-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VHrSjNf76DA8yOcQczQ1rDrzwWNtWFvm1kK02tXGAxgA8djs8pFCOKq+Sy7fDLRA /pn98T7XL9mLipSedEYd0Q== 0001169232-07-002256.txt : 20070510 0001169232-07-002256.hdr.sgml : 20070510 20070510103457 ACCESSION NUMBER: 0001169232-07-002256 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20070331 FILED AS OF DATE: 20070510 DATE AS OF CHANGE: 20070510 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BLUEGREEN CORP CENTRAL INDEX KEY: 0000778946 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE AGENTS & MANAGERS (FOR OTHERS) [6531] IRS NUMBER: 030300793 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09292 FILM NUMBER: 07835405 BUSINESS ADDRESS: STREET 1: 4960 BLUE LAKE DRIVE CITY: BOCA RATON STATE: FL ZIP: 33431 BUSINESS PHONE: 5619128000 MAIL ADDRESS: STREET 1: 4960 BLUE LAKE DRIVE CITY: BOCA RATON STATE: FL ZIP: 33431 FORMER COMPANY: FORMER CONFORMED NAME: PATTEN CORP DATE OF NAME CHANGE: 19920703 10-Q 1 d71810_10-q.txt QUARTERLY REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2007 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________________ to ______________________ Commission File Number: 0-19292 [BLUE GREEN(R) LOGO] Bluegreen Corporation - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Massachusetts 03-0300793 - ----------------------------------------- ------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 4960 Conference Way North, Suite 100, Boca Raton, Florida 33431 - ----------------------------------------- ------------------------------------- (Address of principal executive offices) (Zip Code) (561) 912-8000 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) ________________________________________________________________________________ (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated files. (See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act). (Check one): Large accelerated filer [ ] Accelerated filer [X] Non-accelerated filer [ ] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes [ ] No [X] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. As of May 4, 2007, there were 30,983,988 shares of the registrant's common stock, $0.01 par value, outstanding. 2 BLUEGREEN CORPORATION INDEX TO QUARTERLY REPORT ON FORM 10-Q PART I - FINANCIAL INFORMATION Item 1. Financial Statements Page Condensed Consolidated Balance Sheets at December 31, 2006 and March 31, 2007 ........................................... 4 Condensed Consolidated Statements of Operations - Three months ended March 31, 2006 and 2007 ................................ 5 Condensed Consolidated Statements of Cash Flows - Three months ended March 31, 2006 and 2007 ................................ 6 Notes to Condensed Consolidated Financial Statements ......... 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations .................................... 21 Item 4. Controls and Procedures ...................................... 39 PART II - OTHER INFORMATION Item 1. Legal Proceedings ............................................ 39 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds .. 40 Item 6. Exhibits ..................................................... 40 Signatures ............................................................. 42 TRADEMARKS The terms "Bluegreen(R)," "Bluegreen Communities(R)," "Bluegreen Vacation Club(R)," "Colorful Places To Live And Play(R)," "You're Going To Like What You See!(R)," "Encore Rewards(R)," "Outdoor Traveler Logo(R)," and the "Bluegreen Logo(R)" are registered in the U.S. Patent and Trademark Office by Bluegreen Corporation. The terms "The Hammocks at Marathon(TM)," "Orlando's Sunshine Resort(TM)," "Solara Surfside(TM)," "Mountain Run at Boyne(TM)," "The Falls Village(TM)," "Bluegreen Wilderness Club(TM)," "The Lodge Alley Inn(TM)," "Carolina Grande(TM)," "Harbour Lights(TM)," "Patrick Henry Square(TM)," "SeaGlass Tower(TM)," "Shore Crest Vacation Villas(TM)," "Laurel Crest(TM)," "MountainLoft(TM)," "Daytona SeaBreeze(TM)," "Shenandoah Crossing(TM)," "Christmas Mountain Village(TM)," "Traditions of Braselton(TM)," "Sanctuary Cove at St. Andrews Sound(TM)," "Catawba Falls Preserve(TM)," "Mountain Lakes Ranch(TM)," "Silver Lakes Ranch(TM)," "Mystic Shores(TM)," "Lake Ridge at Joe Pool Lake(TM)," "Ridge Lake Shores(TM)," "Mountain Springs Ranch(TM)," "Havenwood at Hunter's CrossingTM," "Vintage Oaks at the Vineyard(TM)," "The Bridges at Preston Crossings(TM)," "Saddle Creek Forest(TM)," "The Settlement at Patriot Ranch(TM)," "Carolina National(TM)," "Brickshire(TM)," "Golf Club at Brickshire(TM)," "Preserve at Jordan Lake(TM)," "Encore Dividends(TM)," Bluegreen Preferred(TM)," and "Bluegreen Traveler Plus(TM)," are trademarks or service marks of Bluegreen Corporation in the United States. The terms "Big Cedar(R)" and "Bass Pro Shops(R)" are registered in the U.S. Patent and Trademark Office by Bass Pro Trademarks, LP. The term "World Golf Village(R)" is registered in the U.S. Patent and Trademark Office by World Golf Foundation, Inc. All other marks are registered marks of their respective owners. 3 PART I - FINANCIAL INFORMATION Item 1. Financial Statements. BLUEGREEN CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except per share data)
December 31, March 31, 2006 2007 ------------ ----------- (Unaudited) ASSETS Cash and cash equivalents (including restricted cash of $21,476 and $21,967 at December 31, 2006 and March 31, 2007, respectively) .. $ 71,148 $ 54,624 Contracts receivable, net .............................................. 23,856 24,841 Notes receivable (net of allowance of $13,499 and $12,156 at December 31, 2006 and March 31, 2007, respectively) ................. 144,251 150,911 Prepaid expenses ....................................................... 10,800 12,483 Other assets ........................................................... 27,465 27,846 Inventory, net ......................................................... 349,333 385,817 Retained interests in notes receivable sold ............................ 130,623 133,717 Property and equipment, net ............................................ 92,445 92,852 Goodwill ............................................................... 4,291 4,291 ------------ ----------- Total assets ..................................................... $ 854,212 $ 887,382 ============ =========== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Accounts payable ....................................................... $ 18,465 $ 24,029 Accrued liabilities and other .......................................... 49,458 44,787 Deferred income ........................................................ 40,270 42,728 Deferred income taxes .................................................. 87,624 90,767 Receivable-backed notes payable ........................................ 21,050 18,871 Lines-of-credit and notes payable ...................................... 124,412 124,730 10.50% senior secured notes payable .................................... 55,000 55,000 Junior subordinated debentures ......................................... 90,208 110,827 ------------ ----------- Total liabilities ................................................... 486,487 511,739 Minority interest ...................................................... 14,702 16,336 Commitments and contingencies Shareholders' Equity Preferred stock, $.01 par value, 1,000 shares authorized; none issued .. -- -- Common stock, $.01 par value, 90,000 shares authorized; 33,603 and 33,739 shares issued at December 31, 2006 and March 31, 2007, respectively ........................................................ 336 337 Additional paid-in capital ............................................. 175,164 176,322 Treasury stock, 2,756 common shares at both December 31, 2006 and March 31, 2007, at cost ............................................. (12,885) (12,885) Accumulated other comprehensive income, net of income taxes ............ 12,632 12,424 Retained earnings ...................................................... 177,776 183,109 ------------ ----------- Total shareholders' equity .......................................... 353,023 359,307 ------------ ----------- Total liabilities and shareholders' equity ....................... $ 854,212 $ 887,382 ============ ===========
Note: The condensed consolidated balance sheet at December 31, 2006 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by United States generally accepted accounting principles for complete financial statements. See accompanying notes to condensed consolidated financial statements. 4 BLUEGREEN CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited)
Three Months Ended March 31, --------------------- 2006 2007 --------- --------- Revenues: Sales of real estate ............................................................... $ 121,760 $ 122,022 Other resort and communities operations revenue .................................... 16,667 15,018 Interest income .................................................................... 8,173 9,842 Gain on sales of notes receivable .................................................. 505 -- --------- --------- 147,105 146,882 Costs and expenses: Cost of real estate sales .......................................................... 45,222 36,732 Cost of other resort and communities operations .................................... 16,780 12,419 Selling, general and administrative expenses ....................................... 73,585 81,393 Interest expense ................................................................... 3,306 5,151 Other expense, net ................................................................. 635 951 --------- --------- 139,528 136,646 --------- --------- Income before minority interest and provision for income taxes ........................ 7,577 10,236 Minority interest in income of consolidated subsidiary ................................ 1,022 1,634 --------- --------- Income before provision for income taxes and change in accounting principle ........... 6,555 8,602 Provision for income taxes ............................................................ 2,524 3,269 --------- --------- Income before cumulative effect of change in accounting principle ..................... 4,031 5,333 Cumulative effect of change in accounting principle, net of tax ....................... (5,678) -- Minority interest in income of cumulative effect of change in accounting principle .... 1,184 -- --------- --------- Net (loss) income ..................................................................... $ (463) $ 5,333 ========= ========= Income before cumulative effect of change in accounting principle per common share: Basic .............................................................................. $ 0.13 $ 0.17 ========= ========= Diluted ............................................................................ $ 0.13 $ 0.17 ========= ========= 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 (loss) income per common share: Basic .............................................................................. $ (0.02) $ 0.17 ========= ========= Diluted ............................................................................ $ (0.01) $ 0.17 ========= ========= Weighted average number of common and common equivalent shares: Basic .............................................................................. 30,513 30,889 ========= ========= Diluted ............................................................................ 31,179 31,294 ========= =========
See accompanying notes to condensed consolidated financial statements. 5 BLUEGREEN CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Three Months Ended March 31, --------------------- 2006 2007 --------- --------- Operating activities: Net (loss) income .................................................................. $ (463) $ 5,333 Adjustments to reconcile net (loss) income to net cash used in operating activities: Cumulative effect of change in accounting principle, net ........................ 5,678 -- Non-cash stock compensation expense ............................................. 459 613 Minority interest in (loss) income of consolidated subsidiary ................... (162) 1,634 Depreciation and amortization ................................................... 4,010 4,448 Gain on sale of notes receivable ................................................ (7,011) (7,967) Loss on sale of property and equipment .......................................... 75 525 Provision for loan losses ....................................................... 10,630 11,362 Provision for deferred income taxes ............................................. 2,524 3,269 Interest accretion on retained interests in notes receivable sold ............... (2,578) (4,234) Proceeds from sales of notes receivable ......................................... 36,805 46,026 Payments on borrowings collateralized by notes receivable ....................... (5,792) (2,631) Change in operating assets and liabilities: Contracts receivable ............................................................ (10,186) (985) Notes receivable ................................................................ (47,464) (60,992) Inventory ....................................................................... (7,840) (23,884) Prepaid expenses and other assets ............................................... (3,438) (1,493) Accounts payable, accrued liabilities and other ................................. 4,555 3,686 --------- --------- Net cash used in operating activities ................................................. (20,198) (25,290) --------- --------- Investing activities: Purchases of property and equipment ................................................ (6,713) (4,019) Investment in statutory business trust ............................................. -- (619) Cash received from retained interests in notes receivable sold ..................... 10,064 5,871 --------- --------- Net cash provided by investing activities ............................................. 3,351 1,233 --------- --------- Financing activities: Borrowings under lines-of-credit facilities and other notes payable ................ 11,169 12,500 Payments under lines-of-credit facilities and other notes payable .................. (6,014) (25,448) Proceeds from issuance of junior subordinated debentures ........................... -- 20,619 Payment of debt issuance costs ..................................................... (1,236) (684) Proceeds from exercise of stock options ............................................ -- 546 --------- --------- Net cash provided by financing activities ............................................. 3,919 7,533 --------- --------- Net decrease in cash and cash equivalents ............................................. (12,928) (16,524) Cash and cash equivalents at beginning of period ...................................... 84,704 71,148 --------- --------- Cash and cash equivalents at end of period ............................................ 71,776 54,624 Restricted cash and cash equivalents at end of period ................................. (23,717) (21,967) --------- --------- Unrestricted cash and cash equivalents at end of period ............................... $ 48,059 $ 32,657 ========= =========
See accompanying notes to condensed consolidated financial statements. 6 BLUEGREEN CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS--(Continued) (In thousands) (Unaudited)
Three Months Ended March 31, --------------------- 2006 2007 --------- --------- Supplemental schedule of non-cash operating, investing and financing activities: Inventory acquired through financing ............................................... $ 22,827 $ 12,600 ========= ========= Property and equipment acquired through financing .................................. $ -- $ 629 ========= ========= Retained interests in notes receivable sold ........................................ $ 4,718 $ 5,065 ========= ========= Net change in unrealized gains in retained interests in notes receivable sold ...... $ 1,388 $ (334) ========= =========
See accompanying notes to condensed consolidated financial statements. 7 BLUEGREEN CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2007 (Unaudited) 1. Organization and Significant Accounting Policies We have prepared the accompanying unaudited condensed consolidated financial statements in accordance with United States generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by United States generally accepted accounting principles for complete financial statements. The financial information furnished herein reflects all adjustments consisting of normal recurring items that, in our opinion, are necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods. The results of operations for the three months ended March 31, 2007, are not necessarily indicative of the results to be expected for the year ending December 31, 2007. For further information, refer to our audited consolidated financial statements for the year ended December 31, 2006, which are included in our 2006 Annual Report on Form 10-K ("Annual Report"). 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 rights in perpetuity in our Bluegreen Vacation Club (supported by an underlying deeded VOI held in trust for the buyer). Depending on the extent of their ownership and beneficial rights, members in our Bluegreen Vacation Club may stay in any of our participating resorts or take advantage of other vacation options, including cruises and stays at approximately 3,700 resorts offered primarily by a third-party world-wide vacation ownership exchange network. We are currently marketing and selling VOIs in 21 resorts located in the United States and Aruba, 19 of which have active sales offices. We also sell VOIs at seven off-site sales offices and on the campuses of two resorts under development located in the United States. 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 in a high quality residential setting, in some cases on properties featuring a golf course and other related amenities. During the three months ended March 31, 2007, sales recognized by Bluegreen Resorts comprised approximately 71% of our total sales of real estate while sales recognized by Bluegreen Communities comprised approximately 29% of our total sales of real estate. Our other resort and communities operations revenues consist primarily of resort property management services, resort title services, resort amenity operations, sales incentives provided to buyers of VOIs, rental brokerage services, realty operations and daily-fee golf course operations. We also generate significant interest income by providing financing to individual purchasers of VOIs. 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 "Joint Venture"), as we hold a 51% equity interest in the Joint Venture, have an active role as the day-to-day manager of the Joint Venture's activities, and have majority voting control of the Joint Venture's management committee. Additionally, we do not consolidate our wholly-owned statutory business trusts (see Note 4) 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. 8 Use of Estimates United States generally accepted accounting principles require us to make estimates and assumptions that affect the amounts reported in our condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Reclassifications We have made certain reclassifications of prior period amounts to conform to the current period presentation. Earnings Per Common Share We compute basic earnings per common share by dividing net income by the weighted-average number of common shares outstanding. Diluted earnings per common share is computed in the same manner as basic earnings per share, but also gives effect to all dilutive stock options using the treasury stock method. During the three months ended March 31, 2007 a total of 136,313 common shares were issued as a result of stock option exercises. There were approximately 0.8 million and 0.7 million stock options not included in diluted earnings per common share during the three months ended March 31, 2006 and 2007, respectively, as the effect would be anti-dilutive. The following table sets forth the computation of basic and diluted (loss) earnings per share (in thousands, except per share data): Three Months Ended March 31, -------------------- 2006 2007 -------- -------- Basic and diluted (loss) earnings per share - numerator: Net (loss) income ..................................... $ (463) $ 5,333 ======== ======== Denominator: Denominator for basic earnings per share - weighted-average shares ............................... 30,513 30,889 -------- -------- Effect of dilutive securities: Stock options ...................................... 666 405 -------- -------- Denominator for diluted earnings per share - adjusted weighted-average shares ............................... 31,179 31,294 ======== ======== Basic (loss) earnings per common share ................... $ (0.02) $ 0.17 ======== ======== Diluted (loss) earnings per common share ................. $ (0.01) $ 0.17 ======== ======== Retained Interests in Notes Receivable Sold When we sell our notes receivable either pursuant to our VOI receivables purchase facilities (more fully described in Note 2) or through term securitizations, we evaluate whether or not such transfers should be accounted for as a sale pursuant to Statement of Financial Accounting Standards ("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 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 agreement that (1) both 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, rights to excess interest spread and servicing rights, all of which are retained interests in the notes receivable sold. 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. 9 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 holding gains or losses on our retained interests in notes receivable sold are included in our shareholders' equity, 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 future expected cash flows estimated 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. 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. Total compensation costs related to stock-based compensation charged against income during the three months ended March 31, 2006 and 2007 was $0.4 million and $0.6 million, respectively. There were no stock options granted during the three months ended March 31, 2006 or 2007. As of March 31, 2007, there was $7.6 million of total unrecognized compensation cost related to stock-based compensation arrangements, which is expected to be recognized over a weighted average period of approximately 2.8 years. Comprehensive Income Accumulated other comprehensive income on our condensed consolidated balance sheets is comprised of net unrealized gains on retained interests in notes receivable sold, which are held as available-for-sale investments. The following table discloses the components of our comprehensive income for the periods presented (in thousands): Three Months Ended March 31, ------------------ 2006 2007 ------- ------- Net (loss) income ......................................... $ (463) $ 5,333 Change in net unrealized gains on retained interests in notes receivable sold, net of income taxes ........... 854 (208) ------- ------- Total comprehensive income ................................ $ 391 $ 5,125 ======= ======= Cumulative Effect of Change in Accounting Principle from the Adoption of SFAS No. 152 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 new standard addresses 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. 10 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. Recent Accounting Pronouncements In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements ("SFAS No. 157"). SFAS No. 157 establishes a common definition for fair value under United States generally accepted accounting principles guidance requiring the use of fair value, establishes a framework for measuring fair value, and expands disclosure about such fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. We will adopt SFAS No. 157 effective January 1, 2008, and are currently assessing the impact the statement will have on our financial condition, results of operations, cash flows or disclosures. In February 2007 the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities ("SFAS No. 159"). SFAS No. 159 allows entities to voluntarily choose, at specified election dates, to measure many financial assets and financial liabilities at fair value. The election is made on an instrument-by-instrument basis and is irrevocable. Subsequent to the adoption of SFAS No. 159, changes in fair value for the particular instruments shall be reported in earnings. Upon initial adoption, SFAS No. 159 provides entities with a one-time chance to elect the fair value option for existing eligible items. The effect of the first measurement to fair value should be reported as a cumulative-effect adjustment to the opening balance of retained earnings in the year the Statement is adopted. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. We have not completed our analysis of the impact SFAS No. 159 will have on our financial condition, results of operations, cash flows or disclosures. 2. Sales of Notes Receivable During the first quarter of 2007, we sold $51.2 million in VOI receivables pursuant to a receivables purchase facility (the "2006-A GE Purchase Facility") with General Electric Capital Corporation ("GE"). Under the 2006-A GE Purchase Facility, a variable purchase price of approximately 90% of the principal balance of the receivables sold, subject to certain terms and conditions, is 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 over collateralization ratio is achieved, a cash reserve account is fully funded and all servicing, custodial, agent and similar fees and expenses have been paid. GE earns a return equal to the applicable Swap Rate (which is a published interest swap arrangement rate as defined in the 2006-A GE Purchase Facility agreements) plus 2.35%, subject to use of alternate return rates in certain circumstances. Subject to compliance with the terms and conditions of funding, the 2006-A GE Purchase Facility allows for sales of notes receivable for a cumulative purchase price of up to $125.0 million through March 2008. As of March 31, 2007, the remaining availability under the 2006-A GE Purchase Facility was $14.2 million of aggregate purchase price, subject to eligibility requirements and fulfillment of conditions precedent. Sales of notes receivable during the three months ended March 31, 2007 and 2006 were as follows (in millions): For the Three Months Ended March 31, 2007 Aggregate Principal Initial Fair Balance of Value of Notes Purchase Gain Retained Sale Facility Receivable Price Recognized Interest - --------------------------- ---------- -------- ---------- ------------ 2006-A GE Purchase Facility $ 51.2 $ 46.0 $ 8.0 $ 6.2 ========== ======== ========== ============ 11 For the Three Months Ended March 31, 2006 Aggregate Principal Initial Fair Balance of Value of Notes Purchase Gain Retained Sale Facility Receivable Price Recognized Interest - --------------------------- ---------- -------- ---------- ------------ 2005 Term Securitization $ 18.6 $ 16.7 $ 3.6 $ 3.3 GE Purchase Facility 22.3 20.1 3.4 2.6 ---------- -------- ---------- ------------ Total $ 40.9 $ 36.8 $ 7.0 $ 5.9 ========== ======== ========== ============ In accordance with SFAS No. 152, approximately $6.5 million and $8.0 million of the gain were recorded as an increase to VOI sales for the three months ended March 31, 2006, and 2007, respectively. The remaining gain of $0.5 million during the three months ended March 31, 2006 was recorded as a gain on the sales of notes receivable on the accompanying condensed consolidated statement of income. The following assumptions were used to measure the initial fair value of the retained interest in notes receivable sold for each of the transactions during the three months ended March 31, 2006: prepayment rates decreasing from 14.0% to 9.0% per annum as the portfolios mature; a loss severity rate ranging from 35.0% to 71.3%; default rates decreasing from 10.0% to 1.0% per annum as the portfolios mature; and a discount rate of 9.0%. The following assumptions were used to measure the initial fair value of the retained interest in notes receivable sold for each of the transactions during the three months ended March 31, 2007: prepayment rates decreasing from 15.0% to 11.0% per annum as the portfolios mature; loss severity rate ranging from 38% to 71.3%; default rates decreasing from 10.5% to 1.0% per annum as the portfolios mature; and a discount rate of 9.0%. 3. Lines-of-Credit and Receivable-Backed Notes Payable In February 2007, we borrowed $12.6 million under the GMAC Communities Facility (this facility is described in more detail in our "Liquidity and Capital Resources" section of our Management Discussion and Analysis) in connection with the acquisition of 350 acres near St. Simons Island, Georgia, for a property to be called Sanctuary River Club at St. Andrews Sound. As of March 31, 2007, the GMAC Communities Facility had an outstanding balance of $61.7 million bearing interest at 9.25%. The remaining availability under the GMAC Communities Facility, subject to the terms and conditions of the facility, was $13.3 million as of March 31, 2007. Additionally, in February of 2007, we borrowed $12.5 million under the GMAC Communities Facility for general corporate purposes. Total interest expense capitalized to construction in progress was $2.6 million and $3.4 million for the three months ended March 31, 2006 and 2007, respectively. 4. Trust Preferred Securities Offerings We have formed business statutory trusts (collectively, the "Trusts") for the purpose of issuing trust preferred securities and investing 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 FASB Interpretation No. 46R. Accordingly, we do not consolidate the operations of the Trusts; instead, the Trusts are accounted for under the equity method of accounting. On February 26, 2007, one of the Trusts, Bluegreen Statutory Trust VI ("BST VI") issued $20.0 million of trust preferred securities. BST VI 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 will be payable quarterly in arrears at a fixed rate of 9.84% through April 2012, and thereafter at a variable rate of interest, per annum, reset quarterly, equal to the 3-month LIBOR plus 4.80% until the scheduled maturity date of April 30, 2037. Distributions on the trust preferred securities will be cumulative and 12 based upon the liquidation value of the trust preferred security. The trust preferred securities will be 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 five years from the issue date or sooner following certain specified events. In addition, we contributed $619,000 to BST VI in exchange for its common securities, all of which are owned by us. Those proceeds were also used by BST VI to purchase an identical amount of junior subordinated debentures from us. The terms of BST VI's common securities are nearly identical to the trust preferred securities. The above issuances of trust preferred securities were part of larger pooled trust securities offerings which were not registered under the Securities Act of 1933. Proceeds were used for general corporate purposes and debt repayment. We had the following junior subordinated debentures outstanding at March 31, 2007 (dollars in thousands):
Outstanding Amount of Initial Beginning Junior Equity Fixed Optional Subordinated To Issue Interest Variable Interest Redemption Maturity Trust Debentures Trust (3) Date Rate (1) Rate (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 a component of Other assets in our Condensed Consolidated Balance Sheets. 5. 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 September 27, 2005, we redeemed $55.0 million in aggregate principal amount of the Notes at a redemption price of 101.75% plus accrued and unpaid interest through September 26, 2005 of approximately $1.4 million. At March 31, 2007, $55.0 million of the Notes remained outstanding. None of the assets of Bluegreen Corporation secures its obligations under the Notes, and the Notes are effectively subordinated to our secured indebtedness to any third party to the extent of assets serving as security therefor. The Notes are unconditionally guaranteed, jointly and severally, by each of our subsidiaries (the "Subsidiary Guarantors"), with the exception of Bluegreen/Big Cedar Vacations, LLC, Bluegreen Properties N.V., Resort Title Agency, Inc., any 13 special purpose finance subsidiary, any subsidiary which is formed and continues to operate for the limited purpose of holding a real estate license and acting as a broker, and certain other subsidiaries which have individually less than $50,000 of assets (collectively, "Non-Guarantor Subsidiaries"). Each of the note guarantees covers the full amount of the Notes and each of the Subsidiary Guarantors is 100% owned, directly or indirectly by us. Supplemental financial information for Bluegreen Corporation, its combined Non-Guarantor Subsidiaries and its combined Subsidiary Guarantors is presented below: 14 CONDENSED CONSOLIDATING BALANCE SHEETS (In thousands)
December 31, 2006 ----------------------------------------------------------------------- Combined Combined Bluegreen Non-Guarantor Subsidiary Corporation Subsidiaries Guarantors Eliminations Consolidated ----------- ------------- ---------- ------------ ------------ ASSETS Cash and cash equivalents ............................... $ 36,316 $ 17,002 $ 17,830 $ -- $ 71,148 Contracts receivable, net ............................... -- 1,222 22,634 -- 23,856 Intercompany receivable ................................. 159,488 -- -- (159,488) -- Notes receivable, net ................................... -- 57,845 86,406 -- 144,251 Inventory, net .......................................... -- 17,967 331,366 -- 349,333 Retained interests in notes receivable sold ............. -- 130,623 -- -- 130,623 Property and equipment, net ............................. 16,110 933 75,402 -- 92,445 Investments in subsidiaries ............................. 296,593 -- 3,230 (299,823) -- Other assets ............................................ 7,860 4,582 30,114 -- 42,556 ----------- ------------- ---------- ------------ ------------ Total assets ....................................... $ 516,367 $ 230,174 $ 566,982 $ (459,311) $ 854,212 =========== ============= ========== ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Accounts payable, accrued liabilities and other ....... $ 33,303 $ 20,717 $ 54,173 $ -- $ 108,193 Intercompany payable .................................. -- 2,458 157,030 (159,488) -- Deferred income taxes ................................. (19,813) 47,864 59,573 -- 87,624 Lines-of-credit and notes payable ..................... 4,646 18,914 121,902 -- 145,462 10.50% senior secured notes payable ................... 55,000 -- -- -- 55,000 Junior subordinated debentures ........................ 90,208 -- -- -- 90,208 ----------- ------------- ---------- ------------ ------------ Total liabilities .................................. 163,344 89,953 392,678 (159,488) 486,487 Minority interest ..................................... -- -- -- 14,702 14,702 Total shareholders' equity ............................ 353,023 140,221 174,304 (314,525) 353,023 ----------- ------------- ---------- ------------ ------------ Total liabilities and shareholders' equity ......... $ 516,367 $ 230,174 $ 566,982 $ (459,311) $ 854,212 =========== ============= ========== ============ ============
March 31, 2007 (Unaudited) ----------------------------------------------------------------------- Combined Combined Bluegreen Non-Guarantor Subsidiary Corporation Subsidiaries Guarantors Eliminations Consolidated ----------- ------------- ---------- ------------ ------------ ASSETS Cash and cash equivalents ............................... $ 20,713 $ 17,348 $ 16,563 $ -- $ 54,624 Contracts receivable, net ............................... -- 1,457 23,384 -- 24,841 Intercompany receivable ................................. 181,729 20,149 -- (201,878) -- Notes receivable, net ................................... -- 60,924 89,987 -- 150,911 Inventory, net .......................................... -- 12,934 372,883 -- 385,817 Retained interests in notes receivable sold ............. -- 133,717 -- -- 133,717 Property and equipment, net ............................. 17,158 823 74,871 -- 92,852 Investments in subsidiaries ............................. 320,331 -- 3,230 (323,561) -- Other assets ............................................ 7,209 2,384 35,027 -- 44,620 ----------- ------------- ---------- ------------ ------------ Total assets ....................................... $ 547,140 $ 249,736 $ 615,945 $ (525,439) $ 887,382 =========== ============= ========== ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Accounts payable, accrued liabilities and other ....... $ 36,901 $ 19,944 $ 54,699 $ -- $ 111,544 Intercompany payable .................................. -- -- 201,878 (201,878) -- Deferred income taxes ................................. (19,375) 50,946 59,196 -- 90,767 Lines-of-credit and notes payable ..................... 4,480 18,485 120,636 -- 143,601 10.50% senior secured notes payable ................... 55,000 -- -- -- 55,000 Junior subordinated debentures ........................ 110,827 -- -- -- 110,827 ----------- ------------- ---------- ------------ ------------ Total liabilities .................................. 187,833 89,375 436,409 (201,878) 511,739 Minority interest ..................................... -- -- -- 16,336 16,336 Total shareholders' equity ............................ 359,307 160,361 179,536 (339,897) 359,307 ----------- ------------- ---------- ------------ ------------ Total liabilities and shareholders' equity ......... $ 547,140 $ 249,736 $ 615,945 $ (525,439) $ 887,382 =========== ============= ========== ============ ============
15 CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (In thousands) (Unaudited)
Three Months Ended March 31, 2006 ----------------------------------------------------------------------- Combined Combined Bluegreen Non-Guarantor Subsidiary Corporation Subsidiaries Guarantors Eliminations Consolidated ----------- ------------- ---------- ------------ ------------ REVENUES Sales of real estate .................................. $ -- $ 11,236 $ 110,524 $ -- $ 121,760 Other resort and communities operations revenue ....... -- 3,164 13,503 -- 16,667 Management fees ....................................... 13,095 -- -- (13,095) -- Interest income ....................................... 540 4,391 3,242 -- 8,173 Gain on sales of notes receivable ..................... -- 505 -- -- 505 ----------- ------------- ---------- ------------ ------------ 13,635 19,296 127,269 (13,095) 147,105 COSTS AND EXPENSES Cost of real estate sales ............................. -- 3,690 41,532 -- 45,222 Cost of other resort and communities operations ....... -- 1,333 15,447 -- 16,780 Management fees ....................................... -- 241 12,854 (13,095) -- Equity loss from subsidiaries ......................... 2,583 -- -- (2,583) -- Selling, general and administrative expenses .......... 9,330 5,804 58,451 -- 73,585 Interest expense ...................................... 988 770 1,548 -- 3,306 Other (income) expense ................................ (130) 289 476 -- 635 ----------- ------------- ---------- ------------ ------------ 12,771 12,127 130,308 (15,678) 139,528 ----------- ------------- ---------- ------------ ------------ Income (loss) before minority interest and provision (benefit) for income taxes .......................... 864 7,169 (3,039) 2,583 7,577 Minority interest in income of consolidated subsidiary .......................................... -- -- -- 1,022 1,022 ----------- ------------- ---------- ------------ ------------ Income (loss) before provision (benefit) for income taxes and cumulative effect of change in accounting principle ........................................... 864 7,169 (3,039) 1,561 6,555 Provision (benefit) for income taxes .................. 1,327 2,366 (1,169) -- 2,524 ----------- ------------- ---------- ------------ ------------ (Loss) income before cumulative effect of change in accounting principle ................................ (463) 4,803 (1,870) 1,561 4,031 Cumulative effect of change in accounting principle, net of tax .......................................... -- (1,942) (3,736) -- (5,678) Minority interest in income of cumulative effect of change in accounting principle ...................... -- -- -- 1,184 1,184 ----------- ------------- ---------- ------------ ------------ Net (loss) income ..................................... $ (463) $ 2,861 $ (5,606) $ 2,745 $ (463) =========== ============= ========== ============ ============
Three Months Ended March 31, 2007 ----------------------------------------------------------------------- Combined Combined Bluegreen Non-Guarantor Subsidiary Corporation Subsidiaries Guarantors Eliminations Consolidated ----------- ------------- ---------- ------------ ------------ REVENUES Sales of real estate .................................. $ -- $ 13,464 $ 108,558 $ -- $ 122,022 Other resort and communities operations revenue ....... -- 3,149 11,869 -- 15,018 Management fees ....................................... 12,610 -- -- (12,610) -- Equity income from subsidiaries ....................... 4,618 -- -- (4,618) -- Interest income ....................................... 446 6,659 2,737 -- 9,842 ----------- ------------- ---------- ------------ ------------ 17,674 23,272 123,164 (17,228) 146,882 COSTS AND EXPENSES Cost of real estate sales ............................. -- 3,547 33,185 -- 36,732 Cost of other resort and communities operations ....... -- 1,197 11,222 -- 12,419 Management fees ....................................... -- 294 12,316 (12,610) -- Selling, general and administrative expenses .......... 10,206 6,978 64,209 -- 81,393 Interest expense ...................................... 1,627 1,060 2,464 -- 5,151 Other expense, net .................................... 70 121 760 -- 951 ----------- ------------- ---------- ------------ ------------ 11,903 13,197 124,156 (12,610) 136,646 ----------- ------------- ---------- ------------ ------------ Income (loss) before minority interest and provision for income taxes .................................... 5,771 10,075 (992) (4,618) 10,236 Minority interest in income of consolidated subsidiary .......................................... -- -- -- 1,634 1,634 ----------- ------------- ---------- ------------ ------------ Income (loss) before provision for income taxes ....... 5,771 10,075 (992) (6,252) 8,602 Provision (benefit) for income taxes .................. 438 3,208 (377) -- 3,269 ----------- ------------- ---------- ------------ ------------ Net income ............................................ $ 5,333 $ 6,867 $ (615) $ (6,252) $ 5,333 =========== ============= ========== ============ ============
16 CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Three Months Ended March 31, 2006 ------------------------------------------------------- Combined Combined Bluegreen Non-Guarantor Subsidiary Corporation Subsidiaries Guarantors Consolidated ----------- ------------- ---------- ------------ Operating activities: Net cash (used) provided by operating activities ....................... $ (14,752) $ (10,516) $ 5,070 $ (20,198) ----------- ------------- ---------- ------------ Investing activities: Purchases of property and equipment .................................. (2,672) (28) (4,013) (6,713) Cash received from retained interests in notes receivable sold ....... -- 10,064 -- 10,064 ----------- ------------- ---------- ------------ Net cash (used) provided by investing activities ....................... (2,672) 10,036 (4,013) 3,351 ----------- ------------- ---------- ------------ Financing activities: Borrowings under line-of-credit facilities and notes payable ......... -- -- 11,169 11,169 Payments under line-of-credit facilities and notes payable ........... (500) -- (5,514) (6,014) Payment of debt issuance costs ....................................... (8) (660) (568) (1,236) ----------- ------------- ---------- ------------ Net cash (used) provided by financing activities ....................... (508) (660) 5,087 3,919 ----------- ------------- ---------- ------------ Net (decrease) increase in cash and cash equivalents ................... (17,932) (1,140) 6,144 (12,928) Cash and cash equivalents at beginning of period ....................... 55,708 15,443 13,553 84,704 ----------- ------------- ---------- ------------ Cash and cash equivalents at end of period ............................. 37,776 14,303 19,697 71,776 Restricted cash and cash equivalents at end of period .................. (173) (13,248) (10,296) (23,717) ----------- ------------- ---------- ------------ Unrestricted cash and cash equivalents at end of period ................ $ 37,603 $ 1,055 $ 9,401 $ 48,059 =========== ============= ========== ============
Three Months Ended March 31, 2007 ------------------------------------------------------- Combined Combined Bluegreen Non-Guarantor Subsidiary Corporation Subsidiaries Guarantors Consolidated ----------- ------------- ---------- ------------ Operating activities: Net cash (used) provided by operating activities ....................... $ (32,986) $ (5,370) $ 13,066 $ (25,290) ----------- ------------- ---------- ------------ Investing activities: Purchases of property and equipment .................................. (2,259) (13) (1,747) (4,019) Investment in statutory business trusts .............................. (619) -- -- (619) Cash received from retained interests in notes receivable sold ....... -- 5,871 -- 5,871 ----------- ------------- ---------- ------------ Net cash (used) provided by investing activities ....................... (2,878) 5,858 (1,747) 1,233 ----------- ------------- ---------- ------------ Financing activities: Borrowings under line-of-credit facilities and other notes payable ... -- -- 12,500 12,500 Payments under line-of-credit facilities and other notes payable ..... (281) (89) (25,078) (25,448) Proceeds from issuance of junior subordinated debentures ............. 20,619 -- -- 20,619 Payments of debt issuance costs ...................................... (623) (53) (8) (684) Proceeds from exercise of stock options .............................. 546 -- -- 546 ----------- ------------- ---------- ------------ Net cash provided (used) by financing activities ....................... 20,261 (142) (12,586) 7,533 ----------- ------------- ---------- ------------ Net (decrease) increase in cash and cash equivalents ................... (15,603) 346 (1,267) (16,524) Cash and cash equivalents at beginning of period ....................... 36,316 17,002 17,830 71,148 ----------- ------------- ---------- ------------ Cash and cash equivalents at end of period ............................. 20,713 17,348 16,563 54,624 Restricted cash and cash equivalents at end of period .................. (173) (7,623) (14,171) (21,967) ----------- ------------- ---------- ------------ Unrestricted cash and cash equivalents at end of period ................ $ 20,540 $ 9,725 $ 2,392 $ 32,657 =========== ============= ========== ============
17 6. Business Segments We have two reportable business segments. 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. Disclosures for our business segments are as follows (in thousands):
Bluegreen Bluegreen Resorts Communities Total --------- ----------- --------- For the Three Months Ended March 31, 2006 Sales of real estate ................................. $ 74,135 $ 47,625 $ 121,760 Other resort and communities operations revenue ...... 14,331 2,336 16,667 Depreciation expense ................................. 1,871 444 2,315 Field operating profit ............................... 3,136 9,779 12,915 For the Three Months Ended March 31, 2007 Sales of real estate ................................. $ 87,148 $ 34,874 $ 122,022 Other resort and communities operations revenue ...... 12,838 2,180 15,018 Depreciation expense ................................. 2,117 426 2,543 Field operating profit ............................... 8,849 8,808 17,657
Net inventory by business segment (in thousands): December 31, 2006 March 31, 2007 ----------------- -------------- Bluegreen Resorts .......................... $ 233,290 $ 244,467 Bluegreen Communities ...................... 116,043 141,350 ----------------- -------------- Total ...................................... $ 349,333 $ 385,817 ================= ============== Reconciliations to Consolidated Amounts: Field operating profit for our reportable segments reconciled to our consolidated income before minority interest and provision for income taxes is as follows (in thousands): For the Three Months Ended March 31, -------------------- 2006 2007 --------- --------- Field operating profit for reportable segments .......... $ 12,915 $ 17,657 Interest income ......................................... 8,173 9,842 Gain on sales of notes receivable ....................... 505 -- Other expense, net ...................................... (635) (951) Corporate general and administrative expenses ........... (10,075) (11,161) Interest expense ........................................ (3,306) (5,151) --------- --------- Consolidated income before minority interest and provision for income taxes ............................ $ 7,577 $ 10,236 ========= ========= 7. Income Taxes We or one of 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 2003. 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 that is anticipated to be complete by the end of 2007. On 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 the tax benefit based on the largest amount of benefit that is greater than 50% likely of being realized upon settlement. The adoption of FIN 48 on 18 January 1, 2007 did not have an impact on our financial position or results of operations. As of March 31, 2007, we had no amounts recorded for uncertain tax positions. 8. Contingencies In 2005, the State of Tennessee Audit Division (the "Division") audited Bluegreen Vacations Unlimited, our wholly owned Subsidiary, for the period from December 1, 2001 through December 31, 2004. On September 23, 2006, the Division issued a notice of assessment for $0.7 million of accommodations tax based on the use of Bluegreen Vacation Club accommodations by Bluegreen Vacation Club members purchased non-Tennessee property. We believe the attempt to impose such a tax is contrary to Tennessee law, and we intend to vigorously oppose such assessment by the Division. 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. 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 in which they seek to develop their prior reserved mineral interests in, on and under the Mountain Lakes subdivision. 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 related to certain amenities in the subdivision as described in the following paragraph. The court has 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 prior reserved mineral interests of the plaintiffs from being developed and that a duty to exercise the right to lease the minerals to third parties for development exists and has been breached. 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 has appealed the trial court's ruling and, at this time, is unable to predict the ultimate resolution of the litigation. The appeal is styled, Bluegreen Southwest One, LP et al. v. Betty Yvon Lesley et al.; in the 11th Court of Appeals, Eastland, Texas. As of March 31, 2007, we have established a reserve of $1.3 million in connection with the issues raised in these lawsuits. One of the amenity lakes in the Mountain Lakes development has not reached the expected level after construction was completed. Owners of homesites within the Mountain Lakes subdivision and the Property Owners Association of Mountain Lakes have asserted 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 67TH Judicial District Court of Tarrant County, Texas. Southwest has been and continues to investigate the causes and circumstances for the delay of the lake to fill and currently estimates that the cost of remediating the condition will be approximately $3,000,000 and as such was accrued during the year ended December 31, 2006. We filed suit against the general contractor with regard to alleged construction defects at our Shore Crest Vacation Villas resort in South Carolina. Whether the matter is settled by litigation or by negotiation it is possible that we may need to participate financially in some way to correct the construction deficiencies. We can not predict the extent of the financial obligation that we may incur. 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. The Complaint raises allegations concerning the marketing of the LeisurePath Travel Services Network product to the public, and, in particular, 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 initial Plaintiffs (none of whom actually bought the Leisure Path product) assert claims for violations of the New Jersey Consumer Fraud Act, fraud, nuisance, negligence and for equitable relief all stemming from the sale and marketing by Vacation Station, LLC of the LeisurePath Travel Services Network. Plaintiffs are seeking the gifts and prizes they were allegedly told by Vacation Station, LLC that they won as part of the sales promotion, and that they be given the opportunity to rescind their agreement with LeisurePath along with a full refund. Plaintiffs further seek punitive damages, compensatory 19 damages, attorney's fees and treble damages of unspecified amounts. In February of 2007, the Plaintiffs amended the complaint to add two additional Plaintiffs/proposed class representatives, Bruce Doxey and Karen Smith-Doxey. Unlike the initial Plaintiffs who were first contacted by Vacation Station, LLC some seven (7) months after LeisurePath terminated its relationship with Vacation Station, LLC and did not purchase LeisurePath products, the Doxeys purchased a participation in the LeisurePath Travel Services Network. On March 16, 2007, the Court denied a motion filed by Leisure Path and Bluegreen Corporation to dismiss the Doxeys as parties to the lawsuit. Leisure Path and Bluegreen Corporation intend to vigorously contest this action. Vacation Station, LLC and its owner have each filed for bankruptcy protection. 9. Subsequent Events In April 2007, we borrowed $10.9 million under the Textron Construction Facility, a new $12.5 million facility. The borrowings under this facility are primarily for the completion of development at The Grande Villas at World Golf Village resort in St. Augustine, Florida. In April 2007, the Joint Venture, entered into a $45.0 million revolving VOI receivables credit facility (the "GE Big Cedar Receivables Facility") with GE. This facility is further described in our "Liquidity and Capital Recourses" section of our Management Discussion and Analysis. Additionally in April 2007, the Joint Venture pledged $26.8 million in aggregate principal balance of VOI receivables under the GE Big Cedar Receivables Facility and received $25.7 million in cash proceeds, net of issuance costs. In April 2007, we transferred $20.4 million of VOI notes receivable to the 2006 BB&T Purchase Facility, an existing credit facility further described in our "Liquidity and Capital Resources" section of our Management Discussion and Analysis, and received $17.3 million in cash proceeds. Immediately following the transaction, we had $120.2 million in remaining availability under the 2006 BB&T Purchase Facility. 20 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Cautionary Statement Regarding Forward-Looking Statements and Risk Factors We desire to take advantage of the "safe harbor" provisions of the Private Securities Reform Act of 1995 (the "Act") and are making the following statements pursuant to the Act to do so. Certain statements in this Quarterly Report and our other filings with the SEC constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. You may identify these statements by forward-looking words such as "may," "intend," "expect," "anticipate," "believe" "will," "should," "project," "estimate," "plan" or other comparable terminology or by other statements that do not relate to historical facts. All statements, trend analyses and other information relative to the market for our products, remaining life of project sales, our expected future sales, financial position, operating results, liquidity and capital resources, our business strategy, financial plan and expected capital requirements as well as trends in our operations or results are forward-looking statements. These forward-looking statements are subject to known and unknown risks and uncertainties, many of which are beyond our control, including changes in economic conditions, generally, in areas where we operate, or in the travel and tourism industry, increases in interest rates, changes in regulations and other factors discussed throughout our SEC filings all of which could cause our actual results, performance or achievements, or industry trends, to differ materially from any future results, performance, or achievements or trends expressed or implied herein. Given these uncertainties, investors are cautioned not to place undue reliance on these forward-looking statements and no assurance can be given that the plans, estimates and expectations reflected herein will be achieved. Factors that could adversely affect our future results can also be considered general risk factors with respect to our business, whether or not they relate to a forward-looking statement. We wish to caution you that the important factors set forth below and elsewhere in this report in some cases have affected, and in the future could affect our actual results and could cause our actual consolidated results to differ materially from those expressed in any forward-looking statements. o Our continued liquidity depends on our ability to sell or borrow against our notes receivable. o We depend on additional funding to finance our operations. o Our success depends on our ability to market our products successfully and efficiently. o The state of the economy generally, interest rates, the availability of financing and increased fuel prices, in particular, could affect our ability to market VOIs and residential homesites. o We would incur substantial losses if the customers we finance default on their obligations to pay the balance of the purchase price. o Our results of operations and financial condition could be adversely impacted if our estimates concerning our notes receivable are incorrect. o We are subject to the risks of the real estate market and the risks associated with real estate development, including the risks and uncertainties relating to the cost and availability of land, labor and construction materials. o We may not successfully acquire additional inventory or execute our growth strategy. o We may face a variety of risks when we expand our operations. o We may face additional risks when and if we expand into new markets. o The limited resale market for VOIs could adversely affect our business. o We could incur losses based on the outcome of pending or future litigation, claims, and assessments. o Claims for development-related defects could adversely affect our financial condition and operating results. 21 o We may be adversely affected by extensive federal, state and local laws and regulations and changes in applicable laws and regulations, including with respect to the imposition of additional taxes on operations. o Environmental liabilities, including claims with respect to mold or hazardous or toxic substances, could have a material adverse impact on our business. o We could incur costs to comply with laws governing accessibility of facilities by disabled persons. In addition to the foregoing, reference is also made to other risks and factors detailed in reports filed by the Company with the Securities and Exchange Commission including our Annual Report on Form 10-K for the year ended December 31, 2006. Executive Overview We operate through two business segments. Bluegreen Resorts develops, markets and sells VOIs in our Bluegreen Vacation Club resorts, 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. Effective January 1, 2006, we adopted the provisions of SFAS No. 152, Accounting for Real Estate Time-Sharing Transactions, which changes the rules for many aspects of timeshare accounting, including revenue recognition, inventory costing and incidental operations. The adoption of SFAS No. 152 resulted in a $4.5 million or $0.14 per diluted share charge for the cumulative effect of a change in accounting principle, net of income tax and minority interest in 2006. We have historically experienced and expect to continue to experience seasonal fluctuations in our gross revenues and net earnings. This seasonality may cause significant fluctuations in our quarterly operating results, with the majority of our gross revenues and net earnings historically expected to occur in the quarters ending in September and December each year. Although we expect to see more potential customers at our sales offices during the quarters ending in June and September, ultimate recognition of the resulting sales may be delayed due to insufficient down payments on purchases under GAAP or due to the timing of development and the requirement that we use the percentage-of-completion method of accounting. We expect that we will continue to invest in projects that will require substantial development (with significant capital requirements), and as a consequence, our results of operations may fluctuate significantly between quarterly and annual periods as a result of the required use of the percentage-of-completion method of accounting. We believe that inflation and changing prices have materially impacted our revenues and results of operations, specifically due to periodic increases in the sales prices of our VOIs and homesites and continued increases in construction and development costs. We expect the increased construction and development costs over the past few years to result in an increase in our cost of sales for the foreseeable future. There is no assurance that we will be able to continue to increase our sales prices or that increased construction costs will not have a material adverse impact on our gross margin. In addition, to the extent that inflation in general or increased prices for our VOI and homesites would adversely impact consumer sentiment, our results of operations could be adversely impacted. Also, to the extent inflationary trends affect interest rates, a portion of our debt service costs may increase. We recognize revenue on homesite and VOI sales when a minimum of 10% of the sales price has been received in cash, the refund or rescission period has expired, collectibility of the receivable representing the remainder of the sales price is reasonably assured and we have completed substantially all of our obligations with respect to any development of the real estate sold. Refund or rescission periods include those required by law and those provided for in our sales contracts. With respect to VOI sales, the revenue recognition rules require that incentives and other similarly treated items such as customer down payment equity earned through our Sampler Program be considered in calculating the required down payment for our VOI sales. If, after considering the value of sales incentives provided, the required 10% of sales price down payment threshold is not met, the VOI sale and the related cost of sale and direct selling costs are deferred and not recognized until the buyer's commitment test is satisfied, generally through the receipt of required mortgage note payments from the buyer. Further, in cases where all development has not been completed, recognition of income is subject to the percentage-of-completion method of accounting. 22 Costs associated with the acquisition and development of vacation ownership resorts and residential communities, including carrying costs such as interest and taxes, are capitalized as inventory and are allocated to cost of real estate sold as the respective revenues are recognized. A portion of our revenues historically has been, and is expected to continue to be, comprised of gains on sales of notes receivable. The gains are recorded on our consolidated statement of operations and the related retained interests in the notes receivable sold are recorded on our consolidated balance sheet at the time of sale. Effective January 1, 2006, the portion of these gains related to the reversal of previously recorded allowances for loan losses on the receivables sold is now recorded as a component of revenue on sales of VOIs. The amount of gains recognized and the fair value of the retained interests recorded are based in part on management's best estimates of future prepayment rates, default rates, loss severity rates, discount rates and other considerations in light of then-current conditions. If actual prepayments with respect to loans occur more quickly than we projected at the time such loans were sold, as can occur when interest rates decline, interest would be less than expected and may cause a decline in the fair value of the retained interests and a charge to operations. If actual defaults or other factors discussed above with respect to loans sold are greater than estimated, charge-offs would exceed previously estimated amounts and the cash flow from the retained interests in notes receivable sold would decrease. Also, to the extent the portfolio of receivables sold fails to satisfy specified performance criteria (as may occur due to, for example, an increase in default rates or loan loss severity) or certain other events occur, the funds received from obligors must be distributed on an accelerated basis to investors. If the accelerated payment formula were to become applicable, the cash flow to us from the retained interests in notes receivable sold would be reduced until the outside investors were paid or the regular payment formula was resumed. If these situations were to occur on a material basis, it could cause a decline in the fair value of the retained interests and a charge to earnings currently. There is no assurance that the carrying value of our retained interests in notes receivable sold will be fully realized or that future loan sales will be consummated or, if consummated, result in gains. See "Vacation Ownership Receivables Purchase Facilities - Off Balance Sheet Arrangements," below. In addition, we have historically sold VOI receivables to financial institutions through warehouse purchase facilities to monetize the receivables while accumulating receivables for a future term securitization transaction. We currently intend to structure future warehouse purchase facilities so that sales of VOI receivables through these facilities will be accounted for as on-balance sheet borrowings rather than as off-balance sheet sales. Therefore, we will not recognize a gain on the sales of receivables sold to the warehouse purchase facilities until such receivables are subsequently included in a properly structured term securitization transaction. We expect this may impact future quarterly earnings patterns as compared to comparable prior periods. Critical Accounting Policies and Estimates Our discussion and analysis of results of operations and financial condition are based upon our condensed consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of commitments and contingencies. On an ongoing basis, management evaluates its estimates, including those that relate to the recognition of revenue, including revenue recognition under the percentage-of-completion method of accounting; our estimated development cost and future sales on recovered VOIs for the purpose of recognizing cost of sales related to VOI sales; our estimate of fair value related to stock-based compensation; our reserve for loan losses; the valuation of retained interests in notes receivable sold and the related gains on sales of notes receivable; the recovery of the carrying value of real estate inventories; golf courses; intangible assets and other assets; and the estimate of contingent liabilities related to litigation and other claims and assessments. Management bases its 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 for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions and conditions. If actual results significantly differ from management's estimates, our results of operations and financial condition could be materially, adversely impacted. For a more detailed discussion of these critical accounting policies see "Critical Accounting Policies and Estimates" in our Annual Report on Form 10-K for the year ended December 31, 2006. Results of Operations We review financial information, allocate resources and manage our business as two segments, Bluegreen Resorts and Bluegreen Communities. The information reviewed is based on internal reports and excludes an 23 allocation of general and administrative expenses attributable to corporate overhead. The information provided is based on a management approach and is used by us for the purpose of tracking trends and changes in results. It does not reflect the actual economic costs, contributions or results of operations of the segments as stand alone businesses. If a different basis of presentation or allocation were utilized, the relative contributions of the segments might differ but the relative trends, in our view, would likely not be materially impacted. The table below sets forth net revenue and income from operations by segment.
