8 million in the year ended December 31, 2007, compared to no interest expense in the same period in 2006. The increase in interest expense was due to the completion of certain phases of development associated with our real estate inventory, which resulted in a decreased amount of assets which qualified for interest capitalization in 2007 compared to 2006. Interest incurred was higher due to higher average debt balances for the year ended December 31, 2007 as compared to the same period in 2006, as well as increases in the average interest rate on our variable-rate debt. At the time of home closings and land sales, the capitalized interest allocated to such inventory is charged to cost of sales. Cost of sales of real estate for the years ended December 31, 2007 and 2006 included previously capitalized interest of approximately $17.9 million and $15.4 million, respectively.

          Other expenses increased slightly to $3.9 million during the year ended December 31, 2007 from $3.7 million in 2006. In the year ended December 31, 2007, we recorded a surety bond accrual of $1.8 million that did not exist in 2006. In addition to the surety bond accrual, the Other Operations segment also recorded a write-off of leasehold improvements which did not exist in 2006. As part of the reductions in force discussed above and the Chapter 11 Cases, we vacated certain leased space. Leasehold improvements in the amount of $564,000 related to the vacated space will not be recovered and were written-off in the year ended December 31, 2007. These increases were offset as we did not record a write-down of goodwill in 2007, compared to the write-down of goodwill in 2006 of approximately $1.3 million associated with the Tennessee Homebuilding segment. In addition, title and mortgage expense decreased due to the decrease in closings.

          Bluegreen reported net income for the year ended December 31, 2007 of $31.9 million, as compared to net income of $29.8 million in 2006. In the first quarter of 2006, Bluegreen adopted SOP 04-02 and recorded a one-time, non-cash, cumulative effect of change in accounting principle charge of $4.5 million, which contributed to the slight increase in 2007. Our interest in Bluegreen’s income was $10.3 million for the year ended December 31, 2007 compared to $9.7 million in 2006.

          Interest and other income increased from $7.8 million during the year ending December 31, 2006 to $11.3 million during the same period in 2007. The increase was due to higher forfeited deposits on cancelled contracts in our Homebuilding Division as well as higher interest income due to the investment of the proceeds from the Rights Offering.

          The benefit for income taxes had an effective rate of 8.6% in the year ended December 31, 2007 compared to 38.6% in the year ended December 31, 2006. The decrease in the effective tax rate was the result of recording a valuation allowance in the year ended December 31, 2007 for those deferred tax assets that are not expected to be recovered in the future. At December 31, 2007, we had $102.6 million in gross deferred tax assets. After consideration of $24.0 million of deferred tax liabilities and the ability to carryback losses, a valuation allowance of $78.6 million was recorded. The increase in the valuation allowance from December 31, 2006 was $78.1 million.

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Land Division Results of Operations

										2008			2007
	Year Ended December 31,									vs. 2007			vs. 2006
	2008			2007			2006			Change			Change
	(Dollars in thousands)
Revenues
Sales of real estate	$	11,268			16,567			69,778			(5,299	)		(53,211	)
Other revenues		10,592			7,585			3,816			3,007			3,769
Total revenues		21,860			24,152			73,594			(2,292	)		(49,442	)
Costs and expenses
Cost of sales of real estate		6,632			7,447			42,662			(815	)		(35,215	)
Selling, general and administrative expenses		24,608			19,077			15,119			5,531			3,958
Interest expense		3,637			2,629			—			1,008			2,629
Total costs and expenses		34,877			29,153			57,781			5,724			(28,628	)
Interest and other income		5,685			4,489			2,650			1,196			1,839
(Loss) income before income taxes		(7,332	)		(512	)		18,463			(6,820	)		(18,975	)
Provision for income taxes		—			(5,910	)		(6,936	)		5,910			1,026
Net (loss) income	$	(7,332	)		(6,422	)		11,527			(910	)		(17,949	)
Operational data:
Acres sold (a)		40			40			371			—			(331	)
Margin percentage (b)		41.1	%		55.0	%		38.9	%		(13.9	)%		16.1	%
Unsold saleable acres		6,639			6,679			6,871			(40	)		(192	)
Acres subject to sales contracts — Third parties		10			259			74			(249	)		185
Aggregate sales price of acres subject to sales contracts to third parties	$	1,050			77,888			21,124			(76,838	)		56,764

(a)	Includes 5 acres sold related to commercial projects.
(b)	Margin percentage is calculated by dividing margin (sales of real estate minus cost of sales of real estate) by sales of real estate. Sales of real estate and margin percentage include lot sales, revenues from look back provisions and recognition of deferred revenue associated with sales in prior periods.

          Due to the nature and size of individual land transactions, our Land Division results are subject to significant volatility. Although we have historically realized margins of between approximately 40.0% and 60.0% on Land Division sales, margins on land sales are likely to be below the historical range given the downturn in the real estate markets and the significant decrease in demand in Florida. Margins will fluctuate based upon changing sales prices and costs attributable to the land sold. In addition to the impact of economic and market factors, the sales price and margin of land sold varies depending upon: the location; the parcel size; whether the parcel is sold as raw land, partially developed land or individually developed lots; the degree to which the land is entitled; and whether the designated use of the land is residential or commercial. The cost of sales of real estate is dependent upon the original cost of the land acquired, the timing of the acquisition of the land, the amount of land development and interest and real estate tax costs capitalized to the particular land parcel during active development. Allocations to cost of sales involve significant management judgment and include an estimate of future costs of development, which can vary over time due to labor and material cost increases, master plan design changes and regulatory modifications. Accordingly, allocations are subject to change based on factors which are in many instances beyond management’s control. Future margins will continue to vary based on these and other market factors. If conditions in the real estate markets do not improve or deteriorate further, we may not be able to sell land at prices above our carrying cost or even in amounts necessary to repay our indebtedness.

          The number and sales value of acres subject to third party sales contracts decreased to 10 acres

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with a sales value of $1.1 million at December 31, 2008, compared with 259 acres with a sales value of $77.9 million at December 31, 2007. While the backlog is not an exclusive indicator of future sales activity; it provides an indication of potential future sales activity. In addition, contracts in the backlog are subject to cancellation.

For the Year Ended December 31, 2008 Compared to the Year Ended December 31, 2007

          Revenues from sales of real estate decreased to $11.3 million during the year ended December 31, 2008, compared to $16.6 million in 2007. Sales of real estate in Tradition, Florida for the year ended December 31, 2008 consisted of the sale of 31 acres generating revenues of $8.0 million, net of deferred revenue, as compared to the sale of 37 acres generating revenues of $12.7 million, net of deferred revenue, in 2007. In addition, in the year ended December 31, 2008, we sold 11 lots encompassing approximately 4 acres in Tradition Hilton Head, recognizing revenues of $1.1 million, net of deferred revenue, compared to the sale of 9 residential lots encompassing approximately 3 acres, recognizing revenues of $1.1 million, net of deferred revenue, in 2007. In addition, revenues for the year ended December 31, 2008 included “look back” revenue of $145,000 compared to $1.5 million in the year ended December 31, 2007. “Look back” revenue relates to incremental revenue received from homebuilders based on the final resale price to the homebuilder’s customer. We also recognized deferred revenue on previously sold bulk land and residential lots totaling approximately $1.9 million for the year ended December 31, 2008, compared to recognition of deferred revenue of approximately $1.3 million in 2007. These amounts included approximately $159,000 and $733,000 in 2008 and 2007, respectively, of intercompany sales in prior periods and were eliminated in consolidation.

          Other revenues increased approximately $3.0 to $10.6 million for the year ended December 31, 2008, compared to $7.6 million during 2007. The increase was primarily the result of higher leasing revenues associated with the opening of the Landing at Tradition retail power center in late 2007. This increase was offset in part by decreased marketing income associated with Tradition, Florida.

          Cost of sales decreased $815,000 to $6.6 million during the year ended December 31, 2008, as compared to $7.4 million in 2007 due to the decrease in sales of real estate. Costs of sales for the year ended December 31, 2008 represents the costs associated with the sale of approximately 35 acres of land compared to the costs associated with the sale of approximately 40 acres in 2007.

          Margin percentage decreased to 41.1% in the year ended December 31, 2008 from 55.0% in the year ended December 31, 2007. The decrease in margin is attributable to a decrease in the average sales price per acre and less “lookback revenue” recognized in 2008 compared to 2007. “Lookback revenue” margin percentage is 100% because the associated costs were fully expensed at the time of closing.

          Selling, general and administrative expenses increased to $24.6 million during the year ended December 31, 2008 compared to $19.1 million in 2007. The increase was primarily due to higher other administrative expenses associated with increased marketing activities in Tradition Hilton Head, higher repairs and maintenance expenses related to damages from tropical storms and higher depreciation expense associated with the South Carolina irrigation facility placed in service in 2008 and a depreciation recapture as a result of the reclassification of discontinued operations. Additionally, we incurred higher property management expenses related to our commercial leasing activities, higher compensation and benefits expenses, higher expenses associated with our support of the community and commercial associations in our master-planned communities and higher property tax expense due to the completion of certain projects in the year ended December 31, 2008 compared to 2007. These increases were offset in part by a decrease in incentives and commissions expense.

          Interest incurred for the years ended December 31, 2008 and 2007 was $12.0 million and $14.4 million, respectively, while interest capitalized totaled $8.3 million for the year ended December 31, 2008 compared to $11.8 million during 2007. This resulted in interest expense of $3.6 million in the year ended December 31, 2008, compared to $2.6 million in 2007. The interest expense in the year ended December 31, 2008 of approximately $3.6 million mainly related to $1.1 million of interest expense associated with an intercompany loan with the Parent Company from funds borrowed by Core and approximately $2.5 million due to the completion of certain phases of development associated with our real estate inventory which resulted in a decreased amount of assets which qualified for interest capitalization. The interest

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expense in the year ended December 31, 2007 of approximately $2.6 million was attributable to the intercompany loan mentioned above. The capitalization of this interest occurred at the Parent Company level and all intercompany interest expense and income was eliminated in consolidation. Interest incurred was lower in 2008 due to decreases in the average interest rates on our notes and mortgage notes payable, partly offset by higher average debt balances for the year ended December 31, 2008 compared to 2007. At the time of land sales, the capitalized interest allocated to such inventory is charged to cost of sales. Cost of sales of real estate for the years ended December 31, 2008 and 2007 included previously capitalized interest of approximately $84,000 and $66,000, respectively.

          Interest and other income increased to $5.7 million in the year ended December 31, 2008, from $4.5 million in the year ended December 31, 2007. Interest and other income increased primarily due to a $2.5 million gain on sale of property and equipment and higher forfeited deposits in 2008 compared to 2007. The increase was partially offset by lower intercompany interest income related to the intercompany loan mentioned above.

For the Year Ended December 31, 2007 Compared to the Year Ended December 31, 2006

          Revenues from sales of real estate decreased to $16.6 million during the year ended December 31, 2007, compared to $69.8 million in 2006. Sales of real estate in Tradition, Florida for the year ended December 31, 2007 consisted of the sale of 37 acres generating revenues of $12.7 million, net of deferred revenue, as compared to the sale of 208 acres generating revenues of $51.2 million in 2006. In 2007, demand for residential land in Tradition, Florida slowed dramatically. In addition, in the year ended December 31, 2007, we sold 9 residential lots encompassing approximately 3 acres in Tradition Hilton Head generating revenues of $1.1 million, net of deferred revenue, compared to sales to third parties in Tradition Hilton Head encompassing 10 acres generating revenues of $4.7 million in the year ended December 31, 2006 and an additional 150 acres transferred to Carolina Oak which was eliminated in consolidation. In addition, revenues for the year ended December 31, 2007 included “look back” revenues of $1.5 million compared to $870,000 in the year ended December 31, 2006. We also recognized deferred revenue on previously sold bulk land and residential lots totaling approximately $1.3 million for the year ended December 31, 2007, of which $733,000 related to sales to affiliated segments and was eliminated in consolidation. There was no similar activity for the year ended December 31, 2006.

          Other revenues increased approximately $3.8 million to $7.6 million for the year ended December 31, 2007, compared to $3.8 million during 2006. This was due to increased revenues related to irrigation services provided to homebuilders, commercial users and the residents of Tradition, Florida, marketing income associated with Tradition, Florida, and leasing revenues associated with our commercial leasing business.

          Cost of sales decreased $35.2 million to $7.4 million during the year ended December 31, 2007, as compared to $42.7 million for the same period in 2006 due to the decrease in sales of real estate.

          Margin percentage increased to 55.0% in the year ended December 31, 2007 from 38.9% in the year ended December 31, 2006. The increase in margin was primarily due to increased commercial sales in 2007 which generated a higher margin and 100% margin percentage being realized on “lookback” revenue because the associated costs were fully expensed at the time of closing.

          Selling, general and administrative expenses increased to $19.1 million during the year ended December 31, 2007 compared to $15.1 million in the same period in 2006. The increase was the result of higher employee compensation and benefits, increased operating costs associated with the commercial leasing business and increased other general and administrative costs. The number of full time employees increased to 67 at December 31, 2007, from 59 at December 31, 2006, as additional personnel were added to support development activity in Tradition Hilton Head. General and administrative costs increased due to increased expenses associated with our commercial leasing activities, increased legal expenditures, increased insurance costs and increased marketing and advertising expenditures designed to attract buyers in Florida and establish a market presence in South Carolina.

          Interest incurred for the years ended December 31, 2007 and 2006 was $14.4 million and $6.7 million, respectively. Interest capitalized totaled $11.8 million for the year ended December 31, 2007

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compared to $6.7 million during 2006. The interest expense in the year ended December 31, 2007 of approximately $2.6 million was attributable to funds borrowed by Core Communities but then loaned to Woodbridge. The capitalization of this interest occurred at the consolidated level and all intercompany interest expense and income was eliminated on a consolidated basis. As noted above, interest incurred was higher due to higher outstanding balances of notes and mortgage notes payable and an increase in the average interest rate on variable-rate debt. At the time of land sales, the capitalized interest allocated to such inventory is charged to cost of sales. Cost of sales of real estate for the years ended December 31, 2007 and 2006 included previously capitalized interest of approximately $66,000 and $443,000, respectively.

          Interest and other income increased from $2.7 million during the year ending December 31, 2006, to $4.5 million during 2007. Interest and other income increased primarily due to higher intercompany interest income associated with the aforementioned intercompany loan to Woodbridge which was eliminated in consolidation. The increase was partially offset by a gain on sale of fixed assets which totaled $1.3 million in the year ended December 31, 2006 compared to $20,000 in 2007.

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Other Operations Results of Operations

										2008			2007
	Year Ended December 31,									Vs. 2007			Vs. 2006
	2008			2007			2006			Change			Change
	(Dollars in thousands)
Revenues
Sales of real estate	$	2,484			6,574			11,041			(4,090	)		(4,467	)
Other revenues		1,109			952			1,435			157			(483	)
Total revenues		3,593			7,526			12,476			(3,933	)		(4,950	)
Costs and expenses
Cost of sales of real estate		16,151			16,793			11,649			(642	)		5,144
Selling, general and administrative expenses		26,717			32,508			28,174			(5,791	)		4,334
Interest expense		8,315			1,073			—			7,242			1,073
Other expenses		—			2,390			8			(2,390	)		2,382
Total costs and expenses		51,183			52,764			39,831			(1,581	)		12,933
Earnings from Bluegreen Corporation		8,996			10,275			9,684			(1,279	)		591
Impairment of investment in Bluegreen Corporation		(94,426	)		—			—			(94,426	)		—
Impairment of other investments		(14,120	)		—			—			(14,120	)		—
Interest and other income		4,001			7,367			4,059			(3,366	)		3,308
Loss before income taxes		(143,139	)		(27,596	)		(13,612	)		(115,543	)		(13,984	)
Benefit for income taxes		—			34,297			5,639			(34,297	)		28,658
Net (loss) income	$	(143,139	)		6,701			(7,973	)		(149,840	)		14,674

          Our Other Operations segment includes the operations of the Parent Company, Carolina Oak, and Pizza Fusion, other activities through Cypress Creek Capital and Snapper Creek, an equity investment in Bluegreen and an investment in Office Depot. We currently own approximately 9.5 million shares of the common stock of Bluegreen, which represents approximately 31% of Bluegreen’s outstanding shares as of December 31, 2008. Under equity method accounting, we recognize our pro-rata share of Bluegreen’s net income (net of purchase accounting adjustments) as pre-tax earnings. Bluegreen has not paid dividends to its shareholders; therefore, our earnings represent only our claim to the future distributions of Bluegreen’s earnings. Accordingly, we record a tax liability on our portion of Bluegreen’s net income. Our earnings in Bluegreen increase or decrease concurrently with Bluegreen’s reported results. Furthermore, a significant reduction in Bluegreen’s financial position could potentially result in additional impairment charges on our investment against our future results of operations. For a complete discussion of Bluegreen’s results of operations and financial position, we refer you to the financial statements of Bluegreen which are filed as Exhibit 99.1 to this Form 10-K.

For the Year Ended December 31, 2008 Compared to the Year Ended December 31, 2007

          Sales of real estate in the year ended December 31, 2008 were $2.5 million reflecting the delivery of 8 units in Carolina Oak, compared to sales of real estate of $6.6 million in 2007 reflecting the delivery of 17 units at Levitt Commercial. There were no units in backlog at December 31, 2008 or December 31, 2007. Levitt Commercial completed the sale of all remaining flex warehouse units in inventory in 2007 and ceased development activities thereafter.

          Other revenues in the year ended December 31, 2008 were $1.1 million compared to $952,000 in 2007. The increase was due to an increase in leasing revenues.

          Cost of sales of real estate in the year ended December 31, 2008 was $16.2 million compared to $16.8 million in 2007. Cost of sales of real estate for the year ended December 31, 2008 related to the delivery of 8 units in Carolina Oak and a $3.5 million impairment charge related to Carolina Oak’s inventory of real estate while cost of sales of real estate in 2007 was comprised of the cost of sales of the 17 units delivered in Levitt Commercial, the expensing of interest previously capitalized and capitalized

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interest impairment charges related to the cessation of development on certain Levitt and Sons’ projects.

          Bluegreen reported a net loss for the year ended December 31, 2008 of $516,000, as compared to net income of $31.9 million in 2007. For the year ended December 31, 2008, our interest in Bluegreen’s income was $9.0 million (after the amortization of approximately $9.2 million related to the change in the basis as a result of the impairment charge at September 30, 2008), compared to $10.3 million in 2007. We review our investment in Bluegreen for impairment on a quarterly basis or as events or circumstances warrant for other-than-temporary declines in value. Based on the evaluations performed, we recorded an other-than-temporary impairment charge of $53.6 million at September 30, 2008 and an additional other-than-temporary impairment charge of $40.8 million at December 31, 2008. See (Note 10) to our audited consolidated financial statements included in Item 8 for further details of the impairment analysis of our investment in Bluegreen.

          Selling, general and administrative expenses decreased $5.8 million to $26.7 million during the year ended December 31, 2008 compared to $32.5 million in 2007. The decrease was attributable to decreased compensation and benefits expenses, decreased office related expenses and decreased severance charges related to the reductions in workforce associated with the bankruptcy filing of Levitt and Sons. The decrease in compensation, benefits and office related expenses is attributable to decreased headcount, as the number of employees decreased from 47 at December 31, 2007 to 29 at December 31, 2008. These decreases were offset in part by increases in professional fees associated with our investments and the bankruptcy filing of Levitt and Sons, and increased insurance costs due to the absorption of certain of Levitt and Sons’ insurance costs.

          Interest incurred was approximately $11.5 million and $10.8 million for the years ended December 31, 2008 and 2007, respectively, while interest capitalized totaled $3.2 million for the year ended December 31, 2008 compared to $9.8 million during 2007. This resulted in interest expense of $8.3 million in the year ended December 31, 2008, compared to $1.1 million in 2007. The increase in interest expense was due to the completion of certain phases of development associated with our real estate inventory late in 2007, which resulted in a decreased amount of assets which qualified for interest capitalization and, therefore, the expensing of the related interest was only recorded in the fourth quarter of 2007 compared to the full year of 2008. The increase in interest incurred was attributable to higher average debt balances for the year ended December 31, 2008 compared to 2007, offset in part by lower average interest rates. Cost of sales of real estate in the year ended December 31, 2008 included previously capitalized interest of approximately $242,000, which primarily related to the delivery of 8 units in Carolina Oak, compared to approximately $250,000 in 2007 related to the delivery of 17 units in Levitt Commercial.

          We did not incur other expenses in the year ended December 31, 2008. Other expenses for the year ended December 31, 2007 were $2.4 million and consisted of a surety bonds accrual and a write-off of leasehold improvements. In 2007, we recorded $1.8 million in surety bonds accrual related to certain bonds where management considered it probable that reimbursement of the surety under the applicable indemnity agreement would be required. In addition to the surety bond accrual, we also recorded a write-off of leasehold improvements as we vacated certain leased space as part of our workforce reductions and the Levitt and Sons bankruptcy. Leasehold improvements in the amount of $564,000 related to this vacated space will not be recovered and were written off in the year ended December 31, 2007.

          Interest and other income was approximately $4.0 million for the year ended December 31, 2008 compared to $7.4 million in 2007. This decrease was primarily the result of our realization of interest income related to intersegment loans to the Primary and Tennessee Homebuilding segments in the year ended December 31, 2007 which was eliminated in consolidation, whereas no comparable interest income was realized during 2008.

For the Year Ended December 31, 2007 Compared to the Year Ended December 31, 2006

          Revenue from sales of real estate was $6.6 million in the year ended December 31, 2007 compared to $11.0 million in the year ended December 31, 2006. Levitt Commercial delivered 17 flex warehouse units in 2007 while 29 units were delivered during 2006. Levitt Commercial completed the sale of all flex warehouse units in inventory in 2007.

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          Other revenues decreased to $952,000 in the year ended December 31, 2007 from $1.4 million in 2006 due to the reduction in leasing revenue received from a sub-tenant in one office building.

          Cost of sales of real estate increased to $16.8 million during the year ended December 31, 2007, as compared to $11.6 million during the year ended December 31, 2006 due to an increase of $9.3 million in capitalized interest impairment charges. This increase was offset in part by a decrease of $3.8 million in cost of sales related to fewer deliveries of commercial warehouse units, as we delivered 12 fewer flex warehouse units in the year ended December 31, 2007 as compared to 2006. In addition, interest in Other Operations is amortized to cost of sales in accordance with the relief rate used in the Company’s operating segments, and due to the lower sales in 2007, the operating segments experienced decreased interest amortization which resulted in less amortization by the Other Operations segment.

          Bluegreen reported net income for the year ended December 31, 2007 of $31.9 million, as compared to net income of $29.8 million in 2006. In the first quarter of 2006, Bluegreen adopted SOP 04-02 and recorded a one-time, non-cash, cumulative effect of change in accounting principle charge of $4.5 million, which contributed to the slight increase in 2007. Our interest in Bluegreen’s income was $10.3 million for the year ended December 31, 2007 compared to $9.7 million in 2006.

          Selling, general and administrative expenses increased $4.3 million to $32.5 million during the year ended December 31, 2007 compared to $28.2 million in 2006. The increase was attributable to $5.1 million of restructuring related charges associated with Woodbridge and Levitt and Sons employees. In the third and fourth quarters of 2007, substantially all of Levitt and Sons’ employees were terminated and 22 employees were terminated at Woodbridge primarily as a result of the Chapter 11 Cases. Woodbridge recorded approximately $2.4 million in the year ended December 31, 2007 of severance benefits to terminated Levitt and Sons employees to supplement the limited termination benefits which could be paid by Levitt and Sons to those employees. The restructuring related expenses were slightly offset by lower stock based compensation and annual incentive compensation expense as a result of the multiple reductions in force that occurred in 2007 and significant operating losses in 2007. The decrease in non-cash stock based compensation expense was attributable to the large number of employee terminations that occurred in 2007 which resulted in a reversal of stock compensation amounts previously accrued. The reversal related to forfeited options in connection with the terminations.

          Interest incurred in Other Operations was approximately $10.8 million and $7.4 million for the year ended December 31, 2007 and 2006, respectively. While all interest was capitalized in the year ended December 31, 2006, $9.8 million was capitalized in 2007 due to a decreased level of development associated with a portion of our real estate inventory which resulted in a decreased amount of qualified assets for interest capitalization. The increase in interest incurred was attributable to an increase in the average balance of our borrowings as a result of our issuance of trust preferred securities during 2006, and the aforementioned funds borrowed by Core Communities but then loaned to Woodbridge.

          Other expenses increased to $2.4 million during the year ended December 31, 2007 from $8,000 in 2006. In the year ended December 31, 2007, we recorded a $1.8 million surety bond accrual that did not exist in 2006. In addition to the surety bond accrual, the Other Operations segment also recorded a write-off of leasehold improvements which also did not exist in 2006. As part of the reductions in force discussed above and the Chapter 11 Cases, we vacated certain leased space. Leasehold improvements in the amount of $564,000 related to this vacated space will not be recovered and were written off in the year ended December 31, 2007.

          Interest and other income was approximately $7.4 million for the year ended December 31, 2007 compared to $4.1 million in 2006. This increase was primarily the result of the Rights Offering we completed in October 2007, the proceeds of which resulted in higher average cash balances at the Parent Company in the year ended December 31, 2007 which generated higher interest income, as well as interest income related to intersegment loans to the Primary and Tennessee Homebuilding segments which were eliminated in consolidation.

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Primary Homebuilding Segment Results of Operations

									2008			2007
	Year Ended December 31,								vs. 2007			vs. 2006
	2008		2007			2006			Change			Change
	(Dollars in thousands, except average price data)
Revenues
Sales of real estate	$	—		345,666			424,420			(345,666	)		(78,754	)
Other revenues		—		2,243			4,070			(2,243	)		(1,827	)
Total revenues		—		347,909			428,490			(347,909	)		(80,581	)
Costs and expenses
Cost of sales of real estate		—		501,206			367,252			(501,206	)		133,954
Selling, general and administrative expenses		—		61,568			65,052			(61,568	)		(3,484	)
Interest expense		—		7,258			—			(7,258	)		7,258
Other expenses		—		1,539			2,362			(1,539	)		(823	)
Total costs and expenses		—		571,571			434,666			(571,571	)		136,905
Interest and other income		—		6,933			2,982			(6,933	)		3,951
(Loss) income before income taxes		—		(216,729	)		(3,194	)		216,729			(213,535	)
Benefit (provision) for income taxes		—		1,396			1,508			(1,396	)		(112	)
Net (loss) income	$	—		(215,333	)		(1,686	)		215,333			(213,647	)
Operational data:
Homes delivered		—		998			1,320			(998	)		(322	)
Construction starts		—		558			1,445			(558	)		(887	)
Average selling price of homes delivered	$	—		338,000			322,000			(338,000	)		16,000
Margin percentage (a)		—		(45.0	)%		13.5	%		45.0	%		(58.5	)%
Gross sales contracts (units)		—		765			1,108			(765	)		(343	)
Sales contracts cancellations (units)		—		382			261			(382	)		121
Net orders (units)		—		383			847			(383	)		(464	)
Net orders (value)	$	—		94,782			324,217			(94,782	)		(229,435	)
Backlog of homes (units)		—		—			1,126			—			(1,126	)
Backlog of homes (value)	$	—		—			411,578			—			(411,578	)

(a) Margin percentage is calculated by dividing margin (sales of real estate minus cost of sales of real estate) by sales of real estate.

          As of November 9, 2007, the accounts of Levitt and Sons were deconsolidated from our consolidated statements of financial condition and statements of operations. Therefore, the financial data and comparative analysis in the table above reflected operations through November 9, 2007 in the Primary Homebuilding segment compared to full year results of operations in 2006, with the exception of the results of Carolina Oak which were included in the above results for the full year in 2007 since this subsidiary was not part of the Chapter 11 Cases. Carolina Oak’s results of operations were immaterial to the segment, but were included in the Primary Homebuilding segment because it was engaged in homebuilding activities and because the financial metrics from this company were similar in nature to the other homebuilding projects within this segment that existed in 2006 and 2007.

          There are no results of operations or financial metrics included in the preceding table for the year ended December 31, 2008 due to the deconsolidation of Levitt and Sons from our consolidated financial statements at November 9, 2007. Therefore, a comparative analysis is not included in this section. For further information regarding Levitt and Sons’ results of operations, see (Note 24) to our audited consolidated financial statements included in Item 8.

          Historically, the results of operations of Carolina Oak were included as part of the Primary Homebuilding segment. The results of operations of Carolina Oak after January 1, 2008 are included in the

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Other Operations segment as a result of the deconsolidation of Levitt and Sons at November 9, 2007, and the acquisition of Carolina Oak by Woodbridge.

For the Year Ended December 31, 2007 Compared to the Year Ended December 31, 2006

          Revenues from sales of real estate decreased to $345.7 million during the year ended December 31, 2007, from $424.4 million during 2006 despite the increase in average sales price of deliveries from $322,000 in 2006 to $338,000 in 2007. During the year ended December 31, 2007, 998 homes were delivered compared to 1,320 homes delivered during 2006. The decrease in units delivered was partially offset by increased land sales. We recognized $8.0 million of revenue attributable to the sale of land that management decided not to develop further, while there were no land sales in 2006.

          Other revenues decreased $1.8 million to $2.2 million for the year ended December 31, 2007, compared to $4.1 million during 2006. Other revenues in the Primary Homebuilding segment decreased due to lower revenues from our title company due to fewer closings.

          Cost of sales increased to $501.2 million during the year ended December 31, 2007, compared to $367.3 million for 2006. The increase was primarily due to the increased impairment charges on inventory of real estate and an increase in cost of sales associated with the land sale that occurred in the year ended December 31, 2007 slightly offset by a decrease in cost of sales due to a fewer number of deliveries. Impairment charges were $206.4 million in the year ended December 31, 2007 compared to $31.1 million in impairment charges in 2006.

          Margin percentage (defined as sales of real estate minus cost of sales of real estate, divided by sales of real estate) declined to a negative 45.0% in the year ended December 31, 2007 from 13.5% in the year ended December 31, 2006 mainly attributable to the impairment charges recorded in the year ended December 31, 2007. Margin percentage excluding impairments declined from 20.8% in the year ended December 31, 2006 to 14.7% during the year ended December 31, 2007. This decline was primarily attributable to significant discounts offered in an effort to reduce cancellations and to encourage buyers to close, and aggressive pricing discounts on spec units as well as lower margin earned on the $8.0 million land sale mentioned above.

          Selling, general and administrative expenses decreased to $61.6 million during the year ended December 31, 2007, compared to $65.1 million in 2006 primarily as a result of lower employee compensation and benefits expense and decreased office and administrative expenses as a result of the multiple reductions in force that occurred in 2007. In addition, no annual incentive compensation was recorded in 2007 for the Primary Homebuilding segment. In addition, Levitt and Sons was deconsolidated as of November 9, 2007 and the selling, general and administrative expenses of Levitt and Sons were reflected through November 9, 2007 compared to a full year of selling, general and administrative expenses in 2006. These decreases were offset in part by increased legal costs primarily related to the preparation of the Levitt and Sons bankruptcy filing. As a percentage of total revenues, selling, general and administrative expense was approximately 17.7% for the year ended December 31, 2007 compared to 15.2% in 2006.

          Interest incurred totaled $31.2 million and $27.2 million for the years ended December 31, 2007 and 2006, respectively. While all interest was capitalized during the year ended December 31, 2006, $23.9 million in interest was capitalized during the year ended December 31, 2007 due to a decreased level of development occurring in the projects in the Primary Homebuilding segment in 2007 which resulted in a decreased amount of qualified assets for interest capitalization. Interest incurred increased as a result of higher average debt balances for the year ended December 31, 2007 as compared to 2006. At the time of home closings and land sales, the capitalized interest allocated to such inventory was charged to cost of sales. Cost of sales of real estate for the years ended December 31, 2007 and 2006 included previously capitalized interest of approximately $14.1 million and $9.7 million, respectively.

          Other expenses decreased to $1.5 million during the year ended December 31, 2007 from $2.4 million in 2006 as a result of a decrease in title and mortgage expense. Title and mortgage expense mostly relates to closing costs and title insurance costs for closings processed internally. These costs were lower in 2007 due to the decrease in closings.

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          Interest and other income increased from $3.0 million during the year ended December 31, 2006 to $6.9 million during 2007 mainly as a result of an increase in forfeited deposits of $3.5 million resulting from increased cancellations of home sale contracts.

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Tennessee Homebuilding Segment Results of Operations

									2008			2007
	Year Ended December 31,								vs. 2007			vs. 2006
	2008		2007			2006			Change			Change
	(Dollars in thousands, except average price data)
Revenues
Sales of real estate	$	—		42,042			76,299			(42,042	)		(34,257	)
Total revenues		—		42,042			76,299			(42,042	)		(34,257	)
Costs and expenses
Cost of sales of real estate		—		51,360			72,807			(51,360	)		(21,447	)
Selling, general and administrative expenses		—		5,010			12,806			(5,010	)		(7,796	)
Interest expense		—		151			—			(151	)		151
Other expenses		—		—			1,307			—			(1,307	)
Total costs and expenses		—		56,521			86,920			(56,521	)		(30,399	)
Interest and other income		—		83			127			(83	)		(44	)
(Loss) income before income taxes		—		(14,396	)		(10,494	)		14,396			(3,902	)
(Provision) benefit for income taxes		—		(1,700	)		3,241			1,700			(4,941	)
Net (loss) income	$	—		(16,096	)		(7,253	)		16,096			(8,843	)
Operational data:
Homes delivered		—		146			340			(146	)		(194	)
Construction starts		—		171			237			(171	)		(66	)
Average selling price of homes delivered	$	—		205,000			224,000			(205,000	)		(19,000	)
Margin percentage (a)		—		(22.2	)%		4.6	%		22.2	%		(26.8	)%
Gross sales contracts (units)		—		266			412			(266	)		(146	)
Sales contracts cancellations (units)		—		156			143			(156	)		13
Net orders (units)		—		110			269			(110	)		(159	)
Net orders (value)	$	—		20,621			57,776			(20,621	)		(37,155	)
Backlog of homes (units)		—		—			122			—			(122	)
Backlog of homes (value)	$	—		—			26,662			—			(26,662	)

(a) Margin percentage is calculated by dividing margin (sales of real estate minus cost of sales of real estate) by sales of real estate.

          As of November 9, 2007, the accounts of Levitt and Sons were deconsolidated from our consolidated statements of financial condition and statements of operations. Therefore, the financial data and comparative analysis in the above table reflects the operations of the Tennessee Homebuilding segment through November 9, 2007 compared to full year results of operations in 2006.

          There are no results of operations or financial metrics included in the preceding table for the year ended December 31, 2008 due to the deconsolidation of Levitt and Sons from our consolidated financial statements at November 9, 2007. Therefore, a comparative analysis is not included in this section. For further information regarding Levitt and Sons’ results of operations, see (Note 24) to our audited consolidated financial statements included in Item 8.

For the Year Ended December 31, 2007 Compared to the Year Ended December 31, 2006

          Revenues from sales of real estate decreased to $42.0 million during the year ended December 31, 2007, from $76.3 million during 2006. During the year ended December 31, 2007, 146 homes were delivered at an average sales price of $205,000 as compared to 340 homes delivered at an average price of $224,000 during the year ended December 31, 2006. The average sales prices of homes delivered in 2007 declined due to the product mix sold, discounts on deliveries, and aggressive pricing on spec sales. This decrease was offset by an increase of $11.1 million of revenue recognized related to a land sale that occurred in the year ended December 31, 2007 related to property that management decided to not develop

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further. There were no land sales in 2006. Additionally, included in revenues are certain lot sales occurring in the year ended December 31, 2007.

          Cost of sales of real estate decreased to $51.4 million during the year ended December 31, 2007, as compared to $72.8 million during 2006 due to a decrease in home deliveries. The decrease in home deliveries was offset by increased impairment charges related to inventory, and increased cost of sales associated with land sales. Included in cost of sales in the year ended December 31, 2007 was $11.1 million associated with land sales. There were no land sales in 2006. In addition, impairment charges increased $5.5 million from $5.7 million in the year ended December 31, 2006 to $11.2 million in the year ended December 31, 2007.

          Margin percentage decreased to a negative margin of 22.2% in the year ended December 31, 2007 from 4.6% in the year ended December 31, 2006. The decrease in margin percentage was primarily attributable to impairment charges, which increased by $5.5 million in the year ended December 31, 2007 compared to 2006. Margin percentage excluding impairment charges declined from 12.0% during the year ended December 31, 2006 to 4.6% during the year ended December 31, 2007 due to the mix of homes delivered with lower average selling prices and minimal to no margin being generated on the land or lot sales that occurred during the period.

          Selling, general and administrative expenses decreased $7.8 million to $5.0 million during the year ended December 31, 2007 compared to $12.8 million during 2006 primarily as a result of lower employee compensation and benefits, decreased broker commission costs and decreased advertising and marketing costs. The decrease in employee compensation and benefits was mainly a result of the multiple reductions in force that occurred in 2007 in connection with the filing of the Levitt and Sons bankruptcy. Decreased broker commission costs were due to lower revenues generated in the year ended December 31, 2007 compared to 2006 and the decreases associated with marketing and advertising are attributable to a decreased focus in 2007 on advertising in the Tennessee market. In addition, selling, general and administrative expenses related to the Tennessee Homebuilding segment are reflected through November 9, 2007 compared to a full year of selling, general and administrative expenses in 2006. These decreases were offset in part by increased severance related expense related to Tennessee employees, payroll taxes and other benefits associated with the terminations that occurred in 2007.

          Interest incurred totaled $1.9 million and $2.7 million for the years ended December 31, 2007 and 2006, respectively. While all interest was capitalized during the year ended December 31, 2006, $1.8 million in interest was capitalized during the year ended December 31, 2007 due to the decreased level of development in the projects in this segment in 2007 which resulted in less assets being qualified for interest capitalization. Interest incurred decreased as a result of lower average debt balances for the year ended December 31, 2007 as compared to 2006. At the time of home closings and land sales, the capitalized interest allocated to such inventory was charged to cost of sales. Cost of sales of real estate for the years ended December 31, 2007 and 2006 included previously capitalized interest of approximately $1.3 million and $2.1 million, respectively.

          There were no other expenses in the year ended December 31, 2007 compared to $1.3 million in 2006. Other expenses in the year ended December 31, 2006 reflected the write-off of $1.3 million in goodwill related to the Bowden acquisition.

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FINANCIAL CONDITION

          Our total assets at December 31, 2008 and 2007 were $559.3 million and $712.9 million, respectively. The change in total assets primarily resulted from:

• a net decrease in cash and cash equivalents of $80.4 million, which resulted from cash used in operations of $32.9 million, cash used in investing activities of $41.9 million and cash used in financing activities of $5.6 million;

• an increase in restricted cash of $19.1 million primarily related to the funding of the Levitt and Sons Settlement Agreement, providing collateral for a letter of credit as a result of a surety bond claim and the establishment of an interest reserve for one of Core’s loan agreements;

• a decrease in current income tax receivable as a result of the receipt of a $29.7 million federal income tax refund;

• a decrease in our investment in Bluegreen of $86.2 million as a result of impairment charges recorded during 2008;

• a net increase of our investment in other equity securities of $4.3 million as a result of the acquisition (net of shares sold) of shares of Office Depot and a $3.0 million investment in Pizza Fusion;

• an increase in our investment in certificates of deposit of $9.6 million as a result of our investment in FDIC insured certificates of deposit in 2008;

• a net increase in inventory of real estate of $14.0 million primarily associated with the land development activities of the Land Division; and

• a decrease in property and equipment of $8.8 million due to the sale of three ground lease parcels and a depreciation adjustment related to the reclassification into continuing operations of two of Core’s commercial leasing assets previously classified as discontinued operations.

          Total liabilities at December 31, 2008 and 2007 were $439.7 million and $451.7 million, respectively. The change in total liabilities primarily resulted from:

• a net decrease in notes and mortgage notes payable of $3.8 million primarily due to curtailment payments made in connection with a development loan collateralized by land in Tradition Hilton Head, offset in part by draws on lines of credit in the Land Division; and

• an increase in our current tax liability of approximately $2.4 million relating to our FIN 48 liability which was netted against our current tax asset in 2007; and

• a net decrease in accounts payable and other accrued liabilities of approximately $8.1 million primarily attributable to decreased severance and construction accruals due to payments made during the year ended December 31, 2008.

LIQUIDITY AND CAPITAL RESOURCES

          Management assesses our liquidity in terms of our cash and cash equivalent balances and our ability to generate cash to fund our operating and investment activities. During the year ended December 31, 2008, our primary sources of funds were the proceeds from the sale of real estate inventory, borrowings from financial institutions and an income tax refund. We separately manage our liquidity at the Parent Company level and at the operating subsidiary level. Subsidiary operations, consisting primarily of Core Communities’ operations, are generally financed using proceeds from sales of real estate inventory and debt financing using land or other developed assets as loan collateral. Many of the financing agreements contain covenants at the subsidiary level. Parent Company guarantees are provided only in limited circumstances and, when provided, are generally provided on a limited basis. We intend to use available cash and our borrowing capacity to pursue development of our master-planned communities and to pursue investments generally. We are also exploring ways to monetize a portion of our investment in certain of Core’s assets through joint ventures or other strategic relationships, including the possible sale of such assets. We have historically utilized community development districts to fund development costs at Core when possible. We also will use available cash to repay borrowings and to pay operating expenses.

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          We believe that our current financial condition and credit relationships, together with anticipated cash flows from operations and other sources of funds, which may include proceeds from the disposition of certain properties or investments, will provide for our anticipated liquidity needs. We expect to meet our long-term liquidity requirements through the means described above, as well as long-term secured and unsecured indebtedness, and future issuances of equity and/or debt securities.

Woodbridge (Parent Company level)

          As of December 31, 2008 and 2007, Woodbridge had cash of $107.3 million and $162.0 million, respectively. Our cash decreased by $54.7 million during the year ended December 31, 2008 primarily due to the repayment of a $40.0 million intercompany loan to Core, the acquisition (net of shares sold) of 1,435,000 shares of Office Depot common stock for an aggregate cost (net of proceeds received from shares sold) of $16.3 million, severance related payments of approximately $4.9 million, a $3.0 million investment in Pizza Fusion and an increase in restricted cash of $16.4 million primarily related to funding the Levitt and Sons Settlement Agreement, and providing $4.3 million as collateral for a letter of credit. These decreases were offset in part by the receipt of approximately $29.7 million of a federal income tax refund and the receipt from Core of a $30.0 million cash dividend payment. The remaining balance was used in operations and to pay accrued expenses.

          In October 2007, Woodbridge acquired from Levitt and Sons all of the membership interests in Carolina Oak, which owns a 150 acre parcel in Tradition Hilton Head. In connection with this acquisition, the credit facility collateralized by the 150 acre parcel (the “Carolina Oak Loan”) was modified, and Woodbridge became the obligor under the Carolina Oak Loan. Woodbridge was previously a guarantor of this loan and as partial consideration for Woodbridge becoming the obligor of the Carolina Oak Loan, its membership interests in Levitt and Sons, previously pledged by Woodbridge to the lender, was released. At December 31, 2008, the outstanding balance on the Carolina Oak Loan was $37.5 million. The loan is collateralized by a first mortgage on the 150 acre parcel in Tradition Hilton Head and guaranteed by Carolina Oak. The Carolina Oak Loan is due and payable on March 21, 2011 but may be extended for one additional year at the discretion of the lender. Interest accrues under the facility at the Prime Rate (3.25% at December 31, 2008) and is payable monthly. The Carolina Oak Loan is subject to customary terms, conditions and covenants, including periodic appraisal and re-margining and the lender’s right to accelerate the debt upon a material adverse change with respect to Woodbridge. At December 31, 2008, there was no immediate availability to draw on this facility based on available collateral, and we were in compliance with the loan covenants.

          At November 9, 2007, the date of the deconsolidation of Levitt and Sons, Woodbridge had a negative investment in Levitt and Sons of $123.0 million and there were outstanding advances due to Woodbridge from Levitt and Sons of $67.8 million, resulting in a net negative investment of $55.2 million. During the fourth quarter of 2008, the Company identified approximately $2.3 million of deferred revenue on intercompany sales between Core and Carolina Oak that had been misclassified against the negative investment in Levitt and Sons. As a result, the Company recorded a $2.3 million reclassification between inventory of real estate and the loss in excess of investment in subsidiary in the consolidated statements of financial condition. As a result, as of December 31, 2008, the net negative investment was $52.9 million. After the filing of the Levitt and Sons’ bankruptcy, Woodbridge incurred certain administrative costs relating to services performed for Levitt and Sons and its employees (the “Post Petition Services”) in the amounts of $1.6 million and $748,000 in the years ended December 31, 2008 and 2007, respectively. In addition, the Debtors asserted certain claims against Woodbridge, including an entitlement to a portion of the $29.7 million federal tax refund which Woodbridge received as a consequence of losses experienced at Levitt and Sons in prior periods; however, the parties entered into the Settlement Agreement described below which resolved this issue.

          On June 27, 2008, Woodbridge entered into the Settlement Agreement with the Debtors and the

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Joint Committee appointed in the Chapter 11 Cases. Pursuant to the Settlement Agreement, among other things, (i) Woodbridge agreed to pay to the Debtors’ bankruptcy estates the sum of $12.5 million plus accrued interest from May 22, 2008 through the date of payment, (ii) Woodbridge agreed to waive and release substantially all of the claims it has against the Debtors, including its administrative expense claims through July 2008, and (iii) the Debtors (joined by the Joint Committee) agreed to waive and release any claims they may have against Woodbridge and its affiliates. After certain of Levitt and Sons’ creditors indicated that they objected to the terms of the initial Settlement Agreement and stated a desire to pursue claims against Woodbridge, Woodbridge, the Debtors and the Joint Committee agreed in principal to an amendment to the Settlement Agreement, pursuant to which Woodbridge would, in lieu of the previously agreed $12.5 million payment, pay $8 million to the Debtors’ bankruptcy estates and place $4.5 million in a release fund to be disbursed to third party creditors in exchange for a third party release and injunction. The amendment also provided for an additional $300,000 payment to a deposit holders fund. The Settlement Agreement, as amended, was subject to a number of conditions, including the approval of the Bankruptcy Court. As of December 31, 2008, the settlement amount was classified as restricted cash. On February 20, 2009, the Bankruptcy Court presiding over Levitt and Sons’ Chapter 11 bankruptcy case entered an order confirming a plan of liquidation jointly proposed by Levitt and Sons and the Official Committee of Unsecured Creditors. That order also approved the settlement pursuant to the Settlement Agreement, as amended. No appeal or rehearing of the court’s order was timely filed by any party, and the settlement was consummated on March 3, 2009.

          We effected a one-for-five reverse stock split during the third quarter of 2008 which converted each five shares of our Class A Common Stock into one share of Class A Common Stock and each five shares of our Class B Common Stock into one share of Class B Common Stock. The reverse stock split proportionately reduced the number of authorized shares and the number of outstanding shares of our Class A Common Stock and Class B Common Stock, but did not have any impact on our shareholders’ proportionate equity interests or voting rights in the Company. We pursued the reverse stock split based on the continued listing requirements of the New York Stock Exchange. While the reverse stock split was effected for the purpose of addressing issues with respect to the trading price of our Class A Common Stock and our compliance with the New York Stock Exchange’s continued listing requirements, our Class A Common Stock ultimately failed to meet the New York Stock Exchange’s continued listing requirement regarding average market capitalization over a consecutive thirty-day trading period. As a result, our Class A Common Stock was suspended from trading on the New York Stock Exchange beginning with the opening of trading on November 20, 2008. Our Class A Common Stock currently trades on the Pink Sheets under the ticker symbol “WDGH.PK”.

Core Communities

          At December 31, 2008 and 2007, Core had cash and cash equivalents of $16.9 million and $33.1 million, respectively. Cash decreased $16.2 million during the year ended December 31, 2008 primarily as a result of a $30.0 million dividend payment to the Parent Company, an increase in restricted cash of $2.7 million mainly related to the funding of an interest reserve, $19.9 million of curtailment payments mentioned below and cash used to fund the continued development at Core’s projects as well as selling, general and administrative expenses. These decreases were partially offset by Core’s receipt of $40.0 million from the Parent Company as a repayment of an intercompany loan. At December 31, 2008, Core had no immediate availability under its various lines of credit.

          Core has incurred and expects to continue to incur significant land development expenditures in both Tradition, Florida and in Tradition Hilton Head. Tradition Hilton Head is in the early stage of the master-planned community’s development cycle and significant investments have been made and will be required in the future to develop the community infrastructure. Sales in Tradition Hilton Head have been limited to golf course lots sold to various builders and an intercompany land sale in December 2006. Recent investments in Tradition, Florida have been primarily to build infrastructure to support the master-planned community and the sale of various commercial land parcels. The current investment in land and development, as well as property and equipment has been financed primarily through a combination of secured borrowings, which totaled $212.0 million at December 31, 2008, and proceeds from bonds issued by community development districts and special assessment districts which support the development of infrastructure improvements while burdening the developed property with long-term tax assessments. This financing at December 31, 2008 consisted of district bonds totaling $218.7 million with approximately

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$130.5 million currently outstanding and approximately $82.4 million available to fund future development expenditures. These bonds are further discussed below in “Off Balance Sheet Arrangements and Contractual Obligations”. We expect that the availability of tax-exempt bond financing to fund infrastructure development at our master-planned communities could be adversely affected by the disruptions in credit markets, including the municipal bond market, by general economic conditions and by fluctuations in the real estate market. If we are not able to access this type of financing, we would pursue substitute financing, which may not be available on favorable terms, or at all. If we are not able to obtain financing for infrastructure development, we would be forced to use our own funds or delay development activity at our master-planned communities.

          In July 2008, Core refinanced $9.1 million of construction loans. The new loan has an interest rate of 30-day LIBOR plus 210 basis points or Prime Rate (current rate at December 31, 2008 was Prime Rate of 3.25%) and a maturity date of July 2010 with a one year extension subject to certain conditions.

          Core’s loan agreements generally require repayment of specified amounts upon a sale of a portion of the property collateralizing the debt. Core was subject to provisions in one of its loan agreements collateralized by land in Tradition Hilton Head that require additional principal payments, known as curtailment payments, in the event that actual sales are below the contractual requirements. A curtailment payment of $14.9 million relating to Tradition Hilton Head was paid in January 2008. In June 2008, Core modified this loan agreement, terminating the revolving feature of the loan and reducing an approximately $19 million curtailment payment due in June 2008 to $17.0 million, $5.0 million of which was paid in June 2008. The loan was further modified in December 2008, reducing the loan to $25 million, eliminating the curtailment requirements, extending the loan to February 2012 and increasing the interest rate to Prime Rate plus 1%, with a floor of 5.00% (the interest rate was 5% as of December 31, 2008) and the establishment of an interest reserve classified as restricted cash.

          The loans, which provide the primary financing for Tradition, Florida and Tradition Hilton Head, have annual appraisal and re-margining requirements. These provisions may require Core, in circumstances where the value of the real estate collateralizing these loans declines, to pay down a portion of the principal amount of the loan to bring the loan within specified minimum loan-to-value ratios. Accordingly, should land prices decline, reappraisals could result in significant future re-margining payments. Additionally, the loans which provide the primary financing for the commercial leasing projects contain certain debt service coverage ratio covenants. If net operating income from these projects falls below levels necessary to maintain compliance with these covenants, Core would be required to make principal curtailment payments sufficient to reduce the loan balance to an amount which would bring Core into compliance with the requirement, and these curtailment payments could be significant.

          In January of 2009, Core was advised by one of its lenders that they had received an external appraisal on the land that serves as collateral for a development mortgage note payable with an outstanding balance of $86.9 million at December 31, 2008. The appraised value would suggest the potential for a remargining payment to bring the note payable back in line with the minimum loan-to-value requirement. The lender is conducting their internal review procedures of the appraisal, including the determination of the appraised value. As of the date of this filing, the lender’s evaluation is continuing and until such time as there is final conclusion on the part of the lender, the amount of a possible re-margin, if any, is not determinable.

          All of Core’s debt facilities contain financial covenants generally requiring certain net worth, liquidity and loan to value ratios. Further, Core’s debt facilities contain cross-default provisions under which a default on one loan with a lender could cause a default on other debt instruments with the same lender. At December 31, 2008, Core was in compliance with these financial covenants; however, there is no assurance that Core will remain in compliance in future periods. If Core fails to comply with any of these restrictions or covenants, the lenders under the applicable debt facilities could cause Core’s debt to become due and payable prior to maturity. These accelerations or significant re-margining payments could require Core to dedicate a substantial portion of its cash to payment of its debt and reduce its ability to use its cash to fund operations or investments. If Core does not have sufficient cash to satisfy these required

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payments, then Core would need to seek to refinance the debt or seek other funds, which may not be available on attractive terms, if at all. Possible liquidity sources available to Core include the sale of real estate inventory, including commercial properties, debt or outside equity financing, including secured borrowings using unencumbered land. While funding from Woodbridge is a possible source of liquidity, Woodbridge is under no obligation to provide funding to Core and there can be no assurance that it will do so.

          Given the overall condition of the homebuilding industry in Florida and the current oversupply of single-family residential land in the St. Lucie market, we do not expect any meaningful single-family residential land sales by Core in the near future. Management efforts will be focused on commercial and other land sales in Florida and Hilton Head. Core’s business may not generate sufficient cash flow from operations, and future borrowings may not be available under its existing credit facilities or any other financing sources in an amount sufficient to enable Core to service its indebtedness, or to fund its other liquidity needs. We may need to refinance all or a portion of Core’s debt on or before maturity, which we may not be able to do on favorable terms or at all. Recent disruptions in the credit and capital markets could make it more difficult for us to obtain financing than in prior periods. Core’s obligations are independent of the Parent Company and the Parent Company is not legally obligated to support Core.

Off Balance Sheet Arrangements and Contractual Obligations

          In connection with the development of certain of Core’s projects, community development, special assessment or improvement districts have been established and may utilize tax-exempt bond financing to fund construction or acquisition of certain on-site and off-site infrastructure improvements near or at these communities. If these improvement districts were not established, Core would need to fund community infrastructure development out of operating cash flow or through sources of financing or capital, or be forced to delay its development activity. The obligation to pay principal and interest on the bonds issued by the districts is assigned to each parcel within the district, and a priority assessment lien may be placed on benefited parcels to provide security for the debt service. The bonds, including interest and redemption premiums, if any, and the associated priority lien on the property are typically payable, secured and satisfied by revenues, fees, or assessments levied on the property benefited. Core pays a portion of the revenues, fees, and assessments levied by the districts on the properties it still owns that are benefited by the improvements. Core may also be required to pay down a specified portion of the bonds at the time each unit or parcel is sold. The costs of these obligations are capitalized to inventory during the development period and recognized as cost of sales when the properties are sold.

          Core’s bond financing at December 31, 2008 and 2007 consisted of district bonds totaling $218.7 million with outstanding amounts of approximately $130.5 million and $82.9 million, respectively. Further, at December 31, 2008 and 2007, there was approximately $82.4 million and $129.5 million, respectively, available under these bonds to fund future development expenditures. Bond obligations at December 31, 2008 mature in 2035 and 2040. As of December 31, 2008, Core Communities owned approximately 16% of the property subject to assessments within the community development district and approximately 91% of the property subject to assessments within the special assessment district. During the years ended December 31, 2008, 2007 and 2006, Core recorded approximately $584,000, $1.3 million and $1.7 million, respectively, in assessments on property owned by it in the districts. Core is responsible for any assessed amounts until the underlying property is sold and will continue to be responsible for the annual assessments if the property is never sold. Accordingly, if the current adverse conditions in the homebuilding industry do not improve and Core is forced to hold its land inventory longer than originally projected, Core would be forced to pay a higher portion of annual assessments on property which is subject to assessments. In addition, Core has guaranteed payments for assessments under the district bonds in Tradition, Florida which would require funding if future assessments to be allocated to property owners are insufficient to repay the bonds. Management has evaluated this exposure based upon the criteria in SFAS No. 5, “Accounting for Contingencies”, and has determined that there have been no substantive changes to the projected density or land use in the development subject to the bond which would make it probable that Core would have to fund future shortfalls in assessments.

          In accordance with Emerging Issues Task Force Issue No. 91-10, “Accounting for Special Assessments and Tax Increment Financing”, we record a liability for the estimated developer obligations that are fixed and determinable and user fees that are required to be paid or transferred at the time the

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parcel or unit is sold to an end user. At December 31, 2008 and 2007, the liability related to developer obligations was $3.3 million and is included in the accompanying consolidated statement of financial condition as of December 31, 2008 and 2007, and includes amounts associated with Core’s ownership of the property.

          We entered into an indemnity agreement in April 2004 with a joint venture partner at Altman Longleaf relating to, among other obligations, that partner’s guarantee of the joint venture’s indebtedness. Our liability under the indemnity agreement was limited to the amount of any distributions from the joint venture which exceeds our original capital and other contributions. Levitt Commercial owned a 20% interest in Altman Longleaf, LLC, which owned a 20% interest in this joint venture. This joint venture developed a 298-unit apartment complex in Melbourne, Florida. An affiliate of our joint venture partner was the general contractor. Construction commenced on the development in 2004 and was completed in 2006. Our original capital contributions totaled approximately $585,000 and we have received approximately $1.2 million in distributions since 2004. In December 2008, our interest in the joint venture was sold and we received approximately $182,000 as a result of the sale. Accordingly, we were released from any potential obligation of indemnity which may have arisen in connection with the joint venture.

          The following table summarizes our contractual obligations as of December 31, 2008 (in thousands):

	Payments due by period
			Less than		13 - 36		37 - 60		More than
Category (1)	Total		12 Months		Months		Months		60 Months
Long-term debt obligations (2)	$	349,952		3,567		197,233		27,574		121,578
Interest payable on long-term debt		244,269		18,140		31,476		18,855		175,798
Operating lease obligations		3,797		1,279		1,062		386		1,070
Severance related termination obligations		129		129		—		—		—
Independent contractor agreements		681		681		—		—		—
Total obligations	$	598,828		23,796		229,771		46,815		298,446

(1)

Long-term debt obligations consist of notes, mortgage notes and bonds payable. Interest payable on these long-term debt obligations is the interest that will be incurred related to the outstanding debt. Operating lease obligations consist of lease commitments. The timing of contractual payments for debt obligations assumes the exercise of all extensions available at our sole discretion.

(2)

In addition to the above scheduled payments, Core’s borrowing agreements generally require repayment of specified amounts upon a sale of a portion of the property collateralizing the debt or upon a reappraisal of the underlying collateral if declines in value cause the loan to exceed maximum loan to value ratios. In addition, Core is subject to provisions in its borrowing agreements that require additional principal payments, known as curtailment payments, in the event that sales are below those agreed to at the inception of the borrowing. Total curtailment payments during 2008 amounted to $19.9 million, consisting of a $14.9 million curtailment payment which was paid in January 2008 and an additional $5 million million curtailment payment which was paid in June 2008. Additionally, certain borrowings may require increased principal payments on our debt obligations due to re-margining requirements.

          In addition to the above contractual obligations, we have $2.4 million in unrecognized tax benefits related to FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB No. 109” (“FIN No. 48”). FIN No. 48 provides guidance for how a company should recognize, measure, present and disclose in its financial statements uncertain tax positions that a company has taken or expects to take on a tax return.

          Tradition Development Company, LLC, a wholly-owned subsidiary of Core Communities (“TDC”), has an existing advertising agreement with the operator of a Major League Baseball team

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pursuant to which, among other advertising rights, TDC obtained a royalty-free license to use, among others, the trademark “Tradition Field” at the sports complex located in Port St. Lucie and the naming rights to that complex. The initial term of the agreement terminates on December 31, 2013; provided, however, that upon payment of a specified buy-out fee and compliance with other contractual procedures, TDC has the right to terminate the agreement at any time. Required cumulative payments under the agreement through December 31, 2013 are approximately $923,000 and are included under “Operating lease obligations” in the table above.

          We have future obligations relating to the termination of facilities associated with property and equipment leases that we had entered into that were no longer providing a benefit to us, as well as termination fees related to contractual obligations we cancelled. As of December 31, 2008, these obligations amounted to $640,000 and are included under “Operating lease obligations” in the table above.

          At December 31, 2008 and 2007, we had outstanding surety bonds and letters of credit of approximately $8.2 million and $7.1 million, respectively, related primarily to obligations to various governmental entities to construct improvements in our various communities. We estimate that approximately $5.0 million of work remains to complete these improvements. We do not believe that any outstanding bonds or letters of credit will likely be drawn upon.

          In the ordinary course of business we sell land to third parties where obligations exist to complete site development and infrastructure improvements subsequent to the sale date. Future development and construction obligations amount to $5.2 million at December 31, 2008, which are expected to be incurred over the next two years. The timing of future development will depend on factors such as the timing of future sales, demographic growth rates in the areas in which these obligations occur and the impact of any future deterioration or improvement in the local real estate market.

          Levitt and Sons had $33.3 million in surety bonds related to its ongoing projects at the time of the filing of the Chapter 11 Cases. In the event that these obligations are drawn and paid by the surety, Woodbridge could be responsible for up to $11.7 million plus costs and expenses in accordance with the surety indemnity agreements executed by Woodbridge. As of December 31, 2008 and 2007, we had $1.1 million and $1.8 million, respectively, in surety bonds accruals at Woodbridge related to certain bonds which management considers it to be probable that Woodbridge will be required to reimburse the surety under applicable indemnity agreements. During the year ended December 31, 2008, Woodbridge performed under its indemnity agreements and reimbursed the surety $532,000 while no reimbursements were made in 2007. It is unclear given the uncertainty involved in the Chapter 11 Cases whether and to what extent the remaining outstanding surety bonds of Levitt and Sons will be drawn and the extent to which Woodbridge may be responsible for additional amounts beyond this accrual. There is no assurance that Woodbridge will not be responsible for amounts well in excess of the $1.1 million accrual. It is considered unlikely that Woodbridge will receive any repayment, assets or other consideration as recovery of any amounts it may be required to pay. In September 2008, a surety filed a lawsuit to require Woodbridge to post $5.4 million of collateral against a portion of the $11.7 million surety bonds exposure in connection with two bonds totaling $5.4 million with respect to which a municipality made claims against the surety. We believe that the municipality does not have the right to demand payment under the bonds and we initiated a lawsuit against the municipality and do not believe that a loss is probable. Accordingly, we did not accrue any amount related to this claim as of December 31, 2008. Since claims were made on the bonds, the surety requested that Woodbridge post a $4.0 million letter of credit as security while the matter is litigated with the municipality and we have complied with that request.

          On November 9, 2007, Woodbridge put in place an employee fund and offered up to $5 million of severance benefits to terminated Levitt and Sons employees to supplement the limited termination benefits paid by Levitt and Sons to those employees. Levitt and Sons was restricted in the payment of termination benefits to its former employees by virtue of the Chapter 11 Cases. Woodbridge incurred severance and benefits related restructuring charges of approximately $2.2 million during the year ended December 31, 2008. For the year ended December 31, 2008, the Company paid approximately $4.1 million in severance and termination charges related to the above described fund as well as severance for employees other than Levitt and Sons employees. Employees entitled to participate in the fund either received a payment stream, which in certain cases extends over two years, or a lump sum payment, dependent on a variety of factors.

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At December 31, 2008, $129,000 was accrued to be paid with respect to this employee fund and the severance accrual for our other employees and is included under “Severance related termination obligations” in the table above.

          The independent contractor related expense relates to two contractor agreements entered into with former Levitt and Sons employees. The agreements were for past and future consulting services. The total commitment related to these agreements included under “Independent contractor agreements” in the table above was $681,000 as of December 31, 2008 and will be paid monthly through 2009. The expense associated with these arrangements is included in selling, general and administrative expenses for the Other Operations segment for the years ended December 31, 2008 and 2007.

Impact of Inflation

          The financial statements and related financial data presented herein have been prepared in accordance with generally accepted accounting principles, which require the measurement of financial position and operating results in terms of historical dollars without considering changes in the relative purchasing power of money over time due to inflation.

          Inflation could have a long-term impact on us because any increase in the cost of land, materials and labor would result in a need to increase the sales prices of land which may not be possible. In addition, inflation is often accompanied by higher interest rates which could have a negative impact on demand and the costs of financing land development activities. Rising interest rates as well as increased materials and labor costs may reduce margins.

New Accounting Pronouncements

          See (Note 2) to our audited consolidated financial statements for a description of our new accounting pronouncements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

          Market risk is defined as the risk of loss arising from adverse changes in market valuations that arise from interest rate risk, foreign currency exchange rate risk, commodity price risk and equity price risk. We have a risk of loss associated with our borrowings as we are subject to interest rate risk on our long-term debt. At December 31, 2008, we had $244.5 million in borrowings with adjustable rates tied to the Prime Rate and/or LIBOR rates and $102.2 million in borrowings with fixed or initially-fixed rates. Consequently, the impact on our variable rate debt from changes in interest rates may affect our earnings and cash flows but would generally not impact the fair value of such debt except to the extent of the change in credit spreads. With respect to fixed rate debt, changes in interest rates generally affect the fair market value of the debt but not our earnings or cash flow.

          We are subject to equity pricing risks associated with our investments in Bluegreen and Office Depot. The value of these securities will vary based on the results of operations and financial condition of these investments, the general liquidity of Bluegreen and Office Depot common stock and general equity market conditions. The trading market for the shares of these investments may not be liquid enough to permit us to sell the common stock of these investments that we own without significantly reducing the market price of these shares, if we are able to sell them at all.

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          The table below sets forth our debt obligations, principal payments by scheduled maturity, weighted-average interest rates and estimated fair market value as of December 31, 2008 (dollars in thousands):

																						Fair Market
																						Value at
	Payments due by year																					December 31,
	2009			2010			2011			2012			2013			Thereafter			Total			2008
Fixed rate debt:
Notes and mortgage payable (a)		723			561			573			504			499			99,332			102,192			28,384
Average interest rate		8.09	%		8.11	%		8.12	%		8.13	%		8.14	%		8.15	%		8.12	%
Variable rate debt:
Notes and mortgage payable (a)		2,797			8,102			187,895			25,751			707			19,217			244,469			227,145
Average interest rate		4.04	%		4.04	%		4.07	%		5.39	%		5.86	%		5.86	%		4.22	%
Total debt obligations		3,520			8,663			188,468			26,255			1,206			118,549			346,661			255,529

(a) Fair value calculated using current estimated borrowing rates.

          Assuming the variable rate debt balance of $244.5 million outstanding at December 31, 2008 (which does not include approximately $85.1 million of initially fixed-rate obligations which will not become floating rate during 2009) was to remain constant, each one percentage point increase in interest rates would increase the interest incurred by us by approximately $2.2 million per year.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS

Woodbridge Holdings Corporation

Report of Independent Registered Certified Public Accounting Firm of PricewaterhouseCoopers LLP	62
Consolidated Statements of Financial Condition As of December 31, 2008 and 2007	64
Consolidated Statements of Operations For each of the years in the three year period ended December 31, 2008	65
Consolidated Statements of Comprehensive Loss For each of the years in the three year period ended December 31, 2008	66
Consolidated Statements of Shareholders’ Equity For each of the years in the three year period ended December 31, 2008	67
Consolidated Statements of Cash Flows For each of the years in the three year period ended December 31, 2008	68
Notes to Consolidated Financial Statements	70
Schedule III - Real Estate Investments and Accumulated Depreciation	114

Bluegreen Corporation

The financial statements of Bluegreen Corporation, which is considered a significant subsidiary, are required to be included in this report. The financial statements of Bluegreen Corporation for the three years ended December 31, 2008, including the Report of Independent Registered Certified Public Accounting Firm of Ernst & Young LLP, are included as exhibit 99.1 to this report.

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Report of Independent Registered Certified Public Accounting Firm

To the Board of Directors and Shareholders of Woodbridge Holdings Corporation

In our opinion, based on our audits and the report of other auditors, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Woodbridge Holdings Corporation and its subsidiaries (the “Company”) at December 31, 2008 and 2007, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2008 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company’s internal control over financial reporting based on our integrated audits. We did not audit the financial statements of Bluegreen Corporation, an approximate 31 percent-owned equity investment of the Company which reflects a net investment totaling $115.1 million and $116.0 million at December 31, 2008 and 2007, respectively, (prior to an other-than-temporary impairment recorded by the Company of approximately $85.2 million, net of the amortization of $9.2 million of basis difference, in the year ending December 31, 2008) and equity in the net earnings (loss) of approximately ($154,000) (prior to the amortization of approximately $9.2 million related to the change in the basis of the Company’s investment as a result of impairment charges of $94.4 million), $10.3 million and $9.7 million for the years ended December 31, 2008, 2007 and 2006, respectively. The financial statements of Bluegreen Corporation were audited by other auditors whose report thereon has been furnished to us, and our opinion on the financial statements expressed herein, insofar as it relates to the amounts included for Bluegreen Corporation, is based solely on the report of the other auditors. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits and the report of other auditors provide a reasonable basis for our opinions.

As discussed in Note 2 to the consolidated financial statements, the Company adopted the provisions of FASB Interpretation No. 48 — Accounting for Uncertainty in Income Taxes — an interpretation of FASB No. 109 in January 1, 2007.

As discussed in Notes 2, 20 and 24, on November 9, 2007 (the “Petition Date”), Levitt and Sons, LLC (“Levitt and Sons”) and substantially all of its subsidiaries filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States Code in the United States Bankruptcy Court for the Southern District of Florida. As a result, Levitt and Sons was deconsolidated from the Company as of the Petition Date and has been prospectively reported as a cost method investment. On the Petition Date, Levitt and Sons had total assets, total liabilities and net shareholder’s deficit of approximately $373 million, $480 million, and $107 million, respectively.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance

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of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP                       

Fort Lauderdale, Florida

March 19, 2009

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Woodbridge Holdings Corporation
Consolidated Statements of Financial Condition
December 31, 2008 and 2007
(In thousands, except share data)

	2008			2007
Assets
Cash and cash equivalents	$	114,798			195,181
Restricted cash		21,288			2,207
Current income tax receivable		—			27,407
Inventory of real estate		241,318			227,290
Investments:
Bluegreen Corporation		29,789			116,014
Other equity securities		4,278			—
Certificates of deposits, short-term		9,600			—
Unconsolidated trusts		419			2,565
Property and equipment, net		109,477			118,243
Intangible assets		4,324			—
Other assets		23,963			23,944
Total assets	$	559,254			712,851
Liabilities and Shareholders’ Equity
Accounts payable, accrued liabilities and other	$	33,913			42,026
Customer deposits		592			715
Current income tax payable		2,380			—
Notes and mortgage notes payable		264,900			268,738
Junior subordinated debentures		85,052			85,052
Loss in excess of investment in subsidiary		52,887			55,214
Total liabilities		439,724			451,745
Shareholders’ equity:
Preferred stock, $0.01 par value Authorized: 5,000,000 shares Issued and outstanding: no shares		—			—
Class A Common Stock, $0.01 par value Authorized: 30,000,000 shares Issued: 19,042,149 and 19,010,804 shares, respectively		190			190
Class B Common Stock, $0.01 par value Authorized: 2,000,000 shares Issued and outstanding: 243,807 shares		2			2
Additional paid-in capital		339,780			337,565
Accumulated deficit		(218,868	)		(78,537	)
Accumulated other comprehensive (loss) income		(135	)		1,886
		120,969			261,106
Less — common stock in treasury, at cost (2,385,624 in 2008)		(1,439	)		—
Total shareholders’ equity		119,530			261,106
Total liabilities and shareholders’ equity	$	559,254			712,851

See accompanying notes to consolidated financial statements.

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Woodbridge Holdings Corporation
Consolidated Statements of Operations
For each of the years in the three year period ended December 31, 2008
(In thousands, except per share data)

	2008			2007			2006
Revenues:
Sales of real estate	$	13,837			410,115			566,086
Other revenues		11,701			10,458			9,241
Total revenues		25,538			420,573			575,327
Costs and expenses:
Cost of sales of real estate		12,728			573,241			482,961
Selling, general and administrative expenses		50,754			117,924			121,151
Interest expense		10,867			3,807			—
Other expenses		—			3,929			3,677
Total costs and expenses		74,349			698,901			607,789
Earnings from Bluegreen Corporation		8,996			10,275			9,684
Impairment of investment in Bluegreen Corporation		(94,426	)		—			—
Impairment of other investments		(14,120	)		—			—
Interest and other income		8,030			11,264			7,844
Loss before income taxes		(140,331	)		(256,789	)		(14,934	)
Benefit for income taxes		—			22,169			5,770
Net loss	$	(140,331	)		(234,620	)		(9,164	)
Loss per common share:
Basic	$	(7.35	)		(30.00	)		(2.27	)
Diluted	$	(7.35	)		(30.00	)		(2.29	)
Weighted average common shares outstanding:
Basic		19,088			7,821			4,045
Diluted		19,088			7,821			4,045
Dividends declared per common share:
Class A common stock	$	—			0.10			0.40
Class B common stock	$	—			0.10			0.40

See accompanying notes to consolidated financial statements.

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Woodbridge Holdings Corporation
Consolidated Statements of Comprehensive Loss
For each of the years in the three year period ended December 31, 2008
(In thousands)

	2008			2007			2006
Net loss	$	(140,331	)		(234,620	)		(9,164	)
Other comprehensive income:
Pro-rata share of unrealized (loss) gain recognized by Bluegreen Corporation on retained interests in notes receivable sold		(2,021	)		(870	)		1,263
Benefit (provision) for income taxes		—			335			(487	)
Pro-rata share of unrealized (loss) gain recognized by Bluegreen Corporation on retained interests in notes receivable sold (net of tax)		(2,021	)		(535	)		776
Comprehensive loss	$	(142,352	)		(235,155	)		(8,388	)

See accompanying notes to consolidated financial statements.

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Woodbridge Holdings Corporation
Consolidated Statements of Shareholders’ Equity
For each of the years in the three year period ended December 31, 2008
(In thousands)

																							Accumulated
	Shares of Common				Class A		Class B		Additional			Retained			Unearned			Common Stock					Compre-
	Stock Outstanding				Common		Common		Paid-In			Earnings			Compen-			In Treasury					hensive
	Class A		Class B		Stock		Stock		Capital			(Deficit)			sation			Shares		Amount			Income (loss)			Total
Balance at December 31, 2005		3,723		244	$	37	$	2	$	181,243		$	166,969		$	(110	)		—	$	—		$	1,645		$	349,786
Issuance of restricted common stock		1		—		—		—		—			—			—			—		—			—			—
Reversal of unamortized stock compensation related to restricted stock upon adoption of FAS 123 ( R)		—		—		—		—		(110	)		—			110			—		—			—			—
Share based compensation related to stock options and restricted stock		—		—		—		—		3,250			—			—			—		—			—			3,250
Net loss		—		—		—		—		—			(9,164	)		—			—		—			—			(9,164	)
Pro-rata share of unrealized gain recognized by Bluegreen on sale of retained interests, net of tax		—		—		—		—		—			—			—			—		—			776			776
Issuance of Bluegreen common stock, net of tax		—		—		—		—		177			—			—			—		—			—			177
Cash dividends paid		—		—		—		—		—			(1,586	)		—			—		—			—			(1,586
Balance at December 31, 2006		3,724		244	$	37	$	2	$	184,560		$	156,219		$	—			—	$	—		$	2,421		$	343,239
Issuance of restricted common stock		2		—		—		—		—			—			—			—		—			—			—
Issuance from Rights Offering, net of issue costs		15,285		—		153		—		152,498			—			—			—		—			—			152,651
Share based compensation related to stock options and restricted stock		—		—		—		—		2,193			—			—			—		—			—			2,193
Net loss		—		—		—		—		—			(234,620	)		—			—		—			—			(234,620	)
Pro-rata share of unrealized loss recognized by Bluegreen on sale of retained interests, net of tax		—		—		—		—		—			—			—			—		—			(535	)		(535	)
Issuance of Bluegreen common stock, net of tax		—		—		—		—		(279	)		—			—			—		—			—			(279	)
Tax asset valuation allowance associated with Bluegreen capital transactions		—		—		—		—		(1,407	)		—			—			—		—			—			(1,407	)
Cash dividends paid		—		—		—		—		—			(396	)		—			—		—			—			(396	)
Cumulative impact of change in accounting for uncertainties in income taxes (FIN 48 — see Note 16)		—		—		—		—		—			260			—			—		—			—			260
Balance at December 31, 2007		19,011		244	$	190	$	2	$	337,565		$	(78,537	)	$	—			—	$	—		$	1,886		$	261,106
Issuance of restricted common stock		31		—		—		—		—			—			—			—		—			—			—
Purchase of treasury shares		—		—		—		—		—			—			—			2,386		(1,439	)		—			(1,439	)
Share based compensation related to stock options and restricted stock		—		—		—		—		990			—			—			—		—			—			990
Net loss		—		—		—		—		—			(140,331	)		—			—		—			—			(140,331	)
Pro-rata share of unrealized loss recognized by Bluegreen on sale of retained interests		—		—		—		—		—			—			—			—		—			(2,021	)		(2,021	)
Issuance of Bluegreen common Stock		—		—		—		—		1,225			—			—			—		—			—			1,225
Balance at December 31, 2008		19,042		244	$	190	$	2	$	339,780		$	(218,868	)	$	—			2,386	$	(1,439	)	$	(135	)	$	119,530

See accompanying notes to consolidated financial statements

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Woodbridge Holdings Corporation
Consolidated Statements of Cash Flows
For each of the years in the three year period ended December 31, 2008
(In thousands)

	2008			2007			2006
Operating activities:
Net loss	$	(140,331	)		(234,620	)		(9,164	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		7,341			5,207			3,703
Change in deferred income taxes		—			(1,187	)		(14,263	)
Earnings from Bluegreen Corporation		(8,996	)		(10,275	)		(9,684	)
Earnings from unconsolidated trusts		(218	)		(220	)		(178	)
Impairment of investment in Bluegreen Corporation		94,426			—			—
Impairment of other investments		14,120			—			—
(Gain) loss from real estate joint ventures		(182	)		27			417
Share-based compensation expense related to stock options and restricted stock		990			1,962			3,250
Gain on sale of property and equipment		(2,520	)		—			(1,329	)
Gain on sale of equity securities		(1,178	)		—			—
Impairment of property and equipment		114			533			245
Impairment of inventory		3,491			226,879			38,083
Changes in operating assets and liabilities:
Inventory of real estate		(19,964	)		26,950			(255,968	)
Notes receivable		(63	)		2,903			(1,640	)
Other assets		309			2,180			5,174
Income taxes receivable		27,407			—			—
Income taxes payable		2,380			—			—
Customer deposits		(123	)		(23,974	)		(8,990	)
Accounts payable, accrued expenses and other liabilities		(9,900	)		(31,662	)		9,824
Net cash used in operating activities		(32,897	)		(35,297	)		(240,520	)
Investing activities:
Investment in real estate joint ventures		—			(229	)		(469	)
Distributions from real estate joint ventures		182			47			576
(Increase) decrease in restricted cash		(19,081	)		(1,321	)		421
Purchase of equity securities		(33,978	)		—			—
Acquisition of Pizza Fusion		(3,000	)		—			—
Purchase of short-term investments		(9,600	)		—			—
Proceeds from sale of equity securities		18,904			—			—
Investments in unconsolidated trusts		—			—			(928	)
Distributions from unconsolidated trusts		218			220			178
Proceeds from sale of property and equipment		5,588			30			1,943
Deconsolidation of subsidiary cash balance		—			(6,387	)		—
Capital expenditures		(1,154	)		(38,749	)		(29,476	)
Net cash used in investing activities		(41,921	)		(46,389	)		(27,755	)
Financing activities:
Proceeds from notes and mortgage notes payable		27,522			236,839			379,732
Proceeds from junior subordinated debentures		—			—			30,928
Repayment of notes and mortgage notes payable		(31,130	)		(158,923	)		(202,927	)
Cash paid for stock repurchase		(1,439	)		—			—
Payments for debt issuance costs		(518	)		(1,695	)		(3,043	)
Payments for stock issue costs		—			(196	)		—
Proceeds from issuance of common stock		—			152,847			—
Cash dividends paid		—			(396	)		(1,586	)
Net cash (used in) provided by financing activities		(5,565	)		228,476			203,104
(Decrease) increase in cash and cash equivalents	$	(80,383	)		146,790			(65,171	)
Cash and cash equivalents at the beginning of period		195,181			48,391			113,562
Cash and cash equivalents at end of period	$	114,798			195,181			48,391

See accompanying notes to consolidated financial statements.

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Woodbridge Holdings Corporation
Consolidated Statements of Cash Flows
For each of the years in the three year period ended December 31, 2008
(In thousands)

	2008			2007			2006
Supplemental cash flow information
Interest paid on borrowings, net of amounts capitalized	$	11,101			5,927			963
Income taxes (refunded) paid		(29,711	)		4,556			17,140
Supplemental disclosure of non-cash operating, investing and financing activities:
Change in shareholders’ equity resulting from the change in other comprehensive (loss) gain, net of taxes	$	(2,021	)		(535	)		776
Change in shareholders’ equity from the net effect of Bluegreen’s capital transactions, net of taxes		1,225			(279	)		177
Decrease in inventory from reclassification to property and equipment		—			2,859			8,412
Increase in deferred tax liability due to cumulative impact of change in accounting for uncertainties in income taxes (FIN 48 — see Note 16)		—			260			—
Assets and liabilities assumed upon acquisition of Pizza Fusion (see Note 3)

At November 9, 2007, all accounts of Levitt and Sons were deconsolidated from the Company. Refer to (Note 24) for an analysis of the balances at the time of deconsolidation.

See accompanying notes to consolidated financial statements.

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Woodbridge Holdings Corporation
Notes to Consolidated Financial Statements

     1. Description of Business

          Woodbridge Holdings Corporation (“Woodbridge” or the “Company”) (formerly Levitt Corporation), directly and through its wholly owned subsidiaries, historically has been a real estate development company with activities in the Southeastern United States. The Company was organized in December 1982 under the laws of the State of Florida. Historically, the Company’s operations were primarily within the real estate industry, however, the Company’s current business strategy includes the pursuit of investments and acquisitions within or outside of the real estate industry, as well as the continued development of master-planned communities. Under this business strategy, the Company likely will not generate a consistent earnings stream and the composition of the Company’s revenues may vary widely due to factors inherent in a particular investment, including the maturity and cyclical nature of, and market conditions relating to, the businesses in which the Company invests. Net investment gains and other income will be based primarily on the success of the Company’s investments as well as overall market conditions.

          In 2008, Woodbridge engaged in business activities through the Land Division, consisting of the operations of Core Communities, LLC (“Core Communities” or “Core”), which develops master-planned communities, and through the Other Operations segment (“Other Operations”), which includes the parent company operations of Woodbridge (the “Parent Company”), the consolidated operations of Pizza Fusion Holdings, Inc. (“Pizza Fusion”), the consolidated operations of Carolina Oak Homes, LLC (“Carolina Oak”), which engaged in homebuilding in South Carolina prior to the suspension of those activities during the fourth quarter of 2008, and other activities through Cypress Creek Capital Holdings, LLC (“Cypress Creek Capital”) and Snapper Creek Equity Management, LLC (“Snapper Creek”). An equity investment in Bluegreen Corporation (“Bluegreen”) and an investment in Office Depot, Inc. (“Office Depot”) are also included in the Other Operations segment.

          Core Communities was founded in May 1996 to develop a master-planned community in Port St. Lucie, Florida now known as St. Lucie West. During 2008, its activities focused on the development of a master-planned community in St. Lucie, Florida called Tradition, Florida and a community outside of Hardeeville, South Carolina called Tradition Hilton Head (formerly known as Tradition, South Carolina). Tradition, Florida has been in active development for several years, while Tradition Hilton Head is in the early stage of development. As a master-planned community developer, Core Communities engages in four primary activities: (i) the acquisition of large tracts of raw land; (ii) planning, entitlement and infrastructure development; (iii) the sale of entitled land and/or developed lots to homebuilders and commercial, industrial and institutional end-users; and (iv) the development and leasing of commercial space to commercial, industrial and institutional end-users.

          In October 2007, Woodbridge acquired from Levitt and Sons all of the outstanding membership interests in Carolina Oak for the following consideration: (i) the assumption of the outstanding principal balance of a loan in the amount of $34.1 million which is collateralized by a 150 acre parcel of land owned by Carolina Oak located in Tradition Hilton Head, (ii) the execution of a promissory note in the amount of $400,000 to serve as a deposit under a purchase agreement between Carolina Oak and Core Communities of South Carolina, LLC and (iii) the assumption of specified payables in the amount of approximately $5.3 million. The principal asset of Carolina Oak is a 150 acre parcel of land located in Tradition Hilton Head.

          Prior to November 9, 2007, the Company also conducted homebuilding operations through Levitt and Sons, LLC (“Levitt and Sons”), which comprised the Company’s Homebuilding Division. The Homebuilding Division consisted of two reportable operating segments, the Primary Homebuilding segment and the Tennessee Homebuilding segment. Acquired in December 1999, Levitt and Sons was a developer of single family homes and townhome communities for active adults and families in Florida, Georgia, Tennessee and South Carolina. On November 9, 2007 (the “Petition Date”), Levitt and Sons and substantially all of its subsidiaries (collectively, the “Debtors”) filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States Code (the “Chapter 11 Cases”) in the United States Bankruptcy Court for the Southern District of Florida ( the“Bankruptcy Court”). In connection with the filing of the

70

Chapter 11 Cases, Woodbridge deconsolidated Levitt and Sons as of November 9, 2007, eliminating all future operations of Levitt and Sons from Woodbridge’s financial results of operations. Since Levitt and Sons’ results are no longer consolidated and Woodbridge believes that it is not probable that it will be obligated to fund future operating losses at Levitt and Sons, any adjustments reflected in Levitt and Sons’ financial statements subsequent to November 9, 2007 are not expected to affect the results of operations of Woodbridge.

          On November 13, 2008, the Company was notified by the New York Stock Exchange that its Class A Common Stock had fallen below the New York Stock Exchange’s continued listing requirement regarding average global market capitalization over a consecutive thirty-day trading period. As a result, the Company’s Class A Common Stock was suspended from trading on the New York Stock Exchange beginning with the opening of trading on November 20, 2008 and immediately began trading on the Pink Sheets Electronic Quotation Service (“Pink Sheets”) under the trading symbol “WDGH.PK.”.

     2. Summary of Significant Accounting Policies

Consolidation Policy

          The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries and entities in which the Company is the primary beneficiary as defined in Financial Accounting Standards Board (“FASB”) Interpretation No. 46 (revised December 2003), "Consolidation of Variable Interest Entities” (“FIN No. 46(R)”), or has a controlling interest in accordance with the provisions of Statement of Position 78-9, “Accounting for Investments in Real Estate Ventures” (“SOP 78-9”), and Emerging Issues Task Force No. 04-5, “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights” (EITF No. 04-5”). Levitt and Sons is no longer a consolidated entity as described below. All significant inter-company transactions have been eliminated in consolidation.

          In connection with the filing of the Chapter 11 Cases, Woodbridge deconsolidated Levitt and Sons as of November 9, 2007, eliminating all future operations of Levitt and Sons from its financial results of operations, and, as described above, Woodbridge accounts for any remaining investment in Levitt and Sons as a cost method investment.

          In 2008, the Company, indirectly through its wholly-owned subsidiary, Woodbridge Equity Fund II LP, made a $3.0 million investment in Pizza Fusion. Pizza Fusion was determined to be a Variable Interest Entity (“VIE”) under the provisions of FIN No. 46(R) and Woodbridge Equity Fund II, LP was determined to be the primary beneficiary, therefore, the Company consolidated Pizza Fusion into its consolidated financial statements as of September 18, 2008.

          In the ordinary course of business, the Company enters into contracts to purchase land held for development, including option contracts. Option contracts allow the Company to control significant positions with minimal capital investment and substantially reduce the risks associated with land ownership and development. The liability for nonperformance under such contracts is typically only the required non-refundable deposits. The Company does not have legal title to these assets. However, if certain conditions are met, under the requirements of FIN No. 46(R), the Company’s non-refundable deposits in these land contracts may create a variable interest, with the Company being identified as the primary beneficiary. If these conditions are met, FIN No. 46(R) requires the Company to consolidate the VIE holding the asset to be acquired at its fair value. At December 31, 2008 and 2007, there were no non-refundable deposits under these contracts, and the Company had no contracts in place to acquire land.

Use of Estimates

     The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ significantly from those estimates. Material estimates relate to revenue recognition on percent complete

71

projects, reserves and accruals, impairment of assets, determination of the valuation of real estate and estimated costs to complete construction, litigation and contingencies, the current tax liability in accordance with FIN 48, and the amount of the deferred tax asset valuation allowance. The Company bases estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

Reclassification

          In June 2007, Core Communities began soliciting bids from several potential buyers to purchase assets associated with two of Core’s commercial leasing projects (the “Projects”). As the criteria for assets held for sale had been met in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”), the assets were reclassified to assets held for sale and the liabilities related to those assets were reclassified to liabilities related to assets held for sale in prior periods. The results of operations for these assets were reclassified as discontinued operations in the third quarter of 2007 and the Company ceased recording depreciation expense on these Projects. During the fourth quarter of 2008, the Company determined that given the difficulty in predicting the timing or probability of a sale of the assets associated with the Projects as a result of, among other things, the economic downturn and disruptions in credit markets, the requirements of SFAS No. 144 necessary to classify these assets as held for sale and to be included in discontinued operations were no longer met and the Company could not assert the Projects can be sold within a year. Therefore, the results of operations for these Projects were reclassified for the three years ending December 31, 2008 back into continuing operations in the consolidated statements of operations. In accordance with SFAS No. 144, the Company recorded a depreciation recapture of $3.2 million at December 31, 2008 to account for the depreciation not recorded while the assets were classified as discontinued operations. The Company compared the net carrying amount of the asset, after taking into account the adjustment for depreciation recapture, to the fair value at the date of the subsequent decision not to sell and determined that the adjusted net carrying value was less than the fair value on the date of the reclassification. Total assets and liabilities related to the Projects were $92.7 million and $76.1 million, respectively, for the year ended December 31, 2008, and $96.2 million and 80.1 million, respectively, for the year ended December 31, 2007. In addition, total revenues related to the Projects for the years ended December 31, 2008, 2007 and 2006 were $8.7 million, $4.7 million and $1.8 million, respectively, while income (loss) related to the Projects for the same periods in 2008, 2007 and 2006 was $6.0 million, $1.8 million and $(21,000), respectively.

Loss in excess of investment in Levitt and Sons

          Under Accounting Research Bulletin (“ARB”) No. 51, “Consolidated Financial Statements” (“ARB No. 51”), consolidation of a majority-owned subsidiary is precluded where control does not rest with the majority owners. Under these rules, legal reorganization or bankruptcy represents conditions which can preclude consolidation or equity method accounting as control rests with the bankruptcy court, rather than the majority owner. As described elsewhere in this report, Levitt and Sons, our wholly-owned subsidiary, declared bankruptcy on November 9, 2007. Therefore, in accordance with ARB No. 51, Woodbridge deconsolidated Levitt and Sons as of November 9, 2007, eliminating all future operations of Levitt and Sons from Woodbridge’s financial results of operations, and the Company now follows the cost method of accounting to record its interest in Levitt and Sons. Under cost method accounting, income will only be recognized to the extent of cash received in the future or when Levitt and Sons is legally released from its bankruptcy obligations through the approval of the Bankruptcy Court, at which time, any recorded loss in excess of the investment in Levitt and Sons can be recognized into income. (See Notes 20 and 24 for further information regarding Levitt and Sons and the Chapter 11 Cases).

Cash Equivalents

          Cash and cash equivalents consist of demand deposits at commercial banks. The Company also invests in money market funds and certificates of deposits. Certificates of deposits with original maturities of less than three months are considered cash and cash equivalents. The cash deposits are held primarily at various financial institutions and exceed federally insured amounts. However, the Company has not experienced any losses on such accounts and management does not believe these concentrations to be a credit risk to the Company.

Restricted Cash

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          Cash and interest bearing deposits are segregated into restricted accounts for specific uses in accordance with the terms of certain land sale contracts, home sales and other agreements. Restricted funds may be utilized in accordance with the terms of the applicable governing documents. The majority of restricted funds are controlled by third-party escrow fiduciaries and include the amounts reserved under the Levitt and Sons Settlement Agreement.

Impairment of Long-Lived Assets

          Long-lived assets consist of real estate inventory, property and equipment and other amortizable intangible assets. In accordance with SFAS No. 144, long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future undiscounted cash flows, an impairment charge is recognized in an amount by which the carrying amount of the asset exceeds the fair value of the asset.

          For projects representing land investments where homebuilding activity had not yet begun, valuation models are used as the best evidence of fair value and as the basis for the measurement. If the calculated project fair value is lower than the carrying value of the real estate inventory, an impairment charge is recognized to reduce the carrying value of the project to fair value.

          The assumptions developed and used by management to evaluate impairment are subjective and involve significant estimates, and are subject to increased volatility due to the uncertainty of the current market environment. As a result, actual results could differ materially from management’s assumptions and estimates and may result in material impairment charges in the future.

Short-Term Investments

          The Company considers investments with original maturities of greater than three months and remaining maturities of less than one year as short-term investments. Certificates of deposits with original maturities of greater than three months and remaining maturities of less than one year are classified as “Certificates of deposits, short term” in our consolidated statements of financial condition.

Fair Value Measurements

          Effective January 1, 2008, the Company partially adopted the provisions of SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”), which requires the Company to disclose the fair value of its investments in unconsolidated trusts and equity securities, including the investments in Bluegreen and Office Depot. Under this standard, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). In determining fair value, the Company is sometimes required to use various valuation techniques. SFAS No. 157 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. As a basis for considering such assumptions, SFAS No. 157 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

• Level 1. Observable inputs such as quoted prices in active markets for identical assets or liabilities;

• Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

• Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

          When valuation techniques, other than those described as Level 1 are utilized, management must make estimations and judgments in determining the fair value for its investments. The degree to which

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management’s estimation and judgment is required is generally dependent upon the market pricing available for the investments, the availability of observable inputs, the frequency of trading in the investments and the investment’s complexity. If management makes different judgments regarding unobservable inputs the Company could potentially reach different conclusions regarding the fair value of its investments.

Investments

     The Company determines the appropriate classifications of investments in equity securities at the acquisition date and re-evaluates the classifications at each balance sheet date. For entities where the Company is not deemed to be the primary beneficiary under FIN No. 46(R) or in which it has less than a controlling financial interest evaluated under AICPA Statement of Position 78-9, “Accounting for Investments in Real Estate Ventures” or Emerging Issues Task Force No. 04-5, “Determining Whether a General Partner, or the General Partners as a group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights”, these entities are accounted for using the equity or cost method of accounting. Typically, the cost method is used if the Company owns less than 20% of the investee’s stock and the equity method is used if the Company owns more than 20% of the investee’s stock. However, the Company has concluded that the percentage ownership of stock is not the sole determinant in applying the equity or the cost method, but the significant factor is whether the investor has the ability to significantly influence the operating and financial policies of the investee.

Equity Method

          The Company follows the equity method of accounting to record its interests in entities in which it does not own the majority of the voting stock or record its investment in VIEs in which it is not the primary beneficiary. These entities consist of Bluegreen Corporation and statutory business trusts. The statutory business trusts are VIEs in which the Company is not the primary beneficiary. Under the equity method, the initial investment in a joint venture is recorded at cost and is subsequently adjusted to recognize the Company’s share of the joint venture’s earnings or losses. Distributions received and other-than-temporary impairments reduce the carrying amount of the investment.

Cost Method

          The Company uses the cost method for investments where the Company owns less than a 20% interest and does not have the ability to significantly influence the operating and financial policies of the investee in accordance with relative accounting guidance. SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities”, requires the Company to designate its securities as held to maturity, available for sale, or trading, depending on the Company’s intent with regard to its investments at the time of purchase. There are currently no securities classified as held to maturity or trading.

Impairment

          Securities classified as available-for-sale are carried at fair value with net unrealized gains or losses reported as a component of accumulated other comprehensive income (loss), but do not impact the Company’s results of operations. Changes in fair value are taken to income when a decline in value is considered other-than-temporary.

          The Company reviews its equity and cost method investments quarterly for indicators of other-than-temporary impairment in accordance with FSP FAS 115-1/FAS 124-1, “The Meaning of Other-than-Temporary Impairment and Its Application to Certain Investments” (“FSP FAS 115-1/FAS 124-1”), and Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin No. 59 (“SAB No. 59”). This determination requires significant judgment in which the Company evaluates, among other factors, the fair market value of the investments, general market conditions, the duration and extent to which the fair value of the investment is less than cost, and the Company’s intent and ability to hold the investment until it recovers. The Company also considers specific adverse conditions related to the financial health of and business outlook for the investee, including industry and sector performance, rating agency actions, changes in operational and financing cash flow factors. If a decline in the fair value of the investment is determined to be other-than-temporary, an impairment charge is recorded to reduce the investment to its fair value and a new cost basis in the investment is established.

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Capitalized Interest

          Interest incurred relating to land under development and construction is capitalized to real estate inventory or property and equipment during the active development period. For inventory, interest is capitalized at the effective rates paid on borrowings during the pre-construction and planning stages and the periods that projects are under development. Capitalization of interest is discontinued if development ceases at a project. Capitalized interest is expensed as a component of cost of sales as related homes, land and units are sold. For property and equipment under construction, interest associated with these assets is capitalized as incurred to property and equipment and is expensed through depreciation once the asset is put into use. The following table is a summary of interest incurred, capitalized and expensed, exclusive of impairment adjustments (in thousands):

	For the year ended December 31,
	2008			2007			2006
Interest incurred	$	22,367			50,767			42,002
Interest capitalized		(11,500	)		(46,960	)		(42,002	)
Interest expense	$	10,867			3,807			—
Interest expensed in cost of sales	$	326			17,949			15,358

          In addition to the above interest expensed in cost of sales, the capitalized interest balance of inventory of real estate as of December 31, 2008 was reduced by approximately $2.4 million from the impairment reserve allocated to the capitalized interest component of inventory of real estate as a result of the Carolina Oak impairment charge recorded in the Other Operations segment. The capitalized interest balance of inventory of real estate as of December 31, 2007 was also reduced by $24.8 million of impairment reserves, of which approximately $9.3 million of these impairments related to Woodbridge’s impairment of capitalized interest recorded in Other Operations associated with projects at Levitt and Sons, and the remaining $15.5 million related to the Homebuilding segments.

Property and Equipment

          Property and equipment is stated at cost, less accumulated depreciation and amortization, and consists primarily of land and office buildings, furniture and fixtures, leasehold improvements, equipment and water treatment and irrigation facilities. Repairs and maintenance costs are expensed as incurred. Significant renovations and improvements that improve or extend the useful lives of assets are capitalized. Depreciation is primarily computed on the straight-line method over the estimated useful lives of the assets, which generally range up to 50 years for water and irrigation facilities, 40 years for buildings, and 7 years for equipment and furniture and fixtures. Leasehold improvements are amortized using the straight-line method over the shorter of the terms of the related leases or the useful lives of the assets. In cases where the Company determines that land and the related development costs are to be used as fixed assets, these costs are transferred from inventory of real estate to property and equipment.

Goodwill and Intangible Assets

          The Company has recorded certain intangible assets related to its acquisition of Pizza Fusion. Intangible assets consist primarily of franchise contracts which were valued using a discounted cash flows methodology and are amortized over the average life of the franchise contracts. The estimates of useful lives and expected cash flows require the Company to make significant judgments regarding future periods that are subject to outside factors. In accordance with SFAS No. 144, the Company evaluates when events and circumstances indicate that assets may be impaired and when the undiscounted cash flows estimated to be generated by those assets are less than their carrying amounts. The carrying value of these assets is dependent upon estimates of future earnings that the Company expects to generate. If cash flows decrease significantly, intangible assets may be impaired and would be written down to their fair value.

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          On at least an annual basis, the Company conducts a review of its goodwill in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”), to determine whether the carrying value of goodwill exceeds the fair market value using a discounted cash flow methodology. In the year ended December 31, 2006, the Company conducted an impairment review of the goodwill related to the Tennessee Homebuilding segment, the operations of which consisted of the activities of Bowden Building Corporation, which the Company acquired in 2004. The Company used a discounted cash flow methodology to determine the amount of impairment resulting in completely writing off goodwill of approximately $1.3 million in the year ended December 31, 2006. The write-off is included in other expenses in the consolidated statements of operations.

Revenue Recognition

          Revenue and all related costs and expenses from house and land sales are recognized at the time that closing has occurred, when title and possession of the property and the risks and rewards of ownership transfer to the buyer, and when the Company does not have a substantial continuing involvement in accordance with SFAS No. 66, “Accounting for Sales of Real Estate” (“SFAS No. 66”). In order to properly match revenues with expenses, the Company estimates construction and land development costs incurred and to be incurred, but not paid at the time of closing. Estimated costs to complete are determined for each closed home and land sale based upon historical data with respect to similar product types and geographical areas and allocated to closings along with actual costs incurred based on a relative sales value approach. To the extent the estimated costs to complete have significantly changed, the Company will adjust cost of sales in the current period for the impact on cost of sales of previously sold homes and land to ensure a consistent margin of sales is maintained.

          Revenue is recognized for certain land sales on the percentage-of-completion method when the land sale takes place prior to all contracted work being completed. Pursuant to the requirements of SFAS 66, if the seller has some continuing involvement with the property and does not transfer substantially all of the risks and rewards of ownership, profit shall be recognized by a method determined by the nature and extent of the seller’s continuing involvement. In the case of land sales, this involvement typically consists of final development activities. The Company recognizes revenue and related costs as work progresses using the percentage of completion method, which relies on estimates of total expected costs to complete required work. Revenue is recognized in proportion to the percentage of total costs incurred in relation to estimated total costs at the time of sale. Actual revenues and costs to complete construction in the future could differ from current estimates. If the estimates of development costs remaining to be completed and relative sales values are significantly different from actual amounts, then the revenues, related cumulative profits and costs of sales may be revised in the period that estimates change.

          Other revenues consist primarily of rental property income, marketing revenues, irrigation service fees, and title and mortgage revenue. Irrigation service connection fees are deferred and recognized systematically over the life of the irrigation plant. Irrigation usage fees are recognized when billed as the service is performed. Rental property income consists of rent revenue from long-term leases of commercial property. The Company reviews all new leases in accordance with SFAS No. 13 “Accounting for Leases”. If the lease contains fixed escalations for rent, free-rent periods or upfront incentives, rental revenue is recognized on a straight-line basis over the life of the lease.

          Effective January 1, 2006, Bluegreen adopted AICPA Statement of Position 04-02, “Accounting for Real Estate Time-Sharing Transactions” (“SOP 04-02”). This Statement amends FASB Statement No. 67, “Accounting for Costs and Initial Rental Operations of Real Estate Projects” (“SFAS No. 67”), to state that the guidance for incidental operations and costs incurred to sell real estate projects does not apply to real estate time-sharing transactions. The accounting for those operations and costs is subject to the guidance in SOP 04-02. Bluegreen’s adoption of SOP 04-02 resulted in a one-time, non-cash, cumulative effect of change in accounting principle charge of $4.5 million to Bluegreen for the year ended December 31, 2006, and accordingly reduced the earnings in Bluegreen recorded by us by approximately $1.4 million for the same period.

Stock-based Compensation

          The Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004),

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“Share-Based Payment” (“SFAS No. 123R”), as of January 1, 2006 and elected the modified-prospective transition method, under which prior periods are not restated. Under the fair value recognition provisions of this statement, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense on a straight-line basis over the requisite service period, which is the vesting period for all awards granted after January 1, 2006, and for the unvested portion of stock options that were outstanding at January 1, 2006.

          SFAS No. 123R requires a public entity to measure compensation cost associated with awards of equity instruments based on the grant-date fair value of the awards over the requisite service period. SFAS No. 123R requires public entities to initially measure compensation cost associated with awards of liability instruments based on their current fair value. The fair value of that award is to be remeasured subsequently at each reporting date through the settlement date. Changes in fair value during the requisite service period will be recognized as compensation cost over that period.

          The Company currently uses the Black-Scholes option-pricing model to determine the fair value of stock options. The fair value of option awards on the date of grant using the Black-Scholes option-pricing model is determined by the stock price and assumptions regarding expected stock price volatility over the expected term of the awards, risk-free interest rate, expected forfeiture rate and expected dividends. If factors change and the Company uses different assumptions for estimating stock-based compensation expense in future periods or if the Company decides to use a different valuation model, the amounts recorded in future periods may differ significantly from the amounts recorded in the current period and could affect net income and earnings per share.

Income Taxes

          The Company records income taxes using the liability method of accounting for deferred income taxes. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequence of temporary differences between the financial statement and income tax bases of our assets and liabilities. The Company estimates income taxes in each of the jurisdictions in which it operates. This process involves estimating tax exposure together with assessing temporary differences resulting from differing treatment of items, such as deferred revenue, for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within the consolidated statements of financial condition. The recording of a net deferred tax asset assumes the realization of such asset in the future. Otherwise, a valuation allowance must be recorded to reduce this asset to its net realizable value. The Company considers future pretax income and ongoing prudent and feasible tax strategies in assessing the need for such a valuation allowance. In the event that the Company determines that it may not be able to realize all or part of the net deferred tax asset in the future, a valuation allowance for the deferred tax asset is charged against income in the period such determination is made.

          The Company and its subsidiaries file a consolidated Federal and Florida income tax return. Separate state returns are filed by subsidiaries that operate outside the state of Florida. Even though Levitt and Sons and its subsidiaries have been deconsolidated from Woodbridge for financial statement purposes, they will continue to be included in the Company’s Federal and Florida consolidated tax returns until Levitt and Sons is discharged from bankruptcy. As a result of the deconsolidation of Levitt and Sons, all of Levitt and Sons’ net deferred tax assets are no longer presented in the accompanying consolidated statement of financial condition at December 31, 2008 and 2007 but remain a part of Levitt and Sons’ condensed consolidated financial statements at December 31, 2008 and 2007.

          The Company adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB No. 109” (“FIN 48”), on January 1, 2007. FIN 48 provides guidance on recognition, measurement, presentation and disclosure in financial statements of uncertain tax positions that a company has taken or expects to take on a tax return. FIN 48 substantially changes the accounting policy for uncertain tax positions. As a result of the implementation of FIN 48, the Company recognized a decrease of $260,000 in the liability for unrecognized tax benefits, which was accounted for as an increase to the January 1, 2007 balance of retained earnings. At December 31, 2008 and 2007, there were gross tax affected unrecognized tax benefits of $2.4 million, of which $0.2 million, if recognized, would affect the effective tax rate.

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Loss per Share

          The Company has two classes of common stock. Class A common stock is quoted on the Pink Sheets. At December 31, 2008 and 2007, 19,042,149 shares and 19,010,804 shares (after retroactively adjusting this share amounts to reflect the one-for-five reverse stock split effected during September 2008), respectively, were issued. The Company also has Class B common stock which is held exclusively by BFC Financial Corporation (“BFC”), the Company’s controlling shareholder.

          While the Company has two classes of common stock outstanding, the two-class method is not presented because the Company’s capital structure does not provide for different dividend rates or other preferences, other than voting and conversion rights, between the two classes. Basic loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding for the period. Diluted loss per share is computed in the same manner as basic loss per share, but it also gives consideration to (a) the dilutive effect of the Company’s stock options and restricted stock using the treasury stock method and (b) the pro rata impact of Bluegreen’s dilutive securities (stock options and convertible securities) on the amount of Bluegreen’s earnings that the Company recognizes.

          All share and per share data presented in this report for prior periods have been retroactively adjusted to reflect the one-for-five reverse stock split effected by the Company during September 2008.

Stock Repurchases

          The Company accounts for repurchases of its common stock using the cost method with common stock in treasury classified in its consolidated statement of financial condition as a reduction of shareholders’ equity.

New Accounting Pronouncements

          In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51” (“SFAS No. 160”). SFAS No. 160 requires that a noncontrolling interest in a subsidiary be reported as equity and the amount of consolidated net income specifically attributable to the noncontrolling interest be identified in the consolidated financial statements. It also calls for consistency in the manner of reporting changes in the parent’s ownership interest and requires fair value measurement of any noncontrolling equity investment retained in a deconsolidation. SFAS No. 160 is effective for the Company’s fiscal year beginning January 1, 2009. The adoption of SFAS No. 160 will not have a material impact on the Company’s consolidated financial statements.

          In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS No. 141R”). SFAS No. 141R broadens the guidance of SFAS No. 141, extending its applicability to all transactions and other events in which one entity obtains control over one or more other businesses. It broadens the fair value measurement and recognition of assets acquired, liabilities assumed, and interests transferred as a result of business combinations. SFAS No. 141R expands on required disclosures to improve the statement users’ abilities to evaluate the nature and financial effects of business combinations. SFAS No. 141R is effective for the Company’s fiscal year beginning January 1, 2009. The adoption of SFAS No. 141R could have a material effect on the Company’s consolidated financial statements to the extent the Company consummates business combinations due to the requirement to write-off transaction costs to the consolidated statements of operations.

          In April 2008, the FASB issued Staff Position (“FSP”) FAS No. 142-3, “Determination of the Useful Life of Intangible Assets” (“FSP FAS No. 142-3”). FSP FAS No. 142-3 amends paragraph 11(d) of FASB Statement No. 142 “Goodwill and Other Intangible Assets” (“SFAS No. 142”) which sets forth the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142. FSP FAS No. 142-3 intends to improve the consistency between the useful life of a recognized intangible asset under SFAS No. 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS No. 141R. FSP FAS No. 142-3 is effective for the Company’s fiscal year beginning January 1, 2009 and must be applied prospectively to intangible assets acquired after the effective date. The adoption of FSP FAS No. 142-3 will not have a material impact on the Company’s consolidated financial statements.

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          In October 2008, the FASB issued FSP FAS No. 157-3, “Determining Fair Value of a Financial Asset in a Market That Is Not Active” (“FSP FAS No. 157-3”). FSP FAS No. 157-3 clarified the application of SFAS No. 157 in an inactive market. It demonstrated how the fair value of a financial asset is determined when the market for that financial asset is inactive. FSP FAS No. 157-3 was effective upon issuance, including prior periods for which financial statements had not been issued. The implementation of this standard did not have a material impact on the Company’s consolidated financial statements.

          In November 2008, the FASB issued EITF 08-6, “Equity Method Accounting Considerations” (“EITF 08-6”). EITF 08-6 clarifies the application of equity method accounting under Accounting Principles Board 18, “The Equity Method of Accounting for Investments in Common Stock”. Specifically, it requires companies to initially record equity method investments based on the cost accumulation model, precludes separate other-than-temporary impairment tests on an equity method investee’s indefinite-lived assets from the investee’s test, requires companies to account for an investee’s issuance of shares as if the equity method investor had sold a proportionate share of its investment, and requires that an equity method investor continues to apply the guidance in paragraph 19(l) of APB 18 upon a change in the investor’s accounting from the equity method to the cost method. EITF 08-6 is effective prospectively for fiscal years beginning on or after December 15, 2008, and interim periods within those fiscal years. The Company is currently evaluating the impact of EITF 08-6.

          In December 2008, the FASB issued FSP FAS No. 140-4 and FIN 46R-8 “Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities” which requires enhanced disclosure related to VIEs in accordance with SFAS 140 “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities” and FASB Interpretation No. 46 (revised December 2003), “Consolidation of Variable Interest Entities”. These disclosures include significant judgments and assumptions, restrictions on asset, risk and the effects on financial position, financial performance and cash flows. The enhanced disclosures are effective for the first reporting period that ends after December 15, 2008. The implementation of this standard will not have a material impact on the Company’s consolidated financial statements.

     3. Business Combination

          Pizza Fusion is a restaurant franchise operating in a niche market within the quick service and organic food industries. Founded in 2006, Pizza Fusion was operating 16 locations in Florida and California through December 31, 2008 and entered into franchise agreements to open an additional 14 stores over 2009.

          On September 18, 2008, the Company, indirectly through its wholly-owned subsidiary, Woodbridge Equity Fund II LP, purchased for an aggregate of $3.0 million, 2,608,696 shares of Series B Convertible Preferred Stock of Pizza Fusion, together with warrants to purchase up to 1,500,000 additional shares of Series B Convertible Preferred Stock of Pizza Fusion at an exercise price of $1.44 per share. The Company also has options, exercisable on or prior to September 18, 2009, to purchase up to 521,740 additional shares of Series B Convertible Preferred Stock of Pizza Fusion at a price of $1.15 per share and, upon exercise of such options, will receive warrants to purchase up to 300,000 additional shares of Series B Convertible Preferred Stock of Pizza Fusion at an exercise price of $1.44 per share. The warrants have a term of 10 years, subject to earlier expiration in certain circumstances.

          The Company evaluated its investment in Pizza Fusion under FIN No. 46(R) and determined that Pizza Fusion is a VIE. Pizza Fusion is in its infancy stages and does not have enough equity investment and will likely require additional financial support for its normal operations and further expansion of its franchise operations. Furthermore, the Company’s investment on a fully diluted basis will result in the Company having a significant interest in Pizza Fusion and therefore will bear the majority of the variability of the risks and rewards of Pizza Fusion. Additionally, as shareholder of the Series B Preferred Stock, the Company has control over the Board of Directors of Pizza Fusion. Based upon these factors, the Company concluded that it is the primary beneficiary and as such, applied purchase accounting and has consolidated the assets and liabilities of Pizza Fusion in accordance with SFAS No. 141. Apart from the investment of $3.0 million, the Company did not provide any additional financial support to Pizza Fusion. There are no restrictions on the assets currently held by Pizza Fusion and their liabilities are primarily related to franchise deposits, which are not refundable. The financial statements of Pizza Fusion at December 31, 2008 were not material.

          The following table summarizes the fair value of the assets and liabilities associated with the consolidation of Pizza Fusion as of September 18, 2008 (in thousands):

Prepaid and other current assets	$	148
Property, plant and equipment		117
Intangible assets		4,324
Other assets		15
Fair value of assets		4,604
Accounts payable and other liabilities		442
Deposits and deferred fees		1,127
Notes payable		35
Fair value of liabilities	$	1,604
Net assets acquired	$	3,000
Net cash consideration	$	3,000

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          The Company recorded $4.4 million in other intangibles assets. The intangible assets consist primarily of the value of franchise agreements executed by the Company for approximately 14 stores to be open through 2009. These intangible assets will be amortized over the length of the franchise agreements which is approximately 10 years.

     4. Loss per Share

          Basic loss per common share is computed by dividing loss attributable to common shareholders by the weighted average number of common shares outstanding for the period. Diluted loss per common share is computed in the same manner as basic loss per common share, taking into consideration (a) the dilutive effect of the Company’s stock options and restricted stock using the treasury stock method and (b) the pro rata impact of Bluegreen’s dilutive securities (stock options and convertible securities) on the amount of Bluegreen’s earnings recognized by the Company. For the years ended December 31, 2008, 2007 and 2006, common stock equivalents related to the Company’s stock options and unvested restricted stock amounted to 3,258 shares, 2,306 shares and 1,123 shares, respectively, and were not considered in computing diluted loss per common share because their effect would have been antidilutive since the Company recorded a net loss for those years. In addition, for the years ended December 31, 2008, 2007 and 2006, 336,159, 372,564 and 379,772 shares of common stock equivalents, respectively, at various prices were not included in the computation of diluted loss per common share because the exercise prices were greater than the average market price of the common shares and, therefore, their effect would be antidilutive.

          The following table presents the computation of basic and diluted loss per common share (in thousands, except for per share data):

	For the Year Ended December 31,
	2008			2007			2006
Numerator:
Basic loss per common share:
Net loss — basic	$	(140,331	)		(234,620	)		(9,164	)
Diluted loss per common share:
Net loss — basic	$	(140,331	)		(234,620	)		(9,164	)
Pro rata share of the net effect of Bluegreen dilutive securities		—			(42	)		(100	)
Net loss — diluted	$	(140,331	)		(234,662	)		(9,264	)
Denominator:
Basic average shares outstanding		19,088			7,821			3,967
Bonus adjustment factor from registration rights offering		—			—			1.0197
Basic average shares outstanding		19,088			7,821			4,045
Net effect of stock options assumed to be exercised		—			—			—
Diluted average shares outstanding		19,088			7,821			4,045
Loss per common share:
Basic	$	(7.35	)		(30.00	)		(2.27	)
Diluted	$	(7.35	)		(30.00	)		(2.29	)

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     5. Equity transactions

Cash dividends

          Cash dividends declared by the Company’s Board of Directors for the years ended December 31, 2007 and 2006 are summarized as follows:

		Classes of	Dividend
Declaration Date	Record Date	Common Stock	per share		Payment Date
January 24, 2006	February 8, 2006	Class A, Class B	$	0.10	February 15, 2006
April 26, 2006	May 8, 2006	Class A, Class B	$	0.10	May 15, 2006
August 1, 2006	August 11, 2006	Class A, Class B	$	0.10	August 18, 2006
October 23, 2006	November 10, 2006	Class A, Class B	$	0.10	November 17, 2006
January 22, 2007	February 9, 2007	Class A, Class B	$	0.10	February 16, 2007

          The Company did not declare any cash dividends during the year ended December 31, 2008. The Company has not adopted a policy of regular dividend payments. The payment of dividends in the future is subject to approval by the Board of Directors and will depend upon, among other factors, the Company’s results of operations and financial condition. The Company does not expect to pay dividends to shareholders for the foreseeable future.

Reverse stock split

     On September 26, 2008, the Company effected a one-for-five reverse stock split. As a result of the reverse stock split, each five shares of the Company’s Class A Common Stock outstanding at the time of the reverse stock split automatically converted into one share of Class A Common Stock and each five shares of the Company’s Class B Common Stock outstanding at the time of the reverse stock split automatically converted into one share of Class B Common Stock. As a result, the number of outstanding shares of Class A Common Stock decreased from 95,197,445 to 19,042,149, and the number of outstanding shares of Class B Common Stock decreased from 1,219,031 to 243,807. The number of authorized shares of the Company’s Class A and Class B Common Stock as well as the number of shares of Class A Common Stock available for issuance under the Company’s equity compensation plans and the number of shares of Class A Common Stock underlying stock options and other exercisable or convertible instruments were also ratably decreased in connection with the reverse split. All share and per share data presented in this report for prior periods have been retroactively adjusted to reflect the reverse stock split.

Stock Repurchases

          In November 2008, the Company’s Board of Directors approved a stock repurchase program which authorized Woodbridge to repurchase up to 5 million shares of its Class A Common Stock from time to time on the open market or in private transactions. There can be no assurance that Woodbridge will repurchase all of the shares authorized for repurchase under the program, and the actual number of shares repurchased will depend on a number of factors, including levels of cash generated from operations, cash requirements for acquisitions and investment opportunities, repayment of debt, current stock price, and other factors. The stock repurchase program does not have an expiration date and may be modified or discontinued at any time. In the fourth quarter of 2008, the Company repurchased 2,385,624 shares at a cost of $1.4 million which have been recorded as treasury stock in the Statements of Financial Condition. These treasury stock shares repurchased by the Company were canceled and retired on February 25, 2009 subsequent to December 31, 2008. At December 31, 2008, 2,614,376 shares remained available for repurchase under the stock repurchase program.

Rights Offering

          On August 29, 2007, Woodbridge distributed to each holder of record of its Class A Common Stock and Class B Common Stock as of August 27, 2007 5.0414 subscription rights for each share of such

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stock owned on that date (the “Rights Offering”), Each right entitled the holder to purchase one share of Class A Common Stock at $2.00 per share, and, in the aggregate, the Company issued rights to purchase 100 million shares of Class A Common Stock. The Rights Offering was priced at $2.00 per share, commenced on August 29, 2007 and was completed on October 1, 2007. Woodbridge received $152.8 million of proceeds in connection with the exercise of rights by its shareholders. In connection with the offering, Woodbridge issued an aggregate of 76,424,066 shares (15,284,814 shares after adjusting for the reverse stock split) of Class A Common Stock on October 1, 2007. The stock price on the October 1, 2007 closing date was $2.05 per share. As a result, there is a bonus element adjustment of 1.97% for all shareholders of record on August 29, 2007 and accordingly the number of weighted average shares of Class A Common Stock outstanding for basic and diluted (loss) earnings per share was retroactively increased by 1.97% for all periods presented in these consolidated financial statements.

     6. Stock Based Compensation

          On May 11, 2004, the Company’s shareholders approved the 2003 Levitt Corporation Stock Incentive Plan. In March 2006, subject to shareholder approval, the Board of Directors of the Company approved the amendment and restatement of the Company’s 2003 Stock Incentive Plan to increase the maximum number of shares of the Company’s Class A common stock, $0.01 par value, that may be issued for restricted stock awards and upon the exercise of options under the plan from 1,500,000 to 3,000,000 shares. The Company’s shareholders approved the Amended and Restated 2003 Stock Incentive Plan (“Incentive Plan”) on May 16, 2006. In connection with the reverse stock split, the number of shares of Class A Common Stock available for issuance under the Incentive Plan and the number of shares underlying awards previously granted under the Incentive Plan were each ratably decreased and the exercise prices of stock options previously granted under the Incentive Plan were ratably increased. The share and per share data presented below and elsewhere in this report have been adjusted to reflect the reverse stock split.

          The maximum term of options granted under the Incentive Plan is 10 years. The vesting period for each grant is established by the Compensation Committee of the Board of Directors. The vesting period for employees is generally five years utilizing cliff vesting. All options granted to directors vest immediately. Option awards issued to date become exercisable based solely on fulfilling a service condition. Since the inception of the Incentive Plan there have been no expired stock options.

          In accordance with SFAS No. 123R, the Company estimates the grant-date fair value of its stock options using the Black-Scholes option-pricing model, which takes into account assumptions regarding the dividend yield, the risk-free interest rate, the expected stock-price volatility and the expected term of the stock options. The expected life of stock option awards granted is based upon the “simplified method” for “plain vanilla” options, as defined by SAB No. 110. The fair value of the Company’s stock option awards, which are primarily subject to five year cliff vesting, is expensed over the vesting life of the stock options using the straight-line method.

          The fair value for these options was estimated at the date of the grant using the following assumptions:

	Year ended	Year ended	Year ended
	December 31, 2008	December 31, 2007	December 31, 2006
Expected volatility	65.47%	40.05% – 52.59%	37.37% – 39.80%
Expected dividend yield	0.00%	0.00% – 0.83%	0.39% – 0.61%
Risk-free interest rate	4.16%	4.58% – 5.14%	4.57% – 5.06%
Expected life	5 years	5 – 7.5 years	5 – 7.5 years
Forfeiture rate — executives	5%	5%	5%
Forfeiture rate — non-executives	—	10%	10%

          Expected volatility is based on the historical volatility of the Company’s stock. Due to the short period of time the Company has been publicly traded, the historical volatilities of similar publicly traded entities are reviewed to validate the Company’s expected volatility assumption. The expected dividend

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yield is based on an expected quarterly dividend. Historically, forfeiture rates were estimated based on historical employee turnover rates. In 2007, there were substantial forfeitures as a result of the reductions in force related to the bankruptcy of Levitt and Sons. See (Note 24) for further explanation. As a result, the Company adjusted their stock compensation to reflect actual forfeitures. In accordance with SFAS No. 123R, companies are required to adjust forfeiture estimates for all awards with performance and service conditions through the vesting date so that compensation cost is recognized only for awards that vest. During the year ended December 31, 2008, there were substantial pre-vesting forfeitures as a result of the reductions in force related to the Company’s restructurings and the bankruptcy of Levitt and Sons. In accordance with SFAS No. 123R, pre-vesting forfeitures result in a reversal of compensation cost whereas a post-vesting cancellation would not.

          Non-cash stock compensation expense for the years ended December 31, 2008, 2007 and 2006 related to unvested stock options amounted to $840,000, $1.9 million and $3.1 million, respectively, with an expected or estimated income tax benefit of $548,000, $578,000 and $849,000, respectively. Non-cash stock compensation expense for the years ended December 31, 2008 and December 31, 2007 include $2.1 million and $3.5 million, respectively, of amortization of stock option compensation offset by $1.3 million and $1.6 million, respectively, of a reversal of stock compensation previously expensed related to forfeited options. Additionally, during 2007, the Company recorded $231,000 of tax benefit related to employees exercising stock options to acquire shares of BankAtlantic Bancorp, Inc.’s (“Bancorp”) Class A common stock which was granted to the Company’s employees before the Company was spun off from Bancorp.

          At December 31, 2008, the Company had approximately $2.4 million of unrecognized stock compensation expense related to outstanding stock option awards which is expected to be recognized over a weighted-average period of 2.3 years.

          Stock option activity under the Incentive Plan for the years ended December 31, 2007 and 2008 was as follows:

			Weighted		Weighted Average	Aggregate
			Average		Remaining	Intrinsic
	Number		Exercise		Contractual	Value
	of Options		Price		Term	(thousands)
Options outstanding at December 31, 2006		378,521	$	103.65		$	—
Granted		150,489		45.92			—
Exercised		—		—			—
Forfeited		156,478		88.56			—
Options outstanding at December 31, 2007		372,532	$	86.66	8.00 years		—
Granted		36,398		6.70			—
Exercised		—		—			—
Forfeited		90,459		81.85			—
Options outstanding at December 31, 2008		318,471	$	78.89	7.19 years	$	—
Options exercisable at December 31, 2008		69,822	$	40.20	8.36 years	$	—
Stock options available for equity compensation grants at December 31, 2008		281,529

          A summary of the Company’s non-vested stock option activity for the years ended December 31, 2007 and 2008 was as follows:

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					Weighted
			Weighted		Average
			Average		Remaining	Aggregate
	Number of		Grant Date		Contractual	Intrinsic Value
	Options		Fair Value		Term	(in thousands)
Non-vested at December 31, 2006		358,660	$	103.97		$	—
Grants		150,489		45.92			—
Vested		13,563		45.80			—
Forfeited		156,478		88.56			—
Non-vested at December 31, 2007		339,108		87.64	7.98 years		—
Grants		36,398		6.70			—
Vested		36,398		6.70			—
Forfeited		90,459		81.85			—
Non-vested at December 31, 2008		248,649	$	89.75	6.86 years	$	—

          The following table summarizes information about stock options outstanding as of December 31, 2008:

	Options Outstanding				Options Exercisable
			Remaining
Range of Exercise	Number of		Contractual
Price	Stock Options		Life		Options		Exercise Price
$0.00 – $16.07		36,398		9.46		36,398	$	6.70
$32.13 – $48.20		78,935		8.47		13,563	$	45.80
$64.26 – $80.32		59,206		7.56		—	$	—
$80.33 – $96.39		8,825		7.51		8,825	$	80.45
$96.40 – $112.45		83,711		5.09		9,000	$	100.75
$112.46 – $128.52		150		5.22		—	$	—
$144.59 – $160.65		51,246		6.56		2,036	$	159.75
		318,471		7.19		69,822	$	40.20

          The Company also grants shares of restricted Class A Common Stock, valued based on the market price of such stock on the date of grant. Restricted stock is issued primarily to the Company’s directors and typically vests in equal monthly installments over a one-year period. Compensation expense arising from restricted stock grants is recognized using the straight-line method over the vesting period. Unearned compensation for restricted stock is a component of additional paid-in capital in shareholders’ equity in the consolidated statements of financial condition. During the year ended December 31, 2007, the Company granted 1,529 restricted shares of Class A common stock to non-employee directors under the Incentive Plan, having a market price on the date of grant of $45.80 per share. During the year ended December 31, 2008, the Company granted 31,345 restricted shares of Class A common stock to non-employee directors under the Incentive Plan, having a market price on the date of grant of $6.70 per share. The restricted stock vests monthly over a 12 month period. Non-cash stock compensation expense for the years ended December 31, 2008, 2007 and 2006 related to restricted stock awards amounted to $152,000, $81,000 and $150,000, respectively.

     7. Notes Receivable

          Notes receivable, which is included in other assets, was approximately $4.0 million at each of December 31, 2008 and 2007 and represents purchase money notes due from third parties resulting from various land sales at Core Communities. As of December 31, 2008, there were three notes outstanding with

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a weighted average interest rate of 5.15% and interest is payable quarterly. A balloon principal payment on one note of approximately $3.9 million is due in full in December 2009. The remaining two notes of approximately $63,000 have principal payment terms due at various dates through 2012.

     8. Inventory of Real Estate

          At December 31, 2008 and 2007, inventory of real estate is summarized as follows (in thousands):

	December 31,
	2008		2007
Land and land development costs	$	202,456		196,577
Construction cost		463		1,062
Capitalized interest		37,764		29,012
Other costs		635		639
	$	241,318		227,290

          As of December 31, 2008, inventory of real estate included inventory related to the operations of the Land Division and Carolina Oak.

          As a result of the various impairment analyses conducted throughout 2008, 2007 and 2006, the Company recorded impairment charges of approximately $3.5 million, $226.9 million and $36.8 million, respectively, in cost of sales of real estate in the years ended December 31, 2008, 2007 and 2006. During the fourth quarter of 2008, the Company made the decision to suspend the development activities of Carolina Oak and is re-evaluating its options with respect to this entity due to the continued deterioration of the real estate markets in 2008. As a result, the Company re-evaluated its impairment analyses in accordance with SFAS No. 144 and determined that an impairment charge of $3.5 million was required to write the inventory down to its fair value at December 31, 2008. This impairment charge was recorded in the Other Operations segment. The impairment charges recorded in 2007 and 2006 related to Levitt and Sons’ inventory of real estate and were recorded in the Primary and Tennessee Homebuilding segments. In addition, included in total impairment charges there was approximately $2.4 million in 2008 and $9.3 million in 2007 of impairment charges relating to capitalized interest in the Other Operations segment in connection with Carolina Oak (2008) and the projects that Levitt and Sons ceased developing (2007), respectively.

     9. Property and Equipment

          Property and equipment at December 31, 2008 and 2007 is summarized as follows (in thousands):

		December 31,
	Depreciable Life	2008			2007
Real estate investments	30-39 years	$	97,113			101,185
Water and irrigation facilities	35-50 years		12,346			11,515
Furniture and fixtures and equipment	3-7 years		12,259			12,131
			121,718			124,831
Accumulated depreciation			(12,241	)		(6,588	)
Property and equipment, net		$	109,477			118,243

          Depreciation expense for the years ended December 31, 2008, 2007 and 2006 was $5.7 million, $3.1 million and $2.6 million, respectively, and is included in selling, general and administrative expenses in the accompanying consolidated statements of operations.

          The Company received proceeds from the sale of property and equipment for the years ended December 31, 2008 and 2006 of approximately $5.6 million and $1.9 million, respectively. As a result of these sales, the Company realized a gain on sale of property and equipment for the years ended December 31, 2008 and 2006 of approximately $2.5 million and $1.9 million, respectively. Sales of property and equipment for the year ended December 31, 2007 were not material.

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          In 2007, the Company performed a review of its fixed assets and determined that certain leasehold improvements were no longer appropriately valued as we vacated the leased space associated with those improvements. Therefore, the leasehold improvements in the amount of $564,000 related to this vacated space were written off in the year ended December 31, 2007.

     10. Investments

Bluegreen Corporation

     At December 31, 2008, the Company owned approximately 9.5 million shares of common stock of Bluegreen, representing approximately 31% of Bluegreen’s outstanding common stock. The Company accounts for its investment in Bluegreen under the equity method of accounting. The cost of the Bluegreen investment is adjusted to recognize the Company’s interest in Bluegreen’s earnings or losses. The difference between a) the Company’s ownership percentage in Bluegreen multiplied by its earnings and b) the amount of the Company’s equity in earnings of Bluegreen as reflected in the Company’s financial statements relates to the amortization or accretion of purchase accounting adjustments made at the time of the acquisition of Bluegreen’s common stock, to adjustments made to the Company’s investment balance related to equity transactions recorded by Bluegreen that effect the Company’s ownership and to the cumulative adjustment discussed below.

     Effective January 1, 2006, Bluegreen adopted SOP 04-02. This Statement amends FAS No. 67 to state that the guidance for (a) incidental operations and (b) costs incurred to sell real estate projects does not apply to real estate time-sharing transactions. The accounting for those operations and costs is subject to the guidance in SOP 04-02. Bluegreen’s adoption of SOP 04-02 resulted in a one-time, non-cash, cumulative effect of change in accounting principle charge of $4.5 million to Bluegreen for the year ended December 31, 2006, and accordingly reduced the earnings in Bluegreen recorded by the Company by approximately $1.4 million for the same period.

     During 2008, the Company began evaluating its investment in Bluegreen for other-than-temporary impairment in accordance with FSP FAS 115-1/FAS 124-1, APB No. 18 and SAB No. 59 as the fair value of the Bluegreen stock had fallen below the carrying value of the Company’s investment in Bluegreen of approximately $12 per share. The Company analyzed various quantitative and qualitative factors including the Company’s intent and ability to hold the investment, the severity and duration of the impairment and the prospects for the improvement of fair value. On July 21, 2008, Bluegreen’s Board of Directors entered into a non-binding letter of intent for the sale of Bluegreen’s outstanding common stock for $15 per share to a third party, with a due diligence and exclusivity period through September 15, 2008. This due diligence and exclusivity period was subsequently extended through November 15, 2008. In October 2008, Bluegreen disclosed that the third party buyer had been unable to obtain the financing necessary to execute a sale transaction, therefore, no assurances could be provided that a sale would be completed. As of December 31, 2008, the exclusivity period had expired and Bluegreen was not able to consummate a sale.

     At September 30, 2008, the Company’s investment in Bluegreen was $119.4 million compared to the $65.8 million trading value (calculated based upon the $6.91 closing price of Bluegreen’s common stock on the New York Stock Exchange on September 30, 2008). The Company determined that its investment in Bluegreen was other-than-temporarily impaired due to the severity of the decline in the fair value of the investment, the probability that a sale could not be executed by Bluegreen, and due to the deterioration of the debt and equity markets in the third quarter of 2008. Therefore, the Company recorded an impairment charge of $53.6 million, adjusting the carrying value of its investment in Bluegreen to $65.8 million at September 30, 2008. Additionally, after further evaluation of the Company’s investment in Bluegreen as of December 31, 2008, based on, among other things, the continued decline of Bluegreen’s common stock price and the continued deterioration of the equity markets, the Company determined that an additional impairment of the investment in Bluegreen was appropriate. Accordingly, the Company recorded a $40.8 million impairment charge (calculated based upon the $3.13 closing price of Bluegreen’s common stock on the New York Stock Exchange on December 31, 2008) and adjusted the carrying value of its investment in Bluegreen to $29.8 million. On March 13, 2009, the closing price of Bluegreen’s common stock was $1.12 per share.

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     As a result of the impairment charges taken, a basis difference was created between the Company’s investment in Bluegreen and the underlying assets and liabilities carried on the books of Bluegreen. Therefore, earnings from Bluegreen will be adjusted each period to reflect the amortization of this basis difference. As such, the Company established an allocation methodology by which the Company allocated the impairment loss to the relative fair value of Bluegreen’s underlying assets based upon the position that the impairment loss was a reflection of the perceived value of these underlying assets. The appropriate amortization will be calculated based on the useful lives of the underlying assets and other relevant data associated with each asset category. As such, amortization of $9.2 million was recorded into the Company’s pro rata share of Bluegreen’s net loss for the period ended December 31, 2008.

          The following table shows the reconciliation of the Company’s pro rata share of Bluegreen’s net loss to the Company’s total earnings from Bluegreen recorded in the Consolidated Statements of Operations (in thousands):

	December 31,
	2008
Prorata share of Bluegreen’s net loss	$	(154	)
Amortization of basis difference		9,150
Total earnings from Bluegreen Corporation	$	8,996

          The following table shows the reconciliation of the Company’s prorata share of its net investment in Bluegreen and its investment in Bluegreen after impairment charges (in thousands):

	December 31,
	2008
Prorata share of investment in Bluegreen Corporation	$	115,065
Amortization of basis difference		9,150
Less: Impairment of investment in Bluegreen Corporation		(94,426	)
Investment in Bluegreen Corporation	$	29,789

          Bluegreen’s condensed consolidated financial statements are presented below (in thousands):

Condensed Consolidated Balance Sheet
(In thousands)

	December 31,
	2008		2007
Total assets	$	1,193,507		1,039,578
Total liabilities		781,522		632,047
Minority interest		29,518		22,423
Total shareholders’ equity		382,467		385,108
Total liabilities and shareholders’ equity	$	1,193,507		1,039,578

Condensed Consolidated Statements of Income
(In thousands)

	Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,
	2008			2007			2006
Revenues and other income	$	602,043			691,494			671,509
Cost and other expenses		594,698			632,280			609,018
Income before minority interest and provision for income taxes		7,345			59,214			62,491
Minority interest		7,095			7,721			7,319
Income before provision for income taxes		250			51,493			55,172
Provision for income taxes		(766	)		(19,567	)		(20,861	)
(Loss) income before cumulative effect of change in accounting principle		(516	)		31,926			34,311
Cumulative effect of change in accounting principle, net of tax		—			—			(5,678	)
Minority interest in cumulative effect of change in accounting principle		—			—			1,184
Net (loss) income	$	(516	)		31,926			29,817

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          During the fourth quarter of 2008, Bluegreen recorded $15.6 million in restructuring charges as part of its strategic initiative to conserve cash by reducing overhead and capital spending, among other things. In addition, Bluegreen recorded an $8.5 million impairment charge related to its goodwill.

Office Depot Investment

          During March 2008, the Company purchased 3,000,200 shares of Office Depot common stock, which represented approximately one percent of Office Depot’s outstanding common stock, at an average price of $11.33 per share for an aggregate purchase price of approximately $34.0 million.

          During June 2008, the Company sold 1,565,200 shares of Office Depot common stock at an average price of $12.08 per share for an aggregate sales price of approximately $18.9 million. The Company realized a gain of approximately $1.2 million as a result of the sale.

          During December 2008, the Company performed an impairment analysis of its investment in Office Depot common stock. The Company concluded that there was an other-than-temporary impairment associated with its investment in Office Depot based on the severity of the decline of the fair value of its investment, the length of time the stock price had been below the carrying value of the Company’s investment, the continued decline in the overall economy and credit markets, and the unpredictability of the recovery of the Office Depot stock price. Accordingly, the Company recorded an other-than-temporary impairment charge of approximately $12.0 million representing the difference of the average cost of $11.33 per share and the fair value of $2.98 per share as of December 31, 2008 multiplied by the number of shares of Office Depot common stock owned by the Company at that date. As a result of the impairment charge, the Company’s investment in Office Depot was $4.3 million at December 31, 2008. On March 13, 2009, the closing price of Office Depot’s common stock on the New York Stock Exchange was 1.10 per share.

          Data with respect to this investment is shown in the table below (in thousands):

	December 31,
	2008
Total cost	$	33,978
Sale of portion of Office Depot common stock		(17,726	)
Other-than-temporary impairment		(11,974	)
Total fair value	$	4,278

          The table below shows the amount of gains and other-than-temporary loss reclassified out of other comprehensive loss into net loss for the period (in thousands):

	December 31,
	2008
Unrealized holding loss arising during the period	$	(10,796	)
Less: Reclassification adjustment for gains included in net loss		(1,178	)
Less: Reclassification adjustment for other-than-temporary loss		11,974
Net unrealized holding gain (loss)	$	—

          The Company valued Office Depot’s common stock using a market approach valuation technique and Level 1 valuation inputs under SFAS No. 157. The Company uses quoted market prices to value equity securities. The fair value of the Office Depot common stock in the Company’s consolidated statements of financial condition at December 31, 2008 was calculated based upon the $2.98 closing price of Office Depot’s common stock on the New York Stock Exchange on December 31, 2008. On March 13, 2009, the closing price of Office Depot common stock was $1.10 per share. The Company will continue to monitor this investment to determine whether any further other-than-temporary impairment associated with this investment may be required in future periods.

Unconsolidated Trusts

     During the fourth quarter of 2008, the Company determined that the fair value of its investment in unconsolidated trusts, which consists of its common interests in subordinated trust debt securities of approximately $406,000, was less than the carrying value of this investment of $2.6 million primarily due to the deterioration of the market for these instruments and overall economic conditions. The fair value was assessed using Level 3 inputs as defined by FAS 157, whereby the Company’s valuation technique was to measure the fair value based upon the current rates and spreads that were used to value the underlying subordinated trust debt securities which is primarily based upon similarly rated corporate bonds. The Company evaluated its investment for other-than-temporary impairment due to the significance of the carrying value in excess of fair value, and the lack of evidence to support the recoverability of the carrying value in the near future. Therefore, based upon the criteria for other-than-temporary impairment as defined in FSP FAS 115-1/FAS 124-1, the Company determined that an impairment charge of approximately $2.1 million was required at December 31, 2008.

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     11. Notes and Mortgage Notes Payable and Junior Subordinated Debentures

          Notes and mortgages payable at December 31, 2008 and 2007 are summarized as follows (in thousands):

	December 31,
	2008		2007		Interest Rate	Maturity Date
Land acquisition and development mortgage notes payable (a)(f)	$	140,034		136,266	From LIBOR + 2.50% to Fixed 6.88%	Range from June 2011 to October 2019
Commercial development mortgage notes payable (b)(f)		71,905		76,278	From LIBOR + 1.70% to Prime	Range from June 2009 to July 2010
Borrowing base facility (c)		37,458		39,674	Prime	March 2011
Other mortgage notes payable (d)		11,831		12,027	Fixed 5.47%	April 2015
Development bonds		3,291		3,350	Fixed from 6.00% to	2035
					6.13%
Other borrowings		381		1,143	Fixed from 2.44% to	Range from July
					9.15%	2009 to June 2013
Total Notes and Mortgage Notes Payable (e)	$	264,900		268,738

(a)	Core Communities’ land acquisition and development mortgage notes payable are collateralized by inventory of real estate with approximate net carrying values aggregating $174.5 million and $159.2 million as of December 31, 2008 and 2007, respectively. Core has a credit agreement with a financial institution which provides for borrowing of up to $88.9 million. This facility matures in June 2011 and has a Loan to Value limitation of 55%. As of December 31, 2008, $86.9 million was outstanding, with no current availability for borrowing based on available collateral. Core has a credit agreement with a financial institution which provides for borrowings of up to $33.0 million. This facility matures in October 2019. As of December 31, 2008, $23.2 million is outstanding with no current availability for borrowing based on available collateral. Core has a credit agreement with a financial institution which provides for borrowing of up to $5.0 million. This facility matures in October 2019. As of December 31, 2008, $4.9 million was outstanding, with no current availability for borrowing based on available collateral. These notes accrue interest, payable monthly, at fixed and varying rates and are tied to various indices as noted above. For certain notes, principal payments are required monthly or quarterly as the note dictates. Core had a $50.0 million revolving credit facility with a Loan to Value limitation of 75% for construction financing for the development of the Tradition Hilton Head master-planned community which was subsequently modified in 2008 to $25.0 million. This agreement had a provision that required additional principal payments, known as curtailment payments, in the event that actual sales were below the contractual requirements. A curtailment payment of $14.9 million was paid in January 2008. On June 27, 2008, Core modified this loan agreement, terminating the revolving feature of the loan and reducing an approximately $19 million curtailment payment due in June 2008 to $17.0 million, $5.0 million of which was paid in June 2008. The loan was further modified in December 2008, reducing the loan to $25 million, eliminating the curtailment requirements, extending the loan to February 2012 and increasing the rate to Prime Rate plus 1%, with a floor of 5.00%, and the establishment of an interest reserve classified as restricted cash. As of December 31, 2008, $25.0 million was outstanding, with no current availability for borrowing based on available collateral. The loan accrues interest at the bank’s Prime Rate plus 1.0% (subject to a floor of 5%) and interest is payable monthly. The facility is due and payable on February 28, 2012.
(b)	Core Communities has three credit agreements with a financial institution which provides for borrowing of up to $80.3 million. As of December 31, 2008, $71.9 million was outstanding, with no current availability for borrowing based on available collateral. These credit agreements had debt service coverage ratios of up to 1.15. Core has a credit agreement with a financial institution which provides for borrowing of up to $64.3 million. This facility matures in June 2009, has two one-year extension options at the Company’s sole discretion and, as of December 31, 2008, $58.3 million was outstanding, with no current availability for borrowing based on available collateral. In July 2008, one of these credit agreements was refinanced by $9.1 million of construction loans. The new loan has an interest rate of 30-day LIBOR plus 210 basis points or Prime Rate, a maturity date of July 2010 with a one year extension subject to certain conditions, and has an outstanding balance of $8.9 million at December 31, 2008. In 2008, Core extended the maturity of another $6.9 million credit agreement from June 2008 to June 2010, which had an outstanding balance of $4.7 million at December 31, 2008. These notes accrue interest at varying rates tied to various indices as noted above and interest is payable monthly. For certain notes, principal payments are required monthly as the note dictates. Core Communities’ commercial development mortgage notes payable are collateralized by commercial property with approximate net carrying values aggregating $96.1 million and $103.2 million as of December 31, 2008 and 2007, respectively.
(c)	Levitt and Sons had entered into a $100.0 million revolving working capital, land acquisition, development and residential construction borrowing base facility agreement with a 75% Loan to Value limitation and borrowed $30.2 million under the facility

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	(the “Carolina Oak Loan”). The proceeds were used to finance the inter-company purchase of a 150 acre parcel in Tradition Hilton Head from Core Communities and to refinance a $15.0 million line of credit. In October 2007, in connection with Woodbridge’s acquisition from Levitt and Sons of the membership interests in Carolina Oak, Woodbridge became the obligor for the entire Carolina Oak Loan outstanding balance at the time of acquisition of $34.1 million. The Carolina Oak Loan was modified in connection with the acquisition and had an outstanding balance of $37.5 million at December 31, 2008. The Carolina Oak Loan is collateralized by a first mortgage on the 150 acre parcel in Tradition, Hilton Head with approximate net carrying values aggregating $27.6 million and $38.5 million as of December 31, 2008 and 2007, respectively. The Carolina Oak Loan is due and payable on March 21, 2011 and may be extended at the lender’s sole discretion on the anniversary date of the facility. Interest accrues at the Prime Rate and is payable monthly. At December 31, 2008, there was no immediate availability to draw on this facility based on available collateral.
(d)	Woodbridge entered into a mortgage note payable agreement with a financial institution in March 2005 to repay the bridge loan used to temporarily fund the Company’s purchase of an office building in Fort Lauderdale. This note payable is collateralized by the office building with approximate net carrying values aggregating $13.7 million and $14.2 million as of December 31, 2008 and 2007, respectively. The note payable contains a balloon payment provision of approximately $10.4 million at the maturity date in April 2015. Principal and interest are payable monthly.
(e)	At December 31, 2008, 2007 and 2006, the Prime Rate as reported by the Wall Street Journal was 3.25%, 7.25% and 8.25%, respectively, and the three-month LIBOR Rate was 1.83%, 4.98% and 5.36%, respectively.
(f)	Core Communities credit facilities generally require it to maintain a minimum net worth and minimum working capital levels, the most restrictive of which is a minimum net worth of $75 million and minimum liquidity of $7.5 million.

          The Company’s unsecured junior subordinated debentures at December 31, 2008 and 2007 are described in the following table (in thousands):

								Beginning
								Optional
	Issue	As of December 31,				Interest	Maturity	Redemption
	Date	2008		2007		Rate	Date	Date
Levitt Capital Trust I	March 2005	$	23,196		23,196	From fixed 8.11% to	March 2035	March 2010
						LIBOR + 3.85%
Levitt Capital Trust II	May 2005		30,928		30,928	From fixed 8.09% to	June 2035	June 2010
						LIBOR + 3.80%
Levitt Capital Trust III	June 2006		15,464		15,464	From fixed 9.25% to	June 2036	June 2011
						LIBOR + 3.80%
Levitt Capital Trust IV	July 2006		15,464		15,464	From fixed 9.35% to	September 2036	September 2011
						LIBOR + 3.80%
Total		$	85,052		85,052

          The Company formed four statutory business trusts which issued trust preferred securities to third parties and trust common securities to the Company and used the proceeds to purchase an identical amount of junior subordinated debentures from the Company. Interest on the junior subordinated debentures and distributions on these trust preferred securities are payable quarterly in arrears at the fixed rate as described in the above table until the optional redemption date and thereafter at the floating rate as specified in the above table until the corresponding scheduled maturity date. The trust preferred securities are subject to mandatory redemption, in whole or in part, upon repayment of the junior subordinated debentures at maturity or their earlier redemption. The junior subordinated debentures are redeemable in whole or in part at our option at any time after five years from the issue date or sooner following certain specified events.

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          Some of the Company’s subsidiaries have borrowings which contain covenants that, among other things, require the subsidiary to maintain financial ratios and a minimum net worth. These requirements may limit the amount of debt that the subsidiaries can incur in the future and restrict the payment of dividends from subsidiaries to the Parent Company. The loan agreements generally require repayment of specified amounts upon a sale of a portion of the property collateralizing the debt. The land acquisition and development mortgage notes payable, commercial development mortgage notes payable and the borrowing base facility all have loan to value limitations. The commercial development mortgage notes payable also have debt service coverage ratio limitations. At December 31, 2008, the Company was in compliance with all loan agreement financial requirements and covenants. See Note 15 for further discussion of Core’s debt covenants.

          At December 31, 2008, the aggregate required scheduled principal payment of indebtedness in each of the next five years is approximately as follows (in thousands):

Year ended December 31,
2009	$	3,567
2010		8,713
2011		188,520
2012		26,309
2013		1,265
Thereafter		121,578
	$	349,952

          The timing of contractual payments for debt obligations assumes the exercise of all loan extensions available at the Company’s sole discretion.

     12. Development Bonds Payable

          In connection with the development of certain of Core’s projects, community development, special assessment or improvement districts have been established and may utilize tax-exempt bond financing to fund construction or acquisition of certain on-site and off-site infrastructure improvements near or at these communities. The obligation to pay principal and interest on the bonds issued by the districts is assigned to each parcel within the district, and a priority assessment lien may be placed on benefited parcels to provide security for the debt service. The bonds, including interest and redemption premiums, if any, and the associated priority lien on the property are typically payable, secured and satisfied by revenues, fees, or assessments levied on the property benefited. Core is required to pay the revenues, fees, and assessments levied by the districts on the properties it still owns that are benefited by the improvements. Core may also be required to pay down a specified portion of the bonds at the time each unit or parcel is sold. The costs of these obligations are capitalized to inventory during the development period and recognized as cost of sales when the properties are sold.

          Core’s bond financing at December 31, 2008 and 2007 consisted of district bonds totaling $218.7 million with outstanding amounts of approximately $130.5 million and $82.9 million, respectively. Further, at December 31, 2008 and 2007, there was approximately $82.4 million and $129.5 million, respectively, available under these bonds to fund future development expenditures. Bond obligations at December 31, 2008 mature in 2035 and 2040. As of December 31, 2008, Core owned approximately 16% of the property subject to assessments within the community development district and approximately 91% of the property subject to assessments within the special assessment district. During the years ended December 31, 2008, 2007 and 2006, Core recorded approximately $584,000, $1.3 million and $1.7 million, respectively, in assessments on property owned by it in the districts. Core is responsible for any assessed amounts until the underlying property is sold and will continue to be responsible for the annual assessments if the property is never sold. In addition, Core has guaranteed payments for assessments under the district bonds in Tradition, Florida which would require funding if future assessments to be allocated to property owners are insufficient to repay the bonds. Management has evaluated this exposure based upon the criteria in SFAS No. 5, “Accounting for Contingencies”, and has determined that there have been no substantive changes to the projected density or land use in the development subject to the bond which would make it probable that Core would have to fund future shortfalls in assessments.

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          In accordance with Emerging Issues Task Force Issue No. 91-10, “Accounting for Special Assessments and Tax Increment Financing”, the Company records a liability for the estimated developer obligations that are fixed and determinable and user fees that are required to be paid or transferred at the time the parcel or unit is sold to an end user. At December 31, 2008 and 2007, the liability related to developer obligations was $3.3 million associated with Core’s ownership of the property and is recorded in the consolidated statements of financial condition (note 11).

     13. Employee Benefit Plan

          The Company has a defined contribution plan established pursuant to Section 401(k) of the Internal Revenue Code. Employees who have completed three months of service and have reached the age of 18 are eligible to participate. During the years ended December 31, 2008, 2007, and 2006, the Company’s contributions to the plan amounted to $302,000, $1.1 million, and $1.3 million, respectively. These amounts are included in selling, general and administrative expenses in the accompanying consolidated statements of operations.

     14. Certain Relationships and Related Party Transactions

          The Company and BankAtlantic Bancorp, Inc. (“Bancorp”) are under common control. The controlling shareholder of the Company and Bancorp is BFC Financial Corporation (“BFC”). Bancorp is the parent company of BankAtlantic. The Company’s Chairman and Chief Executive Officer, Alan B. Levan, and the Company’s Vice Chairman, John E. Abdo, collectively own or control shares of BFC’s common stock representing a majority of BFC’s total voting power. Mr. Levan and Mr. Abdo are also directors of the Company, and executive officers and directors of BFC, Bancorp and BankAtlantic, and Mr. Levan and Mr. Abdo are the Chairman and Vice Chairman, respectively, of Bluegreen.

          The Company occupied office space at BankAtlantic’s corporate headquarters through November 2006. BFC provided this office space on a month-to-month basis and received reimbursements for overhead based on market rates. Pursuant to the terms of a shared services agreement between the Company and BFC Shared Services Corporation, certain administrative services, including human resources, risk management, and investor and public relations, are provided to the Company by BFC Shared Services Corporation on a percentage of cost basis. The total amounts paid for these services in 2008, 2007 and 2006 were $1.1 million, $1.1 million, and $912,000, respectively, and may not be representative of the amounts that would be paid in an arms-length transaction. The Company entered into a sublease agreement with BFC, effective May 2008, to lease space located at the BankAtlantic corporate office for the Company’s corporate staff at an annual rate of approximately $152,000. During the year ended December 31, 2008, the Company paid BFC approximately $101,000 under this sublease agreement.

          The Company entered into an agreement with BankAtlantic, effective March 2008, pursuant to which BankAtlantic agreed to house the Company’s information technology servers and provide hosting, security and managed services to the Company relating to its information technology operations. Pursuant to the agreement, the Company paid BankAtlantic a one-time set-up charge of approximately $17,000 and agreed to pay BankAtlantic monthly hosting fees of $10,000 for these services. During the year ended December 31, 2008, the Company paid monthly hosting fees to BankAtlantic of approximately $73,000.

          The following table sets forth fees paid to the indicated related parties (in thousands)

	Year Ended December 31,
	2008		2007		2006
BFC	$	1,180		1,057		912
Bancorp		151		101		185
Total fees	$	1,331		1,158		1,097

          The payments represent rent, services performed or expense reimbursements.

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          Levitt and Sons utilized the services of Conrad & Scherer, P.A., a law firm in which William R. Scherer, a member of the Company’s Board of Directors, is a member. Levitt and Sons related party information for the year ended December 31, 2008 was not included in the Company’s consolidated statements of operations due to the deconsolidation of Levitt and Sons as of November 9, 2007. Levitt and Sons paid fees aggregating $22,000 and $470,000 to this firm during the years ended December 31, 2007 and 2006, respectively. No fees were paid to this firm in 2008.

          Certain of the Company’s executive officers separately receive compensation from affiliates of the Company for services rendered to those affiliates. Members of the Company’s Board of Directors and executive officers also have banking relationships with BankAtlantic in the ordinary course of BankAtlantic’s business.

          At December 31, 2008 and 2007, $4.4 million and $6.1 million, respectively, of cash and cash equivalents were held on deposit by BankAtlantic. Interest on deposits held at BankAtlantic for the years ended December 31, 2008, 2007 and 2006 was approximately $72,000, $147,000 and $436,000, respectively. Additionally, at December 31, 2008, BankAtlantic facilitated the placement of $49.9 million of FDIC insured certificates of deposits with other insured depository institutions on our behalf through the Certificate of Deposit Account Registry Service (“CDARS”) program. The CDARS program facilitates the placement of funds into certificates of deposits issued by other financial institutions in increments of less than the standard FDIC insurance maximum to insure that both principal and interest are eligible for full FDIC insurance coverage.

          During 2006, BankAtlantic reimbursed the Company $438,000 for the out-of-pocket costs incurred by it in connection with the Company’s efforts to develop certain property owned by Bank Atlantic, including rezoning of property and obtaining permits necessary to develop the property for residential and commercial use.

     15. Commitments and Contingencies

          The Company’s rent expense for premises and equipment for the years ended December 31, 2008, 2007 and 2006 was $520,000, $2.6 million and $2.7 million, respectively. Approximate minimum future rentals due under non-cancelable leases with a term remaining of at least one year are as follows (in thousands):

Year ended December 31,
2009	$	1,279
2010		700
2011		362
2012		190
2013		196
Thereafter		1,070
	$	3,797

          Of the above lease payments, $604,000 was accrued at December 31, 2008 related to leased furniture and fixtures located at vacated lease space.

          Tradition Development Company, LLC, a wholly-owned subsidiary of Core Communities (“TDC”), has an existing advertising agreement with the operator of a Major League Baseball team pursuant to which, among other advertising rights, TDC obtained a royalty-free license to use, among others, the trademark “Tradition Field” at the sports complex located in Port St. Lucie and the naming rights to that complex. The initial term of the agreement terminates on December 31, 2013; provided, however, upon payment of a specified buy-out fee and compliance with other contractual procedures, TDC has the right to terminate the agreement at any time. Required cumulative payments under the agreement through December 31, 2013 are approximately $923,000.

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          At December 31, 2008 and 2007, the Company had outstanding surety bonds and letters of credit of approximately $8.2 million and $7.1 million, respectively, related primarily to its obligations to various governmental entities to construct improvements in its various communities. The Company estimates that approximately $5.0 million of work remains to complete these improvements and does not believe that any outstanding bonds or letters of credit will likely be drawn upon.

          In January of 2009, Core was advised by one of its lenders that they had received an external appraisal on the land that serves as collateral for a development mortgage note payable with an outstanding balance of $86.9 million at December 31, 2008. The appraised value would suggest the potential for a remargining payment to bring the note payable back in line with the minimum loan-to-value requirement. The lender is conducting their internal review procedures of the appraisal, including the determination of the appraised value. As of the date of this filing, the lender’s evaluation is continuing and until such time as there is final conclusion on the part of the lender, the amount of a possible re-margin, if any, is not determinable.

          Levitt and Sons had $33.3 million in surety bonds related to its ongoing projects at the time of the filing of the Chapter 11 Cases. In the event that these obligations are drawn and paid by the surety, Woodbridge could be responsible for up to $11.7 million plus costs and expenses in accordance with the surety indemnity agreements. As of December 31, 2008 and 2007, the Company had $1.1 million and $1.8 million, respectively, in surety bonds accrual at Woodbridge related to certain bonds which management considers it to be probable that the Company will be required to reimburse the surety under applicable indemnity agreements. During the year ended December 31, 2008, the Company reimbursed the surety $532,000 in accordance with the indemnity agreement for bond claims paid during the period while no reimbursements were made in 2007. It is unclear given the uncertainty involved in the Chapter 11 Cases whether and to what extent the remaining outstanding surety bonds of Levitt and Sons will be drawn and the extent to which Woodbridge may be responsible for additional amounts beyond this accrual. It is unlikely that Woodbridge would have the ability to receive any repayment, assets or other consideration as recovery of any amounts it is required to pay. The expense associated with this accrual is included in other expense in the Other Operations segment for the year ended December 31, 2007, due to its non-recurring and unusual nature. In September 2008, a surety filed a lawsuit to require Woodbridge to post $5.4 million of collateral against a portion of the $11.7 million surety bonds exposure in connection with two bonds totaling $5.4 million with respect to which a municipality made claims against the surety. The Company believes that the municipality does not have the right to demand payment under the bonds and initiated a lawsuit against the municipality and does not believe that a loss is probable. Accordingly, the Company did not accrue any amount in connection with this claim as of December 31, 2008. As claims were made on the bonds, the surety requested the Company post a $4.0 million letter of credit as security while the matter is litigated with the municipality and the Company has complied with that request.

          In the third and fourth quarters of 2007, substantially all of Levitt and Sons’ employees were terminated and 22 employees were terminated at Woodbridge primarily as a result of the Chapter 11 Cases. On November 9, 2007, Woodbridge implemented an employee fund and indicated that it would pay up to $5 million of severance benefits to terminated Levitt and Sons employees to supplement the limited termination benefits which Levitt and Sons was permitted to pay to those employees. Levitt and Sons is restricted in the amount of termination benefits it can pay to its former employees by virtue of the Chapter 11 Cases.

          The following table summarizes the restructuring related accruals activity recorded for the years ended December 31, 2008 and 2007 (in thousands):

	Severance						Independent			Surety
	Related						Contractor			Bond
	and Benefits			Facilities			Agreements			Accrual			Total
Balance at December 31, 2006	$	—			—			—			—			—
Restructuring charges		4,864			1,010			1,497			1,826			9,197
Cash payments		(2,910	)		—			(76	)		—			(2,986	)
Balance at December 31, 2007	$	1,954			1,010			1,421			1,826			6,211
Restructuring charges		2,238			140			—			(150	)		2,228
Cash payments		(4,063	)		(446	)		(824	)		(532	)		(5,865	)
Balance at December 31, 2008	$	129			704			597			1,144			2,574

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          The severance related and benefits accrual includes severance, severance related payments made to Levitt and Sons employees, payroll taxes and other benefits related to the terminations that occurred in 2007 as part of the Chapter 11 Cases. For the years ended December 31, 2008 and 2007, the Company paid approximately $4.1 million and $600,000, respectively, in severance and termination charges related to the employee fund as well as severance for employees other than Levitt and Sons employees which is reflected in the Other Operations segment and paid $2.3 million in severance to the employees of the Homebuilding Division prior to deconsolidation in 2007. Employees entitled to participate in the fund either received a payment stream, which in certain cases extended over two years, or a lump sum payment, dependent on a variety of factors. For any amounts paid related to the fund from the Other Operations segment, these payments were in exchange for an assignment to the Company by those employees of their unsecured claims against Levitt and Sons. At December 31, 2008 and 2007, there was $129,000 and $2.0 million, respectively, accrued to be paid related to this fund as well as severance for employees other than Levitt and Sons employees. As of December 31, 2008, the Company does not expect to incur additional severance related expenses with respect to the Levitt and Sons employees.

          The facilities accrual represents expense associated with property and equipment leases that the Company had entered into that are no longer providing a benefit to the Company, as well as termination fees related to contractual obligations the Company cancelled. Included in this amount are future minimum lease payments, fees and expenses, net of estimated sublease income for which the provisions of SFAS No. 146 “Accounting for Costs Associated with Exit or Disposal Activities”, as applicable, were satisfied. This restructuring expense is included in selling, general and administrative expenses for the Other Operations segment for the year ended December 31, 2007.

          The independent contractor related expense relates to two contractor agreements entered into with former Levitt and Sons employees. The agreements are for past and future consulting services. The total commitment related to these agreements is $681,000 as of December 31, 2008 and will be paid monthly through 2009. The expense associated with these arrangements is included in selling, general and administrative expenses for the Other Operations segment for the years ended December 31, 2008 and 2007.

          The Company entered into an indemnity agreement in April 2004 with a joint venture partner at Altman Longleaf relating to, among other obligations, that partner’s guarantee of the joint venture’s indebtedness. The liability under the indemnity agreement was limited to the amount of any distributions from the joint venture which exceeded the Company’s original capital and other contributions. Original capital contributions were approximately $585,000 and the Company has received approximately $1.2 million in distributions since 2004. In December 2008, the Company’s interest in the joint venture was sold and it received approximately $182,000 as a result of the sale and the Company was released from any potential obligation of indemnity which may have arisen in connection with the joint venture.

     16. Income Taxes

               The benefit for income tax expense consists of the following (in thousands):

	Year Ended December 31,
	2008		2007		2006
Current tax benefit (provision):
Federal	$	—		29,690		(7,350	)
State		—		18		(1,143	)
		—		29,708		(8,493	)

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	Year Ended December 31,
	2008		2007			2006
Deferred income tax (provision) benefit:
Federal		—		(6,421	)		13,060
State		—		(1,118	)		1,203
		—		(7,539	)		14,263
Total income tax benefit	$	—		22,169			5,770

          The Company’s benefit for income taxes differs from the federal statutory tax rate of 35% due to the following (in thousands):

	Year Ended December 31,
	2008			2007			2006
Income tax benefit at expected federal income tax rate of 35%	$	49,116			89,876			5,227
Benefit for state taxes, net of federal benefit		5,005			9,381			936
Tax-exempt income		140			425			489
Goodwill impairment adjustment		—			—			(458	)
Share-based compensation		21			(134	)		(317	)
Loss from Levitt and Sons		20,981			—			—
Increase in valuation allowance		(75,269	)		(76,730	)		(425	)
Other, net		6			(649	)		318
Benefit for income taxes	$	—			22,169			5,770

     The tax effects of temporary differences that give rise to significant portions of the deferred tax assets consist of the following (in thousands):

	As of December 31,
	2008			2007
Deferred tax assets:
Real estate held for sale capitalized for tax purposes in excess of amounts capitalized for financial statement purposes	$	926			2,016
Real estate valuation adjustments		1,295			—
Investment in Levitt and Sons		46,393			68,339
Share based compensation		1,773			1,427
Accrued and other non-deductible expenses		904			2,237
Investment in Bluegreen		10,307			—
Investment in Office Depot		4,620			—
Investment in unconsolidated trusts		828			—
Federal net operating loss carryforward		67,050			14,191
State net operating loss carryforward		10,723			5,122
Income recognized for tax purposes and deferred for financial statement purposes		7,510			7,228
Other		4,095			2,049
Gross deferred tax assets		156,424			102,609
Valuation allowance		(154,138	)		(78,562	)
Total deferred tax assets		2,286			24,047
Deferred tax liabilities:
Investment in Bluegreen		—			21,768
Property and equipment		423			496
Other		1,863			1,783

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	As of December 31,
	2008		2007
Total deferred tax liabilities		2,286		24,047
Net deferred tax asset				—
Less the deferred income tax (assets) liabilities at beginning of period		—		(6,635	)
Implementation of FIN 48		—		(1,798	)
Deferred income taxes on Bluegreen’s unrealized gains, losses and issuance of common stock		—		894
(Provision) benefit for deferred income taxes	$	—		(7,539	)

          Activity in the deferred tax valuation allowance (in thousands):

	As of December 31,
	2008		2007
Balance, beginning of period	$	78,562		425
Increase in deferred tax valuation allowance		75,269		76,730
Increase in deferred tax valuation allowance — paid in capital		307		1,407
Balance, end of period	$	154,138		78,562

          SFAS No. 109, “Accounting for Income Taxes”, requires that all available evidence, both positive and negative, be considered to determine whether, based on the weight of that evidence, a valuation allowance is needed. Future realization of the tax benefits of an existing deductible temporary difference or carryforward ultimately depends on the existence of sufficient taxable income of the appropriate character. Possible sources of taxable income that can be considered include: (i) future reversals of existing taxable temporary differences; (ii) future taxable income exclusive of reversing temporary differences and carryforwards; (iii) taxable income in prior carryback years; and (iv) tax planning strategies.

          The Company has performed such an analysis, and a valuation allowance has been provided against deferred tax assets to the extent they cannot be used to offset future income arising from the expected reversal of taxable differences. The Company has therefore established a valuation allowance for the entire deferred tax assets, net of the deferred tax liabilities. A valuation allowance of $154.1 million and $78.6 million as of December 31, 2008 and December 31, 2007, respectively, has been provided due to the significance of the Company’s losses, including losses generated by Levitt and Sons, and significant uncertainties of its ability to realize these assets. The Company will be required to update its estimates of future taxable income based upon additional information management obtains and will continue to evaluate the realizability of the net deferred tax asset on a quarterly basis.

          Federal and Florida net operating loss carryforwards amount to approximately $191.6 million and $191.2 million, respectively, and expire through the year 2028. Of the total net operating loss carryforwards, approximately $131.8 million were generated be Levitt and Sons after filing for Bankruptcy protection.

          In August of 2008, the Company received $29.7 million from the Internal Revenue Service (“IRS”) in connection with the filing of a refund claim for the carry back to 2005 and 2006 of tax losses incurred in 2007.

          The Company is subject to U.S. federal income tax as well as to income tax in multiple state jurisdictions. The Company is no longer subject to U.S. federal or state and local income tax examinations by tax authorities for tax years before 2005. The IRS commenced an examination of the Company’s U.S. income tax return for 2004 in the fourth quarter of 2006 and completed its examination in the first quarter of 2008. The conclusion of the examination resulted in a small refund received in the second quarter of 2008, which had an immaterial effect on the Company’s results of operations and financial condition. On January 8, 2009, Woodbridge receive a letter from the IRS that Woodbridge and its subsidiaries has been selected for an examination of the tax periods ending December 31, 2005, 2006 and 2007 in connection

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with the 2007 tax refund claim. The IRS examination process is in the early planning stage.

          As a result of the implementation of FIN 48, the Company recognized a decrease of approximately $260,000 in the liability for unrecognized tax benefits, which was accounted for as a reduction to the January 1, 2007 balance of retained earnings. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

Balance at January 1, 2008	$	2,365
Additions based on tax positions related to the current year		542
Additions for tax positions of prior years		—
Reductions for tax positions of prior years		—
Settlements		33
Lapse of Statute of Limitations		(575	)
Balance at December 31, 2008	$	2,365

          At December 31, 2008, the Company had gross tax affected unrecognized tax benefits of $2.4 million, of which $248,000, if recognized, would affect the effective tax rate.

          The Company recognizes interest and penalties accrued related to unrecognized tax benefits in tax expense. During the years ended December 31, 2008, 2007 and 2006, the Company recognized approximately $(22,000), $168,000, and $168,000 in interest and penalties, respectively. The Company had approximately $314,000 and $336,000 for the payment of interest and penalties accrued at December 31, 2008 and 2007, respectively.

     17. Other Revenues

          The following table summarizes other revenues detail information (in thousands):

	For the year ended December 31,
	2008		2007		2006
Other revenues
Mortgage & title operations	$	—		2,243		4,070
Lease/rental income		9,892		5,803		3,254
Marketing fees		579		1,610		1,243
Impact fees		254		—		—
Irrigation revenue		976		802		674
	$	11,701		10,458		9,241

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     18. Other Expenses and Interest and Other Income

          Other expenses and interest and other income are summarized as follows (in thousands):

	For the Year Ended
	December 31,
	2008		2007		2006
Other expenses
Title and mortgage operations expense	$	—		1,539		2,362
Loss on disposal of fixed assets		—		564		—
Hurricane expense, net of projected recoveries		—		—		8
Goodwill impairment		—		—		1,307
Surety bond indemnification		—		1,826		—
Total other expenses	$	—		3,929		3,677
Interest and other income
Interest income	$	3,264		4,046		2,882
Gain on sale of fixed assets		2,520		30		1,329
Gain on sale of equity securities		1,178		—		—
Forfeited buyer deposits		371		6,196		2,700
Other income		697		992		933
Interest and other income	$	8,030		11,264		7,844

          Included in other expense in the year ended December 31, 2007 is $1.8 million associated with Woodbridge’s potential surety bond obligation. Management believes it is probable that the Company will be required to reimburse the surety under the indemnity agreement. No similar other expense was recorded in the year ended December 31, 2008. See (Note 15) for further discussion.

     19. Fair Value Measurements

          Estimated fair values of financial instruments are determined using available market information and appropriate valuation methodologies. However, judgments are involved in interpreting market data to develop estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of amounts the Company could realize in a current market exchange.

          The estimated fair values of cash, cash equivalent, short-term investments, accounts payable and accrued expenses approximate carrying value as of December 31, 2008 and 2007, because of the liquid nature of the assets and relatively short maturities of the obligations. The company estimates that the fair value of its notes receivable at December 31, 2008 and 2007 were approximately $4.0 million and were based upon the Prime rate. The Company estimates that at December 31, 2008 and 2007, the fair value of its fixed rate debt was approximately $31.7 million and $93.7 million, respectively, and the fair value of its variable rate debt was approximately $227.1 million and $242.6 million, respectively, based upon the current rates and spreads it would pay to obtain similar borrowings.

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          On January 1, 2008, the Company partially adopted SFAS No. 157, which, among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. The Company did not adopt the SFAS No. 157 fair value framework for nonfinancial assets and liabilities, except for items that are recognized or disclosed at fair value in the financial statements at least annually. SFAS 157 clarifies that fair value is an exit price, representing the amount that would either be received to sell an asset or be paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, SFAS No. 157 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

• Level 1. Observable inputs such as quoted prices in active markets for identical assets or liabilities;

• Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

• Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

     Investment Measured at Fair Value on a Recurring Basis (in thousands):

		Fair Value at
	Fair Value Hierarchy	December 31, 2008
Investment in Bluegreen Corporation	Level 1	$	29,789
Investment in unconsolidated trusts	Level 3		406
Investment in other equity securities	Level 1		4,278
		$	34,473

     20. Litigation

Bankruptcy of Levitt and Sons

          On November 9, 2007, the Debtors filed voluntary petitions for relief under the Chapter 11 Cases in the Bankruptcy Court. The Debtors commenced the Chapter 11 Cases in order to preserve the value of their assets and to facilitate an orderly wind-down of their businesses and disposition of their assets in a manner intended to maximize the recoveries of all constituents.

          On November 27, 2007, the Office of the United States Trustee (the “U.S. Trustee), appointed an official committee of unsecured creditors in the Chapter 11 Cases (the “Creditors’ Committee”). On January 22, 2008, the U.S. Trustee appointed a Joint Home Purchase Deposit Creditors Committee of Creditors Holding Unsecured Claims (the “Deposit Holders Committee”, and together with the Creditors Committee, the “Committees”) The Committees have a right to appear and be heard in the Chapter 11 Cases.

          On November 27, 2007, the Bankruptcy Court granted the Debtors’ Motion for Authority to Incur Chapter 11 Administrative Expense Claim (the “Chapter 11 Admin. Expense Motion”), thereby authorizing the Debtors to incur a post petition administrative expense claim in favor of Woodbridge for administrative costs relating to certain services and benefits provided by Woodbridge in favor of the Debtors (the “Post Petition Services”). While the Bankruptcy Court approved the incurrence of the amounts as unsecured post petition administrative expense claims, the payment of such claims is subject to additional court approval.

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In addition to the unsecured administrative expense claims, Woodbridge has pre-petition secured and unsecured claims against the Debtors. The Debtors have scheduled the amounts due to Woodbridge in the Chapter 11 Cases. The unsecured pre-petition claims of Woodbridge scheduled by the Debtors are approximately $67.3 million and the secured pre-petition claim scheduled by the Debtors is approximately $460,000. Since the Chapter 11 Cases were filed, Woodbridge has also incurred certain administrative costs related to the Post Petition Services. These costs amounted to $1.6 million and $748,000 in the years ended December 31, 2008 and 2007, respectively. Additionally, as disclosed in (Note 15), in the year ended December 31, 2008, Woodbridge reimbursed a Levitt and Sons surety for $532,000 of bond claims paid by the surety. No payments were made in the year ended December 31, 2007. The payment by the Debtors of its outstanding advances and the Post Petition Services expenses are subject to the risks inherent to recovery by creditors in the Chapter 11 Cases. Woodbridge has also filed contingent claims with respect to any liability it may have arising out of disputed indemnification obligations under certain surety bonds. Woodbridge also implemented an employee severance fund in favor of certain employees of the Debtors. Employees who received funds as part of this program as of December 31, 2008, which totaled approximately $3.9 million as of that date, have assigned their unsecured claims against the Debtors to the Company. It is highly unlikely that Woodbridge will recover these or any other amounts associated with its unsecured claims against the Debtors. In addition, the Debtors asserted certain further claims against Woodbridge, including an entitlement to a portion of the $29.7 million federal tax refund which Woodbridge received as a consequence of losses experienced at Levitt and Sons in prior periods; however, the parties have entered into the Settlement Agreement described below.

          On June 27, 2008, Woodbridge entered into a settlement agreement (the “Settlement Agreement”) with the Debtors and the Joint Committee of Unsecured Creditors (the “Joint Committee”) appointed in the Chapter 11 Cases. Pursuant to the Settlement Agreement, among other things, (i) Woodbridge agreed to pay to the Debtors’ bankruptcy estates the sum of $12.5 million plus accrued interest from May 22, 2008 through the date of payment, (ii) Woodbridge agreed to waive and release substantially all of the claims it had against the Debtors, including its administrative expense claims through July 2008, and (iii) the Debtors (joined by the Joint Committee) agreed to waive and release any claims they had against Woodbridge and its affiliates. After certain of Levitt and Sons’ creditors indicated that they objected to the terms of the Settlement Agreement and stated a desire to pursue claims against Woodbridge, Woodbridge, the Debtors and the Joint Committee agreed in principal to an amendment to the Settlement Agreement, pursuant to which Woodbridge would, in lieu of the $12.5 million payment previously agreed to, pay $8.0 million to the Debtors’ bankruptcy estates and place $4.5 million in a release fund to be disbursed to third party creditors in exchange for a third party release and injunction. The amendment also provided for an additional $300,000 payment by Woodbridge to a deposit holders fund. The Settlement Agreement, as amended, was subject to a number of conditions, including the approval of the Bankruptcy Court.

          Certain of the Debtor subsidiaries of Levitt and Sons have been provided with post-petition financing (“DIP Loans”) from a third-party lender (the “DIP Lender”) which had financed such Debtors’ projects. Under the agreements for the DIP Loans, the DIP Loans are to be used for (i) the reimbursement of the DIP Lender’s costs and fees, (ii) the costs of managing and safeguarding the projects, (iii) the costs of making the projects ready for sale, (iv) the costs to complete the projects, (v) the general working capital needs of the Debtors related to the projects and (vi) such other costs and expenses related to the DIP Loans or the projects as the DIP Lender may elect. The Bankruptcy Court’s order approving the DIP Loans also approved the sales of homes in the projects with the net proceeds from such sales being applied towards the DIP Loans. The order also appointed a Chief Administrator to manage and supervise all administrative functions of these Debtors related to the projects in accordance with the scope of authority set forth in the DIP Loan agreements. These projects represent 89.7% of the total assets, 66.3% of the total liabilities and 34.1% of the shareholders deficit of Levitt and Sons at December 31, 2008.

          During the year ended December 31, 2008, the DIP Loans financed construction and development activities and selling, general and administrative expenses related to the projects, as well as the costs, fees and other expenses of the DIP Lender, including interest expense. Additionally, during the year ended December 31, 2008, homes in the projects have been sold and closed, resulting in the receipt by the Debtors of sales proceeds. The Chief Administrator is maintaining the accounting records for these transactions in accordance with the DIP Loan agreements and, as a result, financial information is not available to the Company which could be used to record these transactions in accordance with generally accepted accounting principles on a basis consistent with the Company’s accounting for similar transactions.

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Accordingly, these transactions have not been reflected in the financial information for Levitt and Sons included in (Note 24) to the Company’s consolidated financial statements. However, as described herein, due to the deconsolidation of Levitt and Sons from Woodbridge’s statements of financial condition and results of operations as of November 9, 2007, these transactions, and the omission of the results of these transactions, will not have an impact on the Company’s financial condition or operating results.

Class Action Lawsuit

          On January 25, 2008, plaintiff Robert D. Dance filed a purported class action complaint as a putative purchaser of the Company’s securities against the Company and certain of its officers and directors, asserting claims under the federal securities law and seeking damages. This action was filed in the United States District Court for the Southern District of Florida and is captioned Dance v. Levitt Corp. et al., No. 08-CV-60111-DLG. The securities litigation purports to be brought on behalf of all purchasers of the Company’s securities beginning on January 31, 2007 and ending on August 14, 2007. The complaint alleges that the defendants violated Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated there under by issuing a series of false and/or misleading statements concerning the Company’s financial results, prospects and condition. The Company intends to vigorously defend this action.

Surety Bond Claim

          In September 2008, a surety filed a lawsuit to require Woodbridge to post $5.4 million of collateral in connection with two bonds totaling $5.4 million with respect to which a municipality made claims against the surety. We believe that the municipality does not have the right to demand payment under the bonds and we initiated a lawsuit against the municipality and do not believe that a loss is probable. Accordingly, we did not accrue any amount related to this claim as of December 31, 2008. As claims were made on the bonds, the surety requested the Company post a $4.0 million letter of credit as security while the matter is litigated with the municipality and the Company has complied with that request.

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     21. Segment Reporting

          Operating segments are components of an enterprise about which separate financial information is available that is regularly reviewed by the chief operating decision maker in deciding how to allocate resources and in assessing performance. During the year ended December 31, 2008, the Company operated through two reportable business segments, the Land Division and Other Operations segments. During the years ended December 31, 2007 and 2006, the Company also operated through two additional reportable business segments, the Primary Homebuilding and Tennessee Homebuilding segments, both of which were eliminated as a result of the Company’s deconsolidation of Levitt and Sons as of November 9, 2007. The Company evaluates segment performance primarily based on pre-tax income. The information provided for segment reporting is based on management’s internal reports. Except as otherwise indicated in this report, the accounting policies of the segments are the same as those of the Company. Eliminations in periods prior to the year ended December 31, 2008 consisted of the elimination of sales and profits on real estate transactions between the Land Division and Primary Homebuilding segment, and eliminations for the year ended December 31, 2008 consist of the elimination of transactions between the Land Division and Other Operations segments. All of the eliminated transactions were recorded based upon terms that management believed would be attained in an arms-length transaction. The presentation and allocation of assets, liabilities and results of operations may not reflect the actual economic costs of the segments as stand-alone businesses. If a different basis of allocation were utilized, the relative contributions of the segments might differ, but management believes that the relative trends in segments would likely not be impacted.

          The Company’s Land Division segment consists of the operations of Core Communities, and the Other Operations segment consists of the operations of the Parent company, Carolina Oak, and Pizza Fusion, other activities through Cypress Creek Capital and Snapper Creek, an equity investment in Bluegreen and an investment in Office Depot. In 2007, the Other Operations segment also consisted of Levitt Commercial, LLC, which specialized in the development of industrial properties. Levitt Commercial, LLC ceased development activities in 2007. The Company’s Homebuilding Division consisted of the Primary Homebuilding segment and the Tennessee Homebuilding segment. The results of operations for the year ended December 31, 2008 do not include the results of operations of the Homebuilding Division due to the deconsolidation of Levitt and Sons, the operations of which comprised the Homebuilding Division, as of November 9, 2007. The results of operations and financial condition of Carolina Oak as of and for the years ended December 31, 2007 and 2006 were included in the Primary Homebuilding segment, whereas the results of operations and financial condition of Carolina Oak as of and for the year ended December 31, 2008 are included in the Other Operations segment.

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          The following tables present segment information for the years ended December 31, 2008, 2007 and 2006 (in thousands):

Year Ended				Other
December 31, 2008	Land			Operations			Eliminations			Total
Revenues:
Sales of real estate	$	11,268			2,484			85			13,837
Other revenues		10,592			1,109			—			11,701
Total revenues		21,860			3,593			85			25,538
Costs and expenses:
Cost of sales of real estate		6,632			16,151			(10,055	)		12,728
Selling, general and administrative expenses		24,608			26,717			(571	)		50,754
Interest expense		3,637			8,315			(1,085	)		10,867
Total costs and expenses		34,877			51,183			(11,711	)		74,349
Earnings from Bluegreen Corporation		—			8,996			—			8,996
Impairment of investment in Bluegreen Corporation		—			(94,426	)		—			(94,426	)
Impairment of other investments		—			(14,120	)		—			(14,120	)
Interest and other income		5,685			4,001			(1,656	)		8,030
(Loss) income before income taxes		(7,332	)		(143,139	)		10,140			(140,331	)
Benefit for income taxes		—			—			—			—
Net (loss) income	$	(7,332	)		(143,139	)		10,140			(140,331	)
Inventory of real estate	$	208,033			34,719			(1,434	)		241,318
Total assets	$	339,941			220,587			(1,274	)		559,254
Total debt	$	215,332			134,620			—			349,952
Total liabilities	$	248,969			185,513			5,242			439,724
Total shareholders’ equity	$	90,972			35,074			(6,516	)		119,530

Year Ended	Primary			Tennessee						Other
December 31, 2007	Homebuilding			Homebuilding			Land			Operations			Eliminations			Total
Revenues:
Sales of real estate	$	345,666			42,042			16,567			6,574			(734	)		410,115
Other revenues		2,243			—			7,585			952			(322	)		10,458
Total revenues		347,909			42,042			24,152			7,526			(1,056	)		420,573
Costs and expenses:
Cost of sales of real estate		501,206			51,360			7,447			16,793			(3,565	)		573,241
Selling, general and administrative expenses		61,568			5,010			19,077			32,508			(239	)		117,924
Interest expense		7,258			151			2,629			1,073			(7,304	)		3,807
Other expenses		1,539			—			—			2,390			—			3,929
Total costs and expenses		571,571			56,521			29,153			52,764			(11,108	)		698,901
Earnings from Bluegreen Corporation		—			—			—			10,275			—			10,275
Interest and other income		6,933			83			4,489			7,367			(7,608	)		11,264
(Loss) income before income taxes		(216,729	)		(14,396	)		(512	)		(27,596	)		2,444			(256,789	)
Benefit (provision) for income taxes		1,396			(1,700	)		(5,910	)		34,297			(5,914	)		22,169
Net (loss) income	$	(215,333	)		(16,096	)		(6,422	)		6,701			(3,470	)		(234,620	)
Inventory of real estate	$	38,457			—			189,903			6,262			(7,332	)		227,290
Total assets	$	38,749			—			342,696			336,713			(5,307	)		712,851
Total debt	$	39,674			—			216,027			98,089			—			353,790
Total liabilities	$	41,402			—			214,393			184,601			11,349			451,745
Total shareholders’ equity	$	(2,653	)		—			128,303			152,112			(16,656	)		261,106

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Year Ended	Primary			Tennessee						Other
December 31, 2006	Homebuilding			Homebuilding			Land			Operations			Eliminations			Total
Revenues:
Sales of real estate	$	424,420			76,299			69,778			11,041			(15,452	)		566,086
Other revenues		4,070			—			3,816			1,435			(80	)		9,241
Total revenues		428,490			76,299			73,594			12,476			(15,532	)		575,327
Costs and expenses:
Cost of sales of real estate		367,252			72,807			42,662			11,649			(11,409	)		482,961
Selling, general and administrative expenses		65,052			12,806			15,119			28,174			—			121,151
Other expenses		2,362			1,307			—			8			—			3,677
Total costs and expenses		434,666			86,920			57,781			39,831			(11,409	)		607,789
Earnings from Bluegreen Corporation		—			—			—			9,684			—			9,684
Interest and other income		2,982			127			2,650			4,059			(1,974	)		7,844
(Loss) income before income taxes		(3,194	)		(10,494	)		18,463			(13,612	)		(6,097	)		(14,934	)
Benefit (provision) for income taxes		1,508			3,241			(6,936	)		5,639			2,318			5,770
Net (loss) income	$	(1,686	)		(7,253	)		11,527			(7,973	)		(3,779	)		(9,164	)
Inventory of real estate	$	608,358			56,214			176,356			13,269			(32,157	)		822,040
Total assets	$	644,447			62,065			271,169			146,116			(33,131	)		1,090,666
Total debt	$	378,633			39,274			95,980			101,816			—			615,703
Total liabilities	$	529,476			55,524			133,015			49,357			(19,945	)		747,427
Total shareholders’ equity	$	114,971			6,541			138,154			96,759			(13,186	)		343,239

          Included in total liabilities at the respective segments are net receivable and payable amounts associated with intersegment loans. These amounts eliminate fully in consolidation but have the effect of decreasing or increasing liabilities when shown on a stand alone basis.

     22. Parent Company Financial Statements

          The Company’s subordinated investment notes (the “Investment Notes”) and junior subordinated debentures (the “Junior Subordinated Debentures”) are direct unsecured obligations of the Parent Company, are not guaranteed by the Company’s subsidiaries and are not secured by any assets of the Company or its subsidiaries. The Parent Company has historically relied on dividends or management fees from its subsidiaries and earnings on its cash investments to fund its operations, including debt service obligations relating to the Investment Notes and Junior Subordinated Debentures. However, as a result of the funds raised in the Company’s 2007 rights offering, the Parent Company’s dependence on payments from subsidiaries has been substantially reduced. The Company would be restricted from paying dividends to its common shareholders if an event of default exists under the terms of either the Investment Notes or the Junior Subordinated Debentures.

          Some of the Company’s subsidiaries incur indebtedness on terms that, among other things, require the subsidiary to maintain certain financial ratios and a minimum net worth. These covenants may have the effect of limiting the amount of debt that the subsidiaries can incur in the future and restricting payments to the Parent Company. At December 31, 2008, under the most restrictive of these covenants, approximately

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$75.0 million of the subsidiaries’ net assets were not available to transfer funds to the Company in the form of loans, advances or dividends, and $17.7 million was available for these transfers. At December 31, 2008 and 2007, the Company and its subsidiaries were in compliance with all loan agreement financial covenants. At December 31, 2008, consolidated retained earnings included approximately $8.6 million which represented undistributed earnings recognized by the equity method.

          The accounting policies for the Parent Company are generally the same as those policies described in the summary of significant accounting policies in (Note 2). The Parent Company’s interests in its consolidated subsidiaries are reported under equity method accounting for purposes of this presentation.

          Condensed statements of financial condition at December 31, 2008 and 2007 and condensed statements of operations and cash flows for each of the years in the three-year period ended December 31, 2008 are shown below:

Woodbridge Holdings Corporation (Parent Company Only)
Condensed Statements of Financial Condition
(In thousands except share data)

	December 31,
	2008		2007
Assets
Cash and cash equivalents	$	94,725		161,557
Restricted cash		16,715		—
Inventory of real estate		6,818		5,950
Investment in Bluegreen Corporation		29,789		116,014
Investment in Unconsolidated Trusts		419		2,565
Investments in wholly-owned subsidiaries		52,272		110,598
Other assets		52,279		32,848
Total assets	$	253,017		429,532
Liabilities and Shareholders’ Equity
Accounts payable and accrued liabilities	$	4,604		42,932
Loss in excess of investment in subsidiary		39,432		39,432
Notes payable		238		1,010
Junior subordinated debentures		85,052		85,052
Income tax payable		4,161		—
Total liabilities		133,487		168,426
Shareholders’ equity:
Preferred stock, $0.01 par value Authorized: 5,000,000 shares Issued and outstanding: no shares		—		—
Common stock, Class A, $0.01 par value Authorized: 30,000,000 shares Issued: 19,042,149 and 19,010,804 shares, respectively		190		190
Common stock, Class B, $0.01 par value Authorized: 2,000,000 shares Issued and outstanding: 243,807 shares		2		2

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	December 31,
	2008			2007
Additional paid-in capital		339,780			337,565
Accumulated deficit		(218,868	)		(78,537	)
Accumulated other comprehensive (loss) income		(135	)		1,886
		120,969			261,106
Less — common stock in treasury, at cost (2,385,624 in 2008)		(1,439	)		—
Total shareholders’ equity		119,530			261,106
Total liabilities and shareholders’ equity	$	253,017			429,532

Woodbridge Holdings Corporation (Parent Company Only)
Condensed Statements of Operations
(In thousands)

	Year Ended December 31,
	2008			2007			2006
Earnings from Bluegreen Corporation	$	8,996			10,275			9,684
Other revenues		2,616			7,363			3,497
Costs and expenses (a)		123,618			44,880			28,158
Loss before income taxes		(112,006	)		(27,242	)		(14,977	)
Benefit for income taxes		—			34,567			6,162
Net (loss) income before undistributed earnings from subsidiaries		(112,006	)		7,325			(8,815	)
Loss from consolidated subsidiaries, net of income taxes		(28,325	)		(241,945	)		(349	)
Net loss	$	(140,331	)		(234,620	)		(9,164	)

(a) Includes an other-than-temporary impairment charge of $94.4 million incurred during the year ended December 31, 2008 related to the Company’s investment in Bluegreen Corporation and a $2.1 million impairment charge related to the Company’s investment in unconsolidated trusts.

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Woodbridge Holdings Corporation (Parent Company Only)
Condensed Statements of Cash Flows
(In thousands)

	Year Ended December 31,
	2008			2007			2006
Operating activities:
Net loss	$	(140,331	)		(234,620	)		(9,164	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		2,595			2,664			1,352
(Decrease) increase in deferred income taxes		—			(19,240	)		2,953
Equity from earnings in Bluegreen Corporation		(8,996	)		(10,275	)		(9,684	)
Equity from loss in consolidated subsidiaries		28,325			241,945			349
Equity from loss in joint ventures		—			—			2
Equity in earnings from unconsolidated trusts		(218	)		(220	)		(178	)
Share-based compensation expense related to stock options and restricted stock		990			1,962			3,250
Impairment of investment in Bluegreen Corporation		94,426			—			—
Impairment of other investment		2,146			—			—
Dividends received from consolidated subsidiaries		30,000			13,073			12,086
Write off of property and equipment		114			536			—
Changes in operating assets and liabilities:
Inventory of real estate		(868	)		1,767			(3,552	)
Other assets		(1,247	)		(1,153	)		1,404
Accounts payable, accrued expenses and other liabilities		(4,694	)		5,043			(9,444	)
Current income tax		29,743			(6,249	)		—
Net cash provided by (used in) by operating activities		31,985			(4,767	)		(10,626	)
Investing activities:
Distributions and advances from real estate joint ventures		—			—			153
Purchase of short-term investments		(9,600	)		—			—
Increase in restricted cash		(16,715	)		—			—
Investment in unconsolidated trusts		—			—			(928	)
Distributions from unconsolidated trusts		218			220			178
Purchase of property, plant and equipment		—			(41	)		(7,895	)
Net cash (used in) provided by investing activities		(26,097	)		179			(8,492	)
Financing activities:
Proceeds from notes and mortgage notes payable		—			151			479
Repayment of notes and mortgage notes payable		(772	)		(2,066	)		(686	)
Proceeds from junior subordinated notes		—			—			30,928
Cash paid for stock repurchase		(1,439	)		—			—
Proceeds from issuance of common stock		—			152,847			—
Payments for debt offering cost		—			—			(1,077	)
Payments for stock issuance costs		—			(196	)		—
Net (decrease) increase in intercompany due		(70,509	)		6,905			(43,858	)
Cash dividends paid		—			(396	)		(1,585	)
Net cash (used in) provided by financing activities		(72,720	)		157,245			(15,799	)
(Decrease) increase in cash and cash equivalents		(66,832	)		152,657			(34,917	)
Cash and cash equivalents at the beginning of period		161,557			8,900			43,817
Cash and cash equivalents at end of period	$	94,725			161,557			8,900

     23. Selected Quarterly Financial Data (unaudited)

          Selected financial information for the quarterly periods in 2008 and 2007 is presented below. Due to rounding and changes in the number of shares outstanding, the sum of the quarterly (loss) earnings per share amounts may not equal the (loss) earnings per share reported for the year (in thousands, except per

108

share data):

	Year Ended December 31, 2008
	First			Second			Third			Fourth			Total
	Quarter			Quarter			Quarter			Quarter			2008
Revenues	$	3,118			5,139			13,677			3,604			25,538
Costs and expenses	$	(15,679	)		(17,242	)		(22,116	)		(19,312	)		(74,349	)
Earnings from Bluegreen Corporation	$	526			1,211			2,241			5,018			8,996
Impairment of investment in Bluegreen Corporation	$	—			—			(53,576	)		(40,850	)		(94,426	)
Impairment of other investments	$	—			—			—			(14,120	)		(14,120	)
Net loss	$	(10,431	)		(8,942	)		(56,003	)		(64,955	)		(140,331	)
Loss per share, basic and diluted	$	(0.54	)		(0.46	)		(2.91	)		(3.49	)		(7.35	)

	Year Ended December 31, 2007
	First			Second			Third			Fourth			Total
	Quarter			Quarter			Quarter			Quarter (a)			2007
Revenues	$	143,795			127,840			125,824			23,114			420,573
Costs and expenses	$	(146,296	)		(205,616	)		(308,315	)		(38,674	)		(698,901	)
Earnings from Bluegreen Corporation	$	1,744			1,357			4,418			2,756			10,275
Net income (loss)	$	976			(58,087	)		(169,168	)		(8,341	)		(234,620	)
Earnings (loss) per share, basic and diluted	$	0.24			(14.36	)		(41.80	)		(0.43	)		(30.00	)
Dividends declared per common share	$	0.10			—			—			—			0.10

(a) As previously reported, Woodbridge deconsolidated Levitt and Sons from its consolidated statements of financial condition and statements of operations as of November 9, 2007, which resulted in the Company not recording results of operations associated with Levitt and Sons after November 9, 2007.

109

     24. Financial Information of Levitt and Sons

          As described in (Note 1) above, on November 9, 2007, the Debtors filed the Chapter 11 Cases. The Debtors commenced the Chapter 11 Cases in order to preserve the value of their assets and to facilitate an orderly wind-down of their businesses and disposition of their assets in a manner intended to maximize the recoveries of all constituents. In connection with the filing of the Chapter 11 Cases, Woodbridge deconsolidated Levitt and Sons as of November 9, 2007. As a result of the deconsolidation, Woodbridge had a negative basis in its investment in Levitt and Sons because Levitt and Sons generated significant losses and intercompany liabilities in excess of its asset balances. This negative investment, “Loss in excess of investment in subsidiary”, is reflected as a single amount on the Company’s consolidated statements of financial condition as a $55.2 million liability as of December 31, 2008 and 2007. This balance was comprised of a negative investment in Levitt and Sons of $123.0 million, and outstanding advances due to Woodbridge from Levitt and Sons of $67.8 million. Included in the negative investment was approximately $15.8 million associated with deferred revenue related to intra-segment sales between Levitt and Sons and Core Communities. During the fourth quarter of 2008, the Company identified approximately $2.3 million of deferred revenue on intercompany sales between Core and Carolina Oak that had been misclassified against the negative investment in Levitt and Sons. As a result, the Company recorded a $2.3 million reclassification between inventory of real estate and the loss in excess of investment in subsidiary in the consolidated statements of financial condition. As a result, as of December 31, 2008, the net negative investment was $52.9 million. Woodbridge’s previously reported consolidated statements of financial condition, consolidated statements of operations and consolidated statements of cash flows prior to November 9, 2007 continue to include Levitt and Sons’ financial condition, results of operations and cash flows. See (Note 20) for further information regarding the Chapter 11 Cases and (note 25) for the status of the Settlement Agreement.

          Since Levitt and Sons’ results are no longer consolidated with the Company’s results, and the status Company believes it is not probable that it will be obligated to fund further losses related to its investment in Levitt and Sons, any material uncertainties related to Levitt and Sons’ ongoing operations are not expected to impact the Company’s future financial results other than in connection with the Company’s contractual obligations to third parties and payment of the settlement amount.

          The following table summarizes the assets, liabilities and net equity of Levitt and Sons as of the deconsolidation date at November 9, 2007, as well as the calculation of the loss in excess of investment in subsidiary which was recorded on the Company’s consolidated statement of financial condition at December 31, 2007:

110

	November 9,
	2007
Cash	$	6,387
Inventory		356,294
Property and equipment		1,681
Other assets		8,974
Assets deconsolidated		373,336
Accounts payable and other accrued liabilities		50,709
Customer deposits		18,007
Notes and mortgage payable		344,052
Due to Woodbridge		67,831
Liabilities deconsolidated	$	480,599
Net equity/negative investment	$	(107,263	)
The loss in excess of investment in subsidiary is comprised of:
Net equity/negative investment		(107,263	)
Due to Woodbridge		67,831
Deferred revenue (a)		(15,780	)
	$	(55,212	)

(a) During the fourth quarter of 2008, deferred revenue was adjusted by $2.3 million due to a reclassification on intercompany land sales between Core and Carolina Oak that had been inadvertently recorded against the negative investment. As a result of this reclassification the net negative investment was reduced from $55.2 million to $52.9 million as of December 31, 2008.

          Included in the loss in excess of investment in subsidiary was approximately $15.8 million associated with deferred revenue related to intra-segment sales between Levitt and Sons and Core Communities.

          The following condensed consolidated financial statements of Levitt and Sons were prepared in conformity with Statement of Position 90-7, “Financial Reporting by Entities in Reorganization Under the Bankruptcy Code” (“SOP 90-7”), which requires that the liabilities subject to compromise by the Bankruptcy Court are reported separately from the liabilities not subject to compromise, and that all transactions directly associated with the bankruptcy plan be reported separately as well. Liabilities subject to compromise include pre-petition unsecured claims that may be settled at amounts that differ from those recorded in Levitt and Sons’ condensed consolidated statements of financial condition.

111

Levitt and Sons
Condensed Consolidated Statements of Financial Condition
As of December 31, 2008 and 2007
(In thousands)

	2008			2007
Assets
Cash	$	4,712			5,365
Restricted cash		885			—
Inventory		166,358			208,686
Property and equipment		—			55
Other assets		19,657			23,810
Total assets	$	191,612			237,916
Liabilities and Shareholders’ Equity
Accounts payable and other accrued liabilities	$	719			469
Due to Woodbridge		2,870			748
Liabilities subject to compromise (A)		327,707			354,748
Shareholders’ deficit	$	(139,684	)		(118,049	)
Total liabilities and shareholders’ equity	$	191,612			237,916

(A) Liabilities Subject to Compromise

          Liabilities subject to compromise in Levitt and Sons’ condensed consolidated statements of financial condition as of December 31, 2008 refer to both secured and unsecured obligations that will be accounted for under the bankruptcy plan, including claims incurred prior to the Petition Date. They represent the debtors’ current estimate of the amount of known or potential pre-petition claims that are subject to restructuring in the Chapter 11 Cases. Such claims remain subject to future adjustments.

          Liabilities subject to compromise at December 31, 2008 were as follows, in thousands:

Accounts payable and other accrued liabilities	$	54,954
Customer deposits		15,754
Due to Woodbridge		87,182
Deficiency claim associated with secured debt		45,458
Notes and mortgage payable		124,359
Total liabilities subject to compromise	$	327,707

112

Levitt and Sons
Condensed Consolidated Statements of Operations
Years Ended December 31, 2008, 2007 and 2006
(In thousands)

	2008			2007			2006
Revenues
Sales of real estate	$	32,505			397,561			500,719
Other revenues		2			2,245			4,070
Total revenues		32,507			399,806			504,789
Costs and expenses
Cost of sales of real estate		42,864			562,763			440,059
Selling, general and administrative expenses		4,340			70,848			77,858
Total costs and expenses		47,204			633,611			517,917
Bankruptcy related items, net		(7,049	)		(3,525	)		—
Other income, net of interest and other expense		111			(1,928	)		(560	)
Loss before income taxes		(21,635	)		(239,258	)		(13,688	)
(Provision) benefit for income taxes		—			(303	)		4,749
Net loss	$	(21,635	)		(239,561	)		(8,939	)

     25. Subsequent Event

Bankruptcy of Levitt and Sons

          On February 20, 2009, the Bankruptcy Court presiding over Levitt and Sons’ Chapter 11 bankruptcy case entered an order confirming a plan of liquidation jointly proposed by Levitt and Sons and the Official Committee of Unsecured Creditors. That order also approved the settlement pursuant to the Settlement Agreement, as amended. No appeal or rehearing of the court’s order was timely filed by any party, and the settlement was consummated on March 3, 2009, at which time, payment was made in accordance with the terms and conditions of the Settlement Agreement, as amended. The cost of settlement and reversal of the related $52.9 million liability will be recognized into income in the first quarter of 2009.

Executive Compensation Program

          On September 29, 2008, the Company’s Board of Directors approved the terms of incentive programs for certain of the Company’s employees including certain of the Company’s named executive officers, pursuant to which a portion of their compensation will be based on the cash returns realized by the Company on its investments. The programs relate to the performance of existing investments and new investments designated by the Board (together, the “Investments”). All of the Company’s investments have been or will be held by individual limited partnerships or other legal entities established for such purpose. Participating executives and employees will have interests in the entities which will be the basis of their incentives under the programs. The Company’s named executive officers may have interests tied both to the performance of a particular investment as well as interests relating to the performance of the portfolio of investments as a whole.

          The Company, in its capacity as investor in the investment program, will be entitled to receive a return of the Company’s invested capital and a specified rate of return on its invested capital prior to the Company’s executive officers or employees being entitled to receive any portion of the realized profits (the share to which they may be entitled is referred to as the “Carried Interest”). For existing investments, the amount of invested capital was determined as of September 1, 2008, by the Company’s Board of Directors. Once the Company receives its priority return of its invested capital and the stated return (which accrues from September 1, 2008), the Company will also generally be entitled to additional amounts that provide it with (i) at least approximately 87% of the aggregate proceeds related to the Company’s status as an investor in excess of the Company’s invested capital in that investment, plus (ii) at least 35% of all other amounts earned from third parties with respect to that investment (i.e., income not related to the Company’s status as an investor, such as management fees charged to third parties). The remaining proceeds will be available under the incentive programs for distribution among those employees directly responsible for the relevant Investments and the Company’s executive officers. The compensation committee of the Company’s Board of Directors will determine the allocations to the Company’s named executive officers. These allocations are identified in advance for each of the executive officers. Although the compensation committee can alter these allocations on a prospective basis, the total amount payable to employees and officers cannot be changed. Management will determine the amounts to be allocated among the other employee participants. The incentive programs relating to both individual investments and the program established for the executive officers with respect to the overall performance of the portfolio of investments contain clawback obligations that are intended to reduce the risk that the participants will be distributed amounts under the programs prior to the Company’s receipt of at least a return of its invested capital and the stated return. To the extent that named executive officers participate in the performance of a particular investment, their clawback obligations nevertheless refer to the performance of the portfolio as a whole. The programs contemplate that the clawback obligations will be funded solely from holdback accounts established with respect to each participant. Amounts equal to a portion of Carried Interest distribution to such participant (initially 25% and which can be increased, when appropriate, to as high as 75%) will be deposited into holdback accounts or otherwise made available for the benefit of the Company. There are also general vesting and forfeiture provisions applicable to each participant’s right to receive any Carried Interest, the terms of which may vary by individual. The Company’s Board of Directors believes that the above-described incentive plans appropriately align payments to participants with the performance of our Investments.

          The “Executive Incentive Plan” which set forth the terms of the Carried Interests of certain executive officers in the performance of the overall investments of the Company and the “Investment Programs” entered into to date which set forth the Carried Interests of employees and certain executive officers in the performance of particular individual investments are included as exhibits to this Annual Report. These exhibits (rather than the general descriptions contained herein) embody the legally binding terms of the incentive arrangements, which were executed on March 13, 2009.

113

Schedule III
Woodbridge Holdings Corporation
Real Estate Investments and Accumulated Depreciation
As of December 31, 2008
(in thousands)

																Date of
			Building and				Accumulated			Net Book				Depreciable		Acquisition/
	Land		Improvement		Total Cost		Depreciation			Value		Encumbrances		Lives (Years)		Completion
Cypress Creek Office Bldg Ft. Laud.	$	2,250	$	13,355	$	15,605	$	(1,892	)	$	13,713	$	11,831		S/L 30	October 2004
The Village Center Port St. Lucie		1,449		19,011		20,460		(2,900	)		17,560		14,381		S/L 39	February 2005
The Landing Port St. Lucie		5,988		55,060		61,048		(1,950	)		59,098		60,624		S/L 39	November 2007
	$	9,687	$	87,426	$	97,113	$	(6,742	)	$	90,371	$	86,836

     The following table presents the changes of the Company’s real estate investments for the years ended December 31, 2008, 2007 and 2006 (in thousands):

	For the Year Ended December 31,
	2008			2007		2006
Balance, beginning of year	$	101,185			40,562		36,897
Improvements		348			60,623		6,898
Sales		(2,675	)		—		(3,233	)
Adjustments		(1,745	)		—		—
Balance, end of year	$	97,113			101,185		40,562

     The adjustments of approximately $1.7 million reflected in the year ended December 31, 2008 relate to tenant reimbursements received from improvements made on the behalf of the tenants in The Landing property during the normal construction of the property.

     The unaudited aggregate cost of real estate investments for federal income tax purposes as of December 31, 2008 was approximately $92.1 million.

     The following table presents the changes of the Company’s real estate investments accumulated depreciation for the years ended December 31, 2008, 2007 and 2006 (in thousands):

	For the Year Ended December 31,
	2008			2007			2006
Balance, beginning of year	$	(3,065	)		(1,942	)		(732	)
Depreciation expense		(3,677	)		(1,123	)		(1,210	)
Balance, end of year	$	(6,742	)		(3,065	)		(1,942	)

     See (Note 9) for further disclosure on the real estate investment and accumulated depreciation tables above.

114

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

          None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

          As of the end of the period covered by this Annual Report on Form 10-K, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2008, our disclosure controls and procedures were effective to ensure the information required to be disclosed in the reports that we file or submit under the Exchange Act was recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and was accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow for timely decisions regarding required disclosures. In designing and evaluating our disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and are subject to certain limitations, including the exercise of judgment by individuals, the difficulty in identifying unlikely future events and the difficulty in eliminating misconduct completely.

Management’s Report on Internal Control over Financial Reporting

          Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). With the participation of our Chief Executive Officer and Chief Financial Officer, our management evaluated, as of December 31, 2008, the effectiveness of our internal control over financial reporting. The evaluation was conducted based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

(a)	pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
(b)	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles in the United States, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
(c)	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material affect on the Company’s financial statements.

          Our management concluded, based on its evaluation of the effectiveness of our internal control over financial reporting described above, that our internal control over financial reporting was effective as of December 31, 2008.

          PricewaterhouseCoopers LLP, our independent registered certified public accounting firm, has audited the effectiveness of our internal control over financial reporting as of December 31, 2008 as stated in its report which appears in this Annual Report on Form 10-K. See Item 8. “Financial Statements and Supplementary Data.”

115

Changes in Internal Control Over Financial Reporting

          There was no change in our internal control over financial reporting that occurred during the quarter ended December 31, 2008 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

/s/ Alan B. Levan  

Alan B. Levan 

Chief Executive Officer 

March 19, 2009 

/s/ John K. Grelle  

John K. Grelle 

Chief Financial Officer 

March 19, 2009 

ITEM 9B. OTHER INFORMATION

None.

116

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

          The information required for this item is incorporated by reference from our Proxy Statement to be filed with the SEC no later than 120 days after the end of the year covered by this Form 10-K, or, alternatively, by amendment to this Form 10-K under cover of Form 10-K/A not later than the end of such 120 day period.

ITEM 11. EXECUTIVE COMPENSATION

          The information required for this item (other than the information relating to our executive officers set forth in Part I, Item 1) is incorporated by reference from our Proxy Statement to be filed with the SEC no later than 120 days after the end of the year covered by this Form 10-K, or, alternatively, by amendment to this Form 10-K under cover of Form 10-K/A not later than the end of such 120 day period.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

          The information required for this item (other than the information related to our equity compensation plans set forth below) is incorporated by reference from our Proxy Statement to be filed with the SEC no later than 120 days after the end of the year covered by this Form 10-K, or, alternatively, by amendment to this Form 10-K under cover of Form 10-K/A not later than the end of such 120 day period.

.

          The following table contains information, as of December 31, 2008, concerning our equity compensation plans:

	Number of securities to be
	issued upon exercise of		Weighted average exercise		Number of securities
	outstanding options, warrants or		price of outstanding		remaining available
Plan Category	rights		options, warrants and rights		for future issuance
Equity compensation plans approved by security holders		318,471	$	78.89		281,529
Equity compensation plans not approved by security holders		—		—		—
Total		318,47	$	78.89		281,529

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

          The information required for this item is incorporated by reference from our Proxy Statement to be filed with the SEC no later than 120 days after the end of the year covered by this Form 10-K, or, alternatively, by amendment to this Form 10-K under cover of Form 10-K/A not later than the end of such 120 day period.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

          The information required for this item is incorporated by reference from our Proxy Statement to be filed with the SEC no later than 120 days after the end of the year covered by this Form 10-K, or, alternatively, by amendment to this Form 10-K under cover of Form 10-K/A not later than the end of such 120 day period.

117

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) Documents Filed as Part of this Report:

(1) Financial Statements

The following consolidated financial statements of Woodbridge and its subsidiaries are included herein under Part II, Item 8 of this Report.

Report of Independent Registered Certified Public Accounting Firm dated March 19, 2009.

Consolidated Statements of Financial Condition as of December 31, 2008 and 2007.

Consolidated Statements of Operations for each of the years in the three year period ended December 31, 2008.

Consolidated Statements of Comprehensive (Loss) Income for each of the years in the three year period ended December 31, 2008.

Consolidated Statements of Shareholders’ Equity for each of the years in the three year period ended December 31, 2008.

Consolidated Statements of Cash Flows for each of the years in the three year period ended December 31, 2008.

Notes to Consolidated Financial Statements.

(2)	Financial Statement Schedules
	Audited Financial Statements of Bluegreen Corporation for the three years ended December 31, 2008 (See Exhibit 99.1)
	Schedule III — Real Estate and Accumulated Depreciation at December 31, 2008.
	Schedules not listed above are omitted as the required information is either not applicable or is presented in the financial statements or related notes.

(3)	Exhibits
	The following exhibits are either filed as a part of this Report or are incorporated herein by reference to documents previously filed as indicated below:

Exhibit
Number	Description	Reference
3.1	Amended and Restated Articles of Incorporation	Exhibit 2.1 to the Registrant’s Registration Statement on Form 8-A, filed on December 12, 2003
3.2	Articles of Amendment to the Amended and Restated Articles of Incorporation	Appendix A to the Registrant’s 2007 Proxy Statement, filed on September 6, 2007
3.3	Articles of Amendment to the Amended and Restated Articles of Incorporation	Exhibit 3.3 to the Registrant’s Current Report on Form 8-K, filed on September 26, 2008
3.4	Articles of Amendment to the Amended and Restated Articles of Incorporation	Appendix A to the Registrant’s Definitive Information Statement on Schedule 14C, filed on September 4, 2008

118

Exhibit
Number	Description	Reference
3.5	Articles of Amendment to the Amended and Restated Articles of Incorporation	Exhibit 3.5 to the Registrant’s Current Report on Form 8-K, filed on September 26, 2008
3.6	Articles of Amendment to the Amended and Restated Articles of Incorporation	Exhibit 3.6 to the Registrant’s Current Report on Form 8-K, filed on September 30, 2008
3.7	Amended and Restated By-laws, as Amended	Exhibit 3.3 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2007, filed on March 17, 2008
4.1	Rights Agreement, dated as of September 29, 2008, by and between Woodbridge Holdings Corporation and American Stock Transfer and Trust Company, as Rights Agent	Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, filed on September 30, 2008
10.1	Woodbridge Holdings Corporation Amended and Restated 2003 Stock Incentive Plan	Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008, filed on November 10, 2008
10.2	Levitt Corporation 2004 Performance-Based Annual Incentive Plan	Appendix D to the Registrant’s 2004 Proxy Statement, filed on April 20, 2004
10.3	Amended and Restated Trust Agreement among Levitt Corporation, as Depositor, JP Morgan Chase Bank, National Association, as Property Trustee, Chase Bank USA, National Association, as Delaware Trustee, and the Administrative Trustees Named Therein, as Administrative Trustees, dated as of March 15, 2005	Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q, filed on May 10, 2005
10.4	Junior Subordinated Debenture between Levitt Corporation and JP Morgan Chase Bank, National Association, as Trustee, dated as of March 15, 2005	Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q, filed on May 10, 2005
10.5	Revolving Loan Agreement by and among Tradition Development Company, LLC, Horizons St. Lucie Development, LLC, Horizons Acquisition 7, LLC and Tradition Mortgage, LLC, as Borrower, Core Communities, LLC, as Guarantor, and Wachovia Bank, National Association, as Lender, dated as of April 8, 2005	Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q, filed on May 10, 2005
10.6	Unconditional Guaranty of Core Communities, LLC, as Guarantor, in favor of Wachovia Bank, National Association, dated as of April 8, 2005	Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q, filed on May 10, 2005
10.7	Amended and Restated Trust Agreement among Levitt Corporation, as Depositor, Wilmington Trust Company, as Property Trustee, Wilmington Trust Company, as Delaware Trustee, and the Administrative Trustees Named Therein, as Administrative Trustees, dated as of May 4, 2005	Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q, filed on May 10, 2005
10.8	Junior Subordinated Debenture between Levitt Corporation and Wilmington Trust Company, as Trustee, dated as of May 4, 2005	Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q, filed on May 10, 2005

119

Exhibit
Number	Description	Reference
10.9	Revolving Working Capital, Land Acquisition and Development and Residential Construction Borrowing Base Facility Agreement by and among Levitt and Sons, LLC and Ohio Savings Bank, dated as of March 21, 2007	Exhibit 10.11 to the Registrant’s Quarterly Report on Form 10-Q, filed on November 9, 2007
10.10	Assumption and Modification of Note and Loan Agreement by and among Levitt and Sons, LLC, Levitt Corporation and AmTrust Bank (f/k/a Ohio Savings Bank), dated as of October 25, 2007	Exhibit 10.12 to the Registrant’s Quarterly Report on Form 10-Q, filed on November 9, 2007
10.11	Woodbridge Executive Compensation Program	Filed with this Report
12.1	Statement re Computation of Ratios — Ratio of Earnings to Fixed Charges	Filed with this Report
14.1	Code of Business Conduct and Ethics	Exhibit 14.1 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2007, filed on March 19, 2008
21.1	Subsidiaries of the Registrant	Filed with this Report
23.1	Consent of PricewaterhouseCoopers LLP	Filed with this Report
23.2	Consent of Ernst & Young LLP	Filed with this Report
31.1	CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed with this Report
31.2	CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed with this Report
32.1	CEO Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Furnished with this Report
32.2	CFO Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Furnished with this Report
99.1	Audited financial statements of Bluegreen Corporation for the three years ended December 31, 2008	Filed with this Report

SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) 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.

	WOODBRIDGE HOLDINGS CORPORATION
March 19, 2009	By:	/s/ Alan B. Levan
		Alan B. Levan
		Chairman of the Board of Directors, Chief Executive Officer

120

     Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

SIGNATURE	TITLE	DATE
/s/ Alan B. Levan	Chairman of the Board and Chief Executive	March 19, 2009
Alan B. Levan	Officer (Principal Executive Officer)
/s/ John E. Abdo	Vice-Chairman of the Board	March 19, 2009
John E. Abdo
/s/ Seth M. Wise	President	March 19, 2009
Seth M. Wise
/s/ John K. Grelle	Chief Financial Officer	March 19, 2009
John K. Grelle	(Principal Financial and Accounting Officer)
/s/ James Blosser	Director	March 19, 2009
James Blosser
/s/ Darwin C. Dornbush	Director	March 19, 2009
Darwin C. Dornbush
/s/ S. Lawrence Kahn, III	Director	March 19, 2009
S. Lawrence Kahn, III
/s/ Alan Levy	Director	March 19, 2009
Alan Levy
/s/ Joel Levy	Director	March 19, 2009
Joel Levy
/s/ William R. Nicholson	Director	March 19, 2009
William R. Nicholson
/s/ William R. Scherer	Director	March 19, 2009
William R. Scherer

121

EX-10.11

Exhibit 10.11

AGREEMENT OF LIMITED PARTNERSHIP

OF

WOODBRIDGE EXECUTIVE INCENTIVE PLAN 1, LP

Date: March 13, 2009

TABLE OF CONTENTS

			Page
ARTICLE I GENERAL PROVISIONS				1
	1.1	Formation		1
	1.2	Name		1
	1.3	Purpose		1
	1.4	Principal Office		2
ARTICLE II DEFINITIONS; DETERMINATIONS				2
	2.1	Definitions		2
	2.2	Determinations		5
ARTICLE III INVESTED CAPITAL; CAPITAL ACCOUNTS				6
	3.1	Invested Capital		6
	3.2	Future Contributions		6
	3.3	Capital Accounts		6
ARTICLE IV DISTRIBUTIONS				6
	4.1	Distribution Policy		6
	4.2	Distributions of Net Proceeds		8
ARTICLE V GENERAL PARTNER				11
	5.1	Management Authority		11
	5.2	No Liability to Partnership or Limited Partners		12
	5.3	Indemnification		12
ARTICLE VI LIMITED PARTNERS				13
	6.1	Limited Liability		13
	6.2	No Participation in Management		13
	6.3	Transfer of Limited Partnership Interests		13
	6.4	No Termination		14
	6.5	Additional Limited Partners		14
	6.6	Reimbursement for Payments on Behalf of a Partner		15
ARTICLE VII DURATION AND TERMINATION				15
	7.1	Term		15
	7.2	Termination and Liquidation		15
ARTICLE VIII VALUATION OF PARTNERSHIP ASSETS				16
	8.1	Normal Valuation		16
	8.2	Restrictions on Transfer or Blockage		16

     -i-     

			Page
ARTICLE IX BOOKS OF ACCOUNTS; MEETINGS				17
	9.1	Books		17
	9.2	Fiscal Year		17
	9.3	Reports		17
ARTICLE X MISCELLANEOUS				17
	10.1	Amendments		17
	10.2	Successors		18
	10.3	Governing Law; Severability		18
	10.4	Notices		18
	10.5	Arbitration		18
	10.6	Miscellaneous		19
	10.7	No Third Party Beneficiaries		19

     -ii-     

AGREEMENT OF LIMITED PARTNERSHIP

OF

WOODBRIDGE EXECUTIVE INCENTIVE PLAN 1, LP

     THIS AGREEMENT OF LIMITED PARTNERSHIP is dated as of March 13, 2009 (the “Effective Date”) between the General Partner and the Limited Partners (as defined below).

     WHEREAS, the Partnership (as defined below) was formed pursuant to (a) the Certificate (as defined below);

     NOW, THEREFORE, the parties hereto agree as follows:

ARTICLE I
GENERAL PROVISIONS

1.1 Formation

     The Partners hereby agree to form a limited partnership (the “Partnership”) pursuant to and in accordance with the Florida Revised Uniform Limited Partnership Act of 2005, as amended from time to time (the “Partnership Act”). The term of the Partnership (the “Term”) commenced upon the filing of the Certificate of Limited Partnership (the “Certificate”) with the Secretary of State of Florida (the date of such filing is referred to herein as the date of “formation” of the Partnership) and shall continue until dissolution and termination of the Partnership in accordance with the provisions of ARTICLE VII hereof.

1.2 Name

     The name of the Partnership shall be Woodbridge Executive Incentive Plan 1, LP, or such other name or names as the General Partner may designate from time to time.

1.3 Purpose

     The Partnership is organized for the principal purpose of (i) serving as the “Residual Partner” or similar partner or member entitled to receive Carried Interest Distributions from one or more of the following: (1) PF Program Partnership, LP, (2) Core Communities, LLC, (3) CCCH Program Partnership 1, LP, (4) Bluegreen Program Partnership, LP, (5) ODI Program Partnership, LLLP, and (6) Snapper Creek Program Partnership 1, LP, and any other partnership (or other entity) established by Woodbridge that is expected to substantially complete its investment phase by December 31, 2010 (each a “Program Partnership,” and collectively, the “Program Partnerships”); and (ii) engaging in such other activities incidental or ancillary thereto as the General Partner deems necessary or advisable.

1.4 Principal Office

     The General Partner shall maintain a principal office in Fort Lauderdale, Florida, or at such other place or places as the General Partner may from time to time designate.

ARTICLE II
DEFINITIONS; DETERMINATIONS

2.1 Definitions

     Capitalized terms used in this Agreement have the meanings set forth below or as otherwise specified herein:

     “Agreement” means this Agreement of Limited Partnership of Woodbridge Executive Incentive Plan 1, LP, as amended or modified from time to time in accordance with its terms.

     “Alternative Clawback Reserve” has the meaning set forth in Section 4.2(b).

     “Capital Account” is the account established for each Partner in accordance with the provisions of Appendix A hereto.

     “Carried Interest Distributions” means those amounts distributed to the Partnership as a result of the Partnership’s right to receive amounts designated as “Carry Distributions” in a Program Partnership’s governing documents or similar distributions of profits for services rendered to or for the benefit of any individual Program Partnership. For the avoidance of doubt, the amount of Carried Interest Distributions received from any single Program Partnership will be determined pursuant to the provisions and terms of any partnership agreement governing such Program Partnership.

     “Cause Event” means, with respect to any Limited Partner, the commission of: (a) any act or omission constituting gross negligence, willful misconduct, or fraud in the performance of his or her duties or obligations as an employee of the applicable Woodbridge Employer, (b) any material breach of any agreement between the Limited Partner and the applicable Woodbridge Employer, (c) any willful refusal to perform a duty as directed by the applicable Woodbridge Employer if such duty is within the scope of such Limited Partner’s duties to the applicable Woodbridge Employer, or (d) any crime resulting in a conviction, whether or not involving the applicable Woodbridge Employer, which constitutes a felony in the jurisdiction involved (other than motor vehicle felonies for which only a non-custodial penalty is imposed).

     “Certificate” has the meaning set forth in Section 1.1.

     “Clawback Reserve” has the meaning set forth in Section 4.2(b).

     “Code” means the U.S. Internal Revenue Code of 1986, as amended from time to time.

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     “Covered Party” means each of the Partners, a director, officer, partner, or member (or a former director, officer, partner or member) of any Partner, and to the extent approved by the General Partner in its sole discretion, any other employee of a Partner or an agent acting at the direction of the General Partner, and in any such case, the heirs and legal representatives of any such person.

     “Effective Date” has the meaning set forth in the Recitals.

     “Fair Market Value” of a security or a Program Asset means the amount that would be realized if such security or Program Asset had been sold at its “value” (determined in accordance with Article VIII).

     “Family Related Partner” means, with respect to any Limited Partner, any Person who is a spouse or lineal descendent of the parents of such Limited Partner or any Person which is a trust formed by such Limited Partner for investment by or for the benefit of such Limited Partner’s spouse or any lineal descendants of the parents of such Limited Partner or of such Limited Partner’s spouse and/or any charitable organization; provided that any cause of action or other dispute arising in relation to a Family Related Partner’s interest may only be pursued by the Limited Partner associated with such Family Related Partner, except if such Limited Partner has died or become legally incapacitated. For the avoidance of doubt, a Family Related Partner’s Vested Percentage shall be equivalent to the Vested Percentage of the Limited Partner associated with such Family Related Partner.

     “GAAP” has the meaning set forth in Section 9.3.

     “General Partner” means Woodbridge Fund I, LLC, in its capacity as general partner of the Partnership, and any successor general partner of the Partnership.

     “Impairment” means, with respect to a Program Asset, a determination by the General Partner that the Program Asset is not expected to be able to provide to the Program Partnership that invested in such Program Asset a return of its capital invested in that Program Asset and a 10% compounded annual return thereon, determined by capitalizing the portion of expenses of the Program Partnership that are deemed allocable to such Program Asset. The General Partner’s determination that a Program Asset has suffered an Impairment for purposes of this Agreement shall be independent of any determination that the value of the Program Asset is reduced for purposes of the financial statements prepared under generally accepted accounting principles.

     “Initial Investment Date” means, with respect to a Program Partnership, the date Woodbridge first made a contribution to the capital of such Program Partnership.

     “Invested Capital” has the meaning set forth in Section 3.1.

     “Investment Proceeds” means the gross investment returns (whether in the form of cash, securities, or other property) received by a Program Partnership in respect of the Program Partnership’s investment of capital in any Program Assets (i.e., in its capacity as an investor and not with respect to the provision of any services with respect to such Program Assets or to any other investor in such assets). For the avoidance of doubt, the amount of Investment Proceeds shall be determined without regard to any management fees, carried interest, or similar deductions that may be charged by the general partner or manager of the Program Partnership to any investment vehicle through which such Program Partnership holds any of its investments.

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     “Limited Partners” means any Persons designated as Limited Partners on Schedule I hereof, in their capacities as limited partners of the Partnership, or any other Persons that are admitted as Limited Partners in accordance with the terms hereof, in each case for so long as such Persons continue to be Limited Partners hereunder, and “Limited Partner” shall mean each of such Persons individually.

     “Net Proceeds” has the meaning set forth in Section 4.1(a).

     “Overall Hurdle Clawback” has the meaning set forth in Section 4.2.

     “Partners” means collectively the General Partner, the Limited Partners, and any other Person that is admitted to the Partnership as a partner in accordance with the terms hereof, and “Partner” shall mean each of such persons individually.

     “Partnership” has the meaning set forth in Section 1.1.

     “Partnership Act” has the meaning set forth in Section 1.1.

     “Percentage Interest” means, with respect to the General Partner, 10%, and, with respect to each Limited Partner, the percentage interest as set forth for such Limited Partner on Schedule I hereof, which may vary, as determined by the General Partner, for each Program Partnership, and which will be adjusted by the vesting and forfeiture provisions described in Article IV. For the avoidance of doubt, a Limited Partner’s Percentage Interest in a Program Partnership that is not a Tenured Program with respect to such Limited Partner shall be 0%.

     “Person” means an individual, a partnership (general, limited, or limited liability), a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, or a governmental, quasi-governmental, judicial, or regulatory entity or any department, agency, or political subdivision thereof.

     “Program Assets” means those assets held by a Program Partnership as part of its investment program, and “Program Asset” shall mean each of such Program Assets individually.

     “Program Clawback Obligation” means the obligation of the Partnership, as the recipient of Carried Interest Distributions from a Program Partnership, to refund a proportionate share of the Carried Interest Distributions received in accordance with the terms of the limited partnership agreement governing such Program Partnership.

     “Program Partnership” has the meaning set forth in Section 1.3.

     “Reimbursing Partner” has the meaning set forth in Section 6.6(a).

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     “Reserve Distributions” has the meaning set forth in Section 4.2(b).

     “Tenured Program” means, with respect to any Limited Partner, each Program Partnership which has an Initial Investment Date during the period when such Person was a Limited Partner (and not a Terminated Limited Partner), or any other Program Partnership in which such Person has been granted a Percentage Interest by the General Partner. For the avoidance of doubt, a Limited Partner will not receive a Percentage Interest with respect to any Program Partnership that is not a Tenured Program with respect to such Limited Partner.

     “Term” has the meaning set forth in Section 1.1.

     “Terminated Limited Partner” means any Limited Partner whose employment with the Woodbridge Employer is terminated for any reason, whether voluntarily or involuntarily, and with or without cause. In the General Partner’s discretion, a Limited Partner whose employment with the Woodbridge Employer is terminated contemporaneously with such Limited Partner becoming employed by another entity within Woodbridge shall not be treated as having been terminated, and the new employer shall become the Woodbridge Employer for purposes of this definition. For purposes of this Agreement, in the case of any Family Related Partner, the termination of employment with the Woodbridge Employer of the Limited Partner with whom such Family Related Partner is associated shall cause such Family Related Partner to become a Terminated Limited Partner.

     “Transfer” means a transfer in any form, including a sale, assignment, conveyance, pledge, mortgage, encumbrance, hypothecation, exchange, gift, or other disposition, or the act of so doing, whether voluntarily, by operation of law, pursuant to judicial process, or otherwise as the context requires.

     “Vested Percentage” has the meaning set forth in Section 4.1(d).

     “Woodbridge” means Woodbridge Holdings Corporation or any direct or indirect subsidiary of such corporation.

     “Woodbridge Employer” means, with respect to any Limited Partner, the entity within Woodbridge that is the employer of such Limited Partner.

2.2 Determinations

     Unless otherwise indicated, any determinations or calculations conducted pursuant to this Agreement shall be determined or calculated as of the date of such determination or calculation.

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ARTICLE III
INVESTED CAPITAL; CAPITAL ACCOUNTS

3.1 Invested Capital

     As of the Effective Date, each Partner shall contribute $250 to the capital of the Partnership (“Invested Capital”). The right of each Limited Partner to receive Net Proceeds represents a profits interest received for services rendered or to be rendered to or for the benefit of the Partnership.

3.2 Future Contributions

     (a) Other than the required Invested Capital described in Section 3.1, any reimbursement payment pursuant to Section 6.6, or as may be required by applicable law, no Partner shall have any further obligation to contribute additional Invested Capital to the Partnership; provided that if there is a Program Clawback Obligation, the General Partner shall be required to contribute 10% of such amount (reflecting its sharing ratio in the Net Proceeds of the Partnership) to the Partnership to be used to satisfy such Program Clawback Obligation to the applicable Program Partnership; and provided further that the General Partner shall be required to make special distributions to the Partnership to the extent that such special distributions are necessary to reduce any Limited Partner’s Alternative Clawback Reserve as described in Section 4.2(d).

     (b) The General Partner, in its discretion, whether or not in connection with the admission of any new Partner to the Partnership in accordance with Section 6.5, may permit a Partner to contribute additional Invested Capital to the Partnership under such circumstances as may be determined by the General Partner.

     (c) The General Partner may cause the Partnership to borrow funds, including from Woodbridge, under such terms as the General Partner may determine, in order to permit the Partnership to meet its liquidity needs.

3.3 Capital Accounts

     (a) A capital account (“Capital Account”) shall be maintained for each Partner in accordance with Appendix A hereto.

ARTICLE IV
DISTRIBUTIONS

4.1 Distribution Policy

     (a) The General Partner shall periodically cause excess cash or cash equivalents held in the Partnership (“Net Proceeds”) to be distributed to the Limited Partners in accordance with Section 4.2.

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     (b) Distributions may be in the form of cash, property, or securities. Except as otherwise provided herein, for purposes of this Agreement, an in-kind distribution of non-cash property shall be treated as if an amount of cash equal to the Fair Market Value of such property had been distributed.

     (c) The General Partner shall determine the particular Program Partnership or the particular Program Partnerships that are responsible for generating the Net Proceeds being distributed.

     (d) A Limited Partner’s right to share in the Net Proceeds with respect to a particular Program Partnership shall be subject to the following vesting provisions. A Limited Partner’s “Vested Percentage” with respect to a particular Program Partnership shall be the vested amount with respect to that Program Partnership at the date such Limited Partner becomes a Terminated Limited Partner.

(i)	Distributions or Termination of Program Partnership While Employed. A Limited Partner will have a Vested Percentage of 100% in all Net Proceeds received by the Partnership from such Limited Partner’s Tenured Programs, if those Net Proceeds are received prior to the Limited Partner becoming a Terminated Limited Partner.
(ii)	Termination for Cause. A Limited Partner will have a Vested Percentage of 0% in all Net Proceeds received by the Partnership from such Limited Partner’s Tenured Programs, if those Net Proceeds are received after such Limited Partner has become a Terminated Limited Partner because of the occurrence of a Cause Event with respect to such Limited Partner.
(iii)	Termination Not for Cause. A Limited Partner will have a Vested Percentage of 75% in all Net Proceeds received by the Partnership from such Limited Partner’s Tenured Programs, if those Net Proceeds are received after such Limited Partner has become a Terminated Limited Partner because (A) the Woodbridge Employer terminated the employment for a reason other than the occurrence of a Cause Event with respect to such Limited Partner or (B) of the death, permanent disability, or legal incapacity of such Limited Partner.
(iv)	Voluntary Resignation. A Limited Partner will have a Vested Percentage as determined pursuant to the following sentence in all Net Proceeds received by the Partnership from such Limited Partner’s Tenured Programs if those Net Proceeds are received after such Limited Partner has become a Terminated Limited Partner because the Limited Partner voluntarily left the employment of the Woodbridge Employer. For purposes of this clause (iv), the Vested Percentage shall be determined separately for each Program Partnership and shall equal: (x) 25% upon the Initial Investment Date, and (y) an additional 12.5 percentage points per year upon each of the first four anniversaries of the Initial Investment Date, for a maximum Vested Percentage of 75%.

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(v)	For the avoidance of doubt, a Limited Partner’s right to receive Net Proceeds distributable to such Limited Partner shall be unaffected by these vesting provisions until such time as the Limited Partner becomes a Terminated Limited Partner.
(vi)	Notwithstanding the foregoing, a Limited Partner will at no time have the right to receive Net Proceeds with respect to any Program that is not a Tenured Program with respect to such Limited Partner.

     (e) 83(b) Election. Each Limited Partner shall make a timely election under section 83(b) of the Code with respect to such Limited Partner’s interest in any Net Proceeds.

4.2 Distributions of Net Proceeds

     (a) Distributions to the Partners. Subject to the holdback provisions of Section 4.2(b) and the provisions regarding a Terminated Limited Partner in Section 4.1(d), Net Proceeds attributable to a particular Program Partnership shall be distributed as follows:

(i)	10% to the General Partner; and
(ii)	The remaining 90% to and among the Limited Partners based on their relative Percentage Interests with respect to the Program Partnership giving rise to such Net Proceeds.

For purposes of clause (ii) above, if a Limited Partner is, at the time of the distribution, a Terminated Limited Partner, his or her Percentage Interest with respect to such Program Partnership shall be reduced by multiplying such Limited Partner’s Percentage Interest by the Vested Percentage. The General Partner may reallocate the forfeited Percentage Interest to such other Limited Partners, and in such amounts, as the General Partner may determine. If the General Partner does not so reallocate such forfeited Percentage Interest, the forfeited Percentage Interest will automatically be reallocated to each Limited Partner who is not a Terminated Limited Partner pro rata based on such Limited Partners’ relative Percentage Interests in the applicable Program Partnership. For the avoidance of doubt, the General Partner is not permitted to reallocate any of the forfeited Percentage Interest to itself or to any other Woodbridge entity.

     (b) Establishment of Clawback Reserve and Alternative Clawback Reserve.

(i) Notwithstanding the foregoing provisions of this Section 4.2, 25% (adjusted as provided in clause (ii) below) of any Net Proceeds that are available for distribution to a Limited Partner shall be withheld by the Partnership, and a separate bookkeeping account (a “Clawback Reserve”) shall be established for such Limited Partner by the Partnership for tracking deposits, withdrawals, and interest earned with respect to such account. The Clawback Reserve will be increased by amounts moved by a Program Partnership from an IP Clawback Reserve in accordance with the terms of the governing agreement of such Program Partnership. The Partnership may aggregate each of the Clawback Reserves within a single interest-bearing Partnership bank account.

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(ii)

Each time that the Partnership is to make a distribution of Net Proceeds earned with respect to a particular Program Partnership, the General Partner will review the assets within each other Program Partnership to determine whether any of the assets within such Program Partnerships have suffered an Impairment that has not been reversed, and if so, the effect that such Impairment would have on the ability of Woodbridge (in its capacity as an investor in such Program Partnership) to receive proceeds from the Program Partnership sufficient to provide Woodbridge with at least a 10% annual cumulative compounded internal rate of return on its Invested Capital in such Program Partnership. If the General Partner determines that the Impairment would prevent the minimum return from being achieved, the percentage of Net Proceeds to be contributed to the Clawback Reserve may be increased by the General Partner (but not in excess of 75%) in order to add to the Clawback Reserve an amount deemed necessary to fund the Overall Hurdle Clawback (as defined below) that is anticipated to arise because of such Impairment.

(iii)

Notwithstanding the foregoing, in the General Partner’s discretion, rather than depositing amounts in the Clawback Reserve of a Limited Partner, the General Partner may cause such amounts to be distributed to the General Partner, which will be credited to a special bookkeeping account (an “Alternative Clawback Reserve”) for the benefit of such Limited Partner (such amounts, “Reserve Distributions”). The balance in the Alternative Clawback Reserve shall be increased from time to time by an interest factor equal to the interest earned on the Clawback Reserve (or, if there is no Clawback Reserve, on the rate of interest that the Partnership would receive on an interest-bearing bank account). In addition, the Alternative Clawback Reserve will be increased by amounts moved by a Program Partnership from an Alternative Clawback Reserve in accordance with the terms of the governing agreement of such Program Partnership.

     (c) Clawback Obligation and Overall Hurdle Clawback.

(i) Obligations of a Limited Partner.

(A) At the end of the term of each Program Partnership (as defined in the governing documents applicable to such Program Partnership), each Limited Partner will be responsible for a share of any Program Clawback Obligation attributed to a Program Partnership from which such Limited Partner received Net Proceeds and any Carry Distributions (as defined by the terms of such Program Partnership) from such Program Partnership. Such share will be based on such Limited Partner’s pro rata share of all proceeds received by all Limited Partners with respect to such Program Partnership. Each Limited Partner’s share of the Program Clawback Obligation shall be satisfied as provided below.

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(B) Additionally, at the expiration of the Term of the Partnership, each Limited Partner will be responsible for a share of the amount of the additional distributions (the “Overall Hurdle Clawback”), if any, that would need to be distributed to Woodbridge so that Woodbridge would have received aggregate distributions with respect to its interest in the Program Partnerships and this Partnership (including Reserve Distributions not returned) to provide it with at least a 10% annual cumulative compounded internal rate of return on its aggregate Invested Capital (as defined in the partnership agreements of the relevant Program Partnerships). Each Limited Partner’s relative share of the Overall Hurdle Clawback will be based on the aggregate amount of Net Proceeds (including, for this purpose, any Carry Distributions (as defined by the terms of the Program Partnerships) from all Program Partnerships) received by the Limited Partners (and not previously returned pursuant to a Program Clawback Obligation) over the Term of the Partnership compared to the unreturned Net Proceeds (modified as described above) received by all Partners. Each Limited Partner’s share of the Overall Hurdle Clawback shall be satisfied as provided below.

(ii) Obligation of the General Partner. At the expiration of the Term of the Partnership, the General Partner shall be required to pay to any Program Partnership an amount equal to the General Partner’s share of the Program Clawback Obligation of such Program Partnership. The General Partner shall pay its share by contributing Invested Capital to the applicable Program Partnership.

     (d) Satisfaction of Obligations.

(i)

To satisfy a Limited Partner’s (A) share of the Program Clawback Obligation and (B) share of the Overall Hurdle Clawback, amounts will first be taken from such Limited Partner’s Alternative Clawback Reserve, which, in the case of the Program Clawback Obligation, will be paid to the applicable Program Partnership, and, in the case of the Overall Hurdle Clawback, will be retained by the General Partner on behalf of Woodbridge. To the extent such Limited Partner’s share of either obligation is not satisfied, amounts will be taken from such Limited Partner’s Clawback Reserve, which, in the case of the Program Clawback Obligation, will be paid to the applicable Program Partnership, and, in the case of the Overall Hurdle Clawback, will be specially distributed to the General Partner on behalf of Woodbridge.

(ii)

To the extent amounts in a Limited Partner’s Alternative Clawback Reserve are not needed to satisfy such Limited Partner’s share of the Program Clawback Obligation or share of the Overall Hurdle Clawback, an amount of Net Proceeds that would otherwise be payable to the General Partner equal to such excess, shall instead be specially distributed to the applicable Limited Partner without regard to Section 4.2(a)(i), which distributions will reduce on a dollar-for-dollar basis the amount in such Limited Partner’s Alternative Clawback Reserve. If the full amount of such excess cannot be so distributed, the shortfall shall be contributed by the General Partner to the Partnership for special distribution to the applicable Limited Partner.

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     (e) Release of Amounts to the Limited Partner.

(i)

At the expiration of the Term of the Partnership, amounts in a Limited Partner’s Clawback Reserve (including any interest earned with respect to such amounts) not needed to fund any clawback obligation will be released to the applicable Limited Partner.

(ii)

Prior to the expiration of the Term of the Partnership, the General Partner, in its discretion, may release amounts from a Limited Partner’s Alternative Clawback Reserve by (A) causing special distributions reducing such Alternative Clawback Reserve or causing contributions and special distributions, each as described in clause (d)(ii), or (B) distributing amounts to a Limited Partner from such Limited Partner’s Clawback Reserve, in either case to the extent the General Partner determines that such special distributions or amounts are not necessary to secure any clawback obligation of such Limited Partner.

     (f) General Provisions Regarding Clawback Obligations.

(i)

A Limited Partner’s share of the Overall Hurdle Clawback and share of any Program Clawback Obligation will be paid only to the extent of the aggregate amount of such Limited Partner’s Clawback Reserve and Alternative Clawback Reserve. In no event will a Limited Partner be personally liable for a clawback obligation that exceeds the aggregate amount of such Limited Partner’s Clawback Reserve and Alternative Clawback Reserve.

(ii)

In no event shall a Limited Partner be responsible for another Limited Partner’s share of the Overall Hurdle Clawback or for another Partner’s share of any Program Clawback Obligation.

ARTICLE V
GENERAL PARTNER

5.1 Management Authority

     (a) The management of the Partnership shall be vested exclusively in the General Partner, and the General Partner shall have full control over the business and affairs of the Partnership. The General Partner shall have the power on behalf and in the name of the Partnership to carry out any and all of the objectives and purposes of the Partnership and to perform all acts and enter into and perform all contracts and other undertakings which the General Partner, in its reasonable discretion, deems necessary, advisable, or incidental thereto.

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     (b) Third parties dealing with the Partnership can rely conclusively upon the General Partner’s certification that it is acting on behalf of the Partnership and that its acts are authorized. The General Partner’s execution of any agreement on behalf of the Partnership is sufficient to bind the Partnership for all purposes.

5.2 No Liability to Partnership or Limited Partners

     No Covered Party shall be liable to the Partnership or any Partner for any action taken, or failure to act, on behalf of the Partnership (or on behalf of the General Partner with respect to the Partnership) if such Covered Party (a) acted honestly and in good faith with a view to the best interests of the Partnership, or, as the case may be, to the best interests of the other entity for which the Covered Party acted as director, officer, employee, agent, or in a similar capacity at the request of the General Partner for the benefit of the Partnership; and (b) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, the Covered Party had reasonable grounds for believing that the Covered Party’s conduct was lawful. In addition, any Covered Party who has delegated to any other Person (other than to another Covered Party) any part of its functions (including participating in the management of or rendering professional advice or other services in respect of any Program Asset) shall not be liable, responsible, or accountable in damages or otherwise to the Partnership or to any Partner for any loss incurred or suffered by reason of any action by such other Person unless the delegating Covered Party did not (x) act honestly and in good faith with a view to the best interests of the Partnership, or, as the case may be, to the best interests of the other entity for which the Covered Party acted as director, officer, employee, agent, or in a similar capacity at the request of the General Partner for the benefit of the Partnership; and (y) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, have reasonable grounds for believing that the Covered Party’s conduct was lawful with respect to such delegation. For the avoidance of doubt, nothing in the immediately preceding sentence shall be deemed to prevent the Partnership or the General Partner from asserting a cause of action against the delegate of a Covered Party for any loss caused by the action, or failure to act, of such delegate and the General Partner shall cause the Partnership to effectively pursue any such cause of action to the extent it would be in the reasonable best interests of the Partnership to do so.

5.3 Indemnification

     (a) Subject to Section 5.3(c) below, the Partnership shall indemnify each Covered Party against all costs, charges, and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by the Covered Party in respect of any civil, criminal, administrative, investigative, or other proceeding in which the Covered Party is involved because of that association with the Partnership or the General Partner, if such Covered Party (a) acted honestly and in good faith with a view to the best interests of the Partnership or, as the case may be, to the best interests of the other entity for which the Covered Party acted as director, officer, employee, agent, or in a similar capacity at the request of the General Partner for the benefit of the Partnership; and (b) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, the Covered Party had reasonable grounds for believing that the Covered Party’s conduct was lawful.

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     (b) Subject to Section 5.3(c) below, the Partnership shall advance moneys to a Covered Party for the costs, charges, and expenses of a proceeding referred to in Section 5.3(a). The Covered Party shall repay the moneys if the Covered Party does not fulfill the conditions of Section 5.3(a).

     (c) Before seeking indemnification from the Partnership, a Covered Party seeking such indemnification shall use all reasonable efforts to seek indemnification from the following sources (in the following order of priority): first, from any portfolio company of a Program Partnership, including any insurance provided by, or purchased on behalf of a Covered Party by, such portfolio company; and second, from the General Partner, including from any insurance provided by the General Partner. To the extent any unpaid indemnification obligation remains after the Covered Party has received indemnification from the foregoing sources, the Partnership shall indemnify such Covered Party for such shortfall.

ARTICLE VI
LIMITED PARTNERS

6.1 Limited Liability

     No Limited Partner shall be personally liable for any obligations of the Partnership or have any obligation to make contributions to the Partnership other than such Limited Partner’s initial contribution pursuant to Section 3.1 or as required pursuant to Section 4.2 or Section 6.6; provided that a Limited Partner shall be required to return any distribution made to it in error. To the extent any Limited Partner is required by the Partnership Act to return to the Partnership any distributions made to it and does so, such Limited Partner shall have a right of contribution from each other Limited Partner similarly liable to return distributions made to it to the extent that such Limited Partner has returned a greater percentage of the total distributions made to it and required to be returned by it than the percentage of the total distributions made to such other Limited Partner and so required to be returned by it.

6.2 No Participation in Management

     The Limited Partners (in their capacity as such) shall not participate in the control, management, direction, or operation of the affairs of the Partnership and shall have no power to bind the Partnership.

6.3 Transfer of Limited Partnership Interests

     (a) A Limited Partner may not Transfer all or a portion of its interest in the Partnership without the consent of the General Partner; provided that the General Partner shall not unreasonably withhold its consent to any Transfer by a Limited Partner to a Family Related Partner of such Limited Partner.

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     (b) Unless and until the General Partner consents to the admission of a transferee as a substituted Limited Partner in accordance with this Section 6.3, the transferor shall remain liable for all liabilities and obligations relating to the transferred beneficial interest, if any, and the transferee shall become an assignee of only a beneficial interest in Partnership profits, losses, and distributions of such interest. No consent of any other Limited Partner shall be required as a condition precedent to any Transfer.

     (c) Unless the General Partner otherwise determines in its sole discretion, the transferor and transferee of any Limited Partner’s interest shall be jointly and severally obligated to reimburse the General Partner and the Partnership for all reasonable expenses (including attorneys’ fees and expenses) of any Transfer or proposed Transfer of a Limited Partner’s interest, whether or not consummated.

     (d) Any substituted Limited Partner admitted to the Partnership with the consent of the General Partner shall succeed to all the rights and be subject to all the obligations of the transferring or assigning Limited Partner with respect to the interest to which such Limited Partner was substituted. The General Partner may modify Schedule I hereof to reflect such admittance of any substituted Limited Partner. Such substituted Limited Partner shall be treated as having received all of the allocations and distributions received by the transferring or assigning Limited Partner, if any.

     (e) Any Transfer that violates this Section 6.3 shall be void and the purported buyer, assignee, transferee, pledgee, mortgagee, or other recipient shall have no interest in or rights to Partnership assets, profits, losses, or distributions, and neither the General Partner nor the Partnership shall be required to recognize any such purported interest or rights.

6.4 No Termination

     Neither the substitution, death, incompetency, dissolution (whether voluntary or involuntary), nor bankruptcy of a Limited Partner shall affect the existence of the Partnership, and the Partnership shall continue for the Term of the Partnership until its existence is terminated as provided herein.

6.5 Additional Limited Partners

     Additional Limited Partners will be admitted only with the consent of the General Partner and each affected Limited Partner on such terms agreed upon by the General Partner, such affected Limited Partners, and the Person seeking admission to the Partnership. For the avoidance of doubt, a Limited Partner is affected by the admission of a new Person to the Partnership if such Limited Partner’s Percentage Interest is modified.

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6.6 Reimbursement for Payments on Behalf of a Partner

     (a) If the Partnership is obligated to pay any amount to a governmental agency or body or to any other Person (or otherwise make a payment) because of a Partner’s status or otherwise specifically attributable to a Partner (including, without limitation, federal withholding taxes with respect to foreign partners, state withholding taxes, state personal property taxes, state unincorporated business taxes, etc.) then such Partner (the “Reimbursing Partner”) shall reimburse the Partnership in full for the entire amount paid (including, without limitation, any interest, penalties, and expenses associated with such payment). At the election of the General Partner, the amount to be reimbursed may be charged against the Capital Account of the Reimbursing Partner, and the Partnership shall reduce subsequent distributions which would otherwise be made to the Reimbursing Partner until the Partnership has recovered the amount to be reimbursed; provided that the amount of such reduction shall be deemed to have been distributed for all purposes of this Agreement, but such deemed distribution shall not further reduce the Reimbursing Partner’s Capital Account.

     (b) A Partner’s obligation to reimburse the Partnership under this Section 6.6 shall survive the termination, dissolution, liquidation, and winding-up of the Partnership, and for purposes of this Section 6.6, the Partnership shall be treated as continuing in existence.

ARTICLE VII
DURATION AND TERMINATION

7.1 Term

     The Partnership shall continue until the occurrence of any of the following events: (i) the entry of a decree of judicial dissolution under the Act or (ii) an election by the General Partner, with the consent of the majority of Limited Partners (as determined by the weighted average of a Limited Partner’s Percentage Interest in all Program Partnerships taking into account the effects of vesting provisions), to dissolve the Partnership.

7.2 Termination and Liquidation

     (a) The Partnership shall not terminate immediately upon the expiration of its Term under Section 7.1, but shall cease to engage in further business except to the extent necessary to promptly wind-up its affairs, perform existing contracts, and preserve the value of the Program Assets.

     (b) During the course of winding-up the Partnership all of the provisions of this Agreement shall continue to bind the parties and apply to the activities of the Partnership except as specifically provided to the contrary, but there shall be no distributions to the Partners except as provided in this Section 7.2.

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     (c) Upon the expiration of the Partnership’s Term, the General Partner shall take such actions as it may think fit for winding-up the Partnership and liquidating the Partnership’s assets, including:

(i)	The filing of all certificates and notices of dissolution as are required by applicable law; and
(ii)	The orderly liquidation of the Partnership’s assets.

The General Partner in taking such actions may exercise and shall have the benefit of all rights, powers, and discretions vested in the General Partner pursuant to the provisions of this Agreement.

     (d) Upon dissolution of the Partnership, all Partnership assets shall be distributed or used as follows and in the following order of priority:

(i)	For the payment of the debts and liabilities of the Partnership, including, without limitation, the expenses of liquidation;
(ii)	For the setting up of any reserves that the General Partner may deem reasonably necessary for any liabilities or obligations of the Partnership; and
(iii)	To the Partners in accordance with the provisions of Article IV.

     (e) The Partnership shall be terminated only after the Partnership assets have been distributed as provided in this Section 7.2.

ARTICLE VIII
VALUATION OF PARTNERSHIP ASSETS

8.1 Normal Valuation

     For purposes of this Agreement, the value of any asset as of any date (or in the event such date is a holiday or other day which is not a business day, as of the immediately preceding business day) shall be valued by the General Partner in good faith using methods it considers appropriate.

8.2 Restrictions on Transfer or Blockage

     Any security which is held under a representation that it has been acquired for investment purposes and not with a view to public sale or distribution, or which is held subject to any other restriction on transfer, or where the size of the Partnership’s holdings compared to the trading volume would adversely affect the marketability of such security, shall be valued at such discount as the General Partner deems reasonably necessary to reflect the marketability and value of such security.

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ARTICLE IX
BOOKS OF ACCOUNTS; MEETINGS

9.1 Books

     The Partnership shall maintain complete and accurate books of accounts of the Partnership’s affairs at the Partnership’s principal office.

9.2 Fiscal Year

     The fiscal year of the Partnership shall be the calendar year, unless otherwise determined by the General Partner.

9.3 Reports

     The General Partner shall furnish to each Partner the following information and reports prepared in accordance with U.S. generally accepted accounting principles (“GAAP”):

     (a) As soon as practicable after the end of each fiscal year commencing with the first year in which the Partnership is in operation for a full fiscal year, (i) financial statements for the Partnership for such year (audited by a firm of independent certified public accountants of recognized national standing selected by the General Partner), and (ii) a statement of each Partner’s closing Capital Account balance as of the end of such year; and

     (b) As soon as practicable after the end of each fiscal year, the Partnership’s United States federal income tax return, including such Partner’s Schedule K-1 for such fiscal year.

ARTICLE X
MISCELLANEOUS

10.1 Amendments

     This Agreement may be amended by the written consent of the General Partner; provided that if such amendment would adversely affect any Limited Partner, then the Limited Partner so affected must consent to such amendment. Notwithstanding anything in this Agreement to the contrary, this Agreement may be amended by the General Partner without the consent of any other Partner in order to cure any ambiguity or error, make an inconsequential revision, provide clarity, comply with any law or regulation or correct or supplement any provision herein that may be defective or inconsistent with any other provisions herein; provided that, except with respect to amendments necessary to comply with any law or regulation, such amendment does not materially and adversely affect any Limited Partner.

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10.2 Successors

     Except as otherwise provided herein, this Agreement shall inure to the benefit of and be binding upon the Partners and their legal representatives, heirs, successors, and assigns.

10.3 Governing Law; Severability

     This Agreement shall be governed by and construed in accordance with the laws of the State of Florida, and, to the maximum extent possible, in such manner as to comply with all the terms and conditions of the Partnership Act. If it is determined by a court of competent jurisdiction that any provision of this Agreement is invalid under applicable law, such provision shall be ineffective only in such jurisdiction and only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement.

10.4 Notices

     All notices, demands, and other communications to be given and delivered under or by reason of provisions under this Agreement shall be in writing and shall be deemed to have been given on the date when personally delivered, when mailed by first class mail, when sent by facsimile or transmitted by email or the internet, or when sent by reputable overnight courier service, in each case to the recipient at the address, facsimile number, or email address set forth in Schedule I hereof or to such other address, facsimile number, or email address, or to the attention of such other Person as has been indicated in writing to the General Partner.

10.5 Arbitration

     The parties to this Agreement shall each use good faith efforts for a period of 30 days (or such longer time as agreed to by the applicable parties) to try to resolve any controversy, dispute, or claim arising out of or in connection with this Agreement, or the breach, termination, or validity hereof. Thereafter, if such controversy, dispute, or claim remains, it shall be settled by final and binding arbitration to be conducted by an arbitration tribunal in Fort Lauderdale, Florida, pursuant to the rules of the American Arbitration Association. The arbitration tribunal shall consist of three arbitrators. The party initiating the controversy, dispute, or claim that led to arbitration shall nominate one arbitrator in the request for arbitration and the other party shall nominate a second arbitrator in the answer thereto within 30 days of receipt of the request; provided that if there are multiple initiating or answering parties, the arbitrator selected must be reasonably acceptable to all initiating or answering parties, as applicable. The two arbitrators so named will then jointly appoint the third arbitrator. If the answering party fails to nominate its arbitrator within the 30-day period, or if the arbitrators named by the parties fail to agree on the third arbitrator within 60 days, the office of the American Arbitration Association in New York, New York shall make the necessary appointments of such arbitrator(s). The decision or award of the arbitration tribunal (by a majority determination, or if there is no majority, then by the determination of the third arbitrator, if any) shall be final, and judgment upon such decision or award may be entered in any competent court or application may be made to any competent court for judicial acceptance of such decision or award and an order of enforcement. In the event of any procedural matter not covered by the aforesaid rules, the procedural law of the State of Florida shall govern.

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10.6 Miscellaneous

     This Agreement (including Appendix A hereto) contains the entire agreement among the parties and supersedes all prior arrangements or understanding with respect thereto. Descriptive headings are for convenience only and shall not control or affect the meaning or construction of any provision of this Agreement. This Agreement may be executed in any number of counterparts, any one of which need not contain the signatures of more than one party, but all of such counterparts together shall constitute one agreement. Whenever from the context it appears appropriate, each term stated in either the singular or the plural shall include the singular and the plural, and pronouns stated in either the masculine, the feminine, or the neuter gender shall include the masculine, the feminine, and the neuter.

10.7 No Third Party Beneficiaries

     No Person that is not a party hereto shall have any rights or obligations pursuant to this Agreement. The rights and obligations set forth herein are for the benefit of the parties hereto only and do not create or grant any rights to third parties.

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

GENERAL PARTNER: WOODBRIDGE FUND I, LLC
By:	WOODBRIDGE HOLDINGS CORPORATION, its Sole Member

By:	/s/ John K. Grelle
	Name:	John K. Grelle
	Title:	Chief Financial Officer

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LIMITED PARTNERS:
 

/s/ Alan B. Levan  

Alan B. Levan 

/s/ John E. Abdo  

John E. Abdo 

/s/ Seth M. Wise  

Seth M. Wise 

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Schedule I
List of Limited Partners and Applicable Percentage Interests

Limited Partner	Percentage Interest
Alan Levan		45.40	%
John Abdo		36.40	%
Seth Wise		18.20	%
TOTAL		100.0	%

APPENDIX A:
Tax and Accounting Provisions

A-1 Definitions

     For purposes of this Appendix A, any capitalized term not defined herein shall have the meaning set forth in the Agreement.

     “Adjusted Capital Account Deficit” means, with respect to any Partner, the deficit balance, if any, in such Partner’s Capital Account, as of a specified time, after giving effect to the following adjustments:

     (a) credit to such Partner’s Capital Account any amounts that such Partner is obligated to restore or deemed obligated to restore pursuant to Treasury Regulations Section 1.704-1(b)(2)(ii)(c) and the penultimate sentences of Treasury Regulations Section 1.704-2(g)(1) and Treasury Regulations Section 1.704-2(i)(5); and

     (b) debit to such Partner’s Capital Account the items described in Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).

The foregoing definition of Adjusted Capital Account Deficit is intended to comply with the provisions of Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

     “Book Value” means, with respect to any asset, the asset’s adjusted basis for U.S. federal income tax purposes, except as follows:

     (a) the initial Book Value of any asset contributed or deemed contributed to the Partnership shall be such asset’s gross fair market value at the time of such contribution as determined by the General Partner pursuant to Article VIII of the Agreement;

     (b) the Book Value of all Partnership assets may be adjusted in the discretion of the General Partner to equal their respective gross fair market values, as determined by the General Partner pursuant to Article VIII of the Agreement, at the times specified in Treasury Regulations Section 1.704-1(b)(2)(iv)(f);

     (c) any adjustments to the adjusted basis of any asset of the Partnership pursuant to Section 734 or Section 743 of the Code shall be taken into account in determining such asset’s Book Value in a manner consistent with Treasury Regulations Section 1.704-1(b)(2)(iv)(m);

     (d) the Book Value of any Partnership asset distributed or deemed distributed by the Partnership to any Partner shall be adjusted immediately prior to such distribution to equal its gross fair market value as of the date of distribution, as determined by the General Partner pursuant to this Article VIII; and

     (e) if the Book Value of an asset has been determined pursuant to clause (a), (b) or (c) of this definition, to the extent permitted by the Treasury Regulations, such Book Value shall thereafter be adjusted in the same manner as would the asset’s adjusted basis for U.S. federal income tax purposes, except that depreciation and amortization deductions shall be computed based on the asset’s Book Value as so determined, rather than on its adjusted tax basis.

A-1

     “Net Profits” and “Net Losses” mean, for any period, the taxable income or loss, respectively, of the Partnership for such period, in each case as determined for U.S. federal income tax purposes, but computed with the following adjustments:

     (a) items of income, gain, loss and deduction (including, without limitation, gain or loss on the disposition of any Partnership asset and depreciation or other cost recovery deduction or expense) shall be computed based upon the Book Value of the Partnership’s assets rather than upon such assets’ adjusted bases for U.S. federal income tax purposes;

     (b) any tax-exempt income received by the Partnership shall be deemed for these purposes only to be an item of gross income;

     (c) any expenditure of the Partnership described in Section 705(a)(2)(B) of the Code (or treated as described therein pursuant to Treasury Regulations under Section 704(b) of the Code) shall be treated as a deductible expense;

     (d) there shall be taken into account any separately stated items under Section 702(a) of the Code;

     (e) if the Book Value of any Partnership asset is adjusted pursuant to clauses (b) or (d) of the definition of “Book Value,” or pursuant to clause (c) of such definition (but only to the extent the adjustment is attributable to a distribution of Investment Proceeds not in liquidation of a Partner’s Partnership interest), the amount of such adjustment shall be taken into account in the period of adjustment as gain or loss from the disposition or deemed disposition of such asset for purposes of computing Net Profits and Net Losses; and

     (f) items of income, gain, loss, deduction or credit allocated pursuant to Section A-4 shall not be taken into account.

     “Regulatory Allocations” has the meaning set forth in Section A-4(d).

     “Tax Matters Partner” has the meaning set forth in Section A-6.

A-2 Maintenance of Capital Accounts

     (a) A capital account (“Capital Account”) shall be maintained for each Partner in accordance with Section 704(b) of the Code and Treasury Regulations Sections 1.704-1(b) and 1.704-2. The initial balance of each Capital Account shall be zero.

     (b) The Capital Account of each Partner shall be increased by (i) the amount of any cash contributed by such Partner to the capital of the Partnership, (ii) in the case of any property contributed by such Partner to the capital of the Partnership, the Book Value of such property (net of liabilities that the Partnership is considered to assume or take the property subject to) when contributed, (iii) the amount of any liabilities of the Partnership that are assumed by such Partner (except for liabilities described in Section A-2(c)(ii) that are assumed by such Partner) for purposes of Treasury Regulations Section 1.704-1(b)(2)(iv)(c), (iv) the Net Profits allocated to such Partner pursuant to Section A-3, and (v) any gross income and gain allocated to such Partner pursuant to Section A-4.

A-2

     (c) The Capital Account of each Partner shall be decreased by (i) the amount of any cash distribution to such Partner when made, (ii) the Book Value of any property distributed to such Partner by the Partnership (net of liabilities that the Partner is considered to assume, or take property subject to) when distributed, (iii) the amount of any liabilities of such Partner that are assumed by the Partnership (except for liabilities described in Section A-2(b)(ii) that are assumed by the Partnership) for purposes of Treasury Regulations Section 1.704-1(b)(2)(iv)(c), (iv) the Net Losses allocated to such Partner pursuant to Section A-3, and (v) any gross deductions and loss allocated to such Partner pursuant to Section A-4.

     (d) In the event that all or a portion of an interest in the Partnership is Transferred in accordance with the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent such Capital Account relates to the Transferred Partnership interest.

     (e) The Capital Account of each Partner shall be adjusted to reflect any adjustment to the Book Value of the Partnership’s assets attributable to the application of Section 734 of the Code in respect of a distribution in liquidation of such Partner’s Partnership interest to the extent required pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m).

     (f) Except as otherwise provided in this Agreement, whenever it is necessary to determine the Capital Account balance of any Partner, the Capital Account balance of such Partner shall be determined after giving effect to all allocations pursuant to this Appendix A and all contributions and distributions made prior to the time as of which such determination is to be made.

     (g) It is the intention of the parties that the Capital Accounts of the Partners be kept in the manner required under Section 704(b) of the Code and Treasury Regulations sections 1.704-1(b) and 1.704-2. To the extent any additional adjustment to the Capital Accounts is required by such provisions, the General Partner is hereby authorized to make such adjustment after notice to the Partners.

A-3

A-3 Allocations of Profits and Losses

     (a) After the application of Section A-4, Net Profits and Net Losses for any taxable year, or portion thereof, shall be allocated among the Partners (and credited or debited to their Capital Accounts) in such manner so that, after taking into account distributions by the Partnership and contributions made to the Partnership through the end of such taxable year and the allocations of Net Profits and Net Losses for such taxable year, (i) the respective positive Capital Account balances of the Partners would correspond as closely as possible to the amount each Partner would receive as a cash distribution pursuant to Section 7.2(d), if the Partnership were to liquidate completely immediately after the end of such taxable year and (ii) any resulting deficit Capital Account balances of the Partners would correspond as closely as possible with the manner in which economic responsibility for Partnership deficit balances (as determined in accordance with the principles of Treasury Regulations under Section 704 of the Code) would be borne by the Partners under the terms of this Agreement if the Partnership were to liquidate completely immediately after the end of such taxable year. For purposes of the preceding sentence, the amount of cash to be distributed to each Partner, each Partner’s Capital Account and the amount of each Partner’s economic responsibility for Partnership deficit balances, upon the assumed liquidation, shall be computed by assuming that in connection with such liquidation, the Partnership sold all of its assets for amounts such that no Net Profits or Net Losses result from the sale and settled all of its liabilities for amounts such that no Net Profits or Net Losses result from the settlement. For purposes of applying this Section A-3, the Capital Account balance of each Partner shall be increased by such Partner’s share of “partnership minimum gain” and “partner minimum gain” (within the meaning of and in accordance with the Treasury Regulations under Section 704(b) of the Code). Subject to the other provisions of this Appendix A, an allocation to a Partner of a share of Net Profit or Net Loss shall be treated as an allocation of the same share of each item of income, gain, loss or deduction that is taken into account in computing Net Profit or Net Loss.

     (b) If a Partner transfers, acquires, or redeems an interest in the Partnership during a taxable year, the Net Profit or Net Loss (and other items referred to in Section A-4) attributable to such interest for such year shall be allocated between the transferring Partner and the transferee (or the other Partners in the Partnership) by any method permitted under Section 706 of the Code selected by the General Partner.

A-4 Regulatory Allocations and Special Allocations

     (a) Notwithstanding any other provision of this Agreement, (i) “partner nonrecourse deductions” (as defined in Treasury Regulations Section 1.704-2(i)), if any, of the Partnership shall be allocated for each period to the Partner that bears the economic risk of loss within the meaning of Treasury Regulations Section 1.704-2(i), and (ii) “nonrecourse deductions” (as defined in Treasury Regulations Section 1.704-2(b)) and “excess nonrecourse liabilities” (as defined in Treasury Regulations Section 1.752-3(a)), if any, of the Partnership shall be allocated to the Partners in accordance with their respective percentage interests in Net Losses.

     (b) This Agreement shall be deemed to include “qualified income offset,” “minimum gain chargeback” and “partner nonrecourse debt minimum gain chargeback” provisions within the meaning of Treasury Regulations under Section 704(b) of the Code. Accordingly, notwithstanding any other provision of this Agreement, items of gross income shall be allocated to the Partners on a priority basis to the extent and in the manner required by such provisions.

     (c) To the extent that Net Losses or items of loss or deduction otherwise allocable to a Partner hereunder would cause such Partner to have an Adjusted Capital Account Deficit as of the end of the taxable year to which such Net Losses, or items of loss or deduction, relate (after taking into account the allocation of all items of income and gain for such taxable period), such Net Losses, or items of loss or deduction, shall not be allocated to such Partner and instead shall be allocated to the Partners in accordance with Section A-3 as if such Partner were not a Partner.

A-4

     (d) Any allocations required to be made pursuant to clauses (a), (b), and (c) above (the “Regulatory Allocations”) (other than allocations, the effect of which are likely to be offset in the future by other special allocations) shall be taken into account, to the extent permitted by the Treasury Regulations, in computing subsequent allocations of income, gain, loss or deduction pursuant to Section A-3 so that the net amount of any items so allocated and all other items allocated to each Partner shall, to the extent possible, be equal to the amount that would have been allocated to each Partner pursuant to Section A-3 had such Regulatory Allocations under this Section A-4 not occurred.

     (e) If any Partner is treated for income tax purposes as realizing ordinary income because of receipt of its Partnership interest (whether under Section 83 of the Code or any similar provisions of any law, rule or regulations or any other applicable law, rule, regulation or doctrine) and the Partnership is entitled to any offsetting deduction, the Partnership’s deduction shall be allocated among the Partners in such manner as to, as nearly as possible, offset such ordinary income realized by such Partner.

A-5 Tax Allocations

     (a) For tax purposes, except as otherwise provided in this Section A-5, each item of income, gain, loss and deduction and credit shall be allocated among the Partners in the same manner as its corresponding item of book income, gain, loss, deduction or credit is allocated pursuant to this Appendix A.

     (b) In accordance with Sections 704(b) and 704(c) of the Code and the Treasury Regulations thereunder, income, gain, loss and deduction with respect to any Partnership asset contributed (or deemed contributed) to the capital of the Partnership shall, solely for federal income tax purposes, be allocated among the Partners so as to take into account any variation between the adjusted basis of such Partnership asset for federal income tax purposes and its Book Value upon its contribution (or deemed contribution). If the Book Value of any Partnership asset is adjusted, subsequent allocations of taxable income, gain, loss and deduction with respect to such Partnership asset shall take account of any variation between the adjusted basis of such Partnership asset for federal income tax purposes and the Book Value of such Partnership asset in the manner prescribed under Code Sections 704(b) and 704(c) and the Treasury Regulations thereunder. The General Partner shall select the manner by which variations between Book Value and adjusted basis are taken into account in accordance with Code Sections 704(b) and 704(c) and the Treasury Regulations thereunder.

     (c) The provisions of this Appendix A (and other related provisions in this Agreement) pertaining to the allocation of items of Partnership income, gain, loss, deductions, and credits shall be interpreted consistently with the Treasury Regulations, and to the extent unintentionally inconsistent with such Treasury Regulations, shall be deemed to be modified to the extent necessary to make such provisions consistent with the Treasury Regulations.

A-5

A-6 Tax Matters Partner; Management Authority Regarding Tax and Accounting

     (a) The General Partner is designated the “Tax Matters Partner” (as defined in Section 6231 of the Code) to manage administrative tax proceedings conducted at the partnership level by the Internal Revenue Service with respect to Partnership matters. The General Partner is specifically directed and authorized to take whatever steps the General Partner, in its sole discretion, deems necessary or desirable to perfect such designation, including, without limitation, filing any forms or documents with the Internal Revenue Service and taking such other action as may from time to time be required under Treasury regulations. The Tax Matters Partner shall have full authority to extend the statute of limitations and control any tax audit or other proceeding on behalf of the Partnership. Expenses of administrative proceedings relating to the determination of Partnership items at the Partnership level undertaken by the Tax Matters Partner will be deemed to be expenses of the Partnership.

     (b) All matters concerning (i) allocations of Net Profits and Net Losses and allocations for tax purposes, (ii) distributions by the Partnership, including the taxes thereon, and (iii) accounting procedures and determinations, tax determinations and elections, determinations as to on whose behalf expenses were incurred and the attribution of fees and expenses to a Program Asset, and other determinations not specifically and expressly provided for by the terms of this Agreement, shall be determined by the General Partner, whose determination shall be final and conclusive as to all the Partners absent manifest clerical error.

A-6

AMENDED AND RESTATED

LIMITED LIABILITY COMPANY OPERATING AGREEMENT

OF

CORE COMMUNITIES, LLC

Date: March 13, 2009

TABLE OF CONTENTS

			Page
ARTICLE I GENERAL PROVISIONS				1
	1.1	Formation		1
	1.2	Name		2
	1.3	Purpose		2
	1.4	Principal Office		2
ARTICLE II DEFINITIONS; DETERMINATIONS				2
	2.1	Definitions		2
	2.2	Determinations		6
ARTICLE III INVESTED CAPITAL; CAPITAL ACCOUNTS				6
	3.1	Invested Capital		6
	3.2	Future Contributions		7
	3.3	Capital Accounts		7
ARTICLE IV DISTRIBUTIONS				7
	4.1	Distribution Policy		7
	4.2	Reimbursement Payment		8
	4.3	Priority of Distributions		8
	4.4	Apportionment of Carry Distributions		9
	4.5	IP Clawback Reserve		9
	4.6	Clawback Obligations		10
ARTICLE V PROGRAM MANAGER				12
	5.1	Program Manager		12
	5.2	Fees		12
ARTICLE VI MANAGING MEMBER				12
	6.1	Management Authority		12
	6.2	No Liability to Company or Members		13
	6.3	Indemnification		13
ARTICLE VII NON-MANAGING MEMBERS				14
	7.1	Limited Liability		14
	7.2	No Participation in Management		14
	7.3	Transfer of LLC Interests by Non-Managing Members		14
	7.4	No Termination		15
	7.5	Additional Non-Managing Members		15
	7.6	Reimbursement for Payments on Behalf of a Member		15

     -i-     

			Page
ARTICLE VIII DURATION AND TERMINATION				16
	8.1	Term		16
	8.2	Termination and Liquidation		16
ARTICLE IX VALUATION OF COMPANY ASSETS				17
	9.1	Normal Valuation		17
	9.2	Restrictions on Transfer or Blockage		17
ARTICLE X BOOKS OF ACCOUNTS; MEETINGS				17
	10.1	Books		17
	10.2	Fiscal Year		17
	10.3	Reports		18
ARTICLE XI MISCELLANEOUS				18
	11.1	Amendments		18
	11.2	Successors		18
	11.3	Governing Law; Severability		18
	11.4	Notices		19
	11.5	Arbitration		19
	11.6	Miscellaneous		19
	11.7	No Third Party Beneficiaries		20
APPENDIX A: Tax and Accounting Provisions				A-1
	A-1	Definitions		A-1
	A-2	Maintenance of Capital Accounts		A-2
	A-3	Allocations of Profits and Losses		A-4
	A-4	Regulatory Allocations and Special Allocations		A-4
	A-5	Tax Allocations		A-5
	A-6	Tax Matters Partner; Management Authority Regarding Tax and Accounting		A-6
APPENDIX B: Apportionment and Modification of Carried Interest to IP Members				B-1
	B-1	Definitions		B-1
	B-2	Vesting Provisions		B-3
	B-3	Determination of Carry Accounts		B-4
	B-4	Distributions to the IP Members		B-5
	B-5	Responsibility for Gross Clawback Amount		B-5
	B-6	83(b) Election		B-5

     -ii-     

AMENDED AND RESTATED

LIMITED LIABILITY COMPANY OPERATING AGREEMENT

OF

CORE COMMUNITIES, LLC

     THIS LIMITED LIABILITY COMPANY OPERATING AGREEMENT is deemed to be effective as of March 13, 2009 (the “Effective Date”) by and among the Managing Member, the Non-Managing Members, and the Program Manager (each as defined below).

     WHEREAS, the Company (as defined below) was formed pursuant to the Articles (as defined below) and an operating agreement was executed (the “Initial Agreement”);

     WHEREAS, the Articles were amended by changing the name of the Company from Levitt Community Development Company, LLC to Core Communities, LLC and the management of the Company from a manager-managed Florida limited liability company to a member-managed Florida limited liability company in a filing with the Secretary of State of Florida on November 5, 2001;

     WHEREAS, the Member amended and restated the Initial Agreement, and approved articles of amendment to the Initial Agreement and ratified the filing thereof, by executing an amended and restated agreement (the “Amended Agreement”), which was effective December 28, 2001; and

     WHEREAS, the parties to this Agreement wish to amend and restate the Amended Agreement in its entirety as hereinafter set forth, and to admit the IP Member and the Residual Member as members of the Company.

     NOW, THEREFORE, the parties hereto agree as follows:

ARTICLE I
GENERAL PROVISIONS

1.1 Formation

     The Members hereby agree to continue a limited liability company (the “Company”) pursuant to and in accordance with the Florida Limited Liability Company Act, as amended from time to time (the “LLC Act”). The term of the Company (the “Term”) commenced upon the filing of the Articles of Organization (the “Articles”) with the Secretary of State of Florida (the date of such filing is referred to herein as the date of “formation” of the Company) and shall continue until dissolution and termination of the Company in accordance with the provisions of ARTICLE VIII hereof.

1.2 Name

     The name of the Company shall be Core Communities, LLC, or such other name or names as the Managing Member may designate from time to time.

1.3 Purpose

     The Company is organized for the principal purpose of (i) acquiring, managing, and supervising the interests in the Program Assets, and (ii) engaging in such other activities incidental or ancillary thereto as the Managing Member deems necessary or advisable.

1.4 Principal Office

     The Company shall maintain a principal office in Fort Lauderdale, Florida, or at such other place or places as the Managing Member may from time to time designate.

ARTICLE II
DEFINITIONS; DETERMINATIONS

2.1 Definitions

     Capitalized terms used in this Agreement have the meanings set forth below or as otherwise specified herein:

     “Agreement” means this Amended and Restated Limited Liability Company Operating Agreement of Core Communities, LLC, as amended or modified from time to time in accordance with its terms.

     “Alternative Clawback Reserve” has the meaning set forth in Section 4.5.

     “Amended Agreement” has the meaning set forth in the Recitals.

     “Articles” has the meaning set forth in Section 1.1.

     “Capital Account” is the account established for each Member in accordance with the provisions of Appendix A hereto.

     “Capital Proceeds” means any Investment Proceeds received by the Company in respect of a Program Asset that are attributable to a Realization event.

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     “Carried Interest Members” means the Sponsor Member, the IP Members, and the Residual Member, in their capacities as Members entitled to receive Carry Distributions, and “Carried Interest Member” shall mean each of such Persons individually.

     “Carry Distributions” means those distributions paid to the Carried Interest Members in their capacities as such pursuant to Section 4.3(a)(ii) and Section 4.3(a)(iii)(B).

     “Carry Percentage” means, with respect to a Carried Interest Member, its percentage interest in Carry Distributions as set forth for such Member on Schedule I hereof.

     “Code” means the U.S. Internal Revenue Code of 1986, as amended from time to time.

     “Company” has the meaning set forth in Section 1.1.

     “Contributed Property” means all of the assets held by Core Communities, LLC as of the Effective Date.

     “Covered Party” means each of the Members, a director, officer, partner or member (or a former director, officer, partner or member) of any Member, and to the extent approved by the Managing Member in its sole discretion, any other employee of a Member or an agent acting at the direction of the Managing Member or the Program Manager, and in any such case, the heirs and legal representatives of any such person.

     “Current Proceeds” means any Investment Proceeds received by the Company in respect of a Program Asset that are not attributable to a Realization event, including dividends, rents, or interest with respect to such Program Asset.

     “Deal Fees” means those amounts received by the Managing Member (or an affiliate of the Managing Member) as break-up fees, director fees, “flip” fees, investment banking, consulting, or similar transaction fees, but not including any amount received as reimbursement for expenses directly related to the provision of such services for which the fee is being paid. “Deal Fees” also means all amounts earned by any employee or agent (in such capacity) of the Program Manager with respect to a Program Asset or other activities of the Company, but not including payments to such employee or agent from the Program Manager.

     “Effective Date” has the meaning set forth in the Recitals.

     “Executive IP Member” has the meaning set forth in Section 4.5(b).

     “Fair Market Value” of a security or a Program Asset means the amount that would be realized as Investment Proceeds if such security or Program Asset had been sold at its “value” (determined in accordance with Article IX).

     “Family Related Member” means, with respect to any IP Member, any Person who is a spouse or lineal descendent of the parents of such IP Member or any Person which is a trust formed by such IP Member for investment by or for the benefit of such IP Member’s spouse or any lineal descendants of the parents of such IP Member or of such IP Member’s spouse and/or any charitable organization; provided that any cause of action or other dispute arising in relation to a Family Related Member’s interest may only be pursued by the IP Member associated with such Family Related Member, except if such IP Member has died or become legally incapacitated.

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     “GAAP” has the meaning set forth in Section 10.3.

     “Gross Clawback Amount” has the meaning specified in Section 4.6.

     “Impairment” means, with respect to a Program Asset, a determination by the Managing Member that the Program Asset is not expected to be able to provide for cash flow or realization proceeds a return to investors of at least the amount of Invested Capital associated with such asset as well as a 10% per annum compounded annual return on such Invested Capital. The Managing Member’s determination that a Program Asset has suffered an Impairment for purposes of this Agreement shall be independent of any determination that the value of the Program Asset is reduced for purposes of the financial statements prepared under generally accepted accounting principles.

     “Initial Agreement” has the meaning set forth in the Recitals.

     “Invested Capital” has the meaning set forth in Section 3.1.

     “Investment Proceeds” means the gross investment returns (whether in the form of cash, securities, or other property) received by the Company in respect of the Company’s Invested Capital in any Program Assets (i.e., in its capacity as an investor and not with respect to the provision of any services with respect to such Program Assets or to any other investor in such Program Assets). For the avoidance of doubt, the amount of Investment Proceeds shall be determined without regard to any management fees, carried interest, or similar deductions that may be charged by the Managing Member or the Program Manager to any investment vehicle through which the Company holds any of its investments.

     “IP Clawback Reserve” has the meaning set forth in Section 4.5.

     “IP Members” means any Persons designated as IP Members on Schedule I hereof, in their capacities as members of the Company, or any other Persons that are admitted as IP Members in accordance with the terms hereof, in each case for so long as such Persons continue to be IP Members hereunder, and “IP Member” shall mean each of such Persons individually.

     “LLC Act” has the meaning set forth in Section 1.1.

     “Managing Member” means Woodbridge Holdings Corporation, in its capacity as managing member of the Company, and any successor managing member of the Company.

     “Members” means collectively the Managing Member (including in its capacity as Sponsor Member), the IP Members, the Residual Member, the Program Manager and any other Person that is admitted to the Company as a partner in accordance with the terms hereof, and “Member” shall mean each of such persons individually.

     “Non-Managing Members” means the IP Member and the Residual Member, and “Non-Managing Member” shall mean each of such Persons individually.

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     “Overall Hurdle Clawback” has the meaning set forth in the limited partnership agreement governing Woodbridge Executive Incentive Plan 1, LP.

     “Person” means an individual, a partnership (general, limited, or limited liability), a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, or a governmental, quasi-governmental, judicial, or regulatory entity or any department, agency, or political subdivision thereof.

     “Platform” means all of the program partnerships (or other entities) that are designated as a “Program Partnership” in accordance with the terms of the governing agreement of Woodbridge Executive Incentive Plan 1, LP.

     “Portfolio Company” means each of the subsidiaries of Core Communities, LLC and such other entities, the interests in which are Program Assets.

     “Preferred Return” has the meaning set forth in Section 4.3.

     “Program Assets” means those assets held by the Company as part of the Company’s investment program, and “Program Asset” shall mean each of such Program Assets individually.

     “Program Expenses” means those costs, expenses, liabilities and obligations relating to the Company’s activities, investments and business (to the extent not borne or reimbursed by the Portfolio Company) as set forth on Schedule II hereof.

     “Program Manager” means Woodbridge Holdings Corporation.

     “Program Partnership” means each partnership (or other entity) that is designated as a “Program Partnership” in accordance with the terms of the governing documents of Woodbridge Executive Incentive Plan 1, LP. All such partnerships together with the Company are the “Program Partnerships.”

     “Realization” means the sale, redemption, or other disposition of, or any other receipt of a capital nature, including proceeds from the recapitalization or refinancing at the investment level (as determined by the Managing Member) with respect to the whole or part of, or the permanent write-off of a Program Asset, and “Realized” shall be construed accordingly. To the extent a Program Asset has suffered an Impairment of less than the whole of the Program Asset, a portion of the Program Asset equal to the amount of the Impairment shall be treated as if sold for no consideration. If the Managing Member determines that an Impairment has been reversed, the Managing Member shall adjust the allocations and distributions made by the Company so as to reverse the effects of the prior Impairment.

     “Realized Base Contributions” has the meaning set forth in Section 4.3(a)(i).

     “Regulatory Allocations” has the meaning set forth in Appendix A hereto.

     “Reimbursement Payment” means the special payment to the Program Manager pursuant to Section 4.2.

     “Reimbursing Member” has the meaning set forth in Section 7.6(a).

     “Residual Member” means the Person entitled to receive the amounts of Carry Distributions not made to the Sponsor Member or the IP Members, which Person will be Woodbridge Executive Incentive Plan 1, LP.

     “Return Distributions” means those distributions to the Managing Member other than Carry Distributions as set forth in Section 4.3.

     “Sponsor Member” means the Person entitled to receive the amounts of Carry Distributions apportioned to the Sponsor Member pursuant to the terms hereof, which Person initially will be the Managing Member, in its capacity as Sponsor Member.

-5-

     “Sponsor Proceeds” means all other proceeds received by the Company from or with respect to its assets other than Investment Proceeds. Sponsor Proceeds include management fees, carried interest, and Deal Fees charged by the Company to other investors in an investment vehicle through which the Company holds its assets; provided, however, that to the extent the Managing Member determines that Deal Fees arising with respect to a Company asset are attributable to the capital invested in that asset by the Company, such fees will be treated as Investment Proceeds, rather than Sponsor Proceeds. For the avoidance of doubt, Deal Fees attributable to the capital invested by a third party or not attributable to any investment of capital will be treated as Sponsor Proceeds.

     “Term” has the meaning set forth in Section 1.1.

     “Transfer” means a transfer in any form, including a sale, assignment, conveyance, pledge, mortgage, encumbrance, hypothecation, exchange, gift, or other disposition, or the act of so doing, whether voluntarily, by operation of law, pursuant to judicial process, or otherwise as the context requires.

     “Woodbridge” means Woodbridge Holdings Corporation or any direct or indirect subsidiary of such corporation.

2.2 Determinations

     Unless otherwise indicated, any determinations or calculations conducted pursuant to this Agreement shall be determined or calculated as of the date of such determination or calculation.

ARTICLE III
INVESTED CAPITAL; CAPITAL ACCOUNTS

3.1 Invested Capital

     As of the Effective Date, the Members shall be required to make the following contributions to the capital of the Company (“Invested Capital”):

     (a) The Managing Member shall be credited with having contributed the Contributed Property to the Company, which for purposes hereof shall be treated as Invested Capital of $127,142,909.00, and such Contributed Property will be treated as having a Book Value as defined in Appendix A hereto.

     (b) Each IP Member shall contribute $250 to the capital of the Company.

     (c) The Residual Member shall contribute $250 to the capital of the Company.

The right of each IP Member, the Residual Member, and the Sponsor Member to receive Carry Distributions represents a profits interest received for services rendered or to be rendered to or for the benefit of the Company.

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3.2 Future Contributions

     (a) Other than the required Invested Capital described in Section 3.1, any reimbursement payment pursuant to Section 7.6, or as may be required by applicable law, no Member shall have any further obligation to contribute additional Invested Capital to the Company; provided that the Managing Member shall be required to make special distributions to the Company to the extent that such special distributions are necessary to reduce any IP Member’s Alternative Clawback Reserve as described in Section 4.2(c).

     (b) The Managing Member, in its discretion, whether or not in connection with the admission of any new Member to the Company in accordance with Section 7.5, may permit a Member to contribute additional Invested Capital to the Company under such circumstances as may be determined by the Managing Member.

     (c) The Managing Member may cause the Company to borrow funds, including from Woodbridge, under such terms as the Managing Member may determine, in order to permit the Company to meet its liquidity needs.

3.3 Capital Accounts

     (a) A capital account shall be maintained for each Member in accordance with the provisions of Appendix A hereto.

ARTICLE IV
DISTRIBUTIONS

4.1 Distribution Policy

     (a) Except as set forth in Section 4.1(c) and Section 4.4, the Managing Member shall periodically cause excess cash or cash equivalents held in the Company to be distributed to the Members in accordance with Section 4.3, subject to any limitations imposed by agreements between the Company and its lenders.

     (b) Distributions may be in the form of cash, property, or securities. Except as otherwise provided herein, for purposes of this Agreement, an in-kind distribution of non-cash property shall be treated as if an amount of cash equal to the Fair Market Value of such property had been distributed.

     (c) In determining the amounts that may be available for distribution to the Members, the Managing Member shall first cause the Company to satisfy its current obligations, including its obligation to make any Reimbursement Payment to the Program Manager in accordance with Section 4.2. In addition, the Managing Member may cause the Company to retain such amounts as the Managing Member determines is appropriate to act as reserves for any fixed or contingent payments or liabilities of the Company (including future amounts of Reimbursement Payments) for which the Company may be liable.

-7-

4.2 Reimbursement Payment

     Prior to making any distributions to the Members pursuant to Section 4.3, the Company shall make a reimbursement payment (the “Reimbursement Payment”) to the Program Manager equal to the amount of Program Expenses (including, for the avoidance of doubt, interest accruing on the Program Manager’s line of credit used to finance such expenses) borne by, and required to be paid by, the Program Manager that have yet to be reimbursed by the Company to the Program Manager.

4.3 Priority of Distributions

     After making any Reimbursement Payment pursuant to Section 4.2, except to the extent specifically provided in this Agreement to the contrary, distributions by the Company shall be made among the Members as follows:

     (a) Capital Proceeds and Sponsor Proceeds. Distributions designated as Capital Proceeds or Sponsor Proceeds by the Managing Member shall be distributed as follows:

(i)	First, 100% to the Managing Member as “Return Distributions” until the Managing Member has received aggregate distributions sufficient to provide the Managing Member a 10% per annum cumulative annually compounded internal rate of return (the “Preferred Return”) on the Managing Member’s Invested Capital attributable to all Program Assets (or portion thereof) that have been Realized (such Invested Capital, the “Realized Base Contributions”), provided that for purposes of determining the Preferred Return, the Invested Capital attributable to the contribution of the Contributed Property shall be treated as having been made on September 1, 2008 (notwithstanding that such date pre-dates the date of this Agreement). The Managing Member will include as Return Distributions any amounts received that relate to the investment in such Program Assets, regardless of whether such amounts are received through, or outside of, the Company. For the avoidance of doubt, an “internal rate of return” calculation encompasses a return of, as well as a return on, the Realized Base Contributions.
(ii)	Second, 20% to the Managing Member (as additional Return Distributions) and 80% to the Carried Interest Members (and among them as provided in Section 4.4) as “Carry Distributions,” until the aggregate amount of Carry Distributions equals 20% of the excess of (A) the aggregate amount of Return Distributions and Carry Distributions distributed over (B) the Realized Base Contributions; and
(iii)	Thereafter, between the Managing Member and the Carried Interest Members as follows:

(A) The Managing Member is allocated an additional amount (as additional Return Distributions) so that the aggregate amount of Return Distributions distributed to the Managing Member equals the sum of (1) the Realized Base Contributions plus (2) 80% of the amount by which the aggregate Investment Proceeds received by the Company exceeds the Realized Base Contributions; and

-8-

(B) The remainder to the Carried Interest Members as additional Carry Distributions.

     (b) Current Proceeds. Distributions designated as Current Proceeds by the Managing Member shall be distributed in the same manner as Capital Proceeds and Sponsor Proceeds pursuant to Section 4.3(a) except that for purposes of applying those provisions with respect to a particular distribution of Current Proceeds, the Program Asset giving rise to such Current Proceeds will be deemed to have been Realized for an amount equal to the Invested Capital (and taking into account any prior unreversed Impairment with respect to such Program Asset) attributable to such Program Asset immediately prior to the distribution of such Current Proceeds.

4.4 Apportionment of Carry Distributions

     Carry Distributions will be made to and among the Carried Interest Members in the following amounts:

     (a) Distributions to the Sponsor Member. The Sponsor Member shall in all cases receive 35% of all Carry Distributions.

     (b) Distributions to the IP Members. The IP Members as a group shall receive a portion of Carry Distributions, which portion shall not exceed the aggregate Carry Percentages of the IP Members, but which may be reduced by the vesting and other provisions in Appendix B hereto. The provisions of Appendix B will govern the determination of each IP Member’s share of such Carry Distributions.

     (c) Distributions to the Residual Member. Carry Distributions not made to the Sponsor Member or the IP Members shall be made to the Residual Member. For the avoidance of doubt, any reductions in Carry Distributions to the IP Members pursuant to the vesting provisions set forth in Appendix B hereto shall accrue to the benefit of the Residual Member.

4.5 IP Clawback Reserve

     (a) Notwithstanding the provisions of Section 4.3 and Section 4.4 and Appendix B hereto, 25% (adjusted as provided in Section 4.5(b) below) of any Carry Distributions that are available for distribution to an IP Member shall be withheld by the Company, and a separate bookkeeping account (an “IP Clawback Reserve”) shall be established for such IP Member by the Company for tracking deposits, withdrawals, and interest earned with respect to such account. The Company may aggregate each of the IP Clawback Reserves within a single interest-bearing Company bank account.

     (b) Each time that the Company is to make a distribution of Carry Distributions, the Managing Member (together with the general partners of each of the other Program Partnerships) will review the remaining Program Assets and the assets within each other Program Partnership in the Platform to determine whether any of the cumulative assets have suffered an Impairment that has not been reversed, and if so, the effect that such Impairment would have on the ability of Woodbridge (in its capacity as an investor in such program partnership) to receive proceeds from such Program Partnership sufficient to provide Woodbridge with at least a 10% annual cumulative compounded internal rate of return on its Invested Capital (as defined by the governing agreement of such Program Partnership) in such Program Partnership. If the Managing Member determines that the Impairment would prevent such minimum return from being achieved, the Managing Member may increase the percentage (but not in excess of 100%) of Carry Distributions to be contributed to the IP Clawback Reserve of any Executive IP Member (as defined below) in order to add to such IP Clawback Reserve an amount which, when combined with the other reserves being established by the other Program Partnerships and by Woodbridge Executive Incentive Plan 1, LP with respect to such Executive IP Member, will cover such Executive IP Member’s share of the Overall Hurdle Clawback that is anticipated to arise.

(i) “Executive IP Member” shall mean any person who is both an IP Member and a limited partner of Woodbridge Executive Incentive Plan 1, LP.

(ii) For the avoidance of doubt, the Managing Member shall not increase the percentage of Carry Distributions to be contributed to the IP Clawback Reserve of any IP Member who is not an Executive IP Member.

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     (c) Notwithstanding the foregoing, in the Managing Member’s discretion, rather than depositing amounts in the IP Clawback Reserve for an IP Member, the Managing Member may cause such amounts to be distributed to the Managing Member as additional Return Distributions, which will be credited to a special bookkeeping account (an “Alternative Clawback Reserve”) for the benefit of such IP Member. The balance in the Alternative Clawback Reserve shall be increased from time to time by an interest factor equal to the interest earned on the IP Clawback Reserve (or, if there is no IP Clawback Reserve, on the rate of interest that the Company would receive on an interest-bearing bank account).

     (d) As set forth in Section 4.6, at the expiration of the Term of the Company, each IP Member will be responsible for a share of the Gross Clawback Amount, if any.

(i) To satisfy an IP Member’s share, amounts will first be taken from such IP Member’s Alternative Clawback Reserve. To the extent that such IP Member’s share is not satisfied, amounts will be taken from such IP Member’s IP Clawback Reserve.

(ii) To the extent amounts in the Alternative Clawback Reserve are not needed to satisfy the share of an IP Member who is not an Executive IP Member of the Gross Clawback Amount, an amount of Return Distributions that would otherwise be payable to the Managing Member or Carry Distributions otherwise payable to the Sponsor Member equal to such excess, shall instead be specially distributed to the applicable IP Member without regard to Section 4.3, which distributions will reduce on a dollar-for-dollar basis the amount in such IP Member’s Alternative Clawback Reserve. If the full amount of such excess cannot be so distributed, the shortfall shall be contributed by the Managing Member to the Company for special distribution to the applicable IP Member.

(iii) To the extent amounts in the Alternative Clawback Reserve are not needed to satisfy the share of an Executive IP Member of the Gross Clawback Amount, such excess amounts will be added to the Alternative Clawback Reserve established for the benefit of such Executive IP Member by Woodbridge Executive Incentive Plan 1, LP.

(iv)	(A) For any IP Member who is not an Executive IP Member, to the extent amounts in such IP Member’s IP Clawback Reserve (including interest earned thereon) are not needed to fund such IP Member’s share of the Gross Clawback Amount, such amounts will be released by the Company to the applicable IP Member.
	(B) For any Executive IP Member, to the extent amounts in such Executive IP Member’s IP Clawback Reserve (including interest earned thereon) are not needed to fund such Executive IP Member’s share of the Gross Clawback Amount, such amounts will be added to the Clawback Reserve established for the benefit of such Executive IP Member by Woodbridge Executive Incentive Plan 1, LP.

     (e) Prior to the expiration of the Term of the Company, the Managing Member, in its discretion, may release reserved amounts to an IP Member who is not an Executive IP Member by (i) causing special distributions reducing such IP Member’s Alternative Clawback Reserve or causing contributions and special distributions, each as described in Section 4.5(d) above, or (ii) distributing amounts to an IP Member from such IP Member’s IP Clawback Reserve, in either case to the extent the Managing Member determines that such released amounts are not necessary to secure such IP Member’s share of the Gross Clawback Amount, each as described in Section 4.6. Similarly, the Managing Member may, in its discretion, move amounts to the Alternative Clawback Reserve or the Clawback Reserve of an Executive IP Member established for the benefit of such Executive IP Member by Woodbridge Executive Incentive Plan 1, LP.

4.6 Clawback Obligations

     (a) Following the final liquidating distribution of assets pursuant to Section 8.2, if there have been any Carry Distributions, the Managing Member shall determine the additional amount of Return Distributions (the “Gross Clawback Amount”), if any, that would need to have been distributed to the Managing Member in connection with such final liquidating distribution so that each of the following would have been true:

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(i)	The Managing Member would have received sufficient Return Distributions to provide it with at least the Preferred Return on the Managing Member’s Invested Capital, as calculated pursuant to Section 4.3(a)(i); and
(ii)	The Managing Member would have received Return Distributions at least equal to the amount of its Invested Capital plus 80% of the amount by which the aggregate Investment Proceeds received by the Company exceeded the Managing Member’s Invested Capital.

     (b) Each Carried Interest Member shall be responsible for returning to the Company, for distribution to the Managing Member, its share of the Gross Clawback Amount, determined as follows:

(i)	The Sponsor Member shall be responsible for its Carry Percentage (i.e., 35%);
(ii)	The IP Members as a group shall be responsible for their aggregate Carry Percentage of the Gross Clawback Amount, with each such IP Member being severally (and not jointly) responsible for the amount determined pursuant to Appendix B hereto and only to the extent of clause (c) below; and
(iii)	The Residual Member shall be responsible for its Carry Percentage of the Gross Clawback Amount;

provided that if Carry Percentages have changed over the Term of the Company, the determination shall be based on the relative amounts of Carry Distributions received over the Term of the Company or any other method determined by the Managing Member to appropriately take into account such variations.

     (c) In no event will an IP Member be personally liable for a clawback obligation that exceeds the aggregate amount of such IP Member’s Alternative Clawback Reserve and IP Clawback Reserve. In no event shall an IP Member be responsible for another Member’s share of the Gross Clawback Amount.

     (d) The Residual Member’s obligation to satisfy its clawback obligation will be limited to those amounts established as a clawback reserve under the terms of the limited partnership agreement governing the Residual Member and will be a several (and not joint) obligation of the partners in the Residual Member.

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ARTICLE V
PROGRAM MANAGER

5.1 Program Manager

     The Program Manager will be responsible for managing the day-to-day activities of the Company and the Company’s assets, subject to the direction of the Managing Member; provided that the Program Manager will have no authority to legally bind the Company without the express consent of the Managing Member.

5.2 Fees

     The Program Manager shall not be entitled to any fees, payments, or distributions other than as expressly provided herein, or as otherwise approved by the Managing Member. To the extent the Program Manager or any employee or agent (in such capacity) of the Program Manager receives any Deal Fees with respect to a Program Asset, the calculations called for in this Agreement will be adjusted so that total amounts received by the Program Manager or such employee or agent (in such capacity) of the Program Manager are the same as if all such Deal Fees had been paid to the Company.

ARTICLE VI
MANAGING MEMBER

6.1 Management Authority

     (a) The management of the Company shall be vested exclusively in the Managing Member, and the Managing Member shall have full control over the business and affairs of the Company. The Managing Member shall have the power on behalf and in the name of the Company to carry out any and all of the objectives and purposes of the Company and to perform all acts and enter into and perform all contracts and other undertakings which the Managing Member, in its reasonable discretion, deems necessary or advisable or incidental thereto, including the power to acquire and dispose of any security (including marketable securities) or incur indebtedness or guarantee the indebtedness of the Portfolio Company.

     (b) Third parties dealing with the Company can rely conclusively upon the Managing Member’s certification that it is acting on behalf of the Company and that its acts are authorized. The Managing Member’s execution of any agreement on behalf of the Company is sufficient to bind the Company for all purposes.

     (c) The Managing Member will have the right and power to establish the availability and terms of any offering of opportunities for an IP Member or any Family Related Member or any other “friend or family member” of an IP Member to co-invest alongside the Company in all or part of the Company’s investments.

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6.2 No Liability to Company or Members

     No Covered Party shall be liable to the Company or any Member for any action taken, or failure to act, on behalf of the Company (or on behalf of the Managing Member or the Program Manager with respect to the Company) if such Covered Party (a) acted honestly and in good faith with a view to the best interests of the Company, or, as the case may be, to the best interests of the other entity for which the Covered Party acted as director, officer, employee, agent, or in a similar capacity at the request of the Managing Member or the Program Manager for the benefit of the Company; and (b) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, the Covered Party had reasonable grounds for believing that the Covered Party’s conduct was lawful. In addition, any Covered Party who has delegated to any other Person (other than to another Covered Party) any part of its functions (including participating in the management of or rendering professional advice or other services in respect of any Program Asset) shall not be liable, responsible, or accountable in damages or otherwise to the Company or to any Member for any loss incurred or suffered by reason of any action by such other Person unless the delegating Covered Party did not (x) act honestly and in good faith with a view to the best interests of the Company, or, as the case may be, to the best interests of the other entity for which the Covered Party acted as director, officer, employee, agent, or in a similar capacity at the request of the Managing Member or the Program Manager for the benefit of the Company; and (y) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, have reasonable grounds for believing that the Covered Party’s conduct was lawful with respect to such delegation. For the avoidance of doubt, nothing in the immediately preceding sentence shall be deemed to prevent the Company, the Managing Member or the Program Manager from asserting a cause of action against the delegate of a Covered Party for any loss caused by the action, or failure to act, of such delegate and the Managing Member shall cause the Company to effectively pursue any such cause of action to the extent it would be in the reasonable best interests of the Company to do so.

6.3 Indemnification

     (a) Subject to Section 6.3(c), the Company shall indemnify each Covered Party against all costs, charges, and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by the Covered Party in respect of any civil, criminal, administrative, investigative, or other proceeding in which the Covered Party is involved because of such Covered Party’s association with the Company, the Managing Member, or the Program Manager if such Covered Party (i) acted honestly and in good faith with a view to the best interests of the Company or, as the case may be, to the best interests of the other entity for which the Covered Party acted as director, officer, employee, agent, or in a similar capacity at the request of the Managing Member or the Program Manager and for the benefit of the Company; and (ii) had reasonable grounds for believing that such Covered Party’s conduct was lawful, in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty.

     (b) Subject to Section 6.3(c), the Company shall advance moneys to a Covered Party for the costs, charges, and expenses of a proceeding referred to in Section 6.3(a). The Covered Party shall repay the moneys if the Covered Party does not fulfill the conditions of Section 6.3(a).

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     (c) Before seeking indemnification from the Company, a Covered Party seeking such indemnification shall use all reasonable efforts to seek indemnification from the following sources (in the following order of priority): first, from the Portfolio Company, including any insurance provided by, or purchased on behalf of a Covered Party by, the Portfolio Company; and second, from the Managing Member or the Program Manager, including from any insurance provided by the Managing Member or the Program Manager. To the extent any unpaid indemnification obligation remains after the Covered Party has received indemnification from the foregoing sources, the Company shall indemnify such Covered Party for such shortfall.

ARTICLE VII
NON-MANAGING MEMBERS

7.1 Limited Liability

     No Non-Managing Member shall be personally liable for any obligations of the Company or have any obligation to make contributions to the Company other than such Non-Managing Member’s initial contribution pursuant to Section 3.1 or as required pursuant to Section 4.6 or Section 7.6; provided that a Non-Managing Member shall be required to return any distribution made to it in error. To the extent any Non-Managing Member is required by the LLC Act to return to the Company any distributions made to it and does so, such Non-Managing Member shall have a right of contribution from each other Non-Managing Member similarly liable to return distributions made to it to the extent that such Non-Managing Member has returned a greater percentage of the total distributions made to it and required to be returned by it than the percentage of the total distributions made to such other Non-Managing Member and so required to be returned by it.

7.2 No Participation in Management

     The Non-Managing Members (in their capacity as such) shall not participate in the control, management, direction, or operation of the affairs of the Company and shall have no power to bind the Company.

7.3 Transfer of LLC Interests by Non-Managing Members

     (a) A Non-Managing Member may not Transfer all or a portion of its interest in the Company without the consent of the Managing Member; provided that the Managing Member shall not unreasonably withhold its consent to a Transfer by an IP Member to a Family Related Member of such IP Member.

     (b) Unless and until the Managing Member consents to the admission of a transferee as a substituted Non-Managing Member in accordance with this Section 7.3, the transferor shall remain liable for all liabilities and obligations relating to the transferred beneficial interest, if any, and the transferee shall become an assignee of only a beneficial interest in Company profits, losses and distributions of such interest. No consent of any other Non-Managing Member shall be required as a condition precedent to any Transfer.

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     (c) Unless the Managing Member otherwise determines in its sole discretion, the transferor and transferee of any Non-Managing Member’s interest shall be jointly and severally obligated to reimburse the Managing Member and the Company for all reasonable expenses (including attorneys’ fees and expenses) of any Transfer or proposed Transfer of a Non-Managing Member’s interest, whether or not consummated.

     (d) Any substituted Non-Managing Member admitted to the Company with the consent of the Managing Member shall succeed to all the rights and be subject to all the obligations of the transferring or assigning Non-Managing Member with respect to the interest to which such Non-Managing Member was substituted. The Managing Member may modify Schedule I hereof to reflect such admittance of any substituted Non-Managing Member. Such substituted Non-Managing Member shall be treated as having received all of the allocations and distributions received by the transferring or assigning Non-Managing Member, if any.

     (e) Any Transfer that violates this Section 7.3 shall be void and the purported buyer, assignee, transferee, pledgee, mortgagee, or other recipient shall have no interest in or rights to Company assets, profits, losses, or distributions, and neither the Managing Member nor the Company shall be required to recognize any such purported interest or rights.

7.4 No Termination

     Neither the substitution, death, incompetency, dissolution (whether voluntary or involuntary), nor bankruptcy of a Non-Managing Member shall affect the existence of the Company, and the Company shall continue for the Term of the Company until its existence is terminated as provided herein.

7.5 Additional Non-Managing Members

     Additional Non-Managing Members will be admitted only with the consent of the Managing Member on such terms as agreed upon by the Managing Member and the Person seeking admission to the Company.

7.6 Reimbursement for Payments on Behalf of a Member

     (a) If the Company is obligated to pay any amount to a governmental agency or body or to any other Person (or otherwise make a payment) because of a Member’s status or otherwise specifically attributable to a Member (including, without limitation, federal withholding taxes with respect to foreign Members, state withholding taxes, state personal property taxes, state unincorporated business taxes, etc.) then such Member (the “Reimbursing Member”) shall reimburse the Company in full for the entire amount paid (including, without limitation, any interest, penalties, and expenses associated with such payment). At the election of the Managing Member, the amount to be reimbursed may be charged against the Capital Account of the Reimbursing Member, and the Company shall reduce subsequent distributions which would otherwise be made to the Reimbursing Member until the Company has recovered the amount to be reimbursed; provided that the amount of such reduction shall be deemed to have been distributed for all purposes of this Agreement, but such deemed distribution shall not further reduce the Reimbursing Member’s Capital Account.

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     (b) A Member’s obligation to reimburse the Company under this Section 7.6 shall survive the termination, dissolution, liquidation, and winding-up of the Company, and for purposes of this Section 7.6, the Company shall be treated as continuing in existence.

ARTICLE VIII
DURATION AND TERMINATION

8.1 Term

     The Company shall continue until the occurrence of any of the following events: (i) the entry of an order of dissolution by a court under the LLC Act or (ii) an election by the Managing Member to dissolve the Company.

8.2 Termination and Liquidation

     (a) The Company shall not terminate immediately upon the expiration of its Term under Section 8.1, but shall cease to engage in further business except to the extent necessary to promptly wind-up its affairs, perform existing contracts, and preserve the value of the Program Assets.

     (b) During the course of winding-up the Company all of the provisions of this Agreement shall continue to bind the parties and apply to the activities of the Company except as specifically provided to the contrary, but there shall be no distributions to the Members except as provided in this Section 8.2.

     (c) Upon the expiration of the Company’s Term, the Managing Member shall take such actions as it may think fit for winding-up the Company and liquidating the Program Assets, including:

(i)	The filing of all certificates and notices of dissolution as are required by applicable law; and
(ii)	The Realization of any Program Asset (unless the Managing Member intends to distribute such Program Asset in kind); provided that all such Realizations shall be conducted in an orderly and businesslike manner so as not to involve undue sacrifice.

The Managing Member in taking such actions may exercise and shall have the benefit of all rights, powers, and discretions vested in the Managing Member pursuant to the provisions of this Agreement. If the Managing Member is not able to act as the liquidator of the Company or exercise the powers inherent thereto, a liquidator shall be appointed by the Residual Member.

     (d) Upon dissolution of the Company, all Company assets shall be distributed or used as follows and in the following order of priority:

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(i)	For the payment of the debts and liabilities of the Company, including, without limitation, the expenses of liquidation.
(ii)	For the setting up of any reserves which the Managing Member may deem reasonably necessary for any liabilities or obligations of the Company.
(iii)	To the Members in accordance with the provisions of Article IV.

     (e) The Company shall be terminated only after the Company assets have been distributed as provided in this Section 8.2.

ARTICLE IX
VALUATION OF COMPANY ASSETS

9.1 Normal Valuation

     For purposes of this Agreement, the value of any asset as of any date (or in the event such date is a holiday or other day which is not a business day, as of the immediately preceding business day) shall be valued by the Managing Member in good faith using methods it considers appropriate.

9.2 Restrictions on Transfer or Blockage

     Any security which is held under a representation that it has been acquired for investment purposes and not with a view to public sale or distribution, or which is held subject to any other restriction on transfer, or where the size of the Company’s holdings compared to the trading volume would adversely affect the marketability of such security, shall be valued at such discount as the Program Manager deems reasonably necessary to reflect the marketability and value of such security.

ARTICLE X
BOOKS OF ACCOUNTS; MEETINGS

10.1 Books

     The Company shall maintain complete and accurate books of accounts of the Company’s affairs at the Company’s principal office.

10.2 Fiscal Year

     The fiscal year and taxable year of the Company shall be the calendar year, unless otherwise determined by the Managing Member.

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10.3 Reports

     The Managing Member shall furnish to each Member the following information and reports prepared in accordance with U.S. generally accepted accounting principles (“GAAP”):

     (a) As soon as practicable after the end of each fiscal year commencing with the first year in which the Company is in operation for a full fiscal year, (i) financial statements for the Company for such year (audited by a firm of independent certified public accountants of recognized national standing selected by the Managing Member), and (ii) a statement of each Member’s closing Capital Account balance as of the end of such year; and

     (b) As soon as practicable after the end of each fiscal year, the Company’s United States federal income tax return, including such Member’s Schedule K-1 for such fiscal year.

ARTICLE XI
MISCELLANEOUS

11.1 Amendments

     This Agreement may be amended by the written consent of the Managing Member, provided that if such amendment would adversely affect any Carried Interest Member, then the Carried Interest Member so affected must consent to such amendment. Notwithstanding anything in this Agreement to the contrary, this Agreement may be amended by the Managing Member without the consent of any other Member in order to cure any ambiguity or error, make an inconsequential revision, provide clarity, comply with any law or regulation or correct or supplement any provision herein which may be defective or inconsistent with any other provisions herein; provided that, except with respect to amendments necessary to comply with any law or regulation, such amendment does not materially and adversely affect any Non-Managing Member.

11.2 Successors

     Except as otherwise provided herein, this Agreement shall inure to the benefit of and be binding upon the Members and their legal representatives, heirs, successors, and assigns.

11.3 Governing Law; Severability

     This Agreement shall be governed by and construed in accordance with the laws of the State of Florida, and, to the maximum extent possible, in such manner as to comply with all the terms and conditions of the LLC Act. If it is determined by a court of competent jurisdiction that any provision of this Agreement is invalid under applicable law, such provision shall be ineffective only in such jurisdiction and only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement.

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11.4 Notices

     All notices, demands, and other communications to be given and delivered under or by reason of provisions under this Agreement shall be in writing and shall be deemed to have been given on the date when personally delivered, when mailed by first class mail, when sent by facsimile or transmitted by email or the internet, or when sent by reputable overnight courier service, in each case to the recipient at the address, facsimile number or email address set forth in Schedule I hereof or to such other address, facsimile number, or email address, or to the attention of such other Person as has been indicated in writing to the Managing Member.

11.5 Arbitration

     The parties to this Agreement shall each use good faith efforts for a period of 30 days (or such longer time as agreed to by the applicable parties) to try to resolve any controversy, dispute, or claim arising out of or in connection with this Agreement, or the breach, termination or validity hereof. Thereafter, if such controversy, dispute, or claim remains, it shall be settled by final and binding arbitration to be conducted by an arbitration tribunal in Fort Lauderdale, Florida, pursuant to the rules of the American Arbitration Association. The arbitration tribunal shall consist of three arbitrators. The party initiating the controversy, dispute, or claim that led to arbitration shall nominate one arbitrator in the request for arbitration and the other party shall nominate a second arbitrator in the answer thereto within 30 days of receipt of the request; provided that if there are multiple initiating or answering parties, the arbitrator selected must be reasonably acceptable to all initiating or answering parties, as applicable. The two arbitrators so named will then jointly appoint the third arbitrator. If the answering party fails to nominate its arbitrator within the 30-day period, or if the arbitrators named by the parties fail to agree on the third arbitrator within 60 days, the office of the American Arbitration Association in New York, New York shall make the necessary appointments of such arbitrator(s). The decision or award of the arbitration tribunal (by a majority determination, or if there is no majority, then by the determination of the third arbitrator, if any) shall be final, and judgment upon such decision or award may be entered in any competent court or application may be made to any competent court for judicial acceptance of such decision or award and an order of enforcement. In the event of any procedural matter not covered by the aforesaid rules, the procedural law of the State of Florida shall govern.

11.6 Miscellaneous

     This Agreement (including the Appendices hereto) contains the entire agreement among the parties and supersedes all prior arrangements or understanding with respect thereto. Descriptive headings are for convenience only and shall not control or affect the meaning or construction of any provision of this Agreement. This Agreement may be executed in any number of counterparts, any one of which need not contain the signatures of more than one party, but all of such counterparts together shall constitute one agreement. Whenever from the context it appears appropriate, each term stated in either the singular or the plural shall include the singular and the plural, and pronouns stated in either the masculine, the feminine or the neuter gender shall include the masculine, the feminine, and the neuter.

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11.7 No Third Party Beneficiaries

     No Person that is not a party hereto shall have any rights or obligations pursuant to this Agreement. The rights and obligations set forth herein are for the benefit of the parties hereto only and do not create or grant any rights to third parties.

[ THIS SPACE INTENTIONALLY LEFT BLANK. ]

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

MANAGING MEMBER: SPONSOR MEMBER: WOODBRIDGE HOLDINGS CORPORATION
By:	/s/ John K. Grelle
	Name:	John K. Grelle
	Title:	Chief Financial Officer
RESIDUAL MEMBER: WOODBRIDGE EXECUTIVE INCENTIVE PLAN 1, LP
By:	WOODBRIDGE FUND I, LLC, its General Partner
By:	WOODBRIDGE HOLDINGS CORPORATION,
	its Sole Member
By:	/s/ John K. Grelle
	Name:	John K. Grelle
	Title:	Chief Financial Officer

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IP MEMBERS:
 

/s/ Alan B. Levan  

Alan B. Levan 

/s/ John E. Abdo  

John E. Abdo 

/s/ Seth M. Wise  

Seth M. Wise 

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PROGRAM MANAGER: WOODBRIDGE HOLDINGS CORPORATION
By:	/s/ John K. Grelle
	Name:	John K. Grelle
	Title:	Chief Financial Officer

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Schedule I
Core Communities, LLC
List of Carried Interest Members and Applicable Carry Percentages

Carried Interest Member	Carry Percentage
Sponsor Member		35.0	%
IP Member (divided as listed below)		32.5	%
Alan Levan		38.25%
John Abdo		38.25%
Seth Wise		23.50%
Residual Member		32.5	%
TOTAL		100.0	%

Schedule II
Program Expenses

Amounts Included in Program Expenses	Amounts Excluded from Program Expenses
Salaries and bonuses Salary for any investment professionals of the Program Manager, except where Woodbridge executives are the investment professionals. Salaries and cash bonus of direct dedicated staff members.	Salaries and bonuses Woodbridge Holdings incentive stock options or stock grants to any investment professional or dedicated staff member as part of a Woodbridge Holdings-wide incentive compensation program.
Direct Expenses Direct dedicated expenses incurred directly by the Program Manager, including rent, facilities charges, equipment and supplies, except where Woodbridge Holdings executives are the investment professionals. Outside legal and accounting expenses incurred for services rendered with respect to the Program Manager or the Company, including formation costs, and tax return preparation. Unreimbursed costs of transactions, including due diligence expenses and the carrying costs of deposits, to the extent the transaction that generated the cost does not close. Travel expenses neither capitalized as part of the acquisition of a completed transaction nor borne by the target company. Standard charges by internal Woodbridge Holdings personnel for provision of back-office support services directly related to the program or Program Assets (i.e., providing the accounting services for the Company, providing human resources services for the Company). Standard charges by BFC Shared Services for back-office support services directly related to the program or Program Assets.	Direct Expenses Time of Investment Committee in evaluating investment recommendations.

Amounts Included in Program Expenses	Amounts Excluded from Program Expenses
Interest on borrowings of the Program Manager, including any that accrued at the rate of 12% compounded per annum on amounts received through a pre-approved line of credit from Woodbridge Overhead Funding, LLC. For purposes of this provision, all amounts of funds provided to the Program Manager shall be treated as borrowings and shall accrue 12% interest regardless of whether such funds were provided in the form of loans, equity capital, or otherwise.
Allocation of Woodbridge Holdings Overhead None.	Allocation of Woodbridge Holdings Overhead General corporate overhead (i.e., public company costs, office expenses for non-dedicated staff, investor relations and accounting staff not dedicated, analytical staff providing analytics to Woodbridge Holdings, management for oversight of programs and Program Assets). Any other overhead expenses not expressly included on this Schedule II as Program Expenses.

APPENDIX A:
Tax and Accounting Provisions

A-1 Definitions

     For purposes of this Appendix A, any capitalized term not defined herein shall have the meaning set forth in the Agreement.

     “Adjusted Capital Account Deficit” means, with respect to any Member, the deficit balance, if any, in such Member’s Capital Account, as of a specified time, after giving effect to the following adjustments:

     (a) credit to such Member’s Capital Account any amounts that such Member is obligated to restore or deemed obligated to restore pursuant to Treasury Regulations Section 1.704-1(b)(2)(ii)(c) and the penultimate sentences of Treasury Regulations Section 1.704-2(g)(1) and Treasury Regulations Section 1.704-2(i)(5); and

     (b) debit to such Member’s Capital Account the items described in Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).

The foregoing definition of Adjusted Capital Account Deficit is intended to comply with the provisions of Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

     “Book Value” means, with respect to any asset, the asset’s adjusted basis for U.S. federal income tax purposes, except as follows:

     (a) the initial Book Value of any asset that is not Contributed Property as defined in the Agreement but is otherwise contributed or deemed contributed to the Company shall be such asset’s gross fair market value at the time of such contribution as determined by the Managing Member pursuant to Article IX of the Agreement;

     (b) the initial Book Value of any asset that is Contributed Property as defined in Section 3.1(a) of the Agreement shall be the value set forth in Section 3.1(a) of the Agreement;

     (c) the Book Value of all Company assets may be adjusted in the discretion of the Managing Member to equal their respective gross fair market values, as determined by the Managing Member pursuant to Article IX of the Agreement, at the times specified in Treasury Regulations Section 1.704-1(b)(2)(iv)(f);

     (d) any adjustments to the adjusted basis of any asset of the Company pursuant to Section 734 or Section 743 of the Code shall be taken into account in determining such asset’s Book Value in a manner consistent with Treasury Regulations Section 1.704-1(b)(2)(iv)(m);

     (e) the Book Value of any Company asset distributed or deemed distributed by the Company to any Member shall be adjusted immediately prior to such distribution to equal its gross fair market value as of the date of distribution, as determined by the Managing Member pursuant to Article IX of the Agreement; and

A-1

     (f) if the Book Value of an asset has been determined pursuant to clauses (a), (c) or (d) of this definition, to the extent permitted by the Treasury Regulations, such Book Value shall thereafter be adjusted in the same manner as would the asset’s adjusted basis for U.S. federal income tax purposes, except that depreciation and amortization deductions shall be computed based on the asset’s Book Value as so determined, rather than on its adjusted tax basis.

     “Net Profits” and “Net Losses” mean, for any period, the taxable income or loss, respectively, of the Company for such period, in each case as determined for U.S. federal income tax purposes, but computed with the following adjustments:

     (a) items of income, gain, loss and deduction (including, without limitation, gain or loss on the disposition of any Company asset and depreciation or other cost recovery deduction or expense) shall be computed based upon the Book Value of the Company’s assets rather than upon such assets’ adjusted bases for U.S. federal income tax purposes;

     (b) any tax-exempt income received by the Company shall be deemed for these purposes only to be an item of gross income;

     (c) any expenditure of the Company described in Section 705(a)(2)(B) of the Code (or treated as described therein pursuant to Treasury Regulations under Section 704(b) of the Code) shall be treated as a deductible expense;

     (d) there shall be taken into account any separately stated items under Section 702(a) of the Code;

     (e) if the Book Value of any Company asset is adjusted pursuant to clauses (c) or (e) of the definition of “Book Value” above, or pursuant to clause (d) of such definition (but only to the extent the adjustment is attributable to a distribution of Investment Proceeds not in liquidation of a Member’s Company interest), the amount of such adjustment shall be taken into account in the period of adjustment as gain or loss from the disposition or deemed disposition of such asset for purposes of computing Net Profits and Net Losses; and

     (f) items of income, gain, loss, deduction or credit allocated pursuant to Section A-6 of this Appendix A shall not be taken into account.

     “Tax Matters Partner” has the meaning set forth in Section A-6.

A-2 Maintenance of Capital Accounts

     (a) A Capital Account shall be maintained for each Member in accordance with Section 704(b) of the Code and Treasury Regulations Sections 1.704-1(b) and 1.704-2. The initial balance of each Capital Account shall be equal to such Member’s initial capital contribution to the Company.

A-2

     (b) The Capital Account of each Member shall be increased by (i) the amount of any cash contributed by such Member to the capital of the Company, (ii) in the case of any property contributed by such Member to the capital of the Company, the Book Value of such property (net of liabilities that the Company is considered to assume or take the property subject to) when contributed, (iii) the amount of any liabilities of the Company that are assumed by such Member (except for liabilities described in Section A-2(c)(ii) of this Appendix A that are assumed by such Member) for purposes of Treasury Regulations Section 1.704-1(b)(2)(iv)(c), (iv) the Net Profits allocated to such Member, and (v) any gross income and gain allocated to such Member.

     (c) The Capital Account of each Member shall be decreased by (i) the amount of any cash distribution to such Member when made, (ii) the Book Value of any property distributed to such Member by the Company (net of liabilities that the Member is considered to assume, or take property subject to) when distributed, (iii) the amount of any liabilities of such Member that are assumed by the Company (except for liabilities described in Section A-2(b)(ii) of this Appendix A that are assumed by the Company) for purposes of Treasury Regulations Section 1.704-1(b)(2)(iv)(c), (iv) the Net Losses allocated to such Member, and (v) any gross deductions and loss allocated to such Member.

     (d) In the event that all or a portion of an interest in the Company is Transferred in accordance with the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent such Capital Account relates to the Transferred interest in the Company.

     (e) The Capital Account of each Member shall be adjusted to reflect any adjustment to the Book Value of the Company’s assets attributable to the application of Section 734 of the Code in respect of a distribution in liquidation of such Member’s interest in the Company to the extent required pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m).

     (f) It is the intention of the parties that the Capital Accounts of the Members be kept in the manner required under Section 704(b) of the Code and Treasury Regulations Sections 1.704-1(b) and 1.704-2. To the extent any additional adjustment to the Capital Accounts is required by such provisions, the Managing Member is hereby authorized to make such adjustment after notice to the Members.

     (g) Except as expressly required herein, no Member shall be required to restore any negative balance in its Capital Account. No allocation to any Member of any loss or deduction, whether attributable to depreciation or otherwise, shall create any obligation of that Member to the Company or any other Member, even if the allocation reduces such Member’s Capital Account or creates or increases a deficit in its Capital Account.

A-3

A-3 Allocations of Profits and Losses

     (a) After the application of Section A-4, Net Profits and Net Losses for any taxable year, or portion thereof, shall be allocated among the Members (and credited or debited to their Capital Accounts) in such manner so that, after taking into account distributions by the Company and contributions made to the Company through the end of such taxable year and the allocations of Net Profits and Net Losses for such taxable year, (i) the respective positive Capital Account balances of the Members would correspond as closely as possible to the amount each Member would receive as a cash distribution pursuant to Article IV of the Agreement, if the Company were to liquidate completely immediately after the end of such taxable year and (ii) any resulting deficit Capital Account balances of the Members would correspond as closely as possible with the manner in which economic responsibility for Company deficit balances (as determined in accordance with the principles of Treasury Regulations under Section 704 of the Code) would be borne by the Members under the terms of this Agreement if the Company were to liquidate completely immediately after the end of such taxable year. For purposes of the preceding sentence, the amount of cash to be distributed to each Member, the amount of each Member’s Capital Account and the amount of each Member’s economic responsibility for Company deficit balances, upon the assumed liquidation, shall be computed by assuming that in connection with such liquidation, the Company sold all of its assets for amounts such that no Net Profits or Net Losses result from the sale and settled all of its liabilities for amounts such that no Net Profits or Net Losses result from the settlement. For purposes of applying this Section A-3, the Capital Account balance of each Member shall be increased by such Member’s share of “partnership minimum gain” and “partner minimum gain” (within the meaning of and in accordance with the Treasury Regulations under Section 704(b) of the Code). Subject to the other provisions of this Appendix A, an allocation to a Member of a share of Net Profit or Net Loss shall be treated as an allocation of the same share of each item of income, gain, loss or deduction that is taken into account in computing Net Profit or Net Loss.

     (b) If a Member Transfers, acquires, or redeems an interest in the Company during a taxable year, the Net Profit or Net Loss (and other items referred to in Section A-4 of this Appendix A) attributable to such interest for such year shall be allocated between the transferring Member and the transferee (or the other Members in the Company) by any method permitted under Section 706 of the Code as selected by the Managing Member.

A-4 Regulatory Allocations and Special Allocations

     (a) Notwithstanding any other provision of the Agreement or this Appendix A, (i) “partner nonrecourse deductions” (as defined in Treasury Regulations Section 1.704-2(i)), if any, of the Company shall be allocated for each period to the Member that bears the economic risk of loss within the meaning of Treasury Regulations Section 1.704-2(i), and (ii) “nonrecourse deductions” (as defined in Treasury Regulations Section 1.704-2(b)) and “excess nonrecourse liabilities” (as defined in Treasury Regulations Section 1.752-3(a)), if any, of the Company shall be allocated to the Members in accordance with their respective percentage interests in Net Losses.

     (b) The Agreement and this Appendix A shall be deemed to include “qualified income offset,” “minimum gain chargeback” and “partner nonrecourse debt minimum gain chargeback” provisions within the meaning of Treasury Regulations under Section 704(b) of the Code. Accordingly, notwithstanding any other provision of this Agreement or this Appendix A, items of gross income shall be allocated to the Members on a priority basis to the extent and in the manner required by such provisions.

A-4

     (c) To the extent that Net Losses or items of loss or deduction otherwise allocable to a Member hereunder would cause such Member to have an Adjusted Capital Account Deficit as of the end of the taxable year to which such Net Losses or items of loss or deduction relate (after taking into account the allocation of all items of income and gain for such taxable period), such Net Losses or items of loss or deduction shall not be allocated to such Member and instead shall be allocated to the Members in accordance with Section A-3 of the Agreement as if such Member were not a Member.

     (d) Any allocations required to be made pursuant to clauses (a), (b), and (c) above (the “Regulatory Allocations”) (other than allocations, the effect of which are likely to be offset in the future by other special allocations) shall be taken into account, to the extent permitted by the Treasury Regulations, in computing subsequent allocations of income, gain, loss or deduction pursuant to Section A-3 so that the net amount of any items so allocated and all other items allocated to each Member shall, to the extent possible, be equal to the amount that would have been allocated to each Member pursuant to Section A-3 had such Regulatory Allocations under this Section A-4 not occurred.

     (e) If any Member is treated for income tax purposes as realizing ordinary income because of receipt of its interest in the Company (whether under Section 83 of the Code or any similar provisions of any law, rule or regulations or any other applicable law, rule, regulation or doctrine) and the Company is entitled to any offsetting deduction, the Company’s deduction shall be allocated among the Members in such manner as to, as nearly as possible, offset such ordinary income realized by such Member.

A-5 Tax Allocations

     (a) For federal income tax purposes, except as otherwise provided in this Section A-5, each item of income, gain, loss, and deduction and credit shall be allocated among the Members in the same manner as its corresponding item of book income, gain, loss, deduction or credit is allocated pursuant to this Appendix A.

     (b) In accordance with Sections 704(b) and 704(c) of the Code and the Treasury Regulations thereunder, income, gain, loss and deduction with respect to any Company asset contributed (or deemed contributed) to the capital of the Company shall, solely for federal income tax purposes, be allocated among the Members so as to take into account any variation between the adjusted basis of such Company asset for federal income tax purposes and its Book Value upon its contribution (or deemed contribution). If the Book Value of any Company asset is adjusted, subsequent allocations of taxable income, gain, loss and deduction with respect to such Company asset shall take account of any variation between the adjusted basis of such Company asset for federal income tax purposes and the Book Value of such Company asset in the manner prescribed under Code Sections 704(b) and 704(c) and the Treasury Regulations thereunder. The Managing Member shall select the manner by which variations between Book Value and adjusted basis are taken into account in accordance with Code Sections 704(b) and 704(c) and the Treasury Regulations thereunder.

A-5

     (c) The provisions of this Appendix A (and other related provisions in the Agreement) pertaining to the allocation of items of Company income, gain, loss, deduction, and credit shall be interpreted consistently with the Treasury Regulations, and to the extent unintentionally inconsistent with such Treasury Regulations, shall be deemed to be modified to the extent necessary to make such provisions consistent with the Treasury Regulations.

A-6 Tax Matters Partner; Management Authority Regarding Tax and Accounting

     (a) The Managing Member is designated the “Tax Matters Partner” (as defined in Section 6231(a)(7) of the Code) to manage administrative tax proceedings conducted at the Company level by the Internal Revenue Service with respect to Company matters. The Managing Member is specifically directed and authorized to take whatever steps the Managing Member, in its sole discretion, deems necessary or desirable to perfect such designation, including, without limitation, filing any forms or documents with the Internal Revenue Service and taking such other action as may from time to time be required under Treasury regulations. The Tax Matters Partner shall have full authority to extend the statute of limitations and control any tax audit or other proceeding on behalf of the Company. Expenses of administrative proceedings relating to the determination of Company items at the Company level undertaken by the Tax Matters Partner will be deemed to be Program Expenses.

     (b) All matters concerning (i) allocations of Net Profits and Net Losses and allocations for tax purposes, (ii) distributions by the Company, including the taxes thereon, and (iii) accounting procedures and determinations, tax determinations, determinations as to on whose behalf expenses were incurred and the attribution of fees and expenses to a Program Asset, and other determinations not specifically and expressly provided for by the terms of this Agreement, shall be determined by the Managing Member, whose determination shall be final and conclusive as to all the Members absent manifest clerical error.

     (c) At the Managing Member’s sole discretion, the Managing Member may cause the Company to make or refrain from making any and all elections permitted by the Code and the Treasury Regulations and any state, local, or foreign tax elections. Notwithstanding the foregoing, it is intended that the Company be treated as a partnership for U.S. federal income tax purposes, and neither the Company nor any Member shall make any election inconsistent with such treatment without the unanimous written consent of the Members.

A-6

APPENDIX B:
Apportionment and Modification of
Carried Interest to IP Members

B-1 Definitions

     For purposes of this Appendix B, any capitalized term not defined herein shall have the meaning set forth in the Agreement.

     “Acquisition Date” means, with respect to a Program Asset, the date the Company first made an investment in such Program Asset (or in the case of a Program Asset that is contributed to the Company, the date of such contribution).

     “Allocated Reimbursement Payments” means the amount of Reimbursement Payments allocated by the Managing Member to each Program Asset. Unless the Managing Member adopts another method (with notification to each other Member), the Managing Member shall allocate the Reimbursement Payments made with respect to a particular year to and among the Program Assets held by the Company during that year based on the relative Invested Capital in such Program Assets and adjusted (on a weighted average basis) to take into account Program Assets that are held for less than an entire year.

     “Carry Account” has the meaning set forth in Section B-3.

     “Carry Loss” means, with respect to the Realization of any Program Asset, 20% of the amount, if any, by which the combined Investment Proceeds and Sponsor Proceeds generated by such Program Asset are less than the sum of the Full Return Amount and the Hurdle Return Amount of such Program Asset. The Managing Member shall use its reasonable discretion in determining the amount of Carry Loss (including adjusting previous allocations of Carry Loss) so as to cause the amount of Carry Loss to accurately reflect the amount by which all Carry Distributions that will ultimately be apportioned by the Company with respect to all other Program Assets will be reduced, which determination shall then be binding on the Company and the Members.

     “Carry Profit” means with respect to any particular Program Asset the amount by which the Investment Proceeds or Sponsor Proceeds generated by that Program Asset produce or lead to the production of Carry Distributions, as determined by the Managing Member. In general, the Carry Profit with respect to any Program Asset will equal the sum of the following amounts:

     (a) 0% of that portion of the combined Investment Proceeds and Sponsor Proceeds from such Program Asset as does not exceed the sum of the applicable Full Return Amount and the applicable Hurdle Return Amount;

     (b) 80% of that portion of the combined Investment Proceeds and Sponsor Proceeds that is in excess of the sum of the applicable Full Return Amount and the applicable Hurdle Return Amount but that is less than the sum of the applicable Full Return Amount and 133% of the applicable Hurdle Return Amount; and

B-1

     (c) to the extent in excess of the sum of clauses (a) and (b) above, (i) 20% of that portion of the Investment Proceeds that is in excess of the sum of the applicable Full Return Amount plus (ii) 100% of any Sponsor Proceeds.

The Managing Member shall use its discretion in determining the amount of Carry Profit (including adjusting previous allocations of Carry Profit) so as to cause the amount of Carry Profit (net of the allocated Carry Loss) to accurately reflect the amount of Carry Distributions that will ultimately be distributed and that are allocable to each Program Asset.

     “Cause Event” means with respect to any IP Member,

     (a) any act or omission constituting gross negligence, willful misconduct, or fraud in the performance of such IP Member’s duties or obligations as an employee of the Program Manager;

     (b) any action or omission that causes there to be a material breach of any applicable management agreement to which the Program Manager is a party;

     (c) any willful refusal to perform a duty as directed by Woodbridge or any of its subsidiaries (including the Managing Member) if such duty is within the scope of such IP Member’s duties to the Program Manager, Woodbridge or any of its subsidiaries; or

     (d) any conviction of any crime constituting a felony in the jurisdiction involved (other than a motor vehicle felony for which only a non-custodial penalty is imposed), whether or not involving the Program Manager or the Company.

     “Full Return Amount” means, with respect to a Program Asset, the sum of (i) the aggregate Invested Capital and (ii) the Allocated Reimbursement Payments, in each case attributable to such Program Asset.

     “Hurdle Return Amount” means, with respect to a Program Asset, as of any date of determination, the summation of an amount calculated on a daily basis through the applicable date of determination equal to 10% per annum, compounded annually, of (i) the aggregate Invested Capital and the Allocated Reimbursement Payments, in each case attributable to such Program Asset, minus (ii) the aggregate amount of all Investment Proceeds attributable to such Program Asset on or prior to such day.

     “Tenured Asset” means, with respect to any IP Member, any Program Asset acquired by the Company during the period when such Person was an IP Member (and not a Terminated IP Member) or any other Program Asset in which such Person has been granted a Carry Percentage by the Managing Member. For the avoidance of doubt, an IP Member will not receive a Carry Percentage with respect to any asset that is not a Tenured Asset.

     “Terminated IP Member” means any IP Member whose employment with the Woodbridge Employer is terminated for any reason, whether voluntarily or involuntarily, and with or without cause. In the Managing Member’s discretion, an IP Member whose employment with the Woodbridge Employer is terminated contemporaneously with such IP Member becoming employed by another entity within Woodbridge shall not be treated as having been terminated, and the new employer shall become the Woodbridge Employer for purposes of this definition. For purposes of this Agreement, in the case of any Family Related Member, the termination of employment with the Woodbridge Employer of the IP Member with whom such Family Related Member is associated shall cause such Family Related Member to become a Terminated IP Member.

B-2

     “Vested Percentage” means, with respect to an IP Member and each Program Asset, that percentage to be applied in determining the amount of Carry Profit or Carry Loss to be allocated to any IP Member as set forth in the vesting provisions in Section B-2.

     “Woodbridge Employer” means, with respect to any IP Member, the Program Manager if the IP Member is an employee of the Program Manager. Otherwise it means the entity within Woodbridge that is the employer of such IP Member.

B-2 Vesting Provisions

     (a) Non-Tenured Assets. An IP Member will have a Vested Percentage of 0% in any Program Asset that is not a Tenured Asset with respect to such Member.

     (b) Tenured Assets. The Vested Percentage of an IP Member with respect to a Tenured Asset will be as follows:

(i)	Distributions or Realizations While Employed. An IP Member will have a Vested Percentage of 100% in all Carry Profit or Carry Loss attributable to any Investment Proceeds or Sponsor Proceeds received by the Company from such Member’s Tenured Assets, or any other consequences of a Realization of a Tenured Asset, if those proceeds are received or the Realization occurs prior to the IP Member becoming a Terminated IP Member. For the avoidance of doubt, an IP Member shall have a Vested Percentage of 100% in any Carry Loss associated with an unreversed Impairment that arises on or prior to an IP Member becoming a Terminated IP Member.
(ii)	Termination for Cause. An IP Member will have a Vested Percentage of 0% in all Carry Profit or Carry Loss attributable to any Investment Proceeds or Sponsor Proceeds received by the Company from such IP Member’s Tenured Assets, or any other consequences of a Realization of a Tenured Asset, if those proceeds are received or the Realization occurs after such IP Member has become a Terminated IP Member because of the occurrence of a Cause Event with respect to such IP Member.
(iii)	Termination Not for Cause. An IP Member will have a Vested Percentage of 75% in all Carry Profit or Carry Loss attributable to any Investment Proceeds or Sponsor Proceeds received by the Company from such IP Member’s Tenured Assets, or any other consequences of a Realization of a Tenured Asset, if those proceeds are received or the Realization occurs after such IP Member has become a Terminated IP Member because (i) the Woodbridge Employer terminated the employment for a reason other than the occurrence of a Cause Event with respect to such IP Member or (ii) of the death, permanent disability or legal incapacity of such IP Member.

B-3

(iv) Voluntary Resignation. An IP Member will have a Vested Percentage as determined pursuant to the following sentence in all Carry Profit or Carry Loss attributable to any Investment Proceeds or Sponsor Proceeds received by the Company from such IP Member’s Tenured Assets, or any other consequences of a Realization of a Tenured Asset, if those proceeds are received or the Realization occurs after such IP Member has become a Terminated IP Member because the IP Member voluntarily left the employment of the Woodbridge Employer. For purposes of this clause (iv), the Vested Percentage shall be determined separately for each Program Asset and shall equal: (A) 25% upon the Acquisition Date of such Program Asset, (B) an additional 12.5 percentage points per year upon each of the first four anniversaries of the Acquisition Date, and (C) the remainder when the Tenured Asset is Realized.

     (c) Permitted Modifications. Notwithstanding the foregoing, the Managing Member may, after consultation with the Program Manager, modify this vesting schedule for any additional IP Member admitted to the Company pursuant to Section 7.5 of the Agreement, including granting an additional IP Member the right to have a Vested Percentage in Program Assets whose Acquisition Date preceded the time such additional IP Member was admitted to the Company.

     (d) Permitted Adjustments. As described in Section B-3(b), the Managing Member, in its discretion, is permitted to make adjustments, including retroactive adjustments, to the allocations of Carry Profit and Carry Loss. The ability of the Managing Member to make these adjustments shall not be restricted by the application of the vesting provisions in this Section B-2.

     (e) Family Related Member. A Family Related Member’s Vested Percentage shall be equivalent to the Vested Percentage of the IP Member associated with such Family Related Member.

B-3 Determination of Carry Accounts

     (a) Maintenance of Carry Accounts. A separate bookkeeping account (a “Carry Account”) shall be maintained for each IP Member. Immediately prior to the Company making any Carry Distributions or upon the Realization of a Program Asset, the Carry Profit (or Carry Loss) determined with respect to such distribution or Realization shall be credited (or debited, and, if necessary, to an amount below zero) to the Carry Account of each IP Member in an amount equal to such IP Member’s Carry Percentage in the Program Asset giving rise to such Carry Profit (or Carry Loss) multiplied by such IP Member’s Vested Percentage in such Carry Profit (or Carry Loss). An IP Member’s Carry Account shall be debited by the amount of Carry Distributions made to such IP Member.

B-4

     (b) Adjustments to Carry Accounts. The Managing Member, in its discretion, is permitted to make adjustments, including retroactive adjustments, to the allocations of Carry Profit and Carry Loss so that, on an aggregate basis the Carry Accounts of the IP Members more closely match the aggregate rights of the IP Members to receive Carry Distributions or to make clawback payments as provided in Article IV of the Agreement. Except to the extent the Managing Member determines otherwise (with notice to the other Members), the Managing Member intends to cause any shortfall in the aggregate net Carry Profits (i.e., net of aggregate Carry Losses) as compared to the aggregate amount of Carry Distributions (net of clawback payments) distributable to the IP Members in accordance with Article IV of the Agreement to be allocated on a pro rata basis to each Program Asset that otherwise produced Carry Profit (and among them based on the relative amounts of Carry Profit).

     (c) Deemed Realization. Solely for purposes of determining an IP Member’s Carry Account, the Managing Member may, upon the admittance of a new Carried Interest Member or at any other time, deem there to have been a Realization of one or more Program Assets at the Fair Market Value at such time of such Program Asset, in which case the deemed Carry Profit or Carry Loss derived from such deemed Realization shall be allocated among the IP Members and charged to the Carry Accounts of the IP Members. Any future actual or deemed Realization of a Program Asset shall take into account the prior deemed Realization or Realizations. Notwithstanding the foregoing, for purposes of determining an IP Member’s Vested Percentage pursuant to Section B-2, such deemed Realizations shall be disregarded.

B-4 Distributions to the IP Members

     Subject to the holdback provisions of Section 4.5 of the Agreement, each IP Member shall be entitled to receive an amount of Carry Distributions equal to the positive balance in his Carry Account, provided that the sum of all of the Carry Distributions made to date to the IP Members as a group cannot exceed the product of (A) the total Carry Distributions made to date times (B) the aggregate Carry Percentages for all of the IP Members (adjusted as necessary to take into account changes in Carry Percentages since the formation of the Company). If the amount of Carry Distributions to be made to the IP Members as a group is insufficient to reduce the positive Carry Account balances of all IP Members to zero, then Carry Distributions made to the IP Members as a group will be made pro rata among the IP Members based on their relative Carry Account balances. If the amount of Carry Distributions to be made to the IP Members exceeds the aggregate positive Capital Account balances of the IP Members, such excess shall be distributed among the IP Members in the manner that the Managing Member determines most appropriately reflects the IP Members’ relative Carry Percentages (as adjusted by the Vested Percentages) in the Program Assets giving rise to the Carry Distributions.

B-5 Responsibility for Gross Clawback Amount

     Each IP Member shall be responsible (only to the extent of Section 4.6(c) of the Agreement) for a portion of the Gross Clawback Amount equal to the negative balance, if any, in such IP Member’s Carry Account as of the final liquidating distribution of assets of the Company pursuant to Section 8.2 of the Agreement.

B-6 83(b) Election

     Each Carried Interest Member shall make a timely election under Section 83(b) of the Code with respect to such Carried Interest Member’s interest in the Company.

B-5

AMENDED AND RESTATED

AGREEMENT OF LIMITED PARTNERSHIP

OF

PF PROGRAM PARTNERSHIP, LP

[ Previously Named: Woodbridge Equity Fund II LP ]

Date: March 13, 2009

TABLE OF CONTENTS

			Page
ARTICLE I GENERAL PROVISIONS				1
	1.1	Formation		1
	1.2	Name		2
	1.3	Purpose		2
	1.4	Principal Office		2
ARTICLE II DEFINITIONS; DETERMINATIONS				2
	2.1	Definitions		2
	2.2	Determinations		6
ARTICLE III INVESTED CAPITAL; CAPITAL ACCOUNTS				6
	3.1	Invested Capital		6
	3.2	Future Contributions		7
	3.3	Capital Accounts		7
ARTICLE IV DISTRIBUTIONS				7
	4.1	Distribution Policy		7
	4.2	Reimbursement Payment		8
	4.3	Priority of Distributions		8
	4.4	Apportionment of Carry Distributions		9
	4.5	IP Clawback Reserve		10
	4.6	Clawback Obligations		11
ARTICLE V PROGRAM MANAGER				12
	5.1	Program Manager		12
	5.2	Fees		12
ARTICLE VI GENERAL PARTNER				12
	6.1	Management Authority		12
	6.2	No Liability to Partnership or Limited Partners		13
	6.3	Indemnification		13
ARTICLE VII LIMITED PARTNERS				14
	7.1	Limited Liability		14
	7.2	No Participation in Management		14
	7.3	Transfer of Limited Partnership Interests		14
	7.4	No Termination		15
	7.5	Additional Limited Partners		15

     -i-     

			Page
	7.6	Reimbursement for Payments on Behalf of a Partner		15
ARTICLE VIII DURATION AND TERMINATION				16
	8.1	Term		16
	8.2	Termination and Liquidation		16
ARTICLE IX VALUATION OF PARTNERSHIP ASSETS				17
	9.1	Normal Valuation		17
	9.2	Restrictions on Transfer or Blockage		17
ARTICLE X BOOKS OF ACCOUNTS; MEETINGS				18
	10.1	Books		18
	10.2	Fiscal Year		18
	10.3	Reports		18
ARTICLE XI MISCELLANEOUS				18
	11.1	Amendments		18
	11.2	Successors		19
	11.3	Governing Law; Severability		19
	11.4	Notices		19
	11.5	Arbitration		19
	11.6	Miscellaneous		20
	11.7	No Third Party Beneficiaries		20
APPENDIX A: TAX AND ACCOUNTING PROVISIONS				A-1
	A-1	Definitions		A-1
	A-2	Maintenance of Capital Accounts		A-2
	A-3	Allocations of Profits and Losses		A-4
	A-4	Regulatory Allocations and Special Allocations		A-4
	A-5	Tax Allocations		A-5
	A-6	Tax Matters Partner; Management Authority Regarding Tax and Accounting	A-6
APPENDIX B: APPORTIONMENT AND MODIFICATION OF CARRIED INTEREST TO IP LIMITED PARTNERS				B-1
	B-1	Definitions		B-1
	B-2	Vesting Provisions		B-3
	B-3	Determination of Carry Accounts		B-4
	B-4	Distributions to the IP Limited Partners		B-5
	B-5	Responsibility for Gross Clawback Amount		B-5
	B-6	83(b) Election		B-5

     -iii-     

AMENDED AND RESTATED

AGREEMENT OF LIMITED PARTNERSHIP

OF

PF PROGRAM PARTNERSHIP, LP

     THIS AGREEMENT OF LIMITED PARTNERSHIP is deemed to be effective as of March 13, 2009 (the “Effective Date”), by and among the General Partner, the Sponsor Partner, the IP Limited Partners, the Program Manager and the Residual Limited Partner (each as defined below).

     WHEREAS, the Partnership (as defined below) was formed pursuant to (a) the Certificate (as defined below) and (b) an Agreement of Limited Partnership (the “Initial Agreement”), between the General Partner, as general partner, and Woodbridge Holdings Corporation, a Florida corporation, as the sole limited partner (the “Initial Limited Partner”);

     WHEREAS, in furtherance of this Agreement, the Initial Limited Partner has transferred its interest in the Partnership to the Program Manager and the Program Manager has transferred such interest to the General Partner which hereafter shall be considered the General Partner’s interest;

     WHEREAS, the parties to this Agreement wish to amend and restate the Initial Agreement in its entirety as hereinafter set forth, and to admit the IP Limited Partners, the Sponsor Partner and the Residual Limited Partner as partners to the Partnership.

     NOW, THEREFORE, the parties hereto agree as follows:

ARTICLE I
GENERAL PROVISIONS

1.1 Formation

     The Partners hereby agree to continue a limited partnership (the “Partnership”) pursuant to and in accordance with the Delaware Revised Uniform Limited Partnership Act, as amended from time to time (the “Partnership Act”). The term of the Partnership (the “Term”) commenced upon the filing of the Certificate of Limited Partnership (the “Certificate”) with the Secretary of State of Delaware (the date of such filing is referred to herein as the date of “formation” of the Partnership) and shall continue until dissolution and termination of the Partnership in accordance with the provisions of ARTICLE VIII hereof.

1.2 Name

     As of the date hereof, the Partners hereby agree that the name of the Partnership shall be PF Program Partnership, LP, and the General Partner shall file a certificate of amendment effecting such name change. The General Partner shall be entitled to further change the name as the General Partner may designate from time to time.

1.3 Purpose

     The Partnership is organized for the principal purpose of (i) acquiring, managing, and supervising the interests in the Program Assets, and (ii) engaging in such other activities incidental or ancillary thereto as the General Partner deems necessary or advisable.

1.4 Principal Office

     The General Partner shall maintain a principal office in Fort Lauderdale, Florida, or at such other place or places as the General Partner may from time to time designate.

ARTICLE II
DEFINITIONS; DETERMINATIONS

2.1 Definitions

     Capitalized terms used in this Agreement have the meanings set forth below or as otherwise specified herein:

     “Agreement” means this Amended and Restated Agreement of Limited Partnership of PF Program Partnership, LP, as amended or modified from time to time in accordance with its terms.

     “Alternative Clawback Reserve” has the meaning set forth in Section 4.5.

     “Capital Account” is the account established for each Partner in accordance with the provisions of Appendix A hereto.

     “Capital Proceeds” means any Investment Proceeds received by the Partnership in respect of a Program Asset that are attributable to a Realization event.

     “Carried Interest Partners” means the Sponsor Partner, the IP Limited Partners, and the Residual Limited Partner, in their capacities as Partners entitled to receive Carry Distributions.

     “Carry Distributions” means those distributions paid to the Carried Interest Partners in their capacities as such pursuant to Section 4.3(a)(ii) and Section 4.3(a)(iii)(B).

-2-

     “Carry Percentage” means, with respect to a Carried Interest Partner, its percentage interest in Carry Distributions as set forth for such Partner on Schedule I hereof.

     “Certificate” has the meaning set forth in Section 1.1.

     “Code” means the U.S. Internal Revenue Code of 1986, as amended from time to time.

     “Contributed Property” means (i) 2,608,696 shares of Series B Convertible Preferred Stock of Pizza Fusion Holdings, Inc.; (ii) warrants to purchase 1,500,000 shares of such stock; and (iii) all additional rights to acquire warrants and shares as described in the Purchase Agreement between Woodbridge Equity Fund II LP and Pizza Fusion Holdings, Inc., dated September 18, 2008.

     “Covered Party” means each of the Partners, a director, officer, partner or member (or a former director, officer, partner or member) of any Partner, and to the extent approved by the General Partner in its sole discretion, any other employee of a Partner or an agent acting at the direction of the General Partner or the Program Manager, and in any such case, the heirs and legal representatives of any such person.

     “Current Proceeds” means any Investment Proceeds received by the Partnership in respect of a Program Asset that are not attributable to a Realization event, including dividends, rents, or interest with respect to such Program Asset.

     “Deal Fees” means those amounts received by the General Partner (or an affiliate of the General Partner) as break-up fees, director fees, “flip” fees, investment banking, consulting, or similar transaction fees, but not including any amount received as reimbursement for expenses directly related to the provision of such services for which the fee is being paid. “Deal Fees” also means all amounts earned by any employee or agent (in such capacity) of the Program Manager with respect to a Program Asset or other activities of the Partnership, but not including payments to such employee or agent from the Program Manager.

     “Effective Date” has the meaning set forth in the Recitals.

     “Fair Market Value” of a security or a Program Asset means the amount that would be realized as Investment Proceeds if such security or Program Asset had been sold at its “value” (determined in accordance with Article IX).

     “Family Related Partner” means, with respect to any IP Limited Partner, any Person who is a spouse or lineal descendent of the parents of such IP Limited Partner or any Person which is a trust formed by such IP Limited Partner for investment by or for the benefit of such IP Limited Partner’s spouse or any lineal descendants of the parents of such IP Limited Partner or of such IP Limited Partner’s spouse and/or any charitable organization; provided that any cause of action or other dispute arising in relation to a Family Related Partner’s interest may only be pursued by the IP Limited Partner associated with such Family Related Partner, except if such IP Limited Partner has died or become legally incapacitated.

     “GAAP” has the meaning set forth in Section 10.3.

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     “General Partner” means PF Program GP, LLC, in its capacity as general partner of the Partnership, and any successor general partner of the Partnership.

     “Gross Clawback Amount” has the meaning specified in Section 4.6.

     “Impairment” means, with respect to a Program Asset, a determination by the General Partner that the Program Asset is not expected to be able to provide for cash flow or realization proceeds a return to investors of at least the amount of Invested Capital associated with such asset as well as a 10% per annum compounded annual return on such Invested Capital. The General Partner’s determination that a Program Asset has suffered an Impairment for purposes of this Agreement shall be independent of any determination that the value of the Program Asset is reduced for purposes of the financial statements prepared under generally accepted accounting principles.

     “Initial Agreement” has the meaning set forth in the Recitals.

     “Initial Limited Partner” has the meaning set forth in the Recitals.

     “Invested Capital” has the meaning set forth in Section 3.1.

     “Investment Proceeds” means the gross investment returns (whether in the form of cash, securities, or other property) received by the Partnership in respect of the Partnership’s Invested Capital in any Program Assets (i.e., in its capacity as an investor and not with respect to the provision of any services with respect to such Program Assets or to any other investor in such Program Assets). For the avoidance of doubt, the amount of Investment Proceeds shall be determined without regard to any management fees, carried interest, or similar deductions that may be charged by the General Partner or the Program Manager to any investment vehicle through which the Partnership holds any of its investments.

     “IP Clawback Reserve” has the meaning set forth in Section 4.5.

     “IP Limited Partners” means any Persons designated as IP Limited Partners on Schedule I hereof, in their capacities as limited partners of the Partnership, or any other Persons that are admitted as IP Limited Partners in accordance with the terms hereof, in each case for so long as such Persons continue to be IP Limited Partners hereunder, and “IP Limited Partner” shall mean each of such Persons individually.

     “Limited Partners” means the IP Limited Partners and the Residual Limited Partner, and “Limited Partner” shall mean each of such Persons individually.

     “Overall Hurdle Clawback” has the meaning set forth in the limited partnership agreement governing Woodbridge Executive Incentive Plan 1, LP.

     “Partners” means collectively the General Partner (including in its capacity as Sponsor Partner), the Limited Partners, the Program Manager and any other Person that is admitted to the Partnership as a partner in accordance with the terms hereof, and “Partner” shall mean each of such persons individually.

     “Partnership” has the meaning set forth in Section 1.1.

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     “Partnership Act” has the meaning set forth in Section 1.1.

     “Person” means an individual, a partnership (general, limited, or limited liability), a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, or a governmental, quasi-governmental, judicial, or regulatory entity or any department, agency, or political subdivision thereof.

     “Platform” means all of the program partnerships (or other entities) that are designated as a “Program Partnership” in accordance with the terms of the governing agreement of Woodbridge Executive Incentive Plan 1, LP.

     “Portfolio Company” means Pizza Fusion Holdings, Inc. and such other entities, the interests in which are Program Assets.

     “Preferred Return” has the meaning set forth in Section 4.3.

     “Program Assets” means those assets held by the Partnership as part of the Partnership’s investment program, and “Program Asset” shall mean each of such Program Assets individually.

     “Program Expenses” means those costs, expenses, liabilities and obligations relating to the Partnership’s activities, investments and business (to the extent not borne or reimbursed by the Portfolio Company) as set forth on Schedule II hereof.

     “Program Manager” means Woodbridge Fund I, LLC.

     “Program Partnership” means each partnership (or other entity) that is designated as a “Program Partnership” in accordance with the terms of the governing documents of Woodbridge Executive Incentive Plan 1, LP. All such partnerships together with the Partnership are the “Program Partnerships.”

     “Realization” means the sale, redemption, or other disposition of, or any other receipt of a capital nature, including proceeds from the recapitalization or refinancing at the investment level (as determined by the General Partner) with respect to the whole or part of, or the permanent write-off of a Program Asset, and “Realized” shall be construed accordingly. To the extent a Program Asset has suffered an Impairment of less than the whole of the Program Asset, a portion of the Program Asset equal to the amount of the Impairment shall be treated as if sold for no consideration. If the General Partner determines that an Impairment has been reversed, the General Partner shall adjust the allocations and distributions made by the Partnership so as to reverse the effects of the prior Impairment.

     “Realized Base Contributions” has the meaning set forth in Section 4.3(a)(i).

     “Regulatory Allocations” has the meaning set forth in Appendix A hereto.

     “Reimbursement Payment” means the special payment to the Program Manager pursuant to Section 4.2.

     “Reimbursing Partner” has the meaning set forth in Section 7.6(a).

     “Residual Limited Partner” means the Person entitled to receive the amounts of Carry Distributions not made to the Sponsor Partner or the IP Limited Partners, which Person will be Woodbridge Executive Incentive Plan 1, LP.

     “Return Distributions” means those distributions to the General Partner other than Carry Distributions as set forth in Section 4.3.

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     “Sponsor Partner” means the Person entitled to receive the amounts of Carry Distributions apportioned to the Sponsor Partner pursuant to the terms hereof, which Person initially will be the General Partner, in its capacity as Sponsor Partner.

     “Sponsor Proceeds” means all other proceeds received by the Partnership from or with respect to its assets other than Investment Proceeds. Sponsor Proceeds include management fees, carried interest, and Deal Fees charged by the Partnership to other investors in an investment vehicle through which the Partnership holds its assets; provided, however, that to the extent the General Partner determines that Deal Fees arising with respect to a Partnership asset are attributable to the capital invested in that asset by the Partnership, such fees will be treated as Investment Proceeds, rather than Sponsor Proceeds. For the avoidance of doubt, Deal Fees attributable to the capital invested by a third party or not attributable to any investment of capital will be treated as Sponsor Proceeds.

     “Term” has the meaning set forth in Section 1.1.

     “Transfer” means a transfer in any form, including a sale, assignment, conveyance, pledge, mortgage, encumbrance, hypothecation, exchange, gift, or other disposition, or the act of so doing, whether voluntarily, by operation of law, pursuant to judicial process, or otherwise as the context requires.

     “Woodbridge” means Woodbridge Holdings Corporation or any direct or indirect subsidiary of such corporation.

2.2 Determinations

     Unless otherwise indicated, any determinations or calculations conducted pursuant to this Agreement shall be determined or calculated as of the date of such determination or calculation.

ARTICLE III
INVESTED CAPITAL; CAPITAL ACCOUNTS

3.1 Invested Capital

     As of the Effective Date, the Partners shall be required to make the following contributions to the capital of the Partnership (“Invested Capital”):

     (a) The General Partner shall contribute the Contributed Property to the Partnership, which for purposes hereof shall be treated as Invested Capital of $3,392,790, and such Contributed Property will be treated as having a Book Value as defined in Appendix A hereto.

     (b) Each IP Limited Partner shall contribute $250 to the capital of the Partnership.

     (c) The Residual Limited Partner shall contribute $250 to the capital of the Partnership.

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     (d) The Program Manager shall contribute $250 to the capital of the Partnership.

The right of each IP Limited Partner, the Residual Limited Partner, and the Sponsor Partner to receive Carry Distributions represents a profits interest received for services rendered or to be rendered to or for the benefit of the Partnership.

3.2 Future Contributions

     (a) Other than the required Invested Capital described in Section 3.1, any reimbursement payment pursuant to Section 7.6, or as may be required by applicable law, no Partner shall have any further obligation to contribute additional Invested Capital to the Partnership; provided that the General Partner shall be required to make special distributions to the Partnership to the extent that such special distributions are necessary to reduce any IP Limited Partner’s Alternative Clawback Reserve as described in Section 4.2(c).

     (b) The General Partner, in its discretion, whether or not in connection with the admission of any new Partner to the Partnership in accordance with Section 7.5, may permit a Partner to contribute additional Invested Capital to the Partnership under such circumstances as may be determined by the General Partner.

     (c) The General Partner may cause the Partnership to borrow funds, including from Woodbridge, under such terms as the General Partner may determine, in order to permit the Partnership to meet its liquidity needs.

3.3 Capital Accounts

     (a) A capital account shall be maintained for each Partner in accordance with the provisions of Appendix A hereto.

ARTICLE IV
DISTRIBUTIONS

4.1 Distribution Policy

     (a) Except as set forth in Section 4.1(c) and Section 4.4, the General Partner shall periodically cause excess cash or cash equivalents held in the Partnership to be distributed to the Limited Partners in accordance with Section 4.3.

     (b) Distributions may be in the form of cash, property, or securities. Except as otherwise provided herein, for purposes of this Agreement, an in-kind distribution of non-cash property shall be treated as if an amount of cash equal to the Fair Market Value of such property had been distributed.

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     (c) In determining the amounts that may be available for distribution to the Partners, the General Partner shall first cause the Partnership to satisfy its current obligations, including its obligation to make any Reimbursement Payment to the Program Manager in accordance with Section 4.2. In addition, the General Partner may cause the Partnership to retain such amounts as the General Partner determines are appropriate to act as reserves for any fixed or contingent payments or liabilities of the Partnership (including future amounts of Reimbursement Payments) for which the Partnership may be liable.

4.2 Reimbursement Payment

     Prior to making any distributions to the Partners pursuant to Section 4.3, the Partnership shall make a reimbursement payment (the “Reimbursement Payment”) to the Program Manager equal to the amount of Program Expenses (including, for the avoidance of doubt, interest accruing on the Program Manager’s line of credit used to finance such expenses) borne by, and required to be paid by, the Program Manager that have yet to be reimbursed by the Partnership to the Program Manager.

4.3 Priority of Distributions

     After making any Reimbursement Payment pursuant to Section 4.2, except to the extent specifically provided in this Agreement to the contrary, distributions by the Partnership shall be made among the Partners as follows:

     (a) Capital Proceeds and Sponsor Proceeds. Distributions designated as Capital Proceeds or Sponsor Proceeds by the General Partner shall be distributed as follows:

(i)

First, 100% to the General Partner as “Return Distributions” until the General Partner has received aggregate distributions sufficient to provide the General Partner a 10% per annum cumulative annually compounded internal rate of return (the “Preferred Return”) on the General Partner’s Invested Capital attributable to all Program Assets (or portion thereof) that have been Realized (such Invested Capital, the “Realized Base Contributions”), provided that for purposes of determining the Preferred Return, the Invested Capital attributable to the contribution of the Contributed Property shall be treated as having been made on September 18, 2008. The General Partner will include as Return Distributions any amounts received that relate to the investment in such Program Assets, regardless of whether such amounts are received through, or outside of, the Partnership. For the avoidance of doubt, an “internal rate of return” calculation encompasses a return of, as well as a return on, the Realized Base Contributions.

(ii)

Second, 20% to the General Partner (as additional Return Distributions) and 80% to the Carried Interest Partners (and among them as provided in Section 4.4) as “Carry Distributions,” until the aggregate amount of Carry Distributions equals 20% of the excess of (A) the aggregate amount of Return Distributions and Carry Distributions distributed over (B) the Realized Base Contributions; and

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(iii) Thereafter, between the General Partner and the Carried Interest Partners as follows:

(A)	The General Partner is allocated an additional amount (as additional Return Distributions) so that the aggregate amount of Return Distributions distributed to the General Partner equals the sum of (1) the Realized Base Contributions plus (2) 80% of the amount by which the aggregate Investment Proceeds received by the Partnership exceeds the Realized Base Contributions; and
(B)	The remainder to the Carried Interest Partners as additional Carry Distributions.

     (b) Current Proceeds. Distributions designated as Current Proceeds by the General Partner shall be distributed in the same manner as Capital Proceeds and Sponsor Proceeds pursuant to Section 4.3(a) except that for purposes of applying those provisions with respect to a particular distribution of Current Proceeds, the Program Asset giving rise to such Current Proceeds will be deemed to have been Realized for an amount equal to the Invested Capital (and taking into account any prior unreversed Impairment with respect to such Program Asset) attributable to such Program Asset immediately prior to the distribution of such Current Proceeds.

4.4 Apportionment of Carry Distributions

     Carry Distributions will be made to and among the Carried Interest Partners in the following amounts:

     (a) Distributions to the Sponsor Partner. The Sponsor Partner shall in all cases receive 35% of all Carry Distributions.

     (b) Distributions to the IP Limited Partners. The IP Limited Partners as a group shall receive a portion of Carry Distributions, which portion shall not exceed the aggregate Carry Percentages of the IP Limited Partners, but which may be reduced by the vesting and other provisions in Appendix B hereto. The provisions of Appendix B will govern the determination of each IP Limited Partner’s share of such Carry Distributions.

     (c) Distributions to the Residual Limited Partner. Carry Distributions not made to the Sponsor Partner or the IP Limited Partners shall be made to the Residual Limited Partner. For the avoidance of doubt, any reductions in Carry Distributions to the IP Limited Partners pursuant to the vesting provisions set forth in Appendix B hereto shall accrue to the benefit of the Residual Partner.

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4.5 IP Clawback Reserve

     (a) Notwithstanding the provisions of Section 4.3 and Section 4.4 and Appendix B hereto, 25% (adjusted as provided in Section 4.5(b) below) of any Carry Distributions that are available for distribution to an IP Limited Partner shall be withheld by the Partnership, and a separate bookkeeping account (an “IP Clawback Reserve”) shall be established for such IP Limited Partner by the Partnership for tracking deposits, withdrawals, and interest earned with respect to such account. The Partnership may aggregate each of the IP Clawback Reserves within a single interest-bearing Partnership bank account.

     (b) Each time that the Partnership is to make a distribution of Carry Distributions, the General Partner (together with the general partners of each of the other Program Partnerships) will review the remaining Program Assets and the assets within each other Program Partnership in the Platform to determine whether any of the cumulative assets have suffered an Impairment that has not been reversed, and if so, the effect that such Impairment would have on the ability of Woodbridge (in its capacity as an investor in such program partnership) to receive proceeds from such Program Partnership sufficient to provide Woodbridge with at least a 10% annual cumulative compounded internal rate of return on its Invested Capital (as defined by the governing agreement of such Program Partnership) in such Program Partnership. If the General Partner determines that the Impairment would prevent such minimum return from being achieved, the General Partner may increase the percentage (but not in excess of 100%) of Carry Distributions to be contributed to the IP Clawback Reserve of any Executive IP Partner (as defined below) in order to add to such IP Clawback Reserve an amount which, when combined with the other reserves being established by the other Program Partnerships and by Woodbridge Executive Incentive Plan 1, LP with respect to such Executive IP Partner, will cover such Executive IP Partner’s share of the Overall Hurdle Clawback that is anticipated to arise.

(i)	“Executive IP Partner” shall mean any person who is both an IP Limited Partner and a limited partner of Woodbridge Executive Incentive Plan 1, LP.
(ii)	For the avoidance of doubt, the General Partner shall not increase the percentage of Carry Distributions to be contributed to the IP Clawback Reserve of any IP Limited Partner who is not an Executive IP Partner.

     (c) Notwithstanding the foregoing, in the General Partner’s discretion, rather than depositing amounts in the IP Clawback Reserve for an IP Limited Partner, the General Partner may cause such amounts to be distributed to the General Partner as additional Return Distributions, which will be credited to a special bookkeeping account (an “Alternative Clawback Reserve”) for the benefit of such IP Limited Partner. The balance in the Alternative Clawback Reserve shall be increased from time to time by an interest factor equal to the interest earned on the IP Clawback Reserve (or, if there is no IP Clawback Reserve, on the rate of interest that the Partnership would receive on an interest-bearing bank account).

     (d) As set forth in Section 4.6, at the expiration of the Term of the Partnership, each IP Limited Partner will be responsible for a share of the Gross Clawback Amount, if any.

(i)	To satisfy an IP Limited Partner’s share, amounts will first be taken from such IP Limited Partner’s Alternative Clawback Reserve. To the extent that such IP Limited Partner’s share is not satisfied, amounts will be taken from such IP Limited Partner’s IP Clawback Reserve.
(ii)	(A) To the extent amounts in the Alternative Clawback Reserve are not needed to satisfy the share of an IP Limited Partner who is not an Executive IP Partner of the Gross Clawback Amount, an amount of Return Distributions that would otherwise be payable to the General Partner or Carry Distributions otherwise payable to the Sponsor Partner equal to such excess, shall instead be specially distributed to the applicable IP Limited Partner without regard to Section 4.3, which distributions will reduce on a dollar-for-dollar basis the amount in such IP Limited Partner’s Alternative Clawback Reserve. If the full amount of such excess cannot be so distributed, the shortfall shall be contributed by the General Partner to the Partnership for special distribution to the applicable IP Limited Partner.
(iii)	(B) To the extent amounts in the Alternative Clawback Reserve are not needed to satisfy the share of an Executive IP Partner of the Gross Clawback Amount, such excess amounts will be added to the Alternative Clawback Reserve established for the benefit of such Executive IP Partner by Woodbridge Executive Incentive Plan 1, LP.
(iv)	(A) For any IP Limited Partner who is not an Executive IP Partner, to the extent amounts in such IP Limited Partner’s IP Clawback Reserve (including interest earned thereon) are not needed to fund such IP Limited Partner’s share of the Gross Clawback Amount, such amounts will be released by the Partnership to the applicable IP Limited Partner.
	(B) For any Executive IP Partner, to the extent amounts in such Executive IP Partner’s IP Clawback Reserve (including interest earned thereon) are not needed to fund such Executive IP Partner’s share of the Gross Clawback Amount, such amounts will be added to the Clawback Reserve established for the benefit of such Executive IP Partner by Woodbridge Executive Incentive Plan 1, LP.

     (e) Prior to the expiration of the Term of the Partnership, the General Partner, in its discretion, may release reserved amounts to an IP Limited Partner who is not an Executive IP Partner by (i) causing special distributions reducing such IP Limited Partner’s Alternative Clawback Reserve or causing contributions and special distributions, each as described in Section 4.5(d) above, or (ii) distributing amounts to an IP Limited Partner from such IP Limited Partner’s IP Clawback Reserve, in either case to the extent the General Partner determines that such released amounts are not necessary to secure such IP Limited Partner’s share of the Gross Clawback Amount, each as described in Section 4.6. Similarly the General Partner may, in its discretion, move amounts to the Alternative Clawback Reserve or the Clawback Reserve of an Executive IP Partner established for the benefit of such Executive IP Partner by Woodbridge Executive Incentive Plan 1, LP.

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4.6 Clawback Obligations

     (a) Following the final liquidating distribution of assets pursuant to Section 8.2, if there have been any Carry Distributions, the General Partner shall determine the additional amount of Return Distributions (the “Gross Clawback Amount”), if any, that would need to have been distributed to the General Partner in connection with such final liquidating distribution so that each of the following would have been true:

(i)	The General Partner would have received sufficient Return Distributions to provide it with at least the Preferred Return on the General Partner’s Invested Capital, as calculated pursuant to Section 4.3(a)(i); and
(ii)	The General Partner would have received Return Distributions at least equal to the amount of its Invested Capital plus 80% of the amount by which the aggregate Investment Proceeds received by the Partnership exceeded the General Partner’s Invested Capital.

     (b) Each Carried Interest Partner shall be responsible for returning to the Partnership, for distribution to the General Partner, its share of the Gross Clawback Amount, determined as follows:

(i)	The Sponsor Partner shall be responsible for its Carry Percentage (i.e., 35%);
(ii)	The IP Limited Partners as a group shall be responsible for their aggregate Carry Percentage of the Gross Clawback Amount, with each such IP Limited Partner being severally (and not jointly) responsible for the amount determined pursuant to Appendix B hereto and only to the extent of clause (c) below; and
(iii)	The Residual Limited Partner shall be responsible for its Carry Percentage of the Gross Clawback Amount;

provided that if Carry Percentages have changed over the Term of the Partnership, the determination shall be based on the relative amounts of Carry Distributions received over the Term of the Partnership or any other method determined by the General Partner to appropriately take into account such variations.

     (c) In no event will an IP Limited Partner be personally liable for a clawback obligation that exceeds the aggregate amount of such IP Limited Partner’s Alternative Clawback Reserve and IP Clawback Reserve. In no event shall an IP Limited Partner be responsible for another Partner’s share of the Gross Clawback Amount.

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     (d) The Residual Limited Partner’s obligation to satisfy its clawback obligation will be limited to those amounts established as a clawback reserve under the terms of the limited partnership agreement governing the Residual Limited Partner and will be a several (and not joint) obligation of the partners in the Residual Limited Partner.

ARTICLE V
PROGRAM MANAGER

5.1 Program Manager

     The Program Manager will be responsible for managing the day-to-day activities of the Partnership and the Partnership’s assets, subject to the direction of the General Partner; provided that the Program Manager will have no authority to legally bind the Partnership without the express consent of the General Partner.

5.2 Fees

     The Program Manager shall not be entitled to any fees, payments, or distributions other than as expressly provided herein, or as otherwise approved by the General Partner. To the extent the Program Manager or any employee or agent (in such capacity) of the Program Manager receives any Deal Fees with respect to a Program Asset, the calculations called for in this Agreement will be adjusted so that total amounts received by the Program Manager or such employee or agent (in such capacity) of the Program Manager are the same as if all such Deal Fees had been paid to the Partnership.

ARTICLE VI
GENERAL PARTNER

6.1 Management Authority

     (a) The management of the Partnership shall be vested exclusively in the General Partner, and the General Partner shall have full control over the business and affairs of the Partnership. The General Partner shall have the power on behalf and in the name of the Partnership to carry out any and all of the objectives and purposes of the Partnership and to perform all acts and enter into and perform all contracts and other undertakings which the General Partner, in its reasonable discretion, deems necessary or advisable or incidental thereto, including the power to acquire and dispose of any security (including marketable securities) or incur indebtedness or guarantee the indebtedness of the Portfolio Company.

     (b) Third parties dealing with the Partnership can rely conclusively upon the General Partner’s certification that it is acting on behalf of the Partnership and that its acts are authorized. The General Partner’s execution of any agreement on behalf of the Partnership is sufficient to bind the Partnership for all purposes.

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     (c) The General Partner will have the right and power to establish the availability and terms of any offering of opportunities for an IP Limited Partner or any Family Related Partner or any other “friend or family member” of an IP Limited Partner to co-invest alongside the Partnership in all or part of the Partnership’s investments.

6.2 No Liability to Partnership or Limited Partners

     No Covered Party shall be liable to the Partnership or any Partner for any action taken, or failure to act, on behalf of the Partnership (or on behalf of the General Partner or the Program Manager with respect to the Partnership) if such Covered Party (a) acted honestly and in good faith with a view to the best interests of the Partnership, or, as the case may be, to the best interests of the other entity for which the Covered Party acted as director, officer, employee, agent, or in a similar capacity at the request of the General Partner or the Program Manager for the benefit of the Partnership; and (b) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, the Covered Party had reasonable grounds for believing that the Covered Party’s conduct was lawful. In addition, any Covered Party who has delegated to any other Person (other than to another Covered Party) any part of its functions (including participating in the management of or rendering professional advice or other services in respect of any Program Asset) shall not be liable, responsible, or accountable in damages or otherwise to the Partnership or to any Partner for any loss incurred or suffered by reason of any action by such other Person unless the delegating Covered Party did not (x) act honestly and in good faith with a view to the best interests of the Partnership, or, as the case may be, to the best interests of the other entity for which the Covered Party acted as director, officer, employee, agent, or in a similar capacity at the request of the General Partner or the Program Manager for the benefit of the Partnership; and (y) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, have reasonable grounds for believing that the Covered Party’s conduct was lawful with respect to such delegation. For the avoidance of doubt, nothing in the immediately preceding sentence shall be deemed to prevent the Partnership, the General Partner or the Program Manager from asserting a cause of action against the delegate of a Covered Party for any loss caused by the action, or failure to act, of such delegate and the General Partner shall cause the Partnership to effectively pursue any such cause of action to the extent it would be in the reasonable best interests of the Partnership to do so.

6.3 Indemnification

     (a) Subject to Section 6.3(c), the Partnership shall indemnify each Covered Party against all costs, charges, and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by the Covered Party in respect of any civil, criminal, administrative, investigative, or other proceeding in which the Covered Party is involved because of such Covered Party’s association with the Partnership, the General Partner, or the Program Manager if such Covered Party (i) acted honestly and in good faith with a view to the best interests of the Partnership or, as the case may be, to the best interests of the other entity for which the Covered Party acted as director, officer, employee, agent, or in a similar capacity at the request of the General Partner or the Program Manager and for the benefit of the Partnership; and (ii) had reasonable grounds for believing that such Covered Party’s conduct was lawful, in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty.

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     (b) Subject to Section 6.3(c), the Partnership shall advance moneys to a Covered Party for the costs, charges, and expenses of a proceeding referred to in Section 6.3(a). The Covered Party shall repay the moneys if the Covered Party does not fulfill the conditions of Section 6.3(a).

     (c) Before seeking indemnification from the Partnership, a Covered Party seeking such indemnification shall use all reasonable efforts to seek indemnification from the following sources (in the following order of priority): first, from the Portfolio Company, including any insurance provided by, or purchased on behalf of a Covered Party by, the Portfolio Company; and second, from the General Partner or the Program Manager, including from any insurance provided by the General Partner or the Program Manager. To the extent any unpaid indemnification obligation remains after the Covered Party has received indemnification from the foregoing sources, the Partnership shall indemnify such Covered Party for such shortfall.

ARTICLE VII
LIMITED PARTNERS

7.1 Limited Liability

     No Limited Partner shall be personally liable for any obligations of the Partnership or have any obligation to make contributions to the Partnership other than such Limited Partner’s initial contribution pursuant to Section 3.1 or as required pursuant to Section 4.6 or Section 7.6; provided that a Limited Partner shall be required to return any distribution made to it in error. To the extent any Limited Partner is required by the Partnership Act to return to the Partnership any distributions made to it and does so, such Limited Partner shall have a right of contribution from each other Limited Partner similarly liable to return distributions made to it to the extent that such Limited Partner has returned a greater percentage of the total distributions made to it and required to be returned by it than the percentage of the total distributions made to such other Limited Partner and so required to be returned by it.

7.2 No Participation in Management

     The Limited Partners (in their capacity as such) shall not participate in the control, management, direction, or operation of the affairs of the Partnership and shall have no power to bind the Partnership.

7.3 Transfer of Limited Partnership Interests

     (a) A Limited Partner may not Transfer all or a portion of its interest in the Partnership without the consent of the General Partner; provided that the General Partner shall not unreasonably withhold its consent to a Transfer by an IP Limited Partner to a Family Related Partner of such IP Limited Partner.

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     (b) Unless and until the General Partner consents to the admission of a transferee as a substituted Limited Partner in accordance with this Section 7.3, the transferor shall remain liable for all liabilities and obligations relating to the transferred beneficial interest, if any, and the transferee shall become an assignee of only a beneficial interest in Partnership profits, losses and distributions of such interest. No consent of any other Limited Partner shall be required as a condition precedent to any Transfer.

     (c) Unless the General Partner otherwise determines in its sole discretion, the transferor and transferee of any Limited Partner’s interest shall be jointly and severally obligated to reimburse the General Partner and the Partnership for all reasonable expenses (including attorneys’ fees and expenses) of any Transfer or proposed Transfer of a Limited Partner’s interest, whether or not consummated.

     (d) Any substituted Limited Partner admitted to the Partnership with the consent of the General Partner shall succeed to all the rights and be subject to all the obligations of the transferring or assigning Limited Partner with respect to the interest to which such Limited Partner was substituted. The General Partner may modify Schedule I hereof to reflect such admittance of any substituted Limited Partner. Such substituted Limited Partner shall be treated as having received all of the allocations and distributions received by the transferring or assigning Limited Partner, if any.

     (e) Any Transfer that violates this Section 7.3 shall be void and the purported buyer, assignee, transferee, pledgee, mortgagee, or other recipient shall have no interest in or rights to Partnership assets, profits, losses, or distributions, and neither the General Partner nor the Partnership shall be required to recognize any such purported interest or rights.

7.4 No Termination

     Neither the substitution, death, incompetency, dissolution (whether voluntary or involuntary), nor bankruptcy of a Limited Partner shall affect the existence of the Partnership, and the Partnership shall continue for the Term of the Partnership until its existence is terminated as provided herein.

7.5 Additional Limited Partners

     Additional Limited Partners will be admitted only with the consent of the General Partner on such terms as agreed upon by the General Partner and the Person seeking admission to the Partnership.

7.6 Reimbursement for Payments on Behalf of a Partner

     (a) If the Partnership is obligated to pay any amount to a governmental agency or body or to any other Person (or otherwise make a payment) because of a Partner’s status or otherwise specifically attributable to a Partner (including, without limitation, federal withholding taxes with respect to foreign Partners, state withholding taxes, state personal property taxes, state unincorporated business taxes, etc.) then such Partner (the “Reimbursing Partner”) shall reimburse the Partnership in full for the entire amount paid (including, without limitation, any interest, penalties, and expenses associated with such payment). At the election of the General Partner, the amount to be reimbursed may be charged against the Capital Account of the Reimbursing Partner, and the Partnership shall reduce subsequent distributions which would otherwise be made to the Reimbursing Partner until the Partnership has recovered the amount to be reimbursed; provided that the amount of such reduction shall be deemed to have been distributed for all purposes of this Agreement, but such deemed distribution shall not further reduce the Reimbursing Partner’s Capital Account.

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     (b) A Partner’s obligation to reimburse the Partnership under this Section 7.6 shall survive the termination, dissolution, liquidation, and winding-up of the Partnership, and for purposes of this Section 7.6, the Partnership shall be treated as continuing in existence.

ARTICLE VIII
DURATION AND TERMINATION

8.1 Term

     The Partnership shall continue until the occurrence of any of the following events: (i) the entry of a decree of judicial dissolution under the Act or (ii) an election by the General Partner to dissolve the Partnership.

8.2 Termination and Liquidation

     (a) The Partnership shall not terminate immediately upon the expiration of its Term under Section 8.1, but shall cease to engage in further business except to the extent necessary to promptly wind-up its affairs, perform existing contracts, and preserve the value of the Program Assets.

     (b) During the course of winding-up the Partnership all of the provisions of this Agreement shall continue to bind the parties and apply to the activities of the Partnership except as specifically provided to the contrary, but there shall be no distributions to the Partners except as provided in this Section 8.2.

     (c) Upon the expiration of the Partnership’s Term, the General Partner shall take such actions as it may think fit for winding-up the Partnership and liquidating the Program Assets, including:

(i)	The filing of all certificates and notices of dissolution as are required by applicable law; and
(ii)	The Realization of any Program Asset (unless the General Partner intends to distribute such Program Asset in kind); provided that all such Realizations shall be conducted in an orderly and businesslike manner so as not to involve undue sacrifice.

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The General Partner in taking such actions may exercise and shall have the benefit of all rights, powers, and discretions vested in the General Partner pursuant to the provisions of this Agreement. If the General Partner is not able to act as the liquidator of the Partnership or exercise the powers inherent thereto, a liquidator shall be appointed by the Residual Limited Partner.

     (d) Upon dissolution of the Partnership, all Partnership assets shall be distributed or used as follows and in the following order of priority:

(i)	For the payment of the debts and liabilities of the Partnership, including, without limitation, the expenses of liquidation.
(ii)	For the setting up of any reserves which the General Partner may deem reasonably necessary for any liabilities or obligations of the Partnership.
(iii)	To the Partners in accordance with the provisions of Article IV.

     (e) The Partnership shall be terminated only after the Partnership assets have been distributed as provided in this Section 8.2.

ARTICLE IX
VALUATION OF PARTNERSHIP ASSETS

9.1 Normal Valuation

     For purposes of this Agreement, the value of any asset as of any date (or in the event such date is a holiday or other day which is not a business day, as of the immediately preceding business day) shall be valued by the General Partner in good faith using methods it considers appropriate.

9.2 Restrictions on Transfer or Blockage

     Any security which is held under a representation that it has been acquired for investment purposes and not with a view to public sale or distribution, or which is held subject to any other restriction on transfer, or where the size of the Partnership’s holdings compared to the trading volume would adversely affect the marketability of such security, shall be valued at such discount as the Program Manager deems reasonably necessary to reflect the marketability and value of such security.

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ARTICLE X
BOOKS OF ACCOUNTS; MEETINGS

10.1 Books

     The Partnership shall maintain complete and accurate books of accounts of the Partnership’s affairs at the Partnership’s principal office.

10.2 Fiscal Year

     The fiscal year and taxable year of the Partnership shall be the calendar year, unless otherwise determined by the General Partner.

10.3 Reports

     The General Partner shall furnish to each Partner the following information and reports prepared in accordance with U.S. generally accepted accounting principles (“GAAP”):

     (a) As soon as practicable after the end of each fiscal year commencing with the first year in which the Partnership is in operation for a full fiscal year, (i) financial statements for the Partnership for such year (audited by a firm of independent certified public accountants of recognized national standing selected by the General Partner), and (ii) a statement of each Partner’s closing Capital Account balance as of the end of such year; and

     (b) As soon as practicable after the end of each fiscal year, the Partnership’s United States federal income tax return, including such Partner’s Schedule K-1 for such fiscal year.

ARTICLE XI
MISCELLANEOUS

11.1 Amendments

     This Agreement may be amended by the written consent of the General Partner, provided that if such amendment would adversely affect any Carried Interest Partner, then the Carried Interest Partner so affected must consent to such amendment. Notwithstanding anything in this Agreement to the contrary, this Agreement may be amended by the General Partner without the consent of any other Partner in order to cure any ambiguity or error, make an inconsequential revision, provide clarity, comply with any law or regulation or correct or supplement any provision herein which may be defective or inconsistent with any other provisions herein; provided that, except with respect to amendments necessary to comply with any law or regulation, such amendment does not materially and adversely affect any Limited Partner.

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11.2 Successors

     Except as otherwise provided herein, this Agreement shall inure to the benefit of and be binding upon the Partners and their legal representatives, heirs, successors, and assigns.

11.3 Governing Law; Severability

     This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, and, to the maximum extent possible, in such manner as to comply with all the terms and conditions of the Partnership Act. If it is determined by a court of competent jurisdiction that any provision of this Agreement is invalid under applicable law, such provision shall be ineffective only in such jurisdiction and only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement.

11.4 Notices

     All notices, demands, and other communications to be given and delivered under or by reason of provisions under this Agreement shall be in writing and shall be deemed to have been given on the date when personally delivered, when mailed by first class mail, when sent by facsimile or transmitted by email or the internet, or when sent by reputable overnight courier service, in each case to the recipient at the address, facsimile number or email address set forth in Schedule I hereof or to such other address, facsimile number, or email address, or to the attention of such other Person as has been indicated in writing to the General Partner.

11.5 Arbitration

     The parties to this Agreement shall each use good faith efforts for a period of 30 days (or such longer time as agreed to by the applicable parties) to try to resolve any controversy, dispute, or claim arising out of or in connection with this Agreement, or the breach, termination or validity hereof. Thereafter, if such controversy, dispute, or claim remains, it shall be settled by final and binding arbitration to be conducted by an arbitration tribunal in Fort Lauderdale, Florida, pursuant to the rules of the American Arbitration Association. The arbitration tribunal shall consist of three arbitrators. The party initiating the controversy, dispute, or claim that led to arbitration shall nominate one arbitrator in the request for arbitration and the other party shall nominate a second arbitrator in the answer thereto within 30 days of receipt of the request; provided that if there are multiple initiating or answering parties, the arbitrator selected must be reasonably acceptable to all initiating or answering parties, as applicable. The two arbitrators so named will then jointly appoint the third arbitrator. If the answering party fails to nominate its arbitrator within the 30-day period, or if the arbitrators named by the parties fail to agree on the third arbitrator within 60 days, the office of the American Arbitration Association in New York, New York shall make the necessary appointments of such arbitrator(s). The decision or award of the arbitration tribunal (by a majority determination, or if there is no majority, then by the determination of the third arbitrator, if any) shall be final, and judgment upon such decision or award may be entered in any competent court or application may be made to any competent court for judicial acceptance of such decision or award and an order of enforcement. In the event of any procedural matter not covered by the aforesaid rules, the procedural law of the State of Delaware shall govern.

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11.6 Miscellaneous

     This Agreement (including the Appendices hereto) contains the entire agreement among the parties and supersedes all prior arrangements or understanding with respect thereto. Descriptive headings are for convenience only and shall not control or affect the meaning or construction of any provision of this Agreement. This Agreement may be executed in any number of counterparts, any one of which need not contain the signatures of more than one party, but all of such counterparts together shall constitute one agreement. Whenever from the context it appears appropriate, each term stated in either the singular or the plural shall include the singular and the plural, and pronouns stated in either the masculine, the feminine or the neuter gender shall include the masculine, the feminine, and the neuter.

11.7 No Third Party Beneficiaries

     No Person that is not a party hereto shall have any rights or obligations pursuant to this Agreement. The rights and obligations set forth herein are for the benefit of the parties hereto only and do not create or grant any rights to third parties.

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

GENERAL PARTNER: SPONSOR PARTNER: PF PROGRAM GP, LLC
By:	WOODBRIDGE FUND I, LLC, its Sole Member
By:	WOODBRIDGE HOLDINGS CORPORATION, its Sole Member
By:	/s/ John K. Grelle
	Name:	John K. Grelle
	Title:	Chief Financial Officer
RESIDUAL LIMITED PARTNER: WOODBRIDGE EXECUTIVE INCENTIVE PLAN 1, LP
By:	WOODBRIDGE FUND I, LLC, its General Partner
By:	WOODBRIDGE HOLDINGS CORPORATION, its Sole Member
By:	/s/ John K. Grelle
	Name:	John K. Grelle
	Title:	Chief Financial Officer

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IP LIMITED PARTNERS:
 

/s/ Alan B. Levan  

Alan B. Levan 

/s/ John E. Abdo  

John E. Abdo 

/s/ Seth M. Wise  

Seth M. Wise 

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PROGRAM MANAGER: WOODBRIDGE FUND I, LLC
By:	WOODBRIDGE HOLDINGS CORPORATION, its sole Member
By:	/s/ John K. Grelle
	Name:	John K. Grelle
	Title:	Chief Financial Officer
INITIAL LIMITED PARTNER: WOODBRIDGE HOLDINGS CORPORATION
By:	/s/ John K. Grelle
	Name:	John K. Grelle
	Title:	Chief Financial Officer

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Schedule I
PF Program Partnership, LP
List of Carried Interest Partners and Applicable Carry Percentages

Carried Interest Partner	Carry Percentage
Sponsor Partner		35.0	%
IP Limited Partners (divided as listed below)		32.5	%
Alan Levan		38.25%
Jack Abdo		38.25%
Seth Wise		23.50%
Residual Limited Partner		32.5	%
TOTAL		100.0	%

Schedule II
Program Expenses

Amounts Included in Program Expenses	Amounts Excluded from Program Expenses
Salaries and bonuses Salary for any investment professionals of the Program Manager, except in the case where Woodbridge Holdings executives are the investment professionals. Salaries and cash bonus of direct dedicated staff members.	Salaries and bonuses Woodbridge Holdings incentive stock options or stock grants to any investment professional or dedicated staff member as part of a Woodbridge Holdings-wide incentive compensation program.
Direct Expenses Direct dedicated expenses incurred directly by the Program Manager, including rent, facilities charges, equipment and supplies, except in the case where Woodbridge Holdings executives are the investment professionals. Outside legal and accounting expenses incurred for services rendered with respect to the Program Manager or the Partnership, including formation costs, and tax return preparation. Unreimbursed costs of transactions, including due diligence expenses and the carrying costs of deposits, to the extent the transaction that generated the cost does not close. Travel expenses neither capitalized as part of the acquisition of a completed transaction nor borne by the target company. Standard charges by internal Woodbridge Holdings personnel for provision of back-office support services directly related to the program or Program Assets (i.e., providing the accounting services for the Partnership, providing human resources services for the Partnership).	Direct Expenses Time of Investment Committee in evaluating investment recommendations.

Amounts Included in Program Expenses	Amounts Excluded from Program Expenses
Standard charges by BFC Shared Services for back-office support services directly related to the program or Program Assets. Interest on borrowings of the Program Manager, including any that accrued at the rate of 12% compounded per annum on amounts received through a pre-approved line of credit from Woodbridge Overhead Funding, LLC. For purposes of this provision, all amounts of funds provided to the Program Manager shall be treated as borrowings and shall accrue 12% interest regardless of whether such funds were provided in the form of loans, equity capital, or otherwise.
Allocation of Woodbridge Holdings Overhead None.	Allocation of Woodbridge Holdings Overhead General corporate overhead (i.e., public company costs, office expenses for non-dedicated staff, investor relations and accounting staff not dedicated, analytical staff providing analytics to Woodbridge Holdings, management for oversight of programs and Program Assets). Any other overhead expenses not expressly included on this Schedule II as Program Expenses.

APPENDIX A:
Tax and Accounting Provisions

A-1 Definitions

     For purposes of this Appendix A, any capitalized term not defined herein shall have the meaning set forth in the Agreement.

     “Adjusted Capital Account Deficit” means, with respect to any Partner, the deficit balance, if any, in such Partner’s Capital Account, as of a specified time, after giving effect to the following adjustments:

     (a) credit to such Partner’s Capital Account any amounts that such Partner is obligated to restore or deemed obligated to restore pursuant to Treasury Regulations Section 1.704-1(b)(2)(ii)(c) and the penultimate sentences of Treasury Regulations Section 1.704-2(g)(1) and Treasury Regulations Section 1.704-2(i)(5); and

     (b) debit to such Partner’s Capital Account the items described in Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).

The foregoing definition of Adjusted Capital Account Deficit is intended to comply with the provisions of Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

     “Book Value” means, with respect to any asset, the asset’s adjusted basis for U.S. federal income tax purposes, except as follows:

     (a) the initial Book Value of any asset that is not Contributed Property as defined in the Agreement but is otherwise contributed or deemed contributed to the Partnership shall be such asset’s gross fair market value at the time of such contribution as determined by the General Partner pursuant to Article IX of the Agreement;

     (b) the initial Book Value of any asset that is Contributed Property as defined in Section 3.1(a) of the Agreement shall be the value set forth in Section 3.1(a) of the Agreement;

     (c) the Book Value of all Partnership assets may be adjusted in the discretion of the General Partner to equal their respective gross fair market values, as determined by the General Partner pursuant to Article IX of the Agreement, at the times specified in Treasury Regulations Section 1.704-1(b)(2)(iv)(f);

     (d) any adjustments to the adjusted basis of any asset of the Partnership pursuant to Section 734 or Section 743 of the Code shall be taken into account in determining such asset’s Book Value in a manner consistent with Treasury Regulations Section 1.704-1(b)(2)(iv)(m);

     (e) the Book Value of any Partnership asset distributed or deemed distributed by the Partnership to any Partner shall be adjusted immediately prior to such distribution to equal its gross fair market value as of the date of distribution, as determined by the General Partner pursuant to Article IX of the Agreement; and

A-1

     (f) if the Book Value of an asset has been determined pursuant to clauses (a), (c) or (d) of this definition, to the extent permitted by the Treasury Regulations, such Book Value shall thereafter be adjusted in the same manner as would the asset’s adjusted basis for U.S. federal income tax purposes, except that depreciation and amortization deductions shall be computed based on the asset’s Book Value as so determined, rather than on its adjusted tax basis.

     “Net Profits” and “Net Losses” mean, for any period, the taxable income or loss, respectively, of the Partnership for such period, in each case as determined for U.S. federal income tax purposes, but computed with the following adjustments:

     (a) items of income, gain, loss and deduction (including, without limitation, gain or loss on the disposition of any Partnership asset and depreciation or other cost recovery deduction or expense) shall be computed based upon the Book Value of the Partnership’s assets rather than upon such assets’ adjusted bases for U.S. federal income tax purposes;

     (b) any tax-exempt income received by the Partnership shall be deemed for these purposes only to be an item of gross income;

     (c) any expenditure of the Partnership described in Section 705(a)(2)(B) of the Code (or treated as described therein pursuant to Treasury Regulations under Section 704(b) of the Code) shall be treated as a deductible expense;

     (d) there shall be taken into account any separately stated items under Section 702(a) of the Code;

     (e) if the Book Value of any Partnership asset is adjusted pursuant to clauses (c) or (e) of the definition of “Book Value” above, or pursuant to clause (d) of such definition (but only to the extent the adjustment is attributable to a distribution of Investment Proceeds not in liquidation of a Partner’s Partnership interest), the amount of such adjustment shall be taken into account in the period of adjustment as gain or loss from the disposition or deemed disposition of such asset for purposes of computing Net Profits and Net Losses; and

     (f) items of income, gain, loss, deduction or credit allocated pursuant to Section A-6 of this Appendix A shall not be taken into account.

     “Tax Matters Partner” has the meaning set forth in Section A-6.

A-2 Maintenance of Capital Accounts

     (a) A Capital Account shall be maintained for each Partner in accordance with Section 704(b) of the Code and Treasury Regulations Sections 1.704-1(b) and 1.704-2. The initial balance of each Capital Account shall be equal to such Partner’s initial capital contribution to the Partnership.

A-2

     (b) The Capital Account of each Partner shall be increased by (i) the amount of any cash contributed by such Partner to the capital of the Partnership, (ii) in the case of any property contributed by such Partner to the capital of the Partnership, the Book Value of such property (net of liabilities that the Partnership is considered to assume or take the property subject to) when contributed, (iii) the amount of any liabilities of the Partnership that are assumed by such Partner (except for liabilities described in Section A-2(c)(ii) of this Appendix A that are assumed by such Partner) for purposes of Treasury Regulations Section 1.704-1(b)(2)(iv)(c), (iv) the Net Profits allocated to such Partner, and (v) any gross income and gain allocated to such Partner.

     (c) The Capital Account of each Partner shall be decreased by (i) the amount of any cash distribution to such Partner when made, (ii) the Book Value of any property distributed to such Partner by the Partnership (net of liabilities that the Partner is considered to assume, or take property subject to) when distributed, (iii) the amount of any liabilities of such Partner that are assumed by the Partnership (except for liabilities described in Section A-2(b)(ii) of this Appendix A that are assumed by the Partnership) for purposes of Treasury Regulations Section 1.704-1(b)(2)(iv)(c), (iv) the Net Losses allocated to such Partner, and (v) any gross deductions and loss allocated to such Partner.

     (d) In the event that all or a portion of an interest in the Partnership is Transferred in accordance with the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent such Capital Account relates to the Transferred Partnership interest.

     (e) The Capital Account of each Partner shall be adjusted to reflect any adjustment to the Book Value of the Partnership’s assets attributable to the application of Section 734 of the Code in respect of a distribution in liquidation of such Partner’s Partnership interest to the extent required pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m).

     (f) It is the intention of the parties that the Capital Accounts of the Partners be kept in the manner required under Section 704(b) of the Code and Treasury Regulations Sections 1.704-1(b) and 1.704-2. To the extent any additional adjustment to the Capital Accounts is required by such provisions, the General Partner is hereby authorized to make such adjustment after notice to the Partners.

     (g) Except as expressly required herein, no Partner shall be required to restore any negative balance in its Capital Account. No allocation to any Partner of any loss or deduction, whether attributable to depreciation or otherwise, shall create any obligation of that Partner to the Partnership or any other Partner, even if the allocation reduces such Partner’s Capital Account or creates or increases a deficit in its Capital Account.

A-3

A-3 Allocations of Profits and Losses

     (a) After the application of Section A-4, Net Profits and Net Losses for any taxable year, or portion thereof, shall be allocated among the Partners (and credited or debited to their Capital Accounts) in such manner so that, after taking into account distributions by the Partnership and contributions made to the Partnership through the end of such taxable year and the allocations of Net Profits and Net Losses for such taxable year, (i) the respective positive Capital Account balances of the Partners would correspond as closely as possible to the amount each Partner would receive as a cash distribution pursuant to Article IV of the Agreement, if the Partnership were to liquidate completely immediately after the end of such taxable year and (ii) any resulting deficit Capital Account balances of the Partners would correspond as closely as possible with the manner in which economic responsibility for Partnership deficit balances (as determined in accordance with the principles of Treasury Regulations under Section 704 of the Code) would be borne by the Partners under the terms of this Agreement if the Partnership were to liquidate completely immediately after the end of such taxable year. For purposes of the preceding sentence, the amount of cash to be distributed to each Partner, the amount of each Partner’s Capital Account and the amount of each Partner’s economic responsibility for Partnership deficit balances, upon the assumed liquidation, shall be computed by assuming that in connection with such liquidation, the Partnership sold all of its assets for amounts such that no Net Profits or Net Losses result from the sale and settled all of its liabilities for amounts such that no Net Profits or Net Losses result from the settlement. For purposes of applying this Section A-3, the Capital Account balance of each Partner shall be increased by such Partner’s share of “partnership minimum gain” and “partner minimum gain” (within the meaning of and in accordance with the Treasury Regulations under Section 704(b) of the Code). Subject to the other provisions of this Appendix A, an allocation to a Partner of a share of Net Profit or Net Loss shall be treated as an allocation of the same share of each item of income, gain, loss or deduction that is taken into account in computing Net Profit or Net Loss.

     (b) If a Partner Transfers, acquires, or redeems an interest in the Partnership during a taxable year, the Net Profit or Net Loss (and other items referred to in Section A-4 of this Appendix A) attributable to such interest for such year shall be allocated between the transferring Partner and the transferee (or the other Partners in the Partnership) by any method permitted under Section 706 of the Code as selected by the General Partner.

A-4 Regulatory Allocations and Special Allocations

     (a) Notwithstanding any other provision of the Agreement or this Appendix A, (i) “partner nonrecourse deductions” (as defined in Treasury Regulations Section 1.704-2(i)), if any, of the Partnership shall be allocated for each period to the Partner that bears the economic risk of loss within the meaning of Treasury Regulations Section 1.704-2(i), and (ii) “nonrecourse deductions” (as defined in Treasury Regulations Section 1.704-2(b)) and “excess nonrecourse liabilities” (as defined in Treasury Regulations Section 1.752-3(a)), if any, of the Partnership shall be allocated to the Partners in accordance with their respective percentage interests in Net Losses.

     (b) The Agreement and this Appendix A shall be deemed to include “qualified income offset,” “minimum gain chargeback” and “partner nonrecourse debt minimum gain chargeback” provisions within the meaning of Treasury Regulations under Section 704(b) of the Code. Accordingly, notwithstanding any other provision of this Agreement or this Appendix A, items of gross income shall be allocated to the Partners on a priority basis to the extent and in the manner required by such provisions.

A-4

     (c) To the extent that Net Losses or items of loss or deduction otherwise allocable to a Partner hereunder would cause such Partner to have an Adjusted Capital Account Deficit as of the end of the taxable year to which such Net Losses or items of loss or deduction relate (after taking into account the allocation of all items of income and gain for such taxable period), such Net Losses or items of loss or deduction shall not be allocated to such Partner and instead shall be allocated to the Partners in accordance with Section A-3 of the Agreement as if such Partner were not a Partner.

     (d) Any allocations required to be made pursuant to clauses (a), (b), and (c) above (the “Regulatory Allocations”) (other than allocations, the effect of which are likely to be offset in the future by other special allocations) shall be taken into account, to the extent permitted by the Treasury Regulations, in computing subsequent allocations of income, gain, loss or deduction pursuant to Section A-3 so that the net amount of any items so allocated and all other items allocated to each Partner shall, to the extent possible, be equal to the amount that would have been allocated to each Partner pursuant to Section A-3 had such Regulatory Allocations under this Section A-4 not occurred.

     (e) If any Partner is treated for income tax purposes as realizing ordinary income because of receipt of its Partnership interest (whether under Section 83 of the Code or any similar provisions of any law, rule or regulations or any other applicable law, rule, regulation or doctrine) and the Partnership is entitled to any offsetting deduction, the Partnership’s deduction shall be allocated among the Partners in such manner as to, as nearly as possible, offset such ordinary income realized by such Partner.

A-5 Tax Allocations

     (a) For federal income tax purposes, except as otherwise provided in this Section A-5, each item of income, gain, loss, and deduction and credit shall be allocated among the Partners in the same manner as its corresponding item of book income, gain, loss, deduction or credit is allocated pursuant to this Appendix A.

     (b) In accordance with Sections 704(b) and 704(c) of the Code and the Treasury Regulations thereunder, income, gain, loss and deduction with respect to any Partnership asset contributed (or deemed contributed) to the capital of the Partnership shall, solely for federal income tax purposes, be allocated among the Partners so as to take into account any variation between the adjusted basis of such Partnership asset for federal income tax purposes and its Book Value upon its contribution (or deemed contribution). If the Book Value of any Partnership asset is adjusted, subsequent allocations of taxable income, gain, loss and deduction with respect to such Partnership asset shall take account of any variation between the adjusted basis of such Partnership asset for federal income tax purposes and the Book Value of such Partnership asset in the manner prescribed under Code Sections 704(b) and 704(c) and the Treasury Regulations thereunder. The General Partner shall select the manner by which variations between Book Value and adjusted basis are taken into account in accordance with Code Sections 704(b) and 704(c) and the Treasury Regulations thereunder.

A-5

     (c) The provisions of this Appendix A (and other related provisions in the Agreement) pertaining to the allocation of items of Partnership income, gain, loss, deduction, and credit shall be interpreted consistently with the Treasury Regulations, and to the extent unintentionally inconsistent with such Treasury Regulations, shall be deemed to be modified to the extent necessary to make such provisions consistent with the Treasury Regulations.

A-6 Tax Matters Partner; Management Authority Regarding Tax and Accounting

     (a) The General Partner is designated the “Tax Matters Partner” (as defined in Section 6231(a)(7) of the Code) to manage administrative tax proceedings conducted at the partnership level by the Internal Revenue Service with respect to Partnership matters. The General Partner is specifically directed and authorized to take whatever steps the General Partner, in its sole discretion, deems necessary or desirable to perfect such designation, including, without limitation, filing any forms or documents with the Internal Revenue Service and taking such other action as may from time to time be required under Treasury regulations. The Tax Matters Partner shall have full authority to extend the statute of limitations and control any tax audit or other proceeding on behalf of the Partnership. Expenses of administrative proceedings relating to the determination of Partnership items at the Partnership level undertaken by the Tax Matters Partner will be deemed to be Program Expenses.

     (b) All matters concerning (i) allocations of Net Profits and Net Losses and allocations for tax purposes, (ii) distributions by the Partnership, including the taxes thereon, and (iii) accounting procedures and determinations, tax determinations, determinations as to on whose behalf expenses were incurred and the attribution of fees and expenses to a Program Asset, and other determinations not specifically and expressly provided for by the terms of this Agreement, shall be determined by the General Partner, whose determination shall be final and conclusive as to all the Partners absent manifest clerical error.

     (c) At the General Partner’s sole discretion, the General Partner may cause the Partnership to make or refrain from making any and all elections permitted by the Code and the Treasury Regulations and any state, local, or foreign tax elections. Notwithstanding the foregoing, it is intended that the Partnership be treated as a partnership for U.S. federal income tax purposes, and neither the Partnership nor any Partner shall make any election inconsistent with such treatment without the unanimous written consent of the Partners.

A-6

APPENDIX B:
Apportionment and Modification of
Carried Interest to IP Limited Partners

B-1 Definitions

     For purposes of this Appendix B, any capitalized term not defined herein shall have the meaning set forth in the Agreement.

     “Acquisition Date” means, with respect to a Program Asset, the date the Partnership first made an investment in such Program Asset (or in the case of a Program Asset that is contributed to the Partnership, the date of such contribution).

     “Allocated Reimbursement Payments” means the amount of Reimbursement Payments allocated by the General Partner to each Program Asset. Unless the General Partner adopts another method (with notification to each other Partner), the General Partner shall allocate the Reimbursement Payments made with respect to a particular year to and among the Program Assets held by the Partnership during that year based on the relative Invested Capital in such Program Assets and adjusted (on a weighted average basis) to take into account Program Assets that are held for less than an entire year.

     “Carry Account” has the meaning set forth in Section B-3.

     “Carry Loss” means, with respect to the Realization of any Program Asset, 20% of the amount, if any, by which the combined Investment Proceeds and Sponsor Proceeds generated by such Program Asset are less than the sum of the Full Return Amount and the Hurdle Return Amount of such Program Asset. The General Partner shall use its reasonable discretion in determining the amount of Carry Loss (including adjusting previous allocations of Carry Loss) so as to cause the amount of Carry Loss to accurately reflect the amount by which all Carry Distributions that will ultimately be apportioned by the Partnership with respect to all other Program Assets will be reduced, which determination shall then be binding on the Partnership and the Partners.

     “Carry Profit” means, with respect to any particular Program Asset, the amount by which the Investment Proceeds or Sponsor Proceeds generated by that Program Asset produce or lead to the production of Carry Distributions, as determined by the General Partner. In general, the Carry Profit with respect to any Program Asset will equal the sum of the following amounts:

     (a) 0% of that portion of the combined Investment Proceeds and Sponsor Proceeds from such Program Asset as does not exceed the sum of the applicable Full Return Amount and the applicable Hurdle Return Amount;

     (b) 80% of that portion of the combined Investment Proceeds and Sponsor Proceeds that is in excess of the sum of the applicable Full Return Amount and the applicable Hurdle Return Amount but that is less than the sum of the applicable Full Return Amount and 133% of the applicable Hurdle Return Amount; and

B-1

     (c) to the extent in excess of the sum of clauses (a) and (b) above, (i) 20% of that portion of the Investment Proceeds that is in excess of the sum of the applicable Full Return Amount plus (ii) 100% of any Sponsor Proceeds.

The General Partner shall use its discretion in determining the amount of Carry Profit (including adjusting previous allocations of Carry Profit) so as to cause the amount of Carry Profit (net of the allocated Carry Loss) to accurately reflect the amount of Carry Distributions that will ultimately be distributed and that are allocable to each Program Asset.

     “Cause Event” means with respect to any IP Limited Partner,

     (a) any act or omission constituting gross negligence, willful misconduct, or fraud in the performance of such IP Limited Partner’s duties or obligations as an employee of the Program Manager;

     (b) any action or omission that causes there to be a material breach of any applicable management agreement to which the Program Manager is a party;

     (c) any willful refusal to perform a duty as directed by Woodbridge or any of its subsidiaries (including the General Partner) if such duty is within the scope of such IP Limited Partner’s duties to the Program Manager, Woodbridge or any of its subsidiaries; or

     (d) any conviction of any crime constituting a felony in the jurisdiction involved (other than a motor vehicle felony for which only a non-custodial penalty is imposed), whether or not involving the Program Manager or the Partnership.

     “Full Return Amount” means, with respect to a Program Asset, the sum of (i) the aggregate Invested Capital and (ii) the Allocated Reimbursement Payments, in each case attributable to such Program Asset.

     “Hurdle Return Amount” means, with respect to a Program Asset, as of any date of determination, the summation of an amount calculated on a daily basis through the applicable date of determination equal to 10% per annum, compounded annually, of (i) the aggregate Invested Capital and the Allocated Reimbursement Payments, in each case attributable to such Program Asset, minus (ii) the aggregate amount of all Investment Proceeds attributable to such Program Asset on or prior to such day.

     “Tenured Asset” means, with respect to any IP Limited Partner, any Program Asset acquired by the Partnership during the period when such Person was an IP Limited Partner (and not a Terminated IP Limited Partner) or any other Program Asset in which such Person has been granted a Carry Percentage by the General Partner. For the avoidance of doubt, an IP Limited Partner will not receive a Carry Percentage with respect to any asset that is not a Tenured Asset.

B-2

     “Terminated IP Limited Partner” means any IP Limited Partner whose employment with the Woodbridge Employer is terminated for any reason, whether voluntarily or involuntarily, and with or without cause. In the General Partner’s discretion, an IP Limited Partner whose employment with the Woodbridge Employer is terminated contemporaneously with such IP Limited Partner becoming employed by another entity within Woodbridge shall not be treated as having been terminated, and the new employer shall become the Woodbridge Employer for purposes of this definition. For purposes of this Agreement, in the case of any Family Related Partner, the termination of employment with the Woodbridge Employer of the IP Limited Partner with whom such Family Related Partner is associated shall cause such Family Related Partner to become a Terminated IP Limited Partner.

     “Vested Percentage” means, with respect to an IP Limited Partner and each Program Asset, that percentage to be applied in determining the amount of Carry Profit or Carry Loss to be allocated to any IP Limited Partner as set forth in the vesting provisions in Section B-2.

     “Woodbridge Employer” means, with respect to any IP Limited Partner, the Program Manager if the IP Limited Partner is an employee of the Program Manager. Otherwise it means the entity within Woodbridge that is the employer of such IP Limited Partner.

B-2 Vesting Provisions

     (a) Non-Tenured Assets. An IP Limited Partner will have a Vested Percentage of 0% in any Program Asset that is not a Tenured Asset with respect to such Partner.

     (b) Tenured Assets. The Vested Percentage of an IP Limited Partner with respect to a Tenured Asset will be as follows:

(i)	Distributions or Realizations While Employed. An IP Limited Partner will have a Vested Percentage of 100% in all Carry Profit or Carry Loss attributable to any Investment Proceeds or Sponsor Proceeds received by the Partnership from such Partner’s Tenured Assets, or any other consequences of a Realization of a Tenured Asset, if those proceeds are received or the Realization occurs prior to the IP Limited Partner becoming a Terminated IP Limited Partner. For the avoidance of doubt, an IP Limited Partner shall have a Vested Percentage of 100% in any Carry Loss associated with an unreversed Impairment that arises on or prior to an IP Limited Partner becoming a Terminated IP Limited Partner.
(ii)	Termination for Cause. An IP Limited Partner will have a Vested Percentage of 0% in all Carry Profit or Carry Loss attributable to any Investment Proceeds or Sponsor Proceeds received by the Partnership from such IP Limited Partner’s Tenured Assets, or any other consequences of a Realization of a Tenured Asset, if those proceeds are received or the Realization occurs after such IP Limited Partner has become a Terminated IP Limited Partner because of the occurrence of a Cause Event with respect to such IP Limited Partner.
(iii)	Termination Not for Cause. An IP Limited Partner will have a Vested Percentage of 75% in all Carry Profit or Carry Loss attributable to any Investment Proceeds or Sponsor Proceeds received by the Partnership from such IP Limited Partner’s Tenured Assets, or any other consequences of a Realization of a Tenured Asset, if those proceeds are received or the Realization occurs after such IP Limited Partner has become a Terminated IP Limited Partner because (i) the Woodbridge Employer terminated the employment for a reason other than the occurrence of a Cause Event with respect to such IP Limited Partner or (ii) of the death, permanent disability or legal incapacity of such IP Limited Partner.

B-3

(iv) Voluntary Resignation. An IP Limited Partner will have a Vested Percentage as determined pursuant to the following sentence in all Carry Profit or Carry Loss attributable to any Investment Proceeds or Sponsor Proceeds received by the Partnership from such IP Limited Partner’s Tenured Assets, or any other consequences of a Realization of a Tenured Asset, if those proceeds are received or the Realization occurs after such IP Limited Partner has become a Terminated IP Limited Partner because the IP Limited Partner voluntarily left the employment of the Woodbridge Employer. For purposes of this clause (iv), the Vested Percentage shall be determined separately for each Program Asset and shall equal: (A) 25% upon the Acquisition Date of such Program Asset, (B) an additional 12.5 percentage points per year upon each of the first four anniversaries of the Acquisition Date, and (C) the remainder when the Tenured Asset is Realized.

     (c) Permitted Modifications. Notwithstanding the foregoing, the General Partner may, after consultation with the Program Manager, modify this vesting schedule for any additional IP Limited Partner admitted to the Partnership pursuant to Section 7.5 of the Agreement, including granting an additional IP Limited Partner the right to have a Vested Percentage in Program Assets whose Acquisition Date preceded the time such additional IP Limited Partner was admitted to the Partnership.

     (d) Permitted Adjustments. As described in Section B-3(b), the General Partner, in its discretion, is permitted to make adjustments, including retroactive adjustments, to the allocations of Carry Profit and Carry Loss. The ability of the General Partner to make these adjustments shall not be restricted by the application of the vesting provisions in this Section B-2.

     (e) Family Related Partner. A Family Related Partner’s Vested Percentage shall be equivalent to the Vested Percentage of the IP Limited Partner associated with such Family Related Partner.

B-3 Determination of Carry Accounts

     (a) Maintenance of Carry Accounts. A separate bookkeeping account (a “Carry Account”) shall be maintained for each IP Limited Partner. Immediately prior to the Partnership making any Carry Distributions or upon the Realization of a Program Asset, the Carry Profit (or Carry Loss) determined with respect to such distribution or Realization shall be credited (or debited, and, if necessary, to an amount below zero) to the Carry Account of each IP Limited Partner in an amount equal to such IP Limited Partner’s Carry Percentage in the Program Asset giving rise to such Carry Profit (or Carry Loss) multiplied by such IP Limited Partner’s Vested Percentage in such Carry Profit (or Carry Loss). An IP Limited Partner’s Carry Account shall be debited by the amount of Carry Distributions made to such IP Limited Partner.

B-4

     (b) Adjustments to Carry Accounts. The General Partner, in its discretion, is permitted to make adjustments, including retroactive adjustments, to the allocations of Carry Profit and Carry Loss so that, on an aggregate basis the Carry Accounts of the IP Limited Partners more closely match the aggregate rights of the IP Limited Partners to receive Carry Distributions or to make clawback payments as provided in Article IV of the Agreement. Except to the extent the General Partner determines otherwise (with notice to the other Partners), the General Partner intends to cause any shortfall in the aggregate net Carry Profits (i.e., net of aggregate Carry Losses) as compared to the aggregate amount of Carry Distributions (net of clawback payments) distributable to the IP Limited Partners in accordance with Article IV of the Agreement to be allocated on a pro rata basis to each Program Asset that otherwise produced Carry Profit (and among them based on the relative amounts of Carry Profit).

     (c) Deemed Realization. Solely for purposes of determining an IP Limited Partner’s Carry Account, the General Partner may, upon the admittance of a new Carried Interest Partner or at any other time, deem there to have been a Realization of one or more Program Assets at the Fair Market Value at such time of such Program Asset, in which case the deemed Carry Profit or Carry Loss derived from such deemed Realization shall be allocated among the IP Limited Partners and charged to the Carry Accounts of the IP Limited Partners. Any future actual or deemed Realization of a Program Asset shall take into account the prior deemed Realization or Realizations. Notwithstanding the foregoing, for purposes of determining an IP Limited Partner’s Vested Percentage pursuant to Section B-2, such deemed Realizations shall be disregarded.

B-4 Distributions to the IP Limited Partners

     Subject to the holdback provisions of Section 4.5 of the Agreement, each IP Limited Partner shall be entitled to receive an amount of Carry Distributions equal to the positive balance in his Carry Account, provided that the sum of all of the Carry Distributions made to date to the IP Limited Partners as a group cannot exceed the product of (A) the total Carry Distributions made to date times (B) the aggregate Carry Percentages for all of the IP Limited Partners (adjusted as necessary to take into account changes in Carry Percentages since the formation of the Partnership). If the amount of Carry Distributions to be made to the IP Limited Partners as a group is insufficient to reduce the positive Carry Account balances of all IP Limited Partners to zero, then Carry Distributions made to the IP Limited Partners as a group will be made pro rata among the IP Limited Partners based on their relative Carry Account balances. If the amount of Carry Distributions to be made to the IP Limited Partners exceeds the aggregate positive Capital Account balances of the IP Limited Partners, such excess shall be distributed among the IP Limited Partners in the manner that the General Partner determines most appropriately reflects the IP Limited Partners’ relative Carry Percentages (as adjusted by the Vested Percentages) in the Program Assets giving rise to the Carry Distributions.

B-5 Responsibility for Gross Clawback Amount

     Each IP Limited Partner shall be responsible (only to the extent of Section 4.6(c) of the Agreement) for a portion of the Gross Clawback Amount equal to the negative balance, if any, in such IP Limited Partner’s Carry Account as of the final liquidating distribution of assets of the Partnership pursuant to Section 8.2 of the Agreement.

B-6 83(b) Election

     Each Carried Interest Partner shall make a timely election under Section 83(b) of the Code with respect to such Carried Interest Partner’s interest in the Partnership.

B-5

AGREEMENT OF LIMITED PARTNERSHIP

OF

BLUEGREEN PROGRAM PARTNERSHIP, LP

Date: March 13, 2009

TABLE OF CONTENTS

			Page
ARTICLE I GENERAL PROVISIONS				1
	1.1	Formation		1
	1.2	Name		1
	1.3	Purpose		2
	1.4	Principal Office		2
ARTICLE II DEFINITIONS; DETERMINATIONS				2
	2.1	Definitions		2
	2.2	Determinations		6
ARTICLE III INVESTED CAPITAL; CAPITAL ACCOUNTS				6
	3.1	Invested Capital		6
	3.2	Future Contributions		6
	3.3	Capital Accounts		7
ARTICLE IV DISTRIBUTIONS				7
	4.1	Distribution Policy		7
	4.2	Reimbursement Payment		7
	4.3	Priority of Distributions		8
	4.4	Apportionment of Carry Distributions		9
	4.5	IP Clawback Reserve		9
	4.6	Clawback Obligations		10
ARTICLE V PROGRAM MANAGER				11
	5.1	Program Manager		11
	5.2	Fees		12
ARTICLE VI GENERAL PARTNER				12
	6.1	Management Authority		12
	6.2	No Liability to Partnership or Limited Partners		12
	6.3	Indemnification		13
ARTICLE VII LIMITED PARTNERS				14
	7.1	Limited Liability		14
	7.2	No Participation in Management		14
	7.3	Transfer of Limited Partnership Interests		14
	7.4	No Termination		15
	7.5	Additional Limited Partners		15
	7.6	Reimbursement for Payments on Behalf of a Partner		15

     -i-     

			Page
ARTICLE VIII DURATION AND TERMINATION				16
	8.1	Term		16
	8.2	Termination and Liquidation		16
ARTICLE IX VALUATION OF PARTNERSHIP ASSETS				17
	9.1	Normal Valuation		17
	9.2	Restrictions on Transfer or Blockage		17
ARTICLE X BOOKS OF ACCOUNTS; MEETINGS				17
	10.1	Books		17
	10.2	Fiscal Year		17
	10.3	Reports		17
ARTICLE XI MISCELLANEOUS				18
	11.1	Amendments		18
	11.2	Successors		18
	11.3	Governing Law; Severability		18
	11.4	Notices		18
	11.5	Arbitration		19
	11.6	Miscellaneous		19
	11.7	No Third Party Beneficiaries		19
APPENDIX A: Tax and Accounting Provisions				A-1
	A-1	Definitions		A-1
	A-2	Maintenance of Capital Accounts		A-2
	A-3	Allocations of Profits and Losses		A-4
	A-4	Regulatory Allocations and Special Allocations		A-4
	A-5	Tax Allocations		A-5
	A-6	Tax Matters Partner; Management Authority Regarding Tax and Accounting		A-6
APPENDIX B: APPORTIONMENT AND MODIFICATION OF CARRIED INTEREST TO IP LIMITED PARTNERS				B-1
	B-1	Definitions		B-1
	B-2	Vesting Provisions		B-3
	B-3	Determination of Carry Accounts		B-4
	B-4	Distributions to the IP Limited Partners		B-5
	B-5	Responsibility for Gross Clawback Amount		B-5
	B-6	83(b) Election		B-5

     -ii-     

AGREEMENT OF LIMITED PARTNERSHIP

OF

BLUEGREEN PROGRAM PARTNERSHIP, LP

     THIS AGREEMENT OF LIMITED PARTNERSHIP is deemed to be effective as of March 13, 2009 (the “Effective Date”), by and among the General Partner, the Sponsor Partner, the IP Limited Partners, the Program Manager and the Residual Limited Partner (each as defined below).

     WHEREAS, the Partnership (as defined below) was formed pursuant to the Certificate (as defined below);

     NOW, THEREFORE, the parties hereto agree as follows:

ARTICLE I
GENERAL PROVISIONS

1.1 Formation

     The Partners hereby agree to form a limited partnership (the “Partnership”) pursuant to and in accordance with the Florida Revised Uniform Limited Partnership Act of 2005, as amended from time to time (the “Partnership Act”). The term of the Partnership (the “Term”) commenced upon the filing of the Certificate of Limited Partnership (the “Certificate”) with the Secretary of State of Florida (the date of such filing is referred to herein as the date of “formation” of the Partnership) and shall continue until dissolution and termination of the Partnership in accordance with the provisions of ARTICLE VIII hereof.

1.2 Name

     As of the date hereof, the General Partner has filed the Certificate contemporaneously with the execution of this Agreement and the Partners hereby agree that the name of the Partnership shall be Bluegreen Program Partnership, LP, or such other name or names as the General Partner may designate from time to time.

1.3 Purpose

     The Partnership is organized for the principal purpose of (i) acquiring, managing, and supervising the interests in the Program Assets, and (ii) engaging in such other activities incidental or ancillary thereto as the General Partner deems necessary or advisable.

1.4 Principal Office

     The General Partner shall maintain a principal office in Fort Lauderdale, Florida, or at such other place or places as the General Partner may from time to time designate.

ARTICLE II
DEFINITIONS; DETERMINATIONS

2.1 Definitions

     Capitalized terms used in this Agreement have the meanings set forth below or as otherwise specified herein:

     “Agreement” means this Agreement of Limited Partnership of Bluegreen Program Partnership, LP, as amended or modified from time to time in accordance with its terms.

     “Alternative Clawback Reserve” has the meaning set forth in Section 4.5.

     “Capital Account” is the account established for each Partner in accordance with the provisions of Appendix A hereto.

     “Capital Proceeds” means any Investment Proceeds received by the Partnership in respect of a Program Asset that are attributable to a Realization event.

     “Carried Interest Partners” means the Sponsor Partner, the IP Limited Partners, and the Residual Limited Partner, in their capacities as Partners entitled to receive Carry Distributions.

     “Carry Distributions” means those distributions paid to the Carried Interest Partners in their capacities as such pursuant to Section 4.3(a)(ii) and Section 4.3(a)(iii)(B).

     “Carry Percentage” means, with respect to a Carried Interest Partner, its percentage interest in Carry Distributions as set forth for such Partner on Schedule I hereof.

     “Certificate” has the meaning set forth in Section 1.1.

     “Code” means the U.S. Internal Revenue Code of 1986, as amended from time to time.

     “Contributed Property” means 100 percent of the shares of common stock of Bluegreen Corporation constituting all of the shares of Bluegreen Corporation currently held by Woodbridge.

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     “Covered Party” means each of the Partners, a director, officer, partner or member (or a former director, officer, partner or member) of any Partner, and to the extent approved by the General Partner in its sole discretion, any other employee of a Partner or an agent acting at the direction of the General Partner or the Program Manager, and in any such case, the heirs and legal representatives of any such person.

     “Current Proceeds” means any Investment Proceeds received by the Partnership in respect of a Program Asset that are not attributable to a Realization event, including dividends, rents, or interest with respect to such Program Asset.

     “Deal Fees” means those amounts received by the General Partner (or an affiliate of the General Partner) as break-up fees, director fees, “flip” fees, investment banking, consulting, or similar transaction fees, but not including any amount received as reimbursement for expenses directly related to the provision of such services for which the fee is being paid. “Deal Fees” also means all amounts earned by any employee or agent (in such capacity) of the Program Manager with respect to a Program Asset or other activities of the Partnership, but not including payments to such employee or agent from the Program Manager.

     “Effective Date” has the meaning set forth in the Recitals.

     “Fair Market Value” of a security or a Program Asset means the amount that would be realized as Investment Proceeds if such security or Program Asset had been sold at its “value” (determined in accordance with Article IX).

     “Family Related Partner” means, with respect to any IP Limited Partner, any Person who is a spouse or lineal descendent of the parents of such IP Limited Partner or any Person which is a trust formed by such IP Limited Partner for investment by or for the benefit of such IP Limited Partner’s spouse or any lineal descendants of the parents of such IP Limited Partner or of such IP Limited Partner’s spouse and/or any charitable organization; provided that any cause of action or other dispute arising in relation to a Family Related Partner’s interest may only be pursued by the IP Limited Partner associated with such Family Related Partner, except if such IP Limited Partner has died or become legally incapacitated.

     “GAAP” has the meaning set forth in Section 10.3.

     “General Partner” means Bluegreen Program GP, LLC, in its capacity as general partner of the Partnership, and any successor general partner of the Partnership.

     “Gross Clawback Amount” has the meaning specified in Section 4.6.

     “Impairment” means, with respect to a Program Asset, a determination by the General Partner that the Program Asset is not expected to be able to provide for cash flow or realization proceeds a return to investors of at least the amount of Invested Capital associated with such asset as well as a 10% per annum compounded annual return on such Invested Capital. The General Partner’s determination that a Program Asset has suffered an Impairment for purposes of this Agreement shall be independent of any determination that the value of the Program Asset is reduced for purposes of the financial statements prepared under generally accepted accounting principles.

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     “Invested Capital” has the meaning set forth in Section 3.1.

     “Investment Proceeds” means the gross investment returns (whether in the form of cash, securities, or other property) received by the Partnership in respect of the Partnership’s Invested Capital in any Program Assets (i.e., in its capacity as an investor and not with respect to the provision of any services with respect to such Program Assets or to any other investor in such Program Assets). For the avoidance of doubt, the amount of Investment Proceeds shall be determined without regard to any management fees, carried interest, or similar deductions that may be charged by the General Partner or the Program Manager to any investment vehicle through which the Partnership holds any of its investments.

     “IP Clawback Reserve” has the meaning set forth in Section 4.5.

     “IP Limited Partners” means any Persons designated as IP Limited Partners on Schedule I hereof, in their capacities as limited partners of the Partnership, or any other Persons that are admitted as IP Limited Partners in accordance with the terms hereof, in each case for so long as such Persons continue to be IP Limited Partners hereunder, and “IP Limited Partner” shall mean each of such Persons individually.

     “Limited Partners” means the IP Limited Partners and the Residual Limited Partner, and “Limited Partner” shall mean each of such Persons individually.

     “Overall Hurdle Clawback” has the meaning set forth in the limited partnership agreement governing Woodbridge Executive Incentive Plan 1, LP.

     “Partners” means collectively the General Partner (including in its capacity as Sponsor Partner), the Limited Partners, the Program Manager and any other Person that is admitted to the Partnership as a partner in accordance with the terms hereof, and “Partner” shall mean each of such persons individually.

     “Partnership” has the meaning set forth in Section 1.1.

     “Partnership Act” has the meaning set forth in Section 1.1.

     “Platform” means all of the program partnerships (or other entities) that are designated as a “Program Partnership” in accordance with the terms of the governing agreement of Woodbridge Executive Incentive Plan 1, LP.

     “Person” means an individual, a partnership (general, limited, or limited liability), a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, or a governmental, quasi-governmental, judicial, or regulatory entity or any department, agency, or political subdivision thereof.

     “Portfolio Company” means Bluegreen Corporation and such other entities, the interests in which are Program Assets.

     “Preferred Return” has the meaning set forth in Section 4.3.

     “Program Assets” means those assets held by the Partnership as part of the Partnership’s investment program, and “Program Asset” shall mean each of such Program Assets individually.

     “Program Expenses” means those costs, expenses, liabilities and obligations relating to the Partnership’s activities, investments and business (to the extent not borne or reimbursed by the Portfolio Company) as set forth on Schedule II hereof.

-4-

     “Program Manager” means Woodbridge Fund I, LLC.

     “Program Partnership” means each partnership (or other entity) that is designated as a “Program Partnership” in accordance with the terms of the governing documents of Woodbridge Executive Incentive Plan 1, LP. All such partnerships together with the Partnership are the “Program Partnerships.”

     “Realization” means the sale, redemption, or other disposition of, or any other receipt of a capital nature, including proceeds from the recapitalization or refinancing at the investment level (as determined by the General Partner) with respect to the whole or part of, or the permanent write-off of a Program Asset, and “Realized” shall be construed accordingly. To the extent a Program Asset has suffered an Impairment of less than the whole of the Program Asset, a portion of the Program Asset equal to the amount of the Impairment shall be treated as if sold for no consideration. If the General Partner determines that an Impairment has been reversed, the General Partner shall adjust the allocations and distributions made by the Partnership so as to reverse the effects of the prior Impairment.

     “Realized Base Contributions” has the meaning set forth in Section 4.3(a)(i).

     “Regulatory Allocations” has the meaning set forth in Appendix A hereto.

     “Reimbursement Payment” means the special payment to the Program Manager pursuant to Section 4.2.

     “Reimbursing Partner” has the meaning set forth in Section 7.6(a).

     “Residual Limited Partner” means the Person entitled to receive the amounts of Carry Distributions not made to the Sponsor Partner or the IP Limited Partners, which Person will be Woodbridge Executive Incentive Plan 1, LP.

     “Return Distributions” means those distributions to the General Partner other than Carry Distributions as set forth in Section 4.3.

     “Sponsor Partner” means the Person entitled to receive the amounts of Carry Distributions apportioned to the Sponsor Partner pursuant to the terms hereof, which Person initially will be the General Partner, in its capacity as Sponsor Partner.

     “Sponsor Proceeds” means all other proceeds received by the Partnership from or with respect to its assets other than Investment Proceeds. Sponsor Proceeds include management fees, carried interest, and Deal Fees charged by the Partnership to other investors in an investment vehicle through which the Partnership holds its assets; provided, however, that to the extent the General Partner determines that Deal Fees arising with respect to a Partnership asset are attributable to the capital invested in that asset by the Partnership, such fees will be treated as Investment Proceeds, rather than Sponsor Proceeds. For the avoidance of doubt, Deal Fees attributable to the capital invested by a third party or not attributable to any investment of capital will be treated as Sponsor Proceeds.

     “Term” has the meaning set forth in Section 1.1.

     “Transfer” means a transfer in any form, including a sale, assignment, conveyance, pledge, mortgage, encumbrance, hypothecation, exchange, gift, or other disposition, or the act of so doing, whether voluntarily, by operation of law, pursuant to judicial process, or otherwise as the context requires.

-5-

     “Woodbridge” means Woodbridge Holdings Corporation or any direct or indirect subsidiary of such corporation.

2.2 Determinations

     Unless otherwise indicated, any determinations or calculations conducted pursuant to this Agreement shall be determined or calculated as of the date of such determination or calculation.

ARTICLE III
INVESTED CAPITAL; CAPITAL ACCOUNTS

3.1 Invested Capital

     As of the Effective Date, the Partners shall be required to make the following contributions to the capital of the Partnership (“Invested Capital”):

     (a) The General Partner shall contribute the Contributed Property to the Partnership, which for purposes hereof shall be treated as Invested Capital of $120,667,123.00, and such Contributed Property will be treated as having a Book Value as defined in Appendix A hereto.

     (b) Each IP Limited Partner shall contribute $250 to the capital of the Partnership.

     (c) The Residual Limited Partner shall contribute $250 to the capital of the Partnership.

     (d) The Program Manager shall contribute $250 to the capital of the Partnership.

The right of each IP Limited Partner, the Residual Limited Partner, and the Sponsor Partner to receive Carry Distributions represents a profits interest received for services rendered or to be rendered to or for the benefit of the Partnership.

3.2 Future Contributions

     (a) Other than the required Invested Capital described in Section 3.1, any reimbursement payment pursuant to Section 7.6, or as may be required by applicable law, no Partner shall have any further obligation to contribute additional Invested Capital to the Partnership; provided that the General Partner shall be required to make special distributions to the Partnership to the extent that such special distributions are necessary to reduce any IP Limited Partner’s Alternative Clawback Reserve as described in Section 4.2(c).

     (b) The General Partner, in its discretion, whether or not in connection with the admission of any new Partner to the Partnership in accordance with Section 7.5, may permit a Partner to contribute additional Invested Capital to the Partnership under such circumstances as may be determined by the General Partner.

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     (c) The General Partner may cause the Partnership to borrow funds, including from Woodbridge, under such terms as the General Partner may determine, in order to permit the Partnership to meet its liquidity needs.

3.3 Capital Accounts

     (a) A capital account shall be maintained for each Partner in accordance with the provisions of Appendix A hereto.

ARTICLE IV
DISTRIBUTIONS

4.1 Distribution Policy

     (a) Except as set forth in Section 4.1(c) and Section 4.4, the General Partner shall periodically cause excess cash or cash equivalents held in the Partnership to be distributed to the Limited Partners in accordance with Section 4.3.

     (b) Distributions may be in the form of cash, property, or securities. Except as otherwise provided herein, for purposes of this Agreement, an in-kind distribution of non-cash property shall be treated as if an amount of cash equal to the Fair Market Value of such property had been distributed.

     (c) In determining the amounts that may be available for distribution to the Partners, the General Partner shall first cause the Partnership to satisfy its current obligations, including its obligation to make any Reimbursement Payment to the Program Manager in accordance with Section 4.2. In addition, the General Partner may cause the Partnership to retain such amounts as the General Partner determines is appropriate to act as reserves for any fixed or contingent payments or liabilities of the Partnership (including future amounts of Reimbursement Payments) for which the Partnership may be liable.

4.2 Reimbursement Payment

     Prior to making any distributions to the Partners pursuant to Section 4.3, the Partnership shall make a reimbursement payment (the “Reimbursement Payment”) to the Program Manager equal to the amount of Program Expenses (including, for the avoidance of doubt, interest accruing on the Program Manager’s line of credit used to finance such expenses) borne by, and required to be paid by, the Program Manager that have yet to be reimbursed by the Partnership to the Program Manager.

-7-

4.3 Priority of Distributions

     After making any Reimbursement Payment pursuant to Section 4.2, except to the extent specifically provided in this Agreement to the contrary, distributions by the Partnership shall be made among the Partners as follows:

     (a) Capital Proceeds and Sponsor Proceeds. Distributions designated as Capital Proceeds or Sponsor Proceeds by the General Partner shall be distributed as follows:

(i)	First, 100% to the General Partner as “Return Distributions” until the General Partner has received aggregate distributions sufficient to provide the General Partner a 10% per annum cumulative annually compounded internal rate of return (the “Preferred Return”) on the General Partner’s Invested Capital attributable to all Program Assets (or portion thereof) that have been Realized (such Invested Capital, the “Realized Base Contributions”), provided that for purposes of determining the Preferred Return, the Invested Capital attributable to the contribution of the Contributed Property shall be treated as having been made on September 1, 2008 (notwithstanding that such date pre-dates the date of this Agreement). The General Partner will include as Return Distributions any amounts received that relate to the investment in such Program Assets, regardless of whether such amounts are received through, or outside of, the Partnership. For the avoidance of doubt, an “internal rate of return” calculation encompasses a return of, as well as a return on, the Realized Base Contributions.
(ii)	Second, 20% to the General Partner (as additional Return Distributions) and 80% to the Carried Interest Partners (and among them as provided in Section 4.4) as “Carry Distributions,” until the aggregate amount of Carry Distributions equals 20% of the excess of (A) the aggregate amount of Return Distributions and Carry Distributions distributed over (B) the Realized Base Contributions; and
(iii)	Thereafter, between the General Partner and the Carried Interest Partners as follows:

(A)	The General Partner is allocated an additional amount (as additional Return Distributions) so that the aggregate amount of Return Distributions distributed to the General Partner equals the sum of (1) the Realized Base Contributions plus (2) 80% of the amount by which the aggregate Investment Proceeds received by the Partnership exceeds the Realized Base Contributions; and
(B)	The remainder to the Carried Interest Partners as additional Carry Distributions.

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     (b) Current Proceeds. Distributions designated as Current Proceeds by the General Partner shall be distributed in the same manner as Capital Proceeds and Sponsor Proceeds pursuant to Section 4.3(a) except that for purposes of applying those provisions with respect to a particular distribution of Current Proceeds, the Program Asset giving rise to such Current Proceeds will be deemed to have been Realized for an amount equal to the Invested Capital (and taking into account any prior unreversed Impairment with respect to such Program Asset) attributable to such Program Asset immediately prior to the distribution of such Current Proceeds.

4.4 Apportionment of Carry Distributions

     Carry Distributions will be made to and among the Carried Interest Partners in the following amounts:

     (a) Distributions to the Sponsor Partner. The Sponsor Partner shall in all cases receive 35% of all Carry Distributions.

     (b) Distributions to the IP Limited Partners. The IP Limited Partners as a group shall receive a portion of Carry Distributions, which portion shall not exceed the aggregate Carry Percentages of the IP Limited Partners, but which may be reduced by the vesting and other provisions in Appendix B hereto. The provisions of Appendix B will govern the determination of each IP Limited Partner’s share of such Carry Distributions.

     (c) Distributions to the Residual Limited Partner. Carry Distributions not made to the Sponsor Partner or the IP Limited Partners shall be made to the Residual Limited Partner. For the avoidance of doubt, any reductions in Carry Distributions to the IP Limited Partners pursuant to the vesting provisions set forth in Appendix B hereto shall accrue to the benefit of the Residual Partner.

4.5 IP Clawback Reserve

     (a) Notwithstanding the provisions of Section 4.3 and Section 4.4 and Appendix B hereto, 25% (adjusted as provided in Section 4.5(b) below) of any Carry Distributions that are available for distribution to an IP Limited Partner shall be withheld by the Partnership, and a separate bookkeeping account (an “IP Clawback Reserve”) shall be established for such IP Limited Partner by the Partnership for tracking deposits, withdrawals, and interest earned with respect to such account. The Partnership may aggregate each of the IP Clawback Reserves within a single interest-bearing Partnership bank account.

     (b) Each time that the Partnership is to make a distribution of Carry Distributions, the General Partner (together with the general partners of each of the other Program Partnerships) will review the remaining Program Assets and the assets within each other Program Partnership in the Platform to determine whether any of the cumulative assets have suffered an Impairment that has not been reversed, and if so, the effect that such Impairment would have on the ability of Woodbridge (in its capacity as an investor in such program partnership) to receive proceeds from such Program Partnership sufficient to provide Woodbridge with at least a 10% annual cumulative compounded internal rate of return on its Invested Capital (as defined by the governing agreement of such Program Partnership) in such Program Partnership. If the General Partner determines that the Impairment would prevent such minimum return from being achieved, the General Partner may increase the percentage (but not in excess of 100%) of Carry Distributions to be contributed to the IP Clawback Reserve of any Executive IP Partner (as defined below) in order to add to such IP Clawback Reserve an amount which, when combined with the other reserves being established by the other Program Partnerships and by Woodbridge Executive Incentive Plan 1, LP with respect to such Executive IP Partner, will cover such Executive IP Partner’s share of the Overall Hurdle Clawback that is anticipated to arise.

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(i)	“Executive IP Partner” shall mean any person who is both an IP Limited Partner and a limited partner of Woodbridge Executive Incentive Plan 1, LP.
(ii)	For the avoidance of doubt, the General Partner shall not increase the percentage of Carry Distributions to be contributed to the IP Clawback Reserve of any IP Limited Partner who is not an Executive IP Partner.

     (c) Notwithstanding the foregoing, in the General Partner’s discretion, rather than depositing amounts in the IP Clawback Reserve for an IP Limited Partner, the General Partner may cause such amounts to be distributed to the General Partner as additional Return Distributions, which will be credited to a special bookkeeping account (an “Alternative Clawback Reserve”) for the benefit of such IP Limited Partner. The balance in the Alternative Clawback Reserve shall be increased from time to time by an interest factor equal to the interest earned on the IP Clawback Reserve (or, if there is no IP Clawback Reserve, on the rate of interest that the Partnership would receive on an interest-bearing bank account).

     (d) As set forth in Section 4.6, at the expiration of the Term of the Partnership, each IP Limited Partner will be responsible for a share of the Gross Clawback Amount, if any.

(i)	To satisfy an IP Limited Partner’s share, amounts will first be taken from such IP Limited Partner’s Alternative Clawback Reserve. To the extent that such IP Limited Partner’s share is not satisfied, amounts will be taken from such IP Limited Partner’s IP Clawback Reserve.
(ii)	(A) To the extent amounts in the Alternative Clawback Reserve are not needed to satisfy the share of an IP Limited Partner who is not an Executive IP Partner of the Gross Clawback Amount, an amount of Return Distributions that would otherwise be payable to the General Partner or Carry Distributions otherwise payable to the Sponsor Partner equal to such excess, shall instead be specially distributed to the applicable IP Limited Partner without regard to Section 4.3, which distributions will reduce on a dollar-for-dollar basis the amount in such IP Limited Partner’s Alternative Clawback Reserve. If the full amount of such excess cannot be so distributed, the shortfall shall be contributed by the General Partner to the Partnership for special distribution to the applicable IP Limited Partner.
(iii)	(B) To the extent amounts in the Alternative Clawback Reserve are not needed to satisfy the share of an Executive IP Partner of the Gross Clawback Amount, such excess amounts will be added to the Alternative Clawback Reserve established for the benefit of such Executive IP Partner by Woodbridge Executive Incentive Plan 1, LP.
(iv)	(A) For any IP Limited Partner who is not an Executive IP Partner, to the extent amounts in such IP Limited Partner’s IP Clawback Reserve (including interest earned thereon) are not needed to fund such IP Limited Partner’s share of the Gross Clawback Amount, such amounts will be released by the Partnership to the applicable IP Limited Partner.
	(B) For any Executive IP Partner, to the extent amounts in such Executive IP Partner’s IP Clawback Reserve (including interest earned thereon) are not needed to fund such Executive IP Partner’s share of the Gross Clawback Amount, such amounts will be added to the Clawback Reserve established for the benefit of such Executive IP Partner by Woodbridge Executive Incentive Plan 1, LP.

     (e) Prior to the expiration of the Term of the Partnership, the General Partner, in its discretion, may release reserved amounts to an IP Limited Partner who is not an Executive IP Partner by (i) causing special distributions reducing such IP Limited Partner’s Alternative Clawback Reserve or causing contributions and special distributions, each as described in Section 4.5(d) above, or (ii) distributing amounts to an IP Limited Partner from such IP Limited Partner’s IP Clawback Reserve, in either case to the extent the General Partner determines that such released amounts are not necessary to secure such IP Limited Partner’s share of the Gross Clawback Amount, each as described in Section 4.6. Similarly the General Partner may, in its discretion, move amounts to the Alternative Clawback Reserve or the Clawback Reserve of an Executive IP Partner established for the benefit of such Executive IP Partner by Woodbridge Executive Incentive Plan 1, LP.

4.6 Clawback Obligations

     (a) Following the final liquidating distribution of assets pursuant to Section 8.2, if there have been any Carry Distributions, the General Partner shall determine the additional amount of Return Distributions (the “Gross Clawback Amount”), if any, that would need to have been distributed to the General Partner in connection with such final liquidating distribution so that each of the following would have been true:

(i) The General Partner would have received sufficient Return Distributions to provide it with at least the Preferred Return on the General Partner’s Invested Capital, as calculated pursuant to Section 4.3(a)(i); and

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(ii) The General Partner would have received Return Distributions at least equal to the amount of its Invested Capital plus 80% of the amount by which the aggregate Investment Proceeds received by the Partnership exceeded the General Partner’s Invested Capital.

     (b) Each Carried Interest Partner shall be responsible for returning to the Partnership, for distribution to the General Partner, its share of the Gross Clawback Amount, determined as follows:

(i)	The Sponsor Partner shall be responsible for its Carry Percentage (i.e., 35%);
(ii)	The IP Limited Partners as a group shall be responsible for their aggregate Carry Percentage of the Gross Clawback Amount, with each such IP Limited Partner being severally (and not jointly) responsible for the amount determined pursuant to Appendix B hereto and only to the extent of clause (c) below; and
(iii)	The Residual Limited Partner shall be responsible for its Carry Percentage of the Gross Clawback Amount;

provided that if Carry Percentages have changed over the Term of the Partnership, the determination shall be based on the relative amounts of Carry Distributions received over the Term of the Partnership or any other method determined by the General Partner to appropriately take into account such variations.

     (c) In no event will an IP Limited Partner be personally liable for a clawback obligation that exceeds the aggregate amount of such IP Limited Partner’s Alternative Clawback Reserve and IP Clawback Reserve. In no event shall an IP Limited Partner be responsible for another Partner’s share of the Gross Clawback Amount.

     (d) The Residual Limited Partner’s obligation to satisfy its clawback obligation will be limited to those amounts established as a clawback reserve under the terms of the limited partnership agreement governing the Residual Limited Partner and will be a several (and not joint) obligation of the partners in the Residual Limited Partner.

ARTICLE V
PROGRAM MANAGER

5.1 Program Manager

     The Program Manager will be responsible for managing the day-to-day activities of the Partnership and the Partnership’s assets, subject to the direction of the General Partner; provided that the Program Manager will have no authority to legally bind the Partnership without the express consent of the General Partner.

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5.2 Fees

     The Program Manager shall not be entitled to any fees, payments, or distributions other than as expressly provided herein, or as otherwise approved by the General Partner. To the extent the Program Manager or any employee or agent (in such capacity) of the Program Manager receives any Deal Fees with respect to a Program Asset, the calculations called for in this Agreement will be adjusted so that total amounts received by the Program Manager or such employee or agent (in such capacity) of the Program Manager are the same as if all such Deal Fees had been paid to the Partnership.

ARTICLE VI
GENERAL PARTNER

6.1 Management Authority

     (a) The management of the Partnership shall be vested exclusively in the General Partner, and the General Partner shall have full control over the business and affairs of the Partnership. The General Partner shall have the power on behalf and in the name of the Partnership to carry out any and all of the objectives and purposes of the Partnership and to perform all acts and enter into and perform all contracts and other undertakings which the General Partner, in its reasonable discretion, deems necessary or advisable or incidental thereto, including the power to acquire and dispose of any security (including marketable securities) or incur indebtedness or guarantee the indebtedness of the Portfolio Company.

     (b) Third parties dealing with the Partnership can rely conclusively upon the General Partner’s certification that it is acting on behalf of the Partnership and that its acts are authorized. The General Partner’s execution of any agreement on behalf of the Partnership is sufficient to bind the Partnership for all purposes.

     (c) The General Partner will have the right and power to establish the availability and terms of any offering of opportunities for an IP Limited Partner or any Family Related Partner or any other “friend or family member” of an IP Limited Partner to co-invest alongside the Partnership in all or part of the Partnership’s investments.

6.2 No Liability to Partnership or Limited Partners

     No Covered Party shall be liable to the Partnership or any Partner for any action taken, or failure to act, on behalf of the Partnership (or on behalf of the General Partner or the Program Manager with respect to the Partnership) if such Covered Party (a) acted honestly and in good faith with a view to the best interests of the Partnership, or, as the case may be, to the best interests of the other entity for which the Covered Party acted as director, officer, employee, agent, or in a similar capacity at the request of the General Partner or the Program Manager for the benefit of the Partnership; and (b) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, the Covered Party had reasonable grounds for believing that the Covered Party’s conduct was lawful. In addition, any Covered Party who has delegated to any other Person (other than to another Covered Party) any part of its functions (including participating in the management of or

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rendering professional advice or other services in respect of any Program Asset) shall not be liable, responsible, or accountable in damages or otherwise to the Partnership or to any Partner for any loss incurred or suffered by reason of any action by such other Person unless the delegating Covered Party did not (x) act honestly and in good faith with a view to the best interests of the Partnership, or, as the case may be, to the best interests of the other entity for which the Covered Party acted as director, officer, employee, agent, or in a similar capacity at the request of the General Partner or the Program Manager for the benefit of the Partnership; and (y) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, have reasonable grounds for believing that the Covered Party’s conduct was lawful with respect to such delegation. For the avoidance of doubt, nothing in the immediately preceding sentence shall be deemed to prevent the Partnership, the General Partner or the Program Manager from asserting a cause of action against the delegate of a Covered Party for any loss caused by the action, or failure to act, of such delegate and the General Partner shall cause the Partnership to effectively pursue any such cause of action to the extent it would be in the reasonable best interests of the Partnership to do so.

6.3 Indemnification

     (a) Subject to Section 6.3(c), the Partnership shall indemnify each Covered Party against all costs, charges, and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by the Covered Party in respect of any civil, criminal, administrative, investigative, or other proceeding in which the Covered Party is involved because of such Covered Party’s association with the Partnership, the General Partner, or the Program Manager if such Covered Party (i) acted honestly and in good faith with a view to the best interests of the Partnership or, as the case may be, to the best interests of the other entity for which the Covered Party acted as director, officer, employee, agent, or in a similar capacity at the request of the General Partner or the Program Manager and for the benefit of the Partnership; and (ii) had reasonable grounds for believing that such Covered Party’s conduct was lawful, in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty.

     (b) Subject to Section 6.3(c), the Partnership shall advance moneys to a Covered Party for the costs, charges, and expenses of a proceeding referred to in Section 6.3(a). The Covered Party shall repay the moneys if the Covered Party does not fulfill the conditions of Section 6.3(a).

     (c) Before seeking indemnification from the Partnership, a Covered Party seeking such indemnification shall use all reasonable efforts to seek indemnification from the following sources (in the following order of priority): first, from the Portfolio Company, including any insurance provided by, or purchased on behalf of a Covered Party by, the Portfolio Company; and second, from the General Partner or the Program Manager, including from any insurance provided by the General Partner or the Program Manager. To the extent any unpaid indemnification obligation remains after the Covered Party has received indemnification from the foregoing sources, the Partnership shall indemnify such Covered Party for such shortfall.

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ARTICLE VII
LIMITED PARTNERS

7.1 Limited Liability

     No Limited Partner shall be personally liable for any obligations of the Partnership or have any obligation to make contributions to the Partnership other than such Limited Partner’s initial contribution pursuant to Section 3.1 or as required pursuant to Section 4.6 or Section 7.6; provided that a Limited Partner shall be required to return any distribution made to it in error. To the extent any Limited Partner is required by the Partnership Act to return to the Partnership any distributions made to it and does so, such Limited Partner shall have a right of contribution from each other Limited Partner similarly liable to return distributions made to it to the extent that such Limited Partner has returned a greater percentage of the total distributions made to it and required to be returned by it than the percentage of the total distributions made to such other Limited Partner and so required to be returned by it.

7.2 No Participation in Management

     The Limited Partners (in their capacity as such) shall not participate in the control, management, direction, or operation of the affairs of the Partnership and shall have no power to bind the Partnership.

7.3 Transfer of Limited Partnership Interests

     (a) A Limited Partner may not Transfer all or a portion of its interest in the Partnership without the consent of the General Partner; provided that the General Partner shall not unreasonably withhold its consent to a Transfer by an IP Limited Partner to a Family Related Partner of such IP Limited Partner.

     (b) Unless and until the General Partner consents to the admission of a transferee as a substituted Limited Partner in accordance with this Section 7.3, the transferor shall remain liable for all liabilities and obligations relating to the transferred beneficial interest, if any, and the transferee shall become an assignee of only a beneficial interest in Partnership profits, losses and distributions of such interest. No consent of any other Limited Partner shall be required as a condition precedent to any Transfer.

     (c) Unless the General Partner otherwise determines in its sole discretion, the transferor and transferee of any Limited Partner’s interest shall be jointly and severally obligated to reimburse the General Partner and the Partnership for all reasonable expenses (including attorneys’ fees and expenses) of any Transfer or proposed Transfer of a Limited Partner’s interest, whether or not consummated.

     (d) Any substituted Limited Partner admitted to the Partnership with the consent of the General Partner shall succeed to all the rights and be subject to all the obligations of the transferring or assigning Limited Partner with respect to the interest to which such Limited Partner was substituted. The General Partner may modify Schedule I hereof to reflect such admittance of any substituted Limited Partner. Such substituted Limited Partner shall be treated as having received all of the allocations and distributions received by the transferring or assigning Limited Partner, if any.

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     (e) Any Transfer that violates this Section 7.3 shall be void and the purported buyer, assignee, transferee, pledgee, mortgagee, or other recipient shall have no interest in or rights to Partnership assets, profits, losses, or distributions, and neither the General Partner nor the Partnership shall be required to recognize any such purported interest or rights.

7.4 No Termination

     Neither the substitution, death, incompetency, dissolution (whether voluntary or involuntary), nor bankruptcy of a Limited Partner shall affect the existence of the Partnership, and the Partnership shall continue for the Term of the Partnership until its existence is terminated as provided herein.

7.5 Additional Limited Partners

     Additional Limited Partners will be admitted only with the consent of the General Partner on such terms as agreed upon by the General Partner and the Person seeking admission to the Partnership.

7.6 Reimbursement for Payments on Behalf of a Partner

     (a) If the Partnership is obligated to pay any amount to a governmental agency or body or to any other Person (or otherwise make a payment) because of a Partner’s status or otherwise specifically attributable to a Partner (including, without limitation, federal withholding taxes with respect to foreign Partners, state withholding taxes, state personal property taxes, state unincorporated business taxes, etc.) then such Partner (the “Reimbursing Partner”) shall reimburse the Partnership in full for the entire amount paid (including, without limitation, any interest, penalties, and expenses associated with such payment). At the election of the General Partner, the amount to be reimbursed may be charged against the Capital Account of the Reimbursing Partner, and the Partnership shall reduce subsequent distributions which would otherwise be made to the Reimbursing Partner until the Partnership has recovered the amount to be reimbursed; provided that the amount of such reduction shall be deemed to have been distributed for all purposes of this Agreement, but such deemed distribution shall not further reduce the Reimbursing Partner’s Capital Account.

     (b) A Partner’s obligation to reimburse the Partnership under this Section 7.6 shall survive the termination, dissolution, liquidation, and winding-up of the Partnership, and for purposes of this Section 7.6, the Partnership shall be treated as continuing in existence.

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ARTICLE VIII
DURATION AND TERMINATION

8.1 Term

     The Partnership shall continue until the occurrence of any of the following events: (i) the entry of a decree of judicial dissolution under the Act or (ii) an election by the General Partner to dissolve the Partnership.

8.2 Termination and Liquidation

     (a) The Partnership shall not terminate immediately upon the expiration of its Term under Section 8.1, but shall cease to engage in further business except to the extent necessary to promptly wind-up its affairs, perform existing contracts, and preserve the value of the Program Assets.

     (b) During the course of winding-up the Partnership all of the provisions of this Agreement shall continue to bind the parties and apply to the activities of the Partnership except as specifically provided to the contrary, but there shall be no distributions to the Partners except as provided in this Section 8.2.

     (c) Upon the expiration of the Partnership’s Term, the General Partner shall take such actions as it may think fit for winding-up the Partnership and liquidating the Program Assets, including:

(i)	The filing of all certificates and notices of dissolution as are required by applicable law; and
(ii)	The Realization of any Program Asset (unless the General Partner intends to distribute such Program Asset in kind); provided that all such Realizations shall be conducted in an orderly and businesslike manner so as not to involve undue sacrifice.

The General Partner in taking such actions may exercise and shall have the benefit of all rights, powers, and discretions vested in the General Partner pursuant to the provisions of this Agreement. If the General Partner is not able to act as the liquidator of the Partnership or exercise the powers inherent thereto, a liquidator shall be appointed by the Residual Limited Partner.

     (d) Upon dissolution of the Partnership, all Partnership assets shall be distributed or used as follows and in the following order of priority:

(i)	For the payment of the debts and liabilities of the Partnership, including, without limitation, the expenses of liquidation.
(ii)	For the setting up of any reserves which the General Partner may deem reasonably necessary for any liabilities or obligations of the Partnership.

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(iii) To the Partners in accordance with the provisions of Article IV.

     (e) The Partnership shall be terminated only after the Partnership assets have been distributed as provided in this Section 8.2.

ARTICLE IX
VALUATION OF PARTNERSHIP ASSETS

9.1 Normal Valuation

     For purposes of this Agreement, the value of any asset as of any date (or in the event such date is a holiday or other day which is not a business day, as of the immediately preceding business day) shall be valued by the General Partner in good faith using methods it considers appropriate.

9.2 Restrictions on Transfer or Blockage

     Any security which is held under a representation that it has been acquired for investment purposes and not with a view to public sale or distribution, or which is held subject to any other restriction on transfer, or where the size of the Partnership’s holdings compared to the trading volume would adversely affect the marketability of such security, shall be valued at such discount as the Program Manager deems reasonably necessary to reflect the marketability and value of such security.

ARTICLE X
BOOKS OF ACCOUNTS; MEETINGS

10.1 Books

     The Partnership shall maintain complete and accurate books of accounts of the Partnership’s affairs at the Partnership’s principal office.

10.2 Fiscal Year

     The fiscal year and taxable year of the Partnership shall be the calendar year, unless otherwise determined by the General Partner.

10.3 Reports

     The General Partner shall furnish to each Partner the following information and reports prepared in accordance with U.S. generally accepted accounting principles (“GAAP”):

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     (a) As soon as practicable after the end of each fiscal year commencing with the first year in which the Partnership is in operation for a full fiscal year, (i) financial statements for the Partnership for such year (audited by a firm of independent certified public accountants of recognized national standing selected by the General Partner), and (ii) a statement of each Partner’s closing Capital Account balance as of the end of such year; and

     (b) As soon as practicable after the end of each fiscal year, the Partnership’s United States federal income tax return, including such Partner’s Schedule K-1 for such fiscal year.

ARTICLE XI
MISCELLANEOUS

11.1 Amendments

     This Agreement may be amended by the written consent of the General Partner, provided that if such amendment would adversely affect any Carried Interest Partner, then the Carried Interest Partner so affected must consent to such amendment. Notwithstanding anything in this Agreement to the contrary, this Agreement may be amended by the General Partner without the consent of any other Partner in order to cure any ambiguity or error, make an inconsequential revision, provide clarity, comply with any law or regulation or correct or supplement any provision herein which may be defective or inconsistent with any other provisions herein; provided that, except with respect to amendments necessary to comply with any law or regulation, such amendment does not materially and adversely affect any Limited Partner.

11.2 Successors

     Except as otherwise provided herein, this Agreement shall inure to the benefit of and be binding upon the Partners and their legal representatives, heirs, successors, and assigns.

11.3 Governing Law; Severability

     This Agreement shall be governed by and construed in accordance with the laws of the State of Florida, and, to the maximum extent possible, in such manner as to comply with all the terms and conditions of the Partnership Act. If it is determined by a court of competent jurisdiction that any provision of this Agreement is invalid under applicable law, such provision shall be ineffective only in such jurisdiction and only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement.

11.4 Notices

     All notices, demands, and other communications to be given and delivered under or by reason of provisions under this Agreement shall be in writing and shall be deemed to have been given on the date when personally delivered, when mailed by first class mail, when sent by facsimile or transmitted by email or the internet, or when sent by reputable overnight courier service, in each case to the recipient at the address, facsimile number or email address set forth in Schedule I hereof or to such other address, facsimile number, or email address, or to the attention of such other Person as has been indicated in writing to the General Partner.

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11.5 Arbitration

     The parties to this Agreement shall each use good faith efforts for a period of 30 days (or such longer time as agreed to by the applicable parties) to try to resolve any controversy, dispute, or claim arising out of or in connection with this Agreement, or the breach, termination or validity hereof. Thereafter, if such controversy, dispute, or claim remains, it shall be settled by final and binding arbitration to be conducted by an arbitration tribunal in Fort Lauderdale, Florida, pursuant to the rules of the American Arbitration Association. The arbitration tribunal shall consist of three arbitrators. The party initiating the controversy, dispute, or claim that led to arbitration shall nominate one arbitrator in the request for arbitration and the other party shall nominate a second arbitrator in the answer thereto within 30 days of receipt of the request; provided that if there are multiple initiating or answering parties, the arbitrator selected must be reasonably acceptable to all initiating or answering parties, as applicable. The two arbitrators so named will then jointly appoint the third arbitrator. If the answering party fails to nominate its arbitrator within the 30-day period, or if the arbitrators named by the parties fail to agree on the third arbitrator within 60 days, the office of the American Arbitration Association in New York, New York shall make the necessary appointments of such arbitrator(s). The decision or award of the arbitration tribunal (by a majority determination, or if there is no majority, then by the determination of the third arbitrator, if any) shall be final, and judgment upon such decision or award may be entered in any competent court or application may be made to any competent court for judicial acceptance of such decision or award and an order of enforcement. In the event of any procedural matter not covered by the aforesaid rules, the procedural law of the State of Florida shall govern.

11.6 Miscellaneous

     This Agreement (including the Appendices hereto) contains the entire agreement among the parties and supersedes all prior arrangements or understanding with respect thereto. Descriptive headings are for convenience only and shall not control or affect the meaning or construction of any provision of this Agreement. This Agreement may be executed in any number of counterparts, any one of which need not contain the signatures of more than one party, but all of such counterparts together shall constitute one agreement. Whenever from the context it appears appropriate, each term stated in either the singular or the plural shall include the singular and the plural, and pronouns stated in either the masculine, the feminine or the neuter gender shall include the masculine, the feminine, and the neuter.

11.7 No Third Party Beneficiaries

     No Person that is not a party hereto shall have any rights or obligations pursuant to this Agreement. The rights and obligations set forth herein are for the benefit of the parties hereto only and do not create or grant any rights to third parties.

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

GENERAL PARTNER: SPONSOR PARTNER: BLUEGREEN PROGRAM GP, LLC
By:	WOODBRIDGE FUND I, LLC, its Sole Member
By:	WOODBRIDGE HOLDINGS CORPORATION, its Sole Member
By:	/s/ John K. Grelle
	Name:	John K. Grelle
	Title:	Chief Financial Officer
RESIDUAL LIMITED PARTNER: WOODBRIDGE EXECUTIVE INCENTIVE PLAN 1, LP
By:	WOODBRIDGE FUND I, LLC, its General Partner
By:	WOODBRIDGE HOLDINGS CORPORATION, its Sole Member
By:	/s/ John K. Grelle
	Name:	John K. Grelle
	Title:	Chief Financial Officer

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IP LIMITED PARTNERS:
 

/s/ Alan B. Levan  

Alan B. Levan 

/s/ John E. Abdo  

John E. Abdo 

/s/ Seth M. Wise  

Seth M. Wise 

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PROGRAM MANAGER: WOODBRIDGE FUND I, LLC
By:	WOODBRIDGE HOLDINGS CORPORATION, its Sole Member
By:	/s/ John K. Grelle
	Name:	John K. Grelle
	Title:	Chief Financial Officer

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Schedule I
Bluegreen Program Partnership, LP
List of Carried Interest Partners and Applicable Carry Percentages

Carried Interest Partner	Carry Percentage
Sponsor Partner		35.0	%
IP Limited Partners (divided as listed below)		32.5	%
Alan Levan		38.25%
Jack Abdo		38.25%
Seth Wise		23.50%
Residual Limited Partner		32.5	%
TOTAL		100.0	%

Schedule II
Program Expenses

Amounts Included in Program Expenses	Amounts Excluded from Program Expenses
Salaries and bonuses Salary for any investment professionals of the Program Manager, except in the case where Woodbridge Holdings executives are the investment professionals. Salaries and cash bonus of direct dedicated staff members.	Salaries and bonuses Woodbridge Holdings incentive stock options or stock grants to any investment professional or dedicated staff member as part of a Woodbridge Holdings-wide incentive compensation program.
Direct Expenses Direct dedicated expenses incurred directly by the Program Manager, including rent, facilities charges, equipment and supplies, except in the case where Woodbridge Holdings executives are the investment professionals. Outside legal and accounting expenses incurred for services rendered with respect to the Program Manager or the Partnership, including formation costs, and tax return preparation. Unreimbursed costs of transactions, including due diligence expenses and the carrying costs of deposits, to the extent the transaction that generated the cost does not close. Travel expenses neither capitalized as part of the acquisition of a completed transaction nor borne by the target company. Standard charges by internal Woodbridge Holdings personnel for provision of back-office support services directly related to the program or Program Assets (i.e., providing the accounting services for the Partnership, providing human resources services for the Partnership).	Direct Expenses Time of Investment Committee in evaluating investment recommendations.

Amounts Included in Program Expenses	Amounts Excluded from Program Expenses
Standard charges by BFC Shared Services for back-office support services directly related to the program or Program Assets. Interest on borrowings of the Program Manager, including any that accrued at the rate of 12% compounded per annum on amounts received through a pre-approved line of credit from Woodbridge Overhead Funding, LLC. For purposes of this provision, all amounts of funds provided to the Program Manager shall be treated as borrowings and shall accrue 12% interest regardless of whether such funds were provided in the form of loans, equity capital, or otherwise.
Allocation of Woodbridge Holdings Overhead None.	Allocation of Woodbridge Holdings Overhead General corporate overhead (i.e., public company costs, office expenses for non-dedicated staff, investor relations and accounting staff not dedicated, analytical staff providing analytics to Woodbridge Holdings, management for oversight of programs and Program Assets). Any other overhead expenses not expressly included on this Schedule II as Program Expenses.

APPENDIX A:
Tax and Accounting Provisions

A-1 Definitions

     For purposes of this Appendix A, any capitalized term not defined herein shall have the meaning set forth in the Agreement.

     “Adjusted Capital Account Deficit” means, with respect to any Partner, the deficit balance, if any, in such Partner’s Capital Account, as of a specified time, after giving effect to the following adjustments:

     (a) credit to such Partner’s Capital Account any amounts that such Partner is obligated to restore or deemed obligated to restore pursuant to Treasury Regulations Section 1.704-1(b)(2)(ii)(c) and the penultimate sentences of Treasury Regulations Section 1.704-2(g)(1) and Treasury Regulations Section 1.704-2(i)(5); and

     (b) debit to such Partner’s Capital Account the items described in Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).

The foregoing definition of Adjusted Capital Account Deficit is intended to comply with the provisions of Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

     “Book Value” means, with respect to any asset, the asset’s adjusted basis for U.S. federal income tax purposes, except as follows:

     (a) the initial Book Value of any asset that is not Contributed Property as defined in the Agreement but is otherwise contributed or deemed contributed to the Partnership shall be such asset’s gross fair market value at the time of such contribution as determined by the General Partner pursuant to Article IX of the Agreement;

     (b) the initial Book Value of any asset that is Contributed Property as defined in Section 3.1(a) of the Agreement shall be the value set forth in Section 3.1(a) of the Agreement;

     (c) the Book Value of all Partnership assets may be adjusted in the discretion of the General Partner to equal their respective gross fair market values, as determined by the General Partner pursuant to Article IX of the Agreement, at the times specified in Treasury Regulations Section 1.704-1(b)(2)(iv)(f);

     (d) any adjustments to the adjusted basis of any asset of the Partnership pursuant to Section 734 or Section 743 of the Code shall be taken into account in determining such asset’s Book Value in a manner consistent with Treasury Regulations Section 1.704-1(b)(2)(iv)(m);

     (e) the Book Value of any Partnership asset distributed or deemed distributed by the Partnership to any Partner shall be adjusted immediately prior to such distribution to equal its gross fair market value as of the date of distribution, as determined by the General Partner pursuant to Article IX of the Agreement; and

A-1

     (f) if the Book Value of an asset has been determined pursuant to clauses (a), (c) or (d) of this definition, to the extent permitted by the Treasury Regulations, such Book Value shall thereafter be adjusted in the same manner as would the asset’s adjusted basis for U.S. federal income tax purposes, except that depreciation and amortization deductions shall be computed based on the asset’s Book Value as so determined, rather than on its adjusted tax basis.

     “Net Profits” and “Net Losses” mean, for any period, the taxable income or loss, respectively, of the Partnership for such period, in each case as determined for U.S. federal income tax purposes, but computed with the following adjustments:

     (a) items of income, gain, loss and deduction (including, without limitation, gain or loss on the disposition of any Partnership asset and depreciation or other cost recovery deduction or expense) shall be computed based upon the Book Value of the Partnership’s assets rather than upon such assets’ adjusted bases for U.S. federal income tax purposes;

     (b) any tax-exempt income received by the Partnership shall be deemed for these purposes only to be an item of gross income;

     (c) any expenditure of the Partnership described in Section 705(a)(2)(B) of the Code (or treated as described therein pursuant to Treasury Regulations under Section 704(b) of the Code) shall be treated as a deductible expense;

     (d) there shall be taken into account any separately stated items under Section 702(a) of the Code;

     (e) if the Book Value of any Partnership asset is adjusted pursuant to clauses (c) or (e) of the definition of “Book Value” above, or pursuant to clause (d) of such definition (but only to the extent the adjustment is attributable to a distribution of Investment Proceeds not in liquidation of a Partner’s Partnership interest), the amount of such adjustment shall be taken into account in the period of adjustment as gain or loss from the disposition or deemed disposition of such asset for purposes of computing Net Profits and Net Losses; and

     (f) items of income, gain, loss, deduction or credit allocated pursuant to Section A-6 of this Appendix A shall not be taken into account.

     “Tax Matters Partner” has the meaning set forth in Section A-6.

A-2 Maintenance of Capital Accounts

     (a) A Capital Account shall be maintained for each Partner in accordance with Section 704(b) of the Code and Treasury Regulations Sections 1.704-1(b) and 1.704-2. The initial balance of each Capital Account shall be equal to such Partner’s initial capital contribution to the Partnership.

A-2

     (b) The Capital Account of each Partner shall be increased by (i) the amount of any cash contributed by such Partner to the capital of the Partnership, (ii) in the case of any property contributed by such Partner to the capital of the Partnership, the Book Value of such property (net of liabilities that the Partnership is considered to assume or take the property subject to) when contributed, (iii) the amount of any liabilities of the Partnership that are assumed by such Partner (except for liabilities described in Section A-2(c)(ii) of this Appendix A that are assumed by such Partner) for purposes of Treasury Regulations Section 1.704-1(b)(2)(iv)(c), (iv) the Net Profits allocated to such Partner, and (v) any gross income and gain allocated to such Partner.

     (c) The Capital Account of each Partner shall be decreased by (i) the amount of any cash distribution to such Partner when made, (ii) the Book Value of any property distributed to such Partner by the Partnership (net of liabilities that the Partner is considered to assume, or take property subject to) when distributed, (iii) the amount of any liabilities of such Partner that are assumed by the Partnership (except for liabilities described in Section A-2(b)(ii) of this Appendix A that are assumed by the Partnership) for purposes of Treasury Regulations Section 1.704-1(b)(2)(iv)(c), (iv) the Net Losses allocated to such Partner, and (v) any gross deductions and loss allocated to such Partner.

     (d) In the event that all or a portion of an interest in the Partnership is Transferred in accordance with the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent such Capital Account relates to the Transferred Partnership interest.

     (e) The Capital Account of each Partner shall be adjusted to reflect any adjustment to the Book Value of the Partnership’s assets attributable to the application of Section 734 of the Code in respect of a distribution in liquidation of such Partner’s Partnership interest to the extent required pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m).

     (f) It is the intention of the parties that the Capital Accounts of the Partners be kept in the manner required under Section 704(b) of the Code and Treasury Regulations Sections 1.704-1(b) and 1.704-2. To the extent any additional adjustment to the Capital Accounts is required by such provisions, the General Partner is hereby authorized to make such adjustment after notice to the Partners.

     (g) Except as expressly required herein, no Partner shall be required to restore any negative balance in its Capital Account. No allocation to any Partner of any loss or deduction, whether attributable to depreciation or otherwise, shall create any obligation of that Partner to the Partnership or any other Partner, even if the allocation reduces such Partner’s Capital Account or creates or increases a deficit in its Capital Account.

A-3

A-3 Allocations of Profits and Losses

     (a) After the application of Section A-4, Net Profits and Net Losses for any taxable year, or portion thereof, shall be allocated among the Partners (and credited or debited to their Capital Accounts) in such manner so that, after taking into account distributions by the Partnership and contributions made to the Partnership through the end of such taxable year and the allocations of Net Profits and Net Losses for such taxable year, (i) the respective positive Capital Account balances of the Partners would correspond as closely as possible to the amount each Partner would receive as a cash distribution pursuant to Article IV of the Agreement, if the Partnership were to liquidate completely immediately after the end of such taxable year and (ii) any resulting deficit Capital Account balances of the Partners would correspond as closely as possible with the manner in which economic responsibility for Partnership deficit balances (as determined in accordance with the principles of Treasury Regulations under Section 704 of the Code) would be borne by the Partners under the terms of this Agreement if the Partnership were to liquidate completely immediately after the end of such taxable year. For purposes of the preceding sentence, the amount of cash to be distributed to each Partner, the amount of each Partner’s Capital Account and the amount of each Partner’s economic responsibility for Partnership deficit balances, upon the assumed liquidation, shall be computed by assuming that in connection with such liquidation, the Partnership sold all of its assets for amounts such that no Net Profits or Net Losses result from the sale and settled all of its liabilities for amounts such that no Net Profits or Net Losses result from the settlement. For purposes of applying this Section A-3, the Capital Account balance of each Partner shall be increased by such Partner’s share of “partnership minimum gain” and “partner minimum gain” (within the meaning of and in accordance with the Treasury Regulations under Section 704(b) of the Code). Subject to the other provisions of this Appendix A, an allocation to a Partner of a share of Net Profit or Net Loss shall be treated as an allocation of the same share of each item of income, gain, loss or deduction that is taken into account in computing Net Profit or Net Loss.

     (b) If a Partner Transfers, acquires, or redeems an interest in the Partnership during a taxable year, the Net Profit or Net Loss (and other items referred to in Section A-4 of this Appendix A) attributable to such interest for such year shall be allocated between the transferring Partner and the transferee (or the other Partners in the Partnership) by any method permitted under Section 706 of the Code as selected by the General Partner.

A-4 Regulatory Allocations and Special Allocations

     (a) Notwithstanding any other provision of the Agreement or this Appendix A, (i) “partner nonrecourse deductions” (as defined in Treasury Regulations Section 1.704-2(i)), if any, of the Partnership shall be allocated for each period to the Partner that bears the economic risk of loss within the meaning of Treasury Regulations Section 1.704-2(i), and (ii) “nonrecourse deductions” (as defined in Treasury Regulations Section 1.704-2(b)) and “excess nonrecourse liabilities” (as defined in Treasury Regulations Section 1.752-3(a)), if any, of the Partnership shall be allocated to the Partners in accordance with their respective percentage interests in Net Losses.

     (b) The Agreement and this Appendix A shall be deemed to include “qualified income offset,” “minimum gain chargeback” and “partner nonrecourse debt minimum gain chargeback” provisions within the meaning of Treasury Regulations under Section 704(b) of the Code. Accordingly, notwithstanding any other provision of this Agreement or this Appendix A, items of gross income shall be allocated to the Partners on a priority basis to the extent and in the manner required by such provisions.

A-4

     (c) To the extent that Net Losses or items of loss or deduction otherwise allocable to a Partner hereunder would cause such Partner to have an Adjusted Capital Account Deficit as of the end of the taxable year to which such Net Losses or items of loss or deduction relate (after taking into account the allocation of all items of income and gain for such taxable period), such Net Losses or items of loss or deduction shall not be allocated to such Partner and instead shall be allocated to the Partners in accordance with Section A-3 of the Agreement as if such Partner were not a Partner.

     (d) Any allocations required to be made pursuant to clauses (a), (b), and (c) above (the “Regulatory Allocations”) (other than allocations, the effect of which are likely to be offset in the future by other special allocations) shall be taken into account, to the extent permitted by the Treasury Regulations, in computing subsequent allocations of income, gain, loss or deduction pursuant to Section A-3 so that the net amount of any items so allocated and all other items allocated to each Partner shall, to the extent possible, be equal to the amount that would have been allocated to each Partner pursuant to Section A-3 had such Regulatory Allocations under this Section A-4 not occurred.

     (e) If any Partner is treated for income tax purposes as realizing ordinary income because of receipt of its Partnership interest (whether under Section 83 of the Code or any similar provisions of any law, rule or regulations or any other applicable law, rule, regulation or doctrine) and the Partnership is entitled to any offsetting deduction, the Partnership’s deduction shall be allocated among the Partners in such manner as to, as nearly as possible, offset such ordinary income realized by such Partner.

A-5 Tax Allocations

     (a) For federal income tax purposes, except as otherwise provided in this Section A-5, each item of income, gain, loss, and deduction and credit shall be allocated among the Partners in the same manner as its corresponding item of book income, gain, loss, deduction or credit is allocated pursuant to this Appendix A.

     (b) In accordance with Sections 704(b) and 704(c) of the Code and the Treasury Regulations thereunder, income, gain, loss and deduction with respect to any Partnership asset contributed (or deemed contributed) to the capital of the Partnership shall, solely for federal income tax purposes, be allocated among the Partners so as to take into account any variation between the adjusted basis of such Partnership asset for federal income tax purposes and its Book Value upon its contribution (or deemed contribution). If the Book Value of any Partnership asset is adjusted, subsequent allocations of taxable income, gain, loss and deduction with respect to such Partnership asset shall take account of any variation between the adjusted basis of such Partnership asset for federal income tax purposes and the Book Value of such Partnership asset in the manner prescribed under Code Sections 704(b) and 704(c) and the Treasury Regulations thereunder. The General Partner shall select the manner by which variations between Book Value and adjusted basis are taken into account in accordance with Code Sections 704(b) and 704(c) and the Treasury Regulations thereunder.

A-5

     (c) The provisions of this Appendix A (and other related provisions in the Agreement) pertaining to the allocation of items of Partnership income, gain, loss, deduction, and credit shall be interpreted consistently with the Treasury Regulations, and to the extent unintentionally inconsistent with such Treasury Regulations, shall be deemed to be modified to the extent necessary to make such provisions consistent with the Treasury Regulations.

A-6 Tax Matters Partner; Management Authority Regarding Tax and Accounting

     (a) The General Partner is designated the “Tax Matters Partner” (as defined in Section 6231(a)(7) of the Code) to manage administrative tax proceedings conducted at the partnership level by the Internal Revenue Service with respect to Partnership matters. The General Partner is specifically directed and authorized to take whatever steps the General Partner, in its sole discretion, deems necessary or desirable to perfect such designation, including, without limitation, filing any forms or documents with the Internal Revenue Service and taking such other action as may from time to time be required under Treasury regulations. The Tax Matters Partner shall have full authority to extend the statute of limitations and control any tax audit or other proceeding on behalf of the Partnership. Expenses of administrative proceedings relating to the determination of Partnership items at the Partnership level undertaken by the Tax Matters Partner will be deemed to be Program Expenses.

     (b) All matters concerning (i) allocations of Net Profits and Net Losses and allocations for tax purposes, (ii) distributions by the Partnership, including the taxes thereon, and (iii) accounting procedures and determinations, tax determinations, determinations as to on whose behalf expenses were incurred and the attribution of fees and expenses to a Program Asset, and other determinations not specifically and expressly provided for by the terms of this Agreement, shall be determined by the General Partner, whose determination shall be final and conclusive as to all the Partners absent manifest clerical error.

     (c) At the General Partner’s sole discretion, the General Partner may cause the Partnership to make or refrain from making any and all elections permitted by the Code and the Treasury Regulations and any state, local, or foreign tax elections. Notwithstanding the foregoing, it is intended that the Partnership be treated as a partnership for U.S. federal income tax purposes, and neither the Partnership nor any Partner shall make any election inconsistent with such treatment without the unanimous written consent of the Partners.

A-6

APPENDIX B:
Apportionment and Modification of
Carried Interest to IP Limited Partners

B-1 Definitions

     For purposes of this Appendix B, any capitalized term not defined herein shall have the meaning set forth in the Agreement.

     “Acquisition Date” means, with respect to a Program Asset, the date the Partnership first made an investment in such Program Asset (or in the case of a Program Asset that is contributed to the Partnership, the date of such contribution).

     “Allocated Reimbursement Payments” means the amount of Reimbursement Payments allocated by the General Partner to each Program Asset. Unless the General Partner adopts another method (with notification to each other Partner), the General Partner shall allocate the Reimbursement Payments made with respect to a particular year to and among the Program Assets held by the Partnership during that year based on the relative Invested Capital in such Program Assets and adjusted (on a weighted average basis) to take into account Program Assets that are held for less than an entire year.

     “Carry Account” has the meaning set forth in Section B-3.

     “Carry Loss” means, with respect to the Realization of any Program Asset, 20% of the amount, if any, by which the combined Investment Proceeds and Sponsor Proceeds generated by such Program Asset are less than the sum of the Full Return Amount and the Hurdle Return Amount of such Program Asset. The General Partner shall use its reasonable discretion in determining the amount of Carry Loss (including adjusting previous allocations of Carry Loss) so as to cause the amount of Carry Loss to accurately reflect the amount by which all Carry Distributions that will ultimately be apportioned by the Partnership with respect to all other Program Assets will be reduced, which determination shall then be binding on the Partnership and the Partners.

     “Carry Profit” means, with respect to any particular Program Asset, the amount by which the Investment Proceeds or Sponsor Proceeds generated by that Program Asset produce or lead to the production of Carry Distributions, as determined by the General Partner. In general, the Carry Profit with respect to any Program Asset will equal the sum of the following amounts:

     (a) 0% of that portion of the combined Investment Proceeds and Sponsor Proceeds from such Program Asset as does not exceed the sum of the applicable Full Return Amount and the applicable Hurdle Return Amount;

     (b) 80% of that portion of the combined Investment Proceeds and Sponsor Proceeds that is in excess of the sum of the applicable Full Return Amount and the applicable Hurdle Return Amount but that is less than the sum of the applicable Full Return Amount and 133% of the applicable Hurdle Return Amount; and

B-1

     (c) to the extent in excess of the sum of clauses (a) and (b) above, (i) 20% of that portion of the Investment Proceeds that is in excess of the sum of the applicable Full Return Amount plus (ii) 100% of any Sponsor Proceeds.

The General Partner shall use its discretion in determining the amount of Carry Profit (including adjusting previous allocations of Carry Profit) so as to cause the amount of Carry Profit (net of the allocated Carry Loss) to accurately reflect the amount of Carry Distributions that will ultimately be distributed and that are allocable to each Program Asset.

     “Cause Event” means with respect to any IP Limited Partner,

     (a) any act or omission constituting gross negligence, willful misconduct, or fraud in the performance of such IP Limited Partner’s duties or obligations as an employee of the Program Manager;

     (b) any action or omission that causes there to be a material breach of any applicable management agreement to which the Program Manager is a party;

     (c) any willful refusal to perform a duty as directed by Woodbridge or any of its subsidiaries (including the General Partner) if such duty is within the scope of such IP Limited Partner’s duties to the Program Manager, Woodbridge or any of its subsidiaries; or

     (d) any conviction of any crime constituting a felony in the jurisdiction involved (other than a motor vehicle felony for which only a non-custodial penalty is imposed), whether or not involving the Program Manager or the Partnership.

     “Full Return Amount” means, with respect to a Program Asset, the sum of (i) the aggregate Invested Capital and (ii) the Allocated Reimbursement Payments, in each case attributable to such Program Asset.

     “Hurdle Return Amount” means, with respect to a Program Asset, as of any date of determination, the summation of an amount calculated on a daily basis through the applicable date of determination equal to 10% per annum, compounded annually, of (i) the aggregate Invested Capital and the Allocated Reimbursement Payments, in each case attributable to such Program Asset, minus (ii) the aggregate amount of all Investment Proceeds attributable to such Program Asset on or prior to such day.

     “Tenured Asset” means, with respect to any IP Limited Partner, any Program Asset acquired by the Partnership during the period when such Person was an IP Limited Partner (and not a Terminated IP Limited Partner) or any other Program Asset in which such Person has been granted a Carry Percentage by the General Partner. For the avoidance of doubt, an IP Limited Partner will not receive a Carry Percentage with respect to any asset that is not a Tenured Asset.

B-2

     “Terminated IP Limited Partner” means any IP Limited Partner whose employment with the Woodbridge Employer is terminated for any reason, whether voluntarily or involuntarily, and with or without cause. In the General Partner’s discretion, an IP Limited Partner whose employment with the Woodbridge Employer is terminated contemporaneously with such IP Limited Partner becoming employed by another entity within Woodbridge shall not be treated as having been terminated, and the new employer shall become the Woodbridge Employer for purposes of this definition. For purposes of this Agreement, in the case of any Family Related Partner, the termination of employment with the Woodbridge Employer of the IP Limited Partner with whom such Family Related Partner is associated shall cause such Family Related Partner to become a Terminated IP Limited Partner.

     “Vested Percentage” means, with respect to an IP Limited Partner and each Program Asset, that percentage to be applied in determining the amount of Carry Profit or Carry Loss to be allocated to any IP Limited Partner as set forth in the vesting provisions in Section B-2.

     “Woodbridge Employer” means, with respect to any IP Limited Partner, the Program Manager if the IP Limited Partner is an employee of the Program Manager. Otherwise it means the entity within Woodbridge that is the employer of such IP Limited Partner.

B-2 Vesting Provisions

     (a) Non-Tenured Assets. An IP Limited Partner will have a Vested Percentage of 0% in any Program Asset that is not a Tenured Asset with respect to such Partner.

     (b) Tenured Assets. The Vested Percentage of an IP Limited Partner with respect to a Tenured Asset will be as follows:

(i)	Distributions or Realizations While Employed. An IP Limited Partner will have a Vested Percentage of 100% in all Carry Profit or Carry Loss attributable to any Investment Proceeds or Sponsor Proceeds received by the Partnership from such Partner’s Tenured Assets, or any other consequences of a Realization of a Tenured Asset, if those proceeds are received or the Realization occurs prior to the IP Limited Partner becoming a Terminated IP Limited Partner. For the avoidance of doubt, an IP Limited Partner shall have a Vested Percentage of 100% in any Carry Loss associated with an unreversed Impairment that arises on or prior to an IP Limited Partner becoming a Terminated IP Limited Partner.
(ii)	Termination for Cause. An IP Limited Partner will have a Vested Percentage of 0% in all Carry Profit or Carry Loss attributable to any Investment Proceeds or Sponsor Proceeds received by the Partnership from such IP Limited Partner’s Tenured Assets, or any other consequences of a Realization of a Tenured Asset, if those proceeds are received or the Realization occurs after such IP Limited Partner has become a Terminated IP Limited Partner because of the occurrence of a Cause Event with respect to such IP Limited Partner.
(iii)	Termination Not for Cause. An IP Limited Partner will have a Vested Percentage of 75% in all Carry Profit or Carry Loss attributable to any Investment Proceeds or Sponsor Proceeds received by the Partnership from such IP Limited Partner’s Tenured Assets, or any other consequences of a Realization of a Tenured Asset, if those proceeds are received or the Realization occurs after such IP Limited Partner has become a Terminated IP Limited Partner because (i) the Woodbridge Employer terminated the employment for a reason other than the occurrence of a Cause Event with respect to such IP Limited Partner or (ii) of the death, permanent disability or legal incapacity of such IP Limited Partner.

B-3

(iv) Voluntary Resignation. An IP Limited Partner will have a Vested Percentage as determined pursuant to the following sentence in all Carry Profit or Carry Loss attributable to any Investment Proceeds or Sponsor Proceeds received by the Partnership from such IP Limited Partner’s Tenured Assets, or any other consequences of a Realization of a Tenured Asset, if those proceeds are received or the Realization occurs after such IP Limited Partner has become a Terminated IP Limited Partner because the IP Limited Partner voluntarily left the employment of the Woodbridge Employer. For purposes of this clause (iv), the Vested Percentage shall be determined separately for each Program Asset and shall equal: (A) 25% upon the Acquisition Date of such Program Asset, (B) an additional 12.5 percentage points per year upon each of the first four anniversaries of the Acquisition Date, and (C) the remainder when the Tenured Asset is Realized.

     (c) Permitted Modifications. Notwithstanding the foregoing, the General Partner may, after consultation with the Program Manager, modify this vesting schedule for any additional IP Limited Partner admitted to the Partnership pursuant to Section 7.5 of the Agreement, including granting an additional IP Limited Partner the right to have a Vested Percentage in Program Assets whose Acquisition Date preceded the time such additional IP Limited Partner was admitted to the Partnership.

     (d) Permitted Adjustments. As described in Section B-3(b), the General Partner, in its discretion, is permitted to make adjustments, including retroactive adjustments, to the allocations of Carry Profit and Carry Loss. The ability of the General Partner to make these adjustments shall not be restricted by the application of the vesting provisions in this Section B-2.

     (e) Family Related Partner. A Family Related Partner’s Vested Percentage shall be equivalent to the Vested Percentage of the IP Limited Partner associated with such Family Related Partner.

B-3 Determination of Carry Accounts

     (a) Maintenance of Carry Accounts. A separate bookkeeping account (a “Carry Account”) shall be maintained for each IP Limited Partner. Immediately prior to the Partnership making any Carry Distributions or upon the Realization of a Program Asset, the Carry Profit (or Carry Loss) determined with respect to such distribution or Realization shall be credited (or debited, and, if necessary, to an amount below zero) to the Carry Account of each IP Limited Partner in an amount equal to such IP Limited Partner’s Carry Percentage in the Program Asset giving rise to such Carry Profit (or Carry Loss) multiplied by such IP Limited Partner’s Vested Percentage in such Carry Profit (or Carry Loss). An IP Limited Partner’s Carry Account shall be debited by the amount of Carry Distributions made to such IP Limited Partner.

B-4

     (b) Adjustments to Carry Accounts. The General Partner, in its discretion, is permitted to make adjustments, including retroactive adjustments, to the allocations of Carry Profit and Carry Loss so that, on an aggregate basis the Carry Accounts of the IP Limited Partners more closely match the aggregate rights of the IP Limited Partners to receive Carry Distributions or to make clawback payments as provided in Article IV of the Agreement. Except to the extent the General Partner determines otherwise (with notice to the other Partners), the General Partner intends to cause any shortfall in the aggregate net Carry Profits (i.e., net of aggregate Carry Losses) as compared to the aggregate amount of Carry Distributions (net of clawback payments) distributable to the IP Limited Partners in accordance with Article IV of the Agreement to be allocated on a pro rata basis to each Program Asset that otherwise produced Carry Profit (and among them based on the relative amounts of Carry Profit).

     (c) Deemed Realization. Solely for purposes of determining an IP Limited Partner’s Carry Account, the General Partner may, upon the admittance of a new Carried Interest Partner or at any other time, deem there to have been a Realization of one or more Program Assets at the Fair Market Value at such time of such Program Asset, in which case the deemed Carry Profit or Carry Loss derived from such deemed Realization shall be allocated among the IP Limited Partners and charged to the Carry Accounts of the IP Limited Partners. Any future actual or deemed Realization of a Program Asset shall take into account the prior deemed Realization or Realizations. Notwithstanding the foregoing, for purposes of determining an IP Limited Partner’s Vested Percentage pursuant to Section B-2, such deemed Realizations shall be disregarded.

B-4 Distributions to the IP Limited Partners

     Subject to the holdback provisions of Section 4.5 of the Agreement, each IP Limited Partner shall be entitled to receive an amount of Carry Distributions equal to the positive balance in his Carry Account, provided that the sum of all of the Carry Distributions made to date to the IP Limited Partners as a group cannot exceed the product of (A) the total Carry Distributions made to date times (B) the aggregate Carry Percentages for all of the IP Limited Partners (adjusted as necessary to take into account changes in Carry Percentages since the formation of the Partnership). If the amount of Carry Distributions to be made to the IP Limited Partners as a group is insufficient to reduce the positive Carry Account balances of all IP Limited Partners to zero, then Carry Distributions made to the IP Limited Partners as a group will be made pro rata among the IP Limited Partners based on their relative Carry Account balances. If the amount of Carry Distributions to be made to the IP Limited Partners exceeds the aggregate positive Capital Account balances of the IP Limited Partners, such excess shall be distributed among the IP Limited Partners in the manner that the General Partner determines most appropriately reflects the IP Limited Partners’ relative Carry Percentages (as adjusted by the Vested Percentages) in the Program Assets giving rise to the Carry Distributions.

B-5 Responsibility for Gross Clawback Amount

     Each IP Limited Partner shall be responsible (only to the extent of Section 4.6(c) of the Agreement) for a portion of the Gross Clawback Amount equal to the negative balance, if any, in such IP Limited Partner’s Carry Account as of the final liquidating distribution of assets of the Partnership pursuant to Section 8.2 of the Agreement.

B-6 83(b) Election

     Each Carried Interest Partner shall make a timely election under Section 83(b) of the Code with respect to such Carried Interest Partner’s interest in the Partnership.

B-5

AMENDED AND RESTATED

LIMITED LIABILITY LIMITED PARTNERSHIP AGREEMENT

OF

ODI PROGRAM PARTNERSHIP, LLLP

[ Previously Named: Woodbridge Equity Fund LLLP ]

Date: March 13, 2009

TABLE OF CONTENTS

			Page
ARTICLE I GENERAL PROVISIONS				1
	1.1	Formation		1
	1.2	Name		2
	1.3	Purpose		2
	1.4	Principal Office		2
ARTICLE II DEFINITIONS; DETERMINATIONS				2
	2.1	Definitions		2
	2.2	Determinations		6
ARTICLE III INVESTED CAPITAL; CAPITAL ACCOUNTS				6
	3.1	Invested Capital		6
	3.2	Future Contributions		7
	3.3	Capital Accounts		7
ARTICLE IV DISTRIBUTIONS				7
	4.1	Distribution Policy		7
	4.2	Reimbursement Payment		8
	4.3	Priority of Distributions		8
	4.4	Apportionment of Carry Distributions		9
	4.5	IP Clawback Reserve		10
	4.6	Clawback Obligations		11
ARTICLE V PROGRAM MANAGER				12
	5.1	Program Manager		12
	5.2	Fees		12
ARTICLE VI GENERAL PARTNER				12
	6.1	Management Authority		12
	6.2	No Liability to Partnership or Limited Partners		13
	6.3	Indemnification		13
ARTICLE VII LIMITED PARTNERS				14
	7.1	Limited Liability		14
	7.2	No Participation in Management		14
	7.3	Transfer of Limited Partnership Interests		15
	7.4	No Termination		15
	7.5	Additional Limited Partners		15

     -i-     

			Page
	7.6	Reimbursement for Payments on Behalf of a Partner		16
ARTICLE VIII DURATION AND TERMINATION				17
	8.1	Term		16
	8.2	Termination and Liquidation		16
ARTICLE IX VALUATION OF PARTNERSHIP ASSETS				17
	9.1	Normal Valuation		17
	9.2	Restrictions on Transfer or Blockage		17
ARTICLE X BOOKS OF ACCOUNTS; MEETINGS				18
	10.1	Books		18
	10.2	Fiscal Year		18
	10.3	Reports		18
ARTICLE XI MISCELLANEOUS				18
	11.1	Amendments		18
	11.2	Successors		19
	11.3	Governing Law; Severability		19
	11.4	Notices		19
	11.5	Arbitration		19
	11.6	Miscellaneous		20
	11.7	No Third Party Beneficiaries		20
APPENDIX A: TAX AND ACCOUNTING PROVISIONS				A-1
	A-1	Definitions		A-1
	A-2	Maintenance of Capital Accounts		A-2
	A-3	Allocations of Profits and Losses		A-4
	A-4	Regulatory Allocations and Special Allocations		A-4
	A-5	Tax Allocations		A-5
	A-6	Tax Matters Partner; Management Authority Regarding Tax and Accounting		A-6
APPENDIX B: APPORTIONMENT AND MODIFICATION OF CARRIED INTEREST TO IP LIMITED PARTNERS				B-1
	B-1	Definitions		B-1
	B-2	Vesting Provisions		B-3
	B-3	Determination of Carry Accounts		B-4
	B-4	Distributions to the IP Limited Partners		B-5
	B-5	Responsibility for Gross Clawback Amount		B-5
	B-6	83(b) Election		B-5

     -ii-     

AMENDED AND RESTATED

LIMITED LIABILITY LIMITED PARTNERSHIP AGREEMENT

OF

ODI PROGRAM PARTNERSHIP, LLLP

     THIS AGREEMENT OF LIMITED LIABILITY LIMITED PARTNERSHIP is deemed to be effective as of March 13, 2009 (the “Effective Date”) among the General Partner, the Limited Partners, the Program Manager, and the Initial Limited Partner.

     WHEREAS, the Partnership (as defined below) was formed pursuant to (a) the Certificate (as defined below) and (b) an Agreement of Limited Liability Limited Partnership dated as of March 13, 2008 (the “Initial Agreement”), between the General Partner, as general partner, and Woodbridge Holdings Corporation, a Florida corporation, as the sole limited partner (the “Initial Limited Partner”);

     WHEREAS, in furtherance of this Agreement, the Initial Limited Partner has transferred its interest in the Partnership to the Program Manager and the Program Manager has transferred such interest to the General Partner which hereafter shall be considered the General Partner’s interest;

     WHEREAS, the parties to this Agreement wish to amend and restate the Initial Agreement in its entirety as hereinafter set forth, and to admit the IP Limited Partners, the Sponsor Partner and the Residual Limited Partner as partners to the Partnership.

     NOW, THEREFORE, the parties hereto agree as follows:

ARTICLE I
GENERAL PROVISIONS

1.1 Formation

     The Partners hereby agree to continue a limited liability limited partnership (the “Partnership”) pursuant to and in accordance with the Florida Revised Uniform Limited Partnership Act of 2005, as amended from time to time (the “Partnership Act”). The term of the Partnership (the “Term”) commenced upon the filing of the Certificate of Limited Partnership (the “Certificate”) with the Secretary of State of Florida (the date of such filing is referred to herein as the date of “formation” of the Partnership) and shall continue until dissolution and termination of the Partnership in accordance with the provisions of ARTICLE VIII hereof.

1.2 Name

     As of the date hereof, the Partners hereby agree that the name of the Partnership shall be changed from Woodbridge Equity Fund LLLP to ODI Program Partnership, LLLP, and the General Partner shall file a certificate of amendment effecting such name change. The General Partner shall be entitled to further change the name to such other name or names as the General Partner may designate from time to time.

1.3 Purpose

     The Partnership is organized for the principal purpose of (i) acquiring, managing, and supervising the interests in the Program Assets, and (ii) engaging in such other activities incidental or ancillary thereto as the General Partner deems necessary or advisable.

1.4 Principal Office

     The General Partner shall maintain a principal office in Fort Lauderdale, Florida, or at such other place or places as the General Partner may from time to time designate.

ARTICLE II
DEFINITIONS; DETERMINATIONS

2.1 Definitions

     Capitalized terms used in this Agreement have the meanings set forth below or as otherwise specified herein:

     “Agreement” means this Amended and Restated Limited Liability Limited Partnership of ODI Program Partnership, LLLP, as amended or modified from time to time in accordance with its terms.

     “Alternative Clawback Reserve” has the meaning set forth in Section 4.5.

     “Capital Account” is the account established for each Partner in accordance with the provisions of Appendix A hereto.

     “Capital Proceeds” means any Investment Proceeds received by the Partnership in respect of a Program Asset that are attributable to a Realization event.

     “Carried Interest Partners” means the Sponsor Partner, the IP Limited Partners, and the Residual Limited Partner, in their capacities as Partners entitled to receive Carry Distributions.

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     “Carry Distributions” means those distributions paid to the Carried Interest Partners in their capacities as such pursuant to Section 4.3(a)(ii) and Section 4.3(a)(iii)(B).

     “Carry Percentage” means, with respect to a Carried Interest Partner, its percentage interest in Carry Distributions as set forth for such Partner on Schedule I hereof.

     “Certificate” has the meaning set forth in Section 1.1.

     “Code” means the U.S. Internal Revenue Code of 1986, as amended from time to time.

     “Contributed Property” means 1,435,000 shares of common stock of Office Depot, Inc.

     “Covered Party” means each of the Partners, a director, officer, partner or member (or a former director, officer, partner or member) of any Partner, and to the extent approved by the General Partner in its sole discretion, any other employee of a Partner or an agent acting at the direction of the General Partner or the Program Manager, and in any such case, the heirs and legal representatives of any such person.

     “Current Proceeds” means any Investment Proceeds received by the Partnership in respect of a Program Asset that are not attributable to a Realization event, including dividends, rents, or interest with respect to such Program Asset.

     “Deal Fees” means those amounts received by the General Partner (or an affiliate of the General Partner) as break-up fees, director fees, “flip” fees, investment banking, consulting, or similar transaction fees, but not including any amount received as reimbursement for expenses directly related to the provision of such services for which the fee is being paid. “Deal Fees” also means all amounts earned by any employee or agent (in such capacity) of the Program Manager with respect to a Program Asset or other activities of the Partnership, but not including payments to such employee or agent from the Program Manager.

     “Effective Date” has the meaning set forth in the Recitals.

     “Fair Market Value” of a security or a Program Asset means the amount that would be realized as Investment Proceeds if such security or Program Asset had been sold at its “value” (determined in accordance with Article IX).

     “Family Related Partner” means, with respect to any IP Limited Partner, any Person who is a spouse or lineal descendent of the parents of such IP Limited Partner or any Person which is a trust formed by such IP Limited Partner for investment by or for the benefit of such IP Limited Partner’s spouse or any lineal descendants of the parents of such IP Limited Partner or of such IP Limited Partner’s spouse and/or any charitable organization; provided that any cause of action or other dispute arising in relation to a Family Related Partner’s interest may only be pursued by the IP Limited Partner associated with such Family Related Partner, except if such IP Limited Partner has died or become legally incapacitated.

     “GAAP” has the meaning set forth in Section 10.3.

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     “General Partner” means ODI Program GP Corporation, in its capacity as general partner of the Partnership, and any successor general partner of the Partnership.

     “Gross Clawback Amount” has the meaning specified in Section 4.6.

     “Impairment” means, with respect to a Program Asset, a determination by the General Partner that the Program Asset is not expected to be able to provide for cash flow or realization proceeds a return to investors of at least the amount of Invested Capital associated with such asset as well as a 10% per annum compounded annual return on such Invested Capital. The General Partner’s determination that a Program Asset has suffered an Impairment for purposes of this Agreement shall be independent of any determination that the value of the Program Asset is reduced for purposes of the financial statements prepared under generally accepted accounting principles.

     “Initial Agreement” has the meaning set forth in the Recitals.

     “Initial Limited Partner” has the meaning set forth in the Recitals.

     “Invested Capital” has the meaning set forth in Section 3.1.

     “Investment Proceeds” means the gross investment returns (whether in the form of cash, securities, or other property) received by the Partnership in respect of the Partnership’s Invested Capital in any Program Assets (i.e., in its capacity as an investor and not with respect to the provision of any services with respect to such Program Assets or to any other investor in such Program Assets). For the avoidance of doubt, the amount of Investment Proceeds shall be determined without regard to any management fees, carried interest, or similar deductions that may be charged by the General Partner or the Program Manager to any investment vehicle through which the Partnership holds any of its investments.

     “IP Clawback Reserve” has the meaning set forth in Section 4.5.

     “IP Limited Partners” means any Persons designated as IP Limited Partners on Schedule I hereof, in their capacities as limited partners of the Partnership, or any other Persons that are admitted as IP Limited Partners in accordance with the terms hereof, in each case for so long as such Persons continue to be IP Limited Partners hereunder, and “IP Limited Partner” shall mean each of such Persons individually.

     “Limited Partners” means the IP Limited Partners and the Residual Limited Partner, and “Limited Partner” shall mean each of such Persons individually.

     “Overall Hurdle Clawback” has the meaning set forth in the limited partnership agreement governing Woodbridge Executive Incentive Plan 1, LP.

     “Partners” means collectively the General Partner (including in its capacity as Sponsor Partner), the Limited Partners, the Program Manager and any other Person that is admitted to the Partnership as a partner in accordance with the terms hereof, and “Partner” shall mean each of such persons individually.

     “Partnership” has the meaning set forth in Section 1.1.

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     “Partnership Act” has the meaning set forth in Section 1.1.

     “Person” means an individual, a partnership (general, limited, or limited liability), a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, or a governmental, quasi-governmental, judicial, or regulatory entity or any department, agency, or political subdivision thereof.

     “Platform” means all of the program partnerships (or other entities) that are designated as a “Program Partnership” in accordance with the terms of the governing agreement of Woodbridge Executive Incentive Plan 1, LP.

     “Portfolio Company” means Office Depot, Inc. and such other entities, the interests in which are Program Assets.

     “Preferred Return” has the meaning set forth in Section 4.3.

     “Program Assets” means those assets held by the Partnership as part of the Partnership’s investment program, and “Program Asset” shall mean each of such Program Assets individually.

     “Program Expenses” means those costs, expenses, liabilities and obligations relating to the Partnership’s activities, investments and business (to the extent not borne or reimbursed by the Portfolio Company) as set forth on Schedule II hereof.

     “Program Manager” means Woodbridge Fund I, LLC.

     “Program Partnership” means each partnership (or other entity) that is designated as a “Program Partnership” in accordance with the terms of the governing documents of Woodbridge Executive Incentive Plan 1, LP. All such partnerships together with the Partnership are the “Program Partnerships.”

     “Realization” means the sale, redemption, or other disposition of, or any other receipt of a capital nature, including proceeds from the recapitalization or refinancing at the investment level (as determined by the General Partner) with respect to the whole or part of, or the permanent write-off of a Program Asset, and “Realized” shall be construed accordingly. To the extent a Program Asset has suffered an Impairment of less than the whole of the Program Asset, a portion of the Program Asset equal to the amount of the Impairment shall be treated as if sold for no consideration. If the General Partner determines that an Impairment has been reversed, the General Partner shall adjust the allocations and distributions made by the Partnership so as to reverse the effects of the prior Impairment.

     “Realized Base Contributions” has the meaning set forth in Section 4.3(a)(i).

     “Regulatory Allocations” has the meaning set forth in Appendix A hereto.

     “Reimbursement Payment” means the special payment to the Program Manager pursuant to Section 4.2.

     “Reimbursing Partner” has the meaning set forth in Section 7.6(a).

     “Residual Limited Partner” means the Person entitled to receive the amounts of Carry Distributions not made to the Sponsor Partner or the IP Limited Partners, which Person will be Woodbridge Executive Incentive Plan 1, LP.

     “Return Distributions” means those distributions to the General Partner other than Carry Distributions as set forth in Section 4.3.

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     “Sponsor Partner” means the Person entitled to receive the amounts of Carry Distributions apportioned to the Sponsor Partner pursuant to the terms hereof, which Person initially will be the General Partner, in its capacity as Sponsor Partner.

     “Sponsor Proceeds” means all other proceeds received by the Partnership from or with respect to its assets other than Investment Proceeds. Sponsor Proceeds include management fees, carried interest, and Deal Fees charged by the Partnership to other investors in an investment vehicle through which the Partnership holds its assets; provided, however, that to the extent the General Partner determines that Deal Fees arising with respect to a Partnership asset are attributable to the capital invested in that asset by the Partnership, such fees will be treated as Investment Proceeds, rather than Sponsor Proceeds. For the avoidance of doubt, Deal Fees attributable to the capital invested by a third party or not attributable to any investment of capital will be treated as Sponsor Proceeds.

     “Term” has the meaning set forth in Section 1.1.

     “Transfer” means a transfer in any form, including a sale, assignment, conveyance, pledge, mortgage, encumbrance, hypothecation, exchange, gift, or other disposition, or the act of so doing, whether voluntarily, by operation of law, pursuant to judicial process, or otherwise as the context requires.

     “Woodbridge” means Woodbridge Holdings Corporation or any direct or indirect subsidiary of such corporation.

2.2 Determinations

     Unless otherwise indicated, any determinations or calculations conducted pursuant to this Agreement shall be determined or calculated as of the date of such determination or calculation.

ARTICLE III
INVESTED CAPITAL; CAPITAL ACCOUNTS

3.1 Invested Capital

     As of the Effective Date, the Partners shall be required to make the following contributions to the capital of the Partnership (“Invested Capital”):

     (a) The General Partner has contributed (or is deemed to have contributed) the Contributed Property to the Partnership, which for purposes hereof shall be treated as Invested Capital of $18,763,454 and such Contributed Property will be treated as having a Book Value as defined in Appendix A hereto.

     (b) Each IP Limited Partner shall contribute $250 to the capital of the Partnership.

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     (c) The Residual Limited Partner shall contribute $250 to the capital of the Partnership.

     (d) The Program Manager shall contribute $250 to the capital of the Partnership.

The right of each IP Limited Partner, the Residual Limited Partner, and the Sponsor Partner to receive Carry Distributions represents a profits interest received for services rendered or to be rendered to or for the benefit of the Partnership.

3.2 Future Contributions

     (a) Other than the required Invested Capital described in Section 3.1, any reimbursement payment pursuant to Section 7.6, or as may be required by applicable law, no Partner shall have any further obligation to contribute additional Invested Capital to the Partnership; provided that the General Partner shall be required to make special distributions to the Partnership to the extent that such special distributions are necessary to reduce any IP Limited Partner’s Alternative Clawback Reserve as described in Section 4.2(c).

     (b) The General Partner, in its discretion, whether or not in connection with the admission of any new Partner to the Partnership in accordance with Section 7.5, may permit a Partner to contribute additional Invested Capital to the Partnership under such circumstances as may be determined by the General Partner.

     (c) The General Partner may cause the Partnership to borrow funds, including from Woodbridge, under such terms as the General Partner may determine, in order to permit the Partnership to meet its liquidity needs.

3.3 Capital Accounts

     (a) A capital account shall be maintained for each Partner in accordance with the provisions of Appendix A hereto.

ARTICLE IV
DISTRIBUTIONS

4.1 Distribution Policy

     (a) Except as set forth in Section 4.1(c) and Section 4.4, the General Partner shall periodically cause excess cash or cash equivalents held in the Partnership to be distributed to the Limited Partners in accordance with Section 4.3.

     (b) Distributions may be in the form of cash, property, or securities. Except as otherwise provided herein, for purposes of this Agreement, an in-kind distribution of non-cash property shall be treated as if an amount of cash equal to the Fair Market Value of such property had been distributed.

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     (c) In determining the amounts that may be available for distribution to the Partners, the General Partner shall first cause the Partnership to satisfy its current obligations, including its obligation to make any Reimbursement Payment to the Program Manager in accordance with Section 4.2. In addition, the General Partner may cause the Partnership to retain such amounts as the General Partner determines are appropriate to act as reserves for any fixed or contingent payments or liabilities of the Partnership (including future amounts of Reimbursement Payments) for which the Partnership may be liable.

4.2 Reimbursement Payment

     Prior to making any distributions to the Partners pursuant to Section 4.3, the Partnership shall make a reimbursement payment (the “Reimbursement Payment”) to the Program Manager equal to the amount of Program Expenses (including, for the avoidance of doubt, interest accruing on the Program Manager’s line of credit used to finance such expenses) borne by, and required to be paid by, the Program Manager that have yet to be reimbursed by the Partnership to the Program Manager.

4.3 Priority of Distributions

     After making any Reimbursement Payment pursuant to Section 4.2, except to the extent specifically provided in this Agreement to the contrary, distributions by the Partnership shall be made among the Partners as follows:

     (a) Capital Proceeds and Sponsor Proceeds. Distributions designated as Capital Proceeds or Sponsor Proceeds by the General Partner shall be distributed as follows:

(i)

First, 100% to the General Partner as “Return Distributions” until the General Partner has received aggregate distributions sufficient to provide the General Partner a 10% per annum cumulative annually compounded internal rate of return (the “Preferred Return”) on the General Partner’s Invested Capital attributable to all Program Assets (or portion thereof) that have been Realized (such Invested Capital, the “Realized Base Contributions”), provided that for purposes of determining the Preferred Return, the Invested Capital attributable to the contribution of the Contributed Property shall be treated as having been made on September 1, 2008. The General Partner will include as Return Distributions any amounts received that relate to the investment in such Program Assets, regardless of whether such amounts are received through, or outside of, the Partnership. For the avoidance of doubt, an “internal rate of return” calculation encompasses a return of, as well as a return on, the Realized Base Contributions.

(ii)

Second, 20% to the General Partner (as additional Return Distributions) and 80% to the Carried Interest Partners (and among them as provided in Section 4.4) as “Carry Distributions,” until the aggregate amount of Carry Distributions equals 20% of the excess of (A) the aggregate amount of Return Distributions and Carry Distributions distributed over (B) the Realized Base Contributions; and

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(iii) Thereafter, between the General Partner and the Carried Interest Partners as follows:

(A)	The General Partner is allocated an additional amount (as additional Return Distributions) so that the aggregate amount of Return Distributions distributed to the General Partner equals the sum of (1) the Realized Base Contributions plus (2) 80% of the amount by which the aggregate Investment Proceeds received by the Partnership exceeds the Realized Base Contributions; and
(B)	The remainder to the Carried Interest Partners as additional Carry Distributions.

     (b) Current Proceeds. Distributions designated as Current Proceeds by the General Partner shall be distributed in the same manner as Capital Proceeds and Sponsor Proceeds pursuant to Section 4.3(a) except that for purposes of applying those provisions with respect to a particular distribution of Current Proceeds, the Program Asset giving rise to such Current Proceeds will be deemed to have been Realized for an amount equal to the Invested Capital (and taking into account any prior unreversed Impairment with respect to such Program Asset) attributable to such Program Asset immediately prior to the distribution of such Current Proceeds.

4.4 Apportionment of Carry Distributions

     Carry Distributions will be made to and among the Carried Interest Partners in the following amounts:

     (a) Distributions to the Sponsor Partner. The Sponsor Partner shall in all cases receive 35% of all Carry Distributions.

     (b) Distributions to the IP Limited Partners. The IP Limited Partners as a group shall receive a portion of Carry Distributions, which portion shall not exceed the aggregate Carry Percentages of the IP Limited Partners, but which may be reduced by the vesting and other provisions in Appendix B hereto. The provisions of Appendix B will govern the determination of each IP Limited Partner’s share of such Carry Distributions.

     (c) Distributions to the Residual Limited Partner. Carry Distributions not made to the Sponsor Partner or the IP Limited Partners shall be made to the Residual Limited Partner. For the avoidance of doubt, any reductions in Carry Distributions to the IP Limited Partners pursuant to the vesting provisions set forth in Appendix B hereto shall accrue to the benefit of the Residual Partner.

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4.5 IP Clawback Reserve

     (a) Notwithstanding the provisions of Section 4.3 and Section 4.4 and Appendix B hereto, 25% (adjusted as provided in Section 4.5(b) below) of any Carry Distributions that are available for distribution to an IP Limited Partner shall be withheld by the Partnership, and a separate bookkeeping account (an “IP Clawback Reserve”) shall be established for such IP Limited Partner by the Partnership for tracking deposits, withdrawals, and interest earned with respect to such account. The Partnership may aggregate each of the IP Clawback Reserves within a single interest-bearing Partnership bank account.

     (b) Each time that the Partnership is to make a distribution of Carry Distributions, the General Partner (together with the general partners of each of the other Program Partnerships) will review the remaining Program Assets and the assets within each other Program Partnership in the Platform to determine whether any of the cumulative assets have suffered an Impairment that has not been reversed, and if so, the effect that such Impairment would have on the ability of Woodbridge (in its capacity as an investor in such program partnership) to receive proceeds from such Program Partnership sufficient to provide Woodbridge with at least a 10% annual cumulative compounded internal rate of return on its Invested Capital (as defined by the governing agreement of such Program Partnership) in such Program Partnership. If the General Partner determines that the Impairment would prevent such minimum return from being achieved, the General Partner may increase the percentage (but not in excess of 100%) of Carry Distributions to be contributed to the IP Clawback Reserve of any Executive IP Partner (as defined below) in order to add to such IP Clawback Reserve an amount which, when combined with the other reserves being established by the other Program Partnerships and by Woodbridge Executive Incentive Plan 1, LP with respect to such Executive IP Partner, will cover such Executive IP Partner’s share of the Overall Hurdle Clawback that is anticipated to arise.

(i)	“Executive IP Partner” shall mean any person who is both an IP Limited Partner and a limited partner of Woodbridge Executive Incentive Plan 1, LP.
(ii)	For the avoidance of doubt, the General Partner shall not increase the percentage of Carry Distributions to be contributed to the IP Clawback Reserve of any IP Limited Partner who is not an Executive IP Partner.

     (c) Notwithstanding the foregoing, in the General Partner’s discretion, rather than depositing amounts in the IP Clawback Reserve for an IP Limited Partner, the General Partner may cause such amounts to be distributed to the General Partner as additional Return Distributions, which will be credited to a special bookkeeping account (an “Alternative Clawback Reserve”) for the benefit of such IP Limited Partner. The balance in the Alternative Clawback Reserve shall be increased from time to time by an interest factor equal to the interest earned on the IP Clawback Reserve (or, if there is no IP Clawback Reserve, on the rate of interest that the Partnership would receive on an interest-bearing bank account).

     (d) As set forth in Section 4.6, at the expiration of the Term of the Partnership, each IP Limited Partner will be responsible for a share of the Gross Clawback Amount, if any.

(i)	To satisfy an IP Limited Partner’s share, amounts will first be taken from such IP Limited Partner’s Alternative Clawback Reserve. To the extent that such IP Limited Partner’s share is not satisfied, amounts will be taken from such IP Limited Partner’s IP Clawback Reserve.
(ii)	(A) To the extent amounts in the Alternative Clawback Reserve are not needed to satisfy the share of an IP Limited Partner who is not an Executive IP Partner of the Gross Clawback Amount, an amount of Return Distributions that would otherwise be payable to the General Partner or Carry Distributions otherwise payable to the Sponsor Partner equal to such excess, shall instead be specially distributed to the applicable IP Limited Partner without regard to Section 4.3, which distributions will reduce on a dollar-for-dollar basis the amount in such IP Limited Partner’s Alternative Clawback Reserve. If the full amount of such excess cannot be so distributed, the shortfall shall be contributed by the General Partner to the Partnership for special distribution to the applicable IP Limited Partner.
(iii)	(B) To the extent amounts in the Alternative Clawback Reserve are not needed to satisfy the share of an Executive IP Partner of the Gross Clawback Amount, such excess amounts will be added to the Alternative Clawback Reserve established for the benefit of such Executive IP Partner by Woodbridge Executive Incentive Plan 1, LP.
(iv)	(A) For any IP Limited Partner who is not an Executive IP Partner, to the extent amounts in such IP Limited Partner’s IP Clawback Reserve (including interest earned thereon) are not needed to fund such IP Limited Partner’s share of the Gross Clawback Amount, such amounts will be released by the Partnership to the applicable IP Limited Partner.
	(B) For any Executive IP Partner, to the extent amounts in such Executive IP Partner’s IP Clawback Reserve (including interest earned thereon) are not needed to fund such Executive IP Partner’s share of the Gross Clawback Amount, such amounts will be added to the Clawback Reserve established for the benefit of such Executive IP Partner by Woodbridge Executive Incentive Plan 1, LP.

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     (e) Prior to the expiration of the Term of the Partnership, the General Partner, in its discretion, may release reserved amounts to an IP Limited Partner who is not an Executive IP Partner by (i) causing special distributions reducing such IP Limited Partner’s Alternative Clawback Reserve or causing contributions and special distributions, each as described in Section 4.5(d) above, or (ii) distributing amounts to an IP Limited Partner from such IP Limited Partner’s IP Clawback Reserve, in either case to the extent the General Partner determines that such released amounts are not necessary to secure such IP Limited Partner’s share of the Gross Clawback Amount, each as described in Section 4.6. Similarly the General Partner may, in its discretion, move amounts to the Alternative Clawback Reserve or the Clawback Reserve of an Executive IP Partner established for the benefit of such Executive IP Partner by Woodbridge Executive Incentive Plan 1, LP.

4.6 Clawback Obligations

     (a) Following the final liquidating distribution of assets pursuant to Section 8.2, if there have been any Carry Distributions, the General Partner shall determine the additional amount of Return Distributions (the “Gross Clawback Amount”), if any, that would need to have been distributed to the General Partner in connection with such final liquidating distribution so that each of the following would have been true:

(i)	The General Partner would have received sufficient Return Distributions to provide it with at least the Preferred Return on the General Partner’s Invested Capital, as calculated pursuant to Section 4.3(a)(i); and
(ii)	The General Partner would have received Return Distributions at least equal to the amount of its Invested Capital plus 80% of the amount by which the aggregate Investment Proceeds received by the Partnership exceeded the General Partner’s Invested Capital.

     (b) Each Carried Interest Partner shall be responsible for returning to the Partnership, for distribution to the General Partner, its share of the Gross Clawback Amount, determined as follows:

(i)	The Sponsor Partner shall be responsible for its Carry Percentage (i.e., 35%);
(ii)	The IP Limited Partners as a group shall be responsible for their aggregate Carry Percentage of the Gross Clawback Amount, with each such IP Limited Partner being severally (and not jointly) responsible for the amount determined pursuant to Appendix B hereto and only to the extent of clause (c) below; and
(iii)	The Residual Limited Partner shall be responsible for its Carry Percentage of the Gross Clawback Amount;

provided that if Carry Percentages have changed over the Term of the Partnership, the determination shall be based on the relative amounts of Carry Distributions received over the Term of the Partnership or any other method determined by the General Partner to appropriately take into account such variations.

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     (c) In no event will an IP Limited Partner be personally liable for a clawback obligation that exceeds the aggregate amount of such IP Limited Partner’s Alternative Clawback Reserve and IP Clawback Reserve. In no event shall an IP Limited Partner be responsible for another Partner’s share of the Gross Clawback Amount.

     (d) The Residual Limited Partner’s obligation to satisfy its clawback obligation will be limited to those amounts established as a clawback reserve under the terms of the limited partnership agreement governing the Residual Limited Partner and will be a several (and not joint) obligation of the partners in the Residual Limited Partner.

ARTICLE V
PROGRAM MANAGER

5.1 Program Manager

     The Program Manager will be responsible for managing the day-to-day activities of the Partnership and the Partnership’s assets, subject to the direction of the General Partner; provided that the Program Manager will have no authority to legally bind the Partnership without the express consent of the General Partner.

5.2 Fees

     The Program Manager shall not be entitled to any fees, payments, or distributions other than as expressly provided herein, or as otherwise approved by the General Partner. To the extent the Program Manager or any employee or agent (in such capacity) of the Program Manager receives any Deal Fees with respect to a Program Asset, the calculations called for in this Agreement will be adjusted so that total amounts received by the Program Manager or such employee or agent (in such capacity) of the Program Manager are the same as if all such Deal Fees had been paid to the Partnership.

ARTICLE VI
GENERAL PARTNER

6.1 Management Authority

     (a) The management of the Partnership shall be vested exclusively in the General Partner, and the General Partner shall have full control over the business and affairs of the Partnership. The General Partner shall have the power on behalf and in the name of the Partnership to carry out any and all of the objectives and purposes of the Partnership and to perform all acts and enter into and perform all contracts and other undertakings which the General Partner, in its reasonable discretion, deems necessary or advisable or incidental thereto, including the power to acquire and dispose of any security (including marketable securities) or incur indebtedness or guarantee the indebtedness of the Portfolio Company.

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     (b) Third parties dealing with the Partnership can rely conclusively upon the General Partner’s certification that it is acting on behalf of the Partnership and that its acts are authorized. The General Partner’s execution of any agreement on behalf of the Partnership is sufficient to bind the Partnership for all purposes.

     (c) The General Partner will have the right and power to establish the availability and terms of any offering of opportunities for an IP Limited Partner or any Family Related Partner or any other “friend or family member” of an IP Limited Partner to co-invest alongside the Partnership in all or part of the Partnership’s investments.

6.2 No Liability to Partnership or Limited Partners

     No Covered Party shall be liable to the Partnership or any Partner for any action taken, or failure to act, on behalf of the Partnership (or on behalf of the General Partner or the Program Manager with respect to the Partnership) if such Covered Party (a) acted honestly and in good faith with a view to the best interests of the Partnership, or, as the case may be, to the best interests of the other entity for which the Covered Party acted as director, officer, employee, agent, or in a similar capacity at the request of the General Partner or the Program Manager for the benefit of the Partnership; and (b) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, the Covered Party had reasonable grounds for believing that the Covered Party’s conduct was lawful. In addition, any Covered Party who has delegated to any other Person (other than to another Covered Party) any part of its functions (including participating in the management of or rendering professional advice or other services in respect of any Program Asset) shall not be liable, responsible, or accountable in damages or otherwise to the Partnership or to any Partner for any loss incurred or suffered by reason of any action by such other Person unless the delegating Covered Party did not (x) act honestly and in good faith with a view to the best interests of the Partnership, or, as the case may be, to the best interests of the other entity for which the Covered Party acted as director, officer, employee, agent, or in a similar capacity at the request of the General Partner or the Program Manager for the benefit of the Partnership; and (y) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, have reasonable grounds for believing that the Covered Party’s conduct was lawful with respect to such delegation. For the avoidance of doubt, nothing in the immediately preceding sentence shall be deemed to prevent the Partnership, the General Partner or the Program Manager from asserting a cause of action against the delegate of a Covered Party for any loss caused by the action, or failure to act, of such delegate and the General Partner shall cause the Partnership to effectively pursue any such cause of action to the extent it would be in the reasonable best interests of the Partnership to do so.

6.3 Indemnification

     (a) Subject to Section 6.3(c), the Partnership shall indemnify each Covered Party against all costs, charges, and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by the Covered Party in respect of any civil, criminal, administrative, investigative, or other proceeding in which the Covered Party is involved because of such Covered Party’s association with the Partnership, the General Partner, or the Program Manager if such Covered Party (i) acted honestly and in good faith with a view to the best interests of the Partnership or, as the case may be, to the best interests of the other entity for which the Covered Party acted as director, officer, employee, agent, or in a similar capacity at the request of the General Partner or the Program Manager and for the benefit of the Partnership; and (ii) had reasonable grounds for believing that such Covered Party’s conduct was lawful, in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty.

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     (b) Subject to Section 6.3(c), the Partnership shall advance moneys to a Covered Party for the costs, charges, and expenses of a proceeding referred to in Section 6.3(a). The Covered Party shall repay the moneys if the Covered Party does not fulfill the conditions of Section 6.3(a).

     (c) Before seeking indemnification from the Partnership, a Covered Party seeking such indemnification shall use all reasonable efforts to seek indemnification from the following sources (in the following order of priority): first, from the Portfolio Company, including any insurance provided by, or purchased on behalf of a Covered Party by, the Portfolio Company; and second, from the General Partner or the Program Manager, including from any insurance provided by the General Partner or the Program Manager. To the extent any unpaid indemnification obligation remains after the Covered Party has received indemnification from the foregoing sources, the Partnership shall indemnify such Covered Party for such shortfall.

ARTICLE VII
LIMITED PARTNERS

7.1 Limited Liability

     No Limited Partner shall be personally liable for any obligations of the Partnership or have any obligation to make contributions to the Partnership other than such Limited Partner’s initial contribution pursuant to Section 3.1 or as required pursuant to Section 4.6 or Section 7.6; provided that a Limited Partner shall be required to return any distribution made to it in error. To the extent any Limited Partner is required by the Partnership Act to return to the Partnership any distributions made to it and does so, such Limited Partner shall have a right of contribution from each other Limited Partner similarly liable to return distributions made to it to the extent that such Limited Partner has returned a greater percentage of the total distributions made to it and required to be returned by it than the percentage of the total distributions made to such other Limited Partner and so required to be returned by it.

7.2 No Participation in Management

     The Limited Partners (in their capacity as such) shall not participate in the control, management, direction, or operation of the affairs of the Partnership and shall have no power to bind the Partnership.

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7.3 Transfer of Limited Partnership Interests

     (a) A Limited Partner may not Transfer all or a portion of its interest in the Partnership without the consent of the General Partner; provided that the General Partner shall not unreasonably withhold its consent to a Transfer by an IP Limited Partner to a Family Related Partner of such IP Limited Partner.

     (b) Unless and until the General Partner consents to the admission of a transferee as a substituted Limited Partner in accordance with this Section 7.3, the transferor shall remain liable for all liabilities and obligations relating to the transferred beneficial interest, if any, and the transferee shall become an assignee of only a beneficial interest in Partnership profits, losses and distributions of such interest. No consent of any other Limited Partner shall be required as a condition precedent to any Transfer.

     (c) Unless the General Partner otherwise determines in its sole discretion, the transferor and transferee of any Limited Partner’s interest shall be jointly and severally obligated to reimburse the General Partner and the Partnership for all reasonable expenses (including attorneys’ fees and expenses) of any Transfer or proposed Transfer of a Limited Partner’s interest, whether or not consummated.

     (d) Any substituted Limited Partner admitted to the Partnership with the consent of the General Partner shall succeed to all the rights and be subject to all the obligations of the transferring or assigning Limited Partner with respect to the interest to which such Limited Partner was substituted. The General Partner may modify Schedule I hereof to reflect such admittance of any substituted Limited Partner. Such substituted Limited Partner shall be treated as having received all of the allocations and distributions received by the transferring or assigning Limited Partner, if any.

     (e) Any Transfer that violates this Section 7.3 shall be void and the purported buyer, assignee, transferee, pledgee, mortgagee, or other recipient shall have no interest in or rights to Partnership assets, profits, losses, or distributions, and neither the General Partner nor the Partnership shall be required to recognize any such purported interest or rights.

7.4 No Termination

     Neither the substitution, death, incompetency, dissolution (whether voluntary or involuntary), nor bankruptcy of a Limited Partner shall affect the existence of the Partnership, and the Partnership shall continue for the Term of the Partnership until its existence is terminated as provided herein.

7.5 Additional Limited Partners

     Additional Limited Partners will be admitted only with the consent of the General Partner on such terms as agreed upon by the General Partner and the Person seeking admission to the Partnership.

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7.6 Reimbursement for Payments on Behalf of a Partner

     (a) If the Partnership is obligated to pay any amount to a governmental agency or body or to any other Person (or otherwise make a payment) because of a Partner’s status or otherwise specifically attributable to a Partner (including, without limitation, federal withholding taxes with respect to foreign Partners, state withholding taxes, state personal property taxes, state unincorporated business taxes, etc.) then such Partner (the “Reimbursing Partner”) shall reimburse the Partnership in full for the entire amount paid (including, without limitation, any interest, penalties, and expenses associated with such payment). At the election of the General Partner, the amount to be reimbursed may be charged against the Capital Account of the Reimbursing Partner, and the Partnership shall reduce subsequent distributions which would otherwise be made to the Reimbursing Partner until the Partnership has recovered the amount to be reimbursed; provided that the amount of such reduction shall be deemed to have been distributed for all purposes of this Agreement, but such deemed distribution shall not further reduce the Reimbursing Partner’s Capital Account.

     (b) A Partner’s obligation to reimburse the Partnership under this Section 7.6 shall survive the termination, dissolution, liquidation, and winding-up of the Partnership, and for purposes of this Section 7.6, the Partnership shall be treated as continuing in existence.

ARTICLE VIII
DURATION AND TERMINATION

8.1 Term

     The Partnership shall continue until the occurrence of any of the following events: (i) the entry of a decree of judicial dissolution under the Act or (ii) an election by the General Partner to dissolve the Partnership.

8.2 Termination and Liquidation

     (a) The Partnership shall not terminate immediately upon the expiration of its Term under Section 8.1, but shall cease to engage in further business except to the extent necessary to promptly wind-up its affairs, perform existing contracts, and preserve the value of the Program Assets.

     (b) During the course of winding-up the Partnership all of the provisions of this Agreement shall continue to bind the parties and apply to the activities of the Partnership except as specifically provided to the contrary, but there shall be no distributions to the Partners except as provided in this Section 8.2.

     (c) Upon the expiration of the Partnership’s Term, the General Partner shall take such actions as it may think fit for winding-up the Partnership and liquidating the Program Assets, including:

(i) The filing of all certificates and notices of dissolution as are required by applicable law; and

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(ii) The Realization of any Program Asset (unless the General Partner intends to distribute such Program Asset in kind); provided that all such Realizations shall be conducted in an orderly and businesslike manner so as not to involve undue sacrifice.

The General Partner in taking such actions may exercise and shall have the benefit of all rights, powers, and discretions vested in the General Partner pursuant to the provisions of this Agreement. If the General Partner is not able to act as the liquidator of the Partnership or exercise the powers inherent thereto, a liquidator shall be appointed by the Residual Limited Partner.

     (d) Upon dissolution of the Partnership, all Partnership assets shall be distributed or used as follows and in the following order of priority:

(i)	For the payment of the debts and liabilities of the Partnership, including, without limitation, the expenses of liquidation.
(ii)	For the setting up of any reserves which the General Partner may deem reasonably necessary for any liabilities or obligations of the Partnership.
(iii)	To the Partners in accordance with the provisions of Article IV.

     (e) The Partnership shall be terminated only after the Partnership assets have been distributed as provided in this Section 8.2.

ARTICLE IX
VALUATION OF PARTNERSHIP ASSETS

9.1 Normal Valuation

     For purposes of this Agreement, the value of any asset as of any date (or in the event such date is a holiday or other day which is not a business day, as of the immediately preceding business day) shall be valued by the General Partner in good faith using methods it considers appropriate.

9.2 Restrictions on Transfer or Blockage

     Any security which is held under a representation that it has been acquired for investment purposes and not with a view to public sale or distribution, or which is held subject to any other restriction on transfer, or where the size of the Partnership’s holdings compared to the trading volume would adversely affect the marketability of such security, shall be valued at such discount as the Program Manager deems reasonably necessary to reflect the marketability and value of such security.

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ARTICLE X
BOOKS OF ACCOUNTS; MEETINGS

10.1 Books

     The Partnership shall maintain complete and accurate books of accounts of the Partnership’s affairs at the Partnership’s principal office.

10.2 Fiscal Year

     The fiscal year and taxable year of the Partnership shall be the calendar year, unless otherwise determined by the General Partner.

10.3 Reports

     The General Partner shall furnish to each Partner the following information and reports prepared in accordance with U.S. generally accepted accounting principles (“GAAP”):

     (a) As soon as practicable after the end of each fiscal year commencing with the first year in which the Partnership is in operation for a full fiscal year, (i) financial statements for the Partnership for such year (audited by a firm of independent certified public accountants of recognized national standing selected by the General Partner), and (ii) a statement of each Partner’s closing Capital Account balance as of the end of such year; and

     (b) As soon as practicable after the end of each fiscal year, the Partnership’s United States federal income tax return, including such Partner’s Schedule K-1 for such fiscal year.

ARTICLE XI
MISCELLANEOUS

11.1 Amendments

     This Agreement may be amended by the written consent of the General Partner, provided that if such amendment would adversely affect any Carried Interest Partner, then the Carried Interest Partner so affected must consent to such amendment. Notwithstanding anything in this Agreement to the contrary, this Agreement may be amended by the General Partner without the consent of any other Partner in order to cure any ambiguity or error, make an inconsequential revision, provide clarity, comply with any law or regulation or correct or supplement any provision herein which may be defective or inconsistent with any other provisions herein; provided that, except with respect to amendments necessary to comply with any law or regulation, such amendment does not materially and adversely affect any Limited Partner.

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11.2 Successors

     Except as otherwise provided herein, this Agreement shall inure to the benefit of and be binding upon the Partners and their legal representatives, heirs, successors, and assigns.

11.3 Governing Law; Severability

     This Agreement shall be governed by and construed in accordance with the laws of the State of Florida, and, to the maximum extent possible, in such manner as to comply with all the terms and conditions of the Partnership Act. If it is determined by a court of competent jurisdiction that any provision of this Agreement is invalid under applicable law, such provision shall be ineffective only in such jurisdiction and only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement.

11.4 Notices

     All notices, demands, and other communications to be given and delivered under or by reason of provisions under this Agreement shall be in writing and shall be deemed to have been given on the date when personally delivered, when mailed by first class mail, when sent by facsimile or transmitted by email or the internet, or when sent by reputable overnight courier service, in each case to the recipient at the address, facsimile number or email address set forth in Schedule I hereof or to such other address, facsimile number, or email address, or to the attention of such other Person as has been indicated in writing to the General Partner.

11.5 Arbitration

     The parties to this Agreement shall each use good faith efforts for a period of 30 days (or such longer time as agreed to by the applicable parties) to try to resolve any controversy, dispute, or claim arising out of or in connection with this Agreement, or the breach, termination or validity hereof. Thereafter, if such controversy, dispute, or claim remains, it shall be settled by final and binding arbitration to be conducted by an arbitration tribunal in Fort Lauderdale, Florida, pursuant to the rules of the American Arbitration Association. The arbitration tribunal shall consist of three arbitrators. The party initiating the controversy, dispute, or claim that led to arbitration shall nominate one arbitrator in the request for arbitration and the other party shall nominate a second arbitrator in the answer thereto within 30 days of receipt of the request; provided that if there are multiple initiating or answering parties, the arbitrator selected must be reasonably acceptable to all initiating or answering parties, as applicable. The two arbitrators so named will then jointly appoint the third arbitrator. If the answering party fails to nominate its arbitrator within the 30-day period, or if the arbitrators named by the parties fail to agree on the third arbitrator within 60 days, the office of the American Arbitration Association in New York, New York shall make the necessary appointments of such arbitrator(s). The decision or award of the arbitration tribunal (by a majority determination, or if there is no majority, then by the determination of the third arbitrator, if any) shall be final, and judgment upon such decision or award may be entered in any competent court or application may be made to any competent court for judicial acceptance of such decision or award and an order of enforcement. In the event of any procedural matter not covered by the aforesaid rules, the procedural law of the State of Florida shall govern.

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11.6 Miscellaneous

     This Agreement (including the Appendices hereto) contains the entire agreement among the parties and supersedes all prior arrangements or understanding with respect thereto. Descriptive headings are for convenience only and shall not control or affect the meaning or construction of any provision of this Agreement. This Agreement may be executed in any number of counterparts, any one of which need not contain the signatures of more than one party, but all of such counterparts together shall constitute one agreement. Whenever from the context it appears appropriate, each term stated in either the singular or the plural shall include the singular and the plural, and pronouns stated in either the masculine, the feminine or the neuter gender shall include the masculine, the feminine, and the neuter.

11.7 No Third Party Beneficiaries

     No Person that is not a party hereto shall have any rights or obligations pursuant to this Agreement. The rights and obligations set forth herein are for the benefit of the parties hereto only and do not create or grant any rights to third parties.

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

GENERAL PARTNER: SPONSOR PARTNER: ODI PROGRAM GP CORPORATION
By:	/s/ John K. Grelle
	Name:	John K. Grelle
	Title:	Chief Financial Officer
RESIDUAL LIMITED PARTNER: WOODBRIDGE EXECUTIVE INCENTIVE PLAN 1, LP
By:	WOODBRIDGE FUND I, LLC, its General Partner
By:	WOODBRIDGE HOLDINGS CORPORATION, its Sole Member
By:	/s/ John K. Grelle
	Name:	John K. Grelle
	Title:	Chief Financial Officer

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IP LIMITED PARTNERS:
 

/s/ Alan B. Levan  

Alan B. Levan 

/s/ John E. Abdo  

John E. Abdo 

/s/ Seth M. Wise  

Seth M. Wise 

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PROGRAM MANAGER: WOODBRIDGE FUND I, LLC
By:	WOODBRIDGE HOLDINGS CORPORATION, its Sole Member
By:	/s/ John K. Grelle
	Name:	John K. Grelle
	Title:	Chief Financial Officer
INITIAL LIMITED PARTNER: WOODBRIDGE HOLDINGS CORPORATION
By:	/s/ John K. Grelle
	Name:	John K. Grelle
	Title:	Chief Financial Officer

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Schedule I
ODI Program Partnership, LLLP
List of Carried Interest Partners and Applicable Carry Percentages

Carried Interest Partner	Carry Percentage
Sponsor Partner		35.0	%
IP Limited Partners (divided as listed below)		32.5	%
Alan Levan		37.5%
Jack Abdo		37.5%
Seth Wise		25.0%
Residual Limited Partner		32.5	%
TOTAL		100.0	%

Schedule II
Program Expenses

Amounts Included in Program Expenses	Amounts Excluded from Program Expenses
Salaries and bonuses Salary for any investment professionals of the Program Manager, except in the case where Woodbridge Holdings executives are the investment professionals. Salaries and cash bonus of direct dedicated staff members.	Salaries and bonuses Woodbridge Holdings incentive stock options or stock grants to any investment professional or dedicated staff member as part of a Woodbridge Holdings-wide incentive compensation program.
Direct Expenses Direct dedicated expenses incurred directly by the Program Manager, including rent, facilities charges, equipment and supplies, except in the case where Woodbridge Holdings executives are the investment professionals. Outside legal and accounting expenses incurred for services rendered with respect to the Program Manager or the Partnership, including formation costs, and tax return preparation. Unreimbursed costs of transactions, including due diligence expenses and the carrying costs of deposits, to the extent the transaction that generated the cost does not close. Travel expenses neither capitalized as part of the acquisition of a completed transaction nor borne by the target company. Standard charges by internal Woodbridge Holdings personnel for provision of back-office support services directly related to the program or Program Assets (i.e., providing the accounting services for the Partnership, providing human resources services for the Partnership).	Direct Expenses Time of Investment Committee in evaluating investment recommendations.

Amounts Included in Program Expenses	Amounts Excluded from Program Expenses
Standard charges by BFC Shared Services for back-office support services directly related to the program or Program Assets. Interest on borrowings of the Program Manager, including any that accrued at the rate of 12% compounded per annum on amounts received through a pre-approved line of credit from Woodbridge Overhead Funding, LLC. For purposes of this provision, all amounts of funds provided to the Program Manager shall be treated as borrowings and shall accrue 12% interest regardless of whether such funds were provided in the form of loans, equity capital, or otherwise.
Allocation of Woodbridge Holdings Overhead None.	Allocation of Woodbridge Holdings Overhead General corporate overhead (i.e., public company costs, office expenses for non-dedicated staff, investor relations and accounting staff not dedicated, analytical staff providing analytics to Woodbridge Holdings, management for oversight of programs and Program Assets). Any other overhead expenses not expressly included on this Schedule II as Program Expenses.

APPENDIX A:
Tax and Accounting Provisions

A-1 Definitions

     For purposes of this Appendix A, any capitalized term not defined herein shall have the meaning set forth in the Agreement.

     “Adjusted Capital Account Deficit” means, with respect to any Partner, the deficit balance, if any, in such Partner’s Capital Account, as of a specified time, after giving effect to the following adjustments:

     (a) credit to such Partner’s Capital Account any amounts that such Partner is obligated to restore or deemed obligated to restore pursuant to Treasury Regulations Section 1.704-1(b)(2)(ii)(c) and the penultimate sentences of Treasury Regulations Section 1.704-2(g)(1) and Treasury Regulations Section 1.704-2(i)(5); and

     (b) debit to such Partner’s Capital Account the items described in Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).

The foregoing definition of Adjusted Capital Account Deficit is intended to comply with the provisions of Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

     “Book Value” means, with respect to any asset, the asset’s adjusted basis for U.S. federal income tax purposes, except as follows:

     (a) the initial Book Value of any asset that is not Contributed Property as defined in the Agreement but is otherwise contributed or deemed contributed to the Partnership shall be such asset’s gross fair market value at the time of such contribution as determined by the General Partner pursuant to Article IX of the Agreement;

     (b) the initial Book Value of any asset that is Contributed Property as defined in Section 3.1(a) of the Agreement shall be the value set forth in Section 3.1(a) of the Agreement;

     (c) the Book Value of all Partnership assets may be adjusted in the discretion of the General Partner to equal their respective gross fair market values, as determined by the General Partner pursuant to Article IX of the Agreement, at the times specified in Treasury Regulations Section 1.704-1(b)(2)(iv)(f);

     (d) any adjustments to the adjusted basis of any asset of the Partnership pursuant to Section 734 or Section 743 of the Code shall be taken into account in determining such asset’s Book Value in a manner consistent with Treasury Regulations Section 1.704-1(b)(2)(iv)(m);

     (e) the Book Value of any Partnership asset distributed or deemed distributed by the Partnership to any Partner shall be adjusted immediately prior to such distribution to equal its gross fair market value as of the date of distribution, as determined by the General Partner pursuant to Article IX of the Agreement; and

A-1

     (f) if the Book Value of an asset has been determined pursuant to clauses (a), (c) or (d) of this definition, to the extent permitted by the Treasury Regulations, such Book Value shall thereafter be adjusted in the same manner as would the asset’s adjusted basis for U.S. federal income tax purposes, except that depreciation and amortization deductions shall be computed based on the asset’s Book Value as so determined, rather than on its adjusted tax basis.

     “Net Profits” and “Net Losses” mean, for any period, the taxable income or loss, respectively, of the Partnership for such period, in each case as determined for U.S. federal income tax purposes, but computed with the following adjustments:

     (a) items of income, gain, loss and deduction (including, without limitation, gain or loss on the disposition of any Partnership asset and depreciation or other cost recovery deduction or expense) shall be computed based upon the Book Value of the Partnership’s assets rather than upon such assets’ adjusted bases for U.S. federal income tax purposes;

     (b) any tax-exempt income received by the Partnership shall be deemed for these purposes only to be an item of gross income;

     (c) any expenditure of the Partnership described in Section 705(a)(2)(B) of the Code (or treated as described therein pursuant to Treasury Regulations under Section 704(b) of the Code) shall be treated as a deductible expense;

     (d) there shall be taken into account any separately stated items under Section 702(a) of the Code;

     (e) if the Book Value of any Partnership asset is adjusted pursuant to clauses (c) or (e) of the definition of “Book Value” above, or pursuant to clause (d) of such definition (but only to the extent the adjustment is attributable to a distribution of Investment Proceeds not in liquidation of a Partner’s Partnership interest), the amount of such adjustment shall be taken into account in the period of adjustment as gain or loss from the disposition or deemed disposition of such asset for purposes of computing Net Profits and Net Losses; and

     (f) items of income, gain, loss, deduction or credit allocated pursuant to Section A-6 of this Appendix A shall not be taken into account.

     “Tax Matters Partner” has the meaning set forth in Section A-6.

A-2 Maintenance of Capital Accounts

     (a) A Capital Account shall be maintained for each Partner in accordance with Section 704(b) of the Code and Treasury Regulations Sections 1.704-1(b) and 1.704-2. The initial balance of each Capital Account shall be equal to such Partner’s initial capital contribution to the Partnership.

A-2

     (b) The Capital Account of each Partner shall be increased by (i) the amount of any cash contributed by such Partner to the capital of the Partnership, (ii) in the case of any property contributed by such Partner to the capital of the Partnership, the Book Value of such property (net of liabilities that the Partnership is considered to assume or take the property subject to) when contributed, (iii) the amount of any liabilities of the Partnership that are assumed by such Partner (except for liabilities described in Section A-2(c)(ii) of this Appendix A that are assumed by such Partner) for purposes of Treasury Regulations Section 1.704-1(b)(2)(iv)(c), (iv) the Net Profits allocated to such Partner, and (v) any gross income and gain allocated to such Partner.

     (c) The Capital Account of each Partner shall be decreased by (i) the amount of any cash distribution to such Partner when made, (ii) the Book Value of any property distributed to such Partner by the Partnership (net of liabilities that the Partner is considered to assume, or take property subject to) when distributed, (iii) the amount of any liabilities of such Partner that are assumed by the Partnership (except for liabilities described in Section A-2(b)(ii) of this Appendix A that are assumed by the Partnership) for purposes of Treasury Regulations Section 1.704-1(b)(2)(iv)(c), (iv) the Net Losses allocated to such Partner, and (v) any gross deductions and loss allocated to such Partner.

     (d) In the event that all or a portion of an interest in the Partnership is Transferred in accordance with the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent such Capital Account relates to the Transferred Partnership interest.

     (e) The Capital Account of each Partner shall be adjusted to reflect any adjustment to the Book Value of the Partnership’s assets attributable to the application of Section 734 of the Code in respect of a distribution in liquidation of such Partner’s Partnership interest to the extent required pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m).

     (f) It is the intention of the parties that the Capital Accounts of the Partners be kept in the manner required under Section 704(b) of the Code and Treasury Regulations Sections 1.704-1(b) and 1.704-2. To the extent any additional adjustment to the Capital Accounts is required by such provisions, the General Partner is hereby authorized to make such adjustment after notice to the Partners.

     (g) Except as expressly required herein, no Partner shall be required to restore any negative balance in its Capital Account. No allocation to any Partner of any loss or deduction, whether attributable to depreciation or otherwise, shall create any obligation of that Partner to the Partnership or any other Partner, even if the allocation reduces such Partner’s Capital Account or creates or increases a deficit in its Capital Account.

A-3

A-3 Allocations of Profits and Losses

     (a) After the application of Section A-4, Net Profits and Net Losses for any taxable year, or portion thereof, shall be allocated among the Partners (and credited or debited to their Capital Accounts) in such manner so that, after taking into account distributions by the Partnership and contributions made to the Partnership through the end of such taxable year and the allocations of Net Profits and Net Losses for such taxable year, (i) the respective positive Capital Account balances of the Partners would correspond as closely as possible to the amount each Partner would receive as a cash distribution pursuant to Article IV of the Agreement, if the Partnership were to liquidate completely immediately after the end of such taxable year and (ii) any resulting deficit Capital Account balances of the Partners would correspond as closely as possible with the manner in which economic responsibility for Partnership deficit balances (as determined in accordance with the principles of Treasury Regulations under Section 704 of the Code) would be borne by the Partners under the terms of this Agreement if the Partnership were to liquidate completely immediately after the end of such taxable year. For purposes of the preceding sentence, the amount of cash to be distributed to each Partner, the amount of each Partner’s Capital Account and the amount of each Partner’s economic responsibility for Partnership deficit balances, upon the assumed liquidation, shall be computed by assuming that in connection with such liquidation, the Partnership sold all of its assets for amounts such that no Net Profits or Net Losses result from the sale and settled all of its liabilities for amounts such that no Net Profits or Net Losses result from the settlement. For purposes of applying this Section A-3, the Capital Account balance of each Partner shall be increased by such Partner’s share of “partnership minimum gain” and “partner minimum gain” (within the meaning of and in accordance with the Treasury Regulations under Section 704(b) of the Code). Subject to the other provisions of this Appendix A, an allocation to a Partner of a share of Net Profit or Net Loss shall be treated as an allocation of the same share of each item of income, gain, loss or deduction that is taken into account in computing Net Profit or Net Loss.

     (b) If a Partner Transfers, acquires, or redeems an interest in the Partnership during a taxable year, the Net Profit or Net Loss (and other items referred to in Section A-4 of this Appendix A) attributable to such interest for such year shall be allocated between the transferring Partner and the transferee (or the other Partners in the Partnership) by any method permitted under Section 706 of the Code as selected by the General Partner.

A-4 Regulatory Allocations and Special Allocations

     (a) Notwithstanding any other provision of the Agreement or this Appendix A, (i) “partner nonrecourse deductions” (as defined in Treasury Regulations Section 1.704-2(i)), if any, of the Partnership shall be allocated for each period to the Partner that bears the economic risk of loss within the meaning of Treasury Regulations Section 1.704-2(i), and (ii) “nonrecourse deductions” (as defined in Treasury Regulations Section 1.704-2(b)) and “excess nonrecourse liabilities” (as defined in Treasury Regulations Section 1.752-3(a)), if any, of the Partnership shall be allocated to the Partners in accordance with their respective percentage interests in Net Losses.

     (b) The Agreement and this Appendix A shall be deemed to include “qualified income offset,” “minimum gain chargeback” and “partner nonrecourse debt minimum gain chargeback” provisions within the meaning of Treasury Regulations under Section 704(b) of the Code. Accordingly, notwithstanding any other provision of this Agreement or this Appendix A, items of gross income shall be allocated to the Partners on a priority basis to the extent and in the manner required by such provisions.

A-4

     (c) To the extent that Net Losses or items of loss or deduction otherwise allocable to a Partner hereunder would cause such Partner to have an Adjusted Capital Account Deficit as of the end of the taxable year to which such Net Losses or items of loss or deduction relate (after taking into account the allocation of all items of income and gain for such taxable period), such Net Losses or items of loss or deduction shall not be allocated to such Partner and instead shall be allocated to the Partners in accordance with Section A-3 of the Agreement as if such Partner were not a Partner.

     (d) Any allocations required to be made pursuant to clauses (a), (b), and (c) above (the “Regulatory Allocations”) (other than allocations, the effect of which are likely to be offset in the future by other special allocations) shall be taken into account, to the extent permitted by the Treasury Regulations, in computing subsequent allocations of income, gain, loss or deduction pursuant to Section A-3 so that the net amount of any items so allocated and all other items allocated to each Partner shall, to the extent possible, be equal to the amount that would have been allocated to each Partner pursuant to Section A-3 had such Regulatory Allocations under this Section A-4 not occurred.

     (e) If any Partner is treated for income tax purposes as realizing ordinary income because of receipt of its Partnership interest (whether under Section 83 of the Code or any similar provisions of any law, rule or regulations or any other applicable law, rule, regulation or doctrine) and the Partnership is entitled to any offsetting deduction, the Partnership’s deduction shall be allocated among the Partners in such manner as to, as nearly as possible, offset such ordinary income realized by such Partner.

A-5 Tax Allocations

     (a) For federal income tax purposes, except as otherwise provided in this Section A-5, each item of income, gain, loss, and deduction and credit shall be allocated among the Partners in the same manner as its corresponding item of book income, gain, loss, deduction or credit is allocated pursuant to this Appendix A.

     (b) In accordance with Sections 704(b) and 704(c) of the Code and the Treasury Regulations thereunder, income, gain, loss and deduction with respect to any Partnership asset contributed (or deemed contributed) to the capital of the Partnership shall, solely for federal income tax purposes, be allocated among the Partners so as to take into account any variation between the adjusted basis of such Partnership asset for federal income tax purposes and its Book Value upon its contribution (or deemed contribution). If the Book Value of any Partnership asset is adjusted, subsequent allocations of taxable income, gain, loss and deduction with respect to such Partnership asset shall take account of any variation between the adjusted basis of such Partnership asset for federal income tax purposes and the Book Value of such Partnership asset in the manner prescribed under Code Sections 704(b) and 704(c) and the Treasury Regulations thereunder. The General Partner shall select the manner by which variations between Book Value and adjusted basis are taken into account in accordance with Code Sections 704(b) and 704(c) and the Treasury Regulations thereunder.

A-5

     (c) The provisions of this Appendix A (and other related provisions in the Agreement) pertaining to the allocation of items of Partnership income, gain, loss, deduction, and credit shall be interpreted consistently with the Treasury Regulations, and to the extent unintentionally inconsistent with such Treasury Regulations, shall be deemed to be modified to the extent necessary to make such provisions consistent with the Treasury Regulations.

A-6 Tax Matters Partner; Management Authority Regarding Tax and Accounting

     (a) The General Partner is designated the “Tax Matters Partner” (as defined in Section 6231(a)(7) of the Code) to manage administrative tax proceedings conducted at the partnership level by the Internal Revenue Service with respect to Partnership matters. The General Partner is specifically directed and authorized to take whatever steps the General Partner, in its sole discretion, deems necessary or desirable to perfect such designation, including, without limitation, filing any forms or documents with the Internal Revenue Service and taking such other action as may from time to time be required under Treasury regulations. The Tax Matters Partner shall have full authority to extend the statute of limitations and control any tax audit or other proceeding on behalf of the Partnership. Expenses of administrative proceedings relating to the determination of Partnership items at the Partnership level undertaken by the Tax Matters Partner will be deemed to be Program Expenses.

     (b) All matters concerning (i) allocations of Net Profits and Net Losses and allocations for tax purposes, (ii) distributions by the Partnership, including the taxes thereon, and (iii) accounting procedures and determinations, tax determinations, determinations as to on whose behalf expenses were incurred and the attribution of fees and expenses to a Program Asset, and other determinations not specifically and expressly provided for by the terms of this Agreement, shall be determined by the General Partner, whose determination shall be final and conclusive as to all the Partners absent manifest clerical error.

     (c) At the General Partner’s sole discretion, the General Partner may cause the Partnership to make or refrain from making any and all elections permitted by the Code and the Treasury Regulations and any state, local, or foreign tax elections. Notwithstanding the foregoing, it is intended that the Partnership be treated as a partnership for U.S. federal income tax purposes, and neither the Partnership nor any Partner shall make any election inconsistent with such treatment without the unanimous written consent of the Partners.

A-6

APPENDIX B:
Apportionment and Modification of
Carried Interest to IP Limited Partners

B-1 Definitions

     For purposes of this Appendix B, any capitalized term not defined herein shall have the meaning set forth in the Agreement.

     “Acquisition Date” means, with respect to a Program Asset, the date the Partnership first made an investment in such Program Asset (or in the case of a Program Asset that is contributed to the Partnership, the date of such contribution).

     “Allocated Reimbursement Payments” means the amount of Reimbursement Payments allocated by the General Partner to each Program Asset. Unless the General Partner adopts another method (with notification to each other Partner), the General Partner shall allocate the Reimbursement Payments made with respect to a particular year to and among the Program Assets held by the Partnership during that year based on the relative Invested Capital in such Program Assets and adjusted (on a weighted average basis) to take into account Program Assets that are held for less than an entire year.

     “Carry Account” has the meaning set forth in Section B-3.

     “Carry Loss” means, with respect to the Realization of any Program Asset, 20% of the amount, if any, by which the combined Investment Proceeds and Sponsor Proceeds generated by such Program Asset are less than the sum of the Full Return Amount and the Hurdle Return Amount of such Program Asset. The General Partner shall use its reasonable discretion in determining the amount of Carry Loss (including adjusting previous allocations of Carry Loss) so as to cause the amount of Carry Loss to accurately reflect the amount by which all Carry Distributions that will ultimately be apportioned by the Partnership with respect to all other Program Assets will be reduced, which determination shall then be binding on the Partnership and the Partners.

     “Carry Profit” means, with respect to any particular Program Asset, the amount by which the Investment Proceeds or Sponsor Proceeds generated by that Program Asset produce or lead to the production of Carry Distributions, as determined by the General Partner. In general, the Carry Profit with respect to any Program Asset will equal the sum of the following amounts:

     (a) 0% of that portion of the combined Investment Proceeds and Sponsor Proceeds from such Program Asset as does not exceed the sum of the applicable Full Return Amount and the applicable Hurdle Return Amount;

     (b) 80% of that portion of the combined Investment Proceeds and Sponsor Proceeds that is in excess of the sum of the applicable Full Return Amount and the applicable Hurdle Return Amount but that is less than the sum of the applicable Full Return Amount and 133% of the applicable Hurdle Return Amount; and

B-1

     (c) to the extent in excess of the sum of clauses (a) and (b) above, (i) 20% of that portion of the Investment Proceeds that is in excess of the sum of the applicable Full Return Amount plus (ii) 100% of any Sponsor Proceeds.

The General Partner shall use its discretion in determining the amount of Carry Profit (including adjusting previous allocations of Carry Profit) so as to cause the amount of Carry Profit (net of the allocated Carry Loss) to accurately reflect the amount of Carry Distributions that will ultimately be distributed and that are allocable to each Program Asset.

     “Cause Event” means with respect to any IP Limited Partner,

     (a) any act or omission constituting gross negligence, willful misconduct, or fraud in the performance of such IP Limited Partner’s duties or obligations as an employee of the Program Manager;

     (b) any action or omission that causes there to be a material breach of any applicable management agreement to which the Program Manager is a party;

     (c) any willful refusal to perform a duty as directed by Woodbridge or any of its subsidiaries (including the General Partner) if such duty is within the scope of such IP Limited Partner’s duties to the Program Manager, Woodbridge or any of its subsidiaries; or

     (d) any conviction of any crime constituting a felony in the jurisdiction involved (other than a motor vehicle felony for which only a non-custodial penalty is imposed), whether or not involving the Program Manager or the Partnership.

     “Full Return Amount” means, with respect to a Program Asset, the sum of (i) the aggregate Invested Capital and (ii) the Allocated Reimbursement Payments, in each case attributable to such Program Asset.

     “Hurdle Return Amount” means, with respect to a Program Asset, as of any date of determination, the summation of an amount calculated on a daily basis through the applicable date of determination equal to 10% per annum, compounded annually, of (i) the aggregate Invested Capital and the Allocated Reimbursement Payments, in each case attributable to such Program Asset, minus (ii) the aggregate amount of all Investment Proceeds attributable to such Program Asset on or prior to such day.

     “Tenured Asset” means, with respect to any IP Limited Partner, any Program Asset acquired by the Partnership during the period when such Person was an IP Limited Partner (and not a Terminated IP Limited Partner) or any other Program Asset in which such Person has been granted a Carry Percentage by the General Partner. For the avoidance of doubt, an IP Limited Partner will not receive a Carry Percentage with respect to any asset that is not a Tenured Asset.

B-2

     “Terminated IP Limited Partner” means any IP Limited Partner whose employment with the Woodbridge Employer is terminated for any reason, whether voluntarily or involuntarily, and with or without cause. In the General Partner’s discretion, an IP Limited Partner whose employment with the Woodbridge Employer is terminated contemporaneously with such IP Limited Partner becoming employed by another entity within Woodbridge shall not be treated as having been terminated, and the new employer shall become the Woodbridge Employer for purposes of this definition. For purposes of this Agreement, in the case of any Family Related Partner, the termination of employment with the Woodbridge Employer of the IP Limited Partner with whom such Family Related Partner is associated shall cause such Family Related Partner to become a Terminated IP Limited Partner.

     “Vested Percentage” means, with respect to an IP Limited Partner and each Program Asset, that percentage to be applied in determining the amount of Carry Profit or Carry Loss to be allocated to any IP Limited Partner as set forth in the vesting provisions in Section B-2.

     “Woodbridge Employer” means, with respect to any IP Limited Partner, the Program Manager if the IP Limited Partner is an employee of the Program Manager. Otherwise it means the entity within Woodbridge that is the employer of such IP Limited Partner.

B-2 Vesting Provisions

     (a) Non-Tenured Assets. An IP Limited Partner will have a Vested Percentage of 0% in any Program Asset that is not a Tenured Asset with respect to such Partner.

     (b) Tenured Assets. The Vested Percentage of an IP Limited Partner with respect to a Tenured Asset will be as follows:

(i)	Distributions or Realizations While Employed. An IP Limited Partner will have a Vested Percentage of 100% in all Carry Profit or Carry Loss attributable to any Investment Proceeds or Sponsor Proceeds received by the Partnership from such Partner’s Tenured Assets, or any other consequences of a Realization of a Tenured Asset, if those proceeds are received or the Realization occurs prior to the IP Limited Partner becoming a Terminated IP Limited Partner. For the avoidance of doubt, an IP Limited Partner shall have a Vested Percentage of 100% in any Carry Loss associated with an unreversed Impairment that arises on or prior to an IP Limited Partner becoming a Terminated IP Limited Partner.
(ii)	Termination for Cause. An IP Limited Partner will have a Vested Percentage of 0% in all Carry Profit or Carry Loss attributable to any Investment Proceeds or Sponsor Proceeds received by the Partnership from such IP Limited Partner’s Tenured Assets, or any other consequences of a Realization of a Tenured Asset, if those proceeds are received or the Realization occurs after such IP Limited Partner has become a Terminated IP Limited Partner because of the occurrence of a Cause Event with respect to such IP Limited Partner.
(iii)	Termination Not for Cause. An IP Limited Partner will have a Vested Percentage of 75% in all Carry Profit or Carry Loss attributable to any Investment Proceeds or Sponsor Proceeds received by the Partnership from such IP Limited Partner’s Tenured Assets, or any other consequences of a Realization of a Tenured Asset, if those proceeds are received or the Realization occurs after such IP Limited Partner has become a Terminated IP Limited Partner because (i) the Woodbridge Employer terminated the employment for a reason other than the occurrence of a Cause Event with respect to such IP Limited Partner or (ii) of the death, permanent disability or legal incapacity of such IP Limited Partner.

B-3

(iv) Voluntary Resignation. An IP Limited Partner will have a Vested Percentage as determined pursuant to the following sentence in all Carry Profit or Carry Loss attributable to any Investment Proceeds or Sponsor Proceeds received by the Partnership from such IP Limited Partner’s Tenured Assets, or any other consequences of a Realization of a Tenured Asset, if those proceeds are received or the Realization occurs after such IP Limited Partner has become a Terminated IP Limited Partner because the IP Limited Partner voluntarily left the employment of the Woodbridge Employer. For purposes of this clause (iv), the Vested Percentage shall be determined separately for each Program Asset and shall equal: (A) 25% upon the Acquisition Date of such Program Asset, (B) an additional 12.5 percentage points per year upon each of the first four anniversaries of the Acquisition Date, and (C) the remainder when the Tenured Asset is Realized.

     (c) Permitted Modifications. Notwithstanding the foregoing, the General Partner may, after consultation with the Program Manager, modify this vesting schedule for any additional IP Limited Partner admitted to the Partnership pursuant to Section 7.5 of the Agreement, including granting an additional IP Limited Partner the right to have a Vested Percentage in Program Assets whose Acquisition Date preceded the time such additional IP Limited Partner was admitted to the Partnership.

     (d) Permitted Adjustments. As described in Section B-3(b), the General Partner, in its discretion, is permitted to make adjustments, including retroactive adjustments, to the allocations of Carry Profit and Carry Loss. The ability of the General Partner to make these adjustments shall not be restricted by the application of the vesting provisions in this Section B-2.

     (e) Family Related Partner. A Family Related Partner’s Vested Percentage shall be equivalent to the Vested Percentage of the IP Limited Partner associated with such Family Related Partner.

B-3 Determination of Carry Accounts

     (a) Maintenance of Carry Accounts. A separate bookkeeping account (a “Carry Account”) shall be maintained for each IP Limited Partner. Immediately prior to the Partnership making any Carry Distributions or upon the Realization of a Program Asset, the Carry Profit (or Carry Loss) determined with respect to such distribution or Realization shall be credited (or debited, and, if necessary, to an amount below zero) to the Carry Account of each IP Limited Partner in an amount equal to such IP Limited Partner’s Carry Percentage in the Program Asset giving rise to such Carry Profit (or Carry Loss) multiplied by such IP Limited Partner’s Vested Percentage in such Carry Profit (or Carry Loss). An IP Limited Partner’s Carry Account shall be debited by the amount of Carry Distributions made to such IP Limited Partner.

B-4

     (b) Adjustments to Carry Accounts. The General Partner, in its discretion, is permitted to make adjustments, including retroactive adjustments, to the allocations of Carry Profit and Carry Loss so that, on an aggregate basis the Carry Accounts of the IP Limited Partners more closely match the aggregate rights of the IP Limited Partners to receive Carry Distributions or to make clawback payments as provided in Article IV of the Agreement. Except to the extent the General Partner determines otherwise (with notice to the other Partners), the General Partner intends to cause any shortfall in the aggregate net Carry Profits (i.e., net of aggregate Carry Losses) as compared to the aggregate amount of Carry Distributions (net of clawback payments) distributable to the IP Limited Partners in accordance with Article IV of the Agreement to be allocated on a pro rata basis to each Program Asset that otherwise produced Carry Profit (and among them based on the relative amounts of Carry Profit).

     (c) Deemed Realization. Solely for purposes of determining an IP Limited Partner’s Carry Account, the General Partner may, upon the admittance of a new Carried Interest Partner or at any other time, deem there to have been a Realization of one or more Program Assets at the Fair Market Value at such time of such Program Asset, in which case the deemed Carry Profit or Carry Loss derived from such deemed Realization shall be allocated among the IP Limited Partners and charged to the Carry Accounts of the IP Limited Partners. Any future actual or deemed Realization of a Program Asset shall take into account the prior deemed Realization or Realizations. Notwithstanding the foregoing, for purposes of determining an IP Limited Partner’s Vested Percentage pursuant to Section B-2, such deemed Realizations shall be disregarded.

B-4 Distributions to the IP Limited Partners

     Subject to the holdback provisions of Section 4.5 of the Agreement, each IP Limited Partner shall be entitled to receive an amount of Carry Distributions equal to the positive balance in his Carry Account, provided that the sum of all of the Carry Distributions made to date to the IP Limited Partners as a group cannot exceed the product of (A) the total Carry Distributions made to date times (B) the aggregate Carry Percentages for all of the IP Limited Partners (adjusted as necessary to take into account changes in Carry Percentages since the formation of the Partnership). If the amount of Carry Distributions to be made to the IP Limited Partners as a group is insufficient to reduce the positive Carry Account balances of all IP Limited Partners to zero, then Carry Distributions made to the IP Limited Partners as a group will be made pro rata among the IP Limited Partners based on their relative Carry Account balances. If the amount of Carry Distributions to be made to the IP Limited Partners exceeds the aggregate positive Capital Account balances of the IP Limited Partners, such excess shall be distributed among the IP Limited Partners in the manner that the General Partner determines most appropriately reflects the IP Limited Partners’ relative Carry Percentages (as adjusted by the Vested Percentages) in the Program Assets giving rise to the Carry Distributions.

B-5 Responsibility for Gross Clawback Amount

     Each IP Limited Partner shall be responsible (only to the extent of Section 4.6(c) of the Agreement) for a portion of the Gross Clawback Amount equal to the negative balance, if any, in such IP Limited Partner’s Carry Account as of the final liquidating distribution of assets of the Partnership pursuant to Section 8.2 of the Agreement.

B-6 83(b) Election

     Each Carried Interest Partner shall make a timely election under Section 83(b) of the Code with respect to such Carried Interest Partner’s interest in the Partnership.

B-5

EX-12.1

Exhibit 12.1

Woodbridge Holdings Corporation
Calculation of Ratio of Earnings to Fixed Charges
(Dollars in thousands)

	Year ended December 31,
	2008			2007			2006			2005			2004
Earnings:
Pre-tax income or loss from operations before adjustment for income or loss from equity investees	$	(42,360	)		(267,262	)		(24,378	)		74,469			74,194
Fixed charges		22,367			50,767			42,002			19,264			11,099
Add: Amortization of capitalized interest		326			17,949			15,358			8,959			9,872
Distributed income from equity investees		400			267			754			447			9,744
Capitalized interest		(11,500	)		(46,960	)		(42,002	)		(19,264	)		(10,840	)
	$	(30,767	)		(245,239	)		(8,266	)		83,875			94,069
Fixed charges:
Interest expense	$	10,867			3,807			—			—			259
Interest capitalized		11,500			46,960			42,002			19,264			10,840
	$	22,367			50,767			42,002			19,264			11,099
Ratio of earnings to fixed charges		—			—			—			4.35			8.48
Deficiency	$	53,134			296,006			50,268			—			—

EX-21.1

Exhibit 21.1

Subsidiaries of Woodbridge Holdings Corporation	State or Other Jurisdiction of Incorporation, Organization or Formation
BankAtlantic Venture Partners 1, LLC	Florida
BankAtlantic Venture Partners 2, LLC	Florida
BankAtlantic Venture Partners 3, LLC	Florida
BankAtlantic Venture Partners 4, LLC	Florida
BankAtlantic Venture Partners 7, Inc	Florida
BankAtlantic Venture Partners 8, Inc	Florida
BankAtlantic Venture Partners 9, Inc	Florida
BankAtlantic Venture Partners 10, Inc	Florida
BankAtlantic Venture Partners 14, Inc	Florida
BankAtlantic Venture Partners 15, Inc	Florida
Carolina Oak Homes, LLC	So. Carolina
Core Communities, LLC	Florida
Cypress Creek Capital Holdings, LLC	Florida
Cypress Creek Holding, LLC	Delaware, Florida (as a foreign LLC)
Levitt Commercial, LLC	Florida
Levitt Insurance Service, LLC	Florida
Woodbridge Capital Corporation	Florida
Woodbridge Equity Fund, LLLP	Florida
Woodbridge Equity Fund II, LLP	Florida
Snapper Creek Equity Management, LLP	Florida
Woodbridge Financial, LLC	Florida
Subsidiaries of Levitt Commercial, LLC	State or Other Jurisdiction of Incorporation, Organization or Formation
Levitt Commercial Andrews, LLC	Florida
Levitt Commercial Boynton Commerce Center, LLC	Florida
Levitt Commercial High Ridge II, LLC	Florida
Levitt Commercial High Ridge, LLC	Florida
Levitt Commercial Sawgrass, LLC	Florida
Levitt Commercial Development LLC	Florida
Levitt Village at Victoria Park, LLC	Florida
Subsidiaries of Levitt Commercial Development, LLC	State or Other Jurisdiction of Incorporation, Organization or Formation
Levitt Commercial Construction, LLC	Florida

Subsidiaries of Core Communities, LLC	State or Other Jurisdiction of Incorporation, Organization or Formation
Core Commercial Group, LLC	Florida
Core Commercial Realty, LLC	Florida
Core Communities of South Carolina, LLC (f/k/a Core Communities S.C. Operations, LLC)	So. Carolina
Horizons Acquisition 5, LLC	Florida
Horizons Acquisition 7, LLC	Florida
Horizons St. Lucie Development, LLC	Florida
Lake Charles Development Company, LLC	Florida
Somerset Realty, LLC	Florida
St. Lucie Farms, LLC	Florida
St. Lucie West Development Company, LLC	Florida
Tradition Brewery, LLC	Florida
Tradition Construction, LLC	Florida
Tradition Development Company, LLC	Florida
Tradition Health & Fitness LLC	Florida
Tradition Irrigation Company, LLC	Florida
Tradition Mortgage, LLC	Florida
Tradition Outfitters, LLC	Florida
Tradition Title Company, LLC	Florida
Tradition Village Center, LLC	Florida
Core Development Company, LLC	Mississippi
Core Asset Advisors, LLC	Florida
Subsidiaries of Core Commercial Group, LLC	State or Other Jurisdiction of Incorporation, Organization or Formation
The Landing Holding Company, LLC	Florida
Landing Phase II, LLC (f/k/a Town Hall at Tradition, LLC)	Florida
Subsidiaries of Core Commercial Realty, LLC	State or Other Jurisdiction of Incorporation, Organization or Formation
Tradition Realty, LLC	Florida
Tradition Referral, LLC	Florida
Subsidiaries of Core Communities of South Carolina, LLC (S.C. LLC)	State or Other Jurisdiction of Incorporation, Organization or Formation
Tradition of South Carolina Commercial Development, LLC	South Carolina
Tradition of South Carolina Construction, LLC	South Carolina

Tradition of South Carolina Development Company, LLC	South Carolina
Tradition of South Carolina Irrigation Company, LLC	South Carolina
Tradition Hilton Head Realty, LLC (f/k/a Tradition of South Carolina Realty, LLC)	South Carolina
Tradition of South Carolina Village Center, LLC	South Carolina
Tradition National Golf Club, LLC (f/k/a TSCG Club, LLC)	South Carolina
Tradition Hilton Head, LLC	South Carolina
Subsidiaries of Horizons St. Lucie Development, LLC	State or Other Jurisdiction of Incorporation, Organization or Formation
Tradition Research Park, LLC	Florida
Florida Center for Innovation at Tradition, LLC	Florida
Village Pointe at Tradition, LLC	Florida
Subsidiaries of The Landing Holding Company, LLC	State or Other Jurisdiction of Incorporation, Organization or Formation
The Landing at Tradition Development Company, LLC	Florida
Subsidiaries of Tradition Development Company, LLC	State or Other Jurisdiction of Incorporation, Organization of Formation
Tradition Outlet, LLC	Florida
Tradition House, LLC	Florida
Partnerships of Woodbridge Capital Corporation	State or Other Jurisdiction of Incorporation, Organization or Formation
Woodbridge Equity Fund, LLLP	Florida

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-136569) and Form S-8’s (Nos. 333-11729, 333-134975) of Woodbridge Holdings Corporation of our report dated March 19, 2009 relating to the financial statements, financial statement schedule and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

PricewaterhouseCoopers LLP	/s/ PricewaterhouseCoopers LLP
Fort Lauderdale, Florida	Certified Public Accountants
March 19, 2009

EX-23.2

Exhibit 23.2

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statements (Form S-3 No. 333-136569, Form S-8 No. 333-11728, Form S-8 No. 333-11729, and Form S-8 No. 333-134975) of our report dated March 19, 2009 with respect to the consolidated financial statements of Bluegreen Corporation as of December 31, 2008 and 2007 and for each of the three years in the period ended December 31, 2008, which are included as an Exhibit in the Woodbridge Holdings Corporation Annual Report (Form 10-K) for the year ended December 31, 2008.

/s/ ERNST & YOUNG LLP
Certified Public Accountants

West Palm Beach, Florida
March 19, 2009

EX-31.1

Exhibit 31.1

I, Alan B. Levan, certify that:

1.	I have reviewed this Annual Report on Form 10-K of Woodbridge Holdings Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d – 15(f)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 19, 2009

By:	/s/ Alan B. Levan
	Alan B. Levan,
	Chief Executive Officer

EX-31.2

Exhibit 31.2

I, John K. Grelle, certify that:

1.	I have reviewed this Annual Report on Form 10-K of Woodbridge Holdings Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 19, 2009

By:	/s/ John K. Grelle
	John K. Grelle,
	Chief Financial Officer

EX-32.1

Exhibit 32.1

Certificate Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report on Form 10-K of Woodbridge Holdings Corporation (the “Company”) for the year ended December 31, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Alan B. Levan, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Alan B. Levan
Name:	Alan B. Levan
Title:	Chief Executive Officer
Date:	March 19, 2009

EX-32.2

Exhibit 32.2

Certificate Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report on Form 10-K of Woodbridge Holdings Corporation (the “Company”) for the year ended December 31, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John K. Grelle, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ John K. Grelle
Name:	John K. Grelle
Title:	Chief Financial Officer
Date:	March 19, 2009

EX-99.1

Exhibit 99.1

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

BLUEGREEN CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)

	December 31,			December 31,
	2007			2008
ASSETS
Cash and cash equivalents (including restricted cash of $19,460 and $21,214 at December 31, 2007 and 2008, respectively)	$	144,973		$	81,775
Contracts receivable, net		20,532			7,452
Notes receivable (net of allowance of $17,458 and $52,029 at December 31, 2007 and 2008, respectively)		160,665			340,644
Prepaid expenses		14,824			9,801
Other assets		23,405			27,488
Inventory		434,968			503,269
Retained interests in notes receivable sold		141,499			113,577
Property and equipment, net		94,421			109,501
Goodwill		4,291			—
Total assets	$	1,039,578		$	1,193,507
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Accounts payable	$	38,901		$	24,900
Accrued liabilities and other		60,421			52,283
Deferred income		36,559			29,854
Deferred income taxes		98,362			91,802
Receivable-backed notes payable		54,999			249,117
Lines-of-credit and notes payable		176,978			222,739
10.50% senior secured notes payable		55,000			—
Junior subordinated debentures		110,827			110,827
Total liabilities		632,047			781,522
Minority interest		22,423			29,518
Commitments and contingencies (Note 16)
Shareholders’ Equity
Preferred stock, $.01 par value, 1,000 shares authorized; none issued		—			—
Common stock, $.01 par value, 90,000 shares authorized; 33,957 and 33,996 shares issued at December 31, 2007 and 2008, respectively		339			339
Additional paid-in capital		178,144			182,654
Treasury stock, 2,756 common shares at both December 31, 2007 and 2008, at cost		(12,885	)		(12,885	)
Accumulated other comprehensive income, net of income taxes		9,808			3,173
Retained earnings		209,702			209,186
Total shareholders’ equity		385,108			382,467
Total liabilities and shareholders’ equity	$	1,039,578		$	1,193,507

See accompanying notes to consolidated financial statements.

BLUEGREEN CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)

	Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,
	2006			2007			2008
Revenues:
Gross sales of real estate	$	583,788		$	605,250		$	542,632
Estimated uncollectible VOI notes receivable		(59,497	)		(65,242	)		(75,847	)
Gains on sales of VOI notes receivable		44,700			39,372			8,245
Sales of real estate		568,991			579,380			475,030
Other resort and communities operations revenue		61,753			67,411			69,182
Interest income		40,765			44,703			57,831
		671,509			691,494			602,043
Costs and expenses:
Cost of real estate sales		179,054			178,731			130,267
Cost of other resort and communities operations		44,356			49,982			48,087
Selling, general and administrative expenses		363,962			377,552			369,700
Interest expense		18,785			24,272			20,888
Other expense, net		2,861			1,743			1,637
Restructuring charges		—			—			15,617
Goodwill impairment charge		—			—			8,502
		609,018			632,280			594,698
Income before minority interest and provision for income taxes		62,491			59,214			7,345
Minority interest in income of consolidated subsidiary		7,319			7,721			7,095
Income before provision for income taxes and cumulative effect of change in accounting principles		55,172			51,493			250
Provision for income taxes		20,861			19,567			766
Income (loss) before cumulative effect of change in accounting principle		34,311			31,926			(516	)
Cumulative effect of change in accounting principle, net of tax		(5,678	)		—			—
Minority interest in cumulative effect of change in accounting principle		1,184			—			—
Net income (loss)	$	29,817		$	31,926		$	(516	)
Income (loss) before cumulative effect of change in accounting principle per common share:
Basic	$	1.12		$	1.03		$	(0.02	)
Diluted	$	1.10		$	1.02		$	(0.02	)
Cumulative effect of change in accounting principle, net of tax and net of minority interest in income of cumulative effect of change in accounting principle per common share:
Basic	$	(0.15	)	$	—		$	—
Diluted	$	(0.14	)	$	—		$	—
Net income (loss) per common share:
Basic	$	0.98		$	1.03		$	(0.02	)
Diluted	$	0.96		$	1.02		$	(0.02	)
Weighted average number of common and common equivalent shares:
Basic		30,557			30,975			31,241
Diluted		31,097			31,292			31,241

See accompanying notes to consolidated financial statements.

2

BLUEGREEN CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands)

										Accumulated
										Other
	Common				Additional		Treasury			Comprehensive
	Shares		Common		Paid-in		Stock at			Income, Net of			Retained
	Issued		Stock		Capital		Cost			Income Taxes			Earnings			Total
Balance at December 31, 2005		33,268	$	333	$	169,684	$	(12,885	)	$	8,575		$	147,959		$	313,666
Net income		—		—		—		—			—			29,817			29,817
Net change in unrealized gains on retained interests in notes receivable sold, net of income taxes and reclassification adjustments		—		—		—		—			4,057			—			4,057
Comprehensive income																	33,874
Shares issued upon exercise of stock options		312		3		2,642		—			—			—			2,645
Stock compensation expense		—		—		2,103		—			—			—			2,103
Modification of equity awards and vesting of restricted stock		23		—		735		—			—			—			735
Balance at December 31, 2006		33,603		336		175,164		(12,885	)		12,632			177,776			353,023
Net income		—		—		—		—			—			31,926			31,926
Net change in unrealized gains or losses on retained interests in notes receivable sold, net of income taxes and reclassification adjustments		—		—		—		—			(2,824	)		—			(2,824	)
Comprehensive income																	29,102
Shares issued upon exercise of stock options		140		1		558		—			—			—			559
Stock compensation expense		—		—		2,052		—			—			—			2,052
Vesting of restricted stock		214		2		370		—			—			—			372
Balance at December 31, 2007		33,957	$	339	$	178,144	$	(12,885	)	$	9,808		$	209,702		$	385,108
Net loss		—		—		—		—			—			(516	)		(516	)
Net change in unrealized gains or losses on retained interests in notes receivable sold, net of income taxes and reclassification adjustments		—		—		—		—			(6,635	)		—			(6,635	)
Comprehensive loss																	(7,151	)
Shares issued upon exercise of stock options		39		—		132		—			—			—			132
Stock compensation expense		—		—		4,378		—			—			—			4,378
Balance at December 31, 2008		33,996	$	339	$	182,654	$	(12,885	)	$	3,173		$	209,186		$	382,467

See accompanying notes to consolidated financial statements.

3

BLUEGREEN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

	Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,
	2006			2007			2008
Operating activities:
Net income (loss)	$	29,817		$	31,926		$	(516	)
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:
Cumulative effect of change in accounting principle, net		5,678			—			—
Communities inventory impairment		—			—			5,204
Non-cash stock compensation expense		2,848			2,422			4,378
Minority interest in income of consolidated subsidiary		6,135			7,721			7,095
Depreciation		14,376			14,489			13,243
Amortization		2,793			3,180			1,841
Gain on sales of notes receivable		(44,700	)		(39,372	)		(8,245	)
Loss on disposal of property and equipment		2,096			688			5,140
Provision for loan losses		59,489			65,419			76,079
Provision (benefit) for deferred income taxes		12,835			12,468			(2,804	)
Interest accretion on retained interests in notes receivable sold		(14,569	)		(15,157	)		(17,729	)
Proceeds from sales of notes receivable		218,455			229,067			55,705
Goodwill impairment		—			—			8,502
Changes in operating assets and liabilities:
Contracts receivable		3,854			3,324			13,080
Notes receivable		(283,305	)		(305,972	)		(313,661	)
Prepaid expenses and other assets		(12,009	)		(473	)		3,898
Inventory		(8,273	)		(59,322	)		(53,470	)
Accounts payable, accrued liabilities and other		12,906			28,471			(26,407	)
Net cash provided (used) by operating activities		8,426			(21,121	)		(228,667	)
Investing activities:
Cash received from retained interests in notes receivable sold		30,032			35,949			44,884
Business acquisitions		—			—			(6,105	)
Investments in statutory business trusts		(928	)		(619	)		—
Purchases of property and equipment		(24,736	)		(15,855	)		(22,883	)
Proceeds from sales of property and equipment		93			2			58
Net cash provided by investing activities		4,461			19,477			15,954
Financing activities:
Proceeds from borrowings collateralized by notes receivable		68,393			151,973			287,478
Payments on borrowings collateralized by notes receivable		(85,114	)		(120,145	)		(94,964	)
Proceeds from borrowings under line-of-credit facilities and notes payable		56,670			147,835			105,832
Payments under line-of-credit facilities and notes payable		(94,586	)		(123,320	)		(90,907	)
Payments on 10.50% senior secured notes		—			—			(55,000	)
Proceeds from issuance of junior subordinated debentures		30,928			20,619			—
Payments of debt issuance costs		(4,438	)		(2,052	)		(3,056	)
Proceeds from exercise of employee and director stock options		2,645			559			132
Distributions to minority interest		(941	)		—			—
Net cash (used) provided by financing activities		(26,443	)		75,469			149,515
Net (decrease) increase in cash and cash equivalents		(13,556	)		73,825			(63,198	)
Cash and cash equivalents at beginning of period		84,704			71,148			144,973
Cash and cash equivalents at end of period		71,148			144,973			81,775
Restricted cash and cash equivalents at end of period		(21,476	)		(19,460	)		(21,214	)
Unrestricted cash and cash equivalents at end of period	$	49,672		$	125,513		$	60,561

See accompanying notes to consolidated financial statements

4

BLUEGREEN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS—(Continued)
(in thousands)

	Year Ended		Year Ended			Year Ended
	December 31,		December 31,			December 31,
	2006		2007			2008
Supplemental schedule of non-cash operating, investing and financing activities:
Inventory acquired through financing	$	95,698	$	26,425		$	10,132
Property and equipment acquired through financing	$	4,640	$	1,188		$	4,639
Retained interests in notes receivable sold	$	33,967	$	36,222		$	9,624
Change in net unrealized gains on retained interests in notes receivable sold	$	6,423	$	(4,554	)	$	(10,391	)
Supplemental schedule of operating cash flow information:
Interest paid, net of amounts capitalized	$	17,171	$	24,407		$	21,813
Income taxes paid	$	10,064	$	9,823		$	5,390

See accompanying notes to consolidated financial statements.

5

BLUEGREEN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Significant Accounting Policies

Organization

We provide Colorful Places to Live and Play^® through our resorts and residential communities businesses. Our resorts business (“Bluegreen Resorts”) acquires, develops, markets, sells and manages real estate-based vacation ownership interests (“VOIs”) in resorts generally located in popular, high-volume, “drive-to” vacation destinations. VOIs in our resorts typically entitle the buyer to use resort accommodations through an annual or biennial allotment of “points” which represent their ownership and beneficial use rights in perpetuity in our Bluegreen Vacation Club (supported by an underlying deeded VOI held in trust for the buyer). Members in our Bluegreen Vacation Club may stay in any of our 50 participating resorts or take advantage of an exchange program offered by a third-party world-wide vacation ownership exchange network of over 3,700 resorts and other vacation experiences such as cruises and hotel stays. Additionally, Bluegreen Vacation Club members who acquired or upgraded their VOIs on or after July 1, 2006, also have access to 18 Shell Vacation Club (“Shell”) resorts, through our Select Connections™ joint venture with Shell. Shell is an unaffiliated privately-held resort developer.

Our residential communities business (“Bluegreen Communities”) acquires, develops and subdivides property and markets residential homesites, the majority of which are sold directly to retail customers who seek to build a home generally in the future, in some cases on properties featuring a golf course and other related amenities.

During the fourth quarter of 2008, despite continued and steady customer demand for our VOIs but in light of the turmoil in and contraction of commercial credit markets, we implemented strategic initiatives to significantly reduce resorts sales operations and related overhead, in an effort to conserve cash and increase efficiencies. Such initiatives included closing 11 of our 29 sales offices; greatly eliminating what we have identified as lower-efficiency marketing programs; reducing overhead including eliminating a significant number of staff positions across a variety of areas at various locations; reducing our overall capital spending; and, limiting sales to borrowers who meet newly applied underwriting standards, and increasing interest rates on new sales transactions for which we provide financing, and reducing the proportion of sales requiring financing while increasing the proportion of sales providing cash proceeds. During 2008, we also made changes in the operations of Bluegreen Communities with a goal to minimize the cash requirement in its in light of current economic conditions and the deterioration of the real estate markets (see Note 3 for further explanation on these activities).

Our other resort and communities operations revenues consist primarily of resort property and homeowners’ association management services, resort title services, resort amenity operations, non-cash sales incentives provided to buyers of VOIs, realty operations and daily-fee golf course operations. We also generate significant interest income by providing financing to individual purchasers of VOIs. We believe our property and association management business and our finance operations are continuing sources of cash profits, and therefore have not materially reduced these areas of our business.

Principles of Consolidation

Our consolidated financial statements include the accounts of all of our wholly-owned subsidiaries and entities in which we hold a controlling financial interest. The only non-wholly owned subsidiary that we consolidate is Bluegreen/Big Cedar Vacations, LLC (the “Bluegreen/Big Cedar Joint Venture”), as we hold a 51% equity interest in the Bluegreen/Big Cedar Joint Venture, have an active role as the day-to-day manager of the Bluegreen/Big Cedar Joint Venture’s activities, and have majority voting control of the Bluegreen/Big Cedar Joint Venture’s management committee. We do not consolidate our statutory business trusts formed to issue trust preferred securities as these entities are each variable interest entities in which we are not the primary beneficiary as defined by Financial Accounting Standards Board (“FASB”) Interpretation No. 46R (“FIN No. 46R”). The statutory business trusts are accounted for under the equity method of accounting. We have eliminated all significant intercompany balances and transactions.

6

Use of Estimates

United States generally accepted accounting principles (“GAAP”) require us to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Cash and Cash Equivalents

We invest cash in excess of our immediate operating requirements in short-term time deposits and money market instruments generally with original maturities at the date of purchase of three months or less. We maintain cash and cash equivalents with various financial institutions. These financial institutions are located throughout the United States, Canada and Aruba. Our policy is designed to limit exposure to any one institution. However, a significant portion of our unrestricted cash is maintained with a single bank and, accordingly, we are subject to credit risk. Periodic evaluations of the relative credit standing of financial institutions maintaining our deposits are performed to evaluate and mitigate, if necessary, credit risk.

Restricted cash consists primarily of customer deposits held in escrow accounts.

Revenue Recognition and Contracts Receivable

In accordance with the requirements of Statement of Financial Accounting Standards (“SFAS”) No. 66, Accounting for Sales of Real Estate, as amended by SFAS No. 152, Accounting for Real Estate Time-Sharing Transactions (“SFAS No. 152”), we recognize revenue on VOI and homesite sales when a minimum of 10% of the sales price has been received in cash (demonstrating the buyer’s commitment), the legal rescission period has expired, collectibility of the receivable representing the remainder of the sales price is reasonably assured and we have completed substantially all of our obligations with respect to any development related to the real estate sold. We believe that we use a reasonably reliable methodology to estimate the collectibility of the receivables representing the remainder of the sales price of real estate sold. See further discussion of our policies regarding the estimation of credit losses on our notes receivable below. Should our estimates regarding the collectibility of our receivables change adversely, we may have to defer the recognition of sales and our results of operations could be negatively impacted. Under the provisions of SFAS No. 152 on January 1, 2006, the calculation of the adequacy of a buyer’s commitment for the sale of VOIs requires that cash received towards the purchase of our VOIs be reduced by the value of certain incentives provided to the buyer at the time of sale. If after considering the value of the incentive the 10% requirement is not met, the VOI sale, and the related cost and direct selling expenses, are deferred until such time that sufficient cash is received from the customer, generally through receipt of mortgage payments. Changes to the quantity, type, or value of sales incentives that we provide to buyers of our VOIs may result in additional VOI sales being deferred, and thus our results of operations could be materially adversely impacted.

In cases where all development has not been completed, we recognize revenue in accordance with the percentage-of-completion method of accounting. Should our estimates of the total anticipated cost of completing one of our Bluegreen Resorts’ or Bluegreen Communities’ projects increase, we may be required to defer a greater amount of revenue or may be required to defer revenue for a longer period of time, and thus our results of operations could be materially adversely impacted.

Contracts receivable consists of: (1) amounts receivable from customers on recent sales of VOIs pending recording of the customers’ notes receivable in our loan servicing system; (2) receivables related to unclosed homesite sales; and, (3) receivables from third-party escrow agents on recently closed homesite sales. Contracts receivable are stated net of a reserve for loan losses of $0.9 million and $0.2 million at December 31, 2007 and 2008, respectively.

Under SFAS No.152, rental operations, including the usage of our Sampler program, are accounted for as incidental operations whereby incremental carrying costs in excess of incremental revenue are charged to expense as incurred. Conversely, incremental revenue in excess of incremental carrying costs is recorded as a reduction to VOI inventory. Incremental carrying costs include costs that have been incurred by us during the holding period of the unsold VOIs, such as developer subsidies and maintenance fees. During the years ended December 31, 2008 and 2007, all of our rental revenue and Sampler revenue earned was recorded as an off-set to cost of other resort and communities operations as such amounts were less than the incremental carrying cost.

7

Our other resort and communities operations revenues consist primarily of sales and service fees from the activities listed below. The table provides a brief description of the applicable revenue recognition policy:

Activity	Revenue is recognized as:
Resort title fees	Escrow amounts are released and title documents are completed.
Resort Management and service fees	Management services are rendered.
Rental and Sampler program	Guests complete stays at the resorts. Rental and Sampler program proceeds are classified as a reduction to “Cost of other resort and communities operations”.
Realty commissions	Sales of third-party-owned real estate are completed.
Golf course and ski hill daily fees	Services are provided.

Our cost of other resort and communities operations consists of the costs associated with the various revenues described above as well as developer subsidies and maintenance fees on our unsold VOIs.

Notes Receivable

Our notes receivable are carried at amortized cost less an allowance for bad debts. Interest income is suspended and previously accrued but unpaid interest income is reversed on all delinquent notes receivable when principal or interest payments are more than three months contractually past due and not resumed until such loans are less than three months past due. As of December 31, 2007 and 2008, $3.1 million and $5.8 million, respectively, of our notes receivable were more than three months contractually past due and, hence, were not accruing interest income. Our notes receivable are generally charged off as uncollectible when they have become approximately 120 days past due.

We estimate uncollectibles for VOI notes receivable in accordance with SFAS No. 152. Under SFAS No. 152, the estimate of uncollectibles is based on historical uncollectibles for similar VOI notes receivable over the applicable historical period. We use a static pool analysis, which tracks uncollectibles for each year’s sales over the entire life of those notes. We also consider whether the historical economic conditions are comparable to current economic conditions, as well as variations in underwriting standards. Additionally, under SFAS No. 152 no consideration is given for future recoveries of defaulted inventory in the estimate of uncollectible VOI notes receivable. We review our reserve for loan losses on at least a quarterly basis. We estimate credit losses on our notes receivable portfolios generated in connection with the sale of homesites in accordance with SFAS No. 5, Accounting for Contingencies, as our notes receivable portfolios consist of large groups of smaller-balance, homogeneous loans. Consistent with Staff Accounting Bulletin No. 102, Selected Loan Loss Allowance Methodology and Documentation Issues, we first segment our notes receivable by identifying risk characteristics that are common to groups of loans and then estimate credit losses based on the risks associated with these segments. Under this method, the amount of loss is reduced by the estimated value of the defaulted inventory to be recovered.

Retained Interest in Notes Receivable Sold

When we sell our notes receivable either pursuant to our vacation ownership receivables purchase facilities (more fully described in Note 6) or through term securitizations, we evaluate whether or not such transfers should be accounted for as a sale pursuant to SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (“SFAS No. 140”) and related interpretations. The evaluation of sale treatment under SFAS No. 140 involves legal assessments of the transactions, which include determining whether the transferred assets have been isolated from us (i.e., put presumptively beyond our reach and the reach of our creditors, even in bankruptcy or other receivership), determining whether each transferee has the right to pledge or exchange the assets it received, and ensuring that we do not maintain effective control over the transferred assets through either an

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agreement that either: (1) entitles and obligates us to repurchase or redeem the assets before their maturity; or (2) provides us with the ability to unilaterally cause the holder to return the assets (other than through a cleanup call).

In connection with such transactions, we retain subordinated tranches and rights to excess interest spread which are retained interests in the notes receivable sold. Historically we have structured such transactions to be accounted for as “off-balance sheet” sales. Gain or loss on the sale of the receivables depends in part on the allocation of the previous carrying amount of the financial assets involved in the transfer between the assets sold and the retained interests based on their relative fair value at the date of transfer.

We consider our retained interests in notes receivable sold as available-for-sale investments and, accordingly, carry them at fair value in accordance with SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities. Unrealized gains or losses on our retained interests in notes receivable sold are included in our shareholders’ equity as accumulated other comprehensive income, net of income taxes. Declines in fair value that are determined to be other than temporary are charged to operations.

We measure the fair value of the retained interests in the notes receivable sold initially and on a quarterly basis based on the present value of estimated future expected cash flows using our best estimates of the key assumptions – prepayment rates, loss severity rates, default rates and discount rates commensurate with the risks involved. Interest on the retained interests in notes receivable sold is accreted using the effective yield method.

Inventory

Our inventory consists of completed VOIs, VOIs under construction, land held for future vacation ownership development and residential land acquired or developed for sale. We carry our completed inventory at the lower of i) cost, including costs of improvements and amenities incurred subsequent to acquisition, capitalized interest, real estate taxes plus other costs incurred during construction, or ii) estimated fair value, less cost to dispose. VOI inventory and cost of sales is accounted for under the provisions of SFAS No. 152, which defines a specific method of the relative sales value method for relieving VOI inventory and recording cost of sales. Under the SFAS No. 152 relative sales value method, cost of sales is calculated as a percentage of net sales using a cost-of-sales percentage—the ratio of total estimated development cost to total estimated VOI revenue, including the estimated incremental revenue from the resale of VOI inventory repossessed, generally as a result of the default of the related receivable. Also, pursuant to SFAS No. 152, we do not relieve inventory for VOI cost of sales related to anticipated credit losses (accordingly, no adjustment is made when inventory is reacquired upon default of the related receivable). For Communities real estate projects, costs are allocated to individual homesites in the Communities’ projects based on the relative estimated sales value of each homesite in accordance with SFAS No. 67, Accounting for Costs and Initial Rental Operations of Real Estate Projects. Under this method, the allocated cost of a unit is relieved from inventory and recognized as cost of sales upon recognition of the related sale. Homesites reacquired upon default of the related receivable are considered held for sale and are recorded at fair value less costs to sell.

We periodically evaluate the recovery of the carrying amount of our individual resort and residential communities’ properties under the guidelines of SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (“SFAS No. 144”). During 2008, we recorded certain charges totaling $5.2 million under SFAS No. 144 related to the impairment of our carrying value of our inventory in our residential communities’ property (See Note 8 for further discussion).

Deferred Financing Costs

Deferred financing costs are comprised of costs incurred in connection with securing financing from third-party lenders and are capitalized and amortized to interest expense on a straight-line basis over the terms of the related financing arrangements. We recognized amortization of deferred financing costs for the years ended December 31, 2006, 2007, and 2008 of approximately $2.7 million, $3.2 million, and $1.8 million, respectively, which is included in interest expense in the accompanying consolidated statements of operations.

Property and Equipment

Our property and equipment acquired is recorded at cost. We record depreciation and amortization in a manner that recognizes the cost of our depreciable assets in operations over their estimated useful lives using the straight-line method. Leasehold improvements are amortized over the shorter of the terms of the underlying leases or the estimated useful lives of the improvements. Depreciation expense includes the amortization of assets recorded under

9

capital leases. We evaluate the recovery of the carrying amounts of our long-lived assets under the guidelines of SFAS No. 144.

Goodwill

Our goodwill related to various business acquisitions made by the Resort Division during and prior to 2008. We account for our goodwill under the provisions of SFAS No. 142, Goodwill and Other Intangible Assets. This statement requires that goodwill deemed to have indefinite lives not be amortized, but rather be tested for impairment on an annual basis. In 2008, we recorded $4.2 million of goodwill related to the business acquisitions for Bluegreen Resorts, increasing total goodwill to $8.5 million. During the year ended December 31, 2008, we completed the required annual impairment testing of the goodwill recorded in our Bluegreen Resorts reporting unit. As a result of our annual impairment testing of goodwill for the year ended December 31, 2008, we determined that the fair value of our Bluegreen Resorts reporting units, based on our overall market capitalization, could not support the book value of goodwill. Accordingly, we wrote-off the balance of our goodwill and recorded a charge of $8.5 million.

Treasury Stock

We account for repurchases of our common stock using the cost method with common stock in treasury classified in our consolidated balance sheets as a reduction of shareholders’ equity.

Advertising Expense

We expense advertising costs, which include marketing costs, as incurred. Advertising expense was $123.0 million, $130.5 million and $126.6 million for the years ended December 31, 2006, 2007, and 2008, respectively. Advertising expense is included in selling, general and administrative expenses in our consolidated statements of operations.

Stock-Based Compensation

We recognize stock-based compensation expense under the provisions of SFAS No. 123R, Share-Based Payment (revised 2004) (“SFAS No. 123R”), which we adopted January 1, 2006, utilizing the modified prospective method. We utilize the Black-Scholes option pricing model for calculating the fair value of each option granted. The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, this model requires the input of subjective assumptions, including the expected price volatility of the underlying stock. Projected data related to the expected volatility and expected life of stock options is based upon historical and other information. Changes in these subjective assumptions can materially affect the fair value of the estimate, and therefore, the existing valuation models do not provide a precise measure of the fair value of our employee stock options. Additionally, SFAS No. 123R also requires us to estimate forfeitures in calculating the expense relating to stock-based compensation.

The fair value for these options was estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:

	During the year ended December 31,
	2006			2007			2008
Risk free investment rate		5.0	%		4.9	%		3.1	%
Dividend yield		0.0	%		0.0	%		0.0	%
Volatility factor of expected market price		53.0	%		45.8	%		49.4	%
Life of option	5.8 years			5.0 years			5.5 years

The Company uses historical data to estimate option exercise behavior and employee termination. The risk free investment rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The Company uses the historical volatility of the Company’s traded stock to estimate the volatility factor of expected market price.

We recognize stock-based compensation expense on a straight-line basis over the service or vesting period of the instrument. Total compensation costs related to stock-based compensation charged against income during the year ended December 31, 2008 was $4.4 million. Total stock-based compensation recorded in 2008 consists of $2.5

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million related to the expense of existing and newly granted stock options and $1.9 million related to existing and newly granted restricted stock. At the grant date, the Company estimates the numbers of shares expected to vest and subsequently adjusts compensation costs for the estimated rate of forfeitures at the option grant date and on an annual basis. The Company uses historical data to estimate option exercise behavior and employee termination in determining the estimated forfeiture rate. Total compensation costs related to stock-based compensation charged against income during the year ended December 31, 2007 was $2.4 million, which consists of $2.0 million related to the expense of existing and newly granted stock options and $0.4 million related to existing and newly granted restricted stock. Total compensation costs related to stock-based compensation charged against income during the year ended December 31, 2006 was $2.8 million, which consists of $2.1 million related to the expense of existing and newly granted stock options, and $0.1 million related to existing and newly granted restricted stock, and $0.6 million related to the modification of existing stock options.

Earnings (Loss) Per Common Share

We compute basic earnings (loss) per common share by dividing net income (loss) by the weighted-average number of common shares outstanding. Diluted earnings per common share is computed in the same manner as basic earnings per share, but also gives effect to all dilutive stock options and unvested restricted shares using the treasury stock method. There were approximately 0.8 million, 1.3 million and 2.7 million stock options not included in diluted earnings per common share during the years ended December 31, 2006, 2007, and 2008, respectively, as the effect would be anti-dilutive.

The following table sets forth our computation of basic and diluted earnings (loss) per common share (in thousands, except per share data):

	Year Ended December 31,
	2006		2007		2008
Basic and diluted earnings per common share — numerator:
Net income (loss)	$	29,817	$	31,926	$	(516	)
Denominator:
Denominator for basic earnings (loss) per common share-weighted-average shares		30,557		30,975		31,241
Effect of dilutive securities:
Stock options and unvested restricted stock		540		317		—
Denominator for diluted earnings (loss) per common share-adjusted weighted-average shares and assumed conversions		31,097		31,292		31,241
Basic earnings (loss) per common share:	$	0.98	$	1.03	$	(0.02	)
Diluted earnings (loss) per common share:	$	0.96	$	1.02	$	(0.02	)

Comprehensive Income (Loss)

SFAS No. 130, Reporting Comprehensive Income, requires the change in net unrealized gains or losses on our retained interests in notes receivable sold, which are held as available-for-sale investments, to be included in other comprehensive income (loss). Comprehensive income (loss) is shown as a subtotal within our consolidated statements of shareholders’ equity for each period presented.

Business Combinations

During 2008, we purchased real estate and operations at two resorts, The Royal Suites at Atlantic Palace in Atlantic City, New Jersey, and Club La Pension in New Orleans, Louisiana. Each of these acquisitions constituted the purchase of a business under SFAS No. 141, Business Combinations, and Emerging Issues Task Force (“EITF”) 98-3, Determining Whether a Nonmonetary Transaction Involves Receipt of Productive Assets or of a Business. The combined purchase price of these acquisitions was $21.8 million, which was allocated as follows: VOI inventory of $9.9 million, property and equipment of $7.7 million, and goodwill of $4.2 million. These acquisitions, individually and in the aggregate, are immaterial to our operations. The goodwill generated from these acquisitions was subsequently written-off (see discussion above on goodwill impairment).

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Recently Adopted Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a methodology for measuring fair value, and expands the required disclosure for fair value measurements. With the exception of its applicability to non-financial assets and liabilities (as discussed below), we adopted SFAS No. 157 on January 1, 2008, at which time it was applied prospectively. The adoption of SFAS No. 157 did not have any impact to our financial condition or results of operations.

SFAS No.157 describes three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that an entity has the ability to access as of the measurement date, or observable inputs.

Level 2: Significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, and other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities Including an Amendment of FASB Statement No. 115 (“SFAS No. 159”). SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value and was adopted by us on January 1, 2008. To date, we have not elected the fair value measurement option for any financial assets or liabilities.

In October 2008, the FASB issued FASB Staff Position (“FSP”) FAS 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active (“FSP 157-3”). FSP 157-3 clarifies the application of SFAS No. 157 in a market that is not active. It states that determining fair value in a dislocated market is dependent upon the certain facts and may require the use of management’s judgment about whether individual transactions are forced liquidations or distressed sales. Additionally, FSP 157-3 provides guidance as to the potentially necessary estimates and adjustments that may be required in determining fair value based on observable data that may not be indicative of accurate fair value because the volume and level of trading activity in the asset class have significantly declined. We adopted FSP 157-3 on September 30, 2008 as it was effective upon issuance for prior periods which had not yet issued financial statements. The adoption of FSP 157-3 did not have any impact on our financial condition or results of operations.

In February 2009, the FASB issued FSP FAS No. 140-4 and FIN 46(R)-8, Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities. We adopted FSP FAS No. 140-4 and FIN 46(R)-8 “Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities” in conjunction with our 2008 fiscal year-end. FSP FAS No. 140-4 and FIN 46(R)-8 amends FAS No. 140 to require public entities to provide additional disclosures about transferors’ continuing involvements with transferred financial assets. It also amends FIN 46(R) to require public enterprises, including sponsors that have a variable interest in a variable interest entity, to provide additional disclosures about their involvement with variable interest entities. The FSP also requires disclosures by a public enterprise that is a sponsor of a qualifying special-purpose entity (“SPE”) that holds a variable interest in the qualifying SPE but was not the transferor of financial assets to the qualifying SPE and a servicer of a qualifying SPE that holds a significant variable interest in the qualifying SPE but was not the transferor of financial assets to the qualifying SPE. FSP FAS No. 140-4 and FIN 46(R)-8 is effective for year-end 2008 disclosures. The adoption of FSP FAS No. 140-4 and FIN 46(R)-8 did not have a material impact on our financial statements.

In January 2009, the FASB issued FSP EITF 99-20-1, Amendments to the Impairment Guidance of EITF Issue No. 99-20, ‘Recognition of Interest Income and Impairment on Purchased Beneficial Interests and Beneficial Interests That Continue to be Held by a Transferor in Securitized Financial Assets,” (“FSP EITF 99-20-1”). FSP EITF 99-20-1 amends EITF Issue No. 99-20 to align the impairment guidance in EITF Issue No. 99-20 with that of FAS No. 115. FAS No. 115 measures impairment based on a determination of whether an other-than-temporary impairment has occurred. FSP EITF 99-20-1 is effective for all fiscal years ending on and after December 31, 2008.

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Accounting Pronouncements Not Yet Adopted

In February 2008, the FASB agreed to partially defer the effective date of SFAS No. 157, with respect to non-financial assets and liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis. We are currently evaluating the impact that the adoption of the remaining provisions of SFAS No. 157 will have on our financial statements.

On December 4, 2007, the FASB issued SFAS No. 141 (Revised 2007), Business Combinations (“SFAS No. 141(R)”). SFAS No. 141(R) will significantly change the accounting for business combinations. Under SFAS No. 141(R), subject to limited exceptions, an acquiring entity will be required to recognize all the assets acquired and liabilities assumed in a transaction at the acquisition-date fair value. Additionally, due diligence and transaction costs incurred to effect an acquisition will be expensed as incurred, as opposed to being capitalized as part of the acquisition purchase price. SFAS No. 141(R) also includes a substantial number of new disclosure requirements. SFAS No. 141(R) must be applied prospectively to business combinations for which the acquisition date is on or after January 1, 2009.

On December 4, 2007, the FASB issued SFAS No. 160, Non-controlling Interests in Consolidated Financial Statements-an Amendment of Accounting Research Bulletin (“ARB”) No. 51 (“SFAS No. 160”). SFAS No. 160 establishes new accounting and reporting standards for a non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. Specifically, this statement requires the recognition of a non-controlling interest (minority interest) as equity in the consolidated financial statements separate from the parent’s equity. The amount of net income attributable to the non-controlling interest will be included in consolidated net income on the face of the income statement. SFAS No. 160 clarifies that changes in a parent’s ownership interest in a subsidiary that do not result in deconsolidation are equity transactions if the parent retains its controlling financial interest. In addition, this statement requires that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated. Such gain or loss will be measured using the fair value of the non-controlling equity investment on the deconsolidation date. SFAS No. 160 also includes expanded disclosure requirements regarding the interests of the parent and its non-controlling interest. SFAS No. 160 will become effective for us beginning with our 2009 fiscal year. Upon the initial adoption of this statement, we will change the classification and presentation of the non-controlling interest in the Bluegreen/Big Cedar Joint Venture, which we currently refer to as minority interest.

2. Cumulative Effect of Change in Accounting Principle

Effective January 1, 2006, we adopted SFAS No. 152, Accounting for Real Estate Time-Sharing Transactions (“SFAS No. 152”). This statement amends SFAS No. 66, Accounting for Sales of Real Estate, and SFAS No. 67, Accounting for Costs and Initial Rental Operations of Real Estate Projects, in association with the issuance of American Institute of Certified Public Accountants (“AICPA”) Statement of Position (“SOP”) 04-2, Accounting for Real Estate Time-Sharing Transactions. SFAS No. 152 was issued to address the diversity in practice resulting from a lack of guidance specific to the timeshare industry. Among other things, the standard addressed the treatment of sales incentives provided by a seller to a buyer to consummate a transaction, the calculation of and presentation of uncollectible notes receivable, the recognition of changes in inventory cost estimates, recovery or repossession of VOIs, selling and marketing costs, operations during holding periods, developer subsidies to property owners’ associations and upgrade and reload transactions. Restatement of previously reported financial statements is not permitted. Accordingly, as a result of the adoption of SFAS No. 152, our financial statements for periods beginning on or after January 1, 2006, are not comparable, in certain respects, with those prepared for periods ended prior to January 1, 2006. Upon the initial adoption of this statement, we will change the classification and presentation of the non-controlling interest in the Bluegreen/Big Cedar joint venture (“the Joint Venture”), which we currently refer to as minority interest.

The adoption of SFAS No. 152 on January 1, 2006, resulted in a net charge of $4.5 million, which is presented as a cumulative effect of change in accounting principle, net of the related tax benefit and the charge related to minority interest.

3. Restructuring Charges

During the fourth quarter of 2008, in light of the uncertainties in the credit markets, we implemented strategic initiatives in the Resort Division to significantly reduce sales, conserve cash, and conserve availability under our receivables credit facilities. We decided, for the time being, to deemphasize our sales operations to conserve cash, while continuing to emphasize our cash generating income streams from our resorts management and finance

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operations. Such initiatives included closing 11 of our 29 sales offices; significantly eliminating what we have identified as lower-efficiency marketing programs; reducing overhead including eliminating a significant number of staff positions across a variety of areas at various locations; reducing our overall capital spending; limiting sales to borrowers who meet newly applied underwriting standards, and increasing interest rates on new sales transactions for which we provide financing. Our goal is to reduce the number of sales, while increasing the ultimate profitability of those sales we do make. In addition, based on the opening or acquisition of new resorts during 2008 and the expected completion of certain communities projects currently under development, we plan to reduce our inventory spending from $152.3 million during 2008 to a projected $30.0 million during 2009.

This restructuring involved incurring cost associated with lease termination obligations, the write down of certain fixed assets, and employee severance and benefits. The total charge associated with this restructuring is presented as a separate line item on our Condensed Consolidated Statements of Operations and the remaining unpaid liability as of December 31, 2008 is included as a component of Accrued Liabilities on our Condensed Consolidated Balance Sheets as of December 31, 2008. Restructuring costs were accounted for in accordance with SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. During 2008, pretax restructuring charges were $15.6 million.

Restructuring costs, as well as our remaining liability, as the end of 2008 was as follows (in thousands):

			Cash Payments		Liability at
	Charges		made during		December 31,
	during 2008		2008		2008
Severance and benefit-related costs(1)	$	5,608	$	2,068	$	3,540
Lease termination obligation(2)		4,766		687		4,079
Fixed Assets write-downs, net of proceeds (3)		3,760		—		—
Other		1,483		173		349
Total Restructuring	$	15,617	$	2,928	$	7,968

(1)	Includes severance payments made to employees, payroll taxes and other benefit relates costs in connection with the terminations of approximately 2,200 employees.
(2)	Includes costs associated with noncancelable property and equipment leases that we have ceased to use, as well as termination fees related to the cancellation of certain contractual lease obligations. Included in this amount are future minimum lease payments in excess of estimated sublease income, fees and expenses for which the provisions of SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities were satisfied.
(3)	Includes write-downs of $1.6 million and $2.2 million for leasehold improvements and property and equipment, respectively, net of a nominal amount of cash received in connections with selling some of our assets.

4. Joint Venture

On June 16, 2000, one of our wholly-owned subsidiaries entered into an agreement with Big Cedar LLC (“Big Cedar”), an affiliate of Bass Pro, Inc. (“Bass Pro”), to form the Joint Venture, a vacation ownership development, marketing and sales limited liability company. We have a 51% ownership interest in the Joint Venture, while Big Cedar owns 49%. Under the terms of the original agreement, the Joint Venture would develop, market and sell VOIs at The Bluegreen Wilderness Club at Big Cedar, a 324-unit, wilderness-themed resort adjacent to the Big Cedar Lodge, a luxury hotel resort owned by Big Cedar, on the shores of Table Rock Lake in Ridgedale, Missouri. In December 2007, the agreement was amended to include the development, marketing, and sale of timeshare interests in additional property purchased by the Joint Venture in September 2007. The agreement, as amended, also requires that the Joint Venture pay Big Cedar a fee on sales of newly developed timeshare interests for promotional, marketing, and advertising services.

In addition to our 51% ownership interest, we also receive a quarterly management fee from the Joint Venture equal to 3% of the Joint Venture’s net sales in exchange for our involvement in the day-to-day operations of the Joint Venture. We also service the Joint Venture’s notes receivable in exchange for a servicing fee.

Based on our role as the day-to-day manager of the Joint Venture, our majority control of the Joint Venture’s Management Committee and our controlling financial interest in the Joint Venture, the accounts of the Joint Venture are consolidated in our financial statements.

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5. Notes Receivable

The table below sets forth additional information relative to our notes receivable (in thousands).

	As of December 31,
	2007			2008
Notes receivable secured by VOIs	$	172,787		$	388,014
Notes receivable secured by homesites		5,336			4,659
Notes receivable, gross		178,123			392,673
Allowance for loan losses		(17,458	)		(52,029	)
Notes receivable, net	$	160,665		$	340,644

The weighted-average interest rate on our notes receivable was 13.8% and 14.4% at December 31, 2007 and 2008, respectively. All of our VOI loans bear interest at fixed rates. The weighted-average interest rate charged on loans secured by VOIs was 13.9% and 14.4% at December 31, 2007 and 2008, respectively. Approximately 81% of our notes receivable secured by homesites bear interest at variable rates, while the balance bears interest at fixed rates. The weighted-average interest rate charged on loans secured by homesites was 12.1% and 10.1% at December 31, 2007 and 2008, respectively.

Our vacation ownership loans are generally secured by property located in Florida, Nevada, Michigan, Missouri, Pennsylvania, South Carolina, Tennessee, Virginia, Wisconsin, Louisiana, New Jersey, and Aruba. The majority of Bluegreen Communities notes receivable are secured by homesites in Georgia, Texas and Virginia.

The table below sets forth the activity in our allowance for uncollectible notes receivable for 2007 and 2008 (in thousands):

	Year Ended
	December 31,
	2007			2008
Balance, beginning of year	$	13,499		$	17,458
Provision for loan losses		65,419			76,079
Less: Allowance on sold receivables		(42,750	)		(10,964	)
Less: Write-offs of uncollectible receivables		(18,710	)		(30,544	)
Balance, end of year	$	17,458		$	52,029

Installments due on our notes receivable during each of the five years subsequent to December 31, 2007, and 2008, and thereafter are set forth below (in thousands):

	2007		2008
Due in 1 year	$	39,838	$	58,989
Due in 2 years		10,761		23,988
Due in 3 years		11,953		27,537
Due in 4 years		13,662		31,473
Due in 5 years		15,412		35,712
Thereafter		86,497		214,974
Total	$	178,123	$	392,673

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The following table summarizes our allowance for loan losses by division as of December 31, 2007 and 2008 (in thousands):

	Bluegreen			Bluegreen
	Resorts			Communities			Total
December 31, 2007:
Notes receivable	$	172,787		$	5,336		$	178,123
Allowance for loan losses		(17,196	)		(262	)		(17,458	)
Notes receivable, net	$	155,591		$	5,074		$	160,665
Allowance as a % of gross notes receivable		10	%		5	%		10	%
December 31, 2008:
Notes receivable	$	388,014		$	4,659		$	392,673
Allowance for loan losses		(51,785	)		(244	)		(52,029	)
Notes receivable, net	$	336,229		$	4,415		$	340,644
Allowance as a % of gross notes receivable		13	%		5	%		13	%

6. Sales of Notes Receivable

Sales of notes receivable during the years ended December 31, 2006, 2007, and 2008 were as follows (in millions):

Year Ended December 31, 2006:

	Aggregate
	Principal						Initial Fair
	Balance of						Value of
	Notes		Purchase		Gain		Retained
Facility	Receivable		Price		Recognized		Interest
2005 Term Securitization	$	18.6	$	16.7	$	4.6	$	3.8
2006-A GE Purchase Facility		72.0		64.8		11.1		8.5
2006 Term Securitization		153.0		137.0		29.0		29.6
Total	$	243.6	$	218.5	$	44.7	$	41.9

Year Ended December 31, 2007:

	Aggregate
	Principal						Initial Fair
	Balance of						Value of
	Notes		Purchase		Gain		Retained
Facility	Receivable		Price		Recognized		Interest
2006-A GE Purchase Facility	$	66.9	$	60.2	$	10.6	$	8.3
2007 Term Securitization		200.0		168.9		28.8		36.3
Total	$	266.9	$	229.1	$	39.4	$	44.6

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Year Ended December 31, 2008:

	Aggregate
	Principal						Initial Fair
	Balance of						Value of
	Notes		Purchase		Gain		Retained
Facility	Receivable		Price		Recognized		Interest
2008 Term Securitization	$	68.6	$	60.0	$	8.2	$	11.7

The following assumptions were used to measure the initial fair value of the retained interest in notes receivable sold for each of the periods listed above:

	For the year ended December 31,
	2006			2007			2008
Prepayment rates		17% - 9	%		29% - 11	%		31% - 17	%
Loss severity rates		35% - 71	%		38% - 72	%		38	%
Default rates		11% - 1	%		12% - 1	%		7.2% - 1.0	%
Discount rates		9	%		9% - 12.6	%		13.4	%

The assumptions take into account our intended actions relating to our right to either acquire or substitute for defaulted loan, pursuant to the terms of each transaction.

The following is a description of the facilities/transactions that were used to sell notes receivable that qualified for sale recognition under the provisions of SFAS 140.

2005 Term Securitization. On December 28, 2005, BB&T Capital Markets, a division of Scott & Stringfellow, Inc., served as initial purchaser and placement agent for a $203.8 million private offering and sale of vacation ownership receivable-backed securities (the “2005 Term Securitization”). The $191.1 million in aggregate principal of vacation ownership receivables offered and sold in the 2005 Term Securitization were previously sold to BRFC IX. In addition, the 2005 Term Securitization allowed for an additional $35.3 million in aggregate principal of our qualifying vacation ownership receivables (the “2005 Pre-funded Receivables”) that could be sold by us through March 28, 2006. The proceeds of $31.8 million (at an advance rate of 90%) as payment for the 2005 Pre-funded Receivables were deposited into an escrow account by the Indenture Trustee of the 2005 Term Securitization until such receivables were actually sold by us to BRFC X. During 2005, we sold $16.7 million in 2005 Pre-funded Receivables to BRFC X and the $15.1 million purchase price was disbursed to us from the escrow account. During 2006, we sold the remaining $18.6 million in pre-funded receivables to BRFC X and the $16.7 million purchase price was disbursed to us from the escrow account.

2006 GE Purchase Facility. In March 2006, we executed agreements for a VOI receivables purchase facility (the “2006 GE Purchase Facility”) with General Electric Real Estate (“GE”). The GE Purchase Facility utilizes an owner’s trust structure, pursuant to which we sell receivables to Bluegreen Receivables Finance Corporation XI, our wholly-owned, special purpose finance subsidiary (“BRFC XI”), and BRFC XI sells the receivables to an owner’s trust (a qualified special purpose entity) without recourse to us or BRFC XI except for breaches of certain customary representations and warranties at the time of sale. We did not enter into any guarantees in connection with the 2006 GE Purchase Facility. The GE Purchase Facility has detailed requirements with respect to the eligibility of receivables for purchase, and fundings under the GE Purchase Facility were subject to certain conditions precedent. Under the 2006 GE Purchase Facility, a variable purchase price of approximately 90% of the principal balance of the receivables sold, subject to adjustment under certain terms and conditions, was paid at closing in cash. The balance of the purchase price is deferred until such time as GE has received a specified return, a specified overcollateralization ratio is achieved, a cash reserve account is fully funded and all servicing, custodial, agent and similar fees and expenses have been paid. GE is entitled to receive a return equal to the applicable Swap Rate (which is essentially a published interest swap arrangement rate as defined in the 2006 GE Purchase Facility agreements) plus 2.35%, subject to use of alternate return rates in certain circumstances. In addition, we paid GE a structuring fee

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of approximately $437,500 in March 2006. Subject to the terms of the agreements, we act as servicer under the 2006 GE Purchase Facility for a fee.

The 2006 GE Purchase Facility allowed for transfers of notes receivable for a cumulative purchase price of up to $125.0 million through March 2008. During 2006, the Company transferred $72.0 million in VOI receivables for an aggregate purchase price of $64.8 million under the 2006 GE Purchase Facility. During 2007, the Company transferred $66.9 million in VOI receivables for an aggregate purchase price of $60.2 million under the GE Purchase Facility, which fully utilized the 2006 GE Purchase Facility.

2006 Term Securitization. In September 2006, BB&T Capital Markets, a division of Scott & Stringfellow, Inc., served as initial purchaser and placement agent for a private offering and sale of $139.2 million of our VOI receivable-backed securities (the “2006 Term Securitization”). Approximately $153.0 million in aggregate principal of VOI receivables were securitized in this transaction, including: (1) $75.7 million in aggregate principal of receivables that were previously transferred under an existing VOI receivables purchase facility in which BB&T serves as Agent (see 2006 BB&T Purchase Facility below in Footnote 10); (2) $38.0 million of VOI receivables owned by us immediately prior to the 2006 Term Securitization and 3) an additional $39.3 million in aggregate principal of our qualifying VOI receivables (the “2006 Pre-funded Receivables”) that could be sold by us through December 22, 2006. The expected proceeds of $35.7 million (at an advance rate of 91%) as payment for the 2006 Pre-funded Receivables were originally deposited into an escrow account by the indenture trustee of the 2006 Term Securitization. During 2006, we sold $39.3 million in 2006 Pre-funded Receivables to BRFC XII and the $35.7 million purchase price was disbursed to us from the escrow account. The proceeds were used by us for general operating purposes.

2007 Term Securitization. In September 2007, BB&T Capital Markets, a division of Scott & Stringfellow, Inc. served as initial purchaser and placement agent for a private offering and sale of $177.0 million of VOI receivable-backed securities (the “2007 Term Securitization”). Approximately $200.0 million in aggregate principal of VOI receivables were securitized and sold in this transaction, including: (1) $115.5 million in aggregate principal of VOI receivables that were previously transferred under the 2006 BB&T Purchase Facility (see Note 10); (2) $35.8 million of VOI receivables owned by the Company immediately prior to the 2007 Term Securitization; and, (3) an additional $48.7 million in aggregate principal of the Company’s qualifying VOI receivables that could be sold by us through December 28, 2007 (the “2007 Pre-funded Receivables”). The purchase price for the 2007 Pre-Funded Receivables was deposited into an escrow account. During 2007, we sold $48.7 million in 2007 Pre-funded Receivables, and the $43.1 million purchase price was disbursed to us from the escrow account.

2008 Term Securitization. On March 31, 2008, the Company completed a private offering and sale of $60.0 million of timeshare loan-backed securities (the “2008 Term Securitization”). The total principal amount of the timeshare loans sold totaled $68.6 million, including: (1) $61.4 million in aggregate principal of timeshare loans that were previously transferred under an existing timeshare loan purchase facility with Branch Banking & Trust Company (“BB&T”) (the “BB&T Purchase Facility”); and (2) $7.2 million of timeshare loans owned by us immediately prior to the 2008 Term Securitization. BB&T Capital Markets acted as the initial purchaser in the 2008 Term Securitization.

The proceeds from the 2008 Term Securitization were used to: (1) repay $51.0 million of the $60.6 million outstanding under the 2008 BB&T Purchase Facility; (2) deposit initial amounts in a required cash reserve account; (3) pay certain transaction fees and expenses, and (4) provide net cash proceeds of $5.8 million to us, which were used for general corporate purposes and debt service. The Company also received a retained interest in the future cash flows from the 2008 Term Securitization. The timeshare loans were sold to BRFC 2008-A LLC, the Company’s wholly-owned, special purpose finance subsidiary (the “Subsidiary”). The Subsidiary then sold the timeshare loans to BXG Receivables Note Trust 2008-A, a Delaware statutory trust (a qualified special purpose entity), without recourse to the Company or the Subsidiary except for breaches of certain representations and warranties at the time of sale.

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7. Retained Interests in Notes Receivable Sold

Our retained interests in notes receivable sold, which are classified as available-for-sale investments, and their associated unrealized gain (loss) are set forth below (in thousands).

			Gross
	Amortized		Unrealized
As of December 31, 2007:	Cost		Gain (Loss)			Fair Value
2002 Term Securitization	$	8,842	$	—		$	8,842
2004 Term Securitization		11,934		2,797			14,731
2004 GE Purchase Facility (see Note 6)		5,633		(609	)		5,024
2005 Term Securitization (see Note 6)		29,268		2,230			31,498
2006 GE Purchase Facility (see Note 6)		15,481		953			16,434
2006 Term Securitization (see Note 6)		24,522		1,529			26,051
2007 Term Securitization (see Note 6)		30,000		8,919			38,919
Total	$	125,680	$	15,819		$	141,499

			Gross
	Amortized		Unrealized
As of December 31, 2008:	Cost		Gain (Loss)			Fair Value
2002 Term Securitization	$	7,505	$	—		$	7,505
2004 Term Securitization		8,508		1,037			9,545
2004 GE Purchase Facility		3,380		78			3,458
2005 Term Securitization (see Note 6)		16,267		—			16,267
2006 GE Purchase Facility (see Note 6)		16,177		(1,687)	(1)		14,490
2006 Term Securitization (see Note 6)		13,730		670			14,400
2007 Term Securitization (see Note 6)		31,145		5,029			36,174
2008 Term Securitization (see Note 6)		11,437		301			11,738
Total	$	108,149	$	5,428		$	113,577

⁽¹⁾ This security has been in a continuous unrealized loss position for less than 12 months.

The net unrealized gain on our retained interests in notes receivable sold, which is presented as a separate component of our shareholders’ equity net of income taxes, was approximately $9.8 million and $3.2 million as of December 31, 2007 and 2008, respectively. Our maximum exposure to loss as a result of our involvement with these special purpose entities is the value of our retained interest.

The contractual maturities of our retained interest in notes receivable sold as of December 31, 2008, based on the final maturity dates of the underlying notes receivable are as follows:

	Amortized
	Cost		Fair Value
After one year but within five	$	7,505	$	7,505
After five years but within ten		100,644		106,072
Total	$	108,149	$	113,577

The following assumptions (which are classified as Level 3 inputs under SFAS No. 157) were used to measure the fair value of the above retained interests as of December 31, 2007 and 2008:

	As of December 31,
	2007		2008
Prepayment rates		33% – 6%	23% – 4%
Loss severity rates		18% – 72%		3% – 38%
Default rates		12% – 0%		12% – 0%
Discount rates		12.6%		19.5%

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These assumptions take into account our intended actions, which can change from time to time, relating to our right to either acquire or substitute for defaulted loans, pursuant to the terms of each transaction.

The following table shows the hypothetical fair value of our retained interests in notes receivable sold based on a 10% and a 20% adverse change in each of the assumptions used to measure the fair value of those retained interests (dollars in thousands):

Hypothetical Fair Value at December 31, 2008
	Prepayment Rate				Loss Severity Rate				Default Rate				Discount Rate
Adverse Change Percentage	10%		20%		10%		20%		10%		20%		10%		20%
2002 Term Securitization	$	7,495	$	7,486	$	7,499	$	7,494	$	7,485	$	7,466	$	7,014	$	6,578
2004 Term Securitization		9,469		9,399		9,493		9,442		9,482		9,419		9,189		8,869
2004 GE Purchase Facility		3,455		3,451		3,390		3,322		3,354		3,256		3,312		3,184
2005 Term Securitization		16,182		16,103		15,781		15,296		15,636		15,014		15,570		14,954
2006 GE Purchase Facility		14,467		14,445		13,957		13,423		13,875		13,276		13,859		13,306
2006 Term Securitization		14,278		14,158		14,109		13,818		14,040		13,685		13,888		13,434
2007 Term Securitization		35,949		35,730		35,816		35,458		35,774		35,380		35,106		34,159
2008 Term Securitization		11,687		11,639		11,498		11,259		11,465		11,189		11,277		10,868

The table below summarizes certain cash flows received from and (paid to) our qualifying special purpose finance subsidiaries (in thousands):

	For the Year Ended December 31,
	2006			2007			2008
Proceeds from new sales of receivables	$	218,455		$	229,067		$	55,705
Collections on previously sold receivables		(145,096	)		(173,448	)		(175,551	)
Servicing fees received		6,955			8,697			9,436
Purchases of defaulted receivables		(1,122	)		(3,420	)		(3,547	)
Resales of foreclosed assets		(40,566	)		(44,786	)		(50,314	)
Remarketing fees received		23,163			25,858			29,581
Cash received on retained interests in notes receivable sold		30,032			35,949			44,884
Cash paid to fund required reserve accounts		(13,495	)		(10,044	)		(8,288	)
Purchases of upgraded accounts		(17,447	)		(28,251	)		(47,045	)

In addition to the cash paid for the purchase of defaulted receivables included in the above table, we also acquire delinquent or defaulted receivables from our qualifying special purpose finance subsidiaries in exchange for unencumbered receivables (a process known as substitution). During the years ended 2006, 2007, and 2008 we provided notes receivable totaling $6.0 million, $11.1 million and $32.2 million, respectively, to our qualifying special purpose finance subsidiaries in exchange for delinquent or defaulted receivables of the same amount. Although we are not obligated to repurchase or substitute for delinquent or defaulted notes receivable from our qualifying special purpose finance subsidiaries, we may do so from time to time for various reasons, including the preservation of the value of our retained interest. Delinquent and defaulted receivables received by us in this manner are typically are ultimately converted to VOI inventory and resold in the normal course of business.

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Quantitative information about the portfolios of VOI notes receivable previously sold without recourse in which we hold the above retained interests is as follows (in thousands):

	As of						Year Ended
	December 31, 2008						December 31, 2008
			Principal
	Total		Amount		Balance
	Principal		of Sold Loans		Owed to Note		Credit
	Amount of		60 or More		Receivable		Losses, Net
	Sold Loans		Days Past Due		Purchasers		of Recoveries
2002 Term Securitization	$	18,435	$	565	$	18,254	$	232
2004 Term Securitization		37,234		1,248		35,098		429
2004 GE Purchase Facility		16,880		656		14,699		625
2005 Term Securitization		95,152		3,609		87,696		2,941
2006 GE Purchase Facility		83,690		2,823		75,055		4,190
2006 Term Securitization		80,719		3,339		75,223		3,258
2007 Term Securitization		154,724		5,922		140,297		4,727
2008 Term Securitization		58,662		1,935		52,487		764

During the year ended December 31, 2006 we recorded an other-than-temporary decrease of approximately $39,000 in the fair value of one of our VOI receivable transactions, based primarily on higher than projected defaults. During the years ended December 31, 2007 and 2008, we recorded charges for other-than-temporary decreases in the fair value of certain of our retained interest in notes receivable sold totaling approximately $2.4 million and $5.0 million, respectively. The decrease in the fair value of our retained interest in notes receivable sold, and the resulting other-than-temporary charges, were primarily a result of an increase in the discount rates applied to estimated future cash flows on our retained interests to reflect current interest rates in the securitization market and unfavorable changes in the amount and timing of estimated future cash flows. These charges have been netted against interest income on our consolidated statements of operations.

8. Inventory

Our inventory holdings, summarized by division, are set forth below (in thousands).

	As of December 31,
	2007		2008
Bluegreen Resorts	$	288,969	$	342,779
Bluegreen Communities		145,999		160,490
	$	434,968	$	503,269

Bluegreen Resorts inventory as of December 31, 2007, consisted of land inventory of $75.3 million, $121.1 million of construction-in-progress and $92.6 million of completed VOI units. Bluegreen Resorts inventory as of December 31, 2008, consisted of land inventory of $42.3 million, $87.9 million of construction-in-progress and $212.6 million of completed VOI units.

As previously stated, as a result of our decreased volume and its impact of extending the anticipated sell-out period of certain of our projects completed in 2008, we recorded a charge to cost of real estate sales of approximately $5.2 million to write-down the inventory balances of certain of our completed Communities properties to their estimated fair value. We calculated the estimated fair value of these impaired properties based on our analysis of their estimated future cash flows (Level 3 input), discounted at rates commensurate with the risk inherent in the property.

Interest capitalized to inventory during the years ended December 31, 2006, 2007, and 2008 totaled $12.1 million, $15.5 million and $12.8 million, respectively. The interest expense reflected in our consolidated statements of operations is net of capitalized interest.

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9. Property and Equipment

     The table below sets forth the property and equipment held by us (dollars in thousands).

		As of December 31,
	Useful Life	2007			2008
Office equipment, furniture and fixtures	3–14 years	$	67,894		$	62,572
Golf course land, land improvements, buildings and equipment	5–39 years		32,462			33,346
Land, buildings and building improvements	3–31 years		42,694			67,359
Leasehold improvements	2–14 years		15,663			12,650
Transportation and equipment	3–5 years		2,435			2,334
			161,148			178,261
Accumulated depreciation and amortization of leasehold improvements			(66,727	)		(68,760	)
Total		$	94,421		$	109,501

10. Receivable-Backed Notes Payable

     The table below sets forth the balances of our receivable-back notes payable facilities (in thousands).

	As of
	December 31, 2007							December 31, 2008
						Balance of							Balance of
						Pledged/							Pledged/
	Debt		Interest			Secured		Debt		Interest			Secured
	Balance		Rate			Receivables		Balance		Rate			Receivables
2008 BB&T Purchase Facility	$	16,967		5.85	%	$	19,890	$	139,057		2.19	%	$	167,538
Liberty Bank Facility		—		—			—		43,505		5.75	%		48,603
GE Bluegreen/Big Cedar Receivables Facility		24,100		6.35	%		27,079		33,725		2.19	%		39,681
Foothill Facility		1,050		7.75	%		2,196		24,096		4.00	%		26,117
GMAC Receivables Facility		11,400		8.60	%		12,775		7,698		4.44	%		8,737
Textron Facility		1,482		8.25	%		1,697		1,036		6.00	%		1,194
Total	$	54,999				$	63,637	$	249,117				$	291,870

2008 BB&T Purchase Facility. In March 2008, we extended the revolving advance period under the BB&T Purchase Facility to May 2010 and the facility amount was increased to a cumulative purchase price of $150.0 million, on a revolving basis. Pursuant to the terms of the 2008 BB&T Purchase Facility, the advance period will end in May 2009 unless a “take out financing” occurs, as defined in the governing agreements, unless otherwise waived by BB&T. The 2008 BB&T Purchase Facility bears interest equal to the 30-day LIBOR plus 1.75%. The 2008 BB&T Purchase Facility is not guaranteed by Bluegreen Corporation and therefore is non-recourse debt. During the year ended December 31, 2008, we transferred $226.5 million of VOI notes receivable to the 2008 BB&T Purchase Facility and received $188.0 million in cash proceeds. In conjunction with the 2008 Term Securitization, we repaid $51.0 million of the outstanding balance on March 31, 2008. As of December 31, 2008, our remaining availability under this facility was $10.9 million, subject to eligible collateral and customary terms and conditions.

In 2009, we pledged $13.0 million of VOI notes receivable to this facility and received cash proceeds of $10.8 million. In addition to this borrowing we also had repayments of $8.2 million during 2009. Subsequent to the repayments and borrowings during 2009, our remaining availability under this facility was $8.3 million. However, availability under the facility increases during the revolving advance period as the outstanding balance decreases.

Liberty Bank Facility. During August 2008, we entered into a $75.0 million revolving timeshare receivables hypothecation facility with a syndicate of lenders led by Liberty Bank and assembled by Wellington Financial. The facility provides for a 90% advance on eligible receivables pledged under the facility during a two-year period ending on August 27, 2010, subject to customary terms and conditions. Amounts borrowed under the facility and

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interest incurred will be repaid as cash is collected on the pledged receivables, with the remaining balance being due on August 27, 2014. The facility bears interest at the one-month LIBOR plus 2.5%, subject to a floor of 5.75%. During the year ended December 31, 2008, we pledged $50.4 million of VOI notes receivable to this facility and received cash proceeds of $45.3 million. As of December 31, 2008, our remaining availability under this facility was $31.5 million, subject to eligible collateral and customary terms and conditions.

In 2009 we pledged $6.5 million of VOI notes receivable to this facility and received cash proceeds of $5.8 million. In addition to these borrowings we also had repayments of $2.1 million during 2009. Subsequent to the repayments and borrowings during 2009 our remaining availability under this facility was $27.8 million; however, availability under this facility increases during the revolving advance period as the outstanding balance decreases.

GE Bluegreen/Big Cedar Receivables Facility. During April 2007, the Bluegreen/Big Cedar Joint Venture entered into a $45.0 million revolving VOI receivables credit facility (the “GE Bluegreen/Big Cedar Receivables Facility”) with GE. Bluegreen Corporation has guaranteed the full payment and performance of the Bluegreen/Big Cedar Joint Venture in connection with the Facility. The GE Bluegreen/Big Cedar Receivables Facility allows for advances on a revolving basis through April 16, 2009. All outstanding borrowings on the GE Bluegreen/Big Cedar Receivables Facility mature no later than April 16, 2016. The GE Bluegreen/Big Cedar Receivables Facility has detailed requirements with respect to the eligibility of receivables for inclusion and other conditions to funding. The borrowing base under the GE Bluegreen/Big Cedar Receivables Facility ranges from 97% - 90% (based on the spread between the weighted average note receivable coupon and GE’s interest rate) of the outstanding principal balance of eligible notes receivable arising from the sale of VOIs. The GE Bluegreen/Big Cedar Receivables Facility includes affirmative, negative and financial covenants and events of default. All principal and interest payments received on pledged receivables are applied to principal and interest due under the GE Bluegreen/Big Cedar Receivables Facility. Indebtedness under the GE Bluegreen/Big Cedar Receivables Facility bears interest adjusted monthly at the one month LIBOR plus 1.75%. During 2008, the Bluegreen/Big Cedar Joint Venture pledged $20.6 million in aggregate principal balance of notes receivable under the facility and received $19.9 million in cash proceeds, net of issuance costs. As of December 31, 2008, the remaining availability under the GE Bluegreen/Big Cedar Receivables Facility, subject to the terms and conditions of this facility, was $11.3 million; however, availability under this facility increases during the revolving advance period as the outstanding balance decreases.

The Foothill Facility. During June 2008, we amended the Loan and Security Agreement with Wells Fargo Foothill, Inc. (“Foothill”). This facility is a $30.0 million revolving credit facility secured by the pledge of Bluegreen Communities’ and Bluegreen Resorts’ receivables. The facility, as amended, provides for a borrowing period for advances on eligible receivables through December 31, 2009, with a maturity date of all borrowings of December 31, 2010. In addition, the amended facility provides for up to $25 million (included in the $30 million facility amount) of advances at 90% on certain timeshare notes receivable that were not previously eligible under the facility. Amounts borrowed under the facility and interest incurred will be repaid as cash is collected on the pledged receivables. The facility bears interest at the Prime rate plus either 0.25% or 0.50%, subject to a 4.00% floor, under various circumstances. During the year ended December 31, 2008, we pledged $39.1 million of timeshare notes receivable to this facility and received proceeds of $35.1 million, net of facility costs of approximately $0.9 million and we made repayments of $12.7 million. At December 31, 2008, $2.0 million of the outstanding balance was secured by the pledge of Bluegreen Communities’ receivables and $22.1 million was secured by the pledge of Bluegreen Resorts’ receivables. As of December 31, 2008, our remaining availability under this facility was $5.9 million; however, availability under this facility increases during the revolving advance period as the outstanding balance decreases.

The GMAC Receivables Facility. In February 2003, we entered into a revolving VOI receivables credit facility (the “GMAC Receivables Facility”) with Residential Funding Corporation (“RFC”), an affiliate of GMAC. The GMAC Receivables Facility has detailed requirements with respect to the eligibility of receivables for inclusion and other conditions to funding. The borrowing base under the GMAC Receivables Facility is 90% of the outstanding principal balance of eligible notes arising from the sale of VOIs. The GMAC Receivables Facility includes affirmative, negative and financial covenants and events of default. All principal and interest payments received on pledged receivables are applied to principal and interest due under the GMAC Receivables Facility. Interest payments are due monthly. During the years ended December 31, 2007 and 2008, we did not pledge any VOI receivables under the GMAC Receivables Facility. In February 2008, the advance period on the GMAC Receivables Facility expired. All amounts outstanding under the GMAC Receivables Facility are due on February 15, 2015.

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The Textron Facility. During December 2003, we signed a combination $30.0 million Acquisition and Development and Timeshare Receivables facility with Textron Financial Corporation (the “Textron Facility”). The borrowing period for acquisition and development loans under the Textron Facility expired on October 1, 2004. The borrowing period for VOI receivables loans under the Textron Facility expired on March 1, 2006, and outstanding VOI receivables borrowings mature no later than March 31, 2009. Receivable-backed borrowings under the Textron Facility bear interest at the prime lending rate plus 1.00%, subject to a 6.00% minimum interest rate.

11. Lines-of-Credit and Notes Payable

We have outstanding borrowings with various financial institutions and other lenders, which have been used to finance the acquisition and development of our inventory and to fund operations. Financial data related to our borrowing facilities is set forth below (in thousands).

	As of
	December 31, 2007			December 31, 2008
			Interest			Interest
	Balance		Rates	Balance		Rates
The GMAC Communities Facility	$	66,418	8.25%	$	59,372	4.25%
The GMAC AD&C Facility		81,662	9.10%		99,776	4.94%
Textron AD&C Facility		9,701	8.50%		15,456	4.50 – 4.75%
Wachovia Notes Payable		16,353	6.60 – 6.95%		30,347	2.44 – 2.79%
Wachovia Line-of-Credit		—	—		9,949	2.19%
Fifth Third Bank Note Payable		—	—		3,400	3.44%
Other		2,844	3.29 – 11.03%		4,439	5.86 – 11.03%
Total	$	176,978		$	222,739

The table below sets forth the contractual minimum principal payments required on our lines-of-credit and notes payable and capital lease obligations for each of the five years and thereafter subsequent to December 31, 2008. Such minimum contractual payments may differ from actual payments due to the effect of principal payments required on a homesite or VOI release basis for certain of the above obligations (in thousands).

2009	$	100,835
2010		49,369
2011		59,673
2012		3,376
2013		3,796
Thereafter		5,690
Total	$	222,739

The GMAC Communities Facility. We have a revolving credit facility with RFC (the “GMAC Communities Facility”) for the purpose of financing our Bluegreen Communities real estate acquisitions and development activities. The GMAC Communities Facility is secured by the real property homesites (and personal property related thereto) at the following Bluegreen Communities projects, (the “Secured Projects”): Catawba Falls Preserve (Black Mountain, North Carolina); Lake Ridge at Joe Pool Lake (Cedar Hill and Grand Prairie, Texas); Mystic Shores at Canyon Lake (Spring Branch, Texas); Havenwood at Hunter’s Crossing (New Braunfels, Texas); The Bridges at Preston Crossings (Grayson County, Texas); King Oaks (College Station, Texas); Vintage Oaks at the Vineyard (New Braunfels, Texas); and Sanctuary River Club at St. Andrews Sound (St. Simons Island, Georgia). In addition, the GMAC Communities Facility is secured by our Carolina National and the Preserve at Jordan Lake golf courses in Southport, North Carolina and Chapel Hill, North Carolina, respectively. The period during which we can add additional projects to the GMAC Communities Facility has expired although we can continue to borrow on projects approved prior to the expiration of the individual borrowing commitments ranging from July 20, 2009 though the maturity of the facility on September 30, 2009, subject to eligible collateral and the terms of the facility. Principal payments are effected through agreed-upon release prices paid to RFC, as homesites in the Secured Projects are sold. Interest payments are due monthly. The GMAC Communities Facility includes customary conditions to funding, acceleration and event of default provisions and certain financial affirmative and negative covenants. We use the proceeds from the GMAC Communities Facility to finance the acquisition and development of Bluegreen Communities projects.

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During 2008, we borrowed $16.5 million to fund development expenditures on certain of the secured projects. These borrowings were offset by repayments of $23.5 million. The interest rate on this borrowing is the prime rate plus 1.00%, and the maturity date is September 30, 2009. As of December 31, 2008, our remaining availability under this facility was approximately $555,000, subject to eligible collateral and customary terms and conditions.

The GMAC AD&C Facility. In February 2003, RFC also provided us with an acquisition, development and construction revolving credit facility for Bluegreen Resorts (the “GMAC AD&C Facility”). The period during which individual projects can be added to the GMAC AD&C Facility, as amended, expired. Outstanding borrowings mature on dates ranging from September 2010 through November 2011. Principal will be repaid through agreed-upon release prices as VOIs are sold at the financed resorts, subject to minimum required amortization. Interest payments are due monthly.

During 2008, we borrowed $36.9 million to fund construction and development at our Club 36 resort in Las Vegas, Nevada, and $31.7 million for construction and development at our Fountains Resort in Orlando, Florida. These borrowings were offset by repayments of $50.5 million. The interest rate on this borrowing is the one-month LIBOR plus 4.50%, and matures at various dates based upon the sub-loan agreements. As of December 31, 2008, we had no remaining availability on this line of credit.

Textron AD&C Facility. In April 2008, we entered into a $75.0 million, revolving master acquisition, development and construction facility loan agreement with Textron Financial Corporation (“Textron”). The Facility is used to facilitate the borrowing of funds for resort development activities. In addition, Bluegreen Corporation is guaranteeing all sub-loans under the master agreement. In addition, certain other obligations to Textron and its affiliates in excess of $25.0 million, including outstanding bonds purchased in Bluegreen Corporation’s term securitization transactions, will also reduce the availability under the Facility at any time by the outstanding balance of such obligations. The Facility is secured, in general, by 1) a first mortgage and lien on assets acquired or developed with funds borrowed under the Facility, and 2) a first assignment of all operating agreements, rents and other revenues at the vacation ownership resorts which serve as collateral for the Facility, subject to any requirements of the respective property owners’ association. Subject to the eligibility requirements and certain conditions precedent, borrowings under this Facility can be drawn through April 17, 2010, with maturity dates varying based on the individual sub-loan agreements. Principal payments will be made through agreed-upon release prices paid to Textron as vacation ownership interests in the properties collateralizing the sub-loans are sold, or through minimum required amortization payments.

In April 2008, we borrowed $9.0 million in connection with the acquisition of The Royal Suites at Atlantic Palace located in Atlantic City, New Jersey. In May 2008, we also borrowed $8.4 million in connection with the acquisition of additional VOIs at one of our existing resorts in Wisconsin. These borrowings were partially offset by repayments of $12.7 million. The interest rate on these borrowings is the prime rate plus 1.50% paid monthly, and the maturity date varies based on the sub-loan borrowing agreements; however, the borrowing period ends on April 17, 2010.

In addition, certain other obligations to Textron and its affiliates in excess of $25.0 million, including the outstanding balance of $1.0 million on an existing Textron receivables facility, and outstanding bonds purchased in Bluegreen Corporation’s term securitization transactions, also reduce the availability under the Textron facility. At December 31, 2008, these other Textron obligations totaled approximately $39.2 million; therefore, the excess of $14.2 million over the $25.0 million threshold reduced our revolving availability under the Textron Facility to $44.3 million, subject to eligible collateral and customary terms and conditions.

Wachovia Notes Payable. In June 2008, we entered into a note payable for $6.1 million in connection with the acquisition of Club La Pension located in New Orleans, Louisiana. The note bears interest at the 30-day LIBOR rate plus 2.35%, which is due monthly. Principal payments are due as VOIs in Club La Pension are sold at a release price of 37% of the sales price with minimum amounts due every year from now until maturity. This note matures in June 2012.

In August 2008, we entered into a note payable for $11.5 million in connection with our property located in Williamsburg, Virginia. Interest is due monthly and bears a rate of the 1-month LIBOR plus 2.35%. Principal payments are made on an interval release basis with minimum cumulative payments due every semi-annual period

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with the balance maturing in July 2010. During 2008, we made payments of $1.8 million and the balance as of December 31, 2008 was $9.7 million.

In addition to the Wachovia Notes Payable described above, we entered into another note payable for $12.1 million, in connection with our property located in Williamsburg, Virginia. During 2008 we had repayments of $1.6 million and this note has a balance of $10.5 million as of December 31, 2008, with the entire balance maturing in June 2009. Interest is due monthly and bears a rate of the 1-month LIBOR plus 2.35%.

The Wachovia Line-of-Credit. In March 2008, we borrowed $10.0 million on this $20 million line of credit for general corporate purposes. Amounts borrowed under this line bear interest at the 30-day LIBOR plus 1.75%. Interest is due monthly, and all outstanding amounts are due on July 30, 2009. The line-of-credit agreement contains certain covenants and conditions typical of arrangements of this type. As of December 31, 2008, the remaining availability under this line-of-credit was approximately $10.0 million.

During February 2009 we borrowed $8.0 million on this line-of-credit. Subsequent to this borrowing our remaining availability under this line-of-credit was approximately $2.0 million.

Fifth Third Bank. In April 2008, we purchased a building in Myrtle Beach, South Carolina. The purchase price was $4.8 million, of which $3.4 million was financed by a note payable to Fifth Third Bank. The note payable allows for total borrowing of $7.1 million, the remaining $3.7 million is available to fund refurbishment of the building, through October 2009, subject to the terms and conditions of the note. Interest is payable monthly through the earlier of the construction completion date or October 31, 2009, and bears interest at a rate equal to the one-month LIBOR plus 3.00%. Subsequent to the construction completion date or October 31, 2009, interest and principal payments shall be made monthly until maturity. The note payable matures in April 2023.

Total interest expense capitalized to construction in progress was $12.1 million, $15.5 million and $12.8 million for 2006, 2007, and 2008, respectively.

12. Senior Secured Notes Payable

On April 1, 1998, we consummated a private placement offering of $110.0 million in aggregate principal amount of 10.50% senior secured notes payable due April 1, 2008 (the “Notes”). On June 27, 2005, we repaid $55.0 million in aggregate principal amount of the Notes at a redemption price of 101.75% plus accrued and unpaid interest through June 26, 2005 of $1.4 million. On March 31, 2008, we repaid the remaining $55.0 million of notes plus accrued interest.

13. Junior Subordinated Debentures

We have formed statutory business trusts (collectively, the “Trusts”) and each issued trust preferred securities and invested the proceeds thereof in our junior subordinated debentures. The Trusts are variable interest entities in which we are not the primary beneficiary as defined by FIN No. 46R. Accordingly, we do not consolidate the operations of the Trusts; instead, the Trusts are accounted for under the equity method of accounting. In each of these transactions, the applicable Trust issued trust preferred securities as part of a larger pooled trust securities offering which was not registered under the Securities Act of 1933. The applicable Trust then used the proceeds from issuing the trust preferred securities to purchase an identical amount of junior subordinated debentures from us. Interest on the junior subordinated debentures and distributions on the trust preferred securities are payable quarterly in arrears at the same interest rate. Distributions on the trust preferred securities are cumulative and based upon the liquidation value of the trust preferred security. The trust preferred securities are subject to mandatory redemption, in whole or in part, upon repayment of the junior subordinated debentures at maturity or their earlier redemption. The junior subordinated debentures are redeemable in whole or in part at the Company’s option at any time after five years from the issue date or sooner following certain specified events. In addition, we made an initial equity contribution to each Trust in exchange for its common securities, all of which are owned by us, and those proceeds were also used to purchase an identical amount of junior subordinated debentures from us. The terms of each Trust’s common securities are nearly identical to the trust preferred securities.

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We had the following junior subordinated debentures outstanding at December 31, 2008 and 2007 (dollars in thousands):

	Outstanding		Initial
	Amount of		Equity			Fixed			Variable	Beginning
	Junior		To			Interest			Interest	Optional
	Subordinated		Trust		Issue	Rate			Rate	Redemption	Maturity
Trust	Debentures		(3)		Date	(1)			(2)	Date	Date
Bluegreen Statutory Trust I	$	23,196	$	696	3/15/05		9.160	%	3-month LIBOR + 4.90%	3/30/10	3/30/35
Bluegreen Statutory Trust II		25,774		774	5/04/05		9.158	%	3-month LIBOR + 4.85%	7/30/10	7/30/35
Bluegreen Statutory Trust III		10,310		310	5/10/05		9.193	%	3-month LIBOR + 4.85%	7/30/10	7/30/35
Bluegreen Statutory Trust IV		15,464		464	4/24/06		10.130	%	3-month LIBOR + 4.85%	6/30/11	6/30/36
Bluegreen Statutory Trust V		15,464		464	7/21/06		10.280	%	3-month LIBOR + 4.85%	9/30/11	9/30/36
Bluegreen Statutory Trust VI		20,619		619	2/26/07		9.842	%	3-month LIBOR + 4.80%	4/30/12	4/30/37
	$	110,827	$	3,327

(1)	Both the trust preferred securities and junior subordinated debentures bear interest at a fixed interest rate from the issue date through the beginning optional redemption date.
(2)	Both the trust preferred securities and junior subordinated debentures bear interest at a variable interest rate from the beginning optional redemption date through the maturity date.
(3)	Initial equity in trust is recorded as part of other assets in our consolidated balance sheets.

14. Fair Value of Financial Instruments

In estimating the fair values of our financial instruments, we used the following methods and assumptions:

Cash and cash equivalents: The amounts reported in our consolidated balance sheets for cash and cash equivalents approximate fair value.

Contracts receivable: The amounts reported in our consolidated balance sheets for contracts receivable approximate fair value. Contracts receivable are non-interest bearing and generally convert into cash or an interest-bearing mortgage note receivable within thirty days.

Notes receivable: The amounts reported in our consolidated balance sheets for notes receivable approximate fair value based on discounted future cash flows using current rates at which similar loans with similar maturities would be made to borrowers with similar credit risk.

Lines-of-credit, notes payable, receivable-backed notes payable and junior subordinated debentures: The amounts reported in our consolidated balance sheets approximate their fair value for indebtedness that provides for variable interest rates. The fair value of our fixed-rate indebtedness was estimated using discounted cash flow analyses, based on our current incremental borrowing rates for similar types of borrowing arrangements.

10.50% senior secured notes payable and junior subordinated debentures: The fair values of our senior secured notes payable and junior subordinated debentures were based on the discounted value of contractual cash flows at a market discount rate or market price quotes from the over-the-counter bond market.

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The estimated fair value of our financial instruments is as follows (in thousands):

	As of December 31, 2007				As of December 31, 2008
	Carrying		Estimated		Carrying		Estimated
	Amount		Fair Value		Amount		Fair Value
Cash and cash equivalents	$	144,973	$	144,973	$	81,775	$	81,775
Contracts receivable, net		20,532		20,532		7,452		7,452
Notes receivable, net		160,665		160,665		340,644		340,644
Lines-of-credit, notes payable, and receivable- backed notes payable		231,977		231,977		471,856		471,856
10.50% senior secured notes payable		55,000		54,725		—		—
Junior subordinated debentures		110,827		103,351		110,827		47,161

15. Common Stock and Stock Option Plans

Shareholders’ Rights Plan

On July 27, 2006, the Board of Directors adopted rights agreement (the “Rights Agreement”) and declared a dividend of one preferred share purchase right (a “Right”) for each outstanding share of the Company’s common stock. The Board of Directors authorized the adoption of the Rights Agreement to protect shareholders from coercive or otherwise unfair takeover tactics. In general terms (as amended with Form 8-A/A filed with the SEC on May 24, 2007), the Rights Agreement imposes a significant penalty upon any person or group which acquires beneficial ownership of 10% or more of the Company’s outstanding common stock without the prior approval of the Board of Directors. Excluded from this rule is the Company, its subsidiaries, employee benefit plans or any of its subsidiaries and any entity holding common stock for or pursuant to the terms of any such employee benefit plan , as well as Woodbridge Holdings, its affiliates, successors and assigns.

Stock Option Plans

Under our employee stock option plans, options can be granted with various vesting periods. Options granted to employees subsequent to December 31, 2002 vest 100% on the five-year anniversary of the date of grant. Our options are granted at exercise prices that either equal or exceed the quoted market price of our common stock at the respective dates of grant. All of our options expire ten years from the date of grant.

All options granted to non-employee directors subsequent to December 31, 2002 vested either immediately upon grant or on the five-year anniversary of the date of grant, subject to accelerated vesting pursuant to change in control provisions included in the terms of certain grants. All non-employee director stock options are nonqualified and expire ten years from the date of grant, subject to alternative expiration dates under certain circumstances.

The following table lists our grants of stock options and restricted stock to our employees and our non-employee directors under the 2005 Stock Incentive Plan and 2008 Stock Incentive Plan (in thousands, except per share amounts). See Note 1 of the Notes to Consolidated Financial Statements for further discussion of stock options granted.

	Stock Option Awards						Restricted Stock Awards
					Weighted average
					grant date fair
	Employees		Directors		value		Employees		Directors
2006		440		143	$	6.58		—		17
2007		—		137	$	5.58		197		17
2008		777		295	$	3.18		1,184		184
Total		1,217		575				1,381		218

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Total stock-based compensation expense for non-employee directors and employees during the years ended December 31, 2006, 2007 and 2008 was $2.8 million, $2.4 million and $4.4 million, respectively. The following table represents certain information related to our unrecognized compensation for our stock-based awards as of December 31, 2008:

	Weighted
	Average
	Remaining
	Recognition		Unrecognized
As of December 31, 2008	Period		Compensation
	(in years)		(000’s)
Stock Option Awards		3.4	$	7,062
Restricted Stock Awards		4.2	$	10,545

Changes in our outstanding stock option plans are presented below (in thousands, except per share data).

				Weighted
				Average		Number of
	Outstanding			Exercise Price		Shares
	Options			Per Share		Exercisable
Balance at December 31, 2006		2,064		$	11.31		481
Granted		137		$	11.98
Forfeited		(123	)	$	17.05
Exercised		(140	)	$	3.99
Balance at December 31, 2007		1,938		$	11.51		579
Granted		1,072		$	7.60
Forfeited		(242	)	$	13.51
Expired		(20	)	$	9.11
Exercised		(39	)	$	3.48
Balance at December 31, 2008		2,709		$	9.91		871

During the years ended December 31, 2006, 2007, and 2008 the total fair value of shares vested was $1.8 million, $616,000 and $897,000, respectively. A summary of the status of the Company’s unvested restricted stock awards and activity during the year ended December 31, 2008, is as follows (in thousands, except per option data):

				Weighted-Average
	Number			Grant-Date
Non-vested Restricted Shares	of Shares			Fair Value per Share
Unvested at January 1, 2008		207		$	11.98
Granted		1,368			7.64
Vested		(27	)		8.20
Forfeited		(131	)		9.01
Unvested at December 31, 2008		1,417		$	8.14

The aggregate intrinsic value of our stock options outstanding and exercisable was $1.9 million and $1.0 million as of December 31, 2007, respectively. The aggregate intrinsic value of our stock options outstanding and exercisable was $32,000 as of December 31, 2008. The total intrinsic value of our stock options exercised during the years ended December 31, 2006, 2007, and 2008 was $1.4 million, $1.1 million and $223,000, respectively. The weighted-average exercise prices and weighted-average remaining contractual lives of our outstanding stock options at December 31, 2008 (grouped by range of exercise prices) were:

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					Weighted-
					Average				Weighted-
					Remaining		Weighted-		Average
	Number		Number of		Contractual		Average		Exercise Price
	of Options		Vested Options		Term		Exercise Price		(Vested Only)
	(In 000’s)		(In 000’s)		(In years)
$2.11 - $3.00		35		35		2.4	$	2.21	$	2.21
$3.01 - $4.52		379		379		3.8	$	3.46	$	3.46
$4.53 - $6.79		183		183		5.8	$	5.92	$	5.92
$6.80 - $10.20		983		19		7.4	$	7.70	$	8.50
$10.21 - $15.31		604		114		8.5	$	11.94	$	11.47
$15.32 - $18.36		525		141		6.6	$	18.27	$	18.04
		2,709		871		6.8	$	9.91	$	7.45

Bluegreen Corporation 2008 Stock Incentive Plan

During May of 2008, the Board of Directors adopted (and the shareholders ratified) the issuance of the Bluegreen Corporation 2008 Stock Incentive Plan (the “Plan”). The Plan allows for a maximum of 4.0 million shares of our common stock to be issued for restricted stock awards and upon the exercise of options granted under the plan. Any shares subject to stock awards or option grants under the plan which expire or are terminated, forfeited, or canceled without having been exercised or vested in full, shall be available for further grant under the Plan.

16. Commitments and Contingencies

At December 31, 2008, the estimated cost to complete development work in subdivisions or resorts from which homesites or VOIs have been sold totaled $49.8 million. Development is estimated to be completed as follows: 2009 — $30.0 million, 2010 — $10.0 million, 2011 and beyond — $9.8 million.

In 2006 we entered into a separation agreement with our former CEO, George Donovan. Under the terms of this agreement, Mr. Donovan will be paid a total of $3 million over a seven year period in exchange for his services to be available on a when and if needed basis. We recorded an expense of $2.6 million in 2006, which represents the then present value of the seven year agreement. As of December 31, 2008, the remaining amount due to Mr. Donovan was $2.0 million, the present value of which is recorded as a liability on our consolidated balance sheet.

Rent expense for the years ended December 31, 2006, 2007, and 2008 totaled approximately $11.6 million, $13.0 million and $14.7 million, respectively.

Lease commitments under these and our various other noncancelable operating leases for each of the five years subsequent to December 31, 2008, and thereafter are as follows (in thousands, inclusive of terminated leases as a result of our plan of restructuring describe above in
Note 3):

2009	$	11,351
2010		10,834
2011		8,081
2012		6,745
2013		4,812
Thereafter		23,228
Total future minimum lease payments	$	65,051

At December 31, 2008, we had $35,000 in outstanding commitments under stand-by letters of credit.

In the ordinary course of our business, we become subject to claims or proceedings from time to time relating to the purchase, subdivision, sale or financing of real estate. Additionally, from time to time, we become involved in disputes with existing and former employees, vendors, taxing jurisdictions and various other parties. Unless otherwise described below, we believe that these claims are routine litigation incidental to our business. The following are matters that we are describing in more detail in accordance with SFAS No. 5, Accounting for Contingencies.

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Bluegreen Resorts

Tennessee Tax Audit

In 2005, the State of Tennessee Audit Division (the “Division”) audited certain subsidiaries within Bluegreen Resorts for the period from December 1, 2001 through December 31, 2004. On September 23, 2006, the Division issued a notice of assessment for approximately $652,000 of accommodations tax based on the use of Bluegreen Vacation Club accommodations by Bluegreen Vacation Club members who became members through the purchase of non-Tennessee property. We believe the attempt to impose such a tax is contrary to Tennessee law and intend to vigorously oppose such assessment by the Division. An informal conference was held in December 2007 to discuss this matter with representatives of the Division. No formal resolution of the issue was reached during the conference and no further action has to date been initiated yet by the State of Tennessee. While the timeshare industry has been successful in challenging the imposition of sales taxes on the use of accommodations by timeshare owners, there is no assurance that we will be successful in contesting the current assessment.

Shore Crest Claim

We filed suit against the general contractor with regard to alleged construction defects at our Shore Crest Vacation Villas resort in South Carolina, including deficiencies in exterior insulating and finishing systems that have resulted in water intrusion; styled Shore Crest Vacation Villas II Owners Association, Inc., Bluegreen Corporation vs. Welbro Constructors, S.C., Inc. et al. Case No.: 04-CP-26-500 and Shore Crest Vacation Villas Owners Association, Inc., Bluegreen Vacations Unlimited, Inc., as successor to Patten Resorts, Inc. and as successor to Bluegreen Resorts, Inc. vs. Welbro Constructors Inc. et al. Case No. 04-CP-26-499.  We sought to recover costs to repair these deficiencies from the defendants.  On October 15, 2008, this matter was settled with the general contractor and other defendants collectively agreeing to pay $4.6 million. Bluegreen received the full amount of the settlement in 2009, and is holding this amount as restricted cash pending completion of the repairs. As of December 31, 2008, Bluegreen had accrued $1.5 million related to this matter to cover Bluegreen’s estimated share of the final total cost of correcting the construction deficiencies at this project.  

LeisurePath Vacation Club

In Michelle Alamo, Ernest Alamo, Toniann Quinn and Terrance Quinn v. Vacation Station, LLC, LeisurePath Vacation Club, LeisurePath, Inc., Bluegreen Corporation, Superior Court of New Jersey, Bergen County, Docket No. L-6716-05, Civil Action, Plaintiffs filed a purported “Class Action Complaint” on September 23, 2005, raising allegations concerning the marketing of the LeisurePath Travel Services Network product (the “Network”) to the public, and, in particular, to New Jersey residents by Vacation Station, LLC, an independent distributor of travel products. Vacation Station, LLC purchased LeisurePath membership kits from LeisurePath, Inc.’s Master Distributor, Mini Vacations, Inc., and then sold the memberships to consumers.  The parties agreed to a settlement pursuant to which persons who purchased a participation in the Network from Vacation Station, LLC’s sales office in Hackensack, New Jersey will be entitled to receive at their option either: (1) seven consecutive nights of accommodations in a Bluegreen resort located in either Orlando, Las Vegas, or Myrtle Beach to be used by December 31, 2009 or (2) continued memberships and a waiver of their Network membership fees until 2012.  In an effort to resolve any claims of individuals who may allege improper soliciting, but did not purchase a participation in the Network, an agreed upon number of three day/two night vacation certificates (for use at the same properties listed above) will be made available and awarded to the first non-purchasers who submit a prepared affidavit swearing to the validity of their claim will receive these certificates. A Fairness Hearing for final approval of the proposed settlement was held on April 18, 2008, at which time the judge gave final approval of the proposed settlement and awarded Plaintiff’s counsel $300,000 in attorney’s fees. Incentive payments totaling $13,000 will be made to the six named Plaintiffs in the suit.  Since that time, certain plaintiffs who elected to opt out of the original class action complaint brought suit in Enrique Merino et al. v. Leisure Path, Inc. et al., Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-7084-08. The parties have reached tentative agreement to settle this lawsuit which settlement contemplates us paying a total of approximately $54,000 in customer refunds and attorney’s fees. We do not believe that there are any other remaining parties that elected to opt out of the original class action suit that would be entitled to bring suit, but no guarantee can be made.

Missouri Attorney General Investigation

By letter dated April 3, 2008, the Attorney General (“AG”) of Missouri advised us that, between early 2005 and that date, the AG had received ninety-six consumer complaints and was investigating the practices alleged. In its letter,

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the AG alleged, among other things, that we violated the Missouri Merchandising Practices Act, Chapter 407 of the Revised Statutes of Missouri (the “Missouri Act”). Since the date of that original letter, additional consumer complaints were added bringing the total number to 112. By letter agreement dated February 16, 2009, this matter was settled with Bluegreen agreeing to contribute approximately $215,000, which was accrued at December 31, 2008, to a fund established with the AG to provide refunds to certain eligible individuals and payment of $5,000 towards the Attorney General’s investigation costs. All amounts accrued as of December 31, 2008 have been subsequently paid in 2009.

Kelly Fair Labor Standards Act Lawsuit

In Cause No. 08-cv-401-bbc, styled Steven Craig Kelly and Jack Clark, individually and on behalf of others similarly situated v. Bluegreen Corporation, in the United States District Court for the Western District of Wisconsin, two former sales representatives brought on July 28, 2008, a lawsuit in the Western District of Wisconsin on behalf of themselves and putative class members who are or were employed by us as sales associates and compensated on a commission-only basis. Plaintiffs claim that we violated the Fair Labor Standards Act (“FLSA”), and that they and the collective class are or were covered, non-exempt employees under federal wage and hour laws, and are entitled to minimum wage and overtime pay consistent with the FLSA. In the complaint, Plaintiffs seek unpaid compensation (minimum wage and overtime), liquidated damages, interest, costs, attorneys’ fees and other legal and equitable relief as the Court deems just and proper. In February of 2009, the Court granted conditional class certification to the Plaintiffs.

Pennsylvania Attorney General Lawsuit

On October 28, 2008, in Cause No. 479 M.D. 2008, styled Commonwealth of Pennsylvania Acting by Attorney General Thomas W. Corbett, Jr. v. Bluegreen Corporation, Bluegreen Resorts, Bluegreen Vacations Unlimited, Inc. and Great Vacation Destinations, Inc., Commonwealth Court of Pennsylvania, the Commonwealth of Pennsylvania acting through its Attorney General filed a lawsuit against Bluegreen Corporation, Bluegreen Resorts, Bluegreen Vacations Unlimited, Inc. and Great Vacation Destinations, Inc. (a wholly owned subsidiary of Bluegreen Corporation) alleging violations of Pennsylvania’s Unfair Trade Practices and Consumer Protection Laws.  The lawsuit alleges that we have used, or are using, sales and marketing methods or practices that are unlawful under Pennsylvania law and seeks a permanent injunction preventing us from using such methods and practices in the future.  The lawsuit also seeks civil penalties against us and restitution on behalf of Pennsylvania consumers who may have suffered losses as a result of the alleged unlawful sales and marketing methods and practices.  The lawsuit does not seek to permanently restrain us or any of our affiliates from doing business in the Commonwealth of Pennsylvania.  While there is no assurance that a resolution will be reached, the parties are currently engaged in negotiations to resolve this litigation.

Bluegreen Communities

Mountain Lakes Mineral Rights

Bluegreen Southwest One, L.P., (“Southwest”), a subsidiary of Bluegreen Corporation, is the developer of the Mountain Lakes subdivision in Texas. In Cause No. 28006; styled Betty Yvon Lesley et a1 v. Bluff Dale Development Corporation, Bluegreen Southwest One. L.P. #et al. in the 266th Judicial District Court, Erath County, Texas, the plaintiffs filed a declaratory judgment action against Southwest seeking to develop their reserved mineral interests in, on and under the Mountain Lakes subdivision. The plaintiffs’ claims are based on property law, oil and gas law, contract and tort theories. The property owners association and some of the individual landowners have filed cross actions against Bluegreen, Southwest and individual directors of the property owners association related to the mineral rights and certain amenities in the subdivision as described below. On January 17, 2007, the court ruled that the restrictions placed on the development that prohibited oil and gas production and development were invalid and not enforceable as a matter of law, that such restrictions do not prohibit the development of the plaintiffs’ prior reserved mineral interests and that Southwest breached its duty to lease the minerals to third parties for development. The Court further ruled that Southwest is the sole holder of the right to lease the minerals to third parties. The order granting the plaintiffs’ motion was severed into a new cause styled Cause No. 28769 Betty Yvon Lesley et a1 v. Bluff Dale Development Corporation, Bluegreen Southwest One. L.P. #et al. in the 266th Judicial District Court, Erath County, Texas. Southwest appealed the trial court’s ruling. On January 22, 2009, in Bluegreen Southwest One, L.P. et al. v. Betty Yvon Lesley et al.; in the 11th Court of Appeals, Eastland, Texas, the Appellate Court reversed the trial court’s decision and ruled in Southwest’s favor. Therefore, as a result, the Appellate Court determined that all executive rights were owned by Southwest and then transferred to the individual property owners

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in connection with the sales of land. All property owner claims were decided in favor of Southwest. It was also decided that Southwest did not breach a fiduciary duty to the Plaintiffs as an executive rights holder. As a result of this decision, there are no damages or attorney’s fees owed to the Plaintiffs. It is unknown whether Plaintiffs will file an appeal to the Supreme Court of Texas. As of December 31, 2008, we had accrued $1.5 million in connection with the issues raised related to the mineral rights claims.

Separately, one of the amenity lakes in the Mountain Lakes development did not reach the expected water level after construction was completed. Owners of homesites within the Mountain Lakes subdivision and the property owners Association of Mountain Lakes have asserted cross claims against Southwest and Bluegreen regarding such failure as part of the Lesley litigation referenced above as well as in Cause No. 067-223662-07; Property Owners Association of Mountain Lakes Ranch, Inc. v. Bluegreen Southwest One, L.P. et al.; in the 67^th Judicial District Court of Tarrant County, Texas. Southwest continues to investigate reasons for the delay of the lake to fill and currently estimates that the cost of remediating the condition will be approximately $3.4 million, which was accrued as of December 31, 2008. Additional claims may be pursued in the future in connection with these matters, and it is not possible at this time to estimate the likelihood of loss or amount of potential exposure with respect to any such matters.

17. Income Taxes

     Our provision for income taxes consists of the following (in thousands):

	Year Ended		Year Ended			Year Ended
	December 31,		December 31,			December 31,
	2006		2007			2008
Federal:
Current	$	7,397	$	5,124		$	2,385
Deferred		11,913		12,749			(1,672	)
		19,310		17,873			713
State and other:
Current		629		1,976			1,185
Deferred		922		(282	)		(1,132	)
		1,551		1,694			53
Total	$	20,861	$	19,567		$	766

The reasons for the difference between our provision for income taxes and the amount that results from applying the federal statutory tax rate to income before provision for income taxes and cumulative effect are as follows (in thousands):

	Year Ended		Year Ended		Year Ended
	December		December 31,		December 31,
	31, 2006		2007		2008
Income tax expense at statutory rate	$	19,310	$	18,024	$	88
Effect of state taxes, net of federal tax benefit		1,236		1,004		10
Effect of state rate changes on net deferred liabilities		—		—		(1,732	)
Change in state valuation allowance		—		—		1,404
Non-deductible items		315		349		1,018
Other		—		190		(22	)
	$	20,861	$	19,567	$	766

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Our deferred income taxes consist of the following components (in thousands):

	December 31,			December 31,
	2007			2008
Deferred federal and state tax liabilities (assets):
Installment sales treatment of notes	$	234,528		$	263,122
Deferred federal and state loss carryforwards/AMT credits (net of valuation allowance of $1.8 million and $3.2 million as of December 31, 2007 and 2008, respectively)		(146,889	)		(164,797	)
Book over tax carrying value of retained interests in notes receivable sold		17,648			24,284
Book reserves for loan losses and inventory		(9,070	)		(23,181	)
Tax over book depreciation		4,862			4,436
Unrealized gains on retained interests in notes receivable sold (see Note 7)		5,739			1,995
Deferral of VOI sales under SFAS No. 152		(5,016	)		(94	)
Deferral of rent		—			(2,284	)
Restructuring		—			(1,810	)
Accrued contingencies		(1,187	)		(2,533	)
Goodwill		306			(2,107	)
Stock-based compensation		(1,484	)		(2,788	)
Other		(1,075	)		(2,441	)
Deferred income taxes	$	98,362		$	91,802
Total deferred federal and state tax liabilities	$	266,590		$	303,481
Total deferred federal and state tax assets		(168,228	)		(211,679	)
Deferred income taxes	$	98,362		$	91,802

As of December 31, 2008, we have federal net operating loss carryforwards of approximately $291 million, which expire beginning in 2021 through 2028, and alternative minimum tax credit carryforwards of approximately $38 million, which never expire. Additionally, as of December 31, 2008, we have state operating loss carryforwards of approximately $621 million, which expire beginning in 2010 through 2028 and Florida alternative minimum tax credit carryforwards of $2.4 million, which never expire.

Internal Revenue Code Section 382 addresses limitations on the use of net operating loss carry forwards following a change in ownership, as defined in Section 382. We do not believe that any such ownership change occurred during 2007 or 2008. If our interpretation were found to be incorrect, there would be significant limitations placed on these carry forwards which would result in an increase in the Company’s tax liability and a reduction of its net income.

We and our subsidiaries file income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2004.

The Internal Revenue Service (“IRS”) commenced an examination of our U.S. income tax returns for 2004 and 2005 in the first quarter of 2007. On October 12, 2007, we received an examination report from the IRS for the 2004 & 2005 tax periods asserting, in the aggregate, approximately $35,000 of additional tax due, plus accrued interest.

On July 12, 2007, the Governor of the State of Michigan signed the Michigan Business Tax Act (“MBT”), which imposes a business income tax and a modified gross receipts tax. The MBT, which became effective January 1, 2008, replaced the state’s current Single Business Tax, which expired on December 31, 2007. The MBT creates a new tax on business income and is assessed on every taxpayer with business activity in Michigan, unless prohibited by federal law. The base of the tax starts with federal taxable income or a comparable measure of income for partnerships and S corporations, which is then subject to various adjustments, including apportionment, to identify business activity in Michigan. The tax rate is 4.95%. The MBT also creates a new tax based on a modified measure of a business’ gross receipts. The base of the tax is gross receipts less purchases from other firms. Purchases from

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other firms include inventory purchased during the tax year and capital expenditures. The tax rate is 0.8%. The newly enacted Michigan tax has been taken into account when we calculated our effective state tax rate.

In July 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes-an Interpretation of FASB Statement No. 109 (“FIN 48”), which clarifies the accounting for uncertainty in tax positions. Based on an evaluation of uncertain tax provisions, we are required to measure tax benefits based on the largest amount of benefit that is greater than 50% likely of being realized upon settlement. The adoption of FIN 48 on January 1, 2007 did not have an impact on our financial position or results of operations. In accordance with our accounting policy, we recognize interest and penalties related to unrecognized taxes as a component of general and administrative expenses. This policy did not change as a result of the adoption of FIN 48.

As of December 31, 2008, we had no amounts recorded for uncertain tax positions.

18. Employee Retirement Savings Plan and Other Employee Matters

Our Employee Retirement Plan is an Internal Revenue Code section 401(k) Retirement Savings Plan (the “Plan”). All U.S.-based employees at least 21 years of age with one year of employment with us and 1,000 work hours are eligible to participate in the Plan. During 2008, the Plan, as amended, provided an annual employer discretionary matching contribution and a fixed-rate employer matching contribution equal to 100% of the first 3% of a participant’s contribution with an annual limit of $1,500 per participant. Subsequent to December 31, 2008, the fixed-rate employer matching contribution was amended and replaced with a discretionary match for the 2009 plan year. During the years ended December 31, 2006, 2007, and 2008, we recognized expenses for our contributions to the Plan of approximately $720,000, $903,000 and $1.3 million, respectively.

Less than five of our employees in New Jersey, which comprise approximately 1% of our total workforce, are subject to the terms of collective bargaining agreements.

19. Business Segments

We have two reportable business segments — Bluegreen Resorts and Bluegreen Communities. Bluegreen Resorts develops markets and sells VOIs in our resorts, through the Bluegreen Vacation Club, and provides resort management services to resort property owners associations. Bluegreen Communities acquires large tracts of real estate, which are subdivided, improved (in some cases to include a golf course on the property and other related amenities) and sold, typically on a retail basis as homesites. Our reportable segments are business units that offer different products. The reportable segments are each managed separately because they sell distinct products with different development, marketing and selling methods.

We evaluate the performance and allocate resources to each business segment based on its respective field operating profit. Field operating profit is operating profit prior to the allocation of corporate overhead, interest income, other income or expense items, interest expense, income taxes, minority interest and cumulative effect of change in accounting principle. Inventory and notes receivable are the only assets that we evaluate on a segment basis — all other assets are only evaluated on a consolidated basis. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies in Note 1 to the Consolidated Financial Statements.

Required disclosures for our business segments are as follows (in thousands):

	Bluegreen			Bluegreen
	Resorts			Communities		Totals
For the year ended December 31, 2006:
Sales of real estate	$	404,950	(1)	$	164,041	$	568,991
Other resort and communities operations revenue		49,831			11,922		61,753
Depreciation expense		8,322			1,641		9,963
Field operating profit		54,310			35,824		90,134

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	Bluegreen			Bluegreen
	Resorts			Communities			Totals
For the year ended December 31, 2007:
Sales of real estate	$	450,163	(1)	$	129,217		$	579,380
Other resort and communities operations revenue		53,624			13,787			67,411
Depreciation expense		8,356			1,715			10,071
Field operating profit		62,890			23,633			86,523
For the year ended December 31, 2008:
Sales of real estate	$	428,010	(1)	$	47,020		$	475,030
Other resort and communities operations revenue		58,473			10,709			69,182
Depreciation expense		7,294			1,618			8,912
Field operating profit (loss)		46,999	(2)		(3,562	)(3)		43,437

(1)	For the years ended December 31, 2006, 2007 and 2008, includes approximately $44.7 million, $39.4 million and $8.2 million, respectively related to gains on the sales of VOI notes receivable through off-balance sheet transactions.
(2)	Amount excludes $15.6 million related to the restructuring and $8.5 million related to the impairment of goodwill, both previously discussed.
(3)	Amount includes a charge of $5.2 million related to the impairment of certain completed communities projects (See Note 8)

	Bluegreen		Bluegreen
	Resorts		Communities		Total
As of December 31, 2007
Notes Receivable	$	155,591	$	5,074	$	160,665
Inventory		288,969		145,999		434,968
Goodwill		4,291		—		4,291

	Bluegreen		Bluegreen
	Resorts		Communities		Total
As of December 31, 2008
Notes Receivable	$	336,229	$	4,415	$	340,644
Inventory		342,779		160,490		503,269
Goodwill		—		—		—

Reconciliations to Consolidated Amounts

Field operating profit for our reportable segments reconciled to our consolidated income before provision for income taxes and minority interest is as follows (in thousands):

	Year Ended December 31,
	2006			2007			2008
Field operating profit for reportable segments	$	90,134		$	86,523		$	43,437
Interest income		40,765			44,703			57,831
Other expense, net		( 2,861	)		(1,743	)		(1,637	)
Corporate general and administrative expenses		(46,762	)		(45,997	)		(47,279	)
Interest expense		(18,785	)		(24,272	)		(20,888	)
Restructuring charges		—			—			(15,617	)
Goodwill impairment		—			—			(8,502	)
Consolidated income before minority interest and provision for income taxes	$	62,491		$	59,214		$	7,345

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Depreciation expense for our reportable segments reconciled to our consolidated depreciation expense is as follows (in thousands):

	Year Ended December 31,
	2006		2007		2008
Depreciation expense for reportable segments	$	9,963	$	10,071	$	8,912
Depreciation expense for corporate fixed assets		4,413		4,418		4,331
Consolidated depreciation expense	$	14,376	$	14,489	$	13,243

Assets for our reportable segments reconciled to our consolidated assets (in thousands):

	As of December 31,
	2007		2008
Notes receivable for reportable segments	$	160,665	$	340,644
Inventory for reportable segments		434,968		503,269
Goodwill		4,291		—
Assets not allocated to reportable segments		439,654		349,594
Total assets	$	1,039,578	$	1,193,507

Geographic Information

Sales of real estate by geographic area are as follows (in thousands):

	Year Ended December 31,
	2006		2007		2008
United States	$	560,749	$	571,931	$	467,500
Aruba		8,242		7,449		7,530
Consolidated totals	$	568,991	$	579,380	$	475,030

Total assets by geographic area are as follows (in thousands):

	As of December 31,
	2007		2008
United States	$	1,031,640	$	1,183,176
Aruba		7,938		10,331
Totals assets	$	1,039,578	$	1,193,507

20. Quarterly Financial Information (Unaudited)

A summary of the quarterly financial information for the years ended December 31, 2007 and 2008 is presented below (in thousands, except for per share information):

	For the Three Months Ended
	March 31,		June 30,		September 30,		December 31,
	2007		2007		2007		2007
Sales of real estate	$	121,798	$	143,274	$	176,717	$	137,591
Gross profit		85, 066		96,969		121,157		97,457
Net income		5,333		4,092		13,953		8,548
Net income per common share:
Basic	$	0.17	$	0.13	$	0.45	$	0.28
Diluted	$	0.17	$	0.13	$	0.45	$	0.27

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	For the Three Months Ended
	March 31,		June 30,		September 30,		December 31,
	2008		2008		2008		2008
Sales of real estate	$	111,256	$	120,086	$	146,907	$	96,781
Gross profit		80,298		89,114		108,690		66,661
Net income (loss)		1,396		3,445		6,821		(12,178	)(1)
Net income (loss) per common share:
Basic	$	0.04	$	0.11	$	0.22	$	(0.39	)(1)
Diluted	$	0.04	$	0.11	$	0.21	$	(0.39	)

(1) Amount reflects $15.6 million for the previously discussed restructuring, $8.5 million of impairment charges for goodwill in our Resorts Division, and $5.2 million inventory impairment charges recognized on certain of our Communities Division real estate developments.

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(2)

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of
Bluegreen Corporation

We have audited the accompanying consolidated balance sheets of Bluegreen Corporation (the Company) as of December 31, 2008 and 2007, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2008. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Bluegreen Corporation at December 31, 2008 and 2007, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2008, in conformity with U.S. generally accepted accounting principles.

As discussed in Note 1 to the consolidated financial statements, the Company adopted SFAS No. 123(R), Share-Based Payment, applying the modified prospective method at the beginning of 2006. As discussed in Note 2, in 2006 the Company also adopted SFAS No. 152, Accounting for Real Estate Time-Sharing Transactions.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Bluegreen Corporation’s internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 12, 2009 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP
Certified Public Accountants

West Palm Beach, Florida
March 12, 2009

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