Bluegreen Resorts Bluegreen Communities Total ----------------------- ---------------------- ---------------------- Percentage Percentage Percentage Amount of Sales Amount of Sales Amount of Sales ---------- ---------- --------- ---------- --------- ---------- Three Months Ended March 31, 2006 Sales of real estate ............. $ 74,135 100% $ 47,625 100% $ 121,760 100% Cost of real estate sales ........ (17,047) (23) (28,175) (59) (45,222) (37) ---------- --------- --------- Gross profit ..................... 57,088 77 19,450 41 76,538 63 Other resort and communities operations revenues ........... 14,331 19 2,336 5 16,667 14 Cost of other resort and communities operations ........ (14,649) (20) (2,131) (4) (16,780) (14) Selling and marketing expenses ...................... (47,433) (64) (6,980) (15) (54,413) (45) Field general and administrative expenses (1) ... (6,201) (8) (2,896) (6) (9,097) (7) ---------- --------- --------- Field Operating Profit ........... $ 3,136 4% $ 9,779 21% $ 12,915 11% ========== ========= ========= Three Months Ended March 31, 2007 Sales of real estate ............. $ 87,148 100% $ 34,874 100% $ 122,022 100% Cost of real estate sales ........ (18,877) (22) (17,855) (51) (36,732) (30) ---------- --------- --------- Gross profit ..................... 68,271 78 17,019 49 85,290 70 Other resort and communities operations revenues ........... 12,838 15 2,180 6 15,018 12 Cost of other resort and communities operations ........ (10,029) (12) (2,390) (7) (12,419) (10) Selling and marketing expenses ...................... (55,301) (63) (5,068) (15) (60,369) (49) Field general and administrative expenses (1) ... (6,930) (8) (2,933) (8) (9,863) (8) ---------- --------- --------- Field Operating Profit ........... $ 8,849 10% $ 8,808 25% $ 17,657 15% ========== ========= =========
(1) General and administrative expenses attributable to corporate overhead have been excluded from the tables. Corporate general and administrative expenses totaled $10.1 million for the three months ended March 31 2006 and $11.2 million for the three months ended March 31, 2007. (See "Corporate General and Administrative Expenses," below, for further discussion). Sales and Field Operations. Consolidated sales increased $262,000 from $121.8 million during the three months ended March 31, 2006 to $122.0 million during the three months ended March 31, 2007. Bluegreen Resorts During the three months ended March 31, 2006 and 2007, Bluegreen Resorts generated $74.1 million (61%) and $87.1 million (71%) of our total consolidated sales, respectively. 24 The following table sets forth certain information for sales of VOIs for the periods indicated, before giving effect to the percentage-of-completion method of accounting and sales deferred under SFAS No. 152. For the Three Months Ended March 31, ----------------------- 2006 2007 --------- ---------- Number of VOI sales transactions 7,681 9,119 Average sales price per transaction $ 10,664 $ 10,566 Gross margin 77% 78% Bluegreen Resorts' sales increased $13.0 million or 18% during the three months ended March 31, 2007, as compared to the three months ended March 31, 2006. The increase was due primarily to an increase in same-resort sales at many of our existing sales offices and, to a lesser extent, the opening of new sales offices. Same-resort sales increased by approximately 15% during the three months ended March 31, 2007, as compared to the three months ended March 31, 2006 and were highlighted by increased sales at The Fountains sales office in Orlando, Florida, our Bluegreen Wilderness Club at Big Cedar sales office in Ridgedale, Missouri, our MountainLoft sales office in Gatlinburg, Tennessee, our Smoky Mountain Preview Center sales office in Sevierville, Tennessee, and our Falls Village sales office in Branson, Missouri. The increase in sales also reflects our continued focus on marketing to our growing Bluegreen Vacation Club owner base. Sales to owners increased by 28% and accounted for approximately 38% of Resort sales during the three months ended March 31, 2007, compared to 33% during the three months ended March 31, 2006. The number of total prospects seen by Bluegreen Resorts remained relatively constant in the first quarter of 2007 compared to the same period in 2006 at approximately 62,000 prospects in both periods. However, our overall sale-to-tour conversion ratio increased from 14% during the first quarter of 2006 to 15% during the first quarter of 2007. Our sale-to-tour conversion ratio for new prospects (i.e., excluding sales to our existing owners) was approximately 11% and 12% for the three months ended March 31, 2006 and 2007, respectively. We opened three new sales sites subsequent to March 31, 2006: an offsite sales office in Las Vegas, Nevada (opened in July 2006), and sales offices located at our new properties in Wisconsin Dells, Wisconsin (opened in July 2006) and Williamsburg, Virginia (opened August 2006). The increase in the average sales price per transaction, primarily due to a system-wide price increase during March 2007, also contributed to the overall increase in resort sales. Bluegreen Resorts' gross margin percentages vary between periods based on the relative costs of the specific VOIs sold in each respective period. Bluegreen Resorts' gross margin more typically ranges between 75% and 77%. During the three months ended March 31, 2007, our gross margin was positively impacted by approximately $1.2 million as a result of adjustments to cost of real estate sales related to our retroactive application of the estimated gross margins based on project lives as required by SFAS No. 152, and the previously discussed price increase. These increases were partially off-set during the three months ended March 31, 2007 by a higher proportion of sales of VOIs in relatively higher cost resorts as a result of rising construction costs. Other resort operations revenue decreased $1.5 million or 10% during the three months ended March 31, 2007, as compared to the three months ended March 31, 2006. The decrease in 2007 represents minimal 2007 sales of mini-vacation packages on behalf of third parties. During 2006, we began transitioning our mini-vacation package business from primarily selling the packages to third-parties to using the sales tours generated by mini-vacations primarily for use at our own sales offices. This had the effect of increasing the profitability of our other resort operations but increasing our selling and marketing costs. The decrease was partially off-set by higher title processing fees on our VOI sales earned by our wholly-owned title company as well as higher resort management fees earned by our resort management company. Resort management fees increased in the aggregate due to an increase in the number of resorts to which management such services are provided. Cost of other resort operations decreased $4.6 million or 32% during the three months ended March 31, 2007, as compared to the three months ended March 31, 2006. The decrease during 2007 primarily reflects the lower cost of mini-vacations sold on behalf of third parties due, as previously discussed, due to the reduction in related revenues. Selling and marketing expenses for Bluegreen Resorts increased $7.9 million or 17% during the three months ended March 31, 2007, as compared to the three months ended March 31, 2006. As a percentage of sales, selling and marketing expenses decreased from 64% during the three months ended March 31, 2006 to 63% during the three months ended March 31 2007. The increase in selling and marketing expenses during the first quarter 2007 as compared to the same period in 2006 reflects the overall increase in sales, higher marketing expenses as a 25 percentage of sales at our newly opened off-site sales offices and the previously discussed transition of our mini-vacations packages from being sold externally to being used internally. As a percentage of sales, our marketing costs decreased primarily a result of increased sales to owners, which generally carry lower marketing costs. We believe that selling and marketing expenses as a percentage of sales is an important indicator of the performance of Bluegreen Resorts and our performance as a whole. No assurance can be given that selling and marketing expenses will not increase as a percentage of sales in future periods. Field general and administrative expenses for Bluegreen Resorts increased $729,000 or 12% during the three months March 31, 2007, as compared to the three months ended March 31, 2006, reflecting the overall cost of operating additional sales and support offices. As of December 31, 2006 and March 31, 2007, Bluegreen Resorts had $614,000, and $857,000, respectively, of sales and $345,000 and $490,000, respectively of field operating profit deferred under percentage-of-completion accounting. Additionally, as of March 31, 2007, approximately $32.8 million and $18.4 million of sales and field operating profit, respectively, were deferred under SFAS No. 152 because the buyers did not make the minimum required initial investment as compared to $27.3 million and $15.3 million of sales and field operating profit, respectively, as of December 31, 2006. Bluegreen Communities During the three months ended March 31, 2006 and 2007, Bluegreen Communities generated $47.6 million (39%) and $34.9 million (29%) of our total consolidated sales, respectively. The table below sets forth the number of homesites sold by Bluegreen Communities and the average sales price per homesite for the periods indicated, before giving effect to the percentage-of-completion method of accounting and excluding sales of bulk parcels. For the Three Months Ended March 31, ----------------------- 2006 2007 ------------ --------- Number of homesites sold 434 324 Average sales price per homesite $ 70,918 $ 82,532 Gross margin 41% 49% Bluegreen Communities' sales decreased $12.8 million or 27% during the first quarter of 2007 as compared to the same period in 2006 as a result of several of our more mature developments either approaching sell out or selling out after March 31, 2006, partially offset by sales generated at new Bluegreen Communities that commenced sales subsequent to the first quarter of 2006. Before giving effect to the percentage-of-completion method of accounting, and the legal rescission period, during the first quarter of 2007 we entered into contracts to sell homesites totaling $32.8 million, as compared to $44.7 million during the first quarter of 2006. These sales consisted of real estate sold at the following properties: Properties Not Substantially Sold Out at March 31, 2007 (in 000's) ------------------------------------- Project 2006 2007 Difference ----------------------------------- ------------ --------- ---------- Chapel Ridge ...................... $ 5,496 $ 5,016 $ (480) Mystic Shores ..................... 9,150 7,557 (1,593) Havenwood at Hunter's Crossing .... 2,327 4,377 2,050 Lake Ridge at Joe Pool Lake ....... 4,873 2,698 (2,175) Vintage Oaks at the Vineyard ...... -- 4,497 4,497 The Bridges at Preston Crossings .. -- 2,702 2,702 SugarTree on the Brazos ........... 540 670 130 Saddle Creek Forest ............... 2,707 1,489 (1,218) The Settlement at Patriot Ranch ... 895 1,617 722 King Oaks ......................... -- 1,906 1,906 ------------ --------- ---------- Total .......................... $ 25,988 $ 32,529 $ 6,541 ============ ========= ========== 26 Properties Substantially Sold Out at March 31, 2007 (in 000's) ------------------------------------- Project 2006 2007 Difference --------------------------------- ------------ --------- ---------- Sanctuary Cove at St. Andrews Sound ........................ $ 2,901 -- $ (2,901) Fairway Crossings ............... 198 41 (157) Mountain Springs Ranch .......... 4,987 -- (4,987) Big Country ..................... 7,000 -- (7,000) Catawba Falls Preserve .......... 2,376 -- (2,376) Brickshire ...................... 544 188 (356) Ridge Lake Shores ............... 577 37 (540) Miscellaneous ................... 176 -- (176) ------------ --------- ---------- Total ........................ $ 18,759 $ 266 $ (18,493) ============ ========= ========== Also contributing to lower sales in the first quarter of 2007 as compared to 2006 was the 2006 bulk sale of Big Country, and the net recognition of approximately $4.5 million in 2006 of revenue previously deferred as a result of the application of the percentage-of-completion method of accounting. These decreases were partially off-set by the recognition in the first quarter of 2007 of approximately $5.8 million of sales made in 2006 that were pending final platting, net of revenue which was pending final platting in 2006 which was deferred under the percentage-of-completion accounting at March 31, 2007. As noted above, certain of our properties substantially sold out earlier in 2006 than previously anticipated as a result of the strong demand for our communities and our challenge to replace sold-out properties with new communities with similar profit margins. Although there is no assurance that we will be successful, we are continually exploring the acquisition of properties in markets where we currently conduct business, and in new regions of the country, in an attempt to maintain appropriate levels of properties in our portfolio. Bluegreen Communities' gross margin increased from 41% in 2006 to 49% in 2007. Variations in cost structures and the market pricing of projects available for sale as well as the opening of phases of projects, which include premium homesites (e.g., water frontage, preferred views, larger acreage homesites, etc.) impact the gross margin of Bluegreen Communities from period to period. These factors, as well as the impact of percentage-of-completion accounting, will cause variations in gross margin between periods, although the gross margin of Bluegreen Communities has historically been between 45% and 55% of sales and is expected to approximate these percentages for the foreseeable future. In addition, during the first quarter of 2006 our gross margin was negatively impacted by the bulk sale of Big Country, which had a relatively low margin. Selling and marketing expenses for Bluegreen Communities decreased $1.9 million or 27% during the three months ending March 31, 2007, as compared to the same period in 2006. As a percentage of sales, selling and marketing expenses for Bluegreen Communities was 15% during the three months ended March 31, 2007 and 2006. These expenditures decreased in total during the three months ended March 31, 2007 due to lower commissions earned as a result of lower sales during the first quarter of 2007 as compared to the first quarter of 2006. Bluegreen Communities' general and administrative expenses remained relatively constant from the three months ended March 31, 2007, as compared to the three months ended March 31, 2006. As of December 31, 2006, Bluegreen Communities had $18.6 million of sales and $7.7 million of Field Operating Profit deferred under percentage-of-completion accounting. As of March 31, 2007, Bluegreen Communities had $19.0 million of sales and $7.6 million of Field Operating Profit deferred under percentage-of-completion accounting. Corporate General and Administrative Expenses. Our corporate general and administrative expenses consist primarily of expenses associated with administering the various support functions at our corporate headquarters, including accounting, human resources, information technology, resorts' acquisition and development, mortgage servicing, treasury and legal. Such expenses were $10.1 million and $11.2 million for the three months ended March 31, 2006 and 2007, respectively. 27 Corporate general and administrative expenses increased $1.1 million or 11% during the first quarter of 2007 as compared to the first quarter of 2006. This increase was primarily driven by increased overhead cost such as accounting, human resources, and legal fees partially off-set by higher fees earned by our mortgage servicing business. As previously discussed, we earn fees for servicing the notes receivable that we have sold in term securitization transactions and through our VOI receivables purchase facilities. For a discussion of field selling, general and administrative expenses, please see "Sales and Field Operations," above. Interest Income. Interest income is earned from our notes receivable, retained interests in notes receivable sold and cash and cash equivalents. Interest income totaled $8.2 million and $9.8 million during the three months ended March 31, 2006 and March 31, 2007, respectively. The increase in interest income during the three months ended March 31, 2007, as compared to the same periods in 2006 was due primarily to higher interest accretion on our retained interest in notes receivable sold and higher average vacation ownership notes receivable balances during the first quarter of 2007 as compared to the same period in 2006. Gain on Sales of Notes Receivable. During the three months ended March 31, 2006 and 2007, we sold $40.9 million and $51.2 million, respectively, of VOI notes receivable that qualified for off-balance sheet sales treatment under SFAS No. 140. In connection with these sales, we recognized gains on sales of notes receivable of $7.0 million and $8.0 million during the three months ended March 31, 2006 and 2007, respectively. As required under SFAS No. 152, approximately $6.5 million and $8.0 million of the gains were recorded as an increase to VOI sales for the three months ended March 31, 2006 and 2007, respectively. The amount of notes receivable sold during a period depends on several factors, including the amount of availability, if any, under receivables purchase facilities, the amount of eligible receivables available for sale, our cash requirements, the covenants and other provisions of the relevant VOI receivables purchase facility (as described further below) and management's discretion. The generally accepted accounting principles governing our sale of receivable transactions is evolving and achieving off-balance sheet accounting treatment is becoming more difficult. Due to the complexity of the accounting rules surrounding such transactions, we have decided to limit the use of off-balance sheet structures in the future. In 2006, we structured a VOI receivables purchase facility that is used to accumulate receivables pending a term securitization transaction in a manner so as to account for sales of receivables under such facilities as on-balance sheet borrowings pursuant to SFAS No. 140. No gains are recognized on the sales of receivables to this facility until the receivables are included in an appropriately structured term securitization transaction. We expect to continue this accounting treatment for similarly structured facilities in the foreseeable future. As a result, we expect that the volatility of our quarterly earnings will increase prospectively, but we do not anticipate that this will materially impact annual earnings, assuming the continued availability of the facilities and ultimate securitizations. Interest Expense. Interest expense was $3.3 million and $5.2 million during the three months ended March 31, 2006 and 2007, respectively. The increase in interest expense during the three months ended March 31, 2007, as compared to 2006, was primarily as a result of higher average debt outstanding and rising interest rates partially offset by increased capitalized interest on current development activity. Average debt outstanding during the first quarter of 2007 increased in part as a result of the issuance of $51.5 million in trust preferred debt since March 31, 2006. Total interest expense capitalized to construction in progress was $2.6 million and $3.4 million for the three months ended March 31, 2006 and 2007, respectively. Provision for Loan Losses. We recorded provisions for loan losses totaling $10.6 million and $11.4 million during the three months ended March 31, 2006 and 2007, respectively. This provision was based on our estimated losses on originated VOI receivables, excluding any benefit for the value of future recoveries, and is reflected as a reduction of VOI sales. The 7% increase in the provision for loan losses during the first quarter of 2007 compared to the first quarter of 2006 was primarily due to increases in Bluegreen Resorts sales, approximately 95% of which are historically financed by us. 28 The allowance for loan losses by division as of December 31, 2006 and March 31, 2007 was as follows:
Bluegreen Bluegreen Resorts Communities Other Total ----------- ----------- -------- ----------- (in thousands) December 31, 2006: Notes receivable ..................... $ 150,649 $ 6,915 $ 186 $ 157,750 Allowance for loan losses ............ (13,140) (173) (186) (13,499) ----------- ----------- -------- ----------- Notes receivable, net ................ $ 137,509 $ 6,742 $ -- $ 144,251 =========== =========== ======== =========== Allowance as a % of gross notes receivable ........................ 9% 3% 100% 9% =========== =========== ======== =========== March 31, 2007: Notes receivable ..................... $ 156,174 $ 6,707 $ 186 $ 163,067 Allowance for loan losses ............ (11,761) (209) (186) (12,156) ----------- ----------- -------- ----------- Notes receivable, net ................ $ 144,413 $ 6,498 $ -- $ 150,911 =========== =========== ======== ----------- Allowance as a % of gross notes receivable ........................ 8% 3% 100% 7% =========== =========== ======== ===========
Other Expense, Net. Other expense, net was $635,000 for the three months ended March 31, 2006 as compared to $951,000 for the three months ended March 31, 2007. The increase in other expense, net, during the three months ended March 31, 2007 compared to the same period in 2006 was primarily a result of a charge of approximately $525,000 for the loss on disposal of various fixed assets. Minority Interest in Income of Consolidated Subsidiary. We include the results of operations and financial position of Bluegreen/Big Cedar Vacations, LLC (the "Subsidiary"), our 51%-owned subsidiary, in our consolidated financial statements. (See Note 1 of the Notes to Condensed Consolidated Financial Statements). The minority interest in income of consolidated subsidiary is the portion of our consolidated pre-tax income that is earned by Big Cedar, L.L.C., the unaffiliated 49% interest holder in the Subsidiary. Minority interest in income of consolidated subsidiary was $1.0 million and $1.6 million during the three months ended March 31, 2006 and 2007, respectively, before the cumulative effect of change in accounting principle. Provision for Income Taxes. Based on our anticipated mix of taxable earnings amongst states, we expect that our 2007 effective income tax rate will be approximately 38.0%. Our effective income tax rate varies as our mix of taxable earnings shifts amongst the various states in which we operate. Additionally, in March of 2007, we received notice from the IRS that our 2004 federal income tax return had been selected for examination. Cumulative Effect of Change in Accounting Principle from the Adoption of SFAS No. 152. 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. The cumulative effect of change in accounting principle primarily consists of the deferral of VOI sales and related costs for sales that were previously recognized but did not meet the required down payment threshold at January 1, 2006, due to sales incentives provided to buyers and the treatment of our Sampler Program, and the related tax benefit, net of the cumulative effect of change in accounting principle charge, related to the minority interest in the Subsidiary. Summary. Based on the factors discussed above, our net (loss)/income was $(463,000) and $5.3 million during the three months ended March 31, 2006 and 2007, respectively. 29 Changes in Financial Condition The following table summarizes our cash flows for the three months ended March 31, 2006 and 2007 (in thousands): For the Three Months Ended ------------------------------- March 31, 2006 March 31, 2007 -------------- -------------- Cash flows used in operating activities ...... $ (20,198) $ (25,290) Cash flows provided by investing activities .. 3,351 1,233 Cash flows provided by financing activities .. 3,919 7,533 -------------- -------------- Net decrease in cash and cash equivalents .... $ (12,928) $ (16,524) ============== ============== Cash Flows From Operating Activities. Cash flows used in operating activities decreased $5.1 million or 25% from an outflow of $20.2 million during the three months ended March 31, 2006 to an outflow of $25.3 million during the three months ended March 31, 2007. The decrease in cash flows used in operating activities during the three months ended March 31, 2007 compared to the same period the prior year was primarily the result of higher inventory development spending and an increase in notes receivable due to increased VOI sales. Partially offsetting the decrease in cash flows from operations was higher proceeds from the sale of notes receivable during the three months ended March 31, 2007, as compared to the same period in 2006. We report cash flows from borrowings collateralized by notes receivable and sales of notes receivable as operating activities in the consolidated statements of cash flows. The majority of Bluegreen Resorts' sales result in the origination of notes receivable from its customers. We believe that accelerating the conversion of such notes receivable into cash, either through the pledge or sale of our notes receivable, on a regular basis is an integral function of our operations, and have therefore classified such activities as operating activities. Cash Flows From Investing Activities. Cash flows provided by investing activities decreased $2.1 million or 64% from an inflow of $3.3 million during the three months ended March 31, 2006 to an inflow of $1.2 million during the three months ended March 31, 2007. This decrease was due primarily to lower amounts of cash received from our retained interests in notes receivable sold. The cash received on our retained interest varies based on the total retained interest outstanding, whether or not a sufficient reserve balance has been met (if required), and the timing of the actual cash distribution. During the three months ended March 31, 2006, we received $7.8 million when we satisfied a unique trigger in our 2004 Term Securitization transaction as cash was received on the related retained interest in notes receivable sold from a general reserve account. There are no similar triggers impacting our retained interests in notes receivable sold at March 31, 2007. In addition, during the three months ended March 31, 2007, we capitalized investments of $619,000 into statutory business trusts for the purpose of issuing trust preferred securities and investing the proceeds thereof in our junior subordinated debentures (see "Liquidity and Capital Resources"). No such amounts were capitalized during the three months ended March 31, 2006. Cash Flows From Financing Activities. Cash flows provided by financing activities increased $3.6 million or 92% from a cash inflow of $3.9 million during the three months ended March 31, 2006 to a cash inflow of $7.5 million during the three months ended March 31, 2007. These increases were primarily related to the receipt of $20.6 million of proceeds in connection with our issuance of the junior subordinated debentures and higher borrowings under our existing lines-of-credit during the period ended March 31, 2007. These increases were partially offset by higher debt payments in 2007. Liquidity and Capital Resources Our capital resources are provided from both internal and external sources. Our primary capital resources from internal operations are: (i) cash sales, (ii) down payments on homesite and VOI sales which are financed, (iii) proceeds from the sale of, or borrowings collateralized by, notes receivable, including cash received from our retained interests in notes receivable sold, (iv) principal and interest payments on the purchase money mortgage loans arising from sales of VOIs and homesites and (v) net cash generated from other resort services and other communities operations. Historically, external sources of liquidity have included non-recourse sales of notes receivable, borrowings under secured and unsecured lines-of-credit, seller and bank financing of inventory acquisitions and the issuance of debt securities. Our capital resources are used to support our operations, including (i) acquiring and developing inventory, (ii) providing financing for customer purchases, (iii) funding operating 30 expenses and (iv) satisfying our debt and other obligations. As we are continually selling and marketing real estate (VOIs and homesites), it is necessary for us to continually acquire and develop new resorts and communities in order to maintain adequate levels of inventory to support operations. We anticipate that we will continue to require external sources of liquidity to support our operations, satisfy our debt and other obligations and to provide funds for growth. Our level of debt and debt service requirements have several important effects on our operations, including the following: (i) we have significant cash requirements to service debt, reducing funds available for operations and future business opportunities and increasing our vulnerability to adverse economic and industry conditions; (ii) our leveraged position increases our vulnerability to economic and competitive pressures; (iii) the financial covenants and other restrictions contained in the indentures, the credit agreements and other agreements relating to our indebtedness require us to meet certain financial tests and restrict our ability to, among other things, borrow additional funds, dispose of assets, make investments or pay cash dividends on, or repurchase, preferred or common stock; and (iv) funds available for working capital, capital expenditures, acquisitions and general corporate purposes may be limited. Certain of our competitors operate on a less leveraged basis and have greater operating and financial flexibility than we do. Subject to the continued availability of financing and liquidity, we currently intend to continue to pursue a growth-oriented strategy, particularly with respect to our Bluegreen Resorts business segment. In connection with this strategy, we may from time to time acquire, among other things, additional resort properties and completed but unsold VOIs; land upon which additional resorts may be built; management contracts; loan portfolios of vacation ownership mortgages; portfolios which include properties or assets which may be integrated into our operations; interests in joint ventures; and operating companies providing or possessing management, sales, marketing, development, administration and/or other expertise with respect to our operations in the vacation ownership industry. In addition, we intend to continue to focus Bluegreen Communities' activities on larger, more capital intensive projects particularly in those regions where we believe the market for our products is strongest, such as new golf communities in the Southeast and other areas and continued growth in our successful regions in Texas. The following is a discussion of our purchase and credit facilities that were important sources of our liquidity as of March 31, 2007. These facilities do not constitute all of our outstanding indebtedness as of March 31, 2007. Our other indebtedness includes outstanding senior secured notes payable, junior subordinated debentures, borrowings collateralized by real estate inventories that were not incurred pursuant to an ongoing credit facility and capital leases. VOI Receivables Purchase Facilities - Off-Balance Sheet Arrangements Our ability to sell and/or borrow against our notes receivable from VOI buyers is a critical factor in our continued liquidity. When we sell VOIs, a financed buyer is only required to pay a minimum of 10% of the purchase in cash at the time of sale; however, selling, marketing and administrative expenses are primarily cash expenses and, in our case for the three months ended March 31, 2007, approximated 63% of sales. Accordingly, having facilities available for the hypothecation or sale of these VOI receivables is a critical factor to our ability to meet our short and long-term cash needs. The 2006 GE Purchase Facility. In March 2006, we executed agreements for a VOI receivables purchase facility (the "2006 GE Purchase Facility") with General Electric Capital Corporation ("GE"). The 2006 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 2006 GE Purchase Facility has detailed requirements with respect to the eligibility of receivables for purchase, and fundings under the 2006 GE Purchase Facility are subject to certain conditions precedent. Under the 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, is 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 over collateralization 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 of approximately $437,500 in March 2006, which is being amortized on a 31 straight-line basis through March 2008. 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 includes various conditions to purchase, covenants, trigger events and other provisions customary for a transaction of this type. GE's obligation to purchase under the 2006 GE Purchase Facility may terminate earlier than the dates noted above upon the occurrence of certain specified events set forth in the 2006 GE Purchase Facility agreements. These specified events, some of which are subject to materiality qualifiers and cure periods, include, without limitation, (i) the aggregate amount of all advances under the GE Purchase Facility equaling $125.0 million; (ii) our breach of the representations or warranties in the 2006 GE Purchase Facility; (iii) our failure to perform our covenants in the 2006 GE Purchase Facility; (iv) our commencement of bankruptcy or similar proceedings; (v) the amount of any advance under the 2006 GE Purchase Facility failing to meet a specified overcollateralization amount; (vi) significant delinquencies or defaults on the receivables sold; (vii) recovery rates falling below a pre-determined amount; (viii) a default or breach under any other agreement beyond the applicable grace period if such default or breach (a) involves the failure to make a payment in excess of 5% of our Tangible Net Worth (as defined in the 2006 GE Purchase Facility agreements to include our subordinated debentures) or (b) causes, or permits the holder of indebtedness to cause, an amount in excess of 5% of our Tangible Net Worth to become due; (ix) our Tangible Net Worth at the end of any calendar quarter not equaling at least $303.3 million plus 50% of net income following December 31, 2005; (x) the ratio of our debt (excluding our subordinated debentures and receivable-backed debt of no more than $600 million) to Tangible Net Worth exceeding 2.50 to 1; (xi) the ratio of our consolidated earnings before interest, taxes, depreciation and amortization to our interest expense (net of interest income) falling below 2.00 to 1; (xii) the number of points available in the Bluegreen Vacation Club falling below approximately 930.7 million points; (xiii) our ceasing to conduct the VOI business or to originate VOI receivables or if certain changes in our ownership or control occur; (xiv) the failure of certain of our resorts to be part of the Bluegreen Vacation Club or be managed by us, one of our subsidiaries or another entity acceptable to GE; (xv) operating budgets and reserve accounts maintained by the property owners' associations responsible for maintaining certain of our resorts failing to comply with applicable laws and governing documents; (xvi) our failure to discharge, stay or bond pending appeal any final judgments for the payment of an amount in excess of 2.5% of our Tangible Net Worth in a timely manner; (xvii) our default under or breach of certain resort management or marketing contracts; or (xviii) our failure to perform our servicing obligations, otherwise have our servicing rights terminated or if we do not exercise the Servicer Purchase Option pursuant to the terms of the 2006 GE Purchase Facility. The 2006 GE Purchase Facility allows for sales of notes receivable for a cumulative purchase price of up to $125.0 million through March 2008. During the first quarter of 2007, we sold $51.2 million in vacation ownership receivables under the 2006 GE Purchase Facility for an aggregate purchase price of $46.0 million. As of March 31, 2007, the remaining availability under the 2006 GE Purchase Facility was $14.2 million in cumulative purchase price, subject to eligibility requirements and fulfillment of conditions precedent. The 2006 GE Purchase Facility discussed above, the 2006 BB&T Purchase Facility, the GMAC Receivables Facility, and the GE Bluegreen/Big Cedar Facility discussed below under "Credit Facilities for Bluegreen Resorts' Receivables and Inventories" are the only ongoing receivables facilities under which we currently have the ability to monetize our VOI notes receivable. Factors which could adversely impact our ability to obtain new or additional VOI receivable purchase facilities include a downturn in general economic conditions; negative trends in the commercial paper or LIBOR markets; increases in interest rates; a decrease in the number of financial institutions or other entities willing to enter into facilities with VOI companies; a deterioration in the performance of our VOI notes receivable or in the performance of portfolios sold in prior transactions, specifically increased delinquency, default and loss severity rates; and a deterioration in our performance generally. There can be no assurance that we will obtain new purchase facilities or will be in a position to replace our existing purchase facilities when they are fully funded or expire. As indicated above, our inability to sell VOI receivables under a current or future facility could have a material adverse impact on our liquidity. However, management believes that to the extent we could not sell receivables under a purchase facility, we could potentially mitigate the adverse impact on our liquidity by using our receivables as collateral under existing or future credit facilities. We have historically chosen to monetize our receivables through facilities such as the 2006 GE Purchase Facility and through periodic term securitization transactions, as these off-balance sheet arrangements provide us with cash inflows both currently and in the future at what we believe to be competitive rates without adding leverage to our balance sheet or retaining recourse for losses on the receivables sold. In addition, these sale transactions have generated gains on our income statement on a periodic basis, which would not be realized under a traditional financing arrangement. 32 Historically, we have also been a party to a number of securitization-type transactions, all of which in our opinion utilize customary structures and terms for transactions of this type. In each securitization-type transaction, we sold receivables to a wholly-owned special purpose entity which, in turn, sold the receivables either directly to third parties or to a trust established for the transaction. In each transaction, the receivables were sold on a non-recourse basis (except for breaches of certain representations and warranties) and the special purpose entity has a retained interest in the receivables sold. We have acted as servicer of the receivables pools in each transaction for a fee, with the servicing obligations specified under the applicable transaction documents. Under the terms of the applicable securitization transaction, the cash payments received from obligors on the receivables sold are distributed to the investors (which, depending on the transaction, may acquire the receivables directly or purchase an interest in, or make loans secured by the receivables to, a trust that owns the receivables), parties providing services in connection with the facility, and our special purpose subsidiary as the holder of the retained interests in the receivables according to specified formulas. In general, available funds are applied monthly to pay fees to service providers, make interest and principal payments to investors, fund required reserves, if any, and pay distributions in respect of the retained interests in the receivables. Pursuant to the terms of the transaction documents; however, to the extent the portfolio of receivables fails to satisfy specified performance criteria (as may occur due to an increase in default rates or loan loss severity) or other trigger events, the funds received from obligors are distributed on an accelerated basis to investors. In effect, during a period in which the accelerated payment formula is applicable, funds go to outside investors until they receive the full amount owed to them and only then are payments made to our subsidiary in its capacity as the holder of the retained interests. Depending on the circumstances and the transaction, the application of the accelerated payment formula may be permanent or temporary until the trigger event is cured. If the accelerated payment formula were to become applicable, the cash flow on the retained interests in the receivables would be reduced until the outside investors were paid or the regular payment formula was resumed. Such a reduction in cash flow could cause a decline in the fair value of our retained interests in the receivables sold. Declines in fair value that are determined to be other than temporary are charged to operations in the current period. In each facility, the failure of the pool of receivables to comply with specified portfolio covenants can create a trigger event, which results in the use of the accelerated payment formula (in certain circumstances until the trigger event is cured and in other circumstances permanently) and, to the extent there was any remaining commitment to purchase receivables from our special purpose subsidiary, the suspension or termination of that commitment. In addition, in each securitization facility certain breaches of our obligations as servicer or other events allow the indenture trustee to cause the servicing to be transferred to a substitute third party servicer. In that case, our obligation to service the receivables would terminate and we would cease to receive a servicing fee. The following is a summary of significant financial information related to the 2006 GE Purchase Facility and prior off-balance sheet, receivables purchase facilities during the periods presented (in thousands): December 31, March 31, 2006 2007 -------------- ---------- On Balance Sheet: Retained interests in notes receivable sold ... $ 130,623 $ 133,717 Off Balance Sheet: Notes receivable sold without recourse ........ 540,536 553,123 Principal balance owed to note receivable purchasers ................................. 503,854 516,463 Three Months Ended ------------------------------ March 31, 2006 March 31, 2007 -------------- -------------- Income Statement: Gain on sales of notes receivable (1) ......... $ 7,011 $ 7,967 Interest accretion on retained interests in notes receivable sold ...................... 2,578 4,234 Servicing fee income .......................... 1,645 2,135 (1) Includes amounts classified as VOI sales, pursuant to SFAS No. 152. As required under SFAS No. 152, approximately $6.5 million and $8.0 million of the gain were recorded as an increase to VOI sales for the three months ended March 31, 2006 and 2007, respectively. 33 Credit Facilities for Bluegreen's Receivables and Inventories In addition to the VOI receivables purchase facilities discussed above, we maintain various credit facilities with financial institutions that provide receivable, acquisition and development financing for our operations. We had the following credit facilities, as of March 31, 2007 (see further discussion below):
Outstanding Borrowings Availability as Advance Period as of March of March 31, Expiration; Borrowing Borrowing Current Credit Facility 31, 2007 2007 Borrowing Maturity Limit Rate Rate - ------------------------------------------------------------------------------------------------------------------- The GMAC $ 15.1 million $ 59.9 million February 15, 2008; $ 75.0 million 30-day LIBOR 9.32% Receivables February 15, 2015 + 4.00% Facility The GMAC $ 35.1 million $ 114.9 million February 15, 2008; $ 150.0 million 30-day LIBOR 9.82% AD&C Facility August 15, 2013 + 4.50% 2006 BB&T $ -- $ 137.5 million May 25, 2008; $ 137.5 million 30-day LIBOR 6.57% Purchase March 5, 2019 + 1.25% Facility The GMAC $ 61.7 million $ 13.3 million September 30, 2008; $ 75.0 million Prime + 1.00% 9.25% Communities September 30, 2009 Facility
Credit Facilities for Bluegreen Resorts' Receivables and Inventories 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 three months ended March 31, 2007, we did not pledge any VOI receivables under the GMAC Receivables Facility. The GMAC AD&C Facility. In September 2003, RFC also provided us with an acquisition, development and construction revolving credit facility for Bluegreen Resorts (the "GMAC AD&C Facility"). The borrowing period on the GMAC AD&C Facility, as amended, expires on February 15, 2008, and outstanding borrowings mature no later than August 15, 2013, although specific draws typically are due four years from the borrowing date. 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. There were no borrowings under this facility during the three months ended March 31, 2007. The 2006 BB&T Purchase Facility. In June 2006, we executed agreements for a VOI receivables purchase facility (the "2006 BB&T Purchase Facility") with BB&T. While ownership of the receivables is transferred for legal purposes, the transfer of the receivables under the facility are accounted for as a financing transaction for financial accounting purposes. Accordingly, the receivables will continue to be reflected as assets and the associated obligations will be reflected as liabilities on our balance sheet. The 2006 BB&T Purchase Facility utilizes an owner's trust structure, pursuant to which we transfer receivables to Bluegreen Timeshare Finance Corporation I, our wholly-owned, special purpose finance subsidiary ("BTFC I"), and BTFC I subsequently transfers the receivables to 34 an owner's trust without recourse to us or BTFC I, except for breaches of certain customary representations and warranties at the time of transfer. We did not enter into any guarantees in connection with the BB&T Purchase Facility. The 2006 BB&T Purchase Facility has detailed requirements with respect to the eligibility of receivables, and fundings under the BB&T Purchase Facility are subject to certain conditions precedent. Under the 2006 BB&T Purchase Facility, a variable purchase price of approximately 85% of the principal balance of the receivables transferred, subject to certain terms and conditions, is paid at closing in cash. The balance of the purchase price is deferred until such time as BB&T and other liquidity providers arranged by BB&T have in aggregate received a specified return (the "Specified Return") and all servicing, custodial, agent and similar fees and expenses have been paid. The Specified Return is equal to either the commercial paper rate or LIBOR rate plus 1.25%, subject to use of alternate return rates in certain circumstances. In addition, we will pay BB&T structuring and other fees totaling $1.7 million over the term of the facility and we will act as servicer under the 2006 BB&T Purchase Facility for a fee. The BB&T Purchase Facility allows for transfers of notes receivable for a cumulative purchase price of up to $137.5 million, on a revolving basis, through May 2008. There were no outstanding amounts due under this facility as of March 31, 2007. In April 2007, we transferred $20.4 million of VOI notes receivable to the BB&T Purchase Facility and received $17.3 million in cash proceeds. Immediately following the transaction, we had $120.2 million of remaining availability under the BB&T Purchase Facility. The GE Bluegreen/Big Cedar Facility. In April 2007, the Subsidiary 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 Subsidiary in connection with the GE Bluegreen/Big Cedar Receivables Facility. The facility allows for advances on a revolving basis through April 16, 2009 and all outstanding borrowings mature no later than April 16, 2016. The facility has detailed requirements with respect to the eligibility of receivables for inclusion and other conditions to funding. The borrowing base under the 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 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 facility. Indebtedness under the facility bears interest adjusted monthly at the one month LIBOR plus 1.75%. The Subsidiary was required to pay an upfront loan commitment fee of $225,000 in connection with the GE Bluegreen/Big Cedar Receivables Facility. On April 20, 2007, the Subsidiary pledged $26.8 million in aggregate principal balance of notes receivable under the facility and received $25.7 million in cash proceeds, net of issuance costs. The Foothill Facility. We are currently seeking to renew a $30.0 million revolving credit facility with Wells Fargo Foothill, Inc. ("Foothill") primarily used for borrowings collateralized by Bluegreen Communities receivables and inventory, but under which we could also borrow up to $10.0 million of the facility collateralized by the pledge of VOI receivables. For further details on this facility, see "Credit Facilities for Bluegreen Communities' Receivables and Inventories" below. Credit Facilities for Bluegreen Communities' Receivables and Inventories The Foothill Facility. We are currently seeking to renew a $30.0 million revolving credit facility with Foothill secured by the pledge of Bluegreen Communities' receivables, with up to $10.0 million of the total facility available for Bluegreen Communities' inventory borrowings and, as indicated above, up to $10.0 million of the total facility available for the pledge of Bluegreen Resorts' receivables (the "Foothill Facility"). The Foothill Facility requires principal payments based on agreed-upon release prices as homesites in the encumbered communities are sold and bears interest at the prime lending rate plus 1.25% (9.5% at March 31, 2007). Interest payments are due monthly. Subject to a minimum monthly interest charge of $15,000, the interest rate charged on outstanding receivable borrowings under the Foothill Facility, as amended, is the prime lending rate plus 0.25% (8.5% at March 31, 2007) when the average monthly outstanding loan balance is greater than or equal to $15.0 million. If the average monthly outstanding loan balance is less than $15.0 million, the interest rate is the greater of 4.00% or the prime lending rate plus 0.50% (8.75% at March 31, 2007). All principal and interest payments received on pledged receivables are applied to principal and interest due under the Foothill Facility. There can be no assurances that we will renew the Foothill Facility on favorable terms, if at all. 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 35 activities. The GMAC Communities Facility is secured by the real property homesites (and personal property related thereto) at the following Bluegreen Communities projects, as well as any Bluegreen Communities projects acquired by us with funds borrowed under the GMAC Communities Facility (the "Secured Projects"): Brickshire (New Kent County, Virginia); Mountain Lakes Ranch (Bluffdale, Texas); Ridge Lake Shores (Magnolia, Texas); Riverwood Forest (Fulshear, Texas); Waterstone (Boerne, Texas); 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); Yellowstone Creek Ranch (Walsenburg, Colorado); Havenwood at Hunter's Crossing (New Braunfels, Texas); The Bridges at Preston Crossing (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. 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 repay outstanding indebtedness on Bluegreen Communities projects, finance the acquisition and development of Bluegreen Communities projects and for general corporate purposes. In February 2007, we acquired 350 acres near St. Simons Island, Georgia, for $18.0 million for a new community to be called Sanctuary River Club at St. Andrews Sound. We borrowed $12.6 million under the GMAC Communities Facility in connection with the acquisition of this property. Over the past several years, substantially all of our homesite sales have been for cash and we have not provided a significant amount of financing to homesite purchasers. Accordingly, in recent years we have reduced the borrowing capacity under credit agreements secured by Bluegreen Communities' receivables. We attribute the significant volume of cash sales to an increased willingness on the part of banks to extend direct customer homesite financing at attractive interest rates. No assurances can be given that local banks will continue to provide such customer financing. Historically, we have funded development for road and utility construction, amenities, surveys and engineering fees from internal operations and have financed the acquisition of Bluegreen Communities properties through seller, bank or financial institution loans. Terms for repayment under these loans typically call for interest to be paid monthly and principal to be repaid through homesite releases. The release price is usually an amount based on a pre-determined percentage (typically 25% to 55%) of the gross selling price of the homesites in the subdivision. In addition, the agreements generally call for minimum cumulative amortization periodically. When we provide financing to our customers (and therefore the release price is not available in cash at closing to repay the lender), we are required to pay the lender with cash derived from other operating activities, principally from cash sales or the pledge of receivables originated from earlier property sales. Trust Preferred Securities 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 FASB Interpretation 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 our 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. 36 On February 26, 2007, one of the Trusts, Bluegreen Statutory Trust VI ("BST VI") issued $20.0 million of trust preferred securities. BST VI 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 will be payable quarterly in arrears at a fixed rate of 9.84% through April 2012, and thereafter at a variable rate of interest, per annum, reset quarterly, equal to the 3-month LIBOR plus 4.80% until the scheduled maturity date of April 30, 2037. Distributions on the trust preferred securities will be cumulative and based upon the liquidation value of the trust preferred security. The trust preferred securities will be 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 five years from the issue date or sooner following certain specified events. In addition, we contributed $619,000 to BST VI in exchange for its common securities, all of which are owned by us. Those proceeds were also used by BST VI to purchase an identical amount of junior subordinated debentures from us. The terms of BST VI's common securities are nearly identical to the trust preferred securities. We had the following junior subordinated debentures outstanding at March 31, 2007 (dollars in thousands):
Outstanding Initial Amount of Equity Fixed Beginning Junior To Interest Variable Optional Subordinated Trust Issue Rate Interest Rate Redemption Maturity Trust Debentures (3) Date (1) (2) Date Date - ---------------------------------------------------------------------------------------------------------- Bluegreen Statutory 3-month Trust I .................. $ 23,196 $ 696 3/15/05 9.160% LIBOR 3/30/10 3/30/35 + 4.90% Bluegreen Statutory 3-month Trust II ................. 25,774 774 5/04/05 9.158% LIBOR 7/30/10 7/30/35 + 4.85% Bluegreen Statutory 3-month Trust III ................ 10,310 310 5/10/05 9.193% LIBOR 7/30/10 7/30/35 + 4.85% Bluegreen Statutory 3-month Trust IV ................. 15,464 464 4/24/06 10.130% LIBOR 6/30/11 6/30/36 + 4.85% Bluegreen Statutory 3-month Trust V .................. 15,464 464 7/21/06 10.280% LIBOR 9/30/11 9/30/36 + 4.85% Bluegreen Statutory 3-month Trust VI ................. 20,619 619 2/26/07 9.842% LIBOR 4/30/12 4/30/37 + 4.80% --------------------- $ 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 Condensed Consolidated Balance Sheets. Unsecured Credit Facility In July 2006, we executed agreements to renew our $15.0 million unsecured line-of-credit with Wachovia Bank, N.A. Amounts borrowed under the line bear interest at 30-day LIBOR plus 2.00% (7.32% at March 31, 2007). Interest is due monthly and all outstanding amounts are due on June 30, 2007. We can only borrow an amount under the line-of-credit which is less than the remaining availability under our current, active vacation ownership receivables purchase facilities plus availability under certain receivables warehouse facilities, less any outstanding letters of credit. The line-of-credit agreement contains certain covenants and conditions typical of arrangements of this type. As of March 31, 2007, no borrowings were outstanding under the line. However, an aggregate of 37 $463,000 of irrevocable letters of credit were provided under this line-of-credit of which $428,000 was required in connection with the obtaining of plats for one of our Bluegreen Communities projects. This line-of-credit is an available source of short-term liquidity for us. Commitments Our material commitments as of March 31, 2007 include the required payments due on our receivable-backed debt, lines-of-credit and other notes and debentures payable, commitments to complete our vacation ownership and communities projects based on our sales contracts with customers and commitments under noncancelable operating leases. The following tables summarize the contractual minimum principal payments and interest obligations required on all of our outstanding debt (including our receivable-backed debt, lines-of-credit and other notes and debentures payable) and our noncancelable operating leases as of March 31, 2007, by period due (in thousands):
Payments Due by Period ----------------------------------------------------------- Contractual Obligations Less than 1 -- 3 4 -- 5 After 5 and Outstanding Debt 1 year Years Years Years Total - ----------------------------------- --------- ---------- -------- ---------- ---------- Receivable-backed notes payable $ 17 $ 3,739 $ -- $ 15,115 $ 18,871 Lines-of-credit and notes payable 37,372 83,516 556 3,286 124,730 10.50% senior secured notes payable -- 55,000 -- -- 55,000 Junior subordinated debentures -- -- -- 110,827 110,827 Noncancelable operating leases 9,934 14,728 8,691 1,674 35,027 --------- ---------- -------- ---------- ---------- Total contractual obligations $ 47,323 $ 156,983 $ 9,247 $ 130,902 $ 344,455 ========= ========== ======== ========== ==========
Payments Due by Period ----------------------------------------------------------- Less than 1 -- 3 4 -- 5 After 5 Interest Obligations (1) 1 year Years Years Years Total - ----------------------------------- --------- ---------- -------- ---------- ---------- Receivable-backed notes payable $ 1,746 $ 3,077 $ 2,818 $ 2,113 $ 9,754 Lines-of-credit and notes payable 9,662 11,204 522 4,584 25,972 10.50% senior secured notes payable 5,775 -- -- -- 5,775 Junior subordinated debentures 10,618 21,236 21,236 271,980 325,070 --------- ---------- -------- ---------- ---------- Total contractual obligations $ 27,801 $ 35,517 $ 24,576 $ 278,677 $ 366,571 ========= ========== ======== ========== ==========
(1) For interest on variable rate debt, we have assumed that the interest rate remains the same as the rate at March 31, 2007. We intend to use cash flow from operations, including cash received from the sale of VOI notes receivable, and cash received from new borrowings under existing or future debt facilities in order to satisfy the principal payments in the contractual obligations. While we believe that we will be able to meet all required debt payments when due, there can be no assurance that this will be the case. As noted above, we have $463,000 in letters-of-credit outstanding at March 31, 2007, all of which were issued under the unsecured line-of-credit with Wachovia Bank, N.A. The majority of these letters-of-credit are required in connection with obtaining governmental approval of plats for one of our Bluegreen Communities projects. We estimate that the total cash required to complete resort buildings in which sales have occurred and resort amenities and other common costs in projects in which sales have occurred to be approximately $10.8 million as of March 31, 2007. We estimate that the total cash required to complete our Bluegreen Communities projects in which sales have occurred to be approximately $39.6 million as of March 31, 2007. These amounts assume that we are not obligated to develop any building, project or amenity in which a commitment has not been made through a sales contract to a customer; however, we anticipate that we will incur such obligations in the future. We plan to fund these expenditures over the next five years primarily with available capacity on existing or proposed credit facilities and cash generated from operations. There can be no assurance that we will be able to obtain the financing or 38 generate the cash from operations necessary to complete the foregoing plans or that actual costs will not exceed those estimated. We believe that our existing cash, anticipated cash generated from operations, anticipated new permitted borrowings under existing or proposed credit facilities and anticipated future sales of notes receivable under the purchase facilities, and one or more replacement facilities we will seek to put in place will be sufficient to meet our anticipated working capital, capital expenditures and debt service requirements for the foreseeable future. We will be required to renew or replace credit and receivables purchase facilities that have expired or that will expire in the near term. We will, in the future, also require additional credit facilities or will be required to issue corporate debt or equity securities in connection with acquisitions or otherwise. Any debt incurred or issued by us may be secured or unsecured, bear fixed or variable rate interest and may be subject to such terms as the lender may require and management deems prudent. There can be no assurance that the credit facilities or receivables purchase facilities which have expired or which are scheduled to expire in the near term will be renewed or replaced or that sufficient funds will be available from operations or under existing, proposed or future revolving credit or other borrowing arrangements or receivables purchase facilities to meet our cash needs, including, our debt service obligations. To the extent we are not able to sell notes receivable or borrow under such facilities, our ability to satisfy our obligations would be materially adversely affected. Our credit facilities, indentures, and other outstanding debt instruments, and receivables purchase facilities include customary conditions to funding, eligibility requirements for collateral, cross-default and other acceleration provisions, certain financial and other affirmative and negative covenants, including, among others, limits on the incurrence of indebtedness, limits on the repurchase of securities, payment of dividends, investments in joint ventures and other restricted payments, the incurrence of liens, transactions with affiliates, covenants concerning net worth, fixed charge coverage requirements, debt-to-equity ratios, portfolio performance requirements and events of default or termination. No assurance can be given that we will not be required to seek waivers of such covenants or that such covenants will not limit our ability to raise funds, sell receivables, satisfy or refinance our obligations or otherwise adversely affect our operations. In addition, our future operating performance and ability to meet our financial obligations will be subject to future economic conditions and to financial, business and other factors, many of which will be beyond our control. Item 4. Controls and Procedures. a) As of the end of the period covered by this report, we carried out an evaluation under the supervision and with the participation of our principal executive officer and principal financial officer of the effectiveness of our disclosure controls and procedures, as defined in Exchange Act Rules 13a-15(e) and 15d-15(e), as of March 31, 2007. Based on such evaluation, such officers have concluded that our disclosure controls and procedures are effective in timely alerting them to material information relating to us that is required to be included in our periodic SEC filings. b) There has been no change in our internal control over financial reporting during the quarter ended March 31, 2007, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. PART II - OTHER INFORMATION Item 1. Legal Proceedings. 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 in which they seek to develop their prior reserved mineral interests in, on and under the Mountain Lakes subdivision. 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 related to certain amenities in the subdivision as described in the following paragraph. The court has 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 prior reserved mineral interests of the plaintiffs from being developed and that a duty to exercise the 39 right to lease the minerals to third parties for development exists and has been breached. 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 has appealed the trial court's ruling and, at this time, is unable to predict the ultimate resolution of the litigation. The appeal is styled, Bluegreen Southwest One, LP et al. v. Betty Yvon Lesley et al.; in the 11th Court of Appeals, Eastland, Texas. One of the amenity lakes in the Mountain Lakes development has not reached the expected level after construction was completed. Owners of homesites within the Mountain Lakes subdivision and the Property Owners Association of Mountain Lakes have asserted 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 67TH Judicial District Court of Tarrant County, Texas. Southwest has been and continues to investigate the causes and circumstances for the delay of the lake to fill and currently estimates that the cost of remediating the condition will be approximately $3,000,000 and as such was accrued during the year ended December 31, 2006. 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. The Complaint raises allegations concerning the marketing of the LeisurePath Travel Services Network product to the public, and, in particular, 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 initial Plaintiffs (none of whom actually bought the Leisure Path product) assert claims for violations of the New Jersey Consumer Fraud Act, fraud, nuisance, negligence and for equitable relief all stemming from the sale and marketing by Vacation Station, LLC of the LeisurePath Travel Services Network. Plaintiffs are seeking the gifts and prizes they were allegedly told by Vacation Station, LLC that they won as part of the sales promotion, and that they be given the opportunity to rescind their agreement with LeisurePath along with a full refund. Plaintiffs further seek punitive damages, compensatory damages, attorney's fees and treble damages of unspecified amounts. In February of 2007, the Plaintiffs amended the complaint to add two additional Plaintiffs/proposed class representatives, Bruce Doxey and Karen Smith-Doxey. Unlike the initial Plaintiffs who were first contacted by Vacation Station, LLC some seven (7) months after LeisurePath terminated its relationship with Vacation Station, LLC and did not purchase LeisurePath products, the Doxeys purchased a participation in the LeisurePath Travel Services Network. On March 16, 2007, the Court denied a motion filed by Leisure Path and Bluegreen Corporation to dismiss the Doxeys as parties to the lawsuit. Leisure Path and Bluegreen Corporation intend to vigorously contest this action. Vacation Station, LLC and its owner have each filed for bankruptcy protection. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. We did not repurchase any of our equity securities registered pursuant to Section 12 of the Securities Exchange Act of 1934. Our Board of Directors has adopted and publicly announced a share repurchase program. Repurchases under such programs from time to time are subject to the price of our stock, prevailing market conditions, our financial condition and available resources, other investment alternatives and other factors. We are not required to seek shareholder approval of share repurchase programs, have not done so in the past, and do not anticipate doing so in the future, except to the extent we may be required to do so under applicable law. We have not repurchased any shares since the fiscal year ended April 1, 2001. As of March 31, 2007, there were 694,500 shares remaining for purchase under our current repurchase program. Item 6. Exhibits. Exhibits: 10.87 Loan and Security Agreement, dated April 16, 2007 among Bluegreen/Big Cedar Vacations, LLC, as borrower and General Electric Capital Corporation, as Lender. 10.88 Revolving Promissory Note, dated April 16, 2007 from Bluegreen/Big Cedar Vacations, LLC, as borrower to General Electric Capital Corporation, as Lender. 40 10.150 Employment Letter Agreement, dated April 25, 2007, by and between Bluegreen Corporation and David L. Pontius. 10.216 Construction Loan and Security Agreement by and among Textron Financial Corporation and Bluegreen Vacations Unlimited, Inc. and Bluegreen Corporation, as of March 23, 2007. 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 41 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BLUEGREEN CORPORATION (Registrant) Date: May 9, 2007 By: /S/ JOHN M. MALONEY, JR. -------------------------------------------------- John M. Maloney, Jr., President and Chief Executive Officer Date: May 9, 2007 By: /S/ ANTHONY M. PULEO -------------------------------------------------- Anthony M. Puleo, Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) Date: May 9, 2007 By: /S/ RAYMOND S. LOPEZ -------------------------------------------------- Raymond S. Lopez, Vice President and Chief Accounting Officer (Principal Accounting Officer) 42 EX-10.87 2 d71810_ex10-87.txt LOAN AND SECURITY AGREEMENT Exhibit 10.87 Loan No.: 77287 LOAN AND SECURITY AGREEMENT THIS LOAN AND SECURITY AGREEMENT (this "Agreement") dated April 16, 2007 is made by and between BLUEGREEN/BIG CEDAR VACATIONS, LLC, a Delaware limited liability company ("Borrower"), whose address is c/o Bluegreen Corporation, 4960 Conference Way North, Suite 100, Boca Raton, FL 33431, and GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation ("Lender"), whose address is 500 West Monroe Street, Chicago, Illinois 60661. A. RECITALS 1. All capitalized terms used herein shall have the meanings ascribed thereto in Section B, below. 2. Borrower desires Lender to extend a revolving secured credit facility to Borrower in an aggregate amount not to exceed Forty-Five Million Dollars ($45,000,000.00) in accordance with the terms of this Agreement. 3. Borrower's obligations under the Loan Documents will be secured by, among other things: (1) a security interest in certain Notes Receivable; and (2) the other Collateral. In addition, pursuant to Section 5.1 of this Agreement and subject to the RFC Loan Documents, Borrower agrees to a negative pledge with respect to the Operating Contracts. B. CERTAIN DEFINITIONS Defined Terms The following terms used in this Agreement shall have the following meanings: Advance. Proceeds of the Loan advanced from time to time by Lender to Borrower in accordance with this Agreement. Affiliate. Any Person: (a) which directly or indirectly controls, or is controlled by, or is under common control with such Person; (b) which directly or indirectly beneficially owns or holds five percent (5%) or more of the voting stock of such Person; or (c) for which five percent (5%) or more of the voting stock of which is directly or indirectly beneficially owned or held by such Person; provided, however, that under no circumstances shall Guarantor be deemed an Affiliate of any 5% or greater shareholder of Guarantor or any Affiliate of such shareholder who is not a Direct Affiliate (as defined herein) of Guarantor, nor shall any such shareholder be deemed to be an Affiliate of Guarantor. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. For purposes of this definition, (i) any entity included in the same GAAP consolidated financial statements and the notes therein as Guarantor shall be an Affiliate of Guarantor (a "Direct Affiliate") and (ii) Guarantor shall be deemed to be an Affiliate of Borrower. -1- Agreement. As defined in the introductory paragraph. Amenities. Any and all facilities, whether on-site or off-site, that are described in the sales prospectus and the Public Report for the Timeshare Project whether available at the Timeshare Project or elsewhere at the Facilities and that are or committed to be made available for the use and enjoyment of the owners of Timeshare Interests under the terms of the Timeshare Documents. Anti-Money Laundering Laws. Those laws, regulations and sanctions, state and federal, criminal and civil, that (a) limit the use of and/or seek the forfeiture of proceeds from illegal transactions; (b) limit commercial transactions with designated countries or individuals believed to be terrorists, narcotics dealers or otherwise engaged in activities contrary to the interests of the United States; (c) require identification and documentation of the parties with whom a Financial Institution conducts business; or (d) are designed to disrupt the flow of funds to terrorist organizations. Such laws, regulations and sanctions shall be deemed to include the Patriot Act, the Bank Secrecy Act, the Trading with the Enemy Act, 50 U.S.C. App. Section 1 et seq., the International Emergency Economic Powers Act, 50 U.S.C. Section 1701 et seq., and the sanction regulations promulgated pursuant thereto by the OFAC, as well as laws relating to prevention and detection of money laundering in 18 U.S.C. Sections 1956 and 1957. Approved Transactions. As defined in Section 4.13, and any other bona fide, good faith transaction with an Affiliate of Borrower, provided such transaction is on "market" terms and would not reasonably be expected to have a Material Adverse Effect. Association. The not-for-profit Missouri corporation which is responsible for operating and maintaining the Timeshare Plan and the Timeshare Project pursuant to the terms of the Timeshare Documents. Availability. At all times during the Revolving Period, the lesser of (x) the Maximum Amount minus the current outstanding principal balance of the Loan or (y) an amount equal to the Availability Percentage times the principal balance of Eligible Notes Receivable to be assigned to Lender in connection with the then current Advance. After expiration of the Revolving Period, Availability shall be Zero Dollars ($0). Availability Percentage. The percentage adjusted in accordance with Exhibit D attached hereto. Availability Report. A monthly report certified by Borrower in the form attached hereto as Exhibit B evidencing Availability. Bank Secrecy Act. The Bank Secrecy Act, 31 U.S.C. Sections 5311 et seq. Base Rate. The U.S. Dollar rate (rounded upward to the nearest one thousandth) listed on page 3750 (i.e., the Libor page) of the Telerate News Services titled "British Banker Association Interest Settlement Rates" for a designated maturity of one (1) month determined as of 11:00 a.m. London Time on the second (2nd) full Eurodollar Business Day next preceding the first day of each month with respect to which interest is payable under the Loan (unless such date is not a Business Day in which event the next succeeding Eurodollar Business Day which is also -2- a Business Day will be used). If the Telerate News Services (a) publishes more than one (1) such Libor Rate, the average of such rates shall apply, or (b) ceases to publish the Libor Rate, then the Base Rate shall be determined from such comparable substitute financial reporting service as Lender in its reasonable discretion shall determine. The term "Eurodollar Business Day", shall mean any day on which banks in the City of London are generally open for interbank or foreign exchange transactions. Big Cedar. Big Cedar, L.L.C., a Missouri limited liability company, one of the members of Borrower. Borrower. As defined in the introductory paragraph. Borrower Party. Borrower, Guarantor and each member of Borrower. Borrower's Equity. The amount of Borrower's equity in the Timeshare Project as referenced in Schedule 1.1. Business Day. Any day which is not a Saturday or Sunday or a legal holiday under the laws of the State of Illinois, State of New York, State of Missouri, State of Florida or the United States. Charges. All federal, state, county, city, municipal, local, foreign or other governmental taxes, levies, assessments, charges, liens, claims or encumbrances upon or relating to (a) the Collateral, (b) the Indebtedness, (c) the employees, payroll, income or gross receipts of any Borrower Party (other than Big Cedar), (d) any Borrower Party's (other than Big Cedar) ownership or use of any properties or other assets, or (e) any other aspect of any Borrower Party's (other than Big Cedar) business. Closing Date. The date that Borrower satisfies all of the conditions set forth in Schedule 1.1, Part A, hereof. Club Trust Agreement. Collectively, that certain Bluegreen Vacation Club Amended and Restated Trust Agreement, dated as of the 18th day of May, 1994, among Bluegreen Vacations Unlimited, Inc., the Club Trustee, Bluegreen Resorts Management, Inc. and Bluegreen Vacation Club, Inc., as amended, restated or otherwise modified from time to time. Club Trustee. Vacation Trust, Inc., a Florida corporation, in its capacity as trustee under the Club Trust Agreement and its permitted successors and assigns. Code. The Uniform Commercial Code as adopted and in force in the State of New York as the same may be amended from time to time; provided that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of, or remedies with respect to, Lender's Lien on any Collateral is governed by the Uniform Commercial Code as enacted and in effect in a jurisdiction other than the State of New York, the term "Code" shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions hereof relating to such attachment, perfection, priority or remedies and for purposes of definitions related to such provisions. -3- Collateral. Has the meaning assigned in Section 2.1. Collection Account. The account of Lender, account no. 50-256-497 at Deutsche Bank, New York, New York, ABA No. 0210-01033, or such other account as Lender may specify in writing to Borrower. Commitment Fee. A loan commitment fee with respect to the Loan equal to Two Hundred Twenty-Five Thousand Dollars ($225,000.00), which is payable in accordance with Section 1.6. Common Furnishings. The furnishings, fixtures and equipment located within the Resort Accommodations or other portions of the Timeshare Project or Facilities owned by, conveyed to, or to be conveyed to, the Association. Compliance Documents. With respect to sales of Timeshare Interests in any state or jurisdiction: (a) an opinion letter in substance satisfactory to Lender from an attorney licensed in such state or jurisdiction addressing (i) the compliance of Borrower's offering materials, sales and financing documents and sales practices with the applicable law of such state or jurisdiction, including the Timeshare Act, all applicable Consumer Laws and usury law, (ii) the enforceability of the Notes Receivables and Security Instruments, (iii) zoning, and (iv) the due organization and good standing of the Association; (b) if applicable, evidence satisfactory to Lender that the Governmental Authority of such state or jurisdiction having jurisdiction over sales of Timeshare Interests has issued all required approvals of Borrower's offering materials, sales and financing documents and sales practices, and (c) copies of Borrower's offering materials, sales and financing documents as, if applicable, approved by the applicable Governmental Authority of such state or jurisdiction. Confidentiality Agreement. The Confidentiality Agreement dated as of July 27, 2006, among Borrower, Guarantor and Lender. Consumer Laws. The applicable portions of any federal, state, and local laws and regulations relating to interest, usury, consumer credit, equal credit opportunity, fair credit reporting, privacy, consumer protection, false or deceptive trade practices and disclosure, and the sales and marketing of timeshare units, including but not limited to the Truth In Lending Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Fair Housing Act, the Real Estate Settlement Procedures Act, the Federal Trade Commission Act, the Fair Debt Collection Practices Act, the Gramm-Leach-Bliley Act, the Patriot Act, any applicable privacy laws and the Soldier's and Sailor's Civil Relief Act. Costs. All reasonable expenditures and expenses which may be paid or incurred by or on behalf of Lender in connection with the documentation, modification, workout, collection or enforcement of the Loan or any of the Loan Documents. Notwithstanding the foregoing, Costs payable on the date of the initial Advance shall be limited to (a) the reasonable fees, costs and expenses of Lender's attorneys in connection with the documentation of the Loan, the due diligence review of Borrower's deliveries and the consumer credit audit; and (b) all applicable title, filing and recording fees and other closing costs. During the term of the Loan, Costs payable by Borrower shall include: payments to remove or protect against liens; -4- reasonable attorneys' fees, costs and expenses; receivers' fees; engineers' fees; accountants' fees; independent consultants' fees (including environmental consultants); fees of the Custodian and the servicing agent; all costs and expenses incurred in connection with any of the foregoing; outlays for documentary and expert evidence; stenographers' charges; stamp taxes; publication costs; and costs (which may be estimates as to items to be expended after entry of an order or judgment) for procuring all such abstracts of title, title and UCC searches, and examination, title insurance policies, and similar data and assurances with respect to title as Lender may deem reasonably necessary either to prosecute any action or to evidence to bidders at any foreclosure sale a true condition of the title to, or the value of, the Collateral. Notwithstanding the foregoing, Lender shall pay the costs incurred by Borrower in connection with obtaining FICO scores of Purchasers in connection with Financed Notes Receivable, any insertion fee charged by Custodian for inserting copies of blanket title insurance policies in each applicable Eligible Note Receivable file as required under subparagraph (j) of the definition of Eligible Note Receivable, and $40,000.00 that Lender will pay in Lender's attorneys' fees relating to the initial Loan closing. Custodial Agreement. An agency and custodial agreement, on Lender's form, among Borrower, Lender and Custodian providing for the maintenance of the Pledged Documents. Custodian. Such Person designated by Lender and approved by Borrower to maintain physical possession of the Pledged Documents. The initial Custodian shall be U.S. Bank National Association. Custodian Certificate. As defined in the Custodial Agreement. Debt. For any Person, without duplication: (a) all indebtedness of such Person for borrowed money, for amounts drawn under a letter of credit, or for the deferred purchase price of property for which such Person or any of its assets is liable, (b) all amounts required to be paid by such Person as a guaranteed payment to partners or a preferred or special dividend, including any mandatory redemption of shares or interests, but excluding minority interests, (c) all indebtedness guaranteed by such Person, directly or indirectly (if required to be recorded as a liability under GAAP), (d) all obligations under leases that constitute capital leases for which such Person or any of its assets is liable or subject, and (e) all obligations of such Person under interest rate swaps, caps, floors, collars and other interest hedge agreements, in each case whether such Person or any of its assets is liable or subject, contingently or otherwise, as obligor, guarantor or otherwise, or in respect of which obligations such Person otherwise assures a creditor against loss. Default Rate. The lesser of (a) the maximum per annum rate of interest allowed by applicable law, and (b) five percent (5%) per annum in excess of the applicable Interest Rate. Defaulted Notes. Notes Receivable that have been either (a) deemed uncollectible by Borrower or (b) are more than ninety (90) days past due on a contractual basis. Dollars. United States Dollars. -5- EBITDA. For any period, Net Income for such period plus without duplication and to the extent reflected as a charge in the statement of such Net Income for such period, the sum of (i) income tax expense, (ii) Interest Expense, (iii) depreciation and amortization expense, and (iv) amortization of intangibles (including, but not limited to, goodwill). Eligible Note Receivable. Each Note Receivable satisfying all of the following criteria: (a) Except with respect to Program Receivables, payments due under the Note Receivable shall be self-amortizing and payable in monthly installments; (b) Except with respect to Program Receivables, the term shall be no greater than one hundred eighty (180) months; provided, however, that the lesser of (i) Eligible Notes Receivable having an aggregate principal balance of $4,500,000.00, or (ii) ten percent (10%) of all Eligible Notes Receivable (based on aggregate principal balances at the time of the applicable Advance), may have an original term of between one hundred twenty one (121) months and one hundred eighty (180) months so long as the primary Purchaser (exclusive of Purchasers who are not residents of the United States) thereunder has a weighted average FICO score of at least 700 at the time of testing for the applicable Advance, and that such Note Receivable provides, as applicable, for joint and several liability of the Purchasers thereunder; (c) At the time of the applicable Advance, the interest rate shall be no less than eight and one quarter percent (8.25%) per annum and the weighted average interest rate of the Financed Notes Receivable which are the subject of the Advance shall not be less than fourteen percent (14%) per annum; (d) Purchaser has made at least one (1) payment under the Note Receivable (except where such Note Receivable is a Program Receivable or pertains to an Upgraded Note Receivable) and the Purchaser thereunder has made a cash down payment of at least ten percent (10%) of the actual purchase price (including closing costs) of the Timeshare Interest (which cash down payment may, in the case of an Upgraded Note Receivable or conversions under a Sampler Program Agreement, be represented in part or in whole by the principal payments on, as applicable, such original Note Receivable or the related Sampler Loan since its date of origination) and no part of such payment has been made or loaned to Purchaser by Borrower or an Affiliate; (e) No installment is more than thirty (30) days past due on a contractual basis at the time of assignment to Lender, nor becomes more than ninety (90) days past due on a contractual basis thereafter; (f) The Resort Accommodations with respect to which the applicable Timeshare Interest has been purchased have been completed (as are evidenced by delivery to Lender of the Certificate of Occupancy or Certificate of Conformance or other local equivalent attached to the Timeshare Declaration), developed and furnished in accordance with the Purchase Documents; (g) The Amenities described in the applicable Public Report for the Timeshare Project have been completed (in accordance with any applicable building inspection required -6- under Governmental Requirements) and are available for use by all Purchasers as described in the applicable Public Report and applicable Timeshare Document; (h) Subject to the Permitted Exceptions, the Note Receivable is free and clear of adverse claims, liens and encumbrances and is not currently, nor shall it be potentially in the future, subject to claims of rescission, invalidity, unenforceability, illegality, defense, offset or counterclaim; (i) The Note Receivable is secured by a first priority security interest on the purchased Timeshare Interest pursuant to a Mortgage; (j) The Mortgage is insured under a mortgagee title insurance policy (or will be insured, as evidenced by a pro forma mortgagee title insurance policy) acceptable to Lender subject only to those exceptions to title as Lender approves (and Borrower and Lender agree that a blanket pro forma mortgagee title insurance policy with a schedule attached listing borrower(s), Unit(s) and week(s) is deemed acceptable provided that, at Lender's expense, a copy of any blanket policy shall be placed by Custodian in each applicable Eligible Note Receivable file); (k) At the time of the applicable Advance, the primary Purchaser has a FICO score in an amount sufficient to yield a weighted average FICO score of at least 675 exclusive of Purchasers who are not residents of the United States and such Note Receivable provides, as applicable, for joint and several liability thereunder; (l) Purchaser is not an obligor under more than $100,000.00 in Financed Notes Receivable; (m) The Note Receivable is payable in Dollars; (n) The Note Receivable and the Purchase Documents are valid, genuine and enforceable against the obligor thereunder, and such obligor has not assigned his or her interest thereunder; (o) Payments have not been made by Borrower or any Affiliate of Borrower on the obligor's behalf; (p) The Purchaser under such Note Receivable is not on any of the Lists; (q) Except as may be required pursuant to the Servicemembers Civil Relief Act or for a reduction or increase in the interest rate not in excess of 1.0% in respect of a Purchaser's election to begin or cease making payments via pre-authorized checking or to correct typographical errors in the Mortgage or Purchase Documents related to the Note Receivable, if any, or as otherwise approved by Lender in writing, the original terms of the Note Receivable have not been modified in any way; (r) At the time of the applicable Advance, the Purchaser is a resident of the United States or Canada; provided, however, that Purchasers under up to ten percent (10%) (based on aggregate principal balances) of the Financed Notes Receivable which are the subject of the Advance may reside in countries other than the United States or Canada; and further -7- provided that not more than two and a half percent (2.5%) of Financed Notes Receivable which are the subject of the Advance (based on aggregate principal balances) are made by foreign residents (i.e., residents of countries other than the United States or Canada) from the same country; (s) At the time of the applicable Advance, if such Note Receivable is a Program Receivable, such Note Receivable plus any other Financed Notes Receivable which are the subject of the Advance and which are Program Receivables shall not exceed eight percent (8%) (based on aggregate principal balances) of all Financed Notes Receivable which are the subject of the Advance; and (t) The Lender has received a Custodian Certificate evidencing that the originals or copies, as required under this Agreement and the Custodial Agreement, of the Pledged Documents relating to such Note Receivable, are in Custodian's possession. Environmental Laws. Any federal, state or local law (whether imposed by statute, ordinance, rule, regulation, administrative or judicial order, or common law), now or hereafter enacted, governing health, safety, industrial hygiene, the environment or natural resources, or Hazardous Materials, including, without limitation, such laws governing or regulating (a) the use, generation, storage, removal, recovery, treatment, handling, transport, disposal, control, release, discharge of, or exposure to, Hazardous Materials, (b) the transfer of property upon a negative declaration or other approval of a governmental authority of the environmental condition of such property, or (c) requiring notification or disclosure of releases of Hazardous Materials or other environmental conditions whether or not in connection with a transfer of title to or interest in property. Event of Default. Has the meaning set forth in Article 7 of this Agreement. Facilities. Collectively, the buildings, Improvements and furniture, fixtures and equipment comprising the Timeshare Project, the Timeshare Property, the Resort Accommodations and the Amenities and known as Big Cedar Wilderness Club Condominium, Ridgedale, Missouri. Fees. Any and all fees payable to Lender pursuant to Sections 1.5(a) and 1.6 of this Agreement. FICO. A Purchaser's credit score shall be the one generated by Experian and, to the extent not available, it shall be the one generated by one of the following credit reporting agencies: (i) Equifax, (ii) Transunion, or by a credit reporting agency of similar experience and recognition in the industry. Financed Note(s) Receivable. Any Note Receivable as to which an Advance has been made and which has been pledged and collaterally assigned to Lender pursuant to the assignment as set forth in Exhibit F attached hereto as security for the Loan. Financial Institution. A United States Financial Institution as defined in 31 U.S.C. 5312, as periodically amended. -8- Force Majeure Delay. Any cause or event that is beyond the control and not due to the negligence of Borrower or Guarantor (including when Guarantor acts in its capacity as Servicer under the Servicing Agreement), which delays, prevents or prohibits the performance of any duty or obligation of Borrower or Guarantor (including when Guarantor acts in its capacity as Servicer under the Servicing Agreement) under the Loan Documents, including, without limitation, computer, electrical and mechanical failures, acts of God or the elements and fire; provided, that no such cause or event shall be deemed to be a Force Majeure Delay unless Borrower or Guarantor (including when Guarantor acts in its capacity as Servicer under the Servicing Agreement) shall have given Lender written notice thereof as soon as possible after the beginning of such delay. GAAP. Generally accepted accounting principles, applied on a consistent basis, set forth in Opinions of the Accounting Principles Board of the American Institute of Certified Public Accountants and/or in statements of the Financial Accounting Standards Board which are applicable in the circumstances as of the date in question; and the requisite that such principles be applied on a consistent basis means that the accounting principles in a current period are comparable in all material respects to those applied in a preceding period, with any exceptions thereto noted. Governmental Authority. The United States of America, the state and county in which any of the Facilities is located, and/or any other governmental authorities, including, if applicable the governmental authorities of a foreign country or political subdivision of such foreign country, having jurisdiction over Borrower, the Association, the Timeshare Project, the Timeshare Plan, the Facilities or the offer and sale of Timeshare Interests. Governmental Requirements. All rules, regulations, ordinances, laws and statutes of any Governmental Authority which affect the Timeshare Project, the Timeshare Plan, the Association, the Facilities, any Amenities or Borrower's offer, sale and financing of Timeshare Interests. Guarantor. Bluegreen Corporation, a Massachusetts corporation. Guaranty. A guaranty agreement, on Lender's form, executed by Guarantor guarantying all of the obligations of Borrower to Lender under the Loan Documents. Hazardous Materials. (a) Petroleum or chemical products, whether in liquid, solid, or gaseous form, or any fraction or by product thereof, (b) asbestos or asbestos containing materials, (c) polychlorinated biphenyls (pcbs), (d) radon gas, (e) underground storage tanks, (f) any explosive or radioactive substances, (g) lead or lead based paint, or (h) any other substance, material, waste or mixture which is or shall be listed, defined, or otherwise determined by any governmental authority to be hazardous, toxic, dangerous or otherwise regulated, controlled or giving rise to liability under any Environmental Laws. Improvements. The timeshare complex as existing from time to time on the Land, including all related common elements, limited common elements, parking areas and other Amenities, as established by the Timeshare Documents. "Include" or similar words. Include, without limitation. -9- Indebtedness. All payment obligations of Borrower to Lender under the Loan Documents. Intangible Asset. A nonphysical, noncurrent right that gives Guarantor or any of its subsidiaries an exclusive or preferred position in the marketplace including but not limited to a copyright, patent, trademark, goodwill, organization costs, capitalized advertising cost, computer programs, licenses for any of the preceding, governmental licenses (e.g., broadcasting or the right to sell liquor), leases, franchises, mailing lists, exploration permits, import and export permits, construction permits, and marketing quotas. Intercreditor Agreement. The letter agreement between Lender and RFC executed substantially concurrently herewith, acknowledging the respective rights of Lender and RFC with respect to the Timeshare Project. Interest Expense. For any period, Borrower's or Guarantor's, as applicable, total interest expense (net of interest income) for such period, including the current interest portion of long-term debt, and the current interest portion of capital lease payments, determined on a GAAP basis. Interest Holder. As defined in Section 5.1. Interest Rate. The Loan Interest Rate. Land. The real property located in Ridgedale, Missouri, and more particularly described in Exhibit A hereto, as amended from time to time pursuant to changes in the Timeshare Declaration. Lender. As defined in the introductory paragraph and including any successors or assigns. Liabilities. The aggregate value of all short and long term notes payable on Borrower's or Guarantor's balance sheet, as applicable, which is included among the financial statements and the notes therein delivered to Lender pursuant to this Agreement less the total dollar amount of monies loaned by an Affiliate to Borrower, the payment of which (including payment of interest or principal) has been fully subordinated to the Loan and to the liens and rights to payment in favor of Lender, as determined to Lender's reasonable satisfaction, all as determined in accordance with GAAP. Lien. Any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim, security interest, easement or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any lease or title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a security interest under the Code or comparable law of any jurisdiction). Lists. The Specially Designated Nationals and Blocked Persons List maintained by the OFAC, and any other list of terrorists or terrorist organizations maintained pursuant to -10- Executive Order No. 133224 (Sept. 23, 2001), any rule or regulation of OFAC with respect to such Executive Order, any enabling legislation with respect to such Executive Order, any other applicable Executive Order or any other applicable law, statute, rule or regulation. Litigation. Any action, demand, lawsuit, investigation, proceeding, order or injunction. Loan. The Forty-Five Million Dollar ($45,000,000.00) revolving credit facility described in this Agreement. Loan Documents. Collectively, this Agreement, the Note, any Guaranty, the Security Agreement, the Custodial Agreement, the Lockbox Agreement, the Servicing Agreement, the Confidentiality Agreement, and any and all other agreements, documents, instruments and certificates delivered or contemplated to be delivered in connection with this Agreement, as such may be amended, renewed, extended, restated or supplemented from time to time. Loan Interest Rate. A floating rate per annum, adjusted monthly, equal to the Base Rate plus one and three-quarters percent (1.75%). Loan Maturity Date. April 16, 2016. Loan Year. Each successive twelve (12) month period commencing with the expiration of the Revolving Period. Lockbox Account. The account designated pursuant to the Lockbox Agreement. Lockbox Agent. Bank of America, N.A., or any other banking institution selected by Borrower and approved by Lender to act as the depositary of payments on the Financed Notes Receivable under the Lockbox Agreement. Lockbox Agreement. An agreement among Borrower, Lender and Lockbox Agent providing for the receipt by Lockbox Agent of payments on the Financed Notes Receivable and disbursement of such payments to Lender. Management Agreement. An agreement among Bluegreen Resorts Management, Inc. and the Association for management of the Timeshare Project. Mandatory Prepayment. Any prepayment required by Section 1.5 of this Agreement. Material Adverse Effect. A material adverse effect on (i) the financial condition or operations of Borrower, Guarantor or the Timeshare Project, (ii) the ability of Borrower or Guarantor to perform its obligations under the Loan Documents to which it is a party, (iii) the legality, validity or enforceability of any Loan Document, (iv) Borrower's interest in the Collateral, or (v) the collectibility of the Notes Receivable generally or of any material portion of the Notes Receivable. -11- Maximum Amount. $45,000,000.00. Minimum Interest Coverage Ratio. For any period described in Section 6.1(c) of this Agreement, the ratio of EBITDA to Interest Expense for any period; excluding, however, interest paid or payable under indebtedness to Affiliates of Borrower that is fully subordinated to the Loan and to the liens and rights to payment in favor of Lender. Monthly Reports. The monthly reports required pursuant to Section 6.2(a) of this Agreement. Mortgage. A mortgage or deed of trust made by the Club Trustee, on behalf of a Purchaser, to secure a Purchaser's Note Receivable. Net Income. The net income of Borrower or the consolidated net income of Guarantor, as applicable, as determined in accordance with GAAP. Net Income Adjustment. The sum of (a) fifty percent (50%) of the Net Income for Guarantor (on a consolidated basis) for the quarter then ending as determined from the quarterly financial statements and the notes therein required pursuant to Section 6.2 hereof plus (b) fifty percent (50%) of the amount of any increase in Guarantor's total equity (on a consolidated basis) arising from the sale of stock, membership interests partnership interests or other ownership interests in Guarantor; provided, that at the end of each fiscal year, the Net Income Adjustment shall be re-calculated based on the Net Income for the year then ending as determined from the audited annual financial statements and the notes therein required pursuant to Article 6 hereof. Note. One or more revolving promissory notes evidencing the Loan executed and delivered by Borrower to Lender concurrently herewith. Note Receivable. A promissory note executed by a Purchaser in favor of Borrower in connection with such Purchaser's acquisition of a Timeshare Interest. OFAC. The Office of Foreign Assets Control, Department of the Treasury. Operating Contracts. The Management Agreement, the reservations systems agreement and any marketing, maintenance, service, franchise, sales and other contracts entered into by Borrower with respect to the Facilities identified in Exhibit I. Owner Beneficiary Rights. As defined in the Club Trust Agreement. Patriot Act. The USA PATRIOT Act of 2001, Pub. L. No. 107 56. Permitted Exceptions. The exceptions to title listed on Exhibit J. Person. Natural persons, corporations, limited partnerships, general partnerships, joint stock companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and governments and agencies and political subdivisions thereof. -12- Pledged Documents. The Financed Notes Receivable, the other Receivables Transaction Documents, and the Purchase Documents, inclusive of any modifications or amendments thereto. Potential Default. An event which, with the giving of notice or passage of time, or both, would constitute an Event of Default. Pre-Tax Income. Net Income before the imposition of Taxes. Program Receivable. A Note Receivable whereby the Purchaser has made a down payment of at least fifty percent (50%) of the purchase price of the subject Timeshare Interest or Timeshare Interest(s), having an annual interest rate of at least 8.25%, and with the remaining balance (together with interest) due and payable within one (1) year of its execution, such balance to be paid either in 12 monthly amortizing installments of principal and interest or all principal and interest due in a lump sum payment on the one year anniversary of the execution of such Note Receivable. Property Manager. Bluegreen Resorts Management, Inc., the property manager of the Timeshare Project approved by Lender, and any successor property manager approved by Lender. Public Reports. The original sales certificate for the Timeshare Project, the Bluegreen Vacation Club Multi-Site Public Offering Statement, and any other public reports now or hereafter filed with and approved or issued by any Governmental Authority with respect to the Timeshare Project. Purchase Documents. Any purchase agreement and related sale and escrow documents, executed and delivered by a Purchaser to Borrower, and all deeds, certificates or other instruments of ownership delivered to such Purchaser by the Borrower, with respect to the purchase of a Timeshare Interest which is the subject of a Financed Note Receivable. Purchaser. Any purchaser of one or more Timeshare Interests who is also an obligor under a Note Receivable. Qualified Assignee. (A) any Affiliate of Lender, or (B) any commercial bank, savings and loan association or savings bank or any other entity which is an "accredited investor" (as defined in Regulation D under the Securities Act of 1933) which extends credit or buys loans as one of its businesses, including insurance companies, mutual funds, lease financing companies, commercial paper conduits and commercial finance companies, in each case, which has a rating of BBB/A-1 (as applicable) or higher from S&P and a rating of Baa2/P-1 (as applicable) or higher from Moody's at the date that it becomes a "lender" hereunder. Reassignment. A Reassignment of Note Receivable, in form and substance attached hereto as Schedule 2.3, to be executed and delivered by Lender when and as provided herein. Receivables Transaction Documents. The Note Receivable and any Security Instrument delivered as security for a Purchaser's obligations thereunder, any title insurance -13- policy obtained by Purchaser in connection with any Mortgage, any guaranty or Purchaser's obligation in connection with such Note Receivable and/or any Mortgage, and all other documents or instruments executed in connection therewith or evidencing a Purchaser's or any guarantor's obligation relating thereto. Resort Accommodation. One individual condominium unit within the Timeshare Project together with any and all interest in common elements appurtenant thereto, as provided in the Timeshare Declaration. Revolving Period. The period commencing on the date hereof and ending on April 16, 2009. RFC. Residential Funding Corporation, a Delaware corporation. RFC Loan Documents. That certain Loan and Security Agreement dated February 10, 2003, between Residential Funding Corporation, a Delaware corporation, as lender, and Bluegreen/Big Cedar Vacations, LLC, a Delaware limited liability company, as borrower, and the other parties thereto, as it may be renewed, amended, restated or replaced ("RFC Loan Agreement"), and the other related Loan Documents (as "Loan Documents" is defined in the RFC Loan Agreement), that certain Loan Agreement dated February 10, 2003 between Residential Funding Corporation, a Delaware corporation, as lender, and Bluegreen Vacations Unlimited, Inc., a Florida corporation, as borrower, as it may be amended or modified ("RFC AD&C Loan Agreement") and the other related Loan Documents (as "Loan Documents" is defined in the RFC AD&C Loan Agreement), and all other loan and security documents executed in connection therewith, all as may be renewed, amended, restated or replaced. Sampler Loan. A loan made to a purchaser by Borrower pursuant to the terms of a Sampler Program Agreement. Sampler Program Agreement. A Bluegreen Vacation Club Sampler Program Agreement, pursuant to which a purchaser thereunder obtains those certain benefits set forth therein which comprise the "Sampler Membership" and, subject to the terms and conditions thereof, has the opportunity to convert such Sampler Membership into full ownership in the multi-site timeshare plan described under the Club Trust Agreement. Schedule. Each Schedule attached to this Agreement. Security Agreement. The security agreement set forth in this Agreement and any other pledge or security agreement executed by Borrower to secure the Loan. Security Instrument. The security agreement, mortgage or deed of trust executed in connection with a Note Receivable and encumbering a Timeshare Interest. Service Charge. As defined in Section 1.2(a). Servicer. Guarantor or any other servicer under the Servicing Agreement as reasonably approved by Lender. -14- Servicing Agreement. A servicing agreement reasonably approved in form and substance by Lender among Lender, Borrower and Servicer providing for the servicing of the Financed Notes Receivable. Site Assessment. An environmental engineering report for the Timeshare Project prepared by an engineer engaged by Lender at Borrower's expense, and in a manner satisfactory to Lender, based upon an investigation relating to and making appropriate inquiries concerning the existence of Hazardous Materials on or about the Timeshare Project, and the past or present discharge, disposal, release or escape of any such substances, all consistent with ASTM Standard E 1527 93 (or any successor thereto published by ASTM) and other good customary and commercial practice. Solvent. With respect to any Person on a particular date, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person; (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured; (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature; and (d) such Person is not engaged in a business or transaction, and is not about to engage in a business or transaction, for which such Person's property would constitute unreasonably small capital. Specially Designated National and Blocked Persons. Those Persons that have been designated by executive order or by the sanction regulations of OFAC as Persons with whom U.S. Persons may not transact business or must limit their interactions to types approved by OFAC. Stock. All shares, options, warrants, general or limited partnership interests, membership interests, or other equivalents (regardless of how designated) of or in a corporation, partnership, limited liability company or equivalent entity whether voting or nonvoting, including common stock, preferred stock or any other "equity security" (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934). Subordinated Indebtedness. Debt represented by Guarantor's junior subordinated debentures or such other Debt incurred by Guarantor which is treated as subordinated indebtedness in accordance with GAAP. Tangible Net Worth. On a consolidated basis for Guarantor and its subsidiaries, at any date, (i) the sum of (a) capital stock taken at par or stated value plus (b) capital of Guarantor in excess of par or stated value relating to capital stock plus (c) retained earnings (or minus any retained earning deficit) of Guarantor plus (d) other comprehensive income plus (e) Subordinated Indebtedness plus (f) an amount not in excess of $600,000,000 of non-recourse receivables-backed notes payable as reported on the consolidated balance sheet of Guarantor, minus (ii) the sum of Intangible Assets, treasury stock, capital stock subscribed for and unissued and other contra-equity accounts, all determined in accordance with GAAP. -15- Taxes. Taxes, levies, imposts, deductions, Charges or withholdings, and all liabilities with respect thereto, excluding taxes imposed on or measured by the net income of Lender by the jurisdictions under the laws of which Lender is organized or conducts business or any political subdivision thereof. Timeshare Act. The applicable provisions of M.R.S. chapter 407, sections 407.600 to 407.630. Timeshare Declaration. The declaration of condominium pursuant to which the Timeshare Project is encumbered and the property regime thereat is created as it may be lawfully amended and/or supplemented from time to time in accordance with its terms. Timeshare Documents. Any and all documents evidencing or relating to the Timeshare Plan, the sale of Timeshare Interests by Borrower or the Purchaser Documents, the Timeshare Declaration, the Articles of Incorporation and Bylaws of the Association, any management agreement between the Association and a manager of the Timeshare Project, the rules and regulations of the Association in the Timeshare Declaration, and any documents referenced in the Timeshare Declaration, or the Articles of Incorporation or Bylaws of the Association. Timeshare Interest. With respect to the Timeshare Project, (x) an undivided fee simple ownership interest as a tenant in common or (y) a Resort Interest (as defined in the Club Trust Agreement) that is an ownership interest in real property substantially similar to an ownership interest described in clause (x) above (including Owner Beneficiary Rights), in either case with respect to any Resort Accommodation, with a right to use such Resort Accommodation, or a Resort Accommodation of such type, generally for one (1) week or a portion of one (1) week annually or biennially, together with all appurtenant rights and interests as more particularly described in the Timeshare Documents. Timeshare Plan. The common scheme and plan for the use, occupancy, enjoyment, repair, maintenance, restoration and improvement of the Timeshare Project established by and as provided in the Timeshare Documents. Timeshare Project. That certain project known as the "Big Cedar Wilderness Club Condominium," located in Ridgedale, Missouri, comprising the Resort Accommodations and Timeshare Property and operated, managed and maintained by the Association and in which the Timeshare Interests are sold to Purchasers under the terms of the Purchase Documents. Timeshare Property. All real and personal property owned by the Association including, but not limited to, any Amenities and furniture, fixtures and equipment located in the Resort Accommodations or elsewhere owned by the Association. Title Company. Resort Title Agency, Inc. Total Revenues. For any period, the total revenues of Borrower or Guarantor, as applicable, as determined in accordance with GAAP. -16- Upgraded Note Receivable. A new Eligible Note Receivable made by the Purchaser of an existing Financed Note Receivable (i) who has elected to terminate such Purchaser's interest in an existing Timeshare Interest and related Owner Beneficiary Rights and Vacation Points (if any) in exchange for purchasing an upgraded Timeshare Interest of higher value than the existing Timeshare Interest and related Owner Beneficiary Rights and Vacation Points (if any) and (ii) whereby the Borrower releases the Purchaser from Purchaser's obligations in respect of the existing Timeshare Interest and all related Owner Beneficiary Rights and Vacation Points (if any) in exchange for receiving (in substantially all cases) the new Eligible Note Receivable from the Purchaser secured by the upgraded Timeshare Interest and related Owner Beneficiary Rights and Vacation Points (if any). All Upgraded Notes Receivable shall also be considered to be Financed Notes Receivable, and shall be subject to the security interest granted to Lender pursuant to Section 2.1 of this Agreement, unless Lender shall have released such Financed Notes Receivable pursuant to the terms of this Agreement. U.S. Person. Any United States citizen, any entity organized under the laws of the United States or its constituent states or territories, or any entity, regardless of where organized, having its principal place of business within the United States or any of its territories. Vacation Points. As defined in the Club Trust Agreement. AGREEMENT NOW, THEREFORE, in consideration of the foregoing recitals and the agreements, provisions and covenants herein contained, and for other good and valuable consideration, Borrower and Lender agree as follows: ARTICLE 1 THE LOAN 1.1 The Loan. During the Revolving Period, provided that Borrower satisfies all conditions set forth in Section 1.2 and Schedule 1.1, Parts A, B and C, hereof, Lender shall make Advances of the Loan to Borrower not in excess of Availability. 1.2 Advances of Loan Proceeds. Lender shall advance the Loan as follows: (i) Availability. Advances of the Loan shall be (A) in minimum amounts of One Hundred Thousand Dollars ($100,000) each, (B) no more frequently than one (1) time each week; provided, however, that, any request for an Advance of the Loan of less than One Hundred Thousand and no/100 Dollars ($100,000) or for any Advance of the Loan in excess of the number of Advances permitted in any week shall be honored by Lender only at Lender's sole discretion and, if Lender agrees to make such Advances, shall, in Lender's discretion, be subject to payment to Lender of a fee (the "Service Charge") equal to the greater of one percent (1%) of the requested Advance or One Thousand Dollars ($1,000) for each such Advance, and (C) subject to Borrower's compliance with the conditions to such Advance set forth herein. Each Advance of the Loan shall be made by Lender on the earlier to occur of -17- (x) two (2) Business Days after the later of Lender's receipt of Borrower's application for a Loan Advance or (y) the date on which Borrower complies with the conditions to such Advance set forth herein. Except in connection with a prepayment mandated under Section 1.5(c) below, any amounts repaid during the Revolving Period may be reborrowed during the Revolving Period. (ii) In addition to, and not in limitation of Advances made pursuant to Section 1.2(i) above, and provided Borrower is in compliance with the conditions to such Advance set forth in this Section 1.2 and in Schedule 1.1 hereof, Lender shall make Advances of the Loan up to the amount of Availability to Borrower not more often than once per month and within ten (10) days of Borrower's delivery to Lender of written request therefor accompanied by Monthly Reports evidencing such Availability to Lender's satisfaction. During the Revolving Period, on the first day of each calendar quarter, the Availability Percentage will be adjusted as set forth in Exhibit D to this Agreement to preserve Lender's credit enhancement if there are increases in the Interest Rate without corresponding increases in the weighted average consumer coupon rate for the Financed Notes Receivable. (iii) The initial Advance of the Loan shall be in an amount at least equal to Twenty-Five Million Dollars ($25,000,000.00) and such Advance must be made within thirty (30) days of the date of this Agreement or Lender in its sole discretion shall have the right to terminate its obligations to lend hereunder unless such Advance was not made due to a Force Majeure Delay. (iv) Maximum Amount. Notwithstanding anything to the contrary contained herein, in no event shall Borrower be entitled to any Advance if as a result thereof the outstanding principal balance of the Loan shall exceed the Maximum Amount. 1.3 Interest Rate. The outstanding principal balance of the Loan together with all other Indebtedness shall bear interest as set forth below; provided, however, that after the occurrence of an Event of Default the Loan will bear interest at the Default Rate: (a) Loan. The Loan shall bear interest at the Loan Interest Rate. (b) Computation. Interest owing for each month shall be computed on the basis of a fraction, the denominator of which is three hundred sixty (360) and the numerator of which is the actual number of days elapsed from the first day of such month (or, for the initial Advance, from the date of such Advance). (c) Late Charge; Default Interest. Principal and other amortization payments shall be applied to the Loan balance as and when actually received. If Borrower fails to pay any installment of interest or principal within five (5) Business Days after the date on which the same is due, Borrower shall pay to Lender a late charge on such past-due amount, as liquidated damages and not as a penalty, equal to five percent (5%) of such amount, but not in excess of the maximum amount of interest allowed by applicable law. The foregoing late charge is intended to compensate Lender for the expenses incident to handling any such delinquent payment and for the losses incurred by Lender as a result of such delinquent payment. Borrower agrees that, considering all of the circumstances existing on the date this Agreement is executed, the late charge represents a reasonable estimate of the costs and losses Lender will incur by -18- reason of late payment. Borrower and Lender further agree that proof of actual losses would be costly, inconvenient, impracticable and extremely difficult to fix. Acceptance of the late charge shall not constitute a waiver of the default arising from the overdue installment, and shall not prevent Lender from exercising any other rights or remedies available to Lender. While any Event of Default exists, the Loan shall bear interest at the Default Rate. Notwithstanding the foregoing, Borrower shall not be obligated to pay to Lender a late charge on any past-due amounts due to a Force Majeure Delay or due to the fault of the Lockbox Agent. 1.4 Payments; Term. (a) From Lockbox Proceeds. All funds collected by the Lockbox Agent with respect to the Financed Notes Receivable shall be paid to Lender daily pursuant to the Lockbox Agreement, and, provided no Event of Default or Potential Default then exists, applied in the following order: first to the payment of Costs incurred by Lender in collecting any amounts due in connection with the Loan; second, to the payment of accrued but unpaid interest on the Loan; and thereafter to the reduction of the principal balance of the Loan. If an Event of Default or Potential Default then exists, the proceeds of the Lockbox Account shall be applied as determined by Lender in its sole discretion. If the funds received by Lender from the Lockbox Agent with respect to any month are insufficient to pay Costs and interest on the Loan in full, Borrower shall pay the difference to Lender within five (5) Business Days after receipt of written notice from Lender. (b) Upon Maturity of the Loan. On the Loan Maturity Date, if not accelerated prior thereto pursuant to the terms of the Loan Documents, the entire outstanding balance of the Loan, inclusive of all outstanding principal, accrued but unpaid interest, and outstanding Fees and Costs attributable thereto, shall be due and payable. 1.5 Prepayments. (a) Voluntary Prepayments. (i) Loan. Other than mandatory prepayments as set forth in Section 1.5(b), below, and in connection with Upgraded Notes Receivable and as provided in (y) below, prepayments of the Loan shall not be permitted during the Revolving Period nor during the first or second Loan Years, except through application of funds pursuant to Section 1.4(a). Any actual or attempted voluntary prepayment by Borrower in violation of such voluntary prepayment prohibition shall constitute an immediate Event of Default and Borrower shall pay interest at the Default Rate calculated and payable based on the aggregate committed Loan amount from and after the date of any such actual or attempted voluntary prepayment until the date that this prepayment prohibition is not longer applicable. Notwithstanding the foregoing, (x) if an inadvertent or erroneous actual or attempted voluntary prepayment occurs in violation of this Section 1.5(a) by reason of a direction of funds to Lender in error, Borrower shall be entitled to withdraw such prepayment within five (5) Business Days after Borrower is notified in writing of such prepayment in which case, no Event of Default shall occur under this Section 1.5(a), and (y) Borrower shall be permitted to prepay the Loan during or after the Revolving Period by reason of a dissolution of Borrower pursuant to the terms of Section 8.1(A)(2) of its limited liability company agreement provided that if such prepayment is made during the Revolving -19- Period or during the first Loan Year, Borrower shall pay to Lender a prepayment premium equal to three percent (3%) of the amount of such prepayment together with such prepayment. For avoidance of doubt, prepayment of the Loan during or after the Revolving Period by reason of a dissolution of Borrower permitted by the foregoing sentence shall not constitute an Event of Default or trigger interest at the Default Rate. Thereafter, voluntary prepayments of the Loan may be made in whole, but not in part, on any scheduled interest payment date upon not less than five (5) Business Days prior written notice to Lender. The above-referenced Default Rate interest and prepayment premium which may be applicable to certain Loan prepayments as set forth herein shall represent liquidated damages and reasonable calculation of Lender's lost profits in view of the difficulties and impracticality of determining actual damages from early termination of the Loan. (b) Mandatory Prepayments. (i) Of Loan. If at any time the outstanding principal balance of the Loan exceeds the Maximum Amount, Borrower shall, within five (5) Business Days after receipt of written notice from Lender prepay the Loan in an amount necessary to reduce the principal balance of the Loan, to be applied as determined by Lender in its sole discretion, such that the remaining outstanding principal balance of the Loan does not exceed the Maximum Amount. (ii) Excess Outstandings. If at any time the outstanding principal balance of the Loan exceeds the Availability, Borrower shall, within five (5) Business Days after receipt of written notice from Lender, either, at Lender's sole option, (A) prepay the Loan in an amount necessary to reduce the principal balance of the Loan, or (B) deliver to Lender such additional or replacement Eligible Notes Receivable, and in either event the remaining outstanding principal balance of the Loan must be equal to or less than the Availability. (iii) Ineligible Financed Note Receivable. If at any time after the expiration of the Revolving Period a Financed Note Receivable ceases to be an Eligible Note Receivable, Borrower shall, within five (5) Business Days after receipt of written notice from Lender, at Lender's election in its sole and absolute discretion, either (A) prepay the Loan in an amount equal to the balance due under such Financed Note Receivable multiplied by the applicable Availability Percentage, or (B) deliver to Lender one (1) or more Eligible Notes Receivable having an outstanding aggregate principal balance equal to the outstanding principal balance of the Financed Note Receivable that has ceased to be an Eligible Note Receivable. To the extent the outstanding aggregate principal balance of such new Eligible Note Receivable(s) is less than the outstanding principal balance of the ineligible Note Receivable being replaced hereunder, Borrower shall deposit cash into the Collection Account in an amount equal to the deficiency. To the extent the outstanding aggregate principal balance(s) of such new Eligible Note Receivable on such date exceeds the outstanding principal balance of the ineligible Note Receivable on such date, the aggregate outstanding principal balance(s) of the new Eligible Note(s) Receivable shall be deemed to be equal to the aggregate outstanding principal balance of the ineligible Note Receivable and shall be included in total Eligible Notes Receivable. Upon any such repayment of the Loan pursuant to clause (A), or replacement pursuant to (B), Lender shall execute an appropriate Reassignment and take all reasonable steps necessary to release related Collateral, and the ineligible Note Receivable, and released Collateral shall be returned to -20- Borrower; provided, however, Borrower shall pay all Costs in connection with execution of such Reassignment and delivery of such Note Receivable. (iv) Incomplete Custodial Files. With respect to each Advance, the Custodian shall have received originals of all Pledged Documents and the Collateral Assignments of Purchase Money Mortgages, in the form attached hereto as Exhibit F (with only such modifications to such form as are necessary to properly identify the collateral and to cause the document to be properly recorded), covering all of the Pledged Documents to be pledged in relation with such Advance; provided that copies of the recordable Mortgages and recordable Collateral Assignment of Purchase Money Mortgages shall be complete provided that recorded originals are delivered to the Custodian within sixty (60) days after the Advance date, all in forms approved by Lender and the Custodian has delivered to Lender its monthly audit report covering the files related to such Pledged Documents. In the event such file is not deemed complete within sixty (60) days, Borrower shall have an additional thirty (30) days to deliver the recorded Security Instrument to such file or such additional time period as may be reasonably necessary to cure such deficiency with respect to the recorded Security Instrument, but in no event longer than a total time period of ninety (90) days. In the event the recorded original of a recordable Security Instrument relating to a Financed Note Receivable and original title insurance policy relating thereto have not been delivered to Custodian within such ninety (90) day period after the Advance made with respect to such Financed Note Receivable (as evidenced by an audit report prepared by Custodian), such Financed Note Receivable shall cease being an Eligible Note Receivable and Borrower shall make any mandatory prepayment of the Receivables Loan required under Section 1.5(b)(i) or (ii), above, if any. 1.6 Commitment Fee. Borrower hereby agrees that by entering into this Agreement, and regardless of whether Borrower satisfies the conditions set forth in Schedule 1.1, the Commitment Fee has been fully earned by Lender. Borrower shall pay to Lender the Commitment Fee (to the extent not paid by Borrower through Lender's application of Borrower's good faith deposit delivered to Lender) on the earlier to occur of (i) thirty (30) days after the date of this Agreement, or (ii) the date of the Initial Advance. 1.7 Receipt of Payments. Borrower shall use reasonable efforts to cause each payment under this Agreement to be paid not later than 2:00 p.m. (New York time) pursuant to Section 3 of the Lockbox Agreement on the day when due in immediately available funds into the Collection Account. For purposes of computing interest and Fees and determining Availability as of any date, all payments shall be deemed received on the Business Day on which immediately available funds therefor are received in the Collection Account prior to 2:00 p.m. New York time. Payments received after 2:00 p.m. New York time on any Business Day or on a day that is not a Business Day shall be deemed to have been received on the following Business Day. 1.8 Taxes. (a) Any and all payments by Borrower hereunder or under the Note shall be made, in accordance with this Section 1.8, free and clear of and without deduction for any and all present or future Taxes. If Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under the Note, (i) the sum payable shall be increased -21- as much as shall be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 1.8) Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) Borrower shall make such deductions, and (iii) Borrower shall pay the full amount deducted to the relevant taxing or other authority in accordance with applicable law. Within 30 days after the date of any payment of Taxes, Borrower shall furnish to Lender (upon Lender's written request) the original or a certified copy of a receipt evidencing payment thereof. Lender shall not be obligated to return or refund any amounts received pursuant to this Section. (b) Borrower hereby indemnifies and, within 10 Business Days of demand therefor, shall pay Lender for the full amount of Taxes (including any Taxes imposed by any jurisdiction on amounts payable under this Section 1.8) properly paid by Lender, and any liability (including penalties, interest and expenses due to Borrower's failure to pay such Taxes when due) arising therefrom or with respect thereto. If the Lender receives a refund of amounts paid by the Lender and as to which it has been indemnified hereunder, the Lender agrees to repay such refund to Borrower. 1.9 Single Loan. The Loan and all of the other obligations of Borrower arising under this Agreement and the other Loan Documents shall constitute one general obligation of Borrower secured by all of the Collateral. 1.10 Application of Advances. In the event that any Costs, including custodial fees, are unpaid at the time of any Advance, Lender may apply the proceeds of the Advance to such Costs without notice to, or demand on, Borrower. ARTICLE 2 COLLATERAL 2.1 Grant of Security Interest. To secure the payment and performance of the Indebtedness, Borrower does hereby unconditionally and irrevocably assign, convey, grant, hypothecate, mortgage, pledge and transfer to Lender a first priority continuing security interest and lien in and to the right, title and interest of Borrower in the following property of Borrower, whether now owned by or owing to Borrower, or leased to or from Borrower, or hereafter acquired by or arising in favor of Borrower and regardless of where located (collectively, with the other collateral being secured by operation of the liens and security interests granted in the other Loan Documents, the "Collateral"): (a) The Financed Notes Receivable and all other Receivables Transaction Documents related thereto; (b) The Purchase Documents; (c) Upgraded Notes Receivable which are also Financed Notes Receivable; (d) All deposits, deposit accounts, including, without limitation, the Lockbox Account and accounts receivable, escrow accounts, payment intangibles, general intangibles and other receivables arising under or in connection with the Pledged Documents, together with all -22- payments, privileges and benefits arising out of the enforcement thereof, and all funds held in any deposit accounts related to any of the Financed Notes Receivable after the date of the Advance relating to such Financed Notes Receivable; (e) All documents, instruments, pledged assets and chattel paper relating to the Pledged Documents and the other properties and rights described as Collateral herein; (f) All books, records, ledger cards, files, correspondence, computer tapes, disks and software relating to the Pledged Documents or any other Collateral described herein; (g) Except to the extent of any deposits which do not relate to the Financed Notes Receivable, all cash and other monies and property of Borrower in the possession of Lender; (h) All proceeds, extensions, amendments, additions, improvements, betterments, renewals, substitutions and replacements of the foregoing; and (i) Any and all after acquired right, title and interest of Borrower in and to any property of the types described in the preceding clauses. 2.2 Security Agreement. This Agreement shall be deemed a security agreement as defined in the Code, and the remedies for any violation of the covenants, terms and conditions of the agreements herein contained shall be cumulative and be as prescribed (a) herein, (b) by general law, (c) as to such part of the Collateral which is also reflected in any filed financing statement, by the specific provisions of the Code now or hereafter enacted, all at Lender's sole election and (d) by any other Loan Document. ARTICLE 3 INSURANCE, CONDEMNATION AND IMPOUNDS 3.1 Insurance. Borrower shall maintain insurance as follows: (a) Casualty; Business Interruption. Borrower shall use its best efforts to cause the Association, at the Association's sole cost and expense, to keep the Timeshare Project insured against damage by fire and the other hazards covered by a standard extended coverage and all-risk insurance policy for the full insurable value thereof on a replacement cost claim recovery basis (without reduction for depreciation or co-insurance and without any exclusions or reduction of policy limits for acts of terrorism or other specified action/inaction), and shall maintain boiler and machinery insurance, acts of terrorism endorsement coverage and such other casualty insurance as reasonably required by Lender and agreed upon by Borrower. Lender reserves the right to require from time to time the following additional insurance in its reasonable discretion: flood, earthquake/sinkhole, windstorm and/or building law or ordinance. Borrower shall cause the Timeshare Project to be insured against loss by flood if the Timeshare Project is located currently or at any time in the future in an area identified by the Federal Emergency Management Agency as an area having special flood hazards and in which flood insurance has been made available under the National Flood Insurance Act of 1968, the Flood Disaster Protection Act of 1973 or the National Flood Insurance Reform Act of 1994 (as such acts may -23- from time to time be amended) in an amount at least equal to the lesser of (a) the maximum amount of the Loan or (b) the maximum limit of coverage available under said acts. Any such flood insurance policy shall be issued in accordance with the requirements and current guidelines of the Federal Insurance Administration. Borrower shall not maintain any separate or additional insurance, other than insurance required under the RFC Loan Documents, which is contributing in the event of loss unless it is properly endorsed and (except with respect to insurance required under the RFC Loan Documents) otherwise satisfactory to Lender in all respects. The proceeds of insurance paid on account of any damage or destruction to the Timeshare Project relating to any Collateral and received by Borrower pursuant to the terms of the Timeshare Declaration shall be applied as provided in Section 3.2. (b) Liability. Borrower shall use its best efforts to cause the Association to maintain, at the Association's sole cost and expense (a) commercial general liability insurance with respect to the Timeshare Project providing for limits of liability of not less than $1,000,000 for both injury to or death of a person and for property damage per occurrence; (b) worker's compensation insurance to statutory limits, and employer's liability insurance covering employees at the Timeshare Project employed by Borrower or Property Manager (to the extent required, and in the amounts required by applicable laws but in no event less than for Employer's Liability, Bodily Injury by Accident--$1,000,000 each accident, for Bodily Injury by Disease--$1,000,000 policy limit and for Bodily Injury by Disease--$1,000,000 each employee); (c) business interruption insurance, including use and occupancy, rental income loss and extra expense, against all periods covered by Borrower's property insurance for a limit equal to twelve (12) calendar months' exposure; (d) employee dishonesty, and money and securities insurance (inside and out), depositors forgery, and liability for guests' property on a blanket basis covering all employees of Borrower or Property Manager who have access to or are responsible for the handling of guest property or tenant security deposits, in such amounts as Lender shall require from time to time, but in no event less than $1,000,000; (e) umbrella liability on a following-form basis with limits of $5,000,000 per occurrence and annual aggregate, and (f) builder's risk insurance, as applicable, in amounts and with coverages required by Lender. Borrower shall be required to maintain the following types of insurance, which must be satisfactory to Lender and Borrower in all respects (including the deductible and the amount of coverage): (i) Liquor Liability Insurance; (ii) Commercial General Liability Insurance; (iii) Deleted; (iv) Worker's Compensation Insurance; (v) Employee Dishonesty; and (vi) Automobile Insurance (c) Form and Quality. The Borrower shall use its best efforts to cause the Association, at the Association's sole cost and expense, to maintain the policies of insurance described on this Article 3 as in effect on the date hereof or otherwise in form and amounts and -24- with insurers reasonably acceptable to Lender and Borrower; provided that in the event the Association fails to maintain any insurance required under this Article 3 then Borrower, so long as Borrower controls the Association, shall be required to obtain and maintain such insurance. All insurance policies shall be endorsed in form and substance acceptable to Lender to name Lender as an additional insured, loss payee or mortgagee thereunder. All such insurance policies and endorsements shall be fully paid for, shall be issued by appropriately licensed insurance companies with a rating of "A-:VIII" or better as established by A.M. Best's Rating Guide, and shall be in such form, and shall contain such provisions, deductibles (with no increased deductible for acts of terrorism or other specified action/inaction) and expiration dates, as are acceptable to Lender and Borrower. Notwithstanding the foregoing, if market conditions in the insurance industry limit the Borrower's ability to obtain the insurance required under this Section 3.1 on commercially reasonable terms, Lender and Borrower shall in good faith cooperate to select insurers and coverages reasonably acceptable to Lender and Borrower. Each policy shall provide that such policy may not be canceled or materially changed except upon (i) providing ten (10) days' prior written notice, with respect to casualty insurance coverage, and (ii) endeavoring to provide ten (10) days' prior written notice, with respect to liability insurance coverage, of intention of non-renewal, cancellation or material change to Lender and that no act or thing done by Borrower shall invalidate any policy as against Lender; provided, however, that Borrower agrees to use commercially reasonable efforts to require the insurer to provide thirty (30) days prior written notice of cancellation. Blanket policies shall be permitted provided that coverage will not be affected by any loss on other properties covered by the policies. If Borrower fails to maintain insurance in compliance with this Section 3.1, Lender may obtain such insurance and pay the premium therefor and Borrower shall, on demand, reimburse Lender for all expenses incurred in connection therewith. (d) Adjustments. Borrower shall give immediate written notice to the insurance carrier and to Lender of any loss in respect to which a claim is being made in excess of $50,000.00 or if the claim has a Material Adverse Effect. 3.2 Use and Application of Insurance Proceeds. In the event that any portion of the Facilities subject to the Timeshare Declaration should suffer any casualty loss covered by hazard insurance or other insurance, upon receipt of any insurance proceeds, the Association is required, during the time such properties are covered by such insurance, under the Timeshare Declaration to rebuild or repair the damaged portions of all of the buildings and other improvements within the condominium property described in the applicable Timeshare Documents unless provided otherwise pursuant to Article 14 of the Timeshare Declaration. In the event that any proceeds of insurance are to be delivered to holders of first mortgage liens pursuant to Article 14 of the Timeshare Declaration, Borrower agrees to deliver such proceeds relating to the Financed Notes Receivable to Lender to the extent received by Borrower. 3.3 Condemnation. Borrower shall immediately notify Lender of the institution of any proceeding for the condemnation or other taking of the Timeshare Project or any portion thereof. Notwithstanding anything to the contrary contained herein, for so long as any condemned portion of the Timeshare Project are to be replaced by the Association in accordance with the applicable Timeshare Declaration, any and all awards and payments arising from any condemnation or conveyances in lieu thereof relating to such portion of the Timeshare Project shall be distributed and used in accordance with the provisions of the Timeshare Declaration. -25- ARTICLE 4 REPRESENTATIONS AND WARRANTIES To induce Lender to make the Loan, the Borrower makes the following representations and warranties to Lender, each and all of which shall survive the execution and delivery of this Agreement and, subject to such supplements as are permitted pursuant to Section 6.2(k), Borrower covenants that the representations and warranties shall remain true and correct during all times while the Loan is outstanding (except with respect to organizational changes made in accordance with the terms of this Agreement), as follows: 4.1 Organization and Power. Borrower and Guarantor are duly organized, validly existing and in good standing under the laws of the state of its formation or existence, and are in compliance with all legal requirements applicable to doing business in the state in which the Timeshare Project is located. Borrower is not a "foreign person" within the meaning of Section 1445(f)(3) of the Internal Revenue Code. The organizational chart for Borrower in Schedule 4.1 accurately reflects the ownership structure of Borrower and its constituent entities. Borrower and Guarantor have only one state of incorporation or organization as set forth in Schedule 4.1. All other information regarding Borrower and Guarantor contained in Schedule 4.1 is true and correct as of the Closing Date. 4.2 Validity of Loan Documents. The execution, delivery and performance by Borrower and Guarantor of the Loan Documents: (1) are duly authorized and do not require the consent or approval of any other party or governmental authority which has not been obtained; and (2) will not violate any law or result in the imposition of any lien, charge or encumbrance upon the assets of any such party, except as contemplated by the Loan Documents. The Loan Documents constitute the legal, valid and binding obligations of Borrower and Guarantor, as applicable, enforceable in accordance with their respective terms, subject to applicable bankruptcy, insolvency, or similar laws generally affecting the enforcement of creditors' rights. 4.3 Liabilities; Litigation; Other Secured Transactions. (i) The financial statements and the notes therein delivered by Borrower and Guarantor are true and correct with no material adverse change since the date of preparation. Except as disclosed in such financial statements and the notes therein, there are no fixed liabilities (or contingent liabilities as required to be disclosed by GAAP) affecting the Timeshare Project, Borrower or Guarantor unless otherwise disclosed to Lender in compliance with Section 12.1 of this Agreement. Except as disclosed in such financial statements and the notes therein, or on Schedule 5.11 attached hereto, there is no litigation, administrative proceeding, investigation or other legal action (including any proceeding under any state or federal bankruptcy or insolvency law) pending or, to the knowledge of Borrower, threatened, against the Timeshare Project, Borrower or Guarantor which would reasonably be expected to have a Material Adverse Effect. (ii) Neither Borrower nor Guarantor nor Bluegreen Vacations Unlimited, Inc. is contemplating either the filing of a petition by it under state or federal bankruptcy or insolvency laws or the liquidation of all or a major portion of its assets or -26- property, and neither Borrower nor Guarantor has actual knowledge of Big Cedar LLC contemplating the filing of such a petition or any Person contemplating the filing of any such petition against Borrower or Guarantor. For purposes of this Section 4.3(ii) and the last sentence of Section 4.11, below, "actual knowledge" of the Borrower or Guarantor shall mean the actual knowledge of the members of the Borrower's Management Committee appointed by Bluegreen Vacations Unlimited, Inc. (iii) Borrower has not within the last five (5) years become bound (whether as a result of a merger or otherwise) as a debtor under a pledge or security agreement entered into by another Person, which has not heretofore been terminated except with respect to the RFC Loan Documents. For purposes of this Section 4.3(iii), a pledge or security agreement in respect of an equipment lease shall be excluded. 4.4 Taxes and Assessments. There are no pending or, to Borrower's best knowledge after diligent inquiry, proposed, special or other assessments for public improvements or otherwise affecting the Timeshare Project, nor are there any contemplated improvements to the Timeshare Project that may result in such special or other assessments. 4.5 Other Agreements; Defaults. Neither Borrower nor Guarantor is a party to any agreement or instrument or subject to any court order, injunction, permit, or restriction which would reasonably be expected to have a Material Adverse Effect. Neither Borrower nor Guarantor is in violation of any agreement which violation would reasonably be expected to have a Material Adverse Effect. 4.6 Compliance with Law. (i) Borrower has all requisite licenses, permits, franchises, qualifications, certificates of occupancy or other governmental authorizations to own, lease and operate the Timeshare Project and carry on its business. Guarantor has all requisite licenses, permits, franchises, qualifications, or other governmental authorizations to carry on its business. The Timeshare Project is in compliance with all applicable zoning, subdivision, building and other legal requirements. All of the Timeshare Project's building systems are in good working order, subject to ordinary wear and tear. The Timeshare Project does not constitute, in whole or in part, a legally non-conforming use under applicable legal requirements; and (ii) No condemnation has been commenced or, to Borrower's knowledge, is contemplated with respect to all or any portion of the Timeshare Project or for the relocation of roadways providing access to the Timeshare Project. 4.7 Location of Borrower. Borrower's principal place of business and chief executive offices are located at the address stated in Section 12.1 and, except as otherwise set forth in Schedule 4.1, Borrower at all times has maintained its principal place of business and chief executive office at such location or at other locations within the same state. 4.8 ERISA. (i) As of the Closing Date and throughout the term of the Loan, (a) Borrower is not and will not be an "employee benefit plan" as defined in Section 3(3) of the -27- Employee Retirement Income Security Act of 1974, as amended ("ERISA"), which is subject to Title I of ERISA, and (b) the assets of Borrower do not and will not constitute "plan assets" of one or more such plans for purposes of Title I of ERISA; and (ii) As of the Closing Date and throughout the term of the Loan (a) Borrower is not and will not be a "governmental plan" within the meaning of Section 3(3) of ERISA and (b) transactions by or with Borrower are not and will not be subject to state statutes applicable to Borrower regulating investments of and fiduciary obligations with respect to governmental plans. 4.9 Margin Stock. No part of proceeds of the Loan will be used for purchasing or acquiring any "margin stock" within the meaning of Regulations T, U or X of the Board of Governors of the Federal Reserve System. 4.10 Tax Filings. Borrower and Guarantor have filed (or have obtained effective extensions for filing) all federal, state and local tax returns required to be filed and have paid or made adequate provision in accordance with GAAP for the payment of all federal, state and local taxes, charges and assessments payable by Borrower and Guarantor, respectively. 4.11 Solvency. Giving effect to the Loan, the fair saleable value of Borrower's assets exceeds and will, immediately following the making of the Loan, exceed Borrower's total liabilities, including, without limitation, subordinated, unliquidated, disputed and contingent liabilities. The fair saleable value of Borrower's assets is and will, immediately following the making of the Loan, be greater than Borrower's probable liabilities, including the maximum amount of its contingent liabilities on its Debts as such Debts become absolute and matured. Borrower's assets do not and, immediately following the making of the Loan will not, constitute unreasonably small capital to carry out its business as conducted or as proposed to be conducted. Borrower does not intend to, and does not believe that it will, incur Debts and liabilities (including contingent liabilities and other commitments) beyond its ability to pay such Debts as they mature (taking into account the timing and amounts of cash to be received by Borrower and the amounts to be payable on or in respect of obligations of Borrower). Except as expressly disclosed to Lender in writing, (a) no petition in bankruptcy has been filed by or against Borrower, Guarantor or Bluegreen Vacations Unlimited, Inc. or, to the actual knowledge of Borrower or Guarantor, against Big Cedar, L.L.C., in the last seven (7) years, and (b) neither Borrower, nor Guarantor nor Bluegreen Vacations Unlimited, Inc., nor, to the actual knowledge of Borrower or Guarantor, Big Cedar, L.L.C., has made in the last seven (7) years an assignment for the benefit of creditors or taken advantage of any insolvency act for the benefit of debtors. 4.12 Full and Accurate Disclosure. No statement of fact made by or on behalf of Borrower or Guarantor in this Agreement or in any of the other Loan Documents contains any untrue statement of a material fact or omits to state any material fact necessary to make statements contained herein or therein not misleading. There is no fact presently known to Borrower which has not been disclosed to Lender which could reasonably be expected to have a Material Adverse Effect. All information supplied by Borrower regarding any other Collateral is accurate and complete in all material respects. -28- 4.13 Contracts with Affiliates; Subordinated Indebtedness. (a) Subject to future changes to Borrower's organization structure made in compliance with Section 5.3 of this Agreement, Schedule 4.1 is a true and complete organizational chart disclosing the ownership and relationship of Borrower and the other Borrower Parties, including any subsidiaries of Borrower and any Affiliates of Borrower that have any involvement or interest in the Association, the Timeshare Project, the Amenities and the other Facilities. Disclosure Schedule 4.13 discloses all agreements between Borrower and any of its Affiliates with respect to the Timeshare Association, the Timeshare Project, the Amenities and the other Facilities (as in effect on the Closing Date or as supplemented with the consent of Lender, the "Approved Transactions"). All Approved Transactions were negotiated in good faith, are arms-length transactions and all terms, covenants and conditions which govern the Approved Transactions are at market rate. (b) The intercompany indebtedness for those of Borrower's Affiliates described as "Due to Related Parties" on Borrower's balance sheet constitutes all Borrower's debts, liabilities and obligations to any Affiliates of Borrower except for the Approved Transactions and for salaries and other compensation due officers and directors as of the date of this Agreement. Other than the Tour Agreement and item 19 set forth in Disclosure Schedule 4.13, Borrower has provided copies of all instruments, agreements and other writings evidencing and/or securing any of the foregoing intercompany debt to Lender for Lender's approval. Borrower agrees that all of such indebtedness shall be expressly subordinated to the Loan and shall be shown on Borrower's financial statements and notes thereto as subordinated obligations. If an Event of Default shall have occurred and is continuing or a Potential Default exists, Borrower will not, directly or indirectly, (i) permit any payment to be made in respect of any intercompany indebtedness, liabilities or obligations, direct or contingent, to any Affiliate other than Guarantor or to members of Borrower as required pursuant to its operating agreement, which payments (i.e., other than payments to Guarantor or members of Borrower as required pursuant to its operating agreement) shall be and are hereby made subordinate to the payment of principal of, and interest on, the Note and the other Indebtedness, (ii) permit the amendment, rescission or other modification of any of Borrower's obligations with respect to intercompany indebtedness other than in respect of Guarantor or members of Borrower, or (iii) incur additional intercompany indebtedness other than in respect of Guarantor or members of Borrower. 4.14 Intellectual Property. As of the Closing Date, each of Borrower and Guarantor owns or has rights to use all intellectual property necessary to continue to conduct its business as now or heretofore conducted by it or proposed to be conducted by it. Each of Borrower and Guarantor conducts its business and affairs without infringement of or interference with any intellectual property of any other Person in any material respect. Neither Borrower nor Guarantor has actual knowledge of any infringement claim by any other Person with respect to any intellectual property. For purposes of this Section 4.14, intellectual property shall mean copyrights, licenses, trademarks or tradenames used in the ordinary course of Borrower's business. 4.15 Title; Prior Liens. Borrower has good and marketable title to the Resort Accommodations and the Resort Accommodations are free and clear of Liens except for Timeshare Interests previously sold in such Resort Accommodations and the Lien of taxes not yet due and the obligations and restrictions arising under the Timeshare Documents and -29- Permitted Exceptions. Borrower is not in default under any of the Timeshare Documents or under any other document evidencing or securing any indebtedness which is secured, wholly or in part, by the Resort Accommodations, and no event has occurred which with the giving of notice, the passage of time or both, would constitute a default under any of the Timeshare Documents or under any of the documents evidencing or securing any such indebtedness. 4.16 Intentionally Deleted. 4.17 Eligible Notes. Each Financed Note Receivable and Upgraded Note Receivable constitutes an Eligible Note Receivable, and Borrower is not aware of any facts or information which would cause such Financed Note Receivable not to be an Eligible Note Receivable hereunder. 4.18 Intentionally Deleted. 4.19 Representations as to the Association. (a) Other Required Licenses and Permits. The Association possesses all material requisite franchises, certificates of convenience and necessity, operating rights, licenses, permits, consents, authorizations, exemptions, orders and approvals as are necessary to carry on its business as now being conducted including without limitation to manage, maintain and operate the Timeshare Project, the Association and in accordance with all applicable Governmental Regulations. (b) Access. All roadways, if any, inside the Timeshare Project are either common areas under the Timeshare Declaration or areas over which the Purchasers of Timeshare Interests have access by easements held by such Purchasers or by the Association. (c) Utilities. Electric, gas, sewer, water facilities and other necessary utilities are lawfully available in sufficient capacity to service the Timeshare Project and any easements necessary to the furnishing of such utility service have been obtained and duly recorded. Water and utility charges relating to the Timeshare Project have been timely paid when due. (d) Amenities. All Amenities described as then being currently available to Purchasers in any applicable Public Reports are completed or, if necessary, a bond or other financial assurance acceptable to the regulatory authority having jurisdiction over the offering of the Timeshare Interests insuring the completion of the Amenities has been posted or provided for. The Amenities include those listed in the applicable Public Reports. Each Purchaser of a Timeshare Interest has access to and the use of all of the completed Amenities of the Timeshare Project as and to the extent provided in the Timeshare Documents. (e) Intentionally Deleted. (f) Compliance with Timeshare Documents. To the best of Borrower's knowledge after due inquiry, the Association is not in default under the Timeshare Documents and no event has occurred which, with the passage of time or the giving of notice would become a material default by the Association under the Timeshare Documents. -30- (g) Construction. All costs arising from the construction of any improvements and the purchase of any equipment, inventory, or Common Furnishings located in or on the Timeshare Project have been paid or are being paid in accordance with the purchase or loan documents in connection therewith. 4.20 Operating Contracts. Except for the Tour Agreement, Borrower has delivered to Lender true, correct and complete copies of the Operating Contracts (with confidential financial terms redacted in certain instances as approved in advance by Lender), including all exhibits, schedules and attachments. Each of the Operating Contracts is in full force and effect. To the best of Borrower's knowledge after due inquiry, Borrower is not in default under any of the Operating Contracts to which it is a party, and Borrower knows of no default on the part of any other party to any of the Operating Contracts. 4.21 Consumer Law Matters. The Notes Receivable were originated and have been serviced in compliance with, and do not contravene any Consumer Laws. ARTICLE 5 COVENANTS To induce Lender to make the Loan, the Borrower makes the following covenants for Lender, each and all of which shall survive the execution and delivery of this Agreement and Borrower covenants while the Loan is outstanding, as follows: 5.1 Due on Sale and Encumbrance; Transfers of Interests. Without the prior written consent of Lender, which consent shall not be unreasonably withheld, and subject to the provisions of Section 1.5(a)(i): (i) no Transfer shall occur or be permitted, nor shall Borrower enter into any easement, declaration of covenant, condition or restriction, public or private dedication or other agreement granting rights in or restricting the use or development of the Timeshare Project, which has a Material Adverse Effect; and (ii) no Transfer shall occur or be permitted which would (a) cause Guarantor or an Affiliate thereof to own less than (i) fifty-one percent (51%) of the beneficial interest in Borrower or (ii) one hundred percent (100%) of the ownership interests in Bluegreen Vacations Unlimited, Inc., or (b) result in a new member having the ability to control the affairs of Borrower being admitted to or created in Borrower (or result in any existing controlling member withdrawing from Borrower). As used in this Agreement, "Transfer" shall mean any direct or indirect sale, transfer, conveyance, installment sale, master lease, mortgage, pledge, encumbrance, grant of Lien or other interest, license, lease, alienation or assignment, whether voluntary or involuntary, of all or any portion of the direct or indirect legal or beneficial ownership of, or any interest in (a) the Timeshare Project or any part thereof, including any Intangible Assets of Borrower in connection with the Timeshare Project, Operating Contracts, and rights under the Timeshare Declaration, or (b) Borrower, including any agreement to transfer or cede to another Person any voting, management or approval rights, or any other rights, appurtenant to any such legal or -31- beneficial ownership or other interest. "Transfer" is specifically intended to include any pledge or assignment, directly or indirectly, of a controlling interest in Borrower or its controlling limited partner or controlling member for purposes of securing so-called "mezzanine" indebtedness. "Transfer" shall not include (i) the sale of Timeshare Interests in the ordinary course of Borrower's business so long as Borrower complies with the provisions of the Loan Documents relating to such sales; or (ii) the transfer of non-managing member interests in Borrower so long as the transfer does not violate the provisions of Section 5.1(ii), and does not violate the provisions of Article 10. Without limiting the foregoing, Borrower further agrees that it will require each Person that proposes to become a partner, member or shareholder (each such Person, an "Interest Holder") in Borrower after the Closing Date to sign and deliver to Borrower, within thirty (30) days after such transfer (and Borrower shall deliver to Lender promptly after receipt), a certificate executed by a duly authorized officer of the new Interest Holder containing representations, warranties and covenants substantially the same as the representations, warranties and covenants provided by Borrower in Article 10 hereof. 5.2 Taxes; Charges. At any time that Borrower is in control of the Association, Borrower shall pay or use reasonable efforts to cause to be paid, to the extent funds are generally available to the Association or pursuant to a special assessment required by the Association, before any fine, penalty, interest or cost may be added thereto, and shall not enter into any agreement to defer, any real estate taxes and assessments, franchise taxes and charges, and other governmental charges that may become a Lien upon the Timeshare Project or become payable during the term of the Loan and will promptly furnish Lender with evidence of such payment upon the written request of Lender. Borrower or the Association, to the extent that Borrower is in control of the Association, shall not consent to the joint assessment of the Timeshare Project with any other real property constituting a separate tax lot or with any other real or personal property and if the foregoing occurs, shall use reasonable efforts to contest such joint assessment. Borrower shall pay when due all claims and demands of mechanics, materialmen, laborers and others which, if unpaid, might result in a Lien on any Financed Note Receivable or security therefor; however, Borrower may contest the validity of such claims and demands so long as Borrower is diligently contesting the same by appropriate legal proceedings in good faith and at its own expense and concludes such contest prior to the tenth (10th) day preceding the earlier to occur of the Revolving Loan Maturity Date or the date on which the Timeshare Project is scheduled to be sold for non-payment. 5.3 Control; Management. Without the prior written consent of Lender, there shall be no change in the day-to-day control and management of Borrower, and no change in their respective organizational documents relating to control over Borrower and/or the Timeshare Project which changes may reasonably be expected to have a Material Adverse Effect. Whether or not Lender's approval is required hereunder, Borrower shall promptly notify Lender in writing of any changes to the organizational documents of Borrower, or any change to the Borrower's management committee. At any time while Borrower is in control of the Association, Borrower shall not terminate, replace or appoint any Property Manager or terminate the Management Agreement for the Timeshare Project or consent to any of the foregoing by another party, including RFC, without Lender's prior written approval which consent shall not be unreasonably withheld, or amend the Management Agreement in a manner which may reasonably be expected to have a -32- Material Adverse Effect. Any change in ownership or control of the Property Manager shall be cause for Lender to re-approve such Property Manager and the Management Agreement, unless, provided that no Event of Default exists, such change in ownership or control results in ownership or control by an Affiliate of Borrower or Bluegreen Vacations Unlimited, Inc. Each Property Manager shall hold and maintain all material necessary licenses, certifications and permits required by law. Borrower shall fully perform all of its material covenants, agreements and obligations under the Management Agreement. 5.4 Operation; Maintenance; Inspection. Borrower shall observe and comply with all legal requirements applicable to its existence and to the ownership, use and operation of the Timeshare Project. Borrower shall maintain, or, so long as Borrower is in control of the Association, shall cause the Association to maintain, the Timeshare Project in good condition (ordinary wear and tear excepted) and promptly repair any damage or casualty in accordance with the Timeshare Declaration. Borrower shall not, without the prior written consent of Lender which shall not be unreasonably withheld, undertake any alteration of the Timeshare Project which may result in a Material Adverse Effect or permit any of the fixtures or personalty owned by Borrower and utilized in connection with the operation of the Timeshare Project to be removed at any time from the Timeshare Project, unless the removed item is removed temporarily for maintenance and repair or, if removed permanently, is obsolete and is replaced by an article of equal or better suitability and value. Subject to the Timeshare Documents, any Governmental Requirements and the provisions of the RFC Loan Documents, Borrower shall permit or cause to be permitted Lender and its agents, representatives and employees, upon reasonable prior notice to Borrower, to inspect the Timeshare Project and conduct such environmental and engineering studies as Lender may require (at Lender's sole cost and expense unless an Event of Default has occurred), provided such inspections and studies do not materially interfere with the use and operation of the Timeshare Project. 5.5 Taxes on Security. Borrower shall pay all taxes, charges, filing, registration and recording fees, excises and levies payable with respect to the Note or the Liens created or secured by the Loan Documents, other than income, franchise and doing business taxes imposed on Lender. If there shall be enacted any law applicable to the Pledged Documents (1) deducting the Loan from the value of the Timeshare Project for the purpose of taxation, (2) affecting any Lien on the Timeshare Project, or (3) changing existing laws of taxation of mortgages, deeds of trust, security deeds, or debts secured by real property, or changing the manner of collecting any such taxes, Borrower shall promptly pay to Lender, on demand, all taxes, costs and charges for which Lender is or may be liable as a result thereof. If Borrower pays any such tax and Lender subsequently receives a refund or reimbursement of such tax, Lender shall promptly deliver such refund or reimbursement to Borrower provided no Event of Default exists. 5.6 Legal Existence; Name, Etc. Borrower and Guarantor shall preserve and keep in full force and effect its respective entity status, and its material franchises, rights and privileges under the laws of the state of its respective formation, and all material qualifications, licenses and permits applicable to the ownership, use and operation of the Timeshare Project. Except in accordance with Section 5.1 of this Agreement, Borrower shall not wind up, liquidate, dissolve, reorganize, merge, or consolidate with or into, or convey, sell, assign, transfer, lease, or otherwise dispose of all or substantially all of its assets, or acquire all or substantially all of the assets of the business of any Person, or permit any subsidiary or Affiliate of Borrower to do so. -33- Without limiting the foregoing, Borrower shall not reincorporate or reorganize itself under the laws of any jurisdiction other than the jurisdiction in which it is incorporated or organized as of the Closing Date. Borrower shall conduct business only in its own name and shall not change its name, identity, organizational structure, state of formation or the location of its chief executive office or principal place of business unless Borrower (1) shall have obtained the prior written consent of Lender to such change, not to be unreasonably withheld, and (2) shall have taken all actions necessary or requested by Lender to file or amend any financing statement or continuation statement to assure perfection and continuation of perfection of security interests under the Loan Documents. Borrower shall maintain its separateness as an entity, including maintaining separate books, records, and accounts and observing corporate and partnership formalities independent of any other entity, shall pay its obligations with its own funds and shall not commingle funds or assets with those of any other entity; provided however that the foregoing shall not preclude Borrower and Guarantor from consolidating its financial statements in accordance with GAAP. 5.7 Affiliate Transactions. Without the prior written consent of Lender, not to be unreasonably withheld, and except for the Approved Transactions, Borrower shall not engage in any transaction affecting the Timeshare Project with an Affiliate of Borrower or of any Borrower Party (other than Guarantor); provided however that the foregoing shall not prohibit Affiliates entering into Purchase Documents in good faith and pursuant to a bona fide transaction in an aggregate amount not to exceed $100,000.00. 5.8 Further Assurances. Borrower shall promptly (1) cure any defects in the execution and delivery of the Loan Documents, and (2) execute and deliver, or cause to be executed and delivered, all such other documents, agreements and instruments, including without limitation new Notes, as Lender may reasonably request to further evidence and more fully describe the Collateral for the Loan, to (i) correct any omissions in the Loan Documents, (ii) perfect, protect or preserve any Liens created under any of the Loan Documents, (iii) to make any recordings, file any notices, or obtain any consents, as may be necessary or appropriate in connection therewith or (iv) to effectuate Loan Outplacement or Loan rearrangement as set forth in Section 12.10 of this Agreement. 5.9 Estoppel Certificates. Borrower, within ten (10) Business Days after request, shall furnish to Lender a written statement in the form attached hereto as Exhibit C, duly acknowledged, setting forth the amount due on the Loan, the terms of payment of the Loan, the date to which interest has been paid, whether any offsets or defenses exist against the Loan and, if any are alleged to exist, the nature thereof in detail, and such other matters as Lender reasonably may request, provided, however, that such request shall not be made more than once per calendar quarter. 5.10 Notice of Certain Events. Borrower shall promptly notify Lender of (1) any Potential Default or Event of Default, together with a detailed statement of the steps being taken to cure such Potential Default or Event of Default; (2) any notice of material default received by Borrower under other obligations relating to the Association or the Timeshare Project or otherwise material to Borrower's business; and (3) any claim, action or threatened or pending legal, judicial or regulatory proceedings, including any dispute between Borrower and any Governmental Authority, which are deemed reasonably possible (as defined by GAAP) -34- of having a Material Adverse Effect other than personal injury claims arising from the Timeshare Project not in excess of $1,000,000.00. 5.11 Indemnification. Borrower shall indemnify, defend and hold Lender harmless from and against any and all losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs and disbursements (including the reasonable fees and actual expenses of Lender's counsel) of any kind or nature whatsoever, including those arising from the joint, concurrent, or comparative negligence of Lender (except to the extent such joint, concurrent or comparative negligence constitutes gross negligence or willful misconduct on the part of Lender), in connection with (1) any inspection, review or testing of or with respect to the Timeshare Project required to be taken by reason of circumstances arising under this Section 5.11 for which Lender is entitled to indemnification hereunder, (2) any investigative, administrative, mediation, arbitration, or judicial proceeding, whether or not Lender is designated a party thereto, commenced or threatened at any time (including after the repayment of the Loan) in any way related to the execution, delivery or performance of any Loan Document or to the Timeshare Project, (3) any proceeding instituted by any Person claiming a Lien, (4) any brokerage commissions or finder's fees claimed by any broker or other party in connection with the Loan, the Timeshare Project, or any of the transactions contemplated in the Loan Documents, (5) the violation by Borrower or the Servicer of Governmental Requirements including without limitation, the Environmental Laws, Consumer Laws, Interstate Land Sales Act, Patriot Act or the Timeshare Act) (whether such law or violation is material or not and whether or not Lender is aware of such violation or makes Advances while such violation exists), (6) any claim by any Person other than Lender with respect to the Collateral, (7) any action taken by or on behalf of Borrower or Guarantor relating to any Financed Note Receivable which is not permitted by or pursuant to the terms of this Agreement or which is taken by Lender pursuant to Section 8.3 of this Agreement, and/or (8) any act or omission constituting negligence or willful misconduct, or breach of fiduciary duty by any officer, director, agent or employee of Guarantor in connection with Borrower's performance under the Servicing Agreement except to the extent that any of such losses in connection with any of the individual circumstances set forth in the foregoing clauses (1)-(8) are caused by Lender's gross negligence or willful misconduct. Borrower shall promptly notify Lender of (A) any claim, action or proceeding affecting the Association, the Timeshare Project, the Timeshare Property, the Amenities or the Collateral, or any part thereof, or any of the security interests granted hereunder which is reasonably expected to have a Material Adverse Effect (it being agreed that such disclosure shall not be deemed to be an amendment of Disclosure Schedule 5.11 unless agreed to in writing by Lender), and (B) any action, suit, proceeding, order or injunction of which Borrower becomes aware after the date hereof pending or threatened against or affecting Guarantor or any Affiliate thereof which is reasonably expected to have a Material Adverse Effect. 5.12 Application of Loan Proceeds/Operating Revenues. Borrower shall not misappropriate funds derived from the Loan or the Collateral and shall at all times apply any proceeds of the Loan and the Collateral as required under this Agreement and the other Loan Documents. 5.13 Compliance with Laws. Borrower shall timely comply with, and, for so long as Borrower shall control the Association shall cause the Association to comply with all material laws and any notice or claim by any Governmental Authority, or by any other party to such -35- indenture, order, instrument, agreement or Timeshare Document, pertaining to the Borrower, the Resort Accommodations, the Association, the Timeshare Project, the Timeshare Plan and the Facilities. Sales of Timeshare Interests are, and during the Term shall be, made by only persons who hold all required licenses, or who are exempt from licensure and are made in compliance with all applicable material Governmental Requirements. The Borrower, the Resort Accommodations with respect to which Timeshare Interests are being sold, the Timeshare Project, the Timeshare Plan, and the Facilities comply with, conform to and obey, and during the term of the Loan shall continue to comply with, conform to and obey, all material Governmental Requirements applicable to the Borrower, such Resort Accommodations, the Timeshare Project, the Timeshare Plan and Facilities, and each indenture, order, instrument, agreement or document to which Borrower is a party or by which it is bound. 5.14 Litigation and Proceeding. Borrower shall (i) at the request of Lender, appear in and defend, at Borrower's expense, any claim naming Lender and any other material claim, action or proceeding pertaining to the Borrower, the Resort Accommodations, the Timeshare Project, the Timeshare Plan and the Facilities; and (ii) comply in all respects, and shall cause all Affiliates to comply in all respects, with the terms of any orders imposed on such Person by any Governmental Authority. 5.15 Collateral. (a) Title. Borrower has, and during the term of the Loan, will continue to have, good and marketable title to the Collateral, free and clear of any Lien except for (i) the security interest created by this Agreement or otherwise created in favor of Lender, and (ii) the Permitted Exceptions. There are no facts, circumstances or conditions known to any Borrower Party that may result in any Liens (including Liens arising under Environmental Laws) other than Permitted Exceptions. No financing statement or other instrument similar in effect covering all or any part of the Collateral is on file in any recording office, except such as may have been filed in favor of, Borrower and are being assigned to Lender. (b) No Modification. Borrower shall not take any action (nor permit or consent to the taking of any action) which might reasonably be anticipated to impair the value of the Collateral or any of the rights of Lender in the Collateral. Borrower shall not (i) modify or amend any of the Pledged Documents without Lender's prior written consent (except that Borrower may modify Pledged Documents to comply with the Servicemembers Civil Relief Act and up to one percent (1%) of other Pledged Documents in the aggregate during the term of the Loan without Lender's consent), or (ii) solicit prepayment of, grant extensions of time for the payment of (except as permitted in (i) above) or compromise for less than the full face value, release in whole or in part any Purchaser liable for the payment of, or allow any credit whatsoever except for the amount of cash to be paid upon, any Collateral or any instrument or document representing the Collateral except as provided in Section 5.15(c) hereof. (c) Upgraded Notes Receivable. The provisions of Section 5.15(b) hereof notwithstanding, Borrower may engage in upgrade sales and shall either replace the affected Financed Notes Receivable with Upgraded Notes Receivable or repay the Loan by the applicable portion of the Loan which is outstanding in respect of the affected Financed Notes Receivable, provided, however, that after the expiration of the Revolving Period, the Borrower's replacement -36- or repayment shall be at Lender's option but no such repayment shall constitute a voluntary prepayment for purposes of Section 1.5(a) of this Agreement. Upon the closing of the upgraded sale, the prior Note Receivable shall be deemed "ineligible." Borrower shall remove the prior Financed Note Receivable from all financial reports delivered by Borrower to Lender pursuant to this Agreement. Upon the replacement of the Financed Note Receivable with an Upgraded Note Receivable, all subsequent requests for Advances shall be calculated to reflect the Upgraded Note Receivable and Lender shall execute an appropriate Reassignment and take all reasonable steps to release the related Collateral and the ineligible Note Receivable and related Collateral shall be returned to Borrower; provided, however, Borrower shall pay all of Lender's Fees and Costs in connection with execution of such Reassignment and delivery of such Note Receivable and related Collateral. For the avoidance of doubt, there shall be no updated FICO requirement to the extent that affected Financed Notes Receivable are replaced with the applicable Upgraded Notes Receivable. 5.16 Sale of Collateral; Proceeds. Immediately upon Borrower's receipt of proceeds from the sale of any of the Collateral (excluding sale proceeds from any Collateral which has been released by Lender in accordance with this Agreement), Borrower shall deliver proceeds in an amount equal to the applicable portion of the Loan which is outstanding with respect to such Collateral to Lender in their original form and, pending delivery to Lender, Borrower will hold such proceeds as agent for Lender and in trust for Lender. Payments received by Borrower directly from any Purchaser shall be delivered to the Lockbox Agent within one (1) Business Day. 5.17 Intentionally Deleted. 5.18 Performance of Operating Contracts. Borrower agrees to perform and discharge its obligations, covenants and agreements contained in the Operating Contracts except where such failure to perform or discharge would not have a Material Adverse Effect; to give prompt notice to the Lender of any notice of default (whether oral or written) either given or received by Borrower with respect thereto, together with a complete copy of any such notice, if written, if such default could reasonably be expected to have a Material Adverse Effect or result in termination of such Operating Contract. Borrower will not (i) amend or modify any of the Operating Contracts or surrender or cancel any such Operating Contract to the extent such amendment or modification could reasonably be expected to have a Material Adverse Effect, or (ii) further encumber any of them without the prior written consent of Lender, which consent shall not be unreasonably withheld; or (iii) consent to any assignment thereof by the other contract parties; provided, however, that in no event shall Borrower amend or modify an Operating Contract in a manner which would violate the Timeshare Documents. 5.19 Servicing of Financed Notes Receivable. Borrower shall cause the Financed Notes Receivable to be serviced pursuant to a Servicing Agreement and a Servicer satisfactory to Lender in its sole discretion. In the event Borrower or Guarantor is the Servicer, Lender shall have the right to replace Borrower or Guarantor with a new Servicer in its sole discretion, upon the occurrence of an Event of Default. All reasonable servicing fees, and the reasonable costs and expenses of the Servicer, shall be paid by Borrower. Borrower shall not amend, modify or make any other alteration to, or consent to any termination of or terminate the Servicing Agreement without the prior written consent of Lender, which consent may be withheld by -37- Lender in Lender's sole discretion. Borrower shall not interfere with the Servicer's performance of its duties under the Servicing Agreement or take any action that would be inconsistent in any way with the terms of the Servicing Agreement. 5.20 Custodian. Lender shall have the right at any time to utilize a third-party Custodian to maintain custody of the Collateral, pursuant to a Custodial Agreement satisfactory to Lender in its sole discretion. All reasonable custodial fees, and the reasonable costs and expenses of the Custodian, shall be paid by Borrower. Borrower shall not amend, modify or make any other alteration to, or consent to any termination of or terminate the Custodial Agreement without the prior written consent of Lender, which consent may be withheld by Lender in Lender's sole discretion. Borrower shall not interfere with the Custodian's performance of its duties under the Custodial Agreement or take any action that would be inconsistent in any way with the terms of the Custodial Agreement. 5.21 Maintenance. To the extent that the Association controls all or any portion of the Facilities and, further, that Borrower controls the Association, Borrower shall cause the Association to maintain each portion of the Facilities under its responsibility in good repair, working order and condition (ordinary wear and tear excepted) and shall make or cause to be made all necessary replacements to such Facilities. To the extent that any Amenities are provided by a third party pursuant to an agreement between the Association and such third party, the Borrower shall, to the extent it controls the Association, cause the Association to maintain such agreement in full force and effect. 5.22 Records. Borrower shall keep its books and records in accordance with GAAP. So long as Borrower is in control of the Association, Borrower shall cause the Association to keep books and records reflecting all financial transactions of the Association, including billing and collection of dues and assessments from its members and any payments in lieu thereof by Borrower under the terms of any subsidy agreement between Borrower and the Association, in which complete entries will be made in accordance with GAAP. 5.23 Other Documents. Borrower or Servicer will maintain accurate and complete files in electronic form relating to the Financed Notes Receivable and other Collateral to the satisfaction of Lender, and such files will contain copies of each Financed Note Receivable together with the purchase agreements, any disclosure or notice required by law including Consumer Laws and the consumer's credit application and all other relevant credit memoranda, if any, and all applicable collection information and correspondence relating to such Financed Notes Receivable and the notice required pursuant to Section 5.25, below. 5.24 Inspections and Audits. Borrower shall cause, or if Borrower is no longer in control of the Association, shall use its best efforts to cause the Association to, at reasonable times during normal business hours and as often as may be requested, permit any agents or representatives of Lender to inspect the Timeshare Project and the other Facilities and any of Borrower's assets (including financial and accounting books and records), to examine and make copies of and abstracts from the books and records of Borrower, the Association, and any servicer under any Servicing Agreement, and to discuss any such party's affairs, finances and accounts with any of its officers, employees or independent public accountants. If an Event of Default has occurred and is continuing or if access is necessary to preserve or protect the Collateral as determined by -38- Lender, Borrower shall, or if Borrower is no longer in control of the Association shall use its best efforts to, provide such access at all times and without advance notice. Borrower acknowledges that Lender intends to conduct or cause to be conducted such audits and inspections on at least an annual basis. Lender acknowledges that the foregoing covenants in this Section 5.24 are subject to the Timeshare Documents and Governmental Requirements. Subject to the Confidentiality Agreement, Borrower shall make available to Lender all credit information in Borrower's possession or under Borrower's control with respect to Purchasers as Lender may request. All inspections and audits (other than environmental and engineering inspections referenced in Section 5.4), shall be at Borrower's expense; provided, however, that Borrower shall not be required to pay for such inspection and audits more than one (1) time per calendar year, unless an Event of Default has occurred and is continuing. 5.25 Notices Regarding Lender's Interests. Within three (3) Business Days after acceptance of a Financed Note Receivable by Lender, Borrower or Servicer shall notify the obligor under each Financed Note Receivable that such Note Receivable has been assigned to Lender and, as applicable, that all future Financed Note Receivable coupon payments should be made to the Lockbox Account. 5.26 Payment of Charges. To the extent Borrower has control over the Association, Borrower shall promptly pay or cause to be paid when due all costs and expenses incurred in connection with Borrower's ownership interest in the Timeshare Project and other portions of the Facilities and the construction of the Improvements, and Borrower shall keep Borrower's ownership interests in the Timeshare Project and other portions of the Facilities free and clear of any Charge other than the Permitted Exceptions, and other Liens approved in writing by Lender if any such lien would attach to any Financed Notes Receivable or Security therefor. Notwithstanding anything to the contrary contained in this Loan Agreement, Borrower may (a) discharge in accordance with applicable law any such Charge or contest the validity or amount of any claim of any contractor, consultant, architect, or other Person providing labor, materials, or services with respect to the Timeshare Project and other portions of the Facilities or (b) contest any tax or special assessments levied by any Governmental Authority; provided that (i) during the pendency of any such contest Borrower shall, if requested by Lender, furnish to Lender and Title Company, cash, an indemnity bond from a corporate surety satisfactory to Lender and Title Company or other adequate security in an amount at least equal to the amount being contested or other security reasonably acceptable to them to induce Title Company to issue its title insurance policy or an interim endorsement thereto insuring against all such claims or liens; (ii) no Lien shall be imposed to secure payment of such Charges (other than payments to warehousemen and bailees) that is superior to any of the Liens securing the Indebtedness and such contest is maintained and prosecuted continuously and with diligence and operates to suspend collection or enforcement of such Charges; (iii) none of the Collateral becomes subject to forfeiture or loss as a result of such contest; and (iv) Borrower shall promptly pay or discharge such contested Charges, Taxes or claims and all additional charges, interest, penalties and expenses, if any, and shall deliver to Lender evidence reasonably acceptable to Lender of such compliance, payment or discharge, if such contest is terminated or discontinued adversely to Borrower or the conditions set forth in this Section 5.26 are no longer met. -39- 5.27 Amendment of Timeshare Documents. Without Lender's prior written consent, which shall not be unreasonably withheld, Borrower shall not amend, modify or terminate the Timeshare Documents in a manner that would have a Material Adverse Effect. ARTICLE 6 FINANCIAL COVENANTS; REPORTING REQUIREMENTS So long as any portion of the Indebtedness remains unpaid or Lender is committed to lend hereunder, unless Lender otherwise consents in writing, Borrower hereby covenants and agrees with Lender as follows: 6.1 Financial Covenants. (a) Tangible Net Worth. It shall be an Event of Default if Guarantor fails to maintain as of the last day of each fiscal quarter a minimum Tangible Net Worth in the amount of at least equal to the sum of Two Hundred Forty Million Dollars ($240,000,000.00) plus the Net Income Adjustment, commencing with the Guarantor's fiscal quarter ending March 31, 2007 statements and continuing throughout the Term. (b) Maximum Leverage Ratio. It shall be an Event of Default if Guarantor's ratio of Liabilities (exclusive of all Subordinated Indebtedness and up to $600,000,000.00 of non-recourse receivables-backed notes payable) to Tangible Net Worth exceeds 2.5 to 1, as determined at the end of each fiscal quarter. (c) Minimum Interest Coverage Ratio. It shall be an Event of Default if Guarantor has an aggregate Minimum Interest Coverage Ratio less than 2.0:1, as determined at the end of each fiscal quarter, calculated on a trailing twelve (12) month basis. For the avoidance of doubt, a negative Minimum Interest Coverage Ratio shall be deemed to be zero and not in violation of this ratio. 6.2 Reporting Requirements. Borrower shall furnish, or Borrower shall cause Servicer to furnish (on a best efforts basis, if Servicer is not an Affiliate of Borrower), the following to Lender during the Term: (a) Monthly Reports. The Availability Report and, to the extent not provided to Lender pursuant to the requirements of the Servicing Agreement, within ten (10) days after the end of each calendar month, reports showing through the end of the preceding month, (i) the following information with respect to each Financed Note Receivable and in the aggregate with respect to all Financed Notes Receivable: (A) the closing balances of Financed Notes Receivable, (B) all payments received allocated to interest, principal, late charges, taxes or the like, (C) the rate of interest, and (D) an itemization of delinquencies, extensions, refinances, prepayments, upgrades, payoffs, cancellations and other adjustments, (ii) the weighted average interest rate and the weighted average remaining term of all Financed Notes Receivable; (iii) a list of all Upgraded Notes Receivable; (iv) calculation of the ratio of the outstanding principal of Financed Notes Receivable for each of thirty-one (31), sixty (60) and ninety (90) days or greater, past due on a contractual basis to the outstanding principal of all Financed Notes Receivable; and (v) a list of Financed Notes Receivable that became Defaulted Notes during the preceding -40- month. Each monthly report shall include a certification from an authorized party of the Servicer that the information contained in such monthly report is true, correct and complete. (b) Sales Reports. Upon written request of the Lender, within fifteen (15) days after Lender's request but not more than fifteen (15) Business Days after the end of the most recent quarter, a quarterly report showing all sales and cancellations of sales of Timeshare Interests at the Timeshare Project, in the form attached hereto as Exhibit K, certified by the treasurer of Borrower to be true, correct and complete and otherwise in the form approved by Lender. Such report will not contain any confidential personal information relating to the Purchaser of such Timeshare Interest of the Timeshare Project. (c) Inventory Reports. Upon written request of the Lender, within fifteen (15) days after Lender's request but not more than fifteen (15) Business Days after the end of the most recent quarter, an inventory report for the Timeshare Project detailing the available inventory of Resort Accommodations, certified by the treasurer of Borrower to be true, correct and complete and otherwise in the form approved by Lender. (d) Quarterly Financial Reports (Borrower and Guarantor). Within forty-five (45) days after the end of each fiscal quarter, other than the fourth (4th) quarter of the year, unaudited financial statements and the notes therein for the trailing three (3) month period of Borrower and Guarantor, together with a certification from the treasurer of Borrower and chief financial officer of Guarantor, as applicable, stating that such financial statements and the notes therein are true, correct and complete and a statement prepared in reasonable detail showing the calculations used in determining compliance with each of the financial covenants of the Guarantor in Section 6.1 hereof. Concurrently with the delivery of such financial reports, a certificate signed by the treasurer of the Borrower indicating that the Borrower is in compliance with all representations, warranties and covenants of the Agreement and the other Loan Documents or, if a Potential Default or Event of Default then exists, an identification of any such Potential Default or Event of Default and the steps, if any, that Borrower is undertaking to cure such Potential Default or Event of Default. (e) Annual Financial Reports (Association). Within ninety (90) days after the end of each fiscal year, unaudited financial statements for such fiscal year of the Association, certified by an officer of the entity preparing such financial statements. (f) Year-End Financial Reports (Borrower and Guarantor). As soon as available and in any event within one hundred and twenty (120) days after the end of each fiscal year of Borrower: (i) the balance sheet of Borrower as of the end of such year and the related statements of income and cash flow for such fiscal year; (ii) a listing of outstanding notes payable at the end of such fiscal year; and (iii) with respect to the financial statements and the notes therein of Borrower and Guarantor, copies of reports from a firm of independent certified public accountants selected by Borrower or Guarantor, as applicable, which report shall be unqualified as to going concern and scope of audit and shall state that such financial statements and the notes therein present fairly the financial position of Borrower and Guarantor, as applicable, as of the dates indicated and the results of its operations and cash flow for the periods indicated in conformity with GAAP. Such financial statements and the notes therein shall be accompanied by the certification of the treasurer of Borrower and chief financial officer of -41- Guarantor, as applicable, that all such financial statements and the notes therein present fairly in accordance with GAAP the financial position, results of operations and statements of cash flows of Borrower and Guarantor, as applicable, as at the end of such fiscal year and for the period then ended and indicating that the Borrower is in compliance with all representations, warranties and covenants of the Agreement and the other Loan Documents or, if the Borrower is in default, an identification of any such default and the steps, if any, that Borrower is undertaking to cure such default. (g) Management Letters. Within five (5) Business Days after receipt thereof by the Borrower or Guarantor, copies of all management letters, exception reports or similar letters or reports received by Borrower or Guarantor from its independent certified public accountants. (h) Annual Report. If the Borrower is in control of the Association, then within one hundred and twenty (120) days or such shorter period as is required by law or the applicable Timeshare Documents, or otherwise as soon as available and in any event within the time period prescribed therefor in the Timeshare Documents, such annual report as is prepared by the Association for delivery to its members. (i) Audit Reports. Promptly upon receipt thereof, one (1) copy of each other report submitted to Borrower or to the Association by independent public accountants in connection with any annual, interim or special audit made by them of the books of the Borrower or the Association, respectively. (j) Supplemental Disclosure. From time to time as may be reasonably requested in writing by Lender (which request will not be made more frequently than once each year absent the occurrence and continuance of a Potential Default or an Event of Default), Borrower and Guarantor shall supplement each of the Schedules attached hereto, or any representation herein or in any other Loan Document, with respect to any matter hereafter arising that, if existing or occurring at the date of this Agreement, would have been required to be set forth or described in such Schedule or as an exception to such representation or that is necessary to correct any information in such Schedule or representation which has been rendered inaccurate thereby (and, in the case of any supplements to any Schedule, such Schedule shall be appropriately marked to show the changes made therein); provided that (i) no such supplement to any such Schedule or representation shall amend, supplement or otherwise modify any Schedule or representation, or be deemed a waiver of any Potential Default or Event of Default resulting from the matters disclosed therein, except as consented to by Lender in writing; and (ii) no supplement shall be required as to representations and warranties that relate solely to the Closing Date. (k) Other Reports. Such other reports, statements, notices or written communications relating to the Borrower, the Association, the Timeshare Project or the Facilities as Lender may require, in its reasonable discretion. -42- ARTICLE 7 EVENTS OF DEFAULT Each of the following shall constitute an Event of Default under the Loan: 7.1 Payments. Borrower's failure to pay any regularly scheduled installment of principal, interest or other amount due under the Loan Documents within five (5) Business Days after the date when due or Borrower's failure to pay the Loan at the applicable maturity date, whether by acceleration or otherwise. In the event of a Force Majeure Delay, the grace period shall be extended up to ten (10) additional Business Days as appropriate and provided further that no grace period shall apply to the payment due on the Loan Maturity Date other than in the event of a Force Majeure Delay. 7.2 Insurance. Borrower's failure to maintain insurance as required under Section 3.1 of this Agreement. 7.3 Transfer. Any Transfer occurs in violation of Section 5.1 of this Agreement. 7.4 Covenants. Borrower's failure to perform, observe or comply with any of the agreements, covenants or provisions contained in this Agreement or in any of the other Loan Documents (other than those agreements, covenants and provisions referred to elsewhere in this Article 7), and the continuance of such failure for ten (10) Business Days after notice by Lender to Borrower; however, subject to any shorter period for curing any failure by Borrower as specified in any of the other Loan Documents, Borrower shall have an additional thirty (30) days to cure such failure if (1) such failure does not involve the failure to make payments on a monetary obligation; (2) such failure cannot reasonably be cured within ten (10) Business Days but, using reasonable diligence, is curable within such 30-day period; (3) Borrower is diligently undertaking to cure such default, and (4) Borrower has provided Lender with security reasonably satisfactory to Lender against any interruption of payment or impairment of collateral as a result of such continuing failure. The notice and cure provisions of this Section 7.4 do not apply to the other Events of Default described in this Article 7 or Borrower's failure to comply with the provisions of Article 10. 7.5 Representations and Warranties. Any representation or warranty made in any Loan Document proves to be untrue in any material and adverse respect when made or deemed made. 7.6 Other Encumbrances. Any default under the RFC Loan Documents relating to the Timeshare Project evidencing or creating a Lien on the Timeshare Project or any part thereof. 7.7 Involuntary Bankruptcy or Other Proceeding. Commencement of an involuntary case or other proceeding against Borrower, Guarantor or the Club Trustee (each, a "Bankruptcy Party") which seeks liquidation, reorganization or other relief with respect to it or its debts or other liabilities under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeks the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any of its property, and such involuntary case or other proceeding shall remain undismissed or unstayed for a period of sixty (60) days; or an order for relief against a Bankruptcy Party shall be entered in any such case under the Federal Bankruptcy Code. -43- 7.8 Voluntary Petitions, Etc. Commencement by a Bankruptcy Party of a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its Debts or other liabilities under any bankruptcy, insolvency or other similar law or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official for it or any of its property, or consent by a Bankruptcy Party to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or the making by a Bankruptcy Party of a general assignment for the benefit of creditors, or the failure by a Bankruptcy Party, or the admission by a Bankruptcy Party in writing of its inability, to pay its debts generally as they become due, or any action by a Bankruptcy Party to authorize or effect any of the foregoing. 7.9 Suspension of Sales. The issuance of any stay order, cease and desist order or similar judicial or non-judicial sanction that materially limits or otherwise affects any Timeshare Interest sales activities relating to the Timeshare Project, and, with respect to any such sanction only, such sanction is not dismissed, terminated or rescinded within thirty (30) days after issuance. 7.10 Default by Borrower in Other Agreements. Any default by Borrower in the payment of indebtedness for borrowed money under the RFC Loan Documents and relating to the Timeshare Project, after the expiration of any applicable grace or cure period; any other default under such indebtedness which accelerates or permits the acceleration (after the giving of notice or passage of time, or both) of the maturity of such indebtedness; or any default under the RFC Loan Documents relating to the Timeshare Project which permits RFC to control the management of Borrower. 7.11 Other Agreements. Any material default or breach of the Borrower occurs and is continuing under the Management Agreement. ARTICLE 8 REMEDIES 8.1 Remedies - Insolvency Events. Upon the occurrence of any Event of Default described in Section 7.7 or 7.8, the obligations of Lender to Advance amounts hereunder shall immediately terminate, and all amounts due under the Loan Documents immediately shall become due and payable, all without written notice and without presentment, demand, protest, notice of protest or dishonor, notice of intent to accelerate the maturity thereof, notice of acceleration of the maturity thereof, or any other notice of default of any kind, all of which are hereby expressly waived by Borrower; however, if the Bankruptcy Party under Section 7.7 or 7.8 is other than Borrower, then all amounts due under the Loan Documents shall become immediately due and payable at Lender's election, in Lender's sole discretion. 8.2 Remedies - Other Events. Except as set forth in Section 8.1 above, while any Event of Default exists beyond applicable cure rights, Lender may (1) by written notice to Borrower, declare the entire Loan to be immediately due and payable without presentment, demand, protest, notice of protest or dishonor, notice of intent to accelerate the maturity thereof, notice of acceleration of the maturity thereof, or other notice of default of any kind, all of which are hereby expressly waived by Borrower, (2) terminate the obligation, if any, of Lender to advance -44- amounts hereunder, and (3) exercise all rights and remedies therefor under the Loan Documents and at law or in equity. 8.3 Lender's Right to Perform the Obligations. If Borrower shall fail, refuse or neglect to make any payment or perform any act required by the Loan Documents, then while any Event of Default exists, and without notice to or demand upon Borrower and without waiving or releasing any other right, remedy or recourse Lender may have because of such Event of Default, Lender may (but shall not be obligated to) make such payment or perform such act for the account of and at the expense of Borrower, and shall, subject to the provisions of the Timeshare Declaration and Governmental Requirements and subject to any other Person's prior right to cure provided Lender has received notice that such Person has elected to cure, have the right to enter upon the Timeshare Project for such purpose and to take all such action thereon and with respect to the Timeshare Project as it may reasonably deem necessary or appropriate. Subject to the foregoing, if Lender shall elect to pay any sum due with reference to the Timeshare Project, Lender may do so in reliance on any bill, statement or assessment procured from the appropriate Governmental Authority or other issuer thereof without inquiring into the accuracy or validity thereof. Similarly, in making any payments to protect the security intended to be created by the Loan Documents, Lender shall not be bound to inquire into the validity of any apparent or threatened adverse title, lien, encumbrance, claim or charge before making an Advance for the purpose of preventing or removing the same. All sums paid by Lender pursuant to this Section 8.3 and all other sums expended by Lender to which it shall be entitled to be indemnified under this Agreement, together with interest thereon at the Default Rate from the date of such payment or expenditure until paid, shall constitute additions to the Loan, shall be secured by the Loan Documents and shall be paid by Borrower to Lender upon demand. 8.4 Remedies Upon Default. Upon the occurrence of an Event of Default, Lender may take any one or more of the following actions, all without notice to Borrower: (a) Judgment. Reduce Lender's claim to judgment, foreclose or otherwise enforce Lender's security interest in all or any part of the Collateral by any available judicial or non-judicial procedure. (b) Sale of Collateral. Exercise all the rights and remedies of a secured party on default under the Code (whether or not the Code applies to the affected Collateral) including (i) require Borrower to, and Borrower hereby agrees that it will, at its expense and upon request of Lender forthwith, assemble all or part of the Collateral as directed by Lender and make it available to Lender at a place to be designated by Lender which is reasonably convenient to both parties; (ii) enter upon any premises of Borrower and take possession of the Collateral; and (iii) sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of the Lender's offices or elsewhere, at such time or times, for cash, on credit or for future delivery, and at such price or prices and upon such other terms as Lender may deem commercially reasonable. Borrower agrees that, to the extent notice of sale shall be required by law, ten (10) Business Days notice of the time and place of any sale shall constitute reasonable notification. At any sale of the Collateral, if permitted by law, Lender may bid (which bid may be, in whole or in part, in the form of cancellation of indebtedness) for the purchase of the Collateral or any portion thereof for the account of Lender. Borrower shall remain liable for any deficiency. Lender shall not be required to proceed against any Collateral but may proceed -45- against Borrower directly. To the extent permitted by law, Borrower hereby specifically waives all rights of redemption, stay or appraisal which it has or may have under any law now existing or hereafter enacted. (c) Receiver. Apply by appropriate judicial proceedings for appointment of a receiver for the Collateral, or any part thereof, and Borrower hereby consents to any such appointment. (d) Reserved. (e) Exercise of Other Rights. Exercise any and all other rights or remedies afforded by any applicable laws or by the Loan Documents as Lender shall deem appropriate, at law, in equity or otherwise, including the right to charge interest at the Default Rate and to bring suit or other proceeding, either for specific performance of any covenant or condition contained in the Loan Documents or in aid of the exercise of any right or remedy granted to Lender in the Loan Documents. 8.5 Funds of Lender. Any funds of Lender used for any purpose referred to in this Section 8 shall constitute protective advances secured by the Loan Documents and shall bear interest at the Default Rate. 8.6 Application of Collateral; Termination of Agreements. Upon the occurrence of an Event of Default, Lender may apply against the Indebtedness any and all Collateral in its possession, other than misdirected deposits, if any, any and all balances, credits, deposits, accounts, reserves, indebtedness or other moneys due or owing to Borrower held by Lender hereunder or under any other financing agreement or otherwise, whether accrued or not. 8.7 Direct Disbursement and Application by Lender. Upon an Event of Default, Lender shall have the right, but not the obligation, to disburse and directly apply the proceeds of any Advance or the unadvanced balance of the Loan to the satisfaction of any of Borrower's obligations hereunder or under any of the other Loan Documents. Any Advance by Lender for such purpose shall be part of the Loan and shall be secured by the Loan Documents, even though in excess of the amount of the Loan, shall be secured by the Loan Documents and payable to Lender. 8.8 Waivers. No waiver by Lender of any Event of Default shall be deemed to be a waiver of any other or subsequent Event of Default, nor shall any waiver by Lender of any of its rights or remedies hereunder, in the other Loan Documents, or otherwise, shall be considered a waiver of any other or subsequent right or remedy of Lender. No delay or omission by Lender in exercising any right or remedy under the Loan Documents shall impair such right or remedy or be construed as a waiver thereof or an acquiescence therein, nor shall any single or partial exercise of any such right or remedy preclude other or further exercise thereof, or the exercise of any other right or remedy under the Loan Documents or otherwise. Further, Borrower waives notice of the occurrence of any Event of Default, presentment and demand for payment, protest, and notice of protest, notice of intention to accelerate, acceleration and nonpayment, and any and all rights to require the marshalling of assets in connection with the exercise of its remedies hereunder, and agrees that its liability shall not be affected by any renewal or extension in the -46- time of payment of the Indebtedness, or by any release or change in any security for the payment or performance of the Indebtedness, regardless of the number of such renewals, extensions, releases or changes. Borrower also hereby waives the right to assert any statute of limitations as a bar to the enforcement of the lien created by any of the Loan Documents or to any action brought to enforce the Note or any other obligation secured by the Loan Documents. 8.9 Commercial Reasonableness. To the extent that applicable law imposes duties on Lender to exercise remedies in a commercially reasonable manner, Borrower acknowledges and agrees that it is not commercially unreasonable for Lender (a) to fail to incur expenses reasonably deemed significant by the Lender to prepare Collateral for disposition, (b) to fail to obtain third party consents for access to Collateral to be disposed of, or to obtain or, if not required by other law, to fail to obtain governmental or third party consents for the collection or disposition of Collateral to be collected or disposed of, (c) to fail to exercise collection remedies against Purchasers or other Persons obligated on Collateral or to remove Liens on or any adverse claims against Collateral, (d) to exercise collection remedies against Purchasers and other Persons obligated on Collateral directly or through the use of collection agencies and other collection specialists, (e) to advertise dispositions of Collateral through publications or media of general circulation, whether or not the Collateral is of a specialized nature, (f) to contact other Persons, whether or not in the same business as Borrower, for expressions of interest in acquiring all or any portion of such Collateral, (g) to hire one or more professional auctioneers to assist in the disposition of Collateral, whether or not the Collateral is of a specialized nature, (h) to dispose of Collateral by utilizing internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capacity of doing so, or that match buyers and sellers of assets, (i) to dispose of assets in wholesale rather than retail markets, (j) to disclaim disposition warranties, such as title, possession or quiet enjoyment, (k) to purchase insurance or credit enhancements to insure the Lender against risks of loss, collection or disposition of Collateral or to provide to Lender a guaranteed return from the collection or disposition of Collateral, or (l) to the extent deemed appropriate by Lender to obtain the services of other brokers, investment bankers, consultants and other professionals to assist the Agent in the collection or disposition of any of the Collateral. Borrower acknowledges that the purpose of this Section 8.9 is to provide non-exhaustive indications of what actions or omissions by Lender would not be commercially unreasonable in the Lender's exercise of remedies against the Collateral and that other actions or omissions by Lender shall not be deemed commercially unreasonable solely on account of not being indicated in this Section 8.9. Without limitation upon the foregoing, nothing contained in this Section 8.9 shall be construed to grant any rights to Borrower or to impose any duties on Lender that would not have been granted or imposed by this Agreement or by applicable law in the absence of this Section 8.9. 8.10 Cumulative Rights. Lender shall have all of the rights and remedies granted in the Loan Documents and available at law or in equity, and these same rights and remedies shall be cumulative and may be pursued separately, successively, or concurrently against Borrower or any Collateral, at the sole discretion of Lender. The exercise or failure to exercise any of the same shall not constitute a waiver or release thereof or of any other right or remedy, and the same shall be nonexclusive. 8.11 Intercreditor Agreement. Borrower and Lender acknowledge and agree that pursuant to the Intercreditor Agreement, RFC has consented to Borrower's entering into the Loan -47- Documents which grant to Lender certain rights to exercise remedies under the Loan Documents including rights of Lender under Article 3, Sections 5.1, 5.8, 5.24, 9.1, 9.2, 9.6 and 9.7. ARTICLE 9 CERTAIN RIGHTS OF LENDER 9.1 Protection of Collateral. Lender may at any time and from time to time take such actions as Lender deems necessary or appropriate to protect Lender's Liens and security interests in and to preserve the Collateral. 9.2 Performance by Lender. If Borrower fails to perform any agreement contained herein, Lender may, but shall not be obligated to, cause the performance of, such agreement, and the expenses of Lender incurred in connection therewith shall be payable by Borrower pursuant to Section 9.3 below. 9.3 Costs. Borrower agrees promptly to pay all Costs and all such Costs shall be included as additional Indebtedness bearing interest at the then applicable Loan Interest Rate until paid. This provision is separate and several, and shall survive merger into judgment. 9.4 Assignment of Lender's Interest. Lender shall have the right to assign all or any portion of its rights in this Agreement to any subsequent holder or holders of the Indebtedness; provided that so long as no Event of Default has occurred and is continuing, such assignment shall be to a Qualified Assignee and shall require the consent of the Borrower, which consent shall not be unreasonably withheld and shall not be required in connection with (i) an assignment to an Affiliate of the Lender, (ii) an assignment of Lender's whole portfolio of timeshare related loans, or (iii) after the end of the Revolving Period. Upon such assignment, such assignee shall be a party hereto (or execute a separate agreement in form and substance acceptable to each of the other parties hereto) and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such assignment, shall have the rights and obligations of the Lender under this Agreement (or the same rights and obligations under a separate agreement in form and substance acceptable to each of the other parties hereto) and the Lender shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such assignment, relinquish its rights and be released from its obligations hereunder. 9.5 Notice to Purchasers. Borrower authorizes each of Lender and, at Lender's direction, the Custodian (but the Lender shall not be obligated) to communicate at any time and from time to time after Lender's financing of a Timeshare Interest if the Lender reasonably believes an Event of Default has occurred, with any Purchaser or any other Person primarily or secondarily liable under a Financed Note Receivable with regard to the lien or other interest of Lender thereon and any other matter relating thereto. Lender may perform, at its expense, any and all credit investigations as Lender may deem necessary to determine whether any such Purchaser meets the credit standards as outlined in the definition of an Eligible Note Receivable. 9.6 Collection of Notes. Borrower shall, or shall cause Servicer to, direct and authorize each applicable party liable for the payment of the Financed Notes Receivable to pay each installment thereon to the Lockbox Agent pursuant to the Lockbox Agreement, until otherwise directed by -48- Lender. Following the occurrence of an Event of Default, Lender shall have the right to (a) require that all payments due under the Financed Notes Receivable be paid directly to Lender, and to receive, collect, hold and apply the same in accordance with the provisions of this Agreement, whereupon Lender shall notify Borrower and Servicer of its receipt and application of any such funds with sufficient detail and information for the Servicer to credit the accounts in respect of a Financed Note Receivable in such timeframe as required by Servicer and (b) take such remedial action available to it for the enforcement of any defaulted Financed Note Receivable including the foreclosure of any Mortgage securing the payment thereof. After the occurrence of an Event of Default, Borrower hereby further irrevocably authorizes, directs and empowers Lender to collect and receive all checks and drafts evidencing payments on the Financed Notes Receivable and to endorse such checks or drafts in the name of Borrower and upon such endorsements, to collect and receive the money therefor. Upon payment and satisfaction in full of all Indebtedness, Lender will, at Borrower's request and sole expense, give written notice as necessary to redirect payment of the Financed Notes Receivable as requested by Borrower. 9.7 Power of Attorney. Borrower does hereby irrevocably constitute and appoint Lender as Borrower's true and lawful agent and attorney in fact, with full power of substitution, for Borrower and in Borrower's name, place and stead, or otherwise, to (a) endorse any checks or drafts payable to Borrower in the name of Borrower and in favor of Lender as provided in Section 9.6 above; (b) demand and receive from time to time any and all property, rights, titles, interests and liens hereby sold, assigned and transferred, or intended so to be, and to give receipts for same; and (c) cause such reports to be prepared or audits to be performed if Borrower fails to deliver such reports and/or audits; (d) upon the occurrence and during the continuance of any Event of Default hereunder, (i) institute and prosecute in the name of Borrower or otherwise, but for the benefit of Lender, any and all proceedings at law, in equity, or otherwise, that Lender may deem proper in order to collect, assert or enforce any claim, right or title, of any kind, in and to the property, rights, titles, interests and liens hereby sold, assigned or transferred, or intended so to be, and to defend and compromise any and all actions, suits or proceedings in respect of any of the said property, rights, titles, interests and liens, and (ii) generally to do all and any such acts and things in relation to the Collateral as Lender shall in good faith deem advisable. Borrower hereby declares that the appointment made and the powers granted pursuant to this Section are coupled with an interest and are and shall be irrevocable by Borrower in any manner, or for any reason, unless and until all obligations of Borrower to Lender have been satisfied. ARTICLE 10 ANTI-MONEY LAUNDERING AND INTERNATIONAL TRADE CONTROLS 10.1 Compliance with International Trade Control Laws and OFAC Regulations. Borrower represents, warrants and covenants to Lender that: (i) It is not now nor shall it be at any time until after the Loan is fully repaid a Person with whom a U.S. Person, including a Financial Institution, is prohibited from transacting business of the type contemplated by this Agreement, whether such prohibition arises under U.S. law, regulation, executive orders and lists published by the OFAC (including those executive -49- orders and lists published by OFAC with respect to Specially Designated Nationals and Blocked Persons) or otherwise. (ii) No Borrower Party and no Person who owns a direct interest in Borrower is now nor shall be at any time until after the Loan is fully repaid a Person with whom a U.S. Person, including a Financial Institution, is prohibited from transacting business of the type contemplated by this Agreement, whether such prohibition arises under U.S. law, regulation, executive orders and lists published by the OFAC (including those executive orders and lists published by OFAC with respect to Specially Designated Nationals and Blocked Persons) or otherwise. 10.2 Borrower's Funds. Borrower represents, warrants and covenants to Lender that: (i) It has taken, and shall continue to take until after the Loan is fully repaid, such measures as are required by law to verify that the funds invested in the Borrower are derived (a) from transactions that do not violate U.S. law nor, to the extent such funds originate outside the United States, do not violate the laws of the jurisdiction in which they originated; and (b) from permissible sources under U.S. law and to the extent such funds originate outside the United States, under the laws of the jurisdiction in which they originated. (ii) To the best of its knowledge, neither Borrower, nor any Borrower Party, nor any holder of a direct interest in Borrower, nor any Person providing funds to Borrower (a) is under investigation by any governmental authority for, or has been charged with, or convicted of, money laundering, drug trafficking, terrorist-related activities, any crimes which in the United States would be predicate crimes to money laundering, or any violation of any Anti-Money Laundering Laws; (b) has been assessed civil or criminal penalties under any Anti-Money Laundering Laws; and (c) has had any of its/his/her funds seized or forfeited in any action under any Anti-Money Laundering Laws. (iii) Borrower shall make payments on the Loan using funds invested in Borrower, Total Revenues of Borrower, collections on Notes Receivable, proceeds of Debt or insurance proceeds unless otherwise agreed to by Lender. (iv) To the best of Borrower's knowledge, as of the Closing Date and at all times during the term of the Loan, all Total Revenues of Borrower, collections on Notes Receivable and proceeds of Debt are and will be derived from Borrower's business activities or other permissible sources under U.S. law. (v) On the Loan Maturity Date, Borrower will take reasonable steps to verify that funds used to repay the Loan in full (whether in connection with a refinancing, asset sale or otherwise) are from sources permissible under U.S. law and to the extent such funds originate outside the United States, permissible under the laws of the jurisdiction in which they originated. -50- ARTICLE 11 ENVIRONMENTAL MATTERS 11.1 Representations and Warranties on Environmental Matters. To Borrower's knowledge, except as set forth in the Site Assessment, (1) no Hazardous Material is now or was formerly used, stored, generated, manufactured, installed, disposed of or otherwise present at or about the Timeshare Project or any property adjacent to the Timeshare Project (except for cleaning and other products currently used in connection with the routine maintenance or repair of the Timeshare Project in full compliance with Environmental Laws), (2) all material permits, licenses, approvals and filings required by Environmental Laws have been obtained, and the use, operation and condition of the Timeshare Project do not, and did not previously, violate any Environmental Laws, and (3) no civil, criminal or administrative action, suit, claim, hearing, investigation or proceeding has been brought or been threatened, nor have any settlements been reached by or with any parties or any liens imposed in connection with the Timeshare Project concerning Hazardous Materials or Environmental Laws. 11.2 Covenants on Environmental Matters. (a) Borrower shall (A) comply in all respects with applicable Environmental Laws; (B) notify Lender immediately upon Borrower's discovery of any spill, discharge, release or presence of any Hazardous Material in violation of applicable Environmental Laws at, upon, under, within, contiguous to or otherwise affecting the Timeshare Project which would have a Material Adverse Effect; (C) promptly remove all Hazardous Materials which violate Environmental Laws and remediate the Timeshare Project which is managed by Borrower or its Affiliate (and if the Timeshare Project is not managed by Borrower or its Affiliate, use its best efforts to cause the Timeshare Project to be so remediated) in full compliance with applicable Environmental Laws and in accordance with the recommendations and specifications of an independent environmental consultant reasonably acceptable to Lender and (D) promptly forward to Lender copies of all claims made against or in respect of Borrower or any of its Affiliates and relating to the Timeshare Project, and copies of all orders, notices, permits, applications or other communications and reports in connection with any spill, discharge, release or the presence of any Hazardous Material or any other matters relating to the Environmental Laws or any similar laws or regulations, as they may affect the Timeshare Project which would be material in respect of the Timeshare Project. Borrower shall not cause, and shall use prudent, commercially reasonable efforts to prohibit any other Person within the control of Borrower from causing any spill, discharge or release, or the use, storage, generation, manufacture, installation, or disposal, of any Hazardous Materials at, upon, under, within or about the Timeshare Project or the transportation of any Hazardous Materials to or from the Timeshare Project (except in material compliance with Environmental Laws). (b) After the Closing Date, Borrower shall provide to Lender, promptly upon the written request of Lender, a Site Assessment or, if required by Lender, an update to any existing Site Assessment, to assess the presence or absence of any Hazardous Materials and the potential costs in connection with abatement, cleanup or removal of any Hazardous Materials found on, under, at or within the Timeshare Project and the cost of any such Site Assessment or update shall be paid as set forth in Section 5.4 of this Agreement. -51- (c) As between Borrower, on the one hand, and Lender, on the other hand, all risk of loss associated with non-compliance with Environmental Laws, or with the presence of any Hazardous Material at, upon, within, contiguous to or otherwise affecting the Timeshare Project, shall lie solely with Borrower. Accordingly, Borrower shall bear all risks and costs associated with any such loss (including any loss in value attributable to Hazardous Materials), damage or liability therefrom, including all costs of removal of Hazardous Materials or other remediation required by applicable Governmental Requirements. (d) Borrower shall indemnify the Lender and agrees to hold Lender harmless from and against any and all losses, liabilities, damages, injuries, costs, expenses and claims of any and every kind whatsoever (including court costs and reasonable attorneys' fees and legal expenses) arising out of or associated, in any way, with the non-compliance with applicable Environmental Laws with respect to the Timeshare Project, or the existence of Hazardous Materials in, on, or about the Facilities, or a breach of any representation, warranty or covenant contained in this Article 11, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute or common law, including those arising from the joint, concurrent, or comparative negligence of the Lender (except to the extent such joint, concurrent or comparative negligence constitutes gross negligence or willful misconduct on the part of Lender); provided, further, that this Article 11 shall not apply with respect to any liability, release, violation or other matter that arises solely from the Lender's gross negligence or willful misconduct or after Borrower loses possession of any property due to foreclosure or other exercises of remedies by Lender. To the extent that the undertaking to indemnify, pay and hold harmless set forth in this Article 11 may be unenforceable because it is violative of any law or public policy, Borrower shall contribute the maximum portion that it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all indemnifications set forth in this Article 11. Borrower's obligations under this Article 11 shall arise upon the discovery of the presence of any Hazardous Material which violates applicable Environmental Law, whether or not any Governmental Authority has taken or threatened any action in connection with the presence of any such Hazardous Material, and whether or not the existence of any such Hazardous Material or potential liability on account thereof is disclosed in any Site Assessment and shall continue notwithstanding the termination of this Agreement or any transfer or sale of any right, title and interest in the assets of Borrower (by foreclosure, deed in lieu of foreclosure or otherwise). (e) Notwithstanding any provision in this Article 11 or elsewhere in any Loan Document, or any rights or remedies granted by any Loan Document, Lender does not waive all rights and benefits now or hereafter accruing to Lender under the "security interest" or "secured creditor" exception under applicable Environmental Laws, as the same may be amended. No action taken by Lender pursuant to the Loan Documents shall be deemed or construed to be a waiver or relinquishment of any such rights or benefits under the "security interest exception." -52- ARTICLE 12 MISCELLANEOUS 12.1 Notices. Any notice required or permitted to be given under this Agreement shall be in writing and either shall be mailed by certified mail, postage prepaid, return receipt requested, or sent by overnight air courier service, or personally delivered to a representative of the receiving party, or sent by telecopy or electronic mail (provided that for both telecopy and electronic mail delivery, an identical notice is also sent simultaneously by mail, overnight courier or personal delivery as otherwise provided in this Section 12.1). All such notices shall be mailed, sent or delivered, addressed to the party for whom it is intended at its address set forth below. If to Borrower: Bluegreen/Big Cedar Vacations, LLC c/o Bluegreen Corporation 4960 Conference Way North, Suite 100 Boca Raton, FL 33431 Attention: Anthony M. Puleo Telecopy: (561) 912-8123 E Mail: tony.puleo@bluegreencorp.com with a copy to: Bluegreen/Big Cedar Vacations, LLC c/o Bluegreen Corporation 4960 Conference Way North, Suite 100 Boca Raton, FL 33431 Attention: General Counsel Telecopy: (561) 912-8299 E Mail: jim.martin@bluegreencorp.com If to Lender: General Electric Capital Corporation c/o GE Real Estate 500 West Monroe Street Chicago, Illinois 60661 Attention: Asset Manager/Bluegreen-Big Cedar Telecopy: (312) 876-2583 E Mail: dawn.sparr@gecapital.com with a copy to: General Electric Capital Corporation c/o GE Real Estate 500 West Monroe Street Chicago, Illinois 60661 Attention: Counsel Telecopy: (312) 441-7872 E Mail: karen.lieberman@GECapital.com Any notice so addressed and sent by United States mail or overnight courier shall be deemed to be given on the earliest of (1) when actually delivered, (2) on the first Business Day after deposit with an overnight air courier service, or (3) on the third Business Day after -53- deposit in the United States mail, postage prepaid, in each case to the address of the intended addressee. Any notice so delivered in person shall be deemed to be given when receipted for by, or actually received by Lender or Borrower, as the case may be. If given by telecopy, a notice shall be deemed given and received when the telecopy is transmitted to the party's telecopy number specified above and confirmation of complete receipt is received by the transmitting party during normal business hours or on the next Business Day if not confirmed during normal business hours, and an identical notice is also sent simultaneously by mail, overnight courier, or personal delivery as otherwise provided in this Section 12.1. If given by electronic mail, a notice shall be deemed given and received when the electronic mail is transmitted to the recipient's electronic mail address specified above and electronic confirmation of receipt (either by reply from the recipient or by automated response to a request for delivery receipt) is received by the sending party during normal business hours or on the next Business Day if not confirmed during normal business hours, and an identical notice is also sent simultaneously by mail, overnight courier or personal delivery as otherwise provided in this Section 12.1. Except for telecopy and electronic mail notices sent as expressly described above, no notice hereunder shall be effective if sent or delivered by electronic means. Either party may designate a change of address by written notice to the other by giving at least ten (10) days prior written notice of such change of address. 12.2 Amendments and Waivers; References. No amendment or waiver of any provision of the Loan Documents shall be effective unless in writing and signed by the party against whom enforcement is sought. This Agreement and the other Loan Documents shall not be executed, entered into, altered, amended, or modified by electronic means. Without limiting the generality of the foregoing, the Borrower and Lender hereby agree that the transactions contemplated by this Agreement shall not be conducted by electronic means, except as specifically set forth in Section 12.1 regarding notices. Any reference to a Loan Document, whether in this Agreement or in any other Loan Document, shall be deemed to be a reference to such Loan Document as it may hereafter from time to time be amended, modified, supplemented and restated in accordance with the terms hereof. 12.3 Limitation on Interest. It is the intention of the parties hereto to conform strictly to applicable usury laws. Accordingly, all agreements between Borrower and Lender with respect to the Loan are hereby expressly limited so that in no event, whether by reason of acceleration of maturity or otherwise, shall the amount paid or agreed to be paid to Lender or charged by Lender for the use, forbearance or detention of the money to be lent hereunder or otherwise, exceed the maximum amount allowed by law. If the Loan would be usurious under applicable law, then, notwithstanding anything to the contrary in the Loan Documents: (1) the aggregate of all consideration which constitutes interest under applicable law that is contracted for, taken, reserved, charged or received under the Loan Documents shall under no circumstances exceed the maximum amount of interest allowed by applicable law, and any excess shall be credited on the Note by the holder thereof (or, if the Note has been paid in full, refunded to Borrower); and (2) if maturity is accelerated by reason of an election by Lender, or in the event of any prepayment, then any consideration which constitutes interest may never include more than the maximum amount allowed by applicable law. In such case, excess interest, if any, provided for in the Loan Documents or otherwise, to the extent permitted by applicable law, shall be amortized, prorated, allocated and spread from the date of Advance until payment in full so that the actual rate of interest is uniform through the term hereof. If such amortization, proration, -54- allocation and spreading is not permitted under applicable law, then such excess interest shall be canceled automatically as of the date of such acceleration or prepayment and, if theretofore paid, shall be credited on the Note (or, if the Note has been paid in full, refunded to Borrower). The terms and provisions of this Section 12.3 shall control and supersede every other provision of the Loan Documents. If at any time the laws of the United States of America permit Lender to contract for, take, reserve, charge or receive a higher rate of interest than is allowed by applicable state law (whether such federal laws directly so provide or refer to the law of any state), then such federal laws shall to such extent govern as to the rate of interest which Lender may contract for, take, reserve, charge or receive under the Loan Documents. 12.4 Invalid Provisions. If any provision of any Loan Document is held to be illegal, invalid or unenforceable, such provision shall be fully severable; the Loan Documents shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part thereof; the remaining provisions thereof shall remain in full effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance therefrom; and in lieu of such illegal, invalid or unenforceable provision there shall be added automatically as a part of such Loan Document a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible to be legal, valid and enforceable. 12.5 Reimbursement of Expenses. Borrower shall pay all Costs. Borrower shall, upon request, promptly reimburse Lender for all amounts expended, advanced or incurred by Lender to collect the Note, or to enforce the rights of Lender under this Agreement or any other Loan Document, or to defend or assert the rights and claims of Lender under the Loan Documents or with respect to the Timeshare Project (by litigation or other proceedings), which amounts will include all Costs, court costs, reasonable attorneys' fees and expenses, fees of auditors and accountants, and investigation expenses as may be incurred by Lender in connection with any such matters (whether or not litigation is instituted), together with interest at the Default Rate on each such amount from the date of disbursement until the date of reimbursement to Lender, all of which shall constitute part of the Loan and shall be secured by the Loan Documents. 12.6 Approvals; Third Parties; Conditions. All rights retained or exercised by Lender to review or approve leases, contracts, plans, studies and other matters, including Borrower's and any other Person's compliance with the provisions of Article 10 and compliance with laws applicable to Borrower, the Timeshare Project or any other Person, are solely to facilitate Lender's credit underwriting, and shall not be deemed or construed as a determination that Lender has passed on the adequacy thereof for any other purpose and may not be relied upon by Borrower or any other Person. This Agreement is for the sole and exclusive use of Lender and Borrower and may not be enforced, nor relied upon, by any Person other than Lender and Borrower. All conditions of the obligations of Lender hereunder, including the obligation to make Advances, are imposed solely and exclusively for the benefit of Lender, its successors and assigns, and no other Person shall have standing to require satisfaction of such conditions or be entitled to assume that Lender will refuse to make Advances in the absence of strict compliance with any or all of such conditions, and no other Person shall, under any circumstances, be deemed to be a beneficiary of such conditions, any and all of which may be freely waived in whole or in part by Lender at any time in Lender's sole discretion. -55- 12.7 Lender Not in Control; No liability or Partnership. None of the covenants or other provisions contained in this Agreement shall, or shall be deemed to, give Lender the right or power to exercise control over the affairs or management of Borrower, the power of Lender being limited to the rights to exercise the remedies referred to in the Loan Documents. The relationship between Borrower and Lender is, and at all times shall remain, solely that of debtor and creditor. No covenant or provision of the Loan Documents is intended, nor shall it be deemed or construed, to create a partnership, joint venture, agency or common interest in profits or income between Lender and Borrower or to create an equity in the Timeshare Project in Lender. Lender neither undertakes nor assumes any responsibility or duty to Borrower or to any other Person with respect to the Lockbox Agent, the Servicer, the Custodian, the Timeshare Project or the Loan, except as expressly provided in the Loan Documents; and notwithstanding any other provision of the Loan Documents: (1) Lender is not, and shall not be construed as, a partner, joint venturer, alter ego, manager, controlling person or other business associate or participant of any kind of Borrower or its stockholders, members, or partners and Lender does not intend to ever assume such status; (2) Lender shall in no event be liable for (a) any acts or omissions of any of the Lockbox Agent, the Servicer or the Custodian and Borrower hereby releases Lender from any claims, losses, damages or liability incurred by Borrower by reason of any such acts or omissions, or (b) any Debts, expenses or losses incurred or sustained by Borrower; and (3) Lender shall not be deemed responsible for or a participant in any acts, omissions or decisions of Borrower or its stockholders, members, or partners. Lender and Borrower disclaim any intention to create any partnership, joint venture, agency or common interest in profits or income between Lender and Borrower, or to create any equity in the Timeshare Project in Lender, or any sharing of liabilities, losses, costs or expenses. 12.8 Time of the Essence. Time is of the essence with respect to this Agreement. 12.9 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of Lender and Borrower and the respective permitted successors and assigns of Lender and Borrower, provided that neither Borrower nor Guarantor shall, without the prior written consent of Lender, assign any rights, duties or obligations hereunder and that Lender shall not assign any rights, duties or obligations hereunder other than in accordance with Section 9.4 above. 12.10 Renewal, Extension, Rearrangement, Loan Outplacement. All provisions of the Loan Documents shall apply with equal effect to each and all promissory notes and amendments thereof hereinafter executed which in whole or in part represent a renewal, extension, increase or rearrangement of the Loan. For portfolio management purposes, at Lender's expense, at any time during the term of the Loan Lender may elect to divide the Loan into two or more separate loans evidenced by separate promissory notes so long as the payment and other obligations of Borrower are not effectively increased or otherwise modified. Borrower agrees to cooperate with Lender and to execute such documents as Lender reasonably may request to effect such division of the Loan, provided that the foregoing do not result in any increased obligations to Borrower under the Loan Documents or decrease of Borrower's rights thereunder. In addition, Borrower acknowledges that Lender and its permitted successors and assigns may without notice to or consent from Borrower participate the Loan to one or more investors or otherwise sell the Loan or interests therein to investors, subject to the provisions of Section 9.4 hereof ("Loan Outplacement"). Borrower shall cooperate with Lender in effecting any such -56- Loan Outplacement and shall cooperate and use all reasonable efforts to satisfy the market standards to which the Lender customarily adheres or which may be reasonably required by any potential participant or purchaser involved in any Loan Outplacement, at no cost to Borrower or Borrower Parties. Notwithstanding anything to the contrary herein or otherwise, Borrower shall be reimbursed by Lender for its reasonable costs incurred in connection with Loan Outplacement, including without limitation, its legal and other professional fees and expenses. Borrower shall provide such information and documents relating to the Borrower and the Timeshare Project as Lender may reasonably request in connection with such Loan Outplacement. In addition, Borrower shall make available to Lender, at Lender's cost and expense if the information is not otherwise required to be provided to Lender under the Loan Documents, all information concerning the property, its business and its operations that Lender may reasonably request. Lender shall be, subject to the Confidentiality Agreement in connection with the consumer information, permitted to share all such information with the potential participants, investors, purchasers, accounting firms, law firms and other third-party advisory firms involved with the Loan and the Loan Documents or the applicable Loan Outplacement. It is understood that the information provided by Borrower to Lender may ultimately be incorporated into the offering or sale documents for the Loan Outplacement and thus various investors, participants or purchasers may also see some or all of the information. Lender and all of the aforesaid potential participants, purchasers, advisors and professional firms shall be entitled to rely on the information supplied by or on behalf of Borrower. Borrower also agrees to execute any amendment of or supplement to this Agreement and the other Loan Documents as Lender may reasonably request in connection with any Loan Outplacement, provided that such amendment or supplement does not change the economic terms of the Loan or result in any increased obligations to Borrower under the Loan Documents or decrease of Borrower's rights thereunder. 12.11 Waivers. No course of dealing on the part of Lender, its officers, employees, consultants or agents, nor any failure or delay by Lender with respect to exercising any right, power or privilege of Lender under any of the Loan Documents, shall operate as a waiver thereof. 12.12 Cumulative Rights. Rights and remedies of Lender under the Loan Documents shall be cumulative, and the exercise or partial exercise of any such right or remedy shall not preclude the exercise of any other right or remedy. 12.13 Singular and Plural. Words used in this Agreement and the other Loan Documents in the singular, where the context so permits, shall be deemed to include the plural and vice versa. The definitions of words in the singular in this Agreement and the other Loan Documents shall apply to such words when used in the plural where the context so permits and vice versa. 12.14 Phrases. When used in this Agreement and the other Loan Documents, the phrase "including" shall mean "including, but not limited to," the phrase "satisfactory to Lender" shall mean "in form and substance satisfactory to Lender in all respects," the phrase "with Lender's consent" or "with Lender's approval" shall mean such consent or approval at Lender's sole discretion, and except where expressly provided otherwise herein, the phrase "acceptable to Lender" shall mean "acceptable to Lender at Lender's sole discretion." -57- 12.15 Exhibits and Schedules. The exhibits and schedules attached to this Agreement are incorporated herein and shall be considered a part of this Agreement for the purposes stated herein. 12.16 Titles of Articles, Sections and Subsections. All titles or headings to articles, sections, subsections or other divisions of this Agreement and the other Loan Documents or the exhibits hereto and thereto are only for the convenience of the parties and shall not be construed to have any effect or meaning with respect to the other content of such articles, sections, subsections or other divisions, such other content being controlling as to the agreement between the parties hereto. 12.17 Promotional Material. Subject to Borrower's reasonable prior written approval in advance of issuance, Lender may issue press releases, advertisements and other promotional materials in connection with Lender's own promotional and marketing activities, and describing the Loan in general terms and Lender's participation in the Loan. All references to Lender contained in any press release, advertisement or promotional material issued by Borrower shall be approved in writing by Lender in advance of issuance. 12.18 Survival. All of the representations, warranties, covenants, and indemnities hereunder, and under the indemnification provisions of the other Loan Documents, shall survive the repayment in full of the Loan and the release of the liens evidencing or securing the Loan, and shall survive the transfer (by sale, foreclosure, conveyance in lieu of foreclosure or otherwise) of any or all right, title and interest in and to the Timeshare Project to any party, whether or not an Affiliate of Borrower. 12.19 WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY LAW, BORROWER AND LENDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTION OF EITHER PARTY OR ANY EXERCISE BY ANY PARTY OF THEIR RESPECTIVE RIGHTS UNDER THE LOAN DOCUMENTS OR IN ANY WAY RELATING TO THE LOAN OR THE TIMESHARE PROJECT (INCLUDING, WITHOUT LIMITATION, ANY ACTION TO RESCIND OR CANCEL THIS AGREEMENT, AND ANY CLAIM OR DEFENSE ASSERTING THAT THIS AGREEMENT WAS FRAUDULENTLY INDUCED OR IS OTHERWISE VOID OR VOIDABLE). THIS WAIVER IS A MATERIAL INDUCEMENT FOR LENDER TO ENTER THIS AGREEMENT. 12.20 Punitive or Consequential Damages; Waiver. Neither Lender nor Borrower shall be responsible or liable to the other or to any other Person for any punitive, exemplary or consequential damages which may be alleged as a result of the Loan or the transaction contemplated hereby, including any breach or other default by any party hereto. Borrower represents and warrants to Lender that as of the Closing Date neither Borrower nor Guarantor has any claims against Lender in connection with the Loan. -58- 12.21 Governing Law. The Loan was negotiated by Lender in the State of Illinois, accepted by Lender in the State of Illinois, which state Borrower agrees has a substantial relationship to Lender and Borrower and to the transaction embodied hereby, in all respects, including, without limiting the generality of the foregoing, matters of construction, validity, enforceability and performance. The Loan and the obligations arising hereunder shall be governed by, and construed in accordance with, the laws of the State of Illinois applicable to contracts made and performed in such State (without regard to the conflicts of law rules thereof) and any applicable law of the United States of America, except that at all times the provisions for the creation, perfection, and enforcement of the liens and security interests created pursuant to this Agreement and the other Loan Documents shall be governed by and construed according to the law of the state, country or other jurisdiction in which the Collateral is located, it being understood that, to the fullest extent permitted by law of such state, country or other jurisdiction, the law of the State of Illinois shall govern the validity and the enforceability of all Loan Documents and obligations arising hereunder or thereunder. To the fullest extent permitted by law, Borrower hereby unconditionally and irrevocably waives any claim to assert that the law of any other jurisdiction governs the Loan and the Loan Documents, and the Loan Documents shall be governed by and construed in accordance with the laws of the State of Illinois. 12.22 Entire Agreement. This Agreement and the other Loan Documents embody the entire agreement and understanding between Lender and Borrower and supersede all prior agreements and understandings between such parties relating to the subject matter hereof and thereof, including any commitment letter (if any) issued by Lender with respect to the Loan. Accordingly, the Loan Documents may not be contradicted by evidence of prior, contemporaneous, or subsequent oral agreements of the parties. There are no unwritten oral agreements between the parties. If any conflict or inconsistency exists between this Agreement and any of the other Loan Documents, the terms of this Agreement shall control. 12.23 Counterparts. This Agreement may be executed in multiple counterparts, each of which shall constitute an original, but all of which shall constitute one document. 12.24 Limitation on Liability of Borrower's, Guarantor's and Lender's Officers, Employees, Etc. Any obligation or liability whatsoever of Lender, Borrower or Guarantor which may arise at any time under this Agreement or any other Loan Document shall be satisfied, if at all, out of the assets of Lender, Borrower or Guarantor, as applicable, only. No such obligation or liability shall be personally binding upon, nor shall resort for the enforcement thereof be had to, the property of any of Lender's, Borrower's or Guarantor's shareholders, directors, officers, employees or agents, regardless of whether such obligation or liability is in the nature of contract, tort or otherwise. 12.25 Venue. BORROWER HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF COOK, STATE OF ILLINOIS, AND IRREVOCABLY AGREES THAT, SUBJECT TO LENDER'S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. BORROWER EXPRESSLY SUBMITS AND CONSENTS TO THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS. BORROWER HEREBY WAIVES PERSONAL SERVICE OF -59- ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON BORROWER BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO BORROWER, AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE TEN (10) BUSINESS DAYS AFTER THE SAME HAS BEEN POSTED. [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK] -60- The parties hereto have executed this Agreement or have caused the same to be executed by their duly authorized representatives as of the date first above written. BORROWER: BLUEGREEN/BIG CEDAR VACATIONS, LLC, a Delaware limited liability company By: ----------------------------------- Anthony M. Puleo Vice President and Treasurer LENDER: GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation By ----------------------------------- Name ----------------------------------- Its ----------------------------------- -61- Schedule 1.1 ADVANCE CONDITIONS Part A Conditions To Initial Advance Part B General Conditions Part C Loan Advances PART A. CONDITIONS TO INITIAL ADVANCE The initial Advance of the Loan shall be subject to Lender's receipt, review, approval and/or confirmation of the following, at Borrower's cost and expense (other than the cost of obtaining FICO scores), each in form and content satisfactory to Lender in its sole discretion: 1. The Loan Documents, executed by Borrower and, as applicable, Guarantor and each other party thereto. 2. The Commitment Fee of $225,000.00 in cash or immediately available funds. 3. A copy of Borrower's Owner's title policy for the Timeshare Project and a mortgagee title insurance policy or a pro forma mortgagee title policy for a Timeshare Interest in accordance with clause (j) of the definition of Eligible Note Receivable. 4. All documents evidencing the formation, organization, valid existence, good standing, and due authorization of and for Borrower and Guarantor and the authorization for the execution, delivery, and performance of the Loan Documents by Borrower and Guarantor. 5. Legal opinions issued by counsel for Borrower and Guarantor, opining as to the due organization, valid existence and good standing of Borrower and Guarantor, and the due authorization, execution, delivery, enforceability and validity of the Loan Documents with respect to, Borrower and Guarantor; that the Loan, as reflected in the Loan Documents, is not usurious; to the extent that Lender is not otherwise satisfied, that the Timeshare Project and its use is in full compliance with all legal requirements and that the Notes Receivable are in compliance with all Consumer Laws; and as to such other matters as Lender and Lender's counsel reasonably may specify. 6. Current UCC searches for Borrower and Guarantor. 7. Evidence of insurance as required by this Agreement, and conforming in all respects to the requirements of Lender. 8. A current "as built" survey of the Timeshare Project, dated or updated to a date not earlier than thirty (30) days prior to the date hereof, certified to Lender, prepared by a licensed surveyor acceptable to Lender and such title insurer, and conforming to Lender's current standard survey requirements. 1.1/1 9. A current engineering report or architect's certificate with respect to the Timeshare Project and the Plans, covering, among other matters, inspection of heating and cooling systems, roof and structural details and showing no failure of compliance with building plans and specifications, applicable legal requirements (including requirements of the Americans with Disabilities Act) and fire, safety and health standards. As requested by Lender, such report shall also include an assessment of the Timeshare Project's tolerance for earthquake and seismic activity. 10. A current Site Assessment. 11. A copy of the Management Agreement for the Timeshare Project, certified by Borrower as being true, correct and complete. 12. Evidence that the Timeshare Project Association, Facilities and the operation thereof comply with all legal requirements, including (if applicable) that all material requisite certificates of occupancy, building permits, and other licenses, certificates, approvals or consents required of any Governmental Authority have been issued without variance or condition and that there is no litigation, action, citation, injunctive proceedings, or like matter pending or threatened with respect to the validity of such matters. Borrower shall furnish Lender with a zoning letter from the applicable municipal agency and utility letters from applicable service providers or other evidence of availability of utilities. 13. No condemnation or adverse zoning or usage change proceeding shall have occurred or, to the best of Borrower's knowledge, shall have been threatened against the Timeshare Project; the Timeshare Project shall not have suffered any significant damage by fire or other casualty which has not been repaired; no law, regulation, ordinance, moratorium, injunctive proceeding, restriction, litigation, action, citation or similar proceeding or matter shall have been enacted, adopted, or, to the best of Borrower's knowledge, threatened by any governmental authority, which would have, in Lender's judgment, a material adverse effect on Borrower. 14. All fees and commissions payable to real estate brokers, mortgage brokers, or any other brokers or agents in connection with the Loan or the acquisition of the Timeshare Project have been paid, if any, such evidence to be accompanied by any waivers or indemnifications deemed reasonably necessary by Lender. 15. Payment of Lender's Costs in underwriting (other than the costs of obtaining FICO scores with respect to Purchasers). 16. Estoppel certificates and subordination, non disturbance and attornment agreements, as reasonably requested by Lender. 17. Such credit checks, background investigations and other information required by Lender regarding Borrower, each Borrower Party and any other Person holding a direct or indirect interest in Borrower in order to confirm compliance with Article 10 of this Agreement. 1.1/2 18. Such other documents or items as Lender or its counsel may reasonably require. 19. The representations and warranties contained in this Loan Agreement and in all other Loan Documents are true and correct. 20. No Potential Default or Event of Default shall have occurred or exist. 21. Lender shall have received satisfactory evidence that all security interests and liens granted to Lender pursuant to this Agreement or the other Loan Documents have been duly perfected and constitute first priority liens on the Collateral. 22. Lender shall have received (i) satisfactory evidence that the Borrower has obtained all required consents and approvals of all Persons including all requisite Governmental Authorities, to the execution, delivery and performance of this Agreement and the other Loan Documents and the consummation of the related transactions or (ii) an officer's certificate in form and substance reasonably satisfactory to Lender affirming that no such consents or approvals are required. 23. Lender shall have completed its business and legal due diligence with results satisfactory to Lender, including Lender's receipt, review and approval of all items shown on the Closing Checklist delivered by Lender to Borrower including the consumer law audit and Fair Housing Act searches as approved by Lender and its counsel. 24. Lender shall have verified that the Association's reserves for replacement are at least equal to $650,000.00. PART B. GENERAL CONDITIONS TO LOAN ADVANCES Each Advance of the Loan following the initial Advance shall be subject to Lender's receipt, review, approval and/or confirmation of the following, each in form and content satisfactory to Lender in its sole discretion: 1. There shall exist no Potential Default or Event of Default (currently and after giving effect to the requested Advance). 2. The representations and warranties contained in this Loan Agreement and in all other Loan Documents are true and correct as of the date of the requested Advance. 3. Such Advance shall be secured by the Loan Documents, subject only to the Permitted Exceptions, as evidenced by title insurance endorsements satisfactory to Lender. 4. Borrower shall have paid Lender's Fees and Costs in connection with such Advance, but excluding the cost of obtaining FICO scores for Purchasers and the insertion fee, if applicable, for the blanket title insurance policies. 5. No materially adverse change shall have occurred in the financial condition of Borrower or Guarantor, or the Timeshare Project. 1.1/3 6. Borrower shall have delivered to Lender all information requested by Lender pursuant to Article 10 and all Interest Holder certifications then required under Section 4.1. 7. No condemnation or Material Adverse Effect, as reasonably determined by Lender, zoning or usage change proceeding shall have occurred; the Timeshare Project shall not have suffered any damage by fire or other casualty which has not been repaired or is not being restored in accordance with this Agreement; no law, regulation, ordinance, moratorium, injunctive proceeding, restriction, litigation, action, citation or similar proceeding or matter shall have been enacted, or adopted, or, to the best of Borrower's knowledge, threatened by any Governmental Authority, which would have, in Lender's reasonable judgment, a Material Adverse Effect. Each request for and acceptance of a Loan Advance shall be deemed to constitute, as of the date of such request or acceptance, a representation and warranty by Borrower that the statements contained in paragraphs 1 and 2 above are true and correct. 8. Advances of the Loan shall be subject to Lender's receipt of the following: (a) Request for Advance (in the form of Exhibit E to the Agreement) listing all Timeshare Interests to be financed; (b) A current aging report for the Eligible Notes Receivable to be pledged in connection with the requested Advance; and (c) Such additional information as Lender may reasonably require. (d) Lender shall have received a Custodian Certificate in substance satisfactory to Lender. 9. Custodian shall have received at least five (5) Business Days prior to the requested funding date all documents, instruments and information as provided for in the Collateral Package Items in the Custodial Agreement. 10. Custodian shall have delivered to Lender its monthly audit report within the time period set forth in the Custodial Agreement (except in the event of a Force Majeure Delay). 11. All documents to be delivered to Lender should be sent to: U.S. Bank National Association 1133 Rankin Street, Suite 100 St. Paul, MN 55116 Attention: Account Management, Bluegreen/Big Cedar Telecopy: (651) 695-6102 1.1/4 Schedule 2.3 FORM OF REASSIGNMENT OF PURCHASE MONEY MORTGAGES ("Reassignment") REASSIGNMENT OF PURCHASE MONEY MORTGAGES ("Reassignment") Dated: _________________________ Grantor: (Assignor) General Electric Capital Corporation, 500 West Monroe Street, Chicago, Illinois 60661 Grantee: (Assignee) Bluegreen/Big Cedar Vacations, LLC, 4960 Conference Way North, Suite 100, Boca Raton, FL 33431 WHEREAS, the Loan and Security Agreement by and between Assignor and Assignee dated April 16, 2007 (the "Loan Agreement") provides that upon repayment of any of the Financed Notes Receivable held as collateral under the Assignment, Assignor will reassign its collateral assignments of such Financed Notes Receivable and the Purchase Documents and Mortgages related thereto to the Borrower. Capitalized terms used herein and not defined shall have the meaning set forth for them in the Loan Agreement. For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, General Electric Capital Corporation, a Delaware Corporation ("Assignor"), as collateral assignee of the mortgages dated, recorded and more particularly described in Schedule A, attached hereto ("Mortgages") affecting property located at the resort in the County of Taney, State of Missouri having the following legal description: Timeshare Interest(s) consisting of an undivided 1/52nd (if Annual) OR 1/104th (if Biennial) Interest(s) one fifty-second (1/52) tenant in common, undivided interest, as a fee simple estate, in each of the below-described Condominium Unit(s), in the Big Cedar Wilderness Club Condominium, according to the Declaration of Condominium and Bylaws for The Big Cedar Wilderness Club Condominium, as recorded in Book 396, Page 3727-3828 of the Office of the Recorder of Deeds, Taney County, Missouri, as such Declaration may now or hereafter be amended (the "Declaration"); together with the right to occupy in the respective season in every calendar year (if Annual) OR every other calendar year (if Biennial), pursuant to the Declaration, the foregoing Condominium Unit(s), and each comparable Unit which is subject to the Flexible Use Plan, during any Flexible Unit Week(s) within that same season, and subject to the provisions of the Flexible Use Plan, the then-current Rules and Regulations for the Resort and the Declaration; the foregoing being conveyed together with a one fifty-second (1/52) tenant in common interest in the Allocated Interests of such Unit(s) (the same being the undivided interest in the Common Elements, the Common 2.3/1 Expense Liability, and votes in the Association as allocated to the Unit(s) pursuant to the terms of the Declaration). An Annual Unit Week allows occupancy and use of a Unit each and every year. An Annual Unit Week is designated with an "F," indicating a Full Timeshare Interest. A Biennial Unit Week, indicating one-half of a Full Timeshare Interest, allows occupancy only during Odd Numbered Years (and such Unit Week is designated with an "O") or only during Even Numbered Years (and such Unit Week is designated with an "E"). hereby reconveys, reassigns, transfers and sets over to Bluegreen/Big Cedar Vacations, LLC, a Delaware limited liability company ("Assignee'), all right, title and interest of Assignor in the Mortgages, and all right, title and interest in and to the promissory note or notes referred to in said Mortgages referred to in Schedule A (the "Notes"), without recourse and without warranty of any kind, and all documents and instruments securing said Notes, whether or not referenced in Schedule A, and all monies, proceeds and awards, including without limitation, interest, due or to become due thereon or with respect thereto, as set forth in the Loan Agreement. Taney County, MO IN WITNESS WHEREOF, Assignor has caused this Reassignment of Purchase Money Mortgages to be duly executed on the date first above written. General Electric Capital Corporation, a Delaware corporation By: ------------------------------ Name: ------------------------------ Title: ------------------------------ 2.3/2 STATE OF ) ):SS COUNTY OF ) The foregoing instrument was acknowledged before me on _______________, 2007 by _________________________, as _________________________ of General Electric Capital Corporation, a Delaware corporation, who is personally known to me or has produced _________________________ as identification. ---------------------------- Notary Public Print Name: _______________________ (AFFIX NOTARIAL SEAL) Prepared by and After Recording Return to: Janet Konstand Bluegreen Corporation - Mortgage Funding 4960 Conference Way North, Suite 100 Boca Raton, FL 33431 Taney County, MO 2.3/3 [Exhibit "1"] [Schedule A] REASSIGNMENT OF CONTRACTS, NOTES RECEIVABLE AND MORTGAGES
Mortgage Unit Mortgage Mortgage Recording Recording Recording Name Number Week Subdivision Amount Document No. Date Book Page - ---- ------ ---- ----------- ------ ------------ ----- ---- ----
2.3/4 Schedule 4.1 ORGANIZATIONAL MATTERS A. Borrower's Organizational Structure. See Attached Organizational Chart. B. Organizational Information: (Borrower and each Borrower Party).
- ----------------------------------------------------------------------------------------------------------------- State of Incorporation or Type of State Organizational Federal Legal Name* Organization Entity ID No.** Tax ID No. - ----------------------------------------------------------------------------------------------------------------- 1. Bluegreen/Big Cedar Delaware limited liability 3220565 65-1016052 Vacations, LLC company - ----------------------------------------------------------------------------------------------------------------- 2. Bluegreen Massachusetts corporation N/A 03-0300793 Corporation - ----------------------------------------------------------------------------------------------------------------- 3. Big Cedar, L.L.C. Missouri limited liability LC0034424 43-1647673 company - ----------------------------------------------------------------------------------------------------------------- 4. Bluegreen Vacations Florida corporation P93000051653 65-0433722 Unlimited, Inc. - -----------------------------------------------------------------------------------------------------------------
* As it appears in official filings in the state of its incorporation or organization. ** If none issued by applicable state of organization/incorporation, insert "none issued." C. Location Information. 1. Borrower: a. Chief Executive Office: 4960 Conference Way North, Suite 100 Boca Raton, FL 33431 Attention: Anthony M. Puleo Telecopy: (561) 912-8123 E Mail: tony.puleo@bluegreencorp.com b. Location of any prior Chief ______________________________________________ Executive Office (during last ______________________________________________ 5 years): ______________________________________________ c. Other Office Location: ______________________________________________ ______________________________________________ ______________________________________________ d. Location of Collateral: At the Timeshare Project and at the offices of U.S. Bank National Association, as Custodian
4.1/1 2. Borrower Parties (Chief Executive Office): a. Bluegreen Corporation 4960 Conference Way North, Suite 100 Boca Raton, FL 33431 Attention: Anthony M. Puleo Telecopy: (561) 912-8123 E Mail: tony.puleo@bluegreencorp.com b. Big Cedar, L.L.C.: 2500 E. Kearney Springfield, MO 65898 c. Bluegreen Vacations 4960 Conference Way North, Suite 100 Unlimited, Inc. Boca Raton, FL 33431 Attention: Anthony M. Puleo Telecopy: (561) 912-8123 E Mail: tony.puleo@bluegreencorp.com
4.1/2 ORGANIZATIONAL CHART OF BORROWER |-------------------------------| |-------------------------------| | Bluegreen Corporation, | | Three Johns Company, | | a Massachusetts corporation | | a Missouri corporation | |------------------------------ | |-------------------------------| \ / \ / \ 100% 100% / \ / \ / |-----------------------------| |------------------------------| | Bluegreen Vacations | | Big Cedar, L.L.C., | | Unlimited, Inc., | | a Missouri limited liability | | a Florida corporation | | company | |-----------------------------| |------------------------------| \ / \ / \ 51% 49% / \ / \ / |-------------------------------| | | | Borrower | | | |-------------------------------| | | |100% | | |-------------------------------| | Big Cedar JV Interiors, | | LLC, | | A Delaware limited liability | | company | |-------------------------------| 4.1/3 Schedule 4.13 Contracts with Affiliates/Approved Transactions 1. Marketing and Promotions Agreement, dated as of June 16, 2000, by and between Big Cedar, L.L.C., Bass Pro, Inc., Bluegreen Vacations Unlimited, Inc. and Bluegreen/Big Cedar Vacations, LLC. 2. Advertising Space Receipt and Confirmation Agreement, dated as of June 16, 2000, by and between Bass Pro, Inc., BPS Catalog, L.P., Bluegreen Vacations Unlimited, Inc. and Bluegreen/Big Cedar Vacations, LLC. 3. License and Concession Agreement, dated June 16, 2000, by and between Bass Pro, Inc., Bass Pro Outdoor World, L.L.C., World Wide Sportsman, Inc., Bluegreen Vacations Unlimited, Inc. and Bluegreen/Big Cedar Vacations, LLC. 4. Mailing List Agreement, dated as of June 16, 2000, by and between Bass Pro, Inc., Bass Pro Trademarks, L.L.C., Bluegreen Corporation, Bluegreen Vacations Unlimited, Inc. and Bluegreen/Big Cedar Vacations, LLC. 5. Security Agreement, dated as of June 16, 2000, by and between Bass Pro, Inc., Bass Pro Trademarks, L.L.C., Bluegreen Vacations Unlimited, Inc. and Bluegreen/Big Cedar Vacations, LLC. 6. Mailing List Agreement, dated as of June 16, 2000, by and between Big Cedar, L.L.C., Bluegreen Corporation, Bluegreen Vacations Unlimited, Inc. and Bluegreen/Big Cedar Vacations, LLC. 7. Trademark License Agreement, dated as of June 16, 2000, by and between Bass Pro, Inc., Bass Pro Trademarks, L.L.C., Bluegreen Corporation, Bluegreen Vacations Unlimited, Inc. and Bluegreen/Big Cedar Vacations, LLC. 8. Trademark License Agreement, dated as of June 16, 2000, by and between Big Cedar, L.L.C., Bluegreen Corporation, Bluegreen Vacations Unlimited, Inc. and Bluegreen/Big Cedar Vacations, LLC. 9. Commercial Lease, dated June 16, 2000, by and between Big Cedar, L.L.C. and Bluegreen/Big Cedar Vacations, LLC. (Sales Center). 10. Commercial Lease, dated June 16, 2000, by and between Big Cedar, L.L.C. and Bluegreen/Big Cedar Vacations, LLC. (Cabin Fever). 11. Administrative Services Agreement, dated as of June 16, 2000, by and between Bluegreen/Big Cedar Vacations, LLC and Bluegreen Vacations Unlimited, Inc. 12. Easement Agreement, dated as of June 15, 2000, by and between Big Cedar, L.L.C., Three Johns Company, Bluegreen/Big Cedar Vacations, LLC. and Big Cedar Resort Club Owners Association, Inc. 4.13/1 13. Intercreditor Agreement, dated as of June 16, 2000, by and among Bass Pro, Inc., Bass Pro Trademarks, L.L.C., Bluegreen Vacations Unlimited, Inc., Bluegreen/Big Cedar Vacations, LLC and Fleet Retail Finance Inc., as Agent. 14. Non-Disturbance Agreement, dated June 16, 2000, by and among Finova Capital Corporation, Bluegreen/Big Cedar Vacations, LLC., Big Cedar Resort Club Owners Association, Inc., Big Cedar, L.L.C. and Bluegreen Vacations Unlimited, Inc. 15. Subordination and Non-Disturbance Agreement, dated June 16, 2000, by and between Finova Capital Corporation, Bluegreen/Big Cedar Vacations, LLC., Big Cedar Resort Club Owners Association, Inc. and Big Cedar, L.L.C. 16. Operational Services and Integration Agreement, dated as of June 16, 2000, Bluegreen/Big Cedar Vacations, LLC., Big Cedar Resort Club Owners Association, Inc. and Big Cedar, L.L.C. 17. Servicing Agreement, dated as of June 16, 2000, by and between Bluegreen Corporation, Bluegreen/Big Cedar Vacations, LLC and Big Cedar, L.L.C. 18. Tour Agreement, dated 2005, by and between Big Cedar, L.L.C., Bluegreen Vacations Unlimited, Inc. and Bluegreen/Big Cedar Vacations, LLC. 19. Contribution or other transfer of certain adjacent property owned by Big Cedar, L.L.C. or an affiliate of Big Cedar, L.L.C. to Bluegreen/Big Cedar Vacations, LLC. (Anticipated Spring 2007). 4.13/2 Schedule 5.11 Litigation Any legal proceedings as disclosed in Guarantor's most recently filed 10K Statement and the following other matters: Bluegreen Southwest One, L.P. ("Southwest"), a subsidiary of Bluegreen Corporation ("Bluegreen"), is the developer of the Mountain Lakes subdivision in Texas. In Lesley, et al v. Bluegreen Southwest One, L.P. acting through its General Partner Bluegreen Southwest Land, Inc., et al, Cause No. 28006 District Court of the 266th Judicial District, Erath County, Texas, plaintiffs filed a declaratory action against Southwest in which they seek to develop mineral interests in the Mountain Lakes subdivision. Plaintiffs' claims against Southwest total in the aggregate $25 million. Plaintiffs' claims are based on property law, contract and tort theories. The property owners association has filed a cross complaint against Bluegreen, Southwest and individual directors of the property owners association related to the mineral rights and related to certain amenities in the subdivision as described in the following paragraph. The court has confirmed the seniority of the mineral interests of the plaintiffs and has held that restrictions against drilling within the subdivision are not enforceable. Bluegreen is evaluating whether to appeal the court's ruling and is unable to predict the ultimate resolution of the litigation. Bluegreen estimates that it is reasonably possible that the company will incur costs of approximately $500,000 in this declaratory action case. One of the lakes that is an amenity in the Mountain Lakes development has not filled to the expected level. Owners of homesites within the subdivision have asserted claims against Bluegreen regarding such failure as part of the litigation referenced above. Southwest has investigated the causes of the failure of the lake to fill and currently estimates that the cost of correcting the condition will be approximately $3,000,000. Bluegreen has initiated litigation against Welbro Construction with regard to construction defects discovered at Bluegreen's Shorecrest Resort in Myrtle Beach, SC. Bluegreen cannot currently predict the outcome of the litigation including the estimated cost of correcting the condition, the amounts that may ultimately be recovered from the defendant or the amounts that Bluegreen may need to contribute to correct the condition if the matter is resolved by negotiated settlement. Bluegreen is involved in litigation relating to the employment of sales associates at its Williamsburg sales and project site, as well as its Shenandoah project, who were allegedly subject to non-compete agreements with a prior employer. Bluegreen cannot predict the outcome of the litigation. Litigation has been initiated against Bluegreen and LeisurePath, Inc. ("LeisurePath"), a subsidiary of Bluegreen whose principal business is a travel club, involving claims asserted by consumers with regard to sales of LeisurePath memberships through Vacation Station, Inc., an independent retail outlet. Claims asserted against Bluegreen and its affiliates relate to transactions that allegedly occurred in May, 2005. LeisurePath had terminated its relationship with Vacation Station, Inc. prior to that time. Bluegreen believes that the likelihood of an 5.11/1 unfavorable outcome resulting in a material loss to be remote; however Bluegreen cannot predict the outcome of the litigation. 5.11/2 Exhibit A LAND Legal Description of Big Cedar Wilderness Club Condominium Phase 1 (Units 2020, 2021, 2022, 2023, 2024, 2025, 2026, 2027, 2028, and 2029) A part of Lots 11, 12, 13, 14, all of Lots 15 and 16 of Block 10, a part of Lots 15, 16 and 17 of Block 16, a part of Lots 3, 4, 5 and 6 of Block 17 of Lakeside South, a subdivision in Taney County, Missouri, recorded in Plat Book 9, at Page 27 of the records of Taney County, Missouri, and a portion of Lot 1, Block 22 of the First Addition to Lakeside South, subdivision in Taney County, Missouri, recorded in Plat Book 12, at Page 15 of the records of Taney County, Missouri, said tract of land being situated N 1/2 of the NE 1/4 of Section 11, Township 21 North, Range 22 West, Taney County, Missouri, Being more particularly described as follows: Beginning at the Southwest comer of Lot 5, Block 22 of The First Addition to Lakeside South, at the Corps of Engineers monument N-1400-14; Thence N 01(degree)31'35" E, along the west line of Lots 5 through 1, Block 22, First Addition to Lakeside South, a distance of 311.58 feet to the New Point of Beginning; Thence continuing N 0(degree)'31'35" E, a distance of 12.52 feet to Corps of Engineers monument 338-3-1; Thence N 25(degree)18'06" W, along the Government Fee Taking Line and the southwesterly line of Lot I of said Block 22, and Lots 16 through 14, Block 10, Lakeside South, a distance of 239.85 feet; Thence N 27(degree)13'46" E, a distance of 323.50 feet; Thence N 73(degree)32'38" E, a distance of 36.45 feet; Thence S 69(degree)32'48" E, a distance of 19.82 feet; Thence N 20(degree)27'12" E, a distance of 248.16 feet to a point on new southerly right-of-way line of Estate Drive, said point being on a non-tangent curve; Along the Southerly right-of-way line of the New Estate Drive as follows: Thence Easterly along a non-tangent 21.0128 degree segment of a curve to the right, 4.28 feet (said segment having a chord bearing and distance of S 81(degree)34'58" E, 4.28 feet and having a radius of 272.67 feet); Thence S 81(degree)07'59" E, a distance of 52.34 feet; Thence S 29(degree)38'39" W, leaving the Southerly right-of-way line of New Estate Drive, a distance of 112.02 feet; Thence S 20(degree)27'12" W, a distance of 353.35 feet; Thence Southerly along a 67.8057 degree curve to the left, 52.67 feet (said curve having a radius of 84.50 feet); Thence S 15(degree)15'36" E, a distance of 53.70 feet; Thence S 81(degree)34'16" E, a distance of 18.34 feet; Thence S 20(degree)50'42" E, a distance of 92.70 feet; Thence S 60(degree)21'15" E, a distance of 54.61 feet; Thence S 42(degree)04'50" E, a distance of 46.04 feet; Thence S 47(degree)55'10" W, a distance of 56.30 feet; Thence S 73(degree)44'33" W, a distance of 85.70 feet; Thence West, a distance of 80.33 feet; to the New Point of Beginning; Containing 1.99 acres of land, more or less, Subject to all easements and restrictions of record. TOGETHER WITH: A-1 Phase 3 (Units 2012, 2030, 2031 and 2032) Parcel One: A tract of land being a part of Lots 1, 6 through 8, and 10 of Block 17 of Lakeside South, a subdivision plat recorded in Plat Book 9, at Page 27 of the records of Taney County, Missouri, and a portion of vacated Juniper Drive, said land being situated in the E 1/2 of the NE 1/4 of Section 11, Township 21 North, Range 22 West, Taney County, Missouri, Being more particularly described as follows: Commencing at the Southwest corner of Lot 5, Block 22, of The First Addition to Lakeside South, being marked by Corps. Of Engineers monument N-1400-14; Thence North 01(degree)31'35" East, along the west line of lots 5 through I of Block 22, The First Addition to Lakeside South, a distance of 311.58 feet; Thence East, a distance of 80.33 feet; Thence North 73(degree)44'33" East, a distance of 85.70 feet; Thence North 47(degree)55'10" East, a distance of 56.30 feet, to the Point of Beginning; Thence North 42(degree)04'50" West, a distance of 24.90 feet; Thence North 59(degree)46'49" East, a distance of 58.12 feet; Thence North 86(degree)03'20" East, a distance of 62.66 feet; Thence North 22(degree)24'03" East, a distance of 97.26 feet; Thence North 25(degree)12'17" West, a distance of 158.23 feet; Thence Northwesterly along a 67.4068 degree curve to the left, 26.47 feet (said curve having a radius of 85.00 feet); Thence North 43(degree)02'42" West, a distance of 16.06 feet; Thence Northwesterly along a 49.8224 degree curve to the right, 33.89 feet (said curve having a radius of 115.00 feet); Thence North 26(degree)09'34" West, a distance of 21.52 feet; Thence Northwesterly along a 38.1972 degree curve to the left, 84.42 feet (said curve having a radius of 150.00 feet), to a point of compound curvature; Thence Northwesterly along a 229.1831 degree curve to the left, 44.13 feet (said curve having a radius of 25.00 feet); Thence North 20(degree)27'12" East, a distance of 80.93 feet; Thence Southerly along a 229.1837 degree curve to the left, 36.32 feet (said curve having a radius of 25.00 feet), to a point of reverse curvature; Thence Southeasterly along a 31.8310 degree curve to the right, 115.05 feet (said curve having a radius of 180.00 feet); Thence South 26(degree)09'34" East, a distance of 21.52 feet; Thence Southeasterly along a 67.4068 degree curve to the left, 25.05 feet (said curve having a radius of 85.00 feet); Thence South 43(degree)02'42" East, a distance of 16.06 feet; Thence Southeasterly along a 49.8224 degree curve to the right, 35.81 feet (said curve having a radius of 115.00 feet); Thence South 25(degree)12'17" East, a distance of 164.69 feet; Thence South 22(degree)24'03" West, a distance of 138.95 feet; Thence South 59(degree)47'07" West, a distance of 105.39 feet; Thence North 30(degree)12'53" West, a distance of 37.73 feet, to the Point of Beginning; Containing 0.48 acres of land, more or less, Subject to all easements and restrictions of record. TOGETHER WITH: Parcel Two: A tract of land being a part of Lots 10, 11 of Block 10 and Lots 16, 17 of Block 11 of Lakeside South, a subdivision plat recorded in Plat Book 9, at Page 27 of the records of Taney County, Missouri, and a portion of vacated Juniper Drive and Woodhull Drive, said land being situated in the E 1/2 of the NE 1/4 of Section 11, Township 21 North, Range 22 West, Taney County, Missouri, Being more particularly described as follows: A-2 Commencing at the Southwest corner of Lot 5, Block 22 of The First Addition to Lakeside South, being marked by Corps of Engineers monument N-1400-14; Thence North 01(degree)31'35" East, along the west line of lots 5 through I of Block 22, of the First Addition to Lakeside South, a distance of 324.10 feet to Corps of Engineers Monument 338-3-1; Thence North 25(degree)18'06" West, along the westerly line of lot 1, Block 22 of The First Addition to Lakeside South, and the lots 16 through 14 of Block 10 of Lakeside South, a distance of 239.85 feet; Thence North 27(degree)13'46" East, a distance of 301.96 feet, to the Point of Beginning; Thence North 09(degree)20'48" West, a distance of 78.62 feet; Thence North 80(degree)47'47" East, a distance of 34.71 feet; Thence North 19(degree)53'11" East, a distance of 184.09 feet to a point on new Southerly right-of-way line of Estate Drive, said point being on a non-tangent curve; Thence Easterly along a non-tangent 21.0128 degree segment of a curve to the right, 66.16 feet (said segment having a chord bearing and distance of South 88(degree)58'58" East, 65.99 feet and having a radius of 272.67 feet); Thence South 20(degree)27'12" West, a distance of 248.16 feet; Thence North 69(degree)32'48" West, a distance of 19.82 feet; Thence South 73(degree)32'38" West, a distance of 36.45 feet; Thence South 27(degree)13'46" West, a distance of 21.54 feet, to the Point of Beginning; Containing 0.38 acres of land, more or less, Subject to all easements and restrictions of record. TOGETHER WITH: Phase 4 (Building 2300) (Units 2301/2302, 2304/2305, 2307/2308, 2309/2310, 2312/2313, 2314/2315, 2317/2318, 2320/2321, 2323/2324, 2326/2327, 2329/2330, 2331/2332, 2334/2335, 2336/2337, 2339/2340, 2342/2343, 2345/2346, 2348/2349, 2351/2352, 2353/2354, 2356/2357, 2358/2359, 2361/2362 and 2364/2365) A tract of land being a part of Lots 11 through 17 of Block 16; part of lots I through 3 of Block 18 all of Lakeside South, a subdivision plat recorded in Plat Book 9, at Page 27 of the records of Taney County, Missouri, and part of lots 13 through 16 of Block 23 of The First Addition to Lakeside South, a subdivision plat recorded in Plat Book 12, at Page 15 of the records of Taney County, Missouri, and a portion of vacated Juniper Drive and McMeen Drive, said land being situated in the E 1/2 of the NE 1/4 of Section 11, Township 21 North, Range 22 West, Taney County, Missouri, Being more particularly described as follows: Commencing at the Southwest corner of Lot 5, Block 22 of The First Addition to Lakeside South, being marked by Corps of Engineers monument N-1400-14; Along the Government Fee Taking Line as follows: Thence South 87(degree)'41'11" East, a distance of 495.69 feet to Corps of Engineers monument N-1400-13; Thence South 73(degree)57'11" East, a distance of 469.22 feet to the Southeast corner of Lot 10, Block 24 of The First Addition to Lakeside South; Thence North 05(degree)37'57" West, leaving the Government Fee Taking Line, a distance of 126.75 feet to the Northeast corner of Lot 10, Block 24, said point being on a non-tangent curve on the Southerly right-of-way line of Esquire Drive; Thence Easterly along a non-tangent 52.0871 degree segment of a curve to the left, along the Southerly right-of-way line of Esquire Drive, 159.14 feet (said segment having a chord bearing and distance of North 42(degree)54'37" East, 145.62 feet and having a radius of 110.00 feet); Thence North 01(degree)27'49" East, along the east right-of-way line of McMeen Drive, a distance of 25.00 feet to the Northwest corner of lot 13, Block 24 of The First Addition to Lakeside South; Thence North 88(degree)32'11" West, a distance of 24.99 feet to the center line of vacated McMeen Drive; Thence North 01(degree)27'49" East along the center line of Vacated McMeen Drive, a distance of 87.57 feet; Thence North 60(degree)29'21" East, a distance of 44.75 feet; Thence A-3 North 01(degree)27'49" East, a distance of 4.65 feet, to the Point of Beginning; Thence North 89(degree)16'41" West, a distance of 349.91 feet; Thence North 00(degree)43'19" East, a distance of 88.83 feet; Thence North 37(degree)57'39" East, a distance of 191.89 feet; Thence North 01(degree)33'02" East, a distance of 94.62 feet to a point on the South right-of-way line of the new Estate Drive; Along the South right-of-way line of Estate Drive as follows: Thence South 88(degree)26'58" East, a distance of 150.71 feet; Thence Easterly along a 15.2789 degree curve to the right, 86.82 feet (said curve having a radius of 375.00 feet); Thence South 01(degree)27'47" West, leaving the south right-of-way line of Estates Drive on a non-tangent line, a distance of 322.81 feet, to the Point of Beginning; Containing 2.24 acres of land, more or less, Subject to all easements and restrictions of record. TOGETHER WITH: Phase 5 (Building 2500) (Units 2501/2502, 2504/2505, 2507/2508, 2509/2510, 2512/2513, 2514/2515, 2517/2518, 2520/2521, 2523/2524, 2526/2527, 2529/2530, 2531/2532, 2534/2535, 2536/2537, 2539/2540, 2542/2543, 2545/2546, 2548/2549, 2551/2552, 2553/2554, 2556/2557, 2558/2559, 2561/2562, 2564/2565, 2567/2568, 2570/2571, 2573/2574, 2575/2576, 2578/2579, 2580/2581, 2583/2584 and 2586/2587) and the Clubhouse Property A tract of land situated in the NE 1/4 of the NE 1/4 of Section 11, Township 21 North, Range 2 West, Taney County, Missouri, Being a part of Lots 4 through 12 of Block 14 and part of Lots 20 through 25 of Block 15, and part of vacated Rockbridge Lane, all in Lakeside South, a subdivision plat recorded in Mat Book 9, at Page 27 of the records of Taney County, Missouri, Being more particularly described as follows: Commencing at the Southwest corner of Lot 5 of Block 22, The First Addition to Lakeside South, a subdivision plat recorded in Plat Book 12, at Page 15 of the records of Taney County, Missouri, being marked by Corps. of Engineers monument N-1400-14; Along the Government Fee Taking Line of Table Rock Lake as follows: Thence South 87(degree)41'11" East, a distance of 495.69 feet to Corps. monument N-1400-13; Thence South 73(degree)57'11" East, a distance of 469.22 feet to the Southeast corner of Lot 10, Block 24 of The First Addition to Lakeside South; Thence North 05(degree)37'57" West, leaving the Government Fee Taking Line, a distance of 126.75 feet to the Northeast corner of Lot 10, Block 24, said point on a non-tangent curve on the Southerly right-of-way line of Esquire Drive; Thence Easterly along a non-tangent 52.0871 degree segment of a curve to the left, along the Southerly right-of-way line of Esquire Drive, 159.14 feet (said segment having a chord bearing and distance of North 42(degree)54'37" East, 145.62 feet and having a radius of 110.00 feet); Thence North 01(degree)27'49" East, along the East right-of-way line of McMeen Drive, a distance of 25.00 feet to the Northwest corner of Lot 13, Block 24 of The First Addition to Lakeside South; Thence North 88(degree)32'11" West, a distance of 24.99 feet to the center line of vacated McMeen Drive; Thence North 01(degree)27'49" East, along the center line of vacated McMeen Drive, a distance of 87.57 feet; Thence North 60(degree)29'21" East, a distance of 44.75 feet; Thence North 01(degree)27'49" East, a distance of 327.46 feet, to a point on the South right-of-way line of the New South right-of-way line of Estates Drive, said point being on a non-tangent curve; Thence Westerly along a non tangent 15.2789 degree segment of a curve to the left, along the South right-of-way line of the new South right-of-way line of Estate Drive, 13.69 feet (said segment having a chord bearing and distance of North 76(degree)13'45" West, 13.68 feet and having a radius of 375.00 feet) to a point on the west line of Lot 4, Block 18 of said Lakeside South; Thence North 01(degree)27'49" East, along the west line of Lot 4, Block 18, a distance of 81.28 feet to A-4 the Northwest corner of Lot 4, Block 18; Thence North 88(degree)32'11" West, a distance of 50.00 feet to a point on the East line of Lot 14, Block 15 of Lakeside South; Thence North 01(degree)27'49" East, along the East line of Lots 14 and 15, Block 15 and Lot 12 of Block 14, a distance of 280.40 feet, to the Point of Beginning; Thence North 88(degree)32'38" West, a distance of 56.56 feet; Thence South 81(degree)16'21" West, a distance of 92.95 feet; Thence North 55(degree)59'06" West, a distance of 76.46 feet; Thence North 41(degree)35'02" West, a distance of 40.85 feet; Thence North 25(degree)15'40" West, a distance of 82.45 feet; Thence South 49(degree)42'26" West, a distance of 134.50 feet; Thence North 29(degree)37'43" West, a distance of 358.51 feet; Thence North 60(degree)22'17" East, a distance of 93.44 feet; Thence North 29(degree)37'43" West, a distance of 43.61 feet; Thence North 59(degree)51'09" East, a distance of 56.31 feet; Thence South 43(degree)07'46" East, a distance of 61.57 feet; Thence South 30(degree)29'42" East, a distance of 192.47 feet; Thence South 40(degree)17'34" East, a distance of 116.81 feet; Thence South 49(degree)42'26" West, a distance of 31.57 feet; Thence South 22(degree)04'26" East, a distance of 48.80 feet; Thence South 43(degree)01'37" East, a distance of 89.11 feet; Thence South 55(degree)59'06" East, a distance of 40.66 feet; Thence South 84(degree)15'30" East, a distance of 20.46 feet; Thence North 81(degree)16'18" East, a distance of 123.48 feet; Thence South 01(degree)27'49" West, a distance of 35.56 feet, to the Point of Beginning; Containing 1.62 acres of land, more or less, Subject to all easements and restrictions of record. TOGETHER WITH: Phase 6 (Units 2013, 2014, 2015, 2016, 2017, 2018 and 2019) A tract of land being a part of Lots 1 through 10 inclusive of Block 17 Lakeside South, a subdivision plat recorded in Plat Book 9, at Page 27 of the records of Taney County, Missouri and a portion of vacated Juniper Drive and Woodhill Drive, said land being situated in the E1/2 of the NE1/4, of Section 11, Township 21 North, Range 22 West, Taney County, Missouri, Being more particularly described as follows: Commencing at the Southwest corner of Lot 5, Block 22 of The First Addition to Lakeside South, being marked by Corps of Engineers monument N-1400-14; Thence North 01(degree)31'35" East, along the west line of Lots 5 through 1 of Block 22 of The First Addition to Lakeside South, a distance of 311.58 feet; Thence East, a distance of 80.33 feet; Thence North 73(degree)44'33" East, a distance of 85.70 feet; Thence North 47(degree)55'10" East, a distance of 56.30 feet; Thence North 42(degree)04'50" West, a distance of 24.90 feet, to the Point of Beginning; Thence continuing North 42(degree)04'50" West, a distance of 21.14 feet; Thence North 60(degree)21'15" West, a distance of 54.61 feet; Thence North 20(degree)50'42" West, a distance of 92.70 feet; Thence North 81(degree)34'16" West, a distance of 18.34 feet; Thence North 15(degree)15'36" West, a distance of 53.70 feet; Thence Northerly along a 67.8057 degree curve to the right, 52.67 feet (said curve having a radius of 84.50 feet); Thence North 20(degree)27'12" East, a distance of 171.63 feet; Thence Northerly along a 229.1831 degree curve to the right, 44.13 feet (said curve having a radius of 25.00 feet), to a point of compound curvature; Thence Southeasterly along a 38.1972 degree curve to the right, 84.42 feet (said curve having a radius of 150.00 feet); Thence South 26(degree)09'34" East, a distance of 21.52 feet; Thence Southeasterly along a 49.8224 degree curve to the left, 33.89 feet (said curve having a radius of 115.00 feet); Thence South 43(degree)02'42" East, a distance of 16.06 feet; Thence Southeasterly along a 67.4068 degree curve to the right, 26.47 feet (said curve having a radius of 85.00 feet); Thence South 25(degree)12'17" East, a distance of 158.23 feet; Thence South 22(degree)24'03" West, a distance of 97.26 feet; Thence South 86(degree)03'20" West, a distance of 62.66 feet; A-5 Thence South 59(degree)46'49" West, a distance of 58.12 feet, to the Point of Beginning; Containing 1.63 acres of land, more or less, Subject to all easements and restrictions of record. TOGETHER WITH: Phase 7 - Parcel 1 (Units 2003, 2004, 2005, 2006, 2007, 2008, 2009, 2010 and 2011) A tract of land being a part of Lots 1 through 7 and 21 through 25 of Block 16 Lakeside South, a subdivision plat recorded in Plat Book 9, at Page 27 of the records of Taney County, Missouri, and a portion of vacated Juniper Drive and Woodhill Drive, said land being situated in the E1/2 of the NE1/4 of Section 11, Township 21 North Range 22 West, Taney County, Missouri; Being more particularly described as follows: Commencing at the Southwest corner of Lot 5, Block 22 of the First Addition to Lakeside South, a subdivision plat recorded in Plat Book 12, at Page 15 of the records of Taney County, Missouri, being marked by Corps of Engineers monument N-1400-14; thence North 01(degree) 31' 35" East, along the west line of Lots 5 through 1 of Block 22 of the First Addition to Lakeside South, a distance of 311.58 feet; thence East, a distance of 80.33 feet; thence North 73(degree) 44' 33" East, a distance of 85.70 feet; thence North 47(degree) 55' 10" East, a distance of 56.30 feet; thence South 30(degree) 12' 53" East, a distance of 37.73 feet; thence North 59(degree) 47' 07" East, a distance of 105.39 feet; thence North 22(degree) 24' 03" East, a distance of 138.95 feet to the POINT OF BEGINNING; thence North 25(degree) 12' 17" West, a distance of 164.69 feet; thence northwesterly along a 49.8224 degree curve to the left 35.81 feet (said curve having a radius of 115.00 feet); thence North 43(degree) 02' 42" West, a distance of 16.06 feet; thence northerly along a 67.4068 degree curve to the right 25.05 feet (said curve having a radius of 85.00 feet); thence North 26(degree) 09' 34" West, a distance of 21.52 feet; thence northwesterly along 31.8310 a degree curve to the left 115.05 feet (said curve having a radius of 180.00 feet); thence along a 229.1831 degree reverse curve to the right 36.32 feet (said curve having a radius of 25.00 feet); thence North 20(degree) 27' 12" East, a distance of 100.79 feet; thence North 29(degree) 18' 39" East, a distance of 112.02 feet, to a point on the new south right-of-way line Estate Drive; Along the southerly right-of-way line of Estate Drive as follows; thence South 81(degree) 07' 59" East, a distance of 4.57 feet; thence southeasterly along a 21.3942 degree curve to the right, 261.52 feet (said curve having a radius of 267.81 feet); thence South 25(degree) 10' 57" East, a distance of 164.45 feet; thence southeasterly along a 17.0027 degree curve to the Left, 69.67 feet (said curve having a radius of 336.98 feet); thence South 52(degree) 58' 17" West, leaving the southerly right-of-way line of Estate Drive, a distance of 208.07 feet; thence South 22(degree) 24' 03" West, a distance of 52.55 feet, to the Point of Beginning, containing 2.50 acres of land more or less, Subject to all easements and restrictions of record. TOGETHER WITH: Phase 7 - Parcel 2 (Building 2400) (Units 2411, 2412, 2413, 2414, 2415, 2416, 2417, 2418, 2419, 2420, 2421, 2422, 2423, 2424, 2425, 2426, 2427, 2428, 2431, 2432, 2433, 2434, 2435, 2436, 2437, 2438, 2441, 2442, 2443, 2444, 2445, 2446, 2447 and 2448) A tract of land being a part of Lots 7, 8, 12 through 21 of Block 15, and part of Lots 10 through 12 of Block 14 of Lakeside South, a subdivision plat recorded in Plat Book 9, at Page 27 of the records of Taney County, Missouri, and a portion of vacated Rockbridge Lane, said land being A-6 situated in the E1/2 of the NE1/4 of Section 11, Township 21 North, Range 22 West, Taney County, Missouri; Being more particularly described as follows: Commencing at the Southwest corner of Lot 5, Block 22 of the First Addition to Lakeside South, a subdivision plat recorded in Plat Book 12, at Page 15 of the records of Taney County, Missouri, being marked by Corps. of Engineers monument N-1400-14; Along the Government Fee Taking Line of Table Rock Lake as follows: Thence South 87(degree) 41' 11" East, a distance of 495.69 feet to Corps. monument N-1400-13; thence South 73(degree) 57' 11" East, a distance of 469.22 feet to the Southeast corner of Lot 10, Block 24 of the First Addition to Lakeside South; thence North 05(degree) 37' 57" West, leaving the Government Fee Taking Line, a distance of 126.75 feet to the Northeast corner of Lot 10, Block 24, said point being on a non-tangent curve on the southerly right-of-way line of Esquire Drive; thence easterly along a non-tangent 52.0871 degree segment of a curve to the left, along the southerly right-of-way line of Esquire Drive, 159.14 feet (said segment having a chord bearing and distance of North 42(degree) 54' 37" East, 145.62 feet and having a radius of 110.00 feet); thence North 01(degree) 27' 49" East, along the east right-of-way line of McMeen Drive, a distance of 25.00 feet to the Northwest corner of Lot 13, Block 24 of the First Addition to Lakeside South; thence North 88(degree) 32' 11" West, a distance of 24.99 feet to the center line of vacated McMeen Drive; thence North 01(degree) 27' 49" East, along the center line of vacated McMeen Drive, a distance of 87.57 feet; thence North 60(degree) 29' 21" East, a distance of 44.75 feet; thence North 01(degree) 27' 49" East, a distance of 327.46 feet to a point on the New south right-of-way line of Estate Drive, said point being on a non-tangent curve; thence westerly along a non-tangent 15.2789 degree curve to the left, along the South right-of-way line of the new south right-of-way line of Estate Drive, 13.69 feet (Said segment having a chord bearing and distance North 76(degree) 13' 45" West, 13.68 feet and having a radius of 375.00 feet) to a point on the west line of Lot 4, Block 18 of said Lakeside South; thence North 01(degree) 27' 49" East, along the west line of Lots 4 and 5, Block 18, a distance of 166.28 feet to the northwest corner of Lot 5, Block 18, of Lakeside South; thence North 88(degree) 32' 11" West, a distance of 50.00 feet to a point on the east line of Lot 14 of Block 15 of Lakeside South; thence North 01(degree) 27' 49" East, along the east line of Lots 14 and 15, Block 15, a distance of 72.10 feet to the POINT OF BEGINNING; thence North 88(degree) 32' 38" West, a distance of 62.80 feet; thence South 01(degree) 27' 22" West, a distance of 84.34 feet; thence South 44(degree) 07' 40" West a distance of 53.93 feet; thence South 79(degree) 44' 42" West, a distance of 31.94 feet; thence North 45(degree) 52' 20" West, a distance of 343.25 feet; thence North 44(degree) 07' 40" East,, a distance of 36.82 feet; thence North 29(degree) 37' 43" West, a distance of 38.20 feet; thence North 49(degree) 42' 26" East, a distance of 134.50 feet; thence South 25(degree) 15' 40" East, a distance of 82.45 feet; thence South 41(degree) 35' 02" East, a distance of 40.85 feet; thence South 55(degree) 59' 06" East, a distance of 76.46 feet; thence North 81(degree) 16' 21" East, a distance of 92.95 feet; thence South 88(degree) 32' 38" East, a distance of 56.56 feet, to a point on the east line of said Lot 12, Block 14; thence South 01(degree) 27' 49" West, along the east line of said Lot 12, Block 14, and Lot 15 of Block 15 of Lakeside South, a distance of 123.30 feet, to the Point of Beginning, Containing 1.61 acres of land, more or less. Subject to all easement and restrictions of record. A-7 TOGETHER WITH: Phase 8 (Building 2600) (Units 2611A/2611B, 2612A/2612B, 2613A/2613B, 2614A/2614B, 2615A/2615B, 2616A/2616B, 2617A/2617B, 2618A/2618B, 2621A/2621B, 2622A/2622B, 2623A/2623B, 2624A/2624B, 2625A/2625B, 2626A/2626B, 2627A/2627B, 2628A/2628B, 2631A/2631B, 2632A/2632B, 2633A/2633B, 2634A/2634B, 2635A/2635B, 2636A/2636B, 2637A/2637B, 2638A/2638B, 2641A/2641B, 2642A/2642B, 2643A/2643B, 2644A/2644B, 2645A/2645B, 2646A/2646B, 2647A/2647B and 2648A/2648B) A tract of land being a part of lot 9, Block 11, part of lots 25 and 26 of Block 15, and part of Lots 1 through 4 and 22 through 25 of Block 14, and part of Lots 1 and 2 of Block 13 of the Lakeside South, a subdivision plat recorded in Plat Book 9, at Page 27 of the records of Taney County, Missouri and a portion of vacated Rockbridge Lane, Blueridge Lane, and Woodhill Drive said land being situated in the E1/2 of the NE1/4 of Section 11, Township 21 North, Range 22 West, Taney County, Missouri, Being more particularly described as follows: Commencing at the Southwest corner of Lot 5, Block 22 of the First Addition to Lakeside South, a subdivision plat recorded in Nat Book 12, at Page 15 of the records of Taney County, Missouri, being marked by Corps of Engineers monument N-1400-14; Along the Government Fee Taking Line of Table Rock Lake as follows: thence South 87(degree) 41' 11" East, a distance of 495.69 feet to Corps monument N-1400-13; thence South 73(degree) 57' 11" East, a distance of 469.22 feet to the Southeast corner of Lot 10, Block 24 of the First Addition to Lakeside South; thence North 05(degree) 37' 57" West, leaving the Government Fee Taking Line, a distance of 126.75 feet to the Northeast corner of Lot 10, Block 24, said point being on a non-tangent curve on the southerly right-of-way line of Esquire Drive; thence easterly along a non-tangent 52.0871 degree segment of a curve to the left, along the southerly right-of-way line of Esquire Drive, 159.14 feet (said segment having a chord bearing and distance of North 42(degree) 54' 37" East, 145.62 feet and having a radius of 110.00 feet); thence North 01(degree) 27' 49" East, along the east right-of-way line of McMeen Drive, a distance of 25.00 feet to the Northwest corner of Lot 13, Block 24 of the First Addition to Lakeside South; thence North 88(degree) 32' 11" West, a distance of 24.99 feet to the center line of vacated McMeen Drive; thence North 01(degree) 27' 49" East, along the center line of vacated McMeen Drive, a distance of 87.57 feet; thence North 60(degree) 29' 21" East, a distance of 44.75 feet; thence North 01(degree) 27' 49" East, a distance of 327.46 feet to a point on the new south right-of-way line of Estate Drive, said point being on a non-tangent curve; thence westerly along a non-tangent 15.2789 degree curve to the left, along the South right-of-way line of the new south right-of-way line of Estate Drive, 13.69 feet (said segment having a chord bearing and distance North 76(degree) 13' 45" West, 13.68 feet and having a radius of 375.00 feet) to a point on the West line of Lot 4, Block 18 of said Lakeside South; thence North 01(degree) 27' 49" East, along the west line of Lots 4 and 5, Block 18, a distance of 166.28 feet to the northwest corner of Lot 5, Block 18 of Lakeside South; thence North 88(degree) 32' 11" West, a distance of 50.00 feet to a point on the east line of Lot 14 of Block 15 of Lakeside South; thence North 01(degree) 27' 49" East, along the east line of Lots 14 and 15, Block 15, a distance of 72.10 feet; thence North 88(degree) 32' 38" West, a distance of 62.80 feet; thence South 01(degree) 27' 22" West, a distance of 84.34 feet; thence South 44(degree) 07' 40" West, a distance of 53.93 feet; thence South 79(degree) 44' 42" West, a distance of 31.94 feet; thence North 45(degree) 52' 20" West, a distance of 343.25 feet; thence North 44(degree) 07' 40" East, a distance of 36.82 feet; thence North 29(degree) 37' 43" West, a distance of 396.70 feet to the POINT of BEGINNING; thence Continuing North 29(degree) 37' 43" West a distance of 49.27 feet; thence North A-8 40(degree) 54' 48" West a distance of 322.91 feet; thence South 49(degree) 05' 12" West a distance of 32.00 feet; thence North 40(degree) 54' 48" West a distance of 36.00 feet; thence North 49(degree) 05' 12" East a distance of 180.14 feet; thence South 44(degree) 10' 47" East a distance of 69.36 feet; thence South 50(degree) 38' 24" East a distance of 134.58 feet; thence South 49(degree) 26' 43" East a distance of 50.44 feet; thence South 38(degree) 20' 10" East a distance of 70.03 feet; thence South 27(degree) 06' 14" East a distance of 46.65 feet; thence South 00(degree) 00' 00" West a distance of 34.59 feet; thence South 59(degree) 51' 09" West a distance of 56.31 feet; thence South 29(degree) 37' 43" East a distance 43.61 feet; thence South 60(degree) 22' 17" West a distance of 92.95 feet to the said POINT of BEGINNING, Containing 1.58 acres of land, more or less, Subject to all easements and restrictions of record. Phase 9 (Units 2033, 2034, 2035, 2036, 2037, 2038, 2039, 2040, 2041, 2042 and 2043) A tract of land situated in the SE1/4 of the SE1/4 of Section 2 and the NE1/4 of Section 11, Township 21 North, Range 22 West, Taney County, Missouri, Being all of Lots 1 through 16 of Block 10, Lots 1 through 17 of Block 11, lots 7 through 17 of Block 12, Lots 1 through 14 of Block 13, Lots 1 through 25 of Block 14, Lots 1 through 26 of Block 15, Lots 1 through 25 of Block 16, Lots 1 through 10 of Block 17, and a portion of Lots 1 through 3 of Block 18, together with the vacated portions of roads within, All in Lakeside South, a subdivision in Taney County, Missouri recorded in Plat Book 9, at page 27 of the records of Taney County, Missouri, Also, together with all of Lots 1 through 5 of Block 22, Lots 1 through 20 of Block 23, Lots 1 through 10 of Block 24, a portion of Lots 14 and 15 of Block 24, together with the vacated roads therein, All in the First Addition to Lakeside South, a subdivision in Taney County, Missouri, as recorded in Plat Book 12, at Page 15 of the records of Taney County, Missouri, Being more particularly described as follows: Beginning at the southwest corner of Lot 5 of Block 22, The First Addition to Lakeside South, being marked by Corps. Of Engineers monument N-1400-14; Thence North 01(degree)31'35" East, a distance of 324.10 feet to Corps. of Engineers monument 338-3-1; Thence North 25(degree)18'06" West, a distance of 366.06 feet to Corps. monument 338-3-2; Thence South 47(degree)25'03" West, along the Government Fee Taking Line, a distance of 449.40 feet, to the southern most corner of said Lot 1 of Book 10; Thence North 34(degree)00'22" West, leaving the Government Fee Taking Line, a distance of 118.17 feet, to the western most corner of Lot 1 of Block 10, said point being on a non-tangent curve; Along the easterly right-of-way line of Lindell Drive and the westerly line of Block 10 of Lakeside South as follows: Thence Northeasterly along a non-tangent 9.1973 degree segment of a curve to the left, 92.57 feet (said segment having a chord bearing and distance of North 51(degree)44'14" East, 92.48 feet and having a radius of 622.96 feet); Thence North 47(degree)28'49" East, a distance of 332.16 feet; Thence Northeasterly along a 9.1973 degree curve to the left, 268.10 feet (said curve having a radius of 622.96 feet); Thence North 22(degree)49'19" East, a distance of 112.11 feet to the southwesterly corner of Lot 1 of Block 11; Thence North 67(degree)10'41" West, leaving the easterly right-of-way line of Lindell Drive, a distance of 50.00 feet to the southeast corner of Lot 27 of Block 7 of Lakeside South; Along the westerly right-of-way line of Lindell Drive as follows: Thence North 22(degree)49'19" East, a distance of 1.73 feet, Thence Northeasterly along a 13.3333 degree curve to the left, 187.54 feet (said curve having a radius of 429.72 feet); Thence North 02(degree)10'59" West, a distance of 122.64 feet; Thence Northerly along a 29.9994 degree curve to the left 135.72 feet (said curve having a radius of 190.99 feet); Thence North 42(degree)53'58" West, a distance of 3.34 feet to the northern most corner of Lot 24 of Block 7 of Lakeside South; Thence North 47(degree)06'02" East leaving the westerly right-of-way line of Lindell A-9 Drive and along the southerly right-of-way line of Oakwood Drive, a distance of 71.43 feet; Thence North 42(degree)53'58" West, a distance of 50.00 feet to the southern common corner of Lots 20 and 21 of Block 9; Along the northerly right-of-way line of Oakwood Drive, and the southerly lot line of Lots 12 Through 23 of Block 9 and Lots 1 through 3 of Block 19 and a portion of Lot 4 of Block 19 as follows: Thence North 47(degree)06'02" East, a distance of 336.25 feet; Thence Northeasterly along a 2.0000 degree curve to the right, 140.00 feet (said curve having a radius of 2864.79 feet); Thence North 49(degree)54'02" East, a distance of 131.27 feet to a point on the southerly line of Lot 4 of Block 19 of Lakeside South; Thence South 40(degree)05'58" East, to a point on the south right-of-way line of Oakwood Drive, a distance of 50.00 feet, to the southwest corner of Lot 1 of Block 12, said point being on a non-tangent curve, Along the northerly right-of-way line of Reinhart Lane and the southerly line of Lots 1 through 6 of Block 12 of Lakeside South; Thence Southeasterly along a non-tangent 45.3325 degree segment of a curve to the left, 101.09 feet (Said segment having a chord bearing and distance of South 63(degree)01'90" East, 98.42 feet and having a radius of 126.39 feet); Thence South 85(degree)56'01" East, a distance of 210.40 feet; Thence Easterly along a 17.2463 degree curve to the right, 160.49 feet (said curve having a radius of 132.22 feet) to the northwest corner Lot 7 of Block 12 of Lakeside South; Thence North 73(degree)45'50" East, along a non-tangent line, a distance of 113.74 feet to the Northeasterly corner of said lot 7 of Block 12; Thence North 01(degree)27'49" East, along the west line of Lot 17 of block 12, a distance of 7.21 feet to the Northwest corner of said Lot 17 of Block 12; Thence South 88(degree)32'11" East, a distance of 102.00 feet to the Northeast corner of said Lot 17 of Block 12, said point being on the west right-of-way line of McMeen Drive; Along the west right-of-way line of McMeen and the east line of Blocks 12, 14 and 15; Thence South 01(degree)27'49" West, a distance of 1122.69 feet to a point on the east line of Lot 14 of Block 15 Lakeside South; Thence South 88(degree)32'11" East, a distance of 50.00 feet to the northwest corner of Lot 5 of Block 18 Lakeside South; Thence South 01(degree)27'49" West, along the west line of Lots 4 and 5 of Block 18, a distance of 166.28 feet, to a point on the south right-of-way line of the New Estate Drive, said point being on a non-tangent curve; Thence Easterly along a non-tangent 15.2789 degree segment of a curve to the right and along the south right-of-way line of the New Estate Drive, 13.69 feet (said segment having a chord bearing and distance of South 76(degree)13'45" East, 13.68 feet and having a radius of 375.00 feet) to a point in Lot 3 of Block 18 of Lakeside South; Thence South 01(degree)27'49" West, over and across a portion of Lots 1 through 3 of said Block 18 Lakeside South and Lots 14 and 15 of The First Addition to Lakeside South, a distance of 327.46 feet; Thence South 60(degree)29'21" West, a distance of 44.75 feet to a point on the center line of vacated McMeen Drive; Thence South 01(degree)27'49" West, along the center line of vacated McMeen, a distance of 87.57 feet; Thence South 88(degree)32'11" East, a distance of 24.99 feet to the northwest corner of Lot 13 of Block 24 of The First Addition to Lakeside South; Along the easterly and southerly right-of-way line of Esquire Drive as follows: thence South 01(degree)27'49" West a distance of 25.00 feet; Thence Southerly along a 52.0871 degree curve to the right, 159.14 feet (said curve having a radius of 110.00 feet) to the northeast corner of Lot 10, Block 24 of The First Addition to Lakeside South; Thence South 05(degree)37'57" East, leaving the southern right-of-way line of Esquire Drive, a distance of 126.75 feet to the Southeast corner of Lot 10 of Block 24 The First Addition to Lakeside South, said point being on the Government Fee Taking Line; Along the south line of Block 24 and the Government Fee Taking Line as follows: Thence North 73(degree)57'11" West, a distance of 469.22 feet to Corps of Engineers No. 1400-13; Thence North 87(degree)41'11" West, a distance of 495.69 feet, to the Point of Beginning; Containing 48.24 acres of land, more or less, Subject to all easements and restrictions of record. A-10 Phase 10 (Building 2700) A tract of land being a part of Lots 6 through 12, 18, 19, all of Lots 13 through 17 of Block 14 and part of Lot 12 of Block 12 Lakeside South, a subdivision plat recorded in Plat Book 9, at Page 27 of the records of Taney County, Missouri, and a portion of vacated Blueridge Lane, said land being situated in the E 1/2 of the NE 1/4 of Section 11, Township 21 North, Range 22 West, Taney County, Missouri, Being more particularly described as follows: Commencing at the Southwest corner of Lot 5, Block 22 of the First Addition to Lakeside South, a subdivision plat recorded in Plat Book 12, at Page 15 of the records of Taney County, Missouri, being marked by Corps. of Engineers monument N-1400-14; Along the Government Fee Taking Line of Table Rock Lake as follows: thence South 87(degree) 41' 11" East, a distance of 495.69 feet to Corps. monument N-1400-13; thence South 73(degree) 57' 11" East, a distance of 469.22 feet to the Southeast corner of Lot 10, Block 24 of the First Addition to Lakeside South; thence North 05(degree) 37' 57" West, leaving the Government Fee Taking Line, a distance of 126.75 feet to the Northeast corner of Lot 10, Block 24, said point being on a non-tangent curve on the southerly right-of-way line of Esquire Drive; thence easterly along the southerly light-of-way line of Esquire Drive through a non-tangent segment of a curve to the left having an arc length of 159.14 feet (said segment having a chord bearing and distance of North 42(degree) 54' 37" East, 145.62 feet and a radius of 110.00 feet); thence North 01(degree) 27' 49" East, along the east right-of-way line of McMeen Drive, a distance of 25.00 feet to the Northwest corner of Lot 13, Block 24 of the First Addition to Lakeside South; thence North 88(degree) 32' 11" West, a distance of 24.99 feet to the center line of vacated McMeen Drive; thence North 01(degree) 27' 49" East, along the center line of vacated McMeen Drive, a distance of 87.57 feet; thence North 60(degree) 29' 21" East, a distance d 44.75 feet; thence North 01(degree) 27' 49" East, a distance of 327.46 feet to a point on the New south right-of-way line of Estate Drive, said point being on a non-tangent curve; thence westerly along a non-tangent segment of a curve to the left, along the South right-of-way line of the new south right-of-way line of Estate Drive, having an arc length of 13.69 feet (said segment having a chord bearing and distance North 76(degree) 13' 46" West, 13.68 feet and a radius of 375.00 feet) to a point on the west line of Lot 4, Block 18 of said Lakeside South; thence North 01(degree) 27' 49" East, along the west line of Lots 4 and 5, Block 18, a distance of 166.28 feet to the northwest comer of Lot 5, Block 18 of Lakeside South; thence North 88(degree) 32' 11" West, a distance of 50.00 feet to a point on the east line of Lot 14 of Block 15 of Lakeside South; thence North 01(degree) 27' 49" East, along the east line of Lots 14 and 15, Block 15 and Lot 12 of Block 14, a distance of 230.96 feet to the POINT of BEGINNING; Thence South 81(degree) 16' 21" West a distance of 123.49 feet; Thence North 84(degree) 15' 18" West a distance of 20.45 feet; Thence North 55(degree) 59' 06" West a distance of 40.66 feet; Thence North 41(degree) 35' 02" West a distance of 87.09 feet; Thence North 25(degree) 15' 40" West a distance of 50.00 feet; Thence North 49(degree) 42' 26" East a distance of 31.57 feet; Thence North 40(degree) 17' 34" West a distance of 116.81 feet; Thence North 30(degree) 08' 51" West a distance of 89.47 feet; Thence North 50(degree) 21' 22" East a distance of 165.10 feet; Thence North 39(degree)12'14" West a distance of 33.53 feet; Thence North 50(degree)47'46" East a distance of 54.56 feet; Thence South 36(degree)05'00" East a distance of 11.84 feet; Thence North 50(degree)18'32" East a distance of 20.87 feet; Thence South 42(degree)33'46" East a distance of 259.22 feet; Thence South 88(degree)32'11" East a distance of 12.26 feet; Thence South 01(degree)27'49" West a distance of 281.71 feet to the said Point of Beginning, Containing 2.52 acres of land, more or less, Subject to all easements and restrictions of record, A-11 Phase 11 (Building 2900) A tract of land being all of Lots 3 and 4 and part of Lots 1, 2, 5, 6, 10, 11, 12, 13 and 14 of Block 13, part of lots 22, 23 and 24 of Block 14, Lakeside South, a subdivision plat recorded in Plat Book 9, at Page 27 of the records of Taney County, Missouri and a portion of vacated Blueridge Lane and Rein Hart Lane, said land being situated in the N1/2 of the of the NE1/4 of Section 11, Township 21 North, Range 22 West, Taney County, Missouri, Being more particularly described as follows: Commencing at the Southwest corner of Lot 5, Block 22 of the First Addition to Lakeside South, a subdivision plat recorded in Plat Book 12, at Page 15 of the records of Taney County, Missouri, being marked by Corps. of Engineers monument N-1400-14; Along the Government Fee Taking Line of Table Rock Lake as follows: Thence South 87(degree) 41' 11" East, a distance of 495.69 feet to Corps. monument N-1400-13; Thence South 73(degree)57'11" East, a distance of 469.22 feet to the Southeast corner of Lot 10, Block 24 of the First Addition to Lakeside South; Thence North 05(degree)37'57" West, leaving the Government Fee Taking Line, a distance of 126.75 feet to the Northeast corner of Lot 10, Block 24, said point being on a non-tangent curve on the southerly right-of-Way line of Esquire Drive; Thence easterly along the southerly right-of-way line of Esquire Drive on a non-tangent curve to the left having an arc length of 159.14 feet, (said segment having a chord bearing and distance of North 42(degree)54'37" East, 145.62 feet and a radius of 110.00 feet); Thence North 01(degree)27'49" East, along the east right-of-way line of McMeen Drive, a distance of 25.00 feet to the Northwest corner of Lot 13, Block 24 of the First Addition to Lakeside South; thence North 88(degree)32'11" West, a distance of 24.99 feet to the center line of vacated McMeen Drive; Thence North 01(degree)27'49" East, along the center line of vacated McMeen Drive, a distance of 87.57 feet; Thence North 60(degree)29'21" East, a distance of 44.75 feet; thence North 01(degree)27'49" East, a distance of 327.46 feet to a point on the new south right-of-way line of Estate Drive, said point being on a non-tangent curve; Thence westerly along the South right-of-way line of the new south right-of-way line of Estate Drive on non-tangent segment of a curve to the left having an arc length of 13.69 feet, (said segment having a chord bearing and distance of North 76(degree)13'45" West, 13.68 feet and a radius of 375.00 feet) to a point on the west line of Lot 4, Block 18 of said Lakeside South; Thence North 01(degree)27'49" East, along the west line of Lots 4 and 5, Block 18, a distance of 166.28 feet to the northwest corner of Lot 5, Block 18 of Lakeside South; Thence North 88(degree)32'11" West, a distance of 50.00 feet to a point on the east line of Lot 14 of Block 15 of Lakeside South; Thence North 01(degree)27'49" East, along the east line of Lots 14 and 15, Block 15, a distance of 72.10 feet; thence North 88(degree)32'38" West, a distance of 62.80 feet; thence South 01(degree)27'22" West, a distance of 84.34 feet; thence South 44(degree)07'40" West a distance of 53.93 feet; Thence South 79(degree)44'42" West a distance of 31.94 feet; Thence North 45(degree)52'20" West a distance of 343.25 feet; Thence North 44(degree)07'40" East a distance of 36.82 feet; Thence North 29(degree)37'43" West a distance of 396.70 feet; Thence North 60(degree)22'17" East a distance of 92.95 feet; Thence North 29(degree)37'43" West a distance of 43.61 feet; Thence North 59(degree)51'09" East a distance or 56.31 feet; Thence North 00(degree)00'00" East a distance of 34.59 feet; Thence North 27(degree)06'14" West a distance of 46.65 feet; Thence North 38(degree)20'10" West a distance of 70.03 feet; Thence North 49(degree)26'43" West a distance of 33.53 feet to the Point of Beginning; Thence continuing North 49(degree)26'43" West a distance of 16.91 feet; Thence North 50(degree)38'24" West a distance of 134.58 feet; Thence North 44(degree)10'47' West a distance of 69.36 feet; Thence North 33(degree)53'56" West a distance of 144.68 feet to a point on the southeasterly right-of-way line of Oakwood Drive; Thence northeasterly along the southeasterly right-of-way line of Oakwood A-12 Drive on a non-tangent segment of a curve to the right having an arc length of 104.89 feet, (said segment having a chord bearing and distance of North 48(degree)49'43" East, 104.88 feet and a radius of 2814.97 feet); Thence North 49(degree)54'02" East, along the southeasterly right-of-way line of Oakwood Drive, a distance of 79.81 feet; Thence South 67(degree)11'47" East a distance of 58.78 feet; Thence South 47(degree)46'44" East a distance of 217.26 feet; Thence South 46(degree)44'20" East a distance of 77.96 feet; Thence South 44(degree)33'57" East a distance of 43.15 feet; Thence South 50(degree)36'41" West a distance of 63.49 feet; Thence North 49(degree)16'39" West a distance of 50.33 feet; Thence South 40(degree)48'31" West a distance of 166.76 feet to the said Point of Beginning, Containing 1.92 acres of land, more or less, Subject to all easements and restrictions of record. A-13 Exhibit B Big Cedar Availability Report Month End Date -------------- Beginning Financed Note Receivable Balance Add: New Eligible Collateral Add: Substitutions Less: Principal Collections Less: Paid in Full Less: Upgrades Less: Defaults/Cancellations Add/Less: Other Adjustments Subtotal Receivables Balance Less: 90+ Day Delinquencies Total Eligible Note Receivable Balance Beginning GE Loan Balance Add: New Fundings Less: Principal Reductions Add/Less: Other Adjustments GE Ending Outstanding Principal Loan Balance FINANCED NOTES RECEIVABLE WTD AVG COUPON LENDER'S INTEREST RATE SPREAD Effective Availability Percentage Availability Percentage Required Loan Balance Excess/(Deficit) Availability Funding Availability B-1 Exhibit C Form of Borrower Estoppel ESTOPPEL CERTIFICATE The undersigned hereby certifies to General Electric Capital Corporation (together with its successors and assigns, "Lender") that: 1. The principal amount outstanding to Lender pursuant to that certain Loan and Security Agreement dated April 16, 2007, between Borrower and Lender (the "Loan Agreement") and the promissory note executed by Borrower in connection therewith is $______________. Capitalized terms used herein and not defined shall have the meanings set forth for them in the Loan Agreement. 2. Interest on the Loan has been paid to _____________________. 3. Pursuant to the Loan Agreement, the Loan Interest Rate is a variable rate equal to the Base Rate plus 1.75% per annum (adjusted monthly). Currently the Base Rate is _______%. 4. The Loan Documents constitute the entire agreement between the parties and there are no other agreements or understandings between Borrower or Lender concerning the Loan. 5. The Loan Documents are valid and in full force and effect, and neither Borrower nor, to the best of Borrower's knowledge, Lender is in default thereunder. Borrower has no defense, setoff or counterclaim against Lender arising out of the Loan Documents or against the payments due under the Loan Documents or in any way relating thereto, or arising out of any other transaction between Lender and Borrower, and no event has occurred and no condition exists, which with the giving of notice or the passage of time, or both, will constitute a default by Borrower under the Loan Documents. Borrower is current in the payment of amounts owing under the Loan Documents. 6. There are no actions, whether voluntary or involuntary, pending against Borrower, Guarantor, or Bluegreen Vacations Unlimited, Inc. under any insolvency, bankruptcy or other debtor relief laws of the United States of America or any of its constituent States. 7. Lender is holding no funds for Borrower's account other than _____________. C-1 Date: ______________, 200__ BORROWER: BLUEGREEN/BIG CEDAR VACATIONS, LLC, a Delaware limited liability company By ------------------------------------ ------------------------------------ [Printed name and title] C-2 ACKNOWLEDGEMENT STATE OF ) ------------------------ ):SS COUNTY OF ) ----------------------- The foregoing instrument was acknowledged before me on _______________, 2007 by _________________________, the _________________ of Bluegreen/Big Cedar Vacations, LLC, who is personally known to me or has produced _________________________ as identification. ----------------------------- Notary Public Print Name: _________________________ (AFFIX NOTARIAL SEAL) C-3 GUARANTOR'S ACKNOWLEDGMENT The undersigned (a) has guaranteed the obligations of the Borrower under the Loan Documents referred to above, (b) consents to the matters set forth above and agrees to be bound thereby, and (c) acknowledges that the guaranty executed by the undersigned is in full force and effect and will not be supplemented, modified, amended or terminated without the prior written consent of the Lender. Guarantor: BLUEGREEN CORPORATION, a Massachusetts corporation By: ---------------------------------- Name: ----------------------------- Title: ---------------------------- C-4 Exhibit D AVAILABILITY PERCENTAGES
- ---------------------------------------------------------------------------------------------- Spread between Borrower's weighted average Availability note receivable coupon and Lender's Interest Rate Adjustment Percentage - ---------------------------------------------------------------------------------------------- >/= 6.00% 0.0% 97.0% - ---------------------------------------------------------------------------------------------- < 6.00% but >/= 5.60% 1.0% 96.0% - ---------------------------------------------------------------------------------------------- < 5.60% but >/= 5.20% 2.0% 95.0% - ---------------------------------------------------------------------------------------------- < 5.20% but >/= 4.80% 3.0% 94.0% - ---------------------------------------------------------------------------------------------- < 4.80% but >/= 4.40% 4.0% 93.0% - ---------------------------------------------------------------------------------------------- < 4.40% but >/= 4.00% 5.0% 92.0% - ---------------------------------------------------------------------------------------------- < 4.00% but >/= 3.60% 6.0% 91.0% - ---------------------------------------------------------------------------------------------- < 3.60% but >/= 3.20% 7.0% 90.0% - ---------------------------------------------------------------------------------------------- < 3.20% N/A No Availability - ----------------------------------------------------------------------------------------------
Note: Lender utilized the average coupon of 14.0%, as the Borrower's weighted average note receivable coupon. D-1 Exhibit E REQUEST FOR ADVANCE DATE: ___________________________ GENERAL ELECTRIC CAPITAL CORPORATION Attn: Asset Manager 500 West Monroe St. Chicago, Illinois 60661 RE: Loan No. 77287 $45,000,000 credit facility described in that certain Loan and Security Agreement (the "Loan Agreement") between GENERAL ELECTRIC CAPITAL CORPORATION ("Lender") and BLUEGREEN/BIG CEDAR VACATIONS, LLC ("Borrower") Dear Sir or Madam: In accordance with the terms of the Loan Agreement, Borrower wishes to obtain an Advance of $_______________________ under the Loan on ___________________, 20____. All terms used herein, unless otherwise specified, shall have the meanings assigned in the Loan Agreement. In order to induce Lender to make such Advance, Borrower hereby represents and warrants to Lender: 1. No Event of Default or Potential Default has occurred or will occur as a result of the Advance requested herein. 2. The representations and warranties contained in the Loan Agreement are true, correct and complete in all material respects to the same extent as though made on the date of the Loan Agreement except for any representation or warranty limited by its terms to a specific date and taking into account any amendments to the schedules or exhibits as a result of any subsequent disclosures made by Borrower in writing to, and approved in writing by, Lender. 3. Borrower is in compliance with each and every one of its covenants, agreements and obligations under the Loan Agreement. 4. (a) As of the date hereof, the weighted average interest rate of the Eligible Notes Receivable which are the subject of this Request for Advance, is no less than fourteen percent (14%) per annum; and (b) any Financed Notes Receivable that have been modified or altered have been modified or altered in compliance with Section 5.15 of the Loan Agreement. 5. Borrower has no defenses or offsets with respect to the payment of any amounts due Lender. E-1 6. Lender has performed all of its obligations to Borrower. 7. All of the documents described in Schedule A attached hereto meet all of the requirements of Eligible Notes Receivable. 8. Borrower shall grant Lender a security interest in and lien upon those certain Eligible Notes Receivable and other documents executed in connection with the sale of Timeshare Interests as set forth in Schedule A attached hereto. 9. No Purchaser has any asserted or, to the best of Borrower's knowledge, threatened defense, offset, counterclaim, discount or allowance in respect of each Eligible Note Receivable to be pledged in connection with this Advance. Borrower has no knowledge of any facts which would lead a reasonable person to conclude that any particular Eligible Note Receivable to be pledged in connection with this Advance shall not be paid in accordance with its terms. 10. Borrower's wiring instructions are attached hereto as Schedule B. BORROWER: BLUEGREEN/BIG CEDAR VACATIONS, LLC, a Delaware limited liability company By: --------------------------------------- Name: ------------------------------------- Its: -------------------------------------- Schedule A: Description of New Eligible Notes Receivable and other Purchase Documents Schedule B: Wiring Instructions E-2 Exhibit F COLLATERAL ASSIGNMENT OF PURCHASE MONEY MORTGAGES ("Assignment") Dated: _________________________ Grantor: (Assignor) Bluegreen/Big Cedar Vacations, LLC, 4960 Conference Way North, Suite 100, Boca Raton, FL 33431 Grantee: (Assignee) General Electric Capital Corporation, 500 West Monroe Street, Chicago, Illinois 60661 WHEREAS, Assignor and Assignee have entered into a Loan and Security Agreement, dated as of April 16, 2007 (as amended from time to time, the "Loan Agreement"), pursuant to which Assignee has agreed to lend, upon the terms and conditions set forth in the Loan Agreement, up to Forty-Five Million Dollars ($45,000,000.00) (the "Loan") to Assignor to be evidenced by a Revolving Promissory Note, dated April 16, 2007 (together with any renewals, extensions, substitutions or modifications thereof, the "Note") and secured by a security interest granted by Assignor to Assignee on certain Financed Notes Receivable and the Purchase Documents and Mortgages related thereto as well as other Collateral of Assignor (as such terms are defined in the Loan Agreement). Capitalized terms used herein and not defined shall have the meaning set forth for them in the Loan Agreement. NOW THEREFORE, to secure the payment and performance of the Indebtedness and other obligations of Assignor to Assignee under the Loan Agreement, the Note and the other Loan Documents (as such term is defined in the Loan Agreement) and in consideration of the extension of the Loan to Assignor, Assignor as record holder to certain mortgages dated, recorded and more particularly described in Schedule 1, attached hereto ("Mortgages") affecting property located at the resort in the County of Taney, State of Missouri having the following legal description: Timeshare Interest(s) consisting of an undivided 1/52nd (if Annual) OR 1/104th (if Biennial) Interest(s) one fifty-second (1/52) tenant in common, undivided interest, as a fee simple estate, in each of the below-described Condominium Unit(s), in the Big Cedar Wilderness Club Condominium, according to the Declaration of Condominium and Bylaws for The Big Cedar Wilderness Club Condominium, as recorded in Book 396, Page 3727-3828 of the Office of the Recorder of Deeds, Taney County, Missouri, as such Declaration may now or hereafter be amended (the "Declaration"); together with the right to occupy in the respective season in every calendar year (if Annual) OR every other calendar year (if Biennial), pursuant to the Declaration, the foregoing Condominium Unit(s), and each comparable Unit which is subject to the Flexible Use Plan, during any Flexible Unit Week(s) within that same season, and subject to the provisions of the Flexible Use Plan, the then-current Rules and Regulations for the Resort and the Declaration; the foregoing being conveyed together with a one fifty-second (1/52) tenant in common interest in the Allocated Interests of such Unit(s) (the same being the undivided interest in the Common F-1 Elements, the Common Expense Liability, and votes in the Association as allocated to the Unit(s) pursuant to the terms of the Declaration). An Annual Unit Week allows occupancy and use of a Unit each and every year. An Annual Unit Week is designated with an "F," indicating a Full Timeshare Interest. A Biennial Unit Week, indicating one-half of a Full Timeshare Interest, allows occupancy only during Odd Numbered Years (and such Unit Week is designated with an "O") or only during Even Numbered Years (and such Unit Week is designated with an "E"). does hereby collaterally convey, assign, transfer and set over to General Electric Capital Corporation, a Delaware corporation ("Assignee'), all right, title and interest of Assignor in the Mortgages, and all right, title and interest in and to the promissory note or notes referred to in said Mortgages referred to in Schedule 1 (the "Notes"), with recourse and warranty, and all documents and instruments securing said Notes, whether or not referenced in Schedule 1, and all monies, proceeds and awards, including without limitation, interest, due or to become due thereon or with respect thereto, as set forth in the Loan Agreement. Taney County, MO IN WITNESS WHEREOF, Assignor has caused this Assignment of Purchase Money Mortgages to be duly executed on the date first above written. Bluegreen/Big Cedar Vacations, LLC, a Delaware limited liability company By: --------------------------------- Name: ------------------------------- Title: ------------------------------ F-2 STATE OF ) ):SS COUNTY OF ) The foregoing instrument was acknowledged before me on _______________, 2007 by _________________________, as _________________________ of Bluegreen/Big Cedar Vacations, LLC, a Delaware limited liability company, who is personally known to me or has produced _________________________ as identification. ------------------------- Notary Public Print Name: ________________________ (AFFIX NOTARIAL SEAL) Prepared by and After Recording Return to: Janet Konstand Bluegreen Corporation - Mortgage Funding 4960 Conference Way North, Suite 100 Boca Raton, FL 33431 Taney County, MO F-3 Schedule 1 ASSIGNMENT OF CONTRACTS, NOTES RECEIVABLE AND MORTGAGES
Mortgage Unit Mortgage Mortgage Recording Recording Recording Name Number Week Subdivision Amount Document No. Date Book Page ---- ------ ---- ----------- ------ ------------ ---- ---- ----
F-4 Exhibit H FORM OF ENDORSEMENT Pay to the order of GENERAL ELECTRIC CAPITAL CORPORATION, with full recourse and warranty. BLUEGREEN/BIG CEDAR VACATIONS, LLC, a Delaware limited liability company By: ---------------------------------- Name: -------------------------------- Its: --------------------------------- H-1 Exhibit I SPECIFIC OPERATING CONTRACTS Operating Contracts 1. Refer to Items 1-18 on Schedule 4.13. 2. Management Agreement, dated January 1, 2002, by and between Big Cedar Wilderness Club Condominium Association, Inc. and Bluegreen Resorts Management, Inc. 3. Agreement for the Purchase of Electric Power and Energy, dated November 13, 2001, between White River Valley Electric Cooperative, Inc. and Bluegreen/Big Cedar Vacations, LLC. 4. Lease, dated 2005, by and between Bluegreen/Big Cedar Vacations, LLC and Jerry's Boat & Mini Storage. I-1 Exhibit J PERMITTED EXCEPTIONS 1. Covenants and Restrictions recorded July 14, 1967 in Book 181, Page 27, Taney County, Missouri Recorder's Office. 2. Covenants and Restrictions recorded June 24, 1971 in Book 202, Page 61, Taney County, Missouri Recorder's Office. 3. Covenants and Restrictions recorded June 24, 1971 in Book 202, Page 62, Taney County, Missouri Recorder's Office. 4. Covenants and Restrictions recorded June 24, 1971 in Book 202, Page 63, Taney County, Missouri Recorder's Office. 5. Covenants and Restrictions recorded July 15, 1971 in Book 202, Page 127, Taney County, Missouri Recorder's Office. 6. Covenants and Restrictions recorded August 31, 1971 in Book 202, Page 241, Taney County, Missouri Recorder's Office. 7. Covenants and Restrictions recorded August 31, 1971 in Book 202, Page 330, Taney County, Missouri Recorder's Office. 8. Covenants and Restrictions recorded July 1, 1980 in Book 251, Page 1520, Taney County, Missouri Recorder's Office. 9. Covenants and Restrictions recorded June 23, 2000 in Book 371, Page 2829, Taney County, Missouri Recorder's Office. 10. Terms and provisions of the Subordination and Non-Disturbance Agreement recorded August 17, 2000 in Book 373, Page 3340, Taney County, Missouri Recorder's Office. 11. Easement agreement recorded August 3, 2000 in Book 371, Page 2834, Taney County, Missouri Recorder's Office. 12. Easement agreement recorded August 3, 2000 in Book 372, Page 6840, Taney County, Missouri Recorder's Office. 13. UCC Financing Statement filed August 3, 2000, in Book 372, Page 6833, executed by Big Cedar L.L.C. to Bluegreen Vacations Unlimited, Inc. affecting the items therein described, which have become affixed to the premises in question. 14. Terms, provisions, restrictive covenants, conditions, reservations, rights, duties and easements contained in the Amended and Restated Declaration of Condominium and Bylaws for the BIG CEDAR WILDERNESS CLUB CONDOMINIUM, and any Exhibits annexed thereto, including but not limited to, provisions for a private charge or assessments and a right of first refusal or the prior approval of a future purchaser or occupant, as recorded in J-1 Book 478, Pages 7189-7322, of the Taney County Recorder's Office, and any amendments thereto, together with the corresponding percentage interest in the common elements and limited common elements appurtenant thereto. In addition, Permitted Exceptions shall mean and include: (i) Liens for state, municipal and other local taxes if such taxes shall not at the time be due and payable; (ii) Liens in favor of Lender pursuant to the Loan Agreement; (iii) Materialmen's, warehousemen's, mechanics' and other Liens arising by operation of law in the ordinary course of business for sums not due; (iv) The Purchaser's interest in the Timeshare Interest relating to the Financed Note Receivable whether pursuant to the Club Trust Agreement or otherwise; (v) Any Owner Beneficiary Rights. J-2 Exhibit K SALES REPORT K-1 LOAN AND SECURITY AGREEMENT between BLUEGREEN/BIG CEDAR VACATIONS, LLC, a Delaware limited liability company BORROWER and GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation LENDER TABLE OF CONTENTS Page ARTICLE 1 THE LOAN............................................................17 1.1 The Loan.......................................................17 1.2 Advances of Loan Proceeds......................................17 1.3 Interest Rate..................................................18 1.4 Payments; Term.................................................19 1.5 Prepayments....................................................19 1.6 Commitment Fee.................................................21 1.7 Receipt of Payments............................................21 1.8 Taxes..........................................................21 1.9 Single Loan....................................................22 1.10 Application of Advances........................................22 ARTICLE 2 COLLATERAL..........................................................22 2.1 Grant of Security Interest.....................................22 2.2 Security Agreement.............................................23 ARTICLE 3 INSURANCE, CONDEMNATION AND IMPOUNDS................................23 3.1 Insurance......................................................23 3.2 Use and Application of Insurance Proceeds......................25 3.3 Condemnation...................................................25 ARTICLE 4 REPRESENTATIONS AND WARRANTIES......................................26 4.1 Organization and Power.........................................26 4.2 Validity of Loan Documents.....................................26 4.3 Liabilities; Litigation; Other Secured Transactions............26 4.4 Taxes and Assessments..........................................27 4.5 Other Agreements; Defaults.....................................27 4.6 Compliance with Law............................................27 4.7 Location of Borrower...........................................27 4.8 ERISA..........................................................27 4.9 Margin Stock...................................................28 4.10 Tax Filings....................................................28 4.11 Solvency.......................................................28 4.12 Full and Accurate Disclosure...................................28 4.13 Contracts with Affiliates; Subordinated Indebtedness...........29 4.14 Intellectual Property..........................................29 4.15 Title; Prior Liens.............................................29 4.16 Intentionally Deleted..........................................30 4.17 Eligible Notes.................................................30 4.18 Intentionally Deleted..........................................30 4.19 Representations as to the Association..........................30 4.20 Operating Contracts............................................31 4.21 Consumer Law Matters...........................................31 -i- ARTICLE 5 COVENANTS...........................................................31 5.1 Due on Sale and Encumbrance; Transfers of Interests............31 5.2 Taxes; Charges.................................................32 5.3 Control; Management............................................32 5.4 Operation; Maintenance; Inspection.............................33 5.5 Taxes on Security..............................................33 5.6 Legal Existence; Name, Etc.....................................33 5.7 Affiliate Transactions.........................................34 5.8 Further Assurances.............................................34 5.9 Estoppel Certificates..........................................34 5.10 Notice of Certain Events.......................................34 5.11 Indemnification................................................35 5.12 Application of Loan Proceeds/Operating Revenues................35 5.13 Compliance with Laws...........................................35 5.14 Litigation and Proceeding......................................36 5.15 Collateral.....................................................36 5.16 Sale of Collateral; Proceeds...................................37 5.17 Intentionally Deleted..........................................37 5.18 Performance of Operating Contracts.............................37 5.19 Servicing of Financed Notes Receivable.........................37 5.20 Custodian......................................................38 5.21 Maintenance....................................................38 5.22 Records........................................................38 5.23 Other Documents................................................38 5.24 Inspections and Audits.........................................38 5.25 Notices Regarding Lender's Interests...........................39 5.26 Payment of Charges.............................................39 5.27 Amendment of Timeshare Documents...............................40 ARTICLE 6 FINANCIAL COVENANTS; REPORTING REQUIREMENTS.........................40 6.1 Financial Covenants............................................40 6.2 Reporting Requirements.........................................40 ARTICLE 7 EVENTS OF DEFAULT...................................................43 7.1 Payments.......................................................43 7.2 Insurance......................................................43 7.3 Transfer.......................................................43 7.4 Covenants......................................................43 7.5 Representations and Warranties.................................43 7.6 Other Encumbrances.............................................43 7.7 Involuntary Bankruptcy or Other Proceeding.....................43 7.8 Voluntary Petitions, Etc.......................................44 7.9 Suspension of Sales............................................44 7.10 Default by Borrower in Other Agreements........................44 7.11 Other Agreements...............................................44 ARTICLE 8 REMEDIES............................................................44 8.1 Remedies - Insolvency Events...................................44 -ii- 8.2 Remedies - Other Events........................................44 8.3 Lender's Right to Perform the Obligations......................45 8.4 Remedies Upon Default..........................................45 8.5 Funds of Lender................................................46 8.6 Application of Collateral; Termination of Agreements...........46 8.7 Direct Disbursement and Application by Lender..................46 8.8 Waivers........................................................46 8.9 Commercial Reasonableness......................................47 8.10 Cumulative Rights..............................................47 8.11 Intercreditor Agreement........................................47 ARTICLE 9 CERTAIN RIGHTS OF LENDER............................................48 9.1 Protection of Collateral.......................................48 9.2 Performance by Lender..........................................48 9.3 Costs..........................................................48 9.4 Assignment of Lender's Interest................................48 9.5 Notice to Purchasers...........................................48 9.6 Collection of Notes............................................48 9.7 Power of Attorney..............................................49 ARTICLE 10 ANTI-MONEY LAUNDERING AND INTERNATIONAL TRADE CONTROLS.............49 10.1 Compliance with International Trade Control Laws and OFAC Regulations....................................................49 10.2 Borrower's Funds...............................................50 ARTICLE 11 ENVIRONMENTAL MATTERS..............................................51 11.1 Representations and Warranties on Environmental Matters........51 11.2 Covenants on Environmental Matters.............................51 ARTICLE 12 MISCELLANEOUS......................................................53 12.1 Notices........................................................53 12.2 Amendments and Waivers; References.............................54 12.3 Limitation on Interest.........................................54 12.4 Invalid Provisions.............................................55 12.5 Reimbursement of Expenses......................................55 12.6 Approvals; Third Parties; Conditions...........................55 12.7 Lender Not in Control; No liability or Partnership.............56 12.8 Time of the Essence............................................56 12.9 Successors and Assigns.........................................56 12.10 Renewal, Extension, Rearrangement, Loan Outplacement...........56 12.11 Waivers........................................................57 12.12 Cumulative Rights..............................................57 12.13 Singular and Plural............................................57 12.14 Phrases........................................................57 12.15 Exhibits and Schedules.........................................58 12.16 Titles of Articles, Sections and Subsections...................58 12.17 Promotional Material...........................................58 -iii- 12.18 Survival.......................................................58 12.19 WAIVER OF JURY TRIAL...........................................58 12.20 Punitive or Consequential Damages; Waiver......................58 12.21 Governing Law..................................................59 12.22 Entire Agreement...............................................59 12.23 Counterparts...................................................59 12.24 Limitation on Liability of Borrower's, Guarantor's and Lender's Officers, Employees, Etc..............................59 12.25 Venue..........................................................59 INDEX OF EXHIBITS AND SCHEDULES Schedule 1.1: Advance Conditions Schedule 2.3: Form of Reassignment of Security Instrument Exhibit 1: Reassignment of Contracts, Notes Receivable and Mortgages Schedule 4.1: Organizational Matters Schedule 4.13 Contracts with Affiliates Schedule 4.17 Description of Amenities] Schedule 5.11 Litigation Schedule 5.13 Jurisdictions of Sales Exhibit A: Land Exhibit B: Form of Availability Report Exhibit C: Form of Borrower Estoppel Exhibit D: Availability Percentages Exhibit E: Request for Advance Exhibit F: Form of Collateral Assignment of Contracts, Notes Receivable and Mortgages Schedule 1: List of Notes Receivable and Purchase Documents and Mortgages, together with all necessary land record information. Exhibit H: Form of Endorsement Exhibit I: Specific Operating Contracts Exhibit J: Permitted Exceptions Exhibit K: Sales Report -iv- EX-10.88 3 d71810_ex10-88.txt REVOLVING PROMISSORY NOTE Exhibit 10.88 REVOLVING PROMISSORY NOTE $45,000,000.00 April 16, 2007 For value received, BLUEGREEN/BIG CEDAR VACATIONS, LLC, a Delaware limited liability company ("Borrower"), promises and agrees to pay to the order of GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation ("Lender"), in lawful money of the United States of America, the principal sum of $45,000,000.00 or so much thereof as may be outstanding under the Loan and Security Agreement of even date herewith between Borrower and Lender (the "Loan Agreement"), with interest on the unpaid principal sum owing thereunder at the rate or rates or in the amounts computed in accordance with the Loan Agreement, together with all other amounts due Lender under the Loan Agreement, all payable in the manner and at the time or times provided in the Loan Agreement. Capitalized terms used herein, but not defined, shall have the meanings assigned to them in the Loan Agreement. If not sooner due and payable in accordance with the Loan Agreement, Borrower shall pay to Lender all amounts due and unpaid under the Loan Agreement on April 16, 2016. Unless otherwise specified in writing by Lender or as set forth in the Lockbox Agreement, all payments hereunder shall be paid to Lender at GEMSA Loan Services, L.P., File 55307, Los Angeles, CA 90074-5307. Lender reserves the right to require, upon five (5) Business Days prior written notice to Borrower, any payment on this Note, whether such payment is a regular installment, prepayment or final payment, to be by wired federal funds or other immediately available funds. All payments to Lender shall be drawn on an account owned by Borrower or another Person approved in writing in advance by Lender and maintained at a banking institution organized under the laws of the United States or one of its constituent States, or at a federally-regulated securities broker-dealer. For purposes of the foregoing sentence, the Lockbox Account shall be deemed to be sufficient to satisfy the foregoing. Borrower expressly waives demand and presentment for payment, notice of nonpayment, protest, notice of protest, notice of dishonor, notice of intent to accelerate the maturity hereof, notice of the acceleration of the maturity hereof, bringing of suit and diligence in taking any action to collect amounts called for hereunder and in the handling of any Collateral at any time existing in connection herewith; Borrower and Guarantor are and shall be jointly, severally, directly and primarily liable for the payment of all sums owing and to be owing hereon, regardless of and without any notice, diligence, act or omission as or with respect to the collection of any amount called for hereunder or in connection with any right, lien, interest or property at any and all times had or existing as Collateral for any amount called for hereunder. This Revolving Promissory Note evidences all Advances made or to be made, interest due and all amounts otherwise owed to Lender under the Loan Agreement. This Note is executed in conjunction with the Loan Agreement and is secured by the liens and security interests created under the Loan Documents. Reference is made to the Loan Agreement for provisions relating to repayment of the indebtedness evidenced by this Note, including -1- mandatory repayment, acceleration following default, late charges, default rate of interest, limitations on interest and restrictions on prepayment. This Note has been executed and delivered in and shall be construed in accordance with and governed by the laws of the State of Illinois and of the United States of America. Executed as of the date first written above. BLUEGREEN/BIG CEDAR VACATIONS, LLC, a Delaware limited liability company By: ------------------------------- Name: ------------------------------- Title: ------------------------------- -2- EX-10.150 4 d71810_ex10-150.txt OFFER LETTER Exhibit 10.150 [LOGO] bluegreen(R) colorful places to live and play(TM) April 25, 2007 Mr. David L. Pontius 459 Henkel Circle Winter Park, FL 32789 Dear Dave: I am pleased to offer you the position of President, Resorts Division and Senior Vice President of Bluegreen Corporation, reporting to me. As I mentioned, it is my intention to recommend to the Nomination & Governance Committee of the Board to change the title to Executive Vice President of the Corporation. Your effective start date will be June 1, 2007. Your annual salary will be $500,000.00 paid at the bi-weekly rate of $19,230.77. In addition, you will receive a bonus budgeted to equal 100% of your base salary or $500,000.00, based upon achievement of the Resort Division's targeted financial metric at plan with a potential of up to 150% of base salary, based upon exceeding the same targeted financial metric. For the year 2007, you will receive a full bonus payment based on full year participation. You will also be eligible for long-term incentive (LTI) compensation budgeted to equal $300,000.00 based on achievement of the Resort Division's targeted financial metric at plan, up to a maximum of $600,000.00 for exceeding the same targeted financial metric. For any year, if the LTI earned is less than $300,000.00, you will be guaranteed an additional payment of $100,000.00, paid in the Fiscal year that the LTI fully vests. If the LTI earned is between $300,000.00 and $400,000.00 you will be paid the difference between the actual award and $400,000.00 in the year the LTI fully vests. If the LTI earned is $400,000.00 or over, the LTI payment will equal what is earned for that year according to the LTI schedule. The form of the LTI compensation will be determined on a future date in 2007. You will also be eligible for a signing bonus of $450,000.00 to be paid in three equal installments of $150,000.00 in January 2008, January 2009, and January 2010. In addition, you will receive a $12,000.00 annual car allowance. All compensation is paid according to Accounting and Human Resources policies and procedures, and all applicable IRS regulations, state and federal laws. In the event you are terminated without cause you will receive a 12-month base salary severance plus a prorated bonus payment based on performance versus objectives. 4960 Conference Way North, Suite 100 Boca Raton, FL 33431 Tel: 561.912.8000 Fax: 561.912.8100 - -------------------------------------------------------------------------------- www.bluegreenonline.com NYSE:BXG - -------------------------------------------------------------------------------- Page 2 David Pontius You also will be eligible to participate in the Company sponsored health insurance program three months from your date of hire and Bluegreen Corporation's Retirement Savings Plan - 401(k) the beginning of the quarter immediately following one year of service in accordance with the eligibility requirements of the Plan. You are also eligible for four weeks of paid vacation time per year, to be incorporated into the Company's Paid Time Off Program. Also, if needed, the Company will reimburse you for the incremental cost in your health insurance (C.O.B.R.A. payment less your former employee premium), until such time that you are eligible to participate in the Company sponsored health insurance program. Please note reimbursed COBRA expenditures will be treated as taxable compensation to you as required by IRS regulations. For your information, our fiscal weeks run Monday through Sunday and payroll is processed bi-weekly for the two weeks ending the Sunday before payday. Per Company policy this offer is contingent upon the satisfactory results of our standard background investigation and drug test. If you agree to the terms of this employment offer letter, please sign on the "Accepted" line at the bottom of both letters, return the original copy for our files and retain one copy for you. David, I look forward to working with you and having you as a key member of my management team. If you have any questions regarding the above information, please feel free to call me or Susan Saturday at (561) 912-8080. Very truly yours, /s/ John M. Maloney Jr. John M. Maloney Jr. President & CEO Bluegreen Corporation Accepted: /s/ David L. Pontius Dated: 4/27/07 ---------------------- David L. Pontius CC: Susan Saturday EX-10.216 5 d71810_ex10-216.txt CONSTRUCTION LOAN AND SECURITY AGREEMENT Exhibit 10.216 CONSTRUCTION LOAN AND SECURITY AGREEMENT By and Among TEXTRON FINANCIAL CORPORATION and BLUEGREEN VACATIONS UNLIMITED, INC. and BLUEGREEN CORPORATION As of: March 23, 2007 EXECUTION VERSION TABLE OF CONTENTS Page 1. Definitions and Construction................................................1 1.1 Definitions.......................................................1 1.2 Construction.....................................................11 1.3 Schedules and Exhibits...........................................11 1.4 Accounting Principles............................................12 2. The Loan...................................................................12 2.1 General..........................................................12 2.2 Intentionally Omitted............................................12 2.3 Construction Loan................................................12 2.4 Advances.........................................................12 2.5 Intentionally Omitted............................................13 2.6 Requests for Construction Advance................................13 2.7 Amounts in Excess of Maximum Loan Amount.........................13 2.8 Use of Proceeds..................................................13 2.9 Closing..........................................................14 2.10 Maximum Relationship Amount.....................................14 3. Loan Documents and Loan Account...........................................14 3.1 Loan Documents..................................................14 3.2 Loan Account....................................................14 4. Interest Rate..............................................................14 4.1 Primary Interest Rate............................................14 4.2 Default Rate.....................................................15 4.3 Calculation of Interest..........................................15 4.4 Limitation of Interest to Maximum Lawful Rate....................15 5. Fees.......................................................................15 5.1 Loan Fee.........................................................15 5.2 Late Charge......................................................15 5.3 General.........................................................16 6. Payments...................................................................16 6.1 General..........................................................16 6.2 Reinstatement of Obligations.....................................17 6.3 Prepayment.......................................................17 6.4 Indemnity........................................................17 7. Security; Guaranties.......................................................18 7.1 Security.........................................................18 7.2 Cross-Default....................................................20 i 7.3 Guaranty.........................................................20 7.4 Additional Documents and Future Actions..........................20 7.5 Location of Collateral...........................................20 7.6 Insurance and Protection of Collateral...........................20 8. Funding Procedures.........................................................20 8.1 General..........................................................20 8.2 Disbursement Agent...............................................21 8.3 Payment of Bills.................................................21 8.4 Construction Component Portion...................................21 8.5 Retainage; Conditions Precedent to Final Disbursements...........21 8.6 Deposit of Funds Advanced/Advances to Disbursement Agent, Architect, Contractor and Subcontractors.........................23 8.7 Advances Do Not Constitute a Waiver..............................23 9. Representations and Warranties.............................................23 9.1 Organization; Power..............................................23 9.2 Authorization; No Legal Restrictions; No Breach of Other Agreements.................................................24 9.3 Approvals; Licenses, Etc.........................................25 9.4 Enforceability...................................................25 9.5 Title............................................................25 9.6 Liens............................................................25 9.7 Financial Statements and Financial Condition.....................25 9.8 Taxes............................................................26 9.9 Subsidiaries; Affiliates and Capital Structure...................27 9.10 Litigation Proceedings, Etc.....................................27 9.11 Licenses; Permits; Etc.........................................27 9.12 Environmental Matters...........................................27 9.13 Full Disclosure.................................................28 9.14 Use of Proceeds/Margin Stock....................................28 9.15 No Defaults.....................................................28 9.16 Compliance with Law.............................................28 9.17 Restrictions of Borrower or Guarantors..........................29 9.18 Broker's Fees...................................................29 9.19 Deferred Compensation Plans.....................................29 9.20 Labor Relations.................................................29 9.21 Tax Identification/Social Security Numbers......................30 9.22 Insurance.......................................................30 9.23 Names and Addresses.............................................30 9.24 Solvency.......................................................30 9.25 Common Enterprise..............................................30 9.26 Intentionally Omitted...........................................31 9.27 Completeness of Representations.................................31 9.28 No Violation of Right of First Refusal.........................31 ii 10. Representations, Warranties and Covenants.................................31 10.1 Access and Utilities............................................31 10.2 Compliance.....................................................31 10.3 Declarations...................................................31 10.4 Zoning Laws, Building Codes, Etc...............................32 10.5 Units Ready for Use............................................32 10.6 Mortgaged Property and Taxes and Fees..........................32 10.7 No Defaults....................................................32 10.8 Timeshare Plan.................................................32 10.9 Sale of Timeshare Interests....................................33 10.10 Brokers.......................................................33 10.11 Tangible Property.............................................33 10.12 Condition of Project..........................................34 10.13 Assessments and Developer Subsidy.............................34 10.14 Amenities....................................................34 10.15 Permits and Licenses..........................................34 10.16 Wetlands......................................................34 10.17 Mechanics Lien Claims.........................................34 10.18 Project Contracts.............................................34 10.19 Certified Survey Map Approved..................................34 10.20 Site Plan Approval.............................................34 10.21 Club Plan......................................................35 10.22 Reservation System.............................................35 10.23 One to One Ratio Compliance....................................35 10.24 Club Documents.................................................35 11. Construction Representations, Warranties and Covenants....................35 11.1 Construction....................................................36 11.2 Cost Certificate................................................36 11.3 Construction Contract...........................................36 11.4 Architect's Contract............................................37 11.5 Subcontracts....................................................38 11.6 Specifications.................................................38 11.7 Permits.........................................................39 11.8 Commencement of Construction....................................39 11.9 Zoning and Land Use.............................................39 11.10 Additional Equity..............................................39 11.11 No Developer's Fee.............................................40 11.12 Right of Lender to Inspect Development Parcel and Review Specifications..........................................40 11.13 Correction of Defects..........................................40 11.14 Notification of Mechanics Lien Claims..........................40 11.15 Construction Tests.............................................40 11.16 Substantial Completion.........................................41 iii 11.17 Occupancy Permits.............................................41 11.18 Notice of Completion...........................................41 11.19 Compliance with Inspector's Standards..........................42 11.20 Bonding Requirements...........................................42 11.21 Force Majeure..................................................42 11.22 Lien Waivers...................................................42 11.23 Specifications.................................................42 12. General Affirmative Covenants.............................................42 12.1 Payment and Performance of Obligations..........................43 12.2 Business Office.................................................43 12.3 Maintenance of Existence, Qualification and Assets..............43 12.4 Consolidation and Merger........................................43 12.5 Maintenance of Insurance........................................43 12.6 Maintenance of Security.........................................43 12.7 Payment of Taxes and Claims.....................................44 12.8 Inspections.....................................................44 12.9 Records.........................................................45 12.10 Management.....................................................45 12.11 Maintenance....................................................45 12.12 Local Legal Compliance.........................................45 12.13 Registration Compliance........................................45 12.14 Other Compliance...............................................46 12.15 Further Assurances.............................................46 12.16 Maintenance and Amenities......................................46 12.17 Loan Costs.....................................................46 12.18 Indemnification of Lender......................................46 12.19 Use of Borrower's Name.........................................48 12.20 Right to Provide Future Financing..............................48 12.21 Inspector......................................................48 12.22 Sales and Marketing...........................................49 12.23 Project Contracts.............................................49 12.24 Consents.......................................................49 12.25 Engineering Survey............................................49 12.26 Intentionally Omitted.........................................49 12.27 Exchange Company..............................................49 12.28 Intentionally Omitted.........................................50 12.29 One to One Ratio Compliance...................................50 13. Reporting Requirements....................................................50 13.1 Intentionally Omitted...........................................50 13.2 Quarterly Financial Reports.....................................50 13.3 Annual Financial Reports of Guarantors..........................50 13.4 Officer's Certificate...........................................50 13.5 Audit Reports...................................................51 iv 13.6 Sales Reports...................................................51 13.7 Association Reports.............................................51 13.8 Notice of Default or Event of Default...........................51 13.9 Notice of Claimed Default.......................................51 13.10 Material Adverse Developments..................................51 13.11 Other Information..............................................52 14. Negative Covenants........................................................52 14.1 Organization....................................................52 14.2 Operating Contracts.............................................52 14.3 Limitation on Other Debt/Further Encumbrances...................52 14.4. Intentionally Omitted..........................................52 14.5 Amendment of Declarations, Etc..................................52 14.6 Ownership.......................................................52 14.7 Other Liens or Assignments......................................53 14.8 Merger, Etc.....................................................53 14.9 Use of Lender's Name............................................53 14.10 Transactions with Affiliates...................................53 14.11 Name or Address Change.........................................53 14.12. Intentionally Omitted........................................53 14.13 Distributions..................................................53 14.14. Intentionally Omitted........................................54 14.15 Intentionally Omitted.........................................54 14.16 Restrictions on Transfers......................................54 14.17 Restrictive Covenants..........................................54 14.18. Intentionally Omitted........................................54 14.19. Intentionally Omitted........................................54 14.20 Intentionally Omitted.........................................54 14.21 Amenities......................................................54 14.22 Changes in Accounting.........................................54 14.23 Club Reservation System.......................................55 15. Affiliate Indebtedness....................................................55 16. Financial Covenants.......................................................55 16.1 Minimum Tangible Net Worth......................................55 16.2 Minimum Debt to Tangible Net Worth Ratio.......................56 17. Conditions of and Documents to be Delivered at the Closing................56 17.1 Loan Documents..................................................56 17.2 Opinions of Counsel.............................................56 17.3 Project Documents...............................................56 17.4 Association Documents...........................................56 17.5 Obligors' Documents.............................................56 17.6 Good Standing Certificates......................................57 17.7 Insurance.......................................................57 v 17.8 Flood Insurance.................................................57 17.9 Authorizing Resolutions.........................................57 17.10 UCC-1 Financing Statements.....................................57 17.11 UCC-1 Search Report............................................57 17.12 Releases.......................................................57 17.13 Closing Certificates...........................................58 17.14 Compliance.....................................................58 17.15 Borrower's Certificate of Indemnity............................58 17.16 Mortgagee Title Insurance Commitment and Policy................58 17.17 Taxes and Assessments..........................................59 17.18 Preclosing Inspections.........................................59 17.19 Expenses.......................................................59 17.20 14.12. Intentionally Omitted.............................59 17.21 Intentionally Omitted..........................................59 17.22 Permits and Approvals..........................................59 17.23 Project Contracts..............................................59 17.24 Compliance with Planning and Zoning............................59 17.25 Project Broker.................................................59 17.26 Escrow Agreements..............................................60 17.27 Credit References..............................................60 17.28 Acquisition Equity.............................................60 17.29 Post-Closing Requirements......................................60 17.30 Other..........................................................60 18. Conditions to Lender's Obligation to Make Construction Advances...........60 18.1 Documents.......................................................60 18.2 Representations and Warranties..................................60 18.3 Covenants.......................................................61 18.4 No Default......................................................61 18.5 Request for Construction Advance................................61 18.6 Soft Costs......................................................61 18.7 Other Agreements................................................62 18.8 Construction Documents..........................................62 18.9 Contractor's Insurance..........................................62 18.10 Intentionally Omitted..........................................62 18.11 Intentionally Omitted..........................................62 18.12 Certificates of Substantial Completion.........................62 18.13 Compliance.....................................................62 18.14 Lien Waivers, etc..............................................62 18.15 Title Policy Endorsements......................................63 18.16 Fees and Expenses..............................................63 18.17 Permits and Approvals..........................................63 18.18 Lender's Mortgage..............................................63 18.19 Completion of Work.............................................63 18.20 Additional Equity.............................................63 vi 18.21 Advances Do Not Constitute a Waiver............................63 18.22 No Obligation to Fund After Filed Liens........................63 18.23 Stored Goods...................................................64 18.24 Other..........................................................64 19. Default; Remedies........................................................64 19.1 Payments........................................................64 19.2 Covenant Defaults...............................................64 19.3 Warranties or Representations...................................64 19.4 Enforceability of Liens.........................................65 19.5 Involuntary Proceedings.........................................65 19.6 Proceedings.....................................................65 19.7 Attachment; Judgment; Tax Liens.................................65 19.8 Intentionally Omitted...........................................65 19.9 Removal of Collateral...........................................65 19.10. Intentionally Omitted.........................................65 19.11 Default of Guarantor..........................................66 19.12 Merger or Dissolution..........................................66 19.13 Default by Borrower or Guarantor Under Other Agreements........66 19.14 Loss of License................................................66 19.15 Suspension of Sales............................................66 19.16 Violation of Negative Covenants................................66 19.17 Deficiency.....................................................66 19.18 Abandonment or Cessation of Construction.......................66 19.19 Lien Against Development Parcel................................66 19.20 Unauthorized Work..............................................67 19.21 Breach.........................................................67 19.22 Criminal Proceedings...........................................67 19.23 Intentionally Omitted..........................................67 19.24 Intentionally Omitted..........................................67 19.25 Intentionally Omitted..........................................67 19.26 Bonding Requirements...........................................67 19.27 Intentionally Omitted..........................................67 19.28 Fraud..........................................................67 19.29 Intentionally Omitted..........................................67 19.30 Insolvency.....................................................67 19.31 Encroachments and Permits......................................67 19.32 Material Adverse Change........................................68 19.33 Cessation of Business..........................................68 20. Termination of Obligation to Advance/Remedies............................68 20.1 Termination of Obligation to Advance............................68 20.2 Remedies........................................................68 20.3 Notice of Sale of Personal Property Collateral..................73 20.4 Application of Collateral; Termination of Agreements............74 vii 20.5 Suits to Protect the Development Parcel.........................74 20.6 Rights of Lender Regarding Collateral...........................74 20.7 Waiver of Appraisement Valuation, Stay, Extension and Redemption Laws.............................................75 20.8 Delegation of Duties and Rights.................................75 20.9 Lender Not in Control...........................................75 20.10 Waivers........................................................75 20.11 Cumulative Rights..............................................77 20.12 Expenditures by Lender.........................................77 20.13 Diminution in Value of Collateral..............................77 20.14 Discontinuance of Proceedings..................................77 21. Partial Releases; Other Releases..........................................77 22. Certain Rights of Lender..................................................78 22.1 Protection of Collateral........................................78 22.2 Performance by Lender...........................................79 22.3 No Liability of Lender..........................................79 22.4 Right to Defend Action Affecting Security.......................79 22.5 Indemnities, Loan Costs and Expenses............................79 22.6 Lender's Right of Set-Off.......................................79 22.7 No Waiver.......................................................80 22.8 Right of Lender to Extend Time of Payment, Substitute, Release Security, Etc...........................................80 22.9 Assignment of Lender's Interest.................................80 22.10 Power of Attorney..............................................81 22.11 Relief from Automatic Stay, Etc................................81 22.12 Investigations and Inquiries...................................81 23. Miscellaneous............................................................82 23.1 Notices.........................................................82 23.2 Term of Agreement...............................................83 23.3 Survival........................................................83 23.4 Continuation and Investigation..................................83 23.5 Governing Law; Consent to Jurisdiction..........................83 23.6 Invalid Provisions..............................................84 23.7 Successors and Assigns..........................................84 23.8 Amendment.......................................................85 23.9 Counterparts; Effectiveness; Facsimile..........................85 23.10 Lender Not Fiduciary...........................................85 23.11 Total Agreement................................................85 23.12 Consents, Approvals and Discretion.............................85 23.13 Litigation.....................................................85 23.14 Submissions....................................................86 23.15 Incorporation of Exhibits......................................86 viii 23.16 Consent to Advertising and Publicity of Documents..............86 23.17 Control of Association.........................................87 23.18 Directly or Indirectly.........................................87 23.19 Savings Clause.................................................87 23.20 Reimbursement for Taxes........................................87 23.21 Headings.......................................................87 23.22 Gender.........................................................87 23.23 Time of the Essence............................................88 23.24 Conflict.......................................................88 23.25 Joinder and Consent............................................88 Schedules Schedule 9.8 - Taxes Schedule 9.9 - Subsidiaries Schedule 9.10 - Litigation Schedule 9.23 - Names and Addresses Schedule 10.18 - Project Contracts Schedule 14.7 - Permitted Liens Schedule 21 - Form of Partial Release ix TABLE OF EXHIBITS EXHIBIT A-1 LEGAL DESCRIPTION OF PHASE 2 LAND EXHIBIT A-2 LEGAL DESCRIPTION OF EXISTING UNITS EXHIBIT B INTENTIONALLY OMITTED EXHIBIT C FORM OF REQUEST FOR CONSTRUCTION COMPONENT ADVANCE EXHIBIT D APPROVED SITE PLAN EXHIBIT E PHASE 2 COST CERTIFICATE EXHIBIT F FORM OF OFFICER'S CERTIFICATE x CONSTRUCTION LOAN AND SECURITY AGREEMENT THIS CONSTRUCTION LOAN AND SECURITY AGREEMENT is made effective as of March ____, 2007 by and among TEXTRON FINANCIAL CORPORATION, a Delaware corporation ("Lender"), BLUEGREEN VACATIONS UNLIMITED, INC., a Florida corporation ("Borrower"), and BLUEGREEN CORPORATION, a Massachusetts corporation ("Guarantor"). NOW THEREFORE, in consideration of the mutual covenants and agreements contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are acknowledged, the parties to this Agreement, intending to be legally bound, hereby agree as follows: 1. Definitions and Construction. 1.1. Definitions. The following words and phrases as used in capitalized form in this Agreement, whether in the singular or plural, shall have the meanings indicated: Advance or Construction Advance means an advance of the proceeds of the Loan by Lender to or on behalf of Borrower in accordance with the terms of this Agreement. Affiliate means any Person: (a) which directly or indirectly controls, or is controlled by, or is under common control with such Person; (b) which directly or indirectly beneficially owns or holds five percent (5%) or more of the voting stock of such Person; or (c) for which five percent (5%) or more of the voting stock of which is directly or indirectly beneficially owned or held by such Person; provided, however, that under no circumstances shall Borrower or Guarantor be deemed an Affiliate of any 5% or greater shareholder of Guarantor or any Affiliate of such shareholder who is not a Direct Affiliate (as defined herein) of Guarantor, nor shall any such shareholder be deemed to be an Affiliate of Borrower or Guarantor. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. For purposes of this definition, any entity included in the same GAAP consolidated financial statements as Guarantor shall be an Affiliate of Guarantor (a "Direct Affiliate"). Affiliate Indebtedness means all present and future indebtedness or obligations owed by Borrower to Guarantor or to any Affiliate of Borrower or Guarantor. Agreement means this Construction Loan and Security Agreement, as amended, restated, extended or supplemented from time to time. Agreement to Provide Insurance means the Agreement to Provide Insurance dated as of the date hereof between Borrower and Lender, as amended, restated, extended or supplemented from time to time. Amenities means the recreational, access and utility facilities to be included as part of or to benefit the Project, including, without limitation, the such amenities may be further described in the Declarations, and Public Report. Amenities Agreements means collectively, each existing and future agreement, including without limitation, the Ingress and Egress Easement Agreement and the Declarations, which grant to the Borrower and to the owners of Units or Timeshare Interests at the Project the right to use the Amenities and which provides for certain easements, access and use rights and for the delivery of certain services at the Project or to Borrower or if applicable, to the Owners of Timeshare Interests, as such agreements may be amended, restated, extended or supplemented from time to time, and any new amenities agreements. Applicable Mechanics Lien Law means any statute, ordinance, rule or other law of the State or any governmental subdivision thereof, pertaining to the perfection and/or priority of the rights of mechanics', materialmen's or other contractors' claimants. Approved Costs means the costs disclosed in the final Phase 2 Cost Certificate, approved by Lender. Architect means Forum Architecture & Interior Design, Inc. and any replacement architect for the Work approved by Lender. Architect's Contract has the meaning set forth in Section 11.4. As-Built Survey has the meaning set forth in Section 8.5(f). Assignment of Construction Contract means that certain Assignment of Construction Contract from Borrower in favor of Lender pursuant to which Borrower assigns its rights but not its obligations under the Construction Contract to Lender. Assignment of Property Rights means that certain first priority Assignment of Property Rights made by Borrower in favor of Lender evidencing the collateral assignment to Lender of all property rights related to the Mortgaged Property. Association means Grande Villas at World Golf Village Condominium Association, Inc., a Florida not-for-profit corporation, together with its successors or assigns. Borrower means Bluegreen Vacations Unlimited, Inc., a Florida corporation. Business Day means each day which is not a Saturday or Sunday or a legal holiday under the laws of the State of Connecticut, the State of Rhode Island, the State of Florida or the United States. Closing means the closing of the transactions contemplated under 2 this Agreement. Closing Date means the effective date of this Agreement set forth in the heading of this Agreement. Club means the Bluegreen Vacation Club Multi-Site Timeshare Plan and its component site resorts; the Club is not a legal entity or association of any kind. Club Documents means the Bluegreen Vacation Club multi-site public offering statement and its exhibits as amended from time to time as filed in Florida with the Division. Code means the Uniform Commercial Code in force in the State of Florida, as amended from time to time. Collateral has the meaning set forth in Section 7.1. Commencement Date means on or before January 1, 2007 for Phase 2 Work. Commercial Leases has the meaning set forth in Section 7.1(e). Commitment means the Letter of Intent issued by Lender to Borrower dated July 14, 2006 and accepted on August 7, 2006. Completion of the Work means one hundred percent (100%) finished construction of the Work (not Substantial Completion) for Phase 2 in accordance with the Specifications for such Phase, certified to Lender by the Inspector, Borrower and Contractor. Condominium Act means the "Florida Condominium Act", Chapter 718, Florida Statutes, as it is amended from time to time. Condominium Plan means the Condominium Plan for the Project. Construction Contract has the meaning set forth in Section 11.3. Construction Advance Period means the period of time commencing on the Closing Date and ending on August 31, 2007, unless sooner terminated hereunder. Contractor means the general contractor(s) selected by Borrower and approved by Lender for any of the applicable Work, and any replacement general contractor approved by Lender. Debtor Relief Laws means all applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement, insolvency, reorganization or similar law, proceeding or device providing for the relief of debtors from time to time in effect and generally affecting the rights of creditors. Declarations means, collectively, the Northwest Commercial Declaration, the Northwest Master Declaration and the Timeshare Declaration. 3 Default Rate has the meaning set forth in Section 4.2. Disbursement Agent has the meaning set forth in Section 8.2. Division means the Division of Land Sales, Condominiums and Mobile Homes of the Department of Business and Professional Regulation for the State of Florida. Environmental Agreement means that certain Environmental Agreement of even date herewith between Borrower and Lender as amended, restated, extended or supplemented from time to time, and any new environmental agreement executed in its place. Environmental Laws has the meaning set forth in the Environmental Agreement. Event of Default means any Event of Default described in Section 19. Existing Units means the presently constructed seventy-two (72) condominium units and land upon which they have been constructed and related common elements and amenities, subject to the Declarations, as more particularly described on Exhibit "A-2" attached hereto. GAAP means generally acceptable accounting principles in the United States, applied on a consistent basis, as described in Opinions of the Accounting Principles Board of the American Institute of Certified Public Accountants and/or in statements of the Financial Accounting Standards Board which are applicable in the circumstances as of the date in question. Governing Documents means the certificate or articles of incorporation or formation, by-laws, partnership agreement, joint venture agreement, trust agreement, operating agreement or other organizational or governing documents of any Person. Governmental Agency shall have the meaning set forth in Section 12.18. Guarantor means Bluegreen Corporation, a Massachusetts corporation, its successors and assigns. Guaranty means each guaranty, surety agreement, guaranty and suretyship agreement and/or other similar agreement executed by the Guarantor in favor of Lender pursuant to which the Guarantor agrees to act as a guarantor for the Obligations and any amendment, restatement, extension or supplement thereto and any new guaranty or similar agreement given in substitution or replacement therefor and any new guaranty or surety agreement by any other Person with respect to all or any part of the Obligations. Hazardous Materials has the meaning set forth in the Environmental Agreement. 4 Incipient Default means any condition or event which, after notice or lapse of time or both, would constitute an Event of Default under this Agreement. Ingress and Egress Easement Agreement means that certain Ingress and Egress Easement Agreement between World Golf Village, Inc. and Vistana WGV, Ltd., as recorded in the Public Records of St. Johns County, Florida, as amended, restated, extended or supplemented from time to time. Inspector has the meaning set forth in Section 12.21. Lease Income has the meaning set forth in Section 7.1(f). Legal Requirements means all federal, state and local ordinances, laws, regulations, orders, judgments, decrees, determinations and other legal restrictions governing the Project, the Borrower, the Guarantor or their business or operations. Lender means Textron Financial Corporation, a Delaware corporation, its successors and assigns. Lender's Mortgage or Mortgage means that certain first priority Mortgage, Assignment of Rents and Security Agreement executed as of the date hereof from the Borrower, as mortgagor, in favor of the Lender, as mortgagee, encumbering the Mortgaged Property, as amended, restated, extended or supplemented from time to time. Loan means the revolving construction loan facility in an amount up to $12,500,000 to be extended by Lender to Borrower pursuant to this Agreement. Loan Account has the meaning set forth in Section 3.2. Loan Costs means all reasonable costs, expenses and fees incurred by Lender in connection with the Loan, including without limitation, those related to negotiating, preparing, documenting, closing and enforcing this Agreement and all other Loan Documents including, but not limited to: (a) the cost of preparing, reproducing and binding this Agreement, the other Loan Documents and all exhibits and schedules thereto; (b) the legal fees, expenses and disbursements of Lender's counsel; (c) Lender's out-of-pocket expenses (including fees and expenses of the Lender's counsel) relating to any Advances, amendments, waivers or consents; (d) all other fees and expenses (including fees and expenses of the Lender's counsel) relating to any Advances, amendments, waivers or consents; (e) all costs, outlays, legal fees and expenses of every kind and character had or incurred in (1) the interpretation or enforcement of any of the provisions of, or the creation, preservation or exercise of rights and remedies under, any of the Loan Documents including the costs of appeal (2) the preparation for, 5 negotiations regarding, consultations concerning, or the defense or prosecution of legal proceedings involving any claim or claims made or threatened against the Lender arising out of this transaction or the protection of the Collateral securing the Loan or Advances made hereunder, expressly including, without limitation, the defense by Lender of any legal proceedings instituted or threatened by any Person to seek to recover or set aside any payment or setoff theretofore, received or applied by the Lender with respect to the Obligations, and any and all appeals thereof; and (3) the advancement of any expenses provided for under any of the Loan Documents; (f) all fees and expenses relating to any escrow by the Title Company or any other escrow agent; (g) all costs and expenses incurred by Lender under the Loan and all late charges under the Loan; (h) all real and personal property taxes and assessments, documentary stamp and intangible taxes, sales taxes, recording fees, title insurance premiums and other title charges, document copying, transmittal and binding costs, appraisal fees, lien, judgment and litigation search costs, fees of architects, engineers, environmental consultants, surveyors and any special consultants, construction inspection fees, brokers fees, escrow fees, wire transfer fees, and all out-of-pocket expenses of Lender to conduct inspections or audits. Without limitation of the foregoing, Borrower shall pay the costs of UCC and other searches, UCC and other Loan Document recording fees and applicable taxes, and premiums on each title insurance policy delivered to Lender pursuant to this Agreement; and (i) all reasonable costs and expenses of Lender related to any meetings with Obligors or other Persons related to the transactions contemplated hereunder, audits or inspections of Obligors or the Project including without limitation travel expenses. Loan Documents means the Commitment, this Agreement, the Note, the Guaranty, the Lender's Mortgage, the Assignment of Property Rights, the Assignment of Construction Contract, any document evidencing any assignment or security interest described in Section 7.1, the Environmental Agreement, and all documents now or hereafter executed in connection with the Loans or securing the Obligations Loan Maturity Date means September 30, 2009. Management Agreement means the Management Agreement between the Association and the Manager for the management of the Project, as amended, restated, extended or supplemented from time to time, and any new management agreement executed in its place, all of which agreements (other than non-material revisions) must be in form and content reasonably approved by 6 Lender. Manager means Bluegreen Resorts Management, Inc., a Delaware corporation, and any replacement manager for the Project approved by Lender. Master Declaration means that certain Master Declaration of Covenants, Conditions and Restrictions dated as of August 25, 1998 and recorded in the Public Records of St. Johns County, Florida, in Book 1345, Page 1586, on September 3, 1998, as amended, restated, extended or supplemented from time to time. Master Property means the real property and existing or future improvements and amenities more particularly described in Exhibit "A" to the Master Declaration. Maximum Loan Amount means $12,500,000, as further described in Section 2.3 and subject to the restrictions set forth in Section 2.4. Mortgaged Property has the meaning set forth in Section 7.1(a). Northwest Commercial Declaration means that certain Declaration of Covenants and Restrictions for Saint Johns Northwest Commercial, dated as of July 24, 1996, and recorded in the Public Records of St. Johns County, Florida, in Book 1185, Page 649, as amended, restated, extended or supplemented from time to time. Northwest Master Declaration means that certain Declaration of Covenants and Restrictions for Saint Johns - Northwest Master, dated as of July 24, 1996, and recorded in the Public Records of St. Johns County, Florida, in Book 1185, Page 598, as amended, restated, extended or supplemented from time to time. Note means that certain Secured Promissory Note dated as the date hereof, payable to the order of Lender further evidencing the Borrower's obligation to repay the Loan and all interest thereon as amended, restated, extended or supplemented from time to time. Obligations means all payment and performance obligations and liabilities of each Obligor to Lender as evidenced by the Note or otherwise owed pursuant to the Loan Documents of every kind, nature and description, direct or indirect, absolute or contingent, due or to become due, contractual or tortious, liquidated or unliquidated, regardless of how such obligations or liabilities arise, including without limitation, the obligation of Borrower to pay (a) the principal of, premium, if any, on and interest on the Loan; and (b) all fees, costs, expenses, indemnities, obligations and liabilities of each Obligor owing at any time to Lender under or in respect of this Agreement and each of the other Loan Documents. 7 Obligor means Borrower and Guarantor, individually. Obligors means Borrower and Guarantor, collectively. One to One Ratio shall have the meaning set forth in Section 10.23. Owner or Owners means a Purchaser or Purchasers of a Timeshare Interest, the successive owner or owners of each Timeshare Interest so conveyed, and the Borrower with respect to Timeshare Interests not so conveyed. Permitted Liens or Permitted Exceptions shall have the meanings set forth in Section 14.7 and Section 9.5, respectively. Person means an individual, a government or any agency or subdivision thereof, a corporation, partnership, trust, unincorporated organization, association, joint stock company, limited liability company or other legal entity. Phase 1 means the Existing Units within the two buildings (numbered 3 and 4) and related facilities which make up a portion of Phase 1 of the Project. Phase 2 means the contemplated sixty (60) purpose-built Units in two buildings (numbered 5 and 6) and related facilities to be constructed as part of Phase 2 of the Project. Phase 2 Completion Date with respect to the Work means the earlier to occur of (a) the date of Completion of the Work for Phase 2 or (b) August 31, 2007 with respect to Phase 2. Phase 2 Cost Certificate shall have the meaning set forth in Section 11.2. Phase 2 Land means the land upon which the improvements to Phase 2 are being constructed, as more particularly described in Exhibit "A-1" attached hereto. Phase 2 Total Budget shall have the meaning set forth in Section 11.10. Phase 2 Work means the construction of sixty (60) purpose-built timeshare Units within Phase 2 of the Project and related facilities and the installation of the site development, landscaping, infrastructure, fixtures, furnishings and soft costs related thereto as shown as costs on the Phase 2 Total Budget and being performed by the Contractor, as further described in the applicable Specifications for Phase 2. Phase means individually, Phase 1 or Phase 2. Phases mean collectively, Phase 1 or Phase 2. Project means collectively, the Existing Units, the Phase 2 Land, and all associated Amenities owned by Borrower. The Project presently consists of Phase 1, and it is contemplated that Phase 2, will be constructed on the Phase 8 2 Land. Project Contracts means each of the agreements listed on Schedule 10.18 and all other existing and future agreements relating to the development, operation, common areas, management, marketing, sales and maintenance of the Mortgaged Property, to the extent the amount to be performed after the date hereof exceeds $50,000 per contract or agreement. Project Documents has the meaning set forth in Section 17.3. Public Records means the public records of St. Johns County in and for the State of Florida. Public Report means collectively, the public offering statement for the Project and the approvals or registrations for the Project, in the jurisdiction in which the Project is located and in each other jurisdiction in which sales of Timeshare Interests are made or the Project is otherwise required to be registered. Purchaser means a bona fide third-party purchaser for value (whether one or more persons) who has purchased one or more Timeshare Interests from Borrower. Release Payment means each Release Payment as defined in Section 6.1(b)(ii). Release Payments mean all Release Payments as defined in Section 6.1(b)(ii). Released Property has the meaning set forth in Section 21. Request for Construction Advance means a Request or Requests for Construction Advance as described in Section 2.6. Retainage Disbursement Requirements shall have the meaning set forth in Section 8.5. Reservation System means collectively, the method, arrangement or procedure including any computer network and software employed for the purpose of enabling or facilitating the operation of the system which enables each Purchaser or Club member to utilize his or her right to reserve a use period in a Club resort including the Project in accordance with the provisions and conditions set forth in the Club Documents and a Unit at the Project in accordance with the Project Documents in the event the Reservation System for the Club is not operational at any time for whatever reason. Site Plan has the meaning set forth in Section 10.20. Special Assessment Agreement means that certain Special Assessment Agreement that provides for construction of a convention center to be located in the World Golf Village development, dated as of July 24, 2006, and recorded in the Public Records of St. Johns County, Florida, in Book 1185 9 Page 1907 on July 24, 2006, as amended, restated, extended or supplemented from time to time. Specifications means collectively, the final plans and specifications for the Work to be performed on Phase 2 of the Project as submitted to and approved by Lender, and all amendments, modifications and supplements thereto and all new plans and specifications with respect thereto, all of which are subject to the prior approval of Lender. The Work for Phase 2 shall require separate Specifications which are applicable only to Phase 2, as distinguished from the other Phases, and which are approved by Lender. State means the State of Florida. Subordination Agreement means any agreement subordinating the obligations owed by an Obligor to a creditor, to the Obligations owed by such Obligor to Lender as required pursuant to Section 15. Substantial Completion shall occur when Lender obtains a certificate of completion executed by the Contractor and approved by the Inspector stating that the applicable Work for Phase 2 is substantially complete, subject only to a "punch list" designating any minor incomplete Work or other performance remaining to be done under the Construction Contract to accomplish Completion of the Work and stating the sums necessary to accomplish Completion of the Work. Survey has the meaning set forth in Section 10.19. Tenant Leases has the meaning set forth in Section 7.1(d). Timeshare Act means the "Florida Vacation Plan and Timeshare Act" Chapter 721, Florida Statutes (2006, as amended). Timeshare Declaration means that certain Declaration of Condominium for Grande Villas at World Golf Village, a Condominium, a Bluegreen Vacation Club Resort, dated as of January 7, 2004, and recorded at Book 2126, Page 1051, on January 23, 2004, in the Public Records of St. Johns County, Florida, as it may be amended, restated or supplemented from time to time. Timeshare Interest means a real property interest established pursuant to F.S. Chapter 721; TO WIT: a right to occupy a timeshare unit, coupled with a freehold estate or an estate for years with a future interest in a timeshare property or a specified portion thereof; more specifically, Timeshare Interest means a timeshare concept whereby Units and the share of the common elements assigned to the Units are conveyed for a period of time, the purchaser receiving a stated time period for a period of years; together with, at 12:00 noon on the first Saturday in the year 2073, a remainder over in fee simple as tenant in common with all other Purchasers of Timeshare Interest in such Units, in that percentage interest determined and established by the Timeshare Declaration. The term shall also mean an interest in a Unit pursuant to section 718.103(22), 10 Florida Statutes. Reference to a Timeshare Interest shall include the Timeshare Interest and its appurtenant timeshare period, which consists of the period or periods of time when a Purchaser is afforded the opportunity to use accommodations or facilities of the timeshare plan. Timeshare Loans means the loans granted by Borrower to Purchasers of Timeshare Interests to finance the acquisition thereof by Purchasers of Timeshare Interests. Title Company means an American Land Title Association company selected by Borrower and approved by Lender which is authorized and duly licensed to carry on a title insurance business in the State in which the Project is located. The Title Company currently used by Borrower is First American Title Insurance Company. Title Policy ALTA extended coverage mortgagee's loan policy of title insurance issued by the Title Company and complying with the provisions of Section 17.16. Trust Agreement means that certain Bluegreen Vacation Club Amended and Restated Trust Agreement dated as of May 18, 1994, as it may be amended from time to time. Unit(s) means collectively, the sixty (60) purpose-built Units to be constructed as part of Phase 2, which Units shall be committed to the Vacation Timesharing Plan in accordance with the provisions of the Timeshare Declaration. Vacation Timesharing Plan means the vacation timesharing regime created pursuant to the Timeshare Act to which Units in Phase 1 are subject and to which Units in Phase 2 shall be subject and pursuant to which a Purchaser receives by deed a Timeshare Interest, subject to the Timeshare Declaration. Work means the Phase 2 Work being performed on by the Contractor, as more further described in the applicable Specifications for Phase 2. WSJ Prime Rate means the rate of interest published in the Wall Street Journal (Eastern Edition) under the designation "Money Rates" and described as "Prime Rate" or "Base Rate on Corporate Loans at Large U.S. Money Center Commercial Banks." If the rate so published is shown as a range of rates, Lender will use the highest rate in such range as the WSJ Prime Rate. If such rate is no longer published or available, Lender will choose a comparable substitute rate based upon a national index, selected by Lender in its discretion. 1.2. Construction. Unless the context of this Agreement clearly requires otherwise, references to the plural include the singular, references to the singular include the plural, the term "including" is not limiting, and the term "or" has, except where otherwise indicated, the inclusive meaning represented by the phrase "and/or." The words "hereof," "herein," "hereby," "hereunder," and similar terms in this Agreement refer to this Agreement as a whole and not to any 11 particular provision of this Agreement. An Event of Default shall "continue" or be "continuing" until such Event of Default has been waived in writing by Lender or cured and the cure accepted by Lender. Section, Subsection, clause, schedule, and exhibit references are to sections, subsections, clauses, schedules and exhibits in this Agreement unless otherwise specified. Any reference in this Agreement or in the Loan Documents to this Agreement, any of the Loan Documents or any other document or agreement shall include all alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, supplements, and restatements thereto and thereof, as applicable. 1.3. Schedules and Exhibits. All of the schedules and exhibits attached to this Agreement, as they may from time to time be amended or restated, shall be deemed incorporated herein by reference. 1.4. Accounting Principles. Where the character or amount of any asset or liability or item of income or expense is required to be determined or any consolidation or other accounting computation is required to be made for the purposes of this Agreement, the same shall be determined or made in accordance with GAAP consistently applied at the time in effect, to the extent applicable, except where such principles are inconsistent with the requirements of this Agreement. 2. The Loan. 2.1. General. The Loan is a construction loan. Subject to other provisions, conditions and restrictions set forth in this Agreement, the outstanding principal balance of the Loan shall at no time exceed the Maximum Loan Amount. 2.2. Intentionally Omitted . 2.3. Construction Loan. Subject to the other provisions and conditions of this Agreement, Lender agrees, from time to time during the Construction Advance Period, to make Construction Advances to the Borrower on a revolving basis in an aggregate principal amount not to exceed $12,500,000 at any one time (the "Maximum Loan Amount"). The Construction Advance proceeds shall be disbursed to reimburse Borrower for the Approved Costs for the Work. 2.4. Advances. (a) Intentionally Omitted. (b) Revolving Credit Under Construction Loan. This Agreement contemplates an extension of credit to Borrower on a revolving basis for the Loan not to exceed the Maximum Loan Amount at any time during the term of the Loan. 12 (c) Restrictions on Construction Advances. Lender shall have no obligation to make an Advance under the Loan: (i) more often than once during any calendar month, (ii) in an amount not less than $50,000 for each Advance, (iii) pursuant to a Request for Construction Advance received after the expiration of the Construction Advance Period, or (iv) after the occurrence of an Incipient Default or an Event of Default. (d) Additional Restrictions on Advances. Notwithstanding anything to the contrary contained in Section 2, Lender shall have no obligation to make any Advance under the Loan which would cause the aggregate outstanding balance under the Loan to exceed (i) $12,500,000; or (ii) 85% of the verifiable costs to acquire Phase 2, costs of the Work performed and pay related costs, all as approved by Lender. 2.5. Intentionally Omitted. 2.6. Requests for Construction Advance. Except for Advances to pay Loan Costs and other obligations of Borrower under the Loan Documents, each Construction Advance shall be made pursuant to a Request for Construction Advance submitted to Lender in the form attached as Exhibit C, with appropriate insertions and duly executed, together with all required supporting documentation. Each Request for Construction Advance must be submitted to Lender at least ten (10) Business Days prior to the date the Construction Advance is requested to be made. 2.7. Amounts in Excess of Maximum Loan Amount. Lender shall have the right, but not the obligation, to fund amounts in excess of the Maximum Loan Amount from time to time to pay accrued and unpaid interest, to complete construction of the Work, or to correct or cure any Event of Default. Obligors agree that the correcting or curing by Lender of an Event of Default shall not cure the Event of Default under this Agreement. Such excess amounts funded shall be deemed evidenced by the Note to the fullest extent possible and then by this Agreement, shall bear interest at the applicable Default Rate set forth in Section 4.2 and shall also be secured by the Collateral, the Lender's Mortgage, the Guaranty, and all other security and collateral for the Loan. Borrower hereby agrees to execute additional notes, mortgages, and other additional Loan Documents, and modifications thereto, promptly upon request by Lender, in favor of Lender, evidencing and securing amounts funded in excess of the Maximum Loan Amount. 2.8. Use of Proceeds. Advances under the Loan will be used by Borrower solely for the purposes described in Section 2.3. 13 2.9. Closing. The Closing under this Agreement shall take place effective as of the Closing Date at such place as Lender may require, provided that all conditions for Closing have been satisfied. 2.10. Maximum Relationship Amount. The maximum amount outstanding under this Loan combined with the maximum amount outstanding under all loans to Borrower, Guarantor and Affiliates of Borrower and Guarantor from Lender shall not exceed $30,000,000. 3. Loan Documents and Loan Account. 3.1. Loan Documents. All Loan Documents shall be satisfactory in form and substance to Lender and Lender's counsel. Borrower's obligation to repay the Loan shall be evidenced by the Note, and the Note shall be payable with interest as provided herein. The Lender's Mortgage shall be a lien upon the Mortgaged Property, subject only to the Permitted Liens. 3.2. Loan Account. Lender will open and maintain on its books a loan account (the "Loan Account") with respect to Advances made, repayments, the computation and payment of interest and fees and the computation and final payment of all other amounts due and sums paid to Lender under this Agreement and the Loan. Lender shall deliver monthly statements regarding the Loan Account to Borrower. Except in the case of manifest error in computation, the Loan Account will be conclusive and binding on Borrower as to the amount at any time due to Lender from Borrower under this Agreement and the Note as an account stated, except to the extent that Lender receives a written notice from Borrower of any specific exceptions of Borrower thereto within thirty (30) days after the date the applicable Loan Account statement has been received by Obligor. 4. Interest Rate. 4.1. Primary Interest Rate. Until the occurrence of an Event of Default and after same is cured (if applicable) and the cure accepted by Lender, interest shall accrue and be payable on the average monthly outstanding principal balance of the Loan as follows: (a) From the Closing Date until the first day of the month following the month during which the Closing Date occurs, at a yearly rate which is equal to one and one-quarter percent (1.25%) per annum in excess of the WSJ Prime Rate in effect on the Closing Date, and (b) On the first day of the second month following the month during which the Closing Date occurs and on the first day of each month thereafter, the yearly rate at which interest shall be payable on the unpaid principal balance of the Loan shall be increased or decreased to a rate which is equal to one and one- 14 quarter percent (1.25%) per annum in excess of the WSJ Prime Rate in effect on such date. (c) Notwithstanding anything herein or elsewhere to the contrary the interest rate accruing and payable on the Loan shall not be less than one and one-quarter percent (1.25%) per annum in excess of the WSJ Prime Rate in effect at such time. 4.2. Default Rate. From and after the occurrence of an Event of Default until cured (if applicable) and the cure accepted by Lender, interest shall accrue and be payable on the unpaid principal balance of the Loan and all other Obligations under the Loan Documents at a rate (the "Default Rate") which is four (4) percentage points higher than the rate provided in Section 4.1. Any judgment obtained for sums due under the Note or other Obligations under the Loan Documents will accrue interest at the Default Rate until paid. Obligors acknowledge and agree that the Default Rate is reasonable in light of the increased risk of collection after occurrence of an Event of Default. 4.3. Calculation of Interest. Interest will accrue as of Lender's wiring of funds through Lender's receipt of repayment of the Loan. Payment received by Lender after noon Eastern Time shall not be credited until the next succeeding Business Day. Interest will be calculated on the basis of a year of three hundred sixty (360) days and charged upon the actual number of days elapsed. 4.4. Limitation of Interest to Maximum Lawful Rate. Lender expressly disclaims any intent to contract for, charge or receive interest in an amount which exceeds the highest lawful rate. All sums paid or agreed to be paid to Lender for the use, forbearance or detention of the indebtedness incurred by Borrower hereunder shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the term of such indebtedness until payment in full, so that the rate or amount of interest on account of such indebtedness does not exceed the usury ceiling from time to time in effect and applicable to the Loan. 5. Fees. 5.1. Loan Fee. Borrower agrees to pay to Lender a loan fee equal to $12,500,000 which is fully earned by Lender and is due and payable in full upon execution of this Agreement. Such fee shall not be refundable in whole or in part, even if the full Maximum Loan Amount is not advanced. Lender acknowledges receipt of a $10,000 deposit from Borrower which will be applied by Lender to pay a portion of the loan fee. 5.2. Late Charge. In the event that any payment required under the Loan (other than the sum due upon maturity or earlier acceleration of the Loan) is not received by Lender within ten (10) days after the due date, Obligors shall pay a 15 late charge equal to five percent (5%) of the total amount of such payment to defray the expenses incident to handling such delinquent payments, and to compensate Lender for the harm and damages related to such late payments. Obligors hereby acknowledge and agree that such late charges are reasonable in light of the anticipated and the actual harm caused by the late payments, the difficulties of proof of loss, harm and damages, and the inconvenience and non-feasibility of Lender otherwise obtaining an adequate remedy. 5.3. General. All of the fees described above are not refundable in whole or in part even if the full amount of the Loan is not advanced. Lender is irrevocably authorized to advance the sums necessary to pay all or any portion of such fees when due and payable to itself from the proceeds of an Advance or as an Advance under the Loan. 6. Payments. 6.1. General. Borrower agrees punctually to pay or cause to be paid to the Lender all principal and interest due under the Note or in respect of the Loan. Borrower shall make the following payments on the Loan: (a) Interest. Interest only on the outstanding principal balance of the Loan owed during the prior calendar month shall be payable monthly on the twentieth (20th) day of each calendar month, commencing on April 20, 2007. The April 20, 2007 interest payment shall include interest accrued between the Closing Date and March 31, 2007. (b) Principal. (i) The entire outstanding principal balance of the Loan, all accrued and unpaid interest thereon and all other sums due in connection therewith shall be payable in full, if not earlier paid pursuant to the terms of this Agreement and of the Loan Documents, on the Loan Maturity Date. (ii) In addition to all other payments required, upon the sale (and expiration of any applicable rescission period) of each Timeshare Interest, Borrower shall make a principal reduction payment on the Loan in an amount equal to 25% of the sales price per sale of each Timeshare Interest sold (each, a "Release Payment," and collectively, the "Release Payments"). Each Release Payment shall be made by the 20th day of the calendar month following the month of the sale (and expiration of any applicable rescission period) of the applicable Timeshare Interest. The Release Payment shall be redetermined and adjusted either to increase or decrease the amount of the Release Payment, as appropriate, no more often than once at the end of each consecutive three (3) month period following the execution of this Agreement, as reasonably determined by Lender so that upon the sale of 85% of the Timeshare Interests in Phase 2, the Loan will be repaid in full. 16 (iii) Notwithstanding anything herein or elsewhere to the contrary, the aggregate principal reduction payments from all sources made with respect to the Loan must equal the following amounts as of the following dates: Aggregate Principal Date Payments ---- -------- March 31, 2008 $2,000,000 September 30, 2008 $4,000,000 March 31, 2009 $8,000,000 Loan Maturity Date Remaining Outstanding Balance To the extent such payments have not been made as a result of Release Payments, Borrower shall make such payments from other funds on the applicable date set forth above. 6.2. Reinstatement of Obligations. Obligors agree that, to the extent any payment or payments are made on any Obligations and such payment or payments, or any part thereof, are subsequently invalidated, declared to be fraudulent or preferential, set aside or are required to be repaid to a trustee, receiver, or any other Person under any bankruptcy act, state or federal law, common law or equitable cause, then to the extent of such payment or payments, the Obligations or part thereof hereunder intended to be satisfied shall be revived and continued in full force and effect as if said payment or payments had not been made. 6.3. Prepayment. The Loan may be prepaid without penalty or premium. 6.4. Indemnity. Obligors agree to indemnify Lender against any loss or expense which Lender sustains or incurs as a consequence of an Event of Default, including, without limitation, any failure of Obligors to pay when due (at maturity, by acceleration or otherwise) any principal, interest, fee or any other amount due under this Agreement or the other Loan Documents. If Lender sustains or incurs any such loss or expense it will notify Obligors in writing of the amount determined in good faith by Lender to be necessary to indemnify it for the loss or expense. Such amount will be due and payable by Obligors to Lender within five (5) Business Days after receipt by Obligor of a statement setting forth a brief explanation of and its calculation of such amount, which statement shall be conclusively deemed correct absent manifest error. Any amount payable by 17 Obligors under this Section will bear interest at the Default Rate from the due date until paid, both before and after judgment. 7. Security; Guaranty. 7.1. Security. The Obligations shall be secured by, and Borrower hereby grants to Lender a security interest in, all of the following to the extent of Borrower's right, title and interest therein (collectively, the "Collateral"): (a) The Phase 2 Land, the Units and the Timeshare Interests thereon, together with all improvements, amenities, fixtures, leases, rents, common areas and common elements, all easements, rights-of-way, privileges and appurtenances belonging or in any way appertaining thereto or which are encumbered by Lender's Mortgage (collectively, the "Mortgaged Property"). (b) All existing and future equipment, furnishings, inventory, supplies, appliances, machinery, plumbing, heating, ventilation, air conditioning system, and fixtures, accounts, chattel paper, contract rights, documents, instruments, and general intangibles at any time located at, arising out of the use of, and/or used in connection with the operation of the Mortgaged Property, with appropriate non-disturbance language relating to common area equipment, fixtures and furniture. (c) All existing and future payment and performance bonds (if any) of the Contractor with respect to the Work. (d) All existing and future leases, subleases, licenses, concessions, entry fees, or other agreements which grant a possessory interest in and to, or the right to use the Mortgaged Property, or any portion thereof (collectively, the "Tenant Leases"). (e) All existing and future leases, subleases, licenses, concessions, entry fees or other agreements which grant a possessory interest in and to, or the right to use, the commercial space, or any portion of the Mortgaged Property thereof (the "Commercial Leases"). (f) All of the existing and future rents, revenues, income, proceeds, royalties, profits and other benefits payable for using, leasing, licensing, possessing, operating from or in, or otherwise enjoying the Mortgaged Property pursuant to the Tenant Leases and the Commercial Leases, including, without limitation, damages received upon the occurrence of a default under any of the Tenant Leases and the Commercial Leases and all proceeds payable under any policy of insurance covering loss of rents with respect thereto (collectively, the "Lease Income"). Borrower shall be entitled to all Lease Income for working capital purposes unless an Event of Default has occurred. 18 (g) All other existing and future agreements to which Borrower is or becomes a party or holds any interest therein and which in any way relate to the use, occupancy, maintenance or enjoyment of the Mortgaged Property, including, but not limited to, all Project Contracts, utility contracts, maintenance agreements, management agreements and service contracts, the Ingress and Egress Easement Agreement, Special Assessment Agreement, the Declarations, and any agreement guaranteeing the performance of the obligations contained in any of the foregoing agreements, all as they relate to the Mortgaged Property. (h) All books, records, ledger cards, files, correspondence, computer tapes and disks, as all of the foregoing pertain to the Mortgaged Property. (i) All hardware used in the management, sales, construction, servicing or operation of the Mortgaged Property. (j) All intellectual property, software and other personal property related to the Mortgaged Property solely owned by Borrower including, without limitation to the extent assignable, the naming rights to "Grande Villas at World Golf Village, a Condominium", and specifically excluding, without limitation, any such intellectual property, software and personal property owned by Guarantor or any Affiliate. (k) To the extent permissible by law, any existing or future development agreements for the Project. (l) All existing and future development or construction contracts between Borrower, Guarantor, and any architect, planner, contractor or sub-contractor together with payment and performance bonds related to the Work. (m) Any and all proceeds of the foregoing. All liens and security interests shall be first priority liens and security interests. Borrower and Lender hereby agree that this Agreement shall be deemed to be a security agreement under the Uniform Commercial Codes of the States of Rhode Island and Florida. Accordingly, in addition to any other rights and remedies available to the Lender hereunder, Lender shall have all the rights of a secured party under the Rhode Island and Florida Uniform Commercial Codes. The above-described liens and security interests shall not be rendered void by the fact that no Obligations exist as of any particular date, but shall continue in full force and effect until all Obligations have been fully and finally paid, performed and satisfied, Lender has no agreement or commitment outstanding pursuant to which Lender may extend credit to or on behalf of Borrower and Lender has executed termination statements or releases with respect thereto. 19 Notwithstanding the foregoing the Mortgaged Property and Collateral shall not include the Released Property, the Reservation System or any rights to the name Bluegreen or Bluegreen Vacation Club or any variation thereof. 7.2. Cross-Default. An Event of Default hereunder shall constitute a default under any other loan documents between Borrower or Guarantor and Lender and vice versa. 7.3. Guaranty. The lien free Completion of the Work and the prompt payment and performance of all Obligations shall be unconditionally and irrevocably guaranteed by Guarantor. 7.4. Additional Documents and Future Actions. Borrower will, at its sole cost, take such actions and provide Lender from time to time with such agreements, financing statements and additional instruments, documents or information as Lender may in its discretion deem necessary or advisable to perfect, protect, maintain or enforce the security interests in the Collateral, to permit Lender to protect or enforce its interest in the Collateral, or to carry out the terms of the Loan Documents. Borrower hereby authorizes and appoints Lender and any officer of Lender as its attorney-in-fact, with full power of substitution, to take such actions as Lender may deem advisable to protect the Collateral and its interests thereon and its rights hereunder, to execute on Borrower's behalf and file at Borrower's expense financing statements, and amendments thereto, in those public offices deemed necessary or appropriate by Lender to establish, maintain and protect a continuously perfected security interest in the Collateral, and to execute on Borrower's behalf such other documents and notices as Lender may deem advisable to protect the Collateral and its interests therein and its rights hereunder. Such power being coupled with an interest is irrevocable. 7.5. Location of Collateral. Borrower agrees that all tangible Collateral which is not delivered to Lender pursuant to this Agreement will remain, at all times, at Borrower's business location at the Project, and Borrower may not transfer such Collateral from such premises other than in connection with the ordinary course of business without the prior written approval of Lender. 7.6. Insurance and Protection of Collateral. Borrower agrees to maintain and pay for insurance upon the Mortgaged Property as contemplated by the Timeshare Declaration as evidenced by the Agreement to Provide Insurance during the construction of Work at Phase 2. 8. Funding Procedures. 8.1. General. The funding of Advances shall be in accordance with such procedures as Lender may require, including without limitation, disbursement through the Title Company or an escrow agent acceptable to Lender if Lender so requires. 20 8.2. Disbursement Agent. A disbursement agent for the Loan acceptable to Lender (the "Disbursement Agent") shall be retained by Lender at Borrower's reasonable cost and expense. The Disbursement Agent shall review and verify all Requests for Construction Advance and all other information required under Section 18 for Construction Advances and all other information deemed necessary by Lender related to the progress of the Work. Lender and Borrower agree that the Disbursement Agent at Lender's request shall disburse Advances directly to Title Company, Contractor or Subcontractors. The Disbursement Agent may be the Title Company or other person or entity acceptable to Lender or Lender's personnel. If Lender's personnel act as Disbursement Agent, Borrower shall still be responsible for all reasonable costs and expenses related thereto. 8.3. Payment of Bills. Lender shall be under no duty or obligation to ascertain whether Borrower or the Disbursement Agent has used or will use the Loan proceeds for the payment of bills incurred by Borrower in connection with the Work. Payment of all bills for labor and materials in connection with the Work shall be Borrower's responsibility, and Lender's sole obligation shall be to advance the proceeds of the Loan subject to, and in accordance with this Agreement. At no time shall Lender be obligated to disburse funds in excess of amounts recommended by the Inspector. Borrower is solely responsible for obtaining any permanent financing, bridge financing, or other financing which may be necessary to repay the Loan on or prior to the Loan Maturity Date. 8.4. Construction Loan Portion. Loan proceeds for the items and in the maximum amounts listed on the Phase 2 Cost Certificate shall only be disbursed at such time as Lender (or the Disbursement Agent, as applicable) has received a Request for Construction Advance and documents required pursuant to Section 18 and Borrower has provided Lender (or the Disbursement Agent, as applicable) with such other information that Lender (or the Disbursement Agent, as applicable) shall require to evidence that all Work covered by each such Request for Construction Advance has been completed. 8.5. Retainage; Conditions Precedent to Final Disbursements. Funds held by Lender as retainage shall be disbursed by Lender upon compliance with the requirements set forth in this Subsection 8.5 and the requirements for all other disbursements as set forth above (collectively, the "Retainage Disbursement Requirements"). The Retainage Disbursement Requirements for the Work shall include: (a) Occupancy Permits. Receipt by Lender of a copy of the final permits and approvals necessary or required from all authorities whose approval is required for the lawful use, occupancy and operation of Phase 2 of the Project after completion of the Work. 21 (b) Final Releases of Lien: Contractor's Affidavit. Receipt by Lender of a "Conditional Waiver and Release Upon Final Payment" executed by the Contractor and all Subcontractors performing work or supplying materials and paid for by such retainage Advance in form and content acceptable to Lender and in conformance with the Applicable Mechanics Lien Law, together with any and all additional affidavits of all such parties sufficient in the opinion of Lender's counsel to comply with the Applicable Mechanics Lien Law, and to remove any and all mechanics' and materialmen's liens (inchoate or otherwise) affecting title to the Project, which might arise related to such work or materials. (c) Certificates of Completion. Certificates of Substantial Completion for the Work utilizing customary AIA forms or the equivalent thereof signed by the Architect, Contractor and Borrower. (d) Other Evidence. Such other evidence as Lender may require to establish that the Work to be paid with such retainage Advance has been completed in compliance with all applicable zoning and other requirements of the public authorities having jurisdiction, including but not limited to, compliance with all applicable Legal Requirements. (e) As-Built Plans. Two (2) sets of detailed as-built plans related to the Work must be submitted to Lender promptly after such Work is completed, but in no event later than two (2) months from the issuance of the Certificates of Substantial Completion for the Work, which plans must be approved and identified as such in writing by Borrower, the Architect, and the Contractor, and must include plans for architectural, structural, mechanical, plumbing, electrical and all site development (including storm drainage, utility lines and landscaping) work. (f) As-Built Survey. As to the final Advance under the of the Loan, receipt by Lender of two (2) originals of a satisfactory "As-Built" Survey prepared by a licensed surveyor satisfactory to Lender and the Title Company, in accordance with the plans and showing all of the applicable Units and each applicable building in place, including, without limitation, striping of parking areas, a statement as to the number of parking spaces and such other matters as Lender shall require ("As-Built Survey"). The survey shall be prepared in accordance with the Standards set forth by ALTA/ACSM 1988 Minimum Survey Requirements, shall be certified to Lender and the Title Company and shall include a narrative metes and bounds or platted description of the boundaries of the Mortgaged Property, the area of the Mortgaged Property and of each of the applicable Phase 2 Units and buildings 5 and 6 (then completed) and the location and dimensions of all easements and improvements. The surveyor must include on the As-Built Survey a signed statement certifying the existence or a narrative statement certifying the existence or nonexistence of any encroachment from or onto the Mortgaged Property and must include the date of the As-Built Survey and the surveyor's registration 22 number and seal and such other matters as the Title Company may require, in form and substance satisfactory to Lender and the Title Company. (g) Insurance. Insurance coverage shall have been broadened to include all forms of insurance related to the Mortgaged Property, and as reasonably required by Lender in form satisfactory to Lender, subject to the terms of the Timeshare Declaration and the Agreement to Provide Insurance. (h) Exception. Notwithstanding the foregoing restrictions, Lender may at its discretion release the specific 10% retainage amounts for individual line items set forth in the Phase 2 Cost Certificate prior to the satisfaction of all of the Retainage Disbursement Requirements, provided that, (i) no Incipient Default or Event of Default has occurred, (ii) each of the Subcontractors being paid such retainage amounts executes and delivers to Lender a "Conditional Waiver and Release Upon Final Payment" and (iii) all of the Work described in such line item has been completed and Lender has received certifications from Borrower, Contractor, Inspector (or Lender's Construction Consultant) and Architect confirming such completion, all in form and content acceptable to Lender. 8.6. Deposit of Funds Advanced/Advances to Disbursement Agent, Architect, Contractor and Subcontractors. Lender, at its option, may make any or all Construction Advances directly to the Disbursement Agent (for disbursement to Borrower, Contractor, Architect or any Subcontractor) or to the Contractor and any Subcontractor. The execution of this Agreement by Borrower shall and hereby does constitute an irrevocable direction and authorization to Lender to so advance the funds. No further direction or authorization from Borrower shall be necessary to warrant such direct advances to the Disbursement Agent, the Contractor, the Architect or any Subcontractor and all such Construction Advances shall satisfy completely Lender's obligations hereunder and shall be secured by the Collateral as fully as if made to Borrower, regardless of the disposition thereof by the Disbursement Agent, the Contractor, the Architect or any Subcontractor. Lender shall assume no liability under the Architect's Contract, Construction Contract or any Subcontract by virtue of directly paying the Architect, Contractor or any Subcontractor. 8.7. Advances Do Not Constitute a Waiver. No Construction Advance shall constitute a waiver of any condition of Lender's obligation to make further Construction Advances. 9. Representations and Warranties. As an inducement to Lender to advance funds to Borrower, Borrower and Guarantor hereby, jointly and severally, represent and warrant to Lender as follows: 9.1. Organization; Power. 23 (a) Borrower. Borrower (i) is a corporation duly incorporated, validly existing in good standing under the laws of the State of Florida; (ii) is duly qualified to do business as a foreign corporation and in good standing under the laws of each jurisdiction where the character of its property, the nature of its business or the performance of its obligations under this Agreement makes such qualification necessary, except where the failure to be so qualified will not have a material adverse effect on its business or its ability to perform its obligations under this Agreement or any other Loan Document to which it is a party or under the transactions contemplated hereunder or thereunder; and (iii) has all requisite corporate power and authority to own its properties, to conduct its business, to execute and deliver this Agreement and all documents and transactions contemplated hereunder and to perform all of its obligations under this Agreement and any other Loan Document to which it is a party or under the transactions contemplated hereunder or thereunder. (b) Guarantor. Guarantor (i) is a corporation duly incorporated, validly existing and in good standing under the laws of the Commonwealth of Massachusetts; (ii) is duly qualified to do business as a foreign corporation and in good standing under the laws of each jurisdiction where the character of its property, the nature of its business or the performance of its obligations under this Agreement makes such qualification necessary except where the failure to be so qualified will not have a material adverse effect on its business or its ability to perform its obligations under this Agreement or the Guaranty; and (iii) has all requisite corporate power and authority to own its properties, to conduct its business, to execute and deliver this Agreement and the Guaranty and to perform all of its obligations under this Agreement and the Guaranty. (c) Association. The Association is a non-profit corporation duly organized, validly existing and in good standing under the laws of the State of Florida, having full power and lawful authority to perform its obligations under the Declarations and carry on its business as now being conducted or as proposed to be conducted. (d) Manager. Manager is a corporation, duly incorporated, validly existing and in good standing under the laws of the State of Delaware, duly licensed in Florida as required, and having full power and lawful authority to act as the Manager of the Project, to perform its obligations under the Management Agreement and to carry on its business as now being conducted and as proposed to be conducted. 9.2. Authorization; No Legal Restrictions; No Breach of Other Agreements. The execution, delivery and performance by Borrower of the Loan Documents has been duly authorized by all necessary corporate action by Borrower and does not and will not: (i) violate any provision of the organizational or governing documents of Borrower, or any agreement, law, rule, regulation, order, 24 writ, judgment, injunction, decree, determination or award presently in effect to which Borrower is a party or is subject; (ii) result in, or require the creation or imposition of any Lien upon or with respect to any asset of Borrower other than Liens in favor of Lender; or (iii) result in a breach of or constitute a default by Borrower under, any indenture, loan or credit agreement or any other agreement, document, instrument or certificate to which Borrower is a party or by which it or any of its assets are bound or affected. 9.3. Approvals; Licenses, Etc. No approval, authorization, order, license, permit, franchise or consent of or registration, declaration, qualification or filing with, any governmental authority or other Person, including without limitation, the Division or Association is required in connection with the execution and delivery by Borrower of any of the Loan Documents. 9.4. Enforceability. The Loan Documents constitute legal, valid and binding obligations of Borrower, enforceable against Borrower in accordance with their respective terms. 9.5. Title. Borrower has and will have good and marketable title to the Collateral, free and clear of any Lien, security interest, charge or encumbrance except for the security interests created by this Agreement or any Loan Document or otherwise created in favor of Lender and the exceptions set forth in the Title Policy provided Lender (collectively, "Permitted Exceptions"). Borrower has good and marketable title to the Timeshare Interests comprising a portion of the Mortgaged Property, and all rights, properties and benefits appurtenant to or benefiting them, subject to the Permitted Exceptions and the condominium timeshare and development documents established by Borrower, subject to Lender's approval. 9.6. Liens. The execution and delivery of the Loan Documents, the filing of the UCC-l Financing Statement's with the Florida Secured Transactions Registry and the recording of the Mortgage, the Assignment of Property Rights and a UCC-1 Financing Statement in the Public Records of St. Johns County, Florida will constitute in favor of Lender a valid and perfected continuing first priority security interest in the Collateral. Lender is not and shall not be required to take, and Borrower has taken any and all required steps to protect Lender's security interests in the Collateral and Lender is not and shall not be required to collect or realize upon the Collateral or any distribution of interest or principal, nor shall loss of or damage to, the Collateral release Borrower or Guarantor from any of the Obligations. 9.7. Financial Statements and Financial Condition. The financial statements of Obligors fairly present the respective financial conditions and results of operations of Borrower and Guarantor as of the date or dates thereof and for the periods covered thereby. There were no material liabilities, direct or indirect, fixed 25 or contingent, of Borrower or Guarantor as of the dates of such financial statements which were not reflected therein or in the notes thereto, which have not otherwise been disclosed to Lender in writing or otherwise set forth in Guarantor's SEC filings. Except for any such changes heretofore expressly disclosed in writing to Lender, there has been no material adverse change in the respective financial conditions of Borrower or Guarantor from the financial conditions shown in their respective financial statements, nor has Borrower or Guarantor incurred any material liabilities, direct or indirect, fixed or contingent, which are not shown in their respective financial statements or reflected in the notes thereto. Borrower is able to pay all of its debts as they become due. Borrower shall maintain such solvent financial condition, giving effect to the Obligations, as long as Borrower is obligated to Lender under this Agreement, or in any other manner whatsoever. Borrower's obligations under this Agreement and under the Loan Documents will not render Borrower unable to pay its debts as they become due. The present fair market value of Borrower's assets is greater than the amount required to pay its respective total liabilities. 9.8. Taxes. Except as set forth on Schedule 9.8: (a) Borrower has paid and will pay in full all real property, personal property, income, sales, ad valorem and other taxes and assessments against the Mortgaged Property and the Collateral or otherwise payable by Borrower, (b) Borrower knows of no basis for any additional taxes or assessments against the Mortgaged Property, the Collateral or Borrower; (c) Borrower has filed all tax returns required to have been filed by then and has caused Association to file all tax returns required to have been filed by then, and (d) has paid or caused Association to pay all taxes shown to be due and payable on such returns, including interest and penalties, and all other taxes which are payable by it or Association, as the case may be, to the extent the same have become due and payable. With respect to real estate taxes against the Mortgaged Property, each Unit will have a separate tax lot number and each Unit is separately billed by the applicable governmental entity for real estate taxes. Such bills are received by the Association. The Association sends bills to each Owner of a Timeshare Interest or Vacation Trust, Inc., a Florida corporation in its capacity as trustee under the Club's Trust Agreement for such Owner's pro-rata share of the real estate taxes assessed and billed to the applicable Unit. To the extent that the Association holds insufficient funds to pay any real estate taxes for the Mortgaged Property then due and payable, Borrower (during the time it is maintaining direct or indirect control of the Association) will pay the amount of such deficiency to the Association to enable the Association to pay all real estate taxes related to the Mortgaged Property when due and prior to the incurrence of any penalties. Borrower will comply with the above-described 26 procedures and will not amend, modify or terminate such procedures without the prior written consent of Lender. 9.9. Subsidiaries; Affiliates and Capital Structure. Except as set forth on Schedule 9.9, Borrower has no subsidiaries or Affiliates which have any involvement or interest in the Mortgaged Property in any way. Borrower is a wholly-owned subsidiary of Guarantor. None of the owners of any interests in Borrower are parties to any proxies, voting trusts, shareholders agreements or similar arrangements pursuant to which voting authority, rights or discretion with respect to Borrower is vested in any other Person. 9.10. Litigation Proceedings, Etc. Except as described on Schedule 9.10, there are no actions, suits, proceedings, orders or injunctions pending or threatened against or affecting Borrower, the Guarantor, the Mortgaged Property, the Collateral or the Association at law or in equity, or before or by any governmental authority or other tribunal which if adversely determined would have a material adverse effect on their ability to perform hereunder with respect to the Project. Borrower has not received any notice from any court, governmental authority or other tribunal alleging that Borrower or the Project has violated the Timeshare Act, the Condominium Act, any of the rules or regulations thereunder, the Project Contracts, or any other applicable Legal Requirements, agreements or arrangements. 9.11. Licenses; Permits; Etc. Borrower, the Mortgaged Property, the Association, Borrower's Affiliates involved in the operations of the Project, and, to the best of Borrower's knowledge after diligent inquiry, all other Persons involved in the operations of the portion of the Mortgaged Property owned by Borrower, possess and will at all times continue to possess, all requisite material franchises, certificates of convenience and necessity, operating rights, approvals, licenses, permits, consents, authorizations, exemptions and orders as are necessary to carry on its or their business including without limitation, operation of the Mortgaged Property, without any known conflict with the rights of others and, with respect to Borrower, the Mortgaged Property and the Association, in each case subject to no mortgage, pledge, Lien, lease, encumbrance, charge, security interest, title retention agreement or option other than Liens in favor of Lender and the Permitted Liens. 9.12. Environmental Matters. The Project does not and will not contain any Hazardous Materials, except for certain Hazardous Materials used in the operation of Borrower's business which are properly stored and maintained. No Hazardous Materials are or will be used or stored at or transported to or from the Development Parcel or the Project, except for certain Hazardous Materials used in the operation of Borrower's business which are properly stored and maintained. Neither Borrower, Manager nor the Association has ever used the Project as a facility for the storage, treatment or disposition of any Hazardous Materials or has received notice from any governmental agency, entity or other Person with regard to Hazardous Materials on, under or affecting the Project. Neither Borrower nor the 27 Project, nor any portion thereof, nor the Association, are in violation of any Environmental Laws. 9.13. Full Disclosure. No information, exhibit or written report or the content of any schedule furnished by or on behalf of Borrower to Lender in connection with the Loan, the Collateral or the Mortgaged Property, and no representation or statement made by Borrower in any Loan Document contains any material misstatement of fact or omits the statement of a material fact necessary to make the statement contained herein or therein not misleading, subject to obtaining the permits and approvals to construct the Work and the creating of the condominium and timeshare documents which have not been prepared at this time. Borrower does not know of any fact or condition which will prevent the sale of Timeshare Interests to Purchasers or prevent the operation of the Project in accordance with the Declarations and related Public Report, and in accordance with all Legal Requirements, or prevent Borrower's performance of its Obligations pursuant to the Loan Documents. 9.14. Use of Proceeds/Margin Stock. None of the proceeds of the Loan will be used to purchase or carry any "margin stock" (as defined under Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time), and no portion of the proceeds of the Loan will be extended to others for the purpose of purchasing or carrying margin stock. None of the transactions contemplated in this Agreement (including, without limitation, the use of the proceeds from the Loan) will violate or result in the violation of Section 7 of the Securities Exchange Act of 1934, as amended, or any regulations issued pursuant thereto, including, without limitation, Regulations G, T, U and X of the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter 11. Borrower is not an investment company as defined by the Investment Company Act of 1940, as amended, and Borrower is not required to register under said Act. 9.15. No Defaults. No Incipient Default or Event of Default exists, and there is no violation in any material respect of any term of any agreement, bylaw or other instrument to which Borrower is a party or by which it may be bound which violation materially and adversely affects Borrower. 9.16. Compliance with Law. (a) Borrower is not in violation, nor is the Mortgaged Property, or the business operations in respect of the Mortgaged Property, or to Borrower's knowledge after diligent inquiry, the Association, in violation of the Condominium Act or Timeshare Act or any other Legal Requirements, which violation materially and adversely affects the Borrower, the Mortgaged Property, the business operations of the Mortgaged Property or the Association; and 28 (b) As to the Existing Units and the Phase 2 Land, Borrower has not failed, nor has the Project or Association failed, to obtain any consents or joinders, or any approvals, licenses, permits, franchises or other governmental authorizations, or to make or cause to be made any filings, submissions, registrations or declarations with any government or agency or department thereof necessary to the establishment, ownership or operation of the Mortgaged Property or any of Borrower's other assets, or to the conduct of Borrower's business, which violation or failure to obtain or register materially and adversely affects Borrower, the Mortgaged Property or the business, prospects, profits, properties or condition (financial or otherwise) of Borrower or the Mortgaged Property. (c) The Timeshare Declaration was duly adopted in compliance with applicable Legal Requirements and governs the condominium and timeshare regimes established pursuant to the Timeshare Declaration. 9.17. Restrictions of Borrower or Guarantor. None of Borrower, Guarantor, or, to Borrower's knowledge, the Association, is a party to any contract or agreement with respect to the Mortgaged Property, or subject to any Lien, charge or corporate restriction with respect to the Mortgaged Property, which materially and adversely affects its or their business other than the Permitted Exceptions. Borrower and Guarantor will not be, on or after the Closing Date, a party to any contract or agreement which prohibits Borrower's or Guarantor's execution of, or compliance with the terms of this Agreement or the other Loan Documents. Borrower has not agreed or consented to cause or permit in the future (upon the happening of a contingency or otherwise) any of the Collateral, whether now owned or hereafter acquired, to be subject to a Lien, except the Liens in favor of Lender as provided hereunder and except for Permitted Liens. 9.18. Broker's Fees. Borrower has not made any commitment or taken any action which will result in a claim for any brokers', finders' or other similar fees or commitments with respect to the transactions described in this Agreement. 9.19. Deferred Compensation Plans. Borrower has no pension, profit sharing or other compensatory or similar plan providing for a program of deferred compensation for any employee or officer. 9.20. Labor Relations. The employees of Borrower are not a party to any collective bargaining agreement with Borrower, and, to the best knowledge of Borrower, there are no material grievances, disputes or controversies with any union or any other organization of Borrower's employees, or threats of strikes, work stoppages or any asserted pending demands for collective bargaining by any union or organization. 29 9.21. Tax Identification Numbers. Borrower's federal taxpayer's identification number and State organization numbers are as follows: Tax I.D. State Organization Number -------- ------------------------- 65-0433722 P9300051653 9.22. Insurance. All the insurance required by the Timeshare Declaration, and the Agreement to Provide Insurance has been obtained, is presently in full force and effect and all premiums thereon have been fully paid to date. To the best of Borrower's knowledge, none of the policies for property insurance may be canceled or materially modified, except after at least thirty (30) days written notice by the insurance carrier to Lender and none of the policies for liability insurance may be canceled or materially modified, except after endeavoring to provide at least ten (10) days written notice by the insurance carrier to Lender. Lender has been named as an additional insured, insured mortgagee (with a standard mortgagee's endorsement) and loss payee (with a lender's loss payable endorsement) on such policies. 9.23. Names and Addresses. During the past five (5) years, Borrower has not been known by any names (including trade names) and has not been located at any addresses, other than those set forth on Schedule 9.23. The portions of the Collateral which are tangible property and have not been delivered to Lender (or a custodian for Lender) and the books and records pertaining thereto will at all times be located at the address for Borrower set forth on Schedule 9.23, at the Project or at such other location determined by Borrower after prior notice to Lender and delivery to Lender of any items requested by Lender to maintain perfection and priority of Lender's security interests and access to such books and records. Schedule 9.23 identifies the chief executive office and principal place of business of Borrower. 9.24. Solvency. Borrower is solvent. No transfer of property is being made by Borrower and no obligation is being incurred by Borrower in connection with the transactions contemplated by this Agreement or the other Loan Documents with the intent to hinder, delay, or defraud either present or future creditors of Borrower. 9.25. Common Enterprise. The successful operation and condition of Obligors are dependent on the continued successful performance of the functions of the Obligors as a whole and the successful operation of each Obligor is dependent on the successful performance and operation of the other Obligor. Each Obligor expects to derive benefit (and the boards of directors or other governing body of each such Obligor has determined that it may reasonably be expected to derive benefit), directly and indirectly, from the credit extended by Lender hereunder, both in its separate capacity and as a member with the other Obligor of an interrelated group of companies. Each Obligor has determined that execution, delivery and 30 performance of this Agreement and any other Loan Documents to be executed by such Obligor is within its corporate or company purpose, will be of direct and indirect benefit to such Obligor and is in its best interest. 9.26. Intentionally Omitted. 9.27. Completeness of Representations. Neither this Agreement nor any exhibit attached hereto nor any certificate, financial statement, correspondence or other document delivered or furnished to Lender hereunder or in connection with the transactions contemplated hereby contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements contained herein and therein not misleading. Except as set forth on Schedule 9.10, there is no fact (a) which materially and adversely affects or in the future may, so far as any Obligor can now foresee, materially and adversely affect any Obligor's ability to perform its obligations under the Loan Documents, or the condition, financial or otherwise, business or prospects of any Obligor, the Association or the Project, (b) which may result in any liability on the part of any Obligor reflected on the financial statements described in Section 9.7, (c) which questions or denies the right of any Obligor to conduct its business or operate the Project, or (d) which prevents or restricts the granting of security interests to Lender in the Collateral. 9.28. No Violation of Right of First Refusal. The execution of this Agreement and any Advances made hereunder shall not violate any right of first refusal of any Person to provide such financing. 10. Representations, Warranties and Covenants With Respect to the Project. Obligors, jointly and severally, represent and warrant to and covenant with Lender as follows, with respect to the Mortgaged Property and each Unit to be included in the Mortgaged Property: 10.1. Access and Utilities. Each Unit will have adequate access from a publicly dedicated street over easement areas when constructed, will be served by adequate utilities and will have adequate parking facilities. 10.2. Compliance. Obligors and the Mortgaged Property are in compliance with and will comply in all material respects with all Legal Requirements. 10.3. Timeshare Declaration. On or before the first sale and closing of a Timeshare Interest by Borrower in Phase 2, all Units, all improvements thereon, all equipment, furnishings and appliances intended for use in connection therewith pertaining to such Timeshare Interest will have been and thereafter will continue to be duly submitted to the provisions of the Timeshare Declaration, as amended to include Phase 2 as part of the timeshare regime, which Timeshare Declaration and any amendment will have been recorded in the Public Records of St. Johns County, 31 Florida. The Timeshare Declaration will not be amended in any way which would materially alter the Project, the rights of Purchasers, the rights of lenders foreclosing on a Timeshare Interest or any priority of past due assessment claims over the lien of any mortgage encumbering a Timeshare Interest without the prior written consent of Lender. 10.4. Zoning Laws, Building Codes, Etc. The Mortgaged Property, all the buildings and other improvements in which the Units are situated and all Amenities will when constructed be completed in all material respects in compliance with all applicable zoning codes, building codes, health codes, fire and safety codes, and other Legal Requirements. All inspections, licenses and permits required to be made or issued in respect of such buildings and Amenities will be made or issued by the appropriate authorities as are required to approve such development at the time same is developed. The use and occupancy of such buildings for their intended purposes is and will be lawful under all applicable laws and regulations. On or before the Phase 2 Completion Date, final certificates of occupancy will be issued and in effect for all Units in Phase 2. The timeshare use and occupancy of Units does not and will not violate any private covenant or restriction or any zoning, use or similar law, ordinance or regulation affecting the use or occupancy of the Mortgaged Property. 10.5. Units Ready for Use. All of the Phase 2 Units will be fully furnished and ready for use by Owners on or before the Phase 2 Completion Date. On or before the Phase 2 Completion Date, all common furnishings (including appliances) within such Phase 2 Units are and will be owned by Borrower or the Association, have been or will be fully paid for, and are and will be free and clear of any liens or other interests of any third party including any lessor. The Mortgaged Property is owned by Borrower free and clear of all liens and encumbrances, except those in favor of Lender and the Permitted Liens. 10.6. Mortgaged Property Taxes and Fees. All real property taxes, condominium and similar maintenance fees, rents, assessments and like charges affecting the Mortgaged Property have been fully paid to date, to the extent such items are due and payable. 10.7. No Defaults. No default or condition which, with the giving of notice or passage of time, or both, would constitute a default, exists with respect to any mortgage, deed of trust or other encumbrance against any of the Mortgaged Property or any personal property therein or used in connection therewith or with respect to any other agreement affecting or related to the Mortgaged Property. 10.8. Timeshare Plan. Borrower shall amend the Public Report and the Timeshare Declaration to add the Units which make up Phase 2 upon their completion. Further Borrower shall file with any applicable regulatory agencies in the State the required documentation for approval of Phase 2 of the Project as a 32 timeshare project. Borrower will provide a copy of the public offering statement as required by Florida state law and all amendments and supplements thereto to Lender and Lender's counsel at the time it is finalized for distribution to Purchasers. Borrower will provide Lender and Lender's counsel with copies of all correspondence and other responses received from the Division related to the application within two (2) Business Days after receipt by Borrower or Borrower's counsel. On or before the date hereof, Phase 2 shall be established and dedicated as a timeshare plan and project in full compliance with all applicable Legal Requirements, including without limitation, the Timeshare Act. On or before the date hereof, Borrower will deliver to Lender: (a) a copy of the Timeshare Declaration, as amended, to add Phase 2 to the timeshare regime, as recorded in the Public Records of St. Johns County, Florida; and a copy of the assignment of declarant rights in favor of Borrower as recorded in the Public Records of St. Johns County, Florida; and (b) copies of any and all endorsements to the Title Policy required by Lender, related to the establishment of the timeshare regime with respect to Phase 2 of the Project. To the best of Borrower's knowledge, the Existing Units have been established and dedicated as a timeshare project in full compliance in all material respects with all applicable Legal Requirements, including without limitation, the Timeshare Act. 10.9. Sale of Timeshare Interests. All sales and marketing activities will be made in compliance in all material respects with all Legal Requirements and utilizing then current and approved Florida public offering statement. The marketing, sale, offering for sale, rental, solicitation of purchasers and financing of Timeshare Interests: (a) will not constitute the sale, or the offering for sale of securities subject to the registration requirements of the Securities Act of 1933, as amended, or any other federal or state securities law applicable to such sale or offer for sale or such sale will comply with such securities laws; (b) will not materially violate the Timeshare Act or any land sales or consumer protection law, statute or regulation of the State of Florida or any other state or jurisdiction in which sales or solicitation activities occur; and (c) will not materially violate any consumer credit or usury statute of the State of Florida or any other state or jurisdiction in which sales or solicitation activities occur. 10.10. Brokers. All marketing and sales activities will be performed by independent contractors, agents or employees of Borrower, all of whom are and will be properly licensed in accordance with applicable laws to the extent required. Borrower will retain a duly licensed broker of record for the Project as required by State law and will forward to Lender and Lender's counsel written evidence of such brokerage arrangement. 33 10.11. Tangible Property . The machinery, equipment, fixtures, tools and supplies used or to be used in connection with the Project, including without limitation, with respect to the operation and maintenance of the common elements, will be owned or leased either by Borrower or the Association or Contractor or any Subcontractor (as defined in Section 11.5). 10.12. Condition of Project. The Mortgaged Property is not now damaged nor injured as a result of any fire, explosion, accident, flood or other casualty. 10.13. Assessments and Developer Subsidy. The assessments levied with respect to the Project together with any subsidies to be paid by Borrower are sufficient to cover all expenses of the Association for the Project. Each Owner of a Timeshare Interest or Vacation Trust, Inc., a Florida corporation in its capacity as trustee under the Club's Trust Agreement is a member of the Association. The Association has the power and authority to levy assessments to cover the expenses of the Project. Any lien for unpaid assessments related to the Mortgaged Property is subject to the lien of Lender's Mortgage. 10.14. Amenities. All Amenities for the Project are located on the Master Property. 10.15. Permits and Licenses. All licenses, permits and approvals required for the use, occupancy and operation of the Phase 2 Units upon completion have been or will be properly obtained. 10.16. Wetlands. None of the Project includes any "wetlands" as designated by the U.S. Army Corps Of Engineers. 10.17. Mechanics Lien Claims. Borrower has not received any written notice of a potential claim, from any contractor, laborer or materialman in connection with any work, labor or materials furnished in connection with the Phase 2. 10.18. Project Contracts. The contract, agreements and arrangements listed and described in Schedule 10.18 comprise all of the agreements, or arrangements relating to the operation, management, marketing, sales and maintenance and of the Mortgaged Property. Subject to the terms of Section 12.23 and Section 14.2, all of the Project Contracts are and shall (unless Lender shall otherwise consent in advance in writing) remain unmodified and free and clear of any lien or encumbrance. 10.19. Intentionally Omitted. 10.20. Site Plan Approval. Borrower represents that St. Johns County, Florida has approved the Site Plan for development of the sixty (60) Units 34 consisting of Phase 2 under this Agreement ("Site Plan"). The approved Site Plan is attached hereto as Exhibit "D". 10.21. Club Plan. The Club has been established and to Borrower's actual current knowledge there are no present material violations of the Legal Requirements in connection with all of the Borrower's accommodations, facilities and resorts which comprise the Club and Borrower shall use its best efforts to cause the foregoing to remain in full compliance in all material respects with all applicable Legal Requirements, including, without limitation, the Timeshare Act and Condominium Act. Borrower shall use its best efforts to cause the Club to remain a multi-site timeshare plan registered under applicable state registration laws and in full compliance with the Club Documents. 10.22. Reservation System. To the best of Borrower's knowledge, the Reservation System for the Club is fully operational for its intended purpose. Guarantor represents that the Reservation System for the Club including the computer software is licensed to the Guarantor by the software's owner. Guarantor shall use all reasonable commercial efforts to assure that the Reservation System shall continue in operation and shall be available to the Club. Guarantor acknowledges the significance of the Reservation System to the ability of the Project and the Club to operate properly and to allow Purchasers to exercise use rights as set forth in Project Documents and Club Documents. Guarantor agrees to cause the appropriate party to prepare reports and provide information on the Reservation System, consistent with information provided to state regulators or other lenders, promptly upon request from Lender. 10.23. One to One Ratio Compliance. Borrower represents and warrants that to the best of Borrower's knowledge, the Club will in all material respects be in compliance with the one to one Owner Beneficiary to Accommodation Ratio as defined in the Club's Trust Agreement ("One to One Ratio"). 10.24. Club Documents. The Borrower has furnished to the Lender and Lender has reviewed true and correct copies of the Club Documents. To the best of Borrower's knowledge, all such filings and/or recordations, and all joinders and consents, necessary in order to establish the timeshare plan in respect of each Club resort, including without limitation, the Phases, the Units, the common elements, common furnishings, facilities and all related use and access rights, have been done or obtained, all statutes, ordinances, rules, and regulations, and all agreements or arrangements, in connection therewith have been complied with in all material respects. 11. Construction Representations, Warranties and Covenants. Obligors, jointly and severally, represent and warrant to and covenant with Lender as follows: 35 11.1. Construction. All costs arising from and owed by Borrower in connection with the Work and the purchase of any fixtures or equipment, inventory, furnishings or other personalty located in, at or on the Project will be paid when due. 11.2. Cost Certificate. Attached hereto as Exhibit "E" is a line item breakdown for Phase 2 (the "Phase 2 Cost Certificate") setting forth the cost of each class of work included in the Phase 2 Work and all incidental costs related to the Phase 2 Work, specifying which items are to be funded from the Loan and which items are to be funded from other sources. The Phase 2 Cost Certificate shall constitute a budget based upon which Construction Advances shall be made for each of the applicable line items. The Phase 2 Cost Certificate shall include a line item of at least $100,000 for Phase 2 Work (from the Loan) for contingencies which may only be disbursed with the prior written consent of Lender, which consent shall not be unreasonably withheld. Notwithstanding the foregoing and subsequent to the Closing Date, up to $10,000 of the total amount budgeted for contingences for Phase 2 Work may be disbursed without Lender's consent but shall be disclosed on the revised Phase 2 Cost Certificate. The Phase 2 Cost Certificate is accurate and complete. If Borrower determines that the Phase 2 Cost Certificate needs to be revised for any reason, including delays in construction, Borrower will immediately notify Lender of the requested change. No change to the Phase 2 Cost Certificate shall be effective without the prior written consent of Lender. Borrower shall prepare a Phase 2 Cost Certificate. The Phase 2 Cost Certificate shall be accompanied by the applicable completion schedule in form and applicable content acceptable to Lender which reflects a timetable and schedule for completion of the Work required for Phase 2. 11.3. Construction Contract. The contract to be executed by and between Borrower and the Contractor for Phase 2 (the "Construction Contract"), shall be in a form and content reasonably satisfactory to Lender, in its sole discretion. Without limiting the foregoing, such Construction Contract shall require the Contractor to construct the Work in accordance with the Specifications. Subsequent to the Closing Date, Borrower shall not permit any default under the terms of the Construction Contract; waive any of Contractor's obligations thereunder; do any act which would relieve Contractor from its obligations to construct the Work according to the Specifications; or make any amendment, other than change orders as may be permitted hereunder without Lender's prior written consent. Borrower shall furnish Lender with a written agreement from the Contractor consenting to the assignment of the Construction Contract to Lender and covering such other matters as Lender may reasonably require. The Contractor shall be duly licensed to act as a contractor in the State and has in force liability insurance in amounts reasonably acceptable to Lender and workers' compensation in amounts required by applicable law. The Construction Contract shall contain, among other things, the following provisions: 36 (a) A provision that prior to final payment to the Contractor, the Contractor shall deliver to Borrower and Lender (i) a final and complete release of liens signed by the Contractor and all Subcontractors, and (ii) a Certificate of Occupancy issued by St. Johns County, Florida for the applicable Work. (b) A provision that (i) no change order involving an increase or decrease in the cost of the Work of more than $50,000 for any one change order or $250,000 in the aggregate with all other change orders (except as approved prior to the Closing Date), and (ii) no change order subsequent to the Closing Date which involves any material change in the architectural, mechanical or structural design of any portion of the Work or any material change in the quality of workmanship or materials or any delay in completion of the Work beyond the Phase 2 Completion Date, shall be effective without the prior written consent of Lender. Any cost saving in a line item of the Phase 2 Cost Certificate may not be automatically applied to any line item which is in excess of the budgeted amount for that line item. (c) A provision that the Construction Contract may not be terminated by the Contractor until thirty (30) days after delivery of a notice of Borrower's default and opportunity to cure to Lender (or such longer period after said delivery as may be reasonably necessary to cure a default thereunder) and may not be terminated by the Contractor by reason of the bankruptcy or insolvency of Borrower. (d) A provision for retainage equal to 10% holdback from each Construction Advance as set forth in the Phase 2 Cost Certificate, which retainage shall be released in the manner set forth in Section 8.5 of this Agreement. (e) Notwithstanding the foregoing, Lender has reviewed the Construction Contract and acknowledges it is in compliance with this Section 11.3. 11.4. Architect's Contract. The contract dated August 19, 2005, by and between Borrower and the Architect for Phase 2 (the "Architect's Contract") shall provide that subsequent to the Closing Date, Borrower shall not agree to nor permit any material amendment, modification, waiver or other material change to or of any of the foregoing without the prior written consent of Lender. Borrower shall furnish Lender with a written agreement from Architect (a) certifying that the Specifications comply with all applicable Legal Requirements relating to the Work, occupancy and use of Phase 2 of the Project, (b) consenting to the assignment of the Architect's Contract to Lender, (c) agreeing that the Architect will continue performance under the Architect's Contract at Lender's request after any Event of Default hereunder or after a default thereunder by Borrower (other than a monetary default not cured), (d) agreeing that Lender may use the Specifications without additional cost to complete the Work after a Default or an Event of Default, and (e) covering such other matters relating to the Work as Lender may reasonably request. All costs of the Architect shall be paid by Borrower. 37 11.5. Subcontracts. If funding of the Loan occurs prior to completion of the Phase 2 Work, then each contract (each a "Subcontract") which has been executed by and between Borrower or the Contractor and each subcontractor, materialman and supplier who is to provide labor or materials at a value equal to or in excess of $100,000 necessary to achieve completion of the Phase 2 Work (each a "Subcontractor") shall contain (a) the agreement of the Subcontractor to perform the Subcontract for Lender following the occurrence of an Event of Default, (b) a provision that the Subcontractor shall comply with the provisions of the Applicable Mechanics Lien Law, (c) a provision for a ten percent (10%) retainage, to be released as set forth in Section 8.5, (d) a provision that prior to final payment to the Subcontractor, the Subcontractor shall deliver to Borrower and Lender a final release of liens signed by the Subcontractor, and (e) a provision that there will be no termination, amendment, waiver or material change of the Subcontract subsequent to the Closing Date without the prior written consent of Lender. If requested by Lender, Borrower shall furnish statements from each Subcontractor and supplier of labor or materials, stating the amount of its contract and the amount paid to date, and acknowledging full payment (less retainage for all work done and/or materials supplied to date). Subsequent to the Closing Date, Borrower shall not: (i) permit any material default by Borrower under the terms of the Subcontracts; (ii) waive any of Subcontractors' obligations thereunder; (iii) do any act which would relieve any of the Subcontractors of their respective obligations to complete the Work according to the Specifications; (iv) or make any amendments, other than change orders permitted hereunder or as Lender may approve in writing, to any of the Subcontracts without Lender's prior written consent. Borrower shall cause Contractor to prepare and maintain a list of all Subcontractors whose contracts with the Contractor each have a value equal to or in excess of $100,000 for Phase 2, together with copies of their contracts, and showing the name, address and telephone number of each Subcontractor, the work or material performed or supplied by each Subcontractor, and the total amount of each contract and subcontract and amounts paid through the date upon which such list was completed, and shall keep the list current until each of the applicable Phases have been completed. 11.6. Specifications. The Specifications for Phase 2 and construction pursuant thereto shall prior to construction have been approved by any governmental or quasi governmental authorities. Such Specifications comply and will continue at all times to comply in all material respects with all applicable Legal Requirements and all other quasi-governmental laws, regulations, and standard requirements, including but not limited to the Fair Housing Act of 1968 as amended, and the Americans with Disabilities Act as amended, and that provisions have been made for the handicapped in accordance with Legal Requirements. No material change shall be made hereafter in the Specifications without the prior written consent of the Lender. 38 11.7. Permits. All renovation or building permits required for the Work at Phase 2, were properly obtained prior to commencing such applicable Work. All other licenses, permits and approvals required for the Work at Phase 2 were properly obtained prior to commencing the applicable Work. 11.8. Commencement of Construction. Borrower commenced the Work on or before the applicable Commencement Date for Phase 2 and diligently pursued the Work to completion utilizing good workmanship and quality materials. Quality of construction is of the essence and each Advance under the Loan shall be subject to satisfactory quality and completion of work in place. Borrower shall supply such sums of money and perform such duties as may be necessary for Completion of the Work in compliance in all material respects with all terms and conditions of the Loan Documents on or prior to the Phase 2 Completion Date, and without any lien, claim or assessment (actual or contingent) asserted against the Project for any material, labor or other items furnished in connection therewith and further in compliance with all construction, use, building, zoning and other similar requirements of any pertinent governmental authority. Borrower will provide to Lender evidence of satisfactory compliance with all of such requirements upon request by Lender and shall provide Lender with true and correct copies of all certificates of occupancy issued by all applicable governmental entities immediately upon issuance thereof. 11.9. Zoning and Land Use. The Project is zoned as a Planned Unit Development (PUD), under which timeshare is an allowed use. 11.10. Additional Equity. Lender reserves the right to require, at any time and from time to time, at Borrower's expense, a construction cost analysis by the Inspector or by an expert in the construction cost field designated by Lender. If Lender reasonably estimates, at any time and from time to time, that the amount necessary to assure final Completion of the Work for Phase 2, including but not limited to, interest and other soft or non-construction budget items (the "Phase 2 Total Budget") shall exceed the amount of the (a) remaining Advances under the Loan which are to be used to fund Approved Costs for the Work, plus (b) the total amount of all equity investments made or scheduled to be made by Borrower or Guarantor, then Borrower, at the request of Lender, shall (i) immediately deposit with Lender, to be held by Lender in a non-interest bearing, non-escrow account, the amount of any such difference, in cash, which amount shall be disbursed toward Phase 2 Total Budget costs prior to any further advance by Lender under the Loan, (ii) provide other financial assurances acceptable to Lender that additional construction funds will be available to Borrower and Guarantor to fund Completion of the Work, or (iii) pay from other sources the amount of any such difference for items included in the Phase 2 Total Budget with satisfactory evidence of such expenditure being provided to Lender prior to any further Advances under the Loan. Lender shall be assured at all times, to its satisfaction, that the estimated Advances to be made under the Loan which are to be used to fund Approved Costs 39 for the Work are sufficient to complete the Work for Phase 2 in accordance with the Phase 2 Total Budget, the applicable Specifications and this Agreement. Obligors hereby agree that payment for any cost overruns related to the Work shall be the sole responsibility of Obligors. Lender reserves the right of continual verification of adequate equity investments made by Borrower as required in this Section. 11.11. No Developer's Fee. The Phase 2 Total Budget does not include, directly or indirectly, any developer's fee and the line item identified as "construction overhead" shall be used for actual out-of-pocket costs and expenses of Borrower and shall not include any hidden fee or developer's profit. 11.12. Right of Lender to Inspect Project and Review Specifications. Borrower shall permit Lender, its representatives and agents and the Inspector at any reasonable time and from time to time to enter upon the Project and to inspect the Work and all materials to be used in the construction thereof and to cooperate and cause Contractor to cooperate with Lender and its representatives and agents and the Inspector during such inspections (including making available to Lender working copies of the Specifications together with all related supplementary materials); provided that this provision shall not be deemed to impose upon Lender any obligation to undertake such inspections. 11.13. Correction of Defects. Borrower shall promptly correct any defect in the Work or any departure from the Specifications not permitted under this Agreement, which has not been approved previously by Lender. The making of any Construction Advance shall not constitute a waiver of Lender's right to require compliance with this covenant. 11.14. Notification of Mechanics Lien Claims. Borrower and Guarantor shall advise Lender promptly in writing if Borrower receives any notice, written or oral, from any Contractor, laborer, subcontractor or materialman in connection with any work, labor or materials furnished in connection with the Work. Borrower shall furnish, and shall cause Contractor to furnish, such information, affidavit(s), cash deposits and/or bond(s) as may be required by the Title Company to issue and continue to date down the Title Policy from time to time free and clear of the claims of contractors, subcontractors, mechanics and/or materialmen. 11.15. Construction Tests. If requested by Lender, Borrower shall furnish to Lender (a) all field tests and laboratory tests performed by local building departments or any independent parties, complete construction schedules, certificates, plans and specifications, appraisals, title insurance and other insurance, reports and agreements, (b) the names of all persons with whom Borrower has contracted or intends to contract for the Work or the furnishing of labor or materials therefor, (c) copies and/or lists of all paid and/or unpaid bills for labor and materials with respect to the Work; and (d) construction budgets of 40 Borrower and revisions thereof showing the estimated cost of completion of the Work and the total funds required at any given time to complete and pay for such construction. 11.16. Substantial Completion. Upon Substantial Completion of the Mortgaged Property, Borrower shall deliver to Lender: (a) Permits. A copy of the final permits and approvals necessary or required from all authorities whose approval is required for the lawful use, occupancy and operation of the Project. (b) Final Releases of Lien; Contractor's Affidavit. Final mechanics' lien releases executed by the Contractor, in form and content acceptable to Lender and in conformance with Florida law, together with any and all additional affidavits of all such parties sufficient in the opinion of Lender's counsel to comply with Florida law to enable the Title Company to remove any and all mechanics' and materialmen's liens (inchoate or otherwise) affecting title to the Mortgaged Property. (c) Certificates of Substantial Completion. Certificates of Substantial Completion signed by the Contractor, Inspector and Borrower. (d) As-Built Survey. As to the final Advance under the Loan for Phase 2, receipt by Lender of two (2) originals of a satisfactory As-Built Survey. (e) As-Built Plans. Two (2) sets of detailed as-built plans must be submitted to Lender promptly after they are completed but in no event later than two (2) months following the issuance of the certificate(s) of occupancy (or the equivalent) with respect to Phase 2. (f) Insurance. Insurance coverage shall be expanded to include all forms of insurance reasonably required by Lender in form satisfactory to Lender to the extent provided in the Timeshare Declaration and the Agreement to Provide Insurance. (g) Other Evidence of Compliance. Such other evidence as Lender may require to establish that the Work, and any portion thereof, and its intended use complies with all applicable zoning, use and other requirements of the public authorities having jurisdiction and any other applicable Legal Requirements. 11.17. Intentionally Omitted. 11.18. Notice of Completion. As soon as practicable, but no later than ten (10) days after Completion of the Work, Borrower shall record or cause to be recorded in the Public Records a "Notice of Completion" pursuant to the Applicable 41 Mechanics Lien Law and shall forward to Lender and Lender's counsel evidence of such recordation. 11.19. Compliance with Inspector's Standards. The Work (including without limitation work which is not financed with proceeds of the Loan) shall comply with standards and specifications acceptable to the Inspector. 11.20. Intentionally Omitted. 11.21. Force Majeure. The Phase 2 Completion Date and the time for performance by Borrower of any of its construction-related obligations under the Loan Documents prior to the Phase 2 Completion Date (excluding any obligations for payments of money, taxes or insurance premiums) may be extended for the period of time during which such performance is delayed or hindered by reason of the occurrence of an event of Force Majeure. "Force Majeure" shall mean any delay or hindrance caused by any events or causes beyond Borrower's reasonable control, including, without limitation, fire, flood, earthquake, casualty, inclement weather, other acts of God, acts of a public enemy including terrorism, riot, insurrection, governmental regulation of the sale of materials or supplies or the transportation thereof, lack of transportation, strikes or boycotts, temporary restraining orders for injunctions prohibiting or restraining all or any portion of the Work if initiated by a third party and not reasonably preventable by Borrower, governmental actions and shortages of material or labor. 11.22. Lien Waivers. Borrower shall provide an indemnity and/or lien waivers or releases from any party with a right to file a lien against the Project as the Title Company may require with respect to insuring (and continuing to insure) the first Lien priority of Lender's Mortgage without and except for any mechanic's or materialmen's liens. 11.23. Specifications. One (1) set of the approved Site Plan and the complete and detailed Specifications which Borrower shall have approved in writing and which shall be satisfactory to Lender and Inspector, in their sole discretion, including any changes or modifications thereto and including Specifications for architectural, structural, mechanical, plumbing, electrical work. All Specifications must be stamped with all required approvals from all Governmental Agencies, certified under seal by Architect and signed by Borrower and Contractor to be true copies of the Specifications architecturally and structurally approved by all authorities and agencies having jurisdiction thereover. They must also incorporate the recommendations made in the soil testing report, if any. No change shall be made thereafter in the Specifications without the prior written consent of Lender. 12. General Affirmative Covenants. Obligors covenant and agree with Lender as follows: 42 12.1. Payment and Performance of Obligations. Borrower shall pay all of the Obligations, Loan Costs and related expenses when and as the same become due and payable, and Borrower shall strictly observe and perform all of the Obligations including without limitation, all covenants, agreements, terms, conditions and limitations contained in the Loan Documents, and all documents collateral thereto and will do all things necessary which are not prohibited by law to prevent the occurrence of any Event of Default hereunder or thereunder. 12.2. Business Office. Borrower will maintain an office or agency in Florida where notices, presentations and demands in respect of the Loan Documents may be made upon Borrower. Such office or agency and the books and records of Borrower shall be maintained at 4960 Conference Way, Suite 100, Boca Raton, Florida 33431. 12.3. Maintenance of Existence, Qualification and Assets. Borrower shall at all times (i) maintain its legal existence, (ii) maintain its qualification to transact business and good standing in the State and in any jurisdiction where it conducts business in connection with the Project, and (iii) comply or cause compliance in all material respects with all Legal Requirements applicable to the Project, Borrower, the Collateral or its business, including, without limitation, the Condominium Act and the Timeshare Act as they relate to the Project. 12.4. Consolidation and Merger. Unless Borrower shall have first obtained Lender's prior written approval, which may be granted, withheld or conditioned in Lender's sole discretion, Borrower will not consolidate with or merge into any other Person or permit any other Person to consolidate with or merge into it. Notwithstanding the foregoing Borrower is permitted to merge or consolidate into any Affiliate of Borrower or Guarantor or with Levitt Corporation or an Affiliate of Levitt Corporation, and such Affiliate may merge into or consolidate with Borrower, subject to the provisions of Section 14.8. 12.5. Maintenance of Insurance. Borrower shall comply with the terms and conditions of the Agreement to Provide Insurance. 12.6. Maintenance of Security. Borrower shall execute and deliver (or cause to be executed and delivered) to Lender all security agreements, financing statements, assignments and such other agreements, documents, instruments and certificates, and supplements and amendments thereto, and take such other actions, as Lender deems necessary or appropriate in order to maintain as valid, enforceable and perfected first priority liens and security interests, all Liens and security interests in the Collateral granted to Lender to secure the Obligations. Except with the prior written consent of Lender, Borrower shall not grant extensions of time for the payment of, compromise for less than the full face value or release in whole or in part, any Purchaser or other Person liable for the payment of or allow any credit whatsoever except for the amount of cash paid upon, any 43 Collateral or any instrument, chattel paper or document representing the Collateral. 12.7. Payment of Taxes and Claims. Borrower will pay when due, during the time Borrower maintains direct or indirect control of the Association, all taxes imposed upon the Project, the Collateral, Borrower, or any of its property, or with respect to any of its franchises, businesses, income or profits, or with respect to the Loan or any of the Loan Documents and all other charges and assessments against Borrower, the Collateral and the Project which Borrower is legally obligated to pay and shall cause the Association to pay when due, all taxes imposed upon the Project, the Collateral, the Association, or any of its property, or with respect to any of its franchises, businesses, income or profits, or with respect to the Loan or any of the Loan Documents which the Association is legally obligated to pay, before any claim (including, without limitation, claims for labor, services, materials and supplies) arises for sums which have become due and payable. Borrower may contest such taxes in good faith as long as the Project is not subject to being delinquent as a result of such challenge. If the Association fails to make such payments, during the time Borrower maintains direct or indirect control of the Association, Borrower shall promptly pay such amounts. Borrower acknowledges and agrees that Lender may require the establishment of an escrow account or a tax escrow agent be retained to collect and pay any taxes payable by Borrower or the Association. Except for (a) the Liens in favor of Lender granted pursuant to the Loan Documents, (b) the Permitted Liens, (c) Liens as are expressly provided for pursuant to the Timeshare Declaration related to unpaid assessments by a Purchaser with respect to such Purchaser's Timeshare Interest, which shall, in any event, be subordinate to the Lien of Lender, Borrower covenants that no statutory or other Liens whatsoever (including, without limitation, mechanics', materialmen's, judgment or tax liens) shall attach to any of the Collateral or the Project. 12.8. Inspections. Borrower shall, at any time and from time to time and at the expense of Borrower, permit Lender or its agents or representatives (including the Inspector) to inspect the Mortgaged Property, the Collateral and Borrower's assets or property, and to examine and make copies of and abstracts from its and, to the extent it has access thereto or possession thereof, the Association's, books, accounts, records, original correspondence, computer tapes, disks, software, and other papers as it may desire; and to discuss its affairs, finances and accounts with any of its officers, employees, Affiliates, Contractors or independent public accountants (and by this provision Borrower authorize said accountants to discuss with Lender, its agents or representatives, the affairs, finances and accounts of Borrower). All audits and inspections which shall not be more than one time per year unless and until an Event of Default has occurred and is continuing (including without limitation, those occurring before and after closing hereunder) shall be at Borrower's expense, including all reasonable travel expenses of Lender's employees. 44 12.9. Records. Borrower shall keep adequate records and books of account reflecting all financial transactions of Borrower and with respect to the Project in which complete entries will be made in accordance with GAAP. Borrower will maintain to the satisfaction of Lender accurate and complete books, records and files relating to the Project, the Collateral and the Work. Borrower shall permit Lender to audit and inspect at any time, and shall promptly deliver to Lender upon Lender's request therefor, all such books, records and files. 12.10. Management. Borrower shall cause the Project to be managed at all times by Manager or a Person or Persons who have substantial experience, background and demonstrated ability to perform, in accordance with a Management Agreement satisfactory to Lender, and who are in all other respects satisfactory to Lender. 12.11. Maintenance. Borrower shall maintain, or shall cause to be maintained, or to the extent provided for pursuant to the Timeshare Declaration, shall cause the Association to maintain, the Project in good repair, working order and condition and shall make all necessary replacements and improvements to the Project so that the value and operating efficiency of the Project will be maintained at all times and so that the Project remains in compliance in all material respects with the Timeshare Act, the Condominium Act, the Project Documents and all applicable Legal Requirements. 12.12. Local Legal Compliance. Borrower will comply, and will cause the Mortgaged Property to comply, in all material respects with all applicable restrictive covenants, applicable planning, zoning or land use ordinances and building codes, all applicable health and Environmental Laws and regulations, and in all material respects with all other applicable Legal Requirements. 12.13. Registration Compliance. Borrower will maintain, or cause to be maintained, all necessary registrations, current filings, consents, franchises, approvals, and exemption certificates, and Borrower will make or pay, or cause to be made or paid, all registrations, declarations or fees with the Division and any other Governmental Agency, whether in the state or another jurisdiction which may be required in connection with the Mortgaged Property and the occupancy, use and operation thereof, the incorporation of Units into the timeshare plan established pursuant to the Timeshare Declaration and the Project Documents, the Club Documents, and the sale, advertising, marketing, and offering for sale of Timeshare Interests. All such registrations, filings and reports will be truthfully completed; and true and complete copies of such registrations, applications, consents, licenses, permits, franchises, approvals, exemption certificates, filings and reports will be delivered to Lender. Borrower shall advise Lender of any material changes with respect to their sales programs for the Project. 45 12.14. Other Compliance. Borrower will comply in all material respects with all Legal Requirements, including to the extent applicable, but not limited to: the Timeshare Act; the Condominium Act; the Consumer Credit Protection Act; Regulation Z of the Federal Reserve Board; the Equal Credit Opportunity Act; Regulation B of the Federal Reserve Board; the Federal Trade Commission's 3-day cooling-off Rule for Door-to-Door Sales; ILSA; Section 5 of the Federal Trade Commission Act; the Gramm-Leach-Bliley Act; federal postal laws; applicable state and federal securities laws; applicable usury laws; applicable trade practices, home and telephone solicitation, sweepstakes, anti-lottery and consumer credit and protection laws; applicable real estate sales licensing, disclosure, reporting and escrow laws; the ADA; RESPA; all amendments to and rules and regulations promulgated under the foregoing acts or laws; and other applicable federal statutes and the rules and regulations promulgated thereunder; and any state law or law of any state (and the rules and regulations promulgated thereunder) relating to ownership, establishment or operation of the Project, or the sale, offering for sale, or financing of Timeshare Interests. 12.15. Further Assurances. Borrower will execute and deliver, or cause to be executed and delivered, such other and further agreements, documents, instruments, certificates and assurances as, in the judgment of Lender exercised in good faith may be necessary or appropriate to more effectively evidence or secure, and to ensure the performance of, the Obligations. 12.16. Maintenance and Amenities. Borrower will maintain, or will cause the Association to maintain, during the time Borrower maintains direct or indirect control of the Association, the Project in good condition and repair, and in accordance with the provisions of the applicable Project Contracts, Declarations and other Project Documents, and Borrower will cause each Purchaser of a Timeshare Interest at the Project to have continuing access to, and the use of to the extent of such Purchaser's use periods, all of the common area, Amenities, and related or appurtenant services, rights and benefits, all as provided in the Declarations, Project Documents and the Club Documents. 12.17. Loan Costs. Whether or not the transactions contemplated hereunder are completed, Borrower agrees to pay all existing and future Loan Costs. The provisions of this Section shall survive repayment of the Obligations or termination of this Agreement. 12.18. Indemnification of Lender. In addition to (and not in lieu of) any other provisions of any Loan Document providing for indemnification in favor of Lender, Borrower agrees to defend, indemnify and hold harmless Lender and its participants and their subsidiaries, affiliates, officers, directors, agents, employees, representatives, consultants, Contractors, servants, and attorneys, as well as the respective heirs, personal representatives, successors or assigns of any or all of them (hereafter collectively the "Indemnified Lender Parties"), from and against, 46 and promptly pay on demand or reimburse each of them with respect to, any and all liabilities, claims, demands, losses, damages, costs and expenses (including without limitation, reasonable attorneys' and paralegals' fees and costs), actions or causes of action of any and every kind or nature whatsoever asserted against or incurred by any of them by reason of or arising out of or in any way related or attributable to: (a) any failure or alleged failure of Borrower to perform any of its covenants or obligations with respect to the Mortgaged Property or to the Purchasers of any of the Timeshare Interests; (b) the development of the Mortgaged Property; (c) the debtor-creditor relationships between Borrower on the one hand, and the Purchasers or Lender or its participants, as the case may be, on the other; (d) the operation of the Project or sale of Timeshare Interests; (e) Borrower's performance under or related to this Agreement, the Loan Documents, the Commitment or the Collateral; (f) the transactions contemplated under any of the Loan Documents or any of the Project Documents or Club Documents to be performed by Borrower, including without limitation, those in any way relating to or arising out of the violation of any Legal Requirements, including the Condominium Act and the Timeshare Act; (g) any breach of any covenant or agreement or the incorrectness or inaccuracy of any representation and warranty of Borrower contained in this Agreement or any of the Loan Documents (including without limitation any certification of Borrower delivered to Lender); (h) any and all taxes, including real estate, personal property, sales, mortgage, excise, intangible or transfer taxes, and any and all fees or charges to be paid by Borrower including, without limitation under the Timeshare Act, which may at any time arise or become due prior to the payment, performance and discharge in full of the Obligations; (i) the breach of any representation or warranty of Borrower as set forth herein regarding any Environmental Laws; (j) the failure of Borrower to perform any obligation or covenant herein required to be performed pursuant to any Environmental Laws; (k) the use, generation, storage, release, threatened release, discharge, disposal or presence on, under or about the Mortgaged Property of any Hazardous Materials; (l) the removal or remediation of any Hazardous Materials from the Mortgaged Property required to be performed pursuant to any Environmental Laws or as a result of recommendations of any environmental consultant or as required by Lender; (m) claims asserted by any Person (including without limitation any governmental or quasi-governmental agency, commission, department, instrumentality or body, court, arbitrator or administrative board (collectively, a "Governmental Agency"), in connection with or any in any way arising out of the presence, use, storage, disposal, generation, transportation, release, or treatment of any Hazardous Materials on, in, under or affecting the Mortgaged Property; (n) the violation or claimed violation of any Environmental Laws in regard to the Mortgaged Property; (o) the preparation of an environmental audit or report on the Mortgaged Property, whether conducted by Lender, Borrower, or a third-party, or the implementation of environmental audit recommendations or (p) any broker fees or commissions or similar compensation. Such indemnification shall not give Borrower any right to participate in the selection of counsel for Lender or the 47 conduct or settlement of any dispute or proceeding for which indemnification may be claimed. Lender agrees to give Borrower written notice of the assertion of any claim or the commencement of any action or lawsuit described in this Section. It is the express intention of the parties hereto that the indemnity provided for in this Section, as well as the disclaimers of liability referred to in this Agreement, are intended to and shall protect and indemnify Lender from the consequences of Lender's own negligence (but not Lender's gross negligence or intentional tortious conduct) whether or not that negligence is the sole or concurring cause of any liability, obligation, loss, damage, penalty, action, judgment, suit, claim, cost, expense or disbursement. The provisions of this Section shall survive the full payment, performance and discharge of the Obligations and the termination of this Agreement, and shall continue thereafter in full force and effect. 12.19. Use of Borrower's Names. Lender may use the name of Borrower and the Project in any press release, advertisement or other promotional materials issued in respect to the Loan. Lender will provide notice and a copy of any such advertisement materials to Borrower. 12.20. Right to Provide Future Financing. Borrower hereby agrees that Lender shall have the right to provide the construction, renovation and development financing for all future phases of timeshare Units to be constructed in connection with the Project. Borrower hereby grants to Lender a first opportunity at Lender's sole discretion, to provide all acquisition, construction, renovation and development financing for the Project, upon the same financial terms or terms more favorable to Borrower, for acquisition, construction, renovation or development financing as contained in this Agreement to be secured by all of the Collateral and such other collateral as may be requested by Lender. Borrower shall not enter into any financing agreement with any other Person relating to the acquisition, construction, renovation or development financing for the Project unless and until Borrower has provided written notice to Lender via certified mail (return receipt requested) that Borrower intends to obtain such financing and Lender has waived in writing the option and rights as set forth in this section. Notwithstanding the foregoing, Lender shall be deemed to have waived the option and rights as set forth in this Section if Lender fails to provide Borrower with a signed letter of intent on terms acceptable to Borrower regarding such financing within thirty (30) days from the date on which Borrower has provided Lender with all information required by Lender related to such financing. The provisions of this Section shall survive payment, performance and discharge of the Obligations and the termination of this Agreement, and shall continue thereafter in full force and effect, and shall be secured by all the Collateral pledged by Obligors to Lender under the Loan Documents. 48 12.21. Inspector. An architectural or engineering firm or firms acceptable to Lender (the "Inspector") may be retained by Lender at Borrower's expense for the purpose of performing inspections as the Work progresses and certifying that each Advance of the Loan is not in excess of the Work completed, less retainage, and that proceeds of Loan are sufficient to complete the Work and covering such other matters as Lender shall require. Any such inspections shall be for Lender's sole benefit and will not be relied upon by Borrower. Borrower shall pay all reasonable expenses of the Inspector in connection with periodic inspections of the progress of the Work and any pre-closing or post-closing meeting, audits or inspections. 12.22. Sales and Marketing. Sales and marketing activities at the Mortgaged Property will be conducted by Borrower or a sales and marketing organization affiliated with, contracted with or employed by Borrower. 12.23. Project Contracts. Subject to the rights of the Association, Lender shall have the right to review and approve all present and future Project Contracts which affect the Phase 2 Units or the Mortgaged Property for amounts equal to or greater than $50,000 per year per Project Contract and all modifications, extensions or terminations thereof, all of which shall be acceptable to Lender in its reasonable discretion, which approval shall not be unreasonably withheld or delayed. 12.24. Consents. Borrower shall obtain all consents, approvals and authorizations for the transactions contemplated under this Agreement, which consents, approvals and authorizations must be in form and content acceptable to Lender in its reasonable discretion. 12.25. Engineering Survey. At any time upon the request of Lender, to the extent Lender has a reasonable basis to believe a problem exists, Borrower shall obtain, at Borrower's cost, an engineering report or reports, by an engineering firm acceptable to Lender, covering the Mortgaged Property and/or Units confirming that the Units are mechanically and structurally sound. If such report or reports discloses any defects or inadequacies, Borrower shall promptly take all corrective actions, at Borrower's expense. 12.26. Intentionally Omitted. 12.27. Exchange Company. Lender has received evidence satisfactory to Lender that the Project has been accepted by Resort Condominiums International LLC ("RCI") into its reciprocal exchange program and continues along with Borrower (or Guarantor) to remain affiliated therewith as of the Closing Date. Borrower agrees that the Project shall at all times be affiliated with either RCI or Interval International. Borrower agrees to pay the applicable external exchange company any and all fees which are properly assessed by the exchange company in 49 connection with Borrower's or the Project's affiliation therewith. Borrower shall continue to sell memberships in the applicable exchange company for so long as it is authorized to do so. 12.28. Intentionally Omitted. 12.29. One to One Ratio Compliance. Borrower covenants that it will use its best efforts to cause the Club manager to maintain at all times the One to One Ratio in a manner consistent with the Club Documents. Borrower shall use its best efforts to cause Club manager to provide Lender with a report on an annual basis which indicates and documents compliance with the One to One Ratio. 13. Reporting Requirements. So long as any portion of the Obligations remains unsatisfied or this Agreement has not been terminated, Borrower shall furnish (or cause to be furnished, as the case may be) to Lender the following: 13.1. Intentionally Omitted. 13.2. Quarterly Financial Reports. As soon as available and in any event within forty-five (45) days after the end of each fiscal quarter, if applicable, of Guarantor, a Form 10-Q of Guarantor for such fiscal quarter. Lender will accept electronic notification of the filing of Guarantor's Form 10-Q with the SEC as delivery of Guarantor's financial statements required under this Agreement. 13.3. Annual Financial Reports of Guarantor. As soon as available and in any event within ninety (90) days after the end of each of calendar year, the financial statements of Guarantor, all in such detail and scope as may be reasonably required and certified by Guarantor to be true, correct and complete, and otherwise acceptable to Lender. Lender will accept electronic notification of the filing of Guarantor's Form 10-K with the SEC as delivery of Guarantor's financial statements required under this Agreement. 13.4. Officer's Certificate. Each set of annual financial statements and quarterly financial statements delivered to Lender pursuant to Sections 13.2 and 13.3 of this Agreement will be accompanied by a certificate of Borrower in the form of Exhibit "G" attached hereto setting forth that the signer has reviewed the relevant terms of this Agreement (and all other agreements and exhibits between the parties) and have made, or caused to be made, under his/her supervision, a review of the transactions and conditions of Borrower and the Mortgaged Property from the beginning of the period covered by the financial statements or reports being delivered therewith to the date of the certificate and that such review has not disclosed the existence during such period of any condition or event which constitutes an Incipient Default or Event of Default or, if any such condition or event existed or exists or will exist, specifying the nature and period of existence thereof and what action Borrower has taken or proposes to take with respect thereto. 50 13.5. Audit Reports. Promptly upon receipt thereof, one copy of each other report submitted to Borrower by independent public accountants or other Persons in connection with any annual, interim or special audit made by them of the books of Guarantor or the Mortgaged Property . 13.6. Inventory Report and Sales Reports. Within twenty (20) days after the end of each month, Borrower shall deliver to Lender an inventory report as of the prior month end, detailing the status (available, restricted, trades, write off, sold (separating deeded sold and pre-sale sold) and model) of all Timeshare Interests in Phase 2 of the Project. Within twenty (20) days after the end of each month, Borrower shall deliver to Lender a sales report as of the prior month end, detailing sales, cancellations and closings for the previous month of Timeshare Interests in Phase 2 of the Project. Such monthly reports shall be certified by Borrower to be true, correct, and complete and otherwise in a form approved by Lender. Borrower shall also provide Club reports if requested by Lender. 13.7. Association Reports. As soon as available and in any event within one hundred and eighty (180) days after the end of each fiscal year for the Association a balance sheet and income statement for the Association prepared in accordance with GAAP and on a basis consistent with prior accounting periods. The annual financial statements of the Association shall be certified by the President of the Association to be true, correct and complete and otherwise acceptable to Lender. 13.8. Notice of Default or Event of Default. Immediately upon becoming aware of the existence of any condition or event which constitutes an Incipient Default or an Event of Default, a written notice specifying the nature and period of existence thereof and what action Borrower are taking or propose to take with respect thereto. 13.9. Notice of Claimed Default. Immediately upon becoming aware that the holder of any material obligation or of any evidence of material indebtedness of Borrower has given notice or taken any other action with respect to a claimed default or event of default thereunder which default or claimed default would in Lender's reasonable judgment have an effect on Borrower's or Guarantor's ability to perform each of their obligations hereunder, a written notice specifying the notice given or action taken by such holder and the nature of the claimed default or event of default and what action Borrower is taking or proposes to take with respect thereto. 13.10. Material Adverse Developments. Immediately upon becoming aware of any litigation, claim, action, proceeding, development or other information which is expected to materially and adversely affect Borrower, Guarantor, the Collateral, the Project, or the business, prospects, profits or condition (financial or otherwise) of Borrower, Guarantor or the ability of Borrower or Guarantor to perform its Obligations under the Loan Documents, or of the existence of any 51 dispute between Borrower and any governmental or regulatory body or any other party which dispute is expected to materially delay or interfere with Borrower's normal business operations or the Work, Borrower shall provide Lender with telephonic or telegraphic notice, followed by telecopied and mailed written confirmation, specifying the nature of such litigation, development, information or dispute and such anticipated effect. At the request of Lender, Borrower shall appear in and defend in favor of Lender, at Borrower's sole expense, with regard to any such claim, action or proceeding. 13.11. Other Information. Borrower will promptly deliver to Lender any other information related to the Work, the Collateral, the Project, Borrower or Guarantor, as Lender may in good faith request. 14. Negative Covenants. Obligors hereby covenant and agree with Lender as follows: 14.1. Organization. Obligors will not amend, modify or supplement their Governing Documents in any material respect. 14.2. Project Contracts. No Project Contract equal to or greater than $50,000 per year shall be modified, extended, terminated or entered into, without the prior written approval of Lender, which approval shall not be unreasonably withheld or delayed. 14.3. Limitation on Other Debt/Further Encumbrances. Borrower will not obtain financing or grant Liens with respect to the Mortgaged Property, the Project Contracts, the Collateral, any Units or Timeshare Interests, other than loans from and Liens in favor of Lender and other than the Permitted Liens. 14.4. Intentionally Omitted. 14.5. Amendment of Declarations, Etc. To the extent within the direct or indirect control of Obligors, Obligors will not without the prior written consent of Lender, which consent shall not be unreasonably withheld, record, file or permit any amendment of the Declarations or the Articles of Incorporation or By-Laws of the Association, or assign any of their rights under the Declarations. Without the prior written consent of Lender, which consent shall not be unreasonably withheld or delayed, Borrower, as owner of Units, shall not vote in favor of any amendment of the Declarations or the Articles of Incorporation or By-Laws of the Association. Further, Borrower shall not assign any of its rights under the Declarations to any Person other than Lender. 14.6. Ownership. Obligors will not permit any change in the ownership interests in Borrower or any change, direct or indirect, in the management or control of Borrower as a result of which Guarantor will cease to own 100% of all outstanding and issued stock of Borrower. 52 14.7. Other Liens or Assignments. Obligors will not sell, convey, transfer, pledge, hypothecate, encumber, grant or permit to exist a lien or security interest in any of the Collateral or in any of the Project Contracts, other than liens in favor of Lender, matters set forth in the title policy provided Lender and other than those liens identified on Schedule 14.7 attached hereto (collectively the "Permitted Liens"). Notwithstanding the foregoing, Obligors may sell Timeshare Interests to Purchasers in the ordinary course of Obligors' business, provided that Obligors pay to Lender the required Release Payments related to such sales. 14.8. Merger, Etc. Obligors will not change their respective names, enter into any merger, consolidation or reorganization or reclassify their ownership interests without the prior written consent of Lender, except Borrower may merge or consolidate into an Affiliate of Borrower or Guarantor or Guarantor may merge or consolidate or be acquired by Levitt Corporation or an Affiliate thereof. If Guarantor merges or consolidates into Levitt Corporation or any Affiliate thereof, Borrower or Guarantor shall (subject to compliance with applicable Legal Requirements) provide Lender with at least fifteen (15) Business Days written notice prior to the public announcement of such merger or consolidation. 14.9. Use of Lender's Name. Without the prior written consent of Lender, Borrower will not, and will not permit any Affiliate of any Borrower to use the name of Lender or the name of any affiliate of Lender in connection with any of their respective businesses or activities, except in connection with internal business matters and as required in dealings with governmental agencies. Guarantor shall be permitted to use Lender's name in its investor relations presentations. 14.10. Transactions with Affiliates. Without the prior written consent of Lender, Borrower will not enter into any transaction with any Affiliate of Borrower in connection with the Mortgaged Property (except for the Management Agreement), including, without limitation, relating to the purchase, sale or exchange any assets or properties or the rendering of any service. 14.11. Name or Address Change. Borrower will not change its name and will not change its chief executive office or the location at which they do business without at least fifteen (15) days prior written notice to Lender and delivery to Lender of such UCC amendments or other financing statement and access agreement as Lender may require to maintain Lender's Lien against any of the Collateral and Lender's ability to obtain access to such Collateral and Borrower's books and records. 14.12. Intentionally Omitted. 14.13. Distributions. Obligors will not declare or pay any dividends or distributions if any Event of Default then exists or if such dividend or distribution would result in an Incipient Default or an Event of Default, except Borrower may 53 make dividends or distributions to Guarantor and Guarantor may make dividends and distributions to its shareholders at any time. 14.14. Intentionally Omitted. 14.15. Intentionally Omitted. 14.16. Restrictions on Transfers. Without the prior written consent of Lender, Obligors shall not, whether voluntarily or involuntarily, by operation of law or otherwise: (a) transfer, sell, pledge, convey, hypothecate, factor or assign all or any portion of the Mortgaged Property or the Collateral, or contract to do any of the foregoing, including, without limitation, pursuant to options to purchase, and so-called "installment sales contracts," "land contracts" or "contracts for deed" (except that Borrower shall have the right to sell Timeshare Interests to Purchasers in arms-length transactions); (b) lease or license the Mortgaged Property or any portion of the Mortgaged Property, or change the legal or actual possession or use thereof; or (c) cause or permit the assignment, pledge or other encumbrance of any of the Project Contracts or all or any portion of Borrower's right, title or interest in the Declarations. 14.17. Restrictive Covenants. Without the prior written consent of Lender, Borrower will not consent to, or otherwise acquiesce in, any change in any private restrictive covenant, planning or zoning law or other public or private restriction, which would limit or alter the use of the Mortgaged Property, except Borrower may record documents in connection with development of the Project provided same are consented to by Lender. 14.18. Intentionally Omitted. 14.19. Intentionally Omitted. 14.20. Intentionally Omitted. 14.21. Amenities. Borrower will not make any promises of or representations regarding any Amenities and their availability for use by Purchasers, unless such Amenities are fully completed and the right of the Purchasers to use such Amenities is set forth in a legally binding agreement approved by Lender in writing or such potential use is accurately disclosed. 14.22. Changes in Accounting. Borrower and Guarantor shall not change their method of accounting unless such change is permitted by GAAP and provides such change does not have the effect of curing or preventing what would otherwise be an Event of Default if such change had not taken place unless such change is required by GAAP. 54 14.23. Club Reservation System. Should the Reservation System become otherwise unavailable to the Club as a result of termination of the Club management contract by and between the Vacation Club Managing Entity, Vacation Trust, Inc., a Florida corporation, as Trustee pursuant to the terms of the Trust Agreement (as defined in the POS) (the "Club Trustee") and Bluegreen Vacation Club, Inc. ("Management Contract") or as a result of termination of the existence of the Vacation Club Managing Entity, then Borrower or Guarantor shall use their best efforts to cause the appropriate persons or entities to comply in all material respects with the F.S. Ch 721 - the Florida Vacation Plan and Timesharing Act (specifically Florida Statutes Chapter 721.56 (5), as may be applicable, together with the then-current Bluegreen Vacation Club Multi-Site Public Offering Statement approved by the Division ("POS"), which presently provides that in the event of termination of the Vacation Club Managing Entity, a trust arrangement meeting the criteria of 721.56(5)(b) shall be established to provide for an adequate period of continued operation of the Reservation System for the Club until a substitute reservation system can be acquired. 15. Affiliate Indebtedness. Borrower agrees that all Affiliate Indebtedness at any time owing by Borrower shall be unsecured and shall be absolutely subordinated to the Obligations except payments of Affiliate indebtedness may be made so long as no Event of Default exists and is continuing. Except as set forth above, Borrower will not, directly or indirectly: (a) permit any payment to be made in respect of any indebtedness, liabilities or obligations, direct or contingent, to any Affiliate which are subordinated by the terms thereof or by separate instrument to the payment of the Obligations, except in accordance with the terms of such subordination; (b) permit the amendment, rescission or other modification of any such subordination provisions of any of Borrower's subordinated obligations in such a manner as to affect adversely Lender's Lien in and to the Collateral or Lender's senior priority position and entitlement as to payment and rights with respect to the Obligations; or (c) permit the prepayment or redemption, of all or any part of Borrower's obligations to any Affiliate, or of any subordinated obligations of Borrower, except in accordance with the terms of such subordination provisions. 16. Financial Covenants. 16.1. Minimum Tangible Net Worth. Guarantor shall maintain Tangible Net Worth determined on a consolidated basis of not less than (a) $225,000,000 plus 50% of Guarantor's consolidated Net Income for the fiscal year ending December 31, 2007, as of the date of this Agreement and at all times thereafter, which shall be measured and confirmed quarterly and annually to Lender's satisfaction, until the Loan is paid in full and Lender shall have no further obligation to fund any Advances hereunder. The terms "Tangible Net Worth" and "Net Income" shall have the meanings given to them under GAAP. 55 16.2. Minimum Debt to Tangible Net Worth Ratio. Guarantor shall not permit the ratio of its total debt (excluding liabilities subordinated to the Loan and non-recourse receivable backed debt), as determined in accordance with GAAP, to its Tangible Net Worth as determined in accordance with GAAP, to exceed 2.5 to 1.0, which shall be measured and confirmed annually to Lender's satisfaction until the Loan is paid in full and Lender shall have no further obligations to fund any Advance hereunder. 17. Conditions of and Documents to be Delivered at the Closing. The following are conditions of Closing. To the extent that the conditions involve the delivery to Lender of any documents or other due diligence items, such documents and items must be in form and content acceptable to Lender in its discretion. 17.1. Loan Documents. Lender shall receive all of the Loan Documents duly executed by all parties thereto. 17.2. Opinions of Counsel. Lender shall receive an opinion of local Wisconsin and corporate counsel for Obligors and the Association. 17.3. Project Documents. Lender shall receive a copy of each of the following and all amendments thereto, certified as to accuracy and completeness by the Borrower: (a) Declarations; (b) Condominium and/or Timeshare Plan; (c) The Public Report; (d) Projected cash flows for the Mortgaged Property; (e) Association Articles of Incorporation and By-laws; (f) Management Agreement; (g) Rules and Regulations; (h) Owner's purchase contract and warranty deed; and (i) Such other Project related documents as Lender may require. 17.4. Association Documents. Lender shall receive a copy of the Governing Documents of the Association and all amendments thereto. 17.5. Obligors' Documents. Lender shall receive a copy of the Governing Documents of each Obligor and all amendments thereto, certified as to 56 accuracy and completeness by either an officer of such Obligor or by the public official in whose office the same are recorded or filed. 17.6. Good Standing Certificates. Lender shall receive current good standing certificates issued by the secretaries of the states of their respective formation and all other states in which they do business, confirming the current good standing and qualification of each Obligor in such states. 17.7. Insurance. Lender shall receive certificates of insurance or policies of insurance evidencing that all insurance (including flood insurance, if required) required by the Timeshare Declaration, the Lender's Mortgage, this Agreement or the Agreement to Provide Insurance is in force and will not attempt to cancel without at least thirty (30) days written notice by the insurance carrier to Lender. 17.8. Flood Insurance. If any portion of any of the Project is within an area designated by the Director of the Federal Emergency Management Agency, pursuant to the Flood Disaster Protection Act of 1973, as amended, as one having special flood hazards, Obligors shall deliver to Lender evidence that the buildings and other improvements within such areas are covered by flood insurance to the maximum limit of coverage available under the Flood Disaster Protection Act of 1973, as amended. If no portion of the Project is within such a special flood hazard area, Obligors shall provide Lender with confirmation of such fact from a surveyor, the municipality in which the Project is located or Obligors' counsel. 17.9. Authorizing Resolutions. Lender shall receive a copy of the resolutions of each Obligor authorizing the transactions contemplated hereunder and the execution of the Loan Documents and all collateral documents on behalf of each Obligor. 17.10. UCC-1 Financing Statements. Lender shall receive confirmation that UCC-1 financing statements naming Lender as secured party and Borrower as debtor describing all Collateral now or hereafter assigned by Borrower to Lender pursuant hereto have been filed with the Secured Transactions Registry of Florida and the Public Records for St. Johns County, Florida. 17.11. UCC-1 Search Report. Lender shall receive a current search report from a UCC search company approved by Lender setting forth all UCC-1 filings, tax liens and judgment liens made against each Obligor. Such search report must indicate that at the time of the filing of the financing statements (Form UCC-1) in favor of Lender there were on file no financing statements or liens evidencing a security interest in any Collateral. 17.12. Releases. Lender shall receive releases and satisfactions from all persons or entities holding liens, claims or encumbrances against the Mortgaged Property or any of the Collateral. 57 17.13. Closing Certificates. Lender shall receive the executed closing certificate of each Obligor certifying to Lender that all representations and warranties of Obligors in this Agreement are accurate and complete and that Obligors or have complied with all covenants and conditions of closing set forth in this Agreement. 17.14. Compliance. Lender shall receive evidence satisfactory to Lender that Borrower, Guarantor and the Project are in compliance in all material respects with all Legal Requirements. 17.15. Borrower's Certificate of Indemnity. Lender shall receive Borrower's Certificate of Indemnity, if necessary, in form and content sufficient to permit the Title Company to delete any exception for parties in possession, matters of survey, mechanics' or materialmen's liens, the gap period, and taxes and assessments which are due and payable. 17.16. Mortgagee Title Insurance Commitment and Policy. Lender shall receive a commitment to issue a Title Policy underwritten by the Title Company, in an amount at least equal to $12,500,000 and insuring that the Lender's Mortgage creates a first lien in and to the Mortgaged Property without exception for any persons claiming a right to use or occupy the Mortgaged Property except as agreed to by Lender, filed and unfiled mechanics' liens and claims, taxes (whether liened or not) or for matters which an accurate survey would disclose and subject only to such exceptions and conditions to title as Lender shall approve in writing. Borrower shall also cause to be delivered to Lender a pro forma lender's policy of title insurance. The Title Policy shall be consistent with the title commitment and pro forma lender's policy. Such Title Policy shall contain such affirmative coverage as Lender deems necessary, including but not limited to, an affirmative statement or endorsement that the Title Policy insures Lender against all mechanics' and materialmen's liens arising from or out of construction of the Work and shall contain endorsements in form and content reasonably acceptable to Lender: (a) insuring against matters which would be disclosed on an accurate survey; (b) insuring that no building restriction or similar exception to title disclosed on the Title Policy has been violated and that any violation thereof would not create or result in any reversion, reverter or forfeiture of title; (c) insuring compliance of the Project with all zoning requirements; (d) insuring over any environmental superlien or similar lien; (e) a contiguity endorsement (if applicable); (f) available interest rate endorsement; and (g) any other endorsements reasonably requested by Lender. The Title Policy shall provide that Lender shall receive an endorsement to the Title Policy on the date of each Advance: (i) indicating that since the date of the last preceding Advance there has been no change in the state of title and no mechanics' or materialmen's lien, claim or lien or similar notice has been filed against the Project; (ii) updating the Title Policy to the date of such Advance; and (iii) increasing the coverage of the Title Policy by an amount equal to such Advance, if the Title Policy does not by its own terms provide for such an increase. The 58 condition of title must be satisfactory to Lender in all respects. The final Title Policy must be delivered to Lender at or promptly after the Closing Date but in no event later than thirty (30) days following the Closing Date consistent in all respects with the title commitment and pro forma lender's policy. 17.17. Taxes and Assessments. Lender shall receive evidence that all taxes and assessments related to the Project have been paid, or will be paid out of closing proceeds, which taxes and assessments include, without limitation, real property taxes, and any assessments related to the Mortgaged Property. Borrower shall have provided evidence satisfactory to Lender that the Units have been segregated from all other property on the applicable municipal tax rolls. 17.18. Preclosing Inspections. Lender shall have conducted and approved due diligence investigations satisfactory to Lender of the Obligors and the Mortgaged Property. 17.19. Expenses. Obligors shall have paid all fees and expenses required to be paid to Lender prior to or at Closing pursuant to this Agreement. 17.20. Intentionally Omitted. 17.21. Intentionally Omitted. 17.22. Permits and Approvals. Lender shall have received copies of all existing building and renovation permits, all other applicable governmental permits, approvals, consents and licenses for the Mortgaged Property and satisfactory evidence that the Mortgaged Property and the intended uses of the Mortgaged Property are and will be in compliance with all Legal Requirements. Such evidence may include letters, licenses, permits, certificates and other correspondence from the appropriate governmental authorities, opinions of Borrower's attorney or other attorneys, as Lender may determine or other confirmation acceptable to Lender. All such approvals shall continue to be legally valid and shall remain in full force and effect after issuance and until the Loan is repaid in full. 17.23. Project Contracts. Lender shall have received executed copies of all Project Contracts. 17.24. Compliance with Planning and Zoning Stipulations. Obligors shall have furnished Lender with evidence of compliance of the Project with applicable zoning and other governmental requirements as Lender may require. 17.25. Project Broker. Lender shall have received evidence that Borrower has retained a broker of record for the Project as may be required by applicable law. 59 17.26. Escrow Agreements. Lender shall have received such executed Escrow Agreements as Lender may reasonably require. 17.27. Credit References. Lender shall have received satisfactory credit references on the Obligors and the officers of the Obligors from such creditors as may be required by Lender. 17.28. Construction Equity. Lender shall have received evidence that Borrower is funding from its own funds (and not with proceeds of the Loan) at least 15% of the verifiable costs to complete the Work for Phase 2 of the Project. 17.29. Post-Closing Requirements. If Lender agrees in its sole discretion to complete closing under this Agreement even though certain conditions or requirements have not been satisfied, Obligors agree to satisfy such conditions and requirements within the time periods set forth in any post-closing letter agreement, but is not otherwise specified in any event no later than 90 days after the date of this Agreement. 17.30. Other. Lender shall have received such other documents, opinions and items as Lender may reasonably request. By completing the closing hereunder, or by making advances hereunder, Lender does not thereby waive a breach of any warranty or representation made by Borrower or Guarantor hereunder or any agreement, document, or instrument delivered to Lender or otherwise referred to herein, and any claims and rights of Lender resulting from any breach or misrepresentation by Borrower or Guarantor is specifically reserved by Lender. 18. Conditions to Lender's Obligation to Make Construction Advances. In addition to, but not in limitation of, any other conditions set forth in this Agreement, Lender's obligation to make any Construction Advance shall be subject to fulfillment of the following conditions to Lender's satisfaction. To the extent that the conditions involve the delivery to Lender of any documents or other due diligence items, such documents and items must be in form and content reasonably acceptable to Lender in its discretion. 18.1. Documents. Lender shall have received the documents and items required under Section 17, as applicable. 18.2. Representations and Warranties. The representations and warranties of Obligors contained in this Agreement or otherwise made by or on behalf of Obligors to Lender in connection with the transactions contemplated hereby shall have been true and complete when made and as of the time of each Construction Advance. 60 18.3. Covenants. Obligors shall have fully performed and complied with all agreements and conditions contained in the Loan Documents. 18.4. No Default. No Incipient Default or Event of Default shall have occurred. 18.5. Request for Construction Advance. Except as otherwise provided in this Agreement, Lender shall have received a Request for Construction Advance duly executed on behalf of Borrower with such supporting documentation as Lender may require. Each Request for Construction Advance shall: (a) specify the principal amount of the Construction Advance requested and the specific category and amount of costs of the Work to be paid with the proceeds thereof; (b) be submitted with a completed standard AIA requisition form or equivalent that describes the total cost budget in detail, by line item categories on the construction budget, with each line item including detail of the total amount completed and stored to date, the total amount of prior Construction Advances, the amount of the current requested Construction Advance and the balance to complete the remainder of the Work on Phase 2 of the Project; (c) be signed by an officer of Borrower; (d) contain a certification by Borrower and/or the Inspector, to the effect that the progress of construction is in accordance with the applicable Specifications and is such that the applicable Work will be completed by the Phase 2 Completion Date; and (e) be accompanied by an internal cost report (including check numbers for bills paid) and if requested by Lender then such further back-up (including copies of bills and paid invoices), as reasonably requested or other documentation satisfactory to Lender that provide evidence for the costs requested to be advanced and evidence, as necessary, that Construction Advances made pursuant to prior Requests for Construction Advance for costs that were billed and not yet paid have been expended as requisitioned. (f) state that the representations, warranties and covenants of Borrower contained in this Agreement and any closing or funding related certifications are true and correct as of the date of the request and, after giving effect to the making of such requested Advance, will be true and correct as of the date on which the requested Advance is to be made; (g) state that no Default or Event of Default exists as of the date of the request and, after giving effect to the making of such requested Advance, 61 no Default or Event of Default would exist as of the date on which the requested Advance is to be paid; 18.6. Soft Costs. Lender shall have received written documentation which satisfactorily accounts to Lender for the expenditure of funds allocated to the payment of any "soft" costs set forth on the Phase 2 Cost Certificate. 18.7. Other Agreements. Each agreement required to have been executed and delivered in connection with any prior Advance shall be consistent with the terms of this Agreement and shall be in full force and effect. 18.8. Construction Documents. Lender shall have received copies of the fully executed Construction Contract, in form and content satisfactory to Lender in its sole discretion. Lender shall have received the consents and agreement of the Contractor, as required under Section 11.3. 18.9. Contractor's Insurance. Lender shall have received evidence of the insurance carried by the Contractor, in coverage and amount satisfactory to Lender, in Lender's reasonable discretion. 18.10. Intentionally Omitted. 18.11. Intentionally Omitted. 18.12. Certificates of Substantial Completion. Lender shall have received Certificates of Substantial Completion from the Contractor, Inspector and Borrower for all Work performed to date. 18.13. Compliance. Lender shall have received a certificate from the Borrower stating that the Work has been in accordance with the Specifications and that such Work, the Mortgaged Property, the Collateral and Obligors have at all times been in compliance with all Legal Requirements. 18.14. Lien Waivers, etc. Title Company and Lender, as appropriate, shall have received any and all affidavits, indemnity agreements, lien waivers, certificates and other documents that may be required by the Title Company as a condition to insuring all Construction Advances under the Title Policy. Such other documents shall include, but not be limited to, paid invoices and lien waivers from the Contractor relating to the Work. 18.15. Title Policy Endorsements. Lender shall have received an endorsement to the Title Policy dating down the Title Policy to the date of each Advance under the Loan; indicating that since the original date of the Title Policy there has been no change in the state of title and no title exceptions not approved by Lender and such other endorsements to the Title Policy required by Lender; insuring the lien of the Lender's Mortgage free and clear of any and all mechanics' 62 liens related to the Work; and, if necessary, increasing the insurance coverage to cover all Construction Advances related to the Work. 18.16. Fees and Expenses. Obligors shall have paid all fees and expenses then due and payable and required to be paid by pursuant to this Agreement in connection with such requested Construction Advance or any conditions related thereto. 18.17. Permits and Approvals. Lender shall have received copies of all building and renovation permits and all other licenses, permits, certificates and approvals required in connection with the Work to be financed with the requested Construction Advance. 18.18. Lender's Mortgage. Lender shall have no obligation to make any Construction Advance unless: (i) the Lender's Mortgage shall constitute a first lien on the Mortgaged Property, subject only to the Permitted Liens; (ii) there shall exist no other lien of any sort, whether prior or inferior, than the lien of the Lender's Mortgage; and (iii) Lender shall have received a date-down of the Title Policy effective as of the date of the requested Construction Advance insuring the foregoing. 18.19. Completion of Work. Lender shall also be under no obligation to make any Construction Advance: (a) if Lender reasonably determines that construction of the Work cannot be completed by the Phase 2 Completion Date; (b) if Lender is not reasonably satisfied that the proceeds of the Loan remaining undisbursed plus the future required equity of Borrower will be sufficient to complete all of the Work according to the applicable Specifications and to pay for all labor, materials and costs and all other costs and disbursements required to complete the Work, including interest and other non-construction costs; (c) if the Project shall have been materially damaged by fire or other casualty; or (d) if the Work is not substantially completed by the Phase 2 Completion Date. 18.20. Additional Equity. Lender shall also be under no obligation to make any Construction Advance unless Borrower shall have furnished Lender with evidence in form and substance reasonably acceptable to Lender which establishes that Borrower has paid or is paying a minimum of 15% of the verifiable costs of the Work related to such Construction Advance. 18.21. Advances Do Not Constitute a Waiver. No Construction Advance shall constitute a waiver of any condition of Lender's obligation to make further Construction Advances. 18.22. No Obligation to Fund After Filed Liens. Lender shall have no obligation to advance any monies at any time (a) that there is a claim of lien filed of record against the Mortgaged Property which has not been paid, transferred to other security or otherwise satisfactorily discharged, or (b) that any condition 63 precedent to such Advance has not been met, or (c) Borrower shall have failed to comply with any material provision of this Agreement, or (d) an Event of Default or Incipient Default has occurred and is continuing, or (e) there should otherwise be a material dispute, involving the Contractor and a Subcontractor with each other or with Borrower, which Lender believes in its reasonable judgment must be resolved prior to funding additional Advances. Lender's commitment to make Construction Advances hereunder shall at no time be subject to or liable to attachment or levy by any creditor of Borrower or by the Contractor, or any agent, contractor, subcontractor or supplier of Borrower. No such Persons are intended to be third party beneficiaries of this Agreement or any documents or instrument related to the Loan or to have any claim or claims in or to any undisbursed or retained Loan proceeds. 18.23. Stored Goods. Lender shall have the right to approve or disapprove Advances for stored or ordered goods. 18.24. Other. Lender and its counsel shall have received copies of such documents and papers as Lender or such counsel may reasonably request in connection with such requested Construction Advance. 19. Default. The occurrence of any one or more of the following events shall constitute an "Event of Default" hereunder: 19.1. Payments. Borrower shall fail to make when due, any payment or mandatory prepayment of principal or interest, any Loan Costs, Release Payments, advance fees, other fees or any other payment obligations within five (5) Business Days of the date the payment is due. 19.2. Covenant Defaults. Borrower shall fail to perform or observe any of Obligations, covenants, agreements or warranties contained in this Agreement or in any of the Loan Documents, and such failure shall continue unremedied for a period of twenty (20) days after the notice from Lender to Borrower of the existence of such failure, provided that in the event that Borrower is entitled to cure such failure within such twenty (20) day period, but due to the nature of such failure, the cure cannot be completed within the twenty (20) day period notwithstanding Borrower's diligent efforts to do so, then Borrower shall have an additional twenty (20) days to complete such cure (for a total of forty (40) days), provided that Borrower is diligently seeking to cure such default within the additional twenty (20) day period. 19.3. Warranties or Representations. Any representation, warranties or other statement made by or on behalf of Borrower or Guarantor in this Agreement, in any of the Loan Documents or in any instrument furnished in compliance with or in reference to the Loan Documents, is false, misleading or incorrect in any material respect as of the date made or reaffirmed. 64 19.4. Enforceability of Liens. Any Lien or security interest granted by Borrower to Lender in connection with the Obligations is or becomes invalid or unenforceable or is not, or ceases to be, a perfected first priority Lien or security interest in favor of Lender encumbering the asset to which it is intended to encumber, and Borrower fails to cause such Lien or security interest to become a valid, enforceable, first and prior lien or security interest in a manner satisfactory to Lender within ten (10) days after Lender delivers written notice thereof to Borrower. 19.5. Involuntary Proceedings. A case is commenced or a petition is filed against Borrower or Guarantor under any Debtor Relief Law, a receiver, liquidator or trustee of Borrower or Guarantor or of any material asset of Borrower or Guarantor is appointed by court order and such order remains in effect for more than thirty (30) days; or if any material asset of Borrower or Guarantor is sequestered by court order and such order remains in effect for more than thirty (30) days. 19.6. Proceedings. Borrower or Guarantor voluntarily seeks, consents to or acquiesces in the benefit of any provision of any Debtor Relief Law, whether now or hereafter in effect, consents to the filing of any petition against it under such law, makes an assignment for the benefit of its creditors, admits in writing its inability to pay its debts generally as they become due, or consents or suffers to the appointment of a receiver, trustee, liquidator or conservator for it, him or her or any part of its, his or her assets. 19.7. Attachment; Judgment; Tax Liens. The issuance, filing, levy or seizure against the Collateral, the Project, the Project Contracts, Borrower, Guarantor or any assets of Borrower or Guarantor, of one or more attachments, injunctions, executions, tax Liens or judgments for the payment of money cumulatively in excess of $100,000 in the aggregate, or the filing of any mechanics' or materialmen's Lien or claim of Lien which is not discharged in full or stayed within thirty (30) days after issuance or filing. 19.8. Intentionally Omitted. 19.9. Removal of Collateral. Borrower conceals, removes, transfers, conveys, assigns or permits to be concealed, removed, transferred, conveyed or assigned, any of the Collateral or any of its assets in violation of the terms of the Loan Documents or with the intent to hinder, delay or defraud its creditors or any of them including, without limitation, Lender. 19.10. Intentionally Omitted. 19.11. Default of Guarantor. Any default under any Guaranty Agreement or the revocation or attempted revocation or repudiation thereof, in whole or part, by Guarantor. 65 19.12. Merger or Dissolution. Any merger, dissolution, consolidation, reorganization, liquidation or restructure of Borrower, in violation of the terms of this Agreement. 19.13. Default by Borrower or Guarantor Under Other Agreements. Any default by Borrower, Guarantor in the payment or performance of any indebtedness to Lender or to any affiliate of Lender (after expiration of any applicable grace, notice or cure period). 19.14. Loss of License. The loss, revocation or failure to renew or file for renewal of any registration, approval, license, permit or franchise now held or hereafter acquired by Borrower with respect to the Work, the Mortgaged Property or sale and financing of Timeshare Interests, or the failure to pay any fee, which is necessary for the continued operation of the Mortgaged Property, sale and financing of Timeshare Interests or Borrower's business in the same manner as it is being conducted at the time of such loss, revocation, failure to renew or failure to pay and such loss, revocation or failure to renew or file for renewal shall continue for thirty (30) days. 19.15. Suspension of Sales. The issuance of any stay order, cease and desist order, injunction, temporary restraining order or similar judicial or nonjudicial sanction limiting or otherwise materially adversely affecting the Work, any sales activities related to Timeshare Interests, other business operations in respect of the Mortgaged Property, or the enforcement of Lender's remedies and such order or other court sanction shall continue for thirty (30) days. 19.16. Violation of Negative Covenants. Borrower violates any negative covenant set forth in Section 14 not cured within the cure period set forth in Section 19.2. 19.17. Deficiency. In Lender's good faith opinion, the cost of completing the applicable Work in accordance with the Specifications exceeds the total amount set forth in the Phase 2 Cost Certificate, and Borrower has failed to make arrangements satisfactory to Lender within ten (10) days after notice from Lender for the payment of such additional costs. 19.18. Abandonment or Cessation of Construction. Prior to completion, the Work which is commenced shall be abandoned or shall cease for any reason (unless an event of Force Majeure as defined in Section 11.21 has occurred) and not be resumed within thirty (30) days thereafter. 19.19. Lien Against Collateral. Borrower grants any Lien upon any of the Collateral or Borrower grants any Lien against any part of the Mortgaged Property unless otherwise approved by Lender in writing. 66 19.20. Unauthorized Work. Borrower shall, without Lender's prior written consent, undertake or contract for Work outside of or beyond the scope of the Specifications other than pursuant to change orders permitted pursuant to Section 11.3 of this Agreement. 19.21. Breach. Any violation or breach shall occur in any agreement, covenant or restriction affecting title to the Project not cured within the cure period set forth in Section 19.2. 19.22. Criminal Proceedings. The indictment of Borrower or Guarantor under any criminal statute, or the commencement of criminal or civil proceedings against Borrower or Guarantor pursuant to which statute or proceedings the penalties or remedies sought or available include forfeiture of any Collateral, or Borrower or Guarantor engages or participates in any "check kiting" activity regardless of whether a criminal investigation has been commenced. 19.23. Intentionally Omitted. 19.24. Intentionally Omitted. 19.25. Intentionally Omitted. 19.26. Intentionally Omitted. 19.27. Intentionally Omitted. 19.28. Fraud. If Borrower or Guarantor takes or is in the process of taking any action which Lender shall deem to be intended to (i) defraud any of their creditors, including, without limitation, Lender, (ii) convert all or any portion of the Collateral, or (iii) intentionally violate or circumvent Legal Requirements material to their respective businesses. 19.29. Intentionally Omitted. 19.30. Insolvency. Borrower or Guarantor becomes insolvent or otherwise generally unable to pay its respective debts as and when they become due or payable. 19.31. Encroachments and Permits. If all or any portion of any of the construction of improvements for Phase 2 encroach (without consent) in any material respects not indicated on the Survey, upon any street or road, setback, or easement or upon any adjoining property, or violate in any material respects any ordinance, regulation, rule, or direction of any federal or state agency, or of any governmental or quasi-governmental authority, or any zoning setback line. 67 19.32. Material Adverse Change. A material adverse change in the value of the Collateral or the Mortgaged Property or in the financial condition of Borrower or Guarantor has occurred as determined by Lender in its reasonable discretion. 19.33. Cessation of Business. Any cessation of a material part of the operation of the Mortgaged Property and if such business shall not be resumed within ten (10) days after such cessation, unless the cessation is due to a Force Majeure event. 20. Termination of Obligation to Advance/Remedies. 20.1. Termination of Obligation to Advance Should an Event of Default occur and be continuing, Lender may, with or without proceeding with any sale or foreclosure or demanding payment or performance of the Obligations, without notice, terminate Lender's further performance under this Agreement or any other agreement or agreements between Lender and Borrower, including, without limitation, any commitment of Lender to lend under this Agreement in its entirety, or any portion of any such commitment, to the extent Lender shall deem appropriate, without notice and without further liability or obligation by Lender. 20.2. Remedies. At the option of the Lender, upon the occurrence of an Event of Default or at any time while an Event of Default is continuing, Lender: (a) Acceleration. Without demand or notice of any nature whatsoever, declare the Obligations, or any part thereof, immediately due and payable, whereupon the same shall be due and payable. (b) Judgment. Reduce Lender's claim to judgment, foreclose or otherwise enforce Lender's security interest in all or any part of the Collateral by any available judicial or other procedure under law. Lender's right to sue and recover a judgment either before, after or during the pendency of any proceeding for the enforcement of any Lien in favor of Lender, including without limitation the Lender's Mortgage and the right of Lender to recover such judgment shall not be affected by any taking, possession or foreclosure sale hereunder or by the exercise of any other right, power or remedy for the enforcement of the terms of any Lien in favor of Lender, including without limitation the Lender's Mortgage, or the foreclosure of the Lien thereof. (c) Termination of Obligation to Grant Partial Release. Lender may in its sole discretion stop granting any partial releases from the Lien of Lender's Mortgage. (d) Foreclosure. Whether or not Lender takes possession of the Collateral, Lender may proceed to foreclose the Lender's Mortgage and to sell the property encumbered by the Lender's Mortgage in its entirety or in separate 68 parcels, under the judgment or decree of a court or courts of competent jurisdiction and to pursue any other remedy available to it, all as Lender shall deem appropriate. Upon commencement of suit or foreclosure of the Lender's Mortgage, obligations, if not previously accelerated and declared due, shall be immediately due and payable. Upon any foreclosure sale pursuant to judicial proceedings, Lender may bid for and purchase all or any portion of the property encumbered by the Lender's Mortgage and, upon compliance with the terms of sale, may hold, retain and possess and dispose of such property. In case of a foreclosure sale under the Lender's Mortgage and of the application of the proceeds of sale to the payment of the Obligations, Lender shall be entitled to enforce payment of and to receive all Obligations then remaining due and unpaid, and Lender shall be entitled to recover judgment for any portion of the Obligations remaining unpaid, with interest. Borrower agrees, to the full extent that it may lawfully so agrees, that no recovery of any such judgment by Lender and no attachment or levy of any execution upon any such judgment upon any of the Collateral or upon any other property shall in any manner or to any extent affect the lien of the Mortgage or any part thereof or any lien, rights, powers or remedies of Lender hereunder, and such lien, rights, powers and remedies shall continue unimpaired. (e) Lender's Right to Take Possession Operate and Apply Income. (i) Upon Lender's demand, Borrower shall forthwith surrender to Lender the actual possession of the Mortgaged Property and, to the extent permitted by law, Lender may enter and take possession of all the Mortgaged Property and may exclude Borrower and its agents and employees wholly therefrom and may have joint access with Borrower to Borrower's books, papers and accounts related to the Project. If Borrower fails to surrender or deliver all or any portion of the Mortgaged Property to Lender upon demand, Lender may obtain a judgment or decree conferring on Lender the right to immediate possession or requiring Borrower to deliver immediate possession of all or part of the Mortgaged Property to Lender, and Borrower hereby specifically consents to the entry of such a judgment or decree. (ii) Upon every such entering upon or taking of possession, Lender may hold, store, use, operate, manage and control the Mortgaged Property and conduct Borrower's business thereon and, from time to time do any of the following things as Lender may from time to time deem necessary, appropriate or desirable: (A) make all maintenance, repairs, renewals, replacements, additions and improvements necessary and proper to the Mortgaged 69 Property and purchase or otherwise acquire additional fixtures, personalty and other property; (B) insure, manage and operate the Mortgaged Property and exercise all of the rights and powers of Borrower (in Lender's name or otherwise) with respect to the insurance, management and operation of the Mortgaged Property; (C) enter into any and all agreements with respect to the exercise by others of any of the powers herein granted to Lender; (D) perform or cause to be performed any and all work and labor necessary to complete the Work which has been commenced in accordance with the Specifications; and (E) disburse that portion of the Loan proceeds not previously disbursed (including any retainage) to the extent necessary to complete the Work which has been commenced in accordance with the Specifications, and if such completion requires a larger sum than the remaining undisbursed portion of the Loan, disburse such additional funds, all of which funds so disbursed by Lender shall be deemed to have been disbursed to Borrower and shall be secured by the Collateral. For this purpose, Borrower hereby constitutes and appoints Lender its true and lawful attorney-in-fact with full power of substitution to complete the Work in Borrower's name and hereby empowers Lender as said attorney-in-fact to take all actions necessary in connection therewith, including but not limited to the following: (i) to use any funds of Borrower, including any balance which may be held in escrow and any funds which may remain unadvanced hereunder, for the purpose of completing the Work in the manner called for by the Specifications; (ii) to make such additions and changes and corrections in the Specifications which shall be necessary or desirable to complete the Work in substantially the manner contemplated by the applicable Specifications; (iii) to employ such contractors, subcontractors, agents, architects, engineers and inspectors as shall be required for said purposes; (iv) to pay, settle or compromise all existing or future bills and claims which are or may be liens against the Mortgaged Property or which may be necessary or desirable for the completion of the Work or the clearance of title to the Mortgaged Property; (v) to execute all applications and certificates in Borrower's name which may be required by any construction contract; and (vi) to do any and every act with respect to the Mortgaged Property which Borrower may do in its own behalf. Such power of attorney shall be deemed to be a power coupled with an interest which cannot be revoked by death or otherwise. Said attorney-in-fact shall also have power to prosecute and defend all actions or proceedings in connection with the Mortgaged Property and to take such action and require such performance as it deems necessary. In accordance therewith, Borrower hereby assigns and quitclaims to Lender all sums to be advanced hereunder, including retainage and any sums in 70 escrow, conditioned upon the use of said sums, if any, for the completion of the Work. (iii) Lender may collect and receive all the income, revenues, rents, issues and profits of the Project, including those past due as well as those accruing thereafter. Lender shall apply such sums received by Lender, first to the payment of accrued interest and then to the payment of principal and all other sums or indebtedness that may be due hereunder, after deducting therefrom: (A) All expenses of taking, holding, managing and operating the Mortgaged Property (including compensation for the services of all persons employed for such purposes); (B) The cost of all such maintenance, repairs, renewals, replacements, additions, betterments, improvements, purchases and acquisitions; (C) The cost of insurance; (D) Such taxes, assessments and other charges, as Lender may determine to pay; (E) Other proper charges upon the Project or any part thereof; and (F) The reasonable compensation, expenses and disbursements of the attorneys and agents of Lender, including attorneys' fees and costs for any appeal. (iv) If an Event of Default giving rise to pursuit of the foregoing remedy shall have been cured, Lender may, at its option, surrender possession of the Mortgaged Property to Borrower, its successors or assigns; provided however, that Lender's right to take possession and to pursue any other remedies hereunder or under any of the Loan Documents shall exist if any subsequent Event of Default shall occur. (f) Sale of Collateral. After notification, if any, provided for in Section 20.3, sell or otherwise dispose of, at the office of Lender, or elsewhere, as chosen by Lender, all or any part of the Collateral, and any such sale or other disposition may be as a unit or in parcels, by public or private proceedings, and by way of one or more contracts (it being agreed that the sale of any part of the Collateral shall not exhaust Lender's power of sale, but sales may be made from time to time until all of the Collateral has been sold or until the Obligations, have been paid in full and fully performed), and at any such sale it shall not be necessary to exhibit the Collateral. Borrower hereby acknowledges and agrees that a private sale or sales of the Collateral, after notification as provided for in Section 20.3, shall 71 constitute a commercially reasonable disposition of the Collateral sold at any such sale or sales, and otherwise, commercially reasonable action on the part of Lender. (g) Retention of Collateral/Purchase of Collateral. At its discretion, retain such portion of the Collateral as shall aggregate in value to an amount equal to the outstanding Obligations, in satisfaction of the Obligations, whenever the circumstances are such that Lender is entitled and elects to do so under applicable law. Lender may also buy the Collateral at any public or private sale. (h) Receiver. As a matter of strict right and without regard to the value or occupancy of the Mortgaged Property, apply by appropriate procedures for the appointment of a receiver who will enter upon and take possession of the Mortgaged Property, collect the rents and profits therefrom and apply the same as the court may direct. The receiver shall have all the rights and powers permitted under the laws of the State. All costs and expenses (including receiver's fees, reasonable attorneys fees and costs, including reasonable attorneys' fees and costs incurred as a result of any appeal, and agents compensation) incurred in connection with the appointment of a receiver shall be secured by the Collateral. The right to enter and take possession of the Mortgaged Property, to manage and operate the same and to collect the rents, issues and profits thereof (whether by a receiver or otherwise) shall be cumulative to any other right or remedy hereunder or afforded by law and may be exercised by Lender concurrently therewith or independently thereof Lender shall be liable to account only for such rents, issues and profit actually received by Lender. Notwithstanding the appointment of any receiver, trustee or other custodian, Lender shall be entitled, as pledgee, to the possession or control of any cash or other instruments, at the time held by or payable or deliverable under the terms of this Agreement or any other Loan Document to Lender. Borrower hereby consents to any such appointment. Lender may also apply by appropriate judicial proceedings for appointment of a receiver for the Collateral, or any part thereof, and Borrower hereby consents to any such appointment. (i) Exercise of Other Rights. Lender shall have all the rights and remedies of a secured party under the Code and other legal and equitable rights to which it may be entitled, and may exercise any and all other rights or remedies afforded by the Loan Documents as Lender shall deem appropriate, at law, in equity or otherwise, including, but not limited to, the right to bring suit or other proceeding, either for specific performance of any covenant or condition contained in the Loan Documents or in aid of the exercise of any right or remedy granted to Lender in the Loan Documents. Lender shall also have the right to require Borrower to assemble any of the Collateral not in Lender's possession, at Borrower's expense, and make it available to Lender at a place to be determined by Lender which is reasonably convenient to both parties, and Lender shall have the right to take immediate possession of all of the Collateral, and may enter the Mortgaged 72 Property or any of the premises of Borrower or wherever the Collateral shall be located, with or without process of law wherever the Collateral may be, and, to the extent such premises are not the property of Lender, to keep and store the same on said premises until sold (and if said premises shall be the property of Borrower, Borrower agrees not to charge Lender for use and occupancy, rent, or storage of the Collateral, for a period of at least ninety (90) days after sale or disposition of the Collateral). 20.3. Notice of Sale of Personal Property Collateral. Reasonable notification of time and place of any public sale of the Collateral or reasonable notification of the time after which any private sale or other intended disposition of the Collateral is to be made shall be sent to Borrower and to any other person entitled under the Code to notice; provided however, that if the Collateral threatens to decline speedily in value or is of a type customarily sold on a recognized market, Lender may sell or otherwise dispose of the Collateral without notification, advertisement or other notice of any kind. It is agreed that notice sent not less than ten (10) calendar days prior to the taking of the action to which such notice relates is reasonable notification and notice for the purposes of this Section 20.3. Lender shall have the right to bid at any public or private sale on its own behalf. Out of money arising from any such sale, Lender shall retain an amount equal to all costs and charges, including attorneys' fees for advice, counsel or other legal services or for pursuing, reclaiming, seeking to reclaim, taking, keeping, removing, storing and advertising such Collateral for sale, selling same and any and all other charges and expenses in connection therewith and in satisfying any prior Liens thereon. Any balance shall be applied upon the Obligations, and in the event of deficiency, Borrower shall remain liable to Lender. In the event of any surplus, such surplus shall be paid to Borrower or to such other Persons as may be legally entitled to such surplus. If, by reason of any suit or proceeding of any kind, nature or description against Borrower, or by Borrower or any other party against Lender, which in Lender's sole discretion makes it advisable for Lender to seek counsel for the protection and preservation of its security interest, or to defend its own interest, such expenses and counsel fees shall be allowed to Lender and the same shall be made a further charge and Lien upon the Collateral. In view of the fact that federal and state securities laws may impose certain restrictions on the methods by which a sale of Collateral comprised of securities may be effected after an Event of Default, Borrower agrees that upon the occurrence or existence of an Event of Default, Lender may, from time to time, attempt to sell all or any part of such Collateral by means of a private placement to the extent permitted by law restricting the bidding and prospective purchasers to those who will represent and agree that they are purchasing for investment only and not for, or with a view to, distribution. In so doing, Lender may solicit offers to buy such Collateral, or any part of it for cash, from a limited number of investors deemed by Lender, in its reasonable judgment, to be responsible parties who might be interested in purchasing the Collateral, and if Lender solicits such offers from 73 not less than two (2) such investors, then the acceptance by Lender of the highest offer obtained therefrom shall be deemed to be a commercially reasonable method of disposition of such Collateral. 20.4. Application of Collateral; Termination of Agreements. Upon the occurrence of any Event of Default until cured (if applicable) and the cure accepted by Lender , Lender may, with or without proceeding with such sale or foreclosure or demanding payment or performance of the Obligations, without notice, terminate Lender's further performance under this Agreement or any other agreement or agreements between Lender and Borrower, without further liability or obligation by Lender, and may also, at any time, appropriate and apply against any Obligations any and all Collateral in its possession, any and all balances, credits, deposits, accounts, reserves, indebtedness or other moneys due or owing to Borrower held by Lender hereunder or under any other financing agreement or otherwise, whether accrued or not. Neither such termination, nor the termination of this Agreement by lapse of time, the giving of notice or otherwise, shall absolve, release or otherwise affect the liability of Borrower in respect of transactions prior to such termination, or affect any of the Liens, security interests, rights, powers and remedies of Lender, but they shall, in all events, continue until all of the Obligations are satisfied. 20.5. Suits to Protect the Project. Lender shall have power to: (a) institute and maintain such suits and proceedings as it may deem expedient to prevent any impairment of the Mortgaged Property by any acts which may be unlawful or which violate this Agreement or any of the Loan Documents; (b) preserve or protect Lender's interest in the Mortgaged Property and in the income, revenues, rents and profits arising therefrom; and (c) restrain the enforcement of or compliance with any legislation or other government enactment, rule or order that may be unconstitutional or otherwise invalid, if the enforcement of or compliance with such enactment, rule or order would impair Lender's security. All payments made or costs or expenses incurred by Lender in connection with this paragraph, including reasonable attorneys' fees and costs, whether or not suit is filed and, if filed, for all appeals, shall be secured by the Collateral and shall be immediately repaid by Borrower to Lender on demand, with interest thereon from the date incurred until the date repaid by Borrower at the Default Rate for the Loan. 20.6. Rights of Lender Regarding Collateral. In addition to all other rights possessed by Lender, Lender, at its option, may from time to time after there shall have occurred an Event of Default, and so long as such Event of Default remains uncured, at its sole discretion, take any or all of the following actions: (a) Transfer all or any part of the Collateral into the name of Lender or its nominee; (b) Take control of any proceeds of any of the Collateral; and 74 (c) Extend or renew the Loan and grant releases, compromises or indulgences with respect to the Obligations, any portion thereof, any extension or renewal thereof, or any security therefor, to any obligor hereunder or thereunder. 20.7. Waiver of Appraisement Valuation, Stay, Extension and Redemption Laws. To the extent permitted by law, Borrower agrees upon the occurrence of an Event of Default, neither Borrower nor anyone claiming by, through or under Borrower, shall set up, claim or seek to take advantage of any appraisement, valuation, stay, extension or redemption laws now or hereafter in force, in order to prevent or hinder the enforcement or foreclosure of any of the Liens in favor of Lender, including without limitation the Mortgage, or the final and absolute sale of the property encumbered by the Mortgage or the final and absolute possession of the property encumbered by the Mortgage by the purchasers in foreclosure, and Borrower, for itself and for all who may at any time claim through or under it, hereby waives to the full extent that it may lawfully do so the benefit of all such laws and any and all right to have the assets comprising the property encumbered by the Mortgage marshaled upon any foreclosure and Borrower agrees that the property encumbered by the Mortgage may be sold in its entirety. Any money collected by Lender or received by Lender following pursuit by Lender of any remedy hereunder or under any of the Loan Documents shall be applied to the payment of the compensation, expenses, costs and disbursements of the agents and attorneys of Lender, to the payment of the amounts of accrued interest and principal and any other amount due and unpaid under the Loan, and to the payment of all other Obligations, in such order as Lender may determine. 20.8. Delegation of Duties and Rights. Lender may execute any of its duties and/or exercise any of its rights or remedies under the Loan Documents by or through its officers, directors, employees, attorneys, agents or other representatives. 20.9. Lender Not in Control. None of the covenants or other provisions contained in this Agreement or in any Loan Document shall give Lender the right or power to exercise control over the affairs and/or management of Borrower or Guarantor or either of their Affiliates. 20.10. Waivers. The acceptance by Lender at any time and from time to time of partial payments of the Obligations shall not be deemed to be a waiver of any Event of Default then existing. No waiver by Lender of any Event of Default shall be deemed to be a waiver of any other or subsequent Event of Default. No delay or omission by either party in exercising any right or remedy under the Loan Documents shall impair such right or remedy or be construed as a waiver thereof or an acquiescence therein, nor shall any single or partial exercise of any such right or remedy preclude other or further exercise thereof, or the exercise of any other right or remedy under the Loan Documents or otherwise. Further, except as otherwise 75 expressly provided in this Agreement or by applicable law, Borrower and each and every surety, endorser, guarantor and other party liable for the payment or performance of all or any portion of the Obligations, severally waive notice of the occurrence of any Event of Default, presentment and demand for payment, protest, and notice of protest, notice of intention to accelerate, acceleration and nonpayment, and agree that their liability shall not be affected by any renewal or extension in the time of payment of the Obligations, or by any release or change in any security for the payment or performance of the Obligations, regardless of the number of such renewals, extensions, releases or changes. If Lender: (a) grants forbearance or an extension of time for the payment of any sums secured by the Collateral; (b) takes other or additional security for the payment of the Obligations; (c) waives or does not exercise any right granted in this Agreement or any Loan Documents; (d) releases any part of the Collateral from the Lien in favor of Lender or otherwise changes any of the terms of this Agreement or any Loan Documents; (e) consents to the filing of any map, plat or replat of the Mortgaged Property; (f) consents to the granting of any easement on the Mortgaged Property; or (g) makes or consents to any agreement subordinating Lender's Lien against any of the Collateral, any such act or omission by Lender shall not release, discharge, modify, change or affect Borrower's original liability under this Agreement or any of the Loan Documents or otherwise, or the original liability of any maker, general partner, co-signer, endorser, surety or guarantor nor shall any such act or omission preclude Lender from exercising any right, power or privilege granted in this Agreement or any Loan Document in the event of any other concurrent or subsequent default, nor (except as otherwise expressly provided in an instrument or instruments executed by Lender) shall Lender's Lien against any of the Collateral be altered thereby. Upon the sale or transfer by operation of law or otherwise of all or any part of the Collateral, Lender, without further notice, is authorized and empowered to deal with any such transferee as fully and to the same extent as it might deal with Borrower, without in any way waiving, releasing or discharging any of Borrower's liabilities or obligations hereunder. BORROWER HEREBY WAIVES ALL NOTICES (EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREUNDER) WITH RESPECT TO ANY LOSSES, DAMAGES, LIABILITIES, SUITS, COSTS AND EXPENSES, AND ALL OTHER DEMANDS WHATSOEVER HEREBY INDEMNIFIED, AND AGREES THAT ITS OBLIGATIONS UNDER THIS AGREEMENT SHALL NOT BE AFFECTED BY ANY CIRCUMSTANCES, WHETHER OR NOT REFERRED TO ABOVE, WHICH MIGHT OTHERWISE CONSTITUTE LEGAL OR EQUITABLE DISCHARGES OF ITS OBLIGATIONS HEREUNDER. IF A COURT OF COMPETENT JURISDICTION SHOULD DETERMINE THAT BORROWER IS ENTITLED TO RECOVER DAMAGES FROM LENDER 76 FOR ANY REASON OR UPON ANY CAUSE, CLAIM OR COUNTERCLAIM, IN CONNECTION WITH THE LOAN OR THE TRANSACTIONS PROVIDED FOR OR CONTEMPLATED PURSUANT TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS, BORROWER STIPULATES AND AGREES THAT ANY SUCH DAMAGES OR AWARDS SHALL NOT INCLUDE CONSEQUENTIAL, PUNITIVE OR ANY OTHER DAMAGES. IN THE EVENT THE FOREGOING PROVISION IS NOT ENFORCED BY THE COURTS, THEN BORROWER AGREES THAT BORROWER'S SOLE REMEDY FOR ANY CAUSE, CLAIM OR COUNTERCLAIM WILL BE TO RECOVER COMPENSATORY DAMAGES IN CONNECTION WITH THE LOAN AND SHALL NOT INCLUDE PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES. 20.11. Cumulative Rights. All rights and remedies available to Lender under the Loan Documents shall be cumulative of and in addition to all other rights and remedies granted to Lender under any of the Loan Documents, at law or in equity, whether or not the Loan is due and payable and whether or not Lender shall have instituted any suit for collection or other action in connection with the Loan Documents. 20.12. Expenditures by Lender. Any sums expended by or on behalf of Lender pursuant to the exercise of any right or remedy provided herein, and all expenses payable by Borrower under any provision of this Agreement shall become part of the Obligations, shall be paid by Borrower to Lender upon demand and shall bear interest at the Default Rate for the Loan, from the date of such expenditure until the date repaid. 20.13. Diminution in Value of Collateral. Lender shall not have any liability or responsibility whatsoever for any diminution or loss in value of any of the Collateral, excluding Lender's gross negligence or intentional wrongful acts. 20.14. Discontinuance of Proceedings. If Lender proceeds to enforce any right or remedy under the Loan Documents by foreclosure, entry or otherwise and such proceedings shall have been discontinued or abandoned for any reason or shall have been determined adversely to Lender, then Borrower and Lender shall be restored to their former positions and rights hereunder and all rights, powers and remedies of Lender shall continue as if no such proceeding occurred. 21. Partial Releases; Other Releases. At Borrower's cost and expense, Lender agrees to execute, from time to time, releases from the Lien of the Mortgage, in form and substance acceptable to Lender and Borrower, of Timeshare Interests and related Collateral in connection with the bona fide sale of such Timeshare Interests as permitted hereunder ("Released Property"), upon the written request of Borrower, provided that: (a) No Event of Default or Default shall exist; 77 (b) For each Timeshare Interest to be released, Borrower pays to Lender, the required Release Payments; (c) All costs incident to the preparation and recording of the release documents shall be paid by Borrower; (d) Borrower shall execute such documents as Lender reasonably requests to evidence satisfaction of all conditions of the release set forth herein and shall provide Lender with copies of all documents and information reasonably requested by Lender regarding the sale of each Timeshare Interest; and (e) Borrower's escrow agent (if any) and Lender shall have agreed upon mutually acceptable escrow instructions setting forth the logistical arrangements for the release of each Timeshare Interest at settlement of the sale thereof. In addition, at Borrower's cost and expense, Lender agrees to execute, from time to time, releases from the Lien of the Lender's Mortgage, in form and content (consistent with Schedule 21 attached hereto), of certain furniture, fixtures and equipment being conveyed by Borrower to the Association as provided for in the Timeshare Declaration, Collateral subject to any UCC financing statement which is to be partially released or of such other items of personal or real property as may be requested by the Division in connection with the approval of Phase 2 of the Project. At such time as the Obligations have been paid in full, this Agreement is terminated and of no further force or effect, Lender will, at Borrower's cost and expense, execute and deliver to Borrower such releases, termination statements and such other agreements as Borrower may reasonably request to evidence the release and termination of any and all Liens granted by Borrower in favor of Lender against the Collateral. 22. Certain Rights of Lender. 22.1. Protection of Collateral. Lender may at any time and from time to time take such actions as Lender deems necessary or appropriate to protect Lender's Liens and security interests in and to preserve the Collateral, and to establish, maintain and protect the enforceability of Lender's rights with respect thereto, all at the expense of Borrower. Borrower agrees to cooperate fully with all of Lender's efforts to preserve the Collateral and Lender's Liens, security interests and rights and will take such actions to preserve the Collateral and Lender's Liens, security interests and rights as Lender may direct, including, without limitation, by promptly paying upon Lender's demand therefor, all documentary stamp taxes or other taxes that may be or may become due in respect of any of the Collateral. All of Lender's expenses of preserving the Collateral and its liens and security interests and rights therein shall be added to the Obligations. 78 22.2. Performance by Lender. If Borrower fails to perform any agreement contained herein not cured within any applicable cure period, Lender may itself perform, or cause the performance of, such agreement, and the expenses of Lender incurred in connection therewith shall be payable by Borrower under Section 22.5 below. In no event, however, shall Lender have any obligation or duties whatsoever to perform any covenant or agreement of Borrower contained herein or in any of the Loan Documents, Project Documents or Project Contracts, and any such performance by Lender shall be wholly discretionary with Lender. The performance by Lender, of any agreement or covenant of Borrower on any occasion shall not give rise to any duty on the part of Lender to perform any such agreements or covenants on any other occasion or at any time. In addition, Borrower acknowledges that Lender shall not at any time or under any circumstances whatsoever have any duty to Borrower or to any third party to exercise any of Lender's rights or remedies hereunder. 22.3. No Liability of Lender. Neither the acceptance of this Agreement by Lender, nor the exercise of any rights hereunder by Lender, shall be construed in any way as an assumption by Lender of any obligations, responsibilities or duties of Borrower arising in connection with the Mortgaged Property or under the Loan Documents or Condominium Act or Timeshare Act, or under any of the Project Contracts, or in connection with any other business of Borrower, or the Collateral, or otherwise bind Lender to the performance of any obligations with respect to the Mortgaged Property or the Collateral; it being expressly understood that Lender shall not be obligated to perform, observe or discharge any obligation, responsibility, duty, or liability of Borrower with respect to the Mortgaged Property or any of the Collateral, or under any of the Loan Documents, the Condominium Act or the Timeshare Act or under any of the Project Contracts, including, but not limited to, appearing in or defending any action, expending any money or incurring any expense in connection therewith. 22.4. Right to Defend Action Affecting Security. Lender may, at Borrower's expense, appear in and defend any action or proceeding at law or in equity which Lender in good faith believes may affect the value of the Collateral, the Work and of the Mortgaged Property the Liens granted under this Agreement. 22.5. Indemnities, Loan Costs and Expenses. All indemnities, Loan Costs and other expenses payable by Borrower under any provision of this Agreement shall be part of the Obligations of Borrower and shall be paid by Borrower to Lender, and shall bear interest at the primary interest rate as set forth in Section 4.1 hereof or the Default Rate as applicable for the Loan from the date of demand until repaid by Borrower. 22.6. Lender's Right of Set-Off. Lender shall have the right to set-off any Collateral against any Obligations then due and unpaid by Borrower. 79 22.7. No Waiver. No failure or delay on the part of Lender in exercising any right, remedy or power under this Agreement or in giving or insisting upon strict performance by Borrower hereunder or in giving notice hereunder shall operate as a waiver of the same or any other power or right, and no single or partial exercise of any such power or right shall preclude any other or further exercise thereof or the exercise of any other such power or right. Lender, notwithstanding any such failure, shall have the right thereafter to insist upon the strict performance by Borrower of any and all of the terms and provisions of this Agreement to be performed by Borrower. The collection and application of proceeds, the entering and taking possession of the Collateral, and the exercise of the rights of Lender contained in the Loan Documents and this Agreement shall not cure or waive any default, or affect any notice of default, or invalidate any acts done pursuant to such notice. No waiver by Lender of any breach or default of or by any party hereunder shall be deemed to alter or affect Lender's rights hereunder with respect to any prior or subsequent default. 22.8. Right of Lender to Extend Time of Payment, Substitute, Release Security, Etc. Without affecting the liability of any Person or entity including without limitation, any Purchasers, for the payment of any of the Obligations or without affecting or impairing Lender's Lien on the Collateral, or the remainder thereof, as security for the Obligations, Lender may from time to time, without notice: (a) release any Person liable for the payment of any part of the Obligations; (b) extend the time or otherwise alter the terms of payment of any part of the Obligations; (c) accept additional security for the Obligations of any kind, including deeds of trust or mortgages and security agreements; (d) alter, substitute or release any property securing any part of the Obligations; (e) realize upon any Collateral for the payment of all or any portion of the Obligations in such order and manner as it may deem fit; or (f) join in any subordination or other agreement affecting this Agreement or the Lien or charge thereof. 22.9. Assignment of Lender's Interest. Lender shall have the right to assign, participate or transfer the Loan and all or any portion of its rights in or pursuant to this Agreement or any of the Loan Documents, holder or holders of such rights or interests shall be entitled to the benefits of this Agreement and the Loan Documents. The consent of Borrower shall not be required for any such assignment, participation or transfer and failure to give notice of any assignment, participation or transfer shall not affect the validity or enforceability of this Agreement, any Loan Document, or subject Lender to any liability. Borrower consents to the dissemination of information regarding the Obligations, the Loan, Borrower, Borrower's business, and all matters related hereto in connection with any assignment, participation or sale. In the event that Lender participates or sells its interest in the Loan to any other Person, which in Lender's reasonable judgment has the financial capability to fund Advances (or its share thereof in the event of a participation) hereunder, Lender shall have no further responsibilities or liabilities in connection with the sold or participated portion of the Loan, including without 80 limitation the obligation to fund Advances related to such sold or participated portions, after the date of such sale or participation. All of such responsibilities and liabilities after the date of such sale or participation shall be those of the participant or the purchaser of Lender's interest. 22.10. Power of Attorney. Borrower does hereby irrevocably constitute and appoint Lender as Borrower's true and lawful agent and attorney-in-fact, with full power of substitution, for Borrower and in Borrower's name, place and stead, or otherwise, to: (a) endorse any checks or drafts payable to Borrower in the name of Borrower and in favor of Lender; (b) to demand and receive from time to time any and all property, rights, titles, interests and liens hereby sold, assigned and transferred, or intended so to be, and to give receipts for same; (c) from time to time to institute and prosecute in Lender's own name any and all proceedings at law, in equity, or otherwise, that Lender may deem proper in order to collect, assert or enforce any claim, right or title, of any kind, in and to the property, rights, titles, interests and liens hereby sold, assigned or transferred, or intended so to be, and to defend and compromise any and all actions, suits or proceedings in respect of any of the said property, rights, titles, interests and Liens; (d) upon an Event of Default to change any post office mailing address for purpose of payments to be remitted directly to Lender with respect to the Collateral; and (e) generally to do all and any such acts and things in relation to the Collateral as Lender shall in good faith deem advisable. Borrower hereby declares that the appointment made and the powers granted pursuant to this Section 22.10 are coupled with an interest and are and shall be irrevocable by Borrower in any manner, or for any reason, unless and until a release of the same is executed by Lender and duly recorded in the appropriate office for recordation. 22.11. Relief from Automatic Stay, Etc. To the fullest extent permitted by law, in the event Borrower shall make application for or seek relief or protection under the federal bankruptcy code ("Bankruptcy Code") or other Debtor Relief Laws, or in the event that any involuntary petition is filed against Borrower under such Bankruptcy Code or other Debtor Relief Laws, and not dismissed with prejudice within forty-five (45) days, the automatic stay provisions of Section 362 of the Bankruptcy Code are hereby modified as to Lender to the extent necessary to implement the provisions hereof permitting set-off and the filing of financing statements or other instruments or documents and Lender shall automatically and without demand or notice (each of which is hereby waived) be entitled to immediate relief from any automatic stay imposed by Section 362 of the Bankruptcy Code or otherwise, on or against the exercise of the rights and remedies otherwise available to Lender as provided in the Loan Documents. 22.12. Investigations and Inquiries. Borrower hereby authorizes Lender to conduct such investigations and inquiries as to credit, operations of Borrower, the Mortgaged Property and Collateral as shall be necessary or desirable in connection with monitoring the Obligations, and all such persons of whom 81 Lender may make such inquiry are empowered to cooperate with, and to provide requested information to Lender. 23. Miscellaneous. 23.1. Notices. All notices, requests and other communications to either party hereunder shall be in writing and shall be given to such party at its address set forth below or at such other address as such party may hereafter specify for the purpose of notice to Lender or Borrower. Each such notice, request or other communication shall be effective: (a) if given by mail, on the third Business day after such notice is deposited in the United States Mail with first class postage prepaid, addressed as aforesaid, provided that such mailing is by registered or certified mail, return receipt requested; (b) if given by overnight delivery, on the first Business Day after such notice is deposited with a nationally recognized overnight delivery service such as Federal Express or UPS with all fees and charges prepaid, addressed as provided below; or (c) if given by any other means, when delivered at the address specified in this Section 23.1. If to Borrower: Bluegreen Vacations Unlimited, Inc. 4960 Conference Way North Suite 100 Boca Raton, Florida 33431 Attention: Anthony M. Puleo With a copy to: Bluegreen Vacations Unlimited, Inc. 4960 Conference Way North Suite 100 Boca Raton, Florida 33431 Attention: James Martin, Esq., General Counsel If to Guarantor: Bluegreen Corporation 4960 Conference Way North Suite 100 Boca Raton, Florida 33431 Attention: Anthony M. Puleo If to Lender: Textron Financial Corporation 45 Glastonbury Boulevard Glastonbury, Connecticut, 06033 Attention: RFD Vice President With a copy to: Textron Financial Corporation 40 Westminster Street Providence, Rhode Island 02940-6687 Attention: RFD Commission Counsel 82 23.2. Term of Agreement. This Agreement shall continue in full force and effect and the Liens granted hereby and the duties, covenants and liabilities of Borrower hereunder and all the terms, conditions and provisions hereof relating thereto shall continue to be fully operative until all of the Obligations and all other obligations secured by the Collateral have been satisfied in full and Lender has no further obligation to make Advances hereunder. Borrower expressly agrees that if Borrower or any Guarantor makes a payment to Lender, which payment or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, or otherwise required to be repaid to a trustee, receiver or any other party under any Debtor Relief Laws, state or federal law, common law or equitable cause, then to the extent of such repayment, the Obligations or any part thereof intended to be satisfied and the Liens provided for hereunder securing the same shall be revived and continued in full force and effect as if said payment had not been made. 23.3. Survival. All representations, warranties, covenants and agreements made by Borrower and Guarantor herein, in the Commitment, in any other Loan Documents or in any other agreement, document, instrument or certificate delivered by or on behalf of Borrower or Guarantor under or pursuant to the Loan Documents shall be considered to have been relied upon by Lender and shall survive the delivery to Lender of such Loan Documents (and each part thereof), regardless of any investigation made by or on behalf of Lender, and shall survive the making of any or all of the disbursements contemplated hereby. 23.4. Continuation and Investigation. The warranties and representations contained herein shall be and remain true and correct so long as any of the Obligations have not been satisfied, or so long as part of the Obligations shall remain outstanding, and each request by Borrower for an Advance shall constitute an affirmation that the foregoing representations and warranties remain true and correct as of the date thereof. 23.5. Governing Law; Consent to Jurisdiction. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (EXCEPT AS MAY BE EXPRESSLY PROVIDED THEREIN TO THE CONTRARY) SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF RHODE ISLAND, EXCLUSIVE OF ITS CHOICE OF LAWS PRINCIPLES. BORROWER CONSENTS TO PERSONAL JURISDICTION BEFORE THE CIRCUIT COURT IN AND FOR PROVIDENCE COUNTY, RHODE ISLAND AND THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF RHODE ISLAND. BORROWER WAIVES ANY OBJECTION WHICH THEY MAY NOW OR HEREAFTER HAVE TO VENUE IN PROVIDENCE COUNTY, RHODE ISLAND OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OBLIGATIONS CREATED HEREUNDER OR ANY OF THE LOAN DOCUMENTS AND FURTHER WAIVES ANY CLAIM THAT PROVIDENCE COUNTY, RHODE ISLAND IS NOT A CONVENIENT FORUM 83 FOR ANY SUCH SUIT, ACTION OR PROCEEDING. SERVICE OF PROCESS ON BORROWER IN ANY ACTION ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS SHALL BE EFFECTIVE IF MAILED TO BORROWER AT THE ADDRESS LISTED FOR BORROWER IN SECTION 23.1. 23.6. Invalid Provisions. If any provision of this Agreement or any of the other Loan Documents is held to be illegal, invalid or unenforceable under present or future laws effective during the term thereof, such provision shall be fully severable, this Agreement and the other Loan Documents shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof or thereof, and the remaining provisions hereof or thereof shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance therefrom. Furthermore, in lieu of such illegal, invalid or unenforceable provision there shall be added automatically as a part of this Agreement and/or the Loan Documents (as the case may be) a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable. 23.7. Successors and Assigns; Third Party Beneficiaries. This Agreement and the other Loan Documents shall be binding upon and inure to the benefit of Borrower and Lender and their respective successors and assigns; provided that Borrower may not transfer or assign any of their rights or obligations under this Agreement, the Commitment or the other Loan Documents without the prior written consent of Lender. This Agreement and the transactions provided for or contemplated hereunder or under any of the Loan Documents are intended solely for the benefit of the parties hereto and any of Lender's participants in the Obligations. No third party shall have any rights or derive any benefits under or with respect to this Agreement, the Commitment or the other Loan Documents except for participants in the Obligations or as provided in advance in a writing signed on behalf of Lender. No person other than Borrower, shall have standing to require satisfaction of such conditions in accordance with their terms or be entitled to assume that Lender will refuse to make advances in the absence of strict compliance with any or all thereof, and no other person, other than Borrower, under any circumstance, shall be deemed to be a beneficiary of such conditions, any and all of which Lender freely may waive in whole or in part at any time it, in its sole discretion, deems it desirable to do so. In particular, Lender makes no representation and assumes no obligation as to third parties concerning the quality of the Work by Borrower or the absence therefrom of defects. In this connection, Borrower agrees to and shall indemnify Lender and any of Lender's participants in the Obligations from any liability, claim or loss and reasonable attorneys fees and costs resulting from the disbursement of the Advances or from the condition of the Project, whether related to the quality of the Work or otherwise and whether arising during or after the term of the Loan. This Section shall survive the repayment of the Obligations and shall continue in full force and effect so long as the possibility of such liability, claim or loss exists. 84 23.8. Amendment. This Agreement may not be amended or modified, and no term or provision hereof may be waived, except by written instrument signed by the parties hereto. 23.9. Counterparts; Effectiveness; Facsimile. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signature thereto and hereto were on the same instrument. This Agreement shall become effective upon Lender's receipt of one or more counterparts hereof signed by Borrower and Lender. Any signature on any Loan Document or any document collateral thereto, delivered by Borrower or Guarantor by facsimile transmission shall be deemed to be an original signature thereto. 23.10. Lender Not Fiduciary. The relationship between Borrower and Lender is solely that of debtor and creditor, and Lender has no fiduciary or other special relationship with Borrower or Guarantor, and no term or provision of any of the Loan Documents shall be construed so as to deem the relationship between Borrower and Lender to be other than that of debtors and creditor. Nothing herein contained shall be construed to create a partnership or joint venture between Borrower and Lender, and the parties hereby acknowledge that no such relationship exists between them. 23.11. Total Agreement. This Agreement, and the other Loan Documents, including the Exhibits and Schedules thereto, is the entire agreement between the parties relating to the subject matter hereof, incorporates or rescinds all prior agreements and understandings between the parties hereto relating to the subject matter hereof, cannot be changed or terminated orally or by course of conduct, and shall be deemed effective as of the date it is accepted by Lender at the offices set forth above. 23.12. Consents, Approvals and Discretion. Whenever Lender's consent or approval is required or permitted, as any documents or other items are required to be acceptable to Lender, such consent, approval or determination of acceptability must be in writing and shall be at the reasonable discretion of Lender and may be subject to such conditions as Lender may require, unless otherwise expressly provided hereunder or under the other Loan Documents. 23.13. Litigation. TO THE FULLEST EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, BORROWER AND LENDER HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY AND IRREVOCABLY WAIVE ANY AND ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND OR CLARIFY ANY RIGHT, POWER, REMEDY OR DEFENSE ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREIN OR THEREIN, WHETHER SOUNDING IN TORT OR CONTRACT OR OTHERWISE, OR WITH RESPECT TO 85 ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY; AND AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A JUDGE AND NOT BEFORE A JURY. BORROWER AND LENDER FURTHER WAIVE ANY RIGHT TO SEEK TO CONSOLIDATE ANY SUCH LITIGATION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER LITIGATION IN WHICH A JURY TRIAL CANNOT OR HAS NOT BEEN WAIVED. FURTHER, BORROWER HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF LENDER, NOR LENDER'S COUNSEL, HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT LENDER WOULD NOT, IN THE EVENT OF SUCH LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION. BORROWER ACKNOWLEDGES THAT THE PROVISIONS OF THIS SECTION ARE A MATERIAL INDUCEMENT TO LENDER'S ACCEPTANCE OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. The waiver and stipulations of Borrower and Lender in this Section 23.13 shall survive the final payment or performance of all of the Obligations of Borrower and all other obligations secured by the Collateral and the resulting termination of this Agreement. 23.14. Submissions. All documents, agreements, reports, surveys, appraisals, insurance, financial information or other submissions (collectively, the "Submissions") required under the Loan Documents shall be in form and content reasonably satisfactory to Lender and performed at Borrower's expense. Lender shall have the prior right of approval of any person, firm or entity responsible for preparing each Submission (a "Preparer") and may reject any Submissions if Lender believes in its reasonable opinion that the experience, skill, reputation or other aspect of the Preparer is unsatisfactory in any material respect. All reports and appraisals related to the Development Parcel required pursuant to the Loan Documents shall be addressed to Lender and include the following language: "The undersigned acknowledges that Textron Financial Corporation is relying on the within information in connection with extending financing to Bluegreen Vacations Unlimited, Inc." 23.15. Incorporation of Exhibits. This Agreement, together with all Exhibits and Schedules hereto, constitute one document and agreement which is referred to herein by the use of the defined term "Agreement." The definitions contained in any part of this Agreement shall apply to all parts of this Agreement. 23.16. Consent to Advertising and Publicity of Documents. Borrower agrees that Lender and its participants may, subject to prior review and consent of Borrower, which consent Borrower agrees not to unreasonably withhold or delay, 86 issue and disseminate to the public information describing the credit accommodation entered into pursuant to this Agreement, including the names and addresses of Borrower and any subsidiaries and Affiliates, the amount, interest rate, maturity, collateral, and a general description of Borrower's business. 23.17. Control of Association. Lender agrees that Borrower shall only be obligated to act on behalf of the Association or cause the Association to act at such time that Borrower directly or indirectly control the Association. 23.18. Directly or Indirectly. Where any provision in this Agreement refers to action to be taken by any Person, or which such Person is prohibited from taking, such provisions shall be applicable whether such action is taken directly or indirectly by such Person. 23.19. Savings Clause. Anything contained in this Agreement to the contrary notwithstanding, the obligations of Borrower with respect to the repayment of the outstanding principal balance of the Loan shall be limited to a maximum aggregate amount equal to the greater of (a) the Advances actually received by Borrower and the value of all other consideration and benefits received by or for the benefit of Borrower in connection with the financing transactions contemplated hereunder, or (b) the largest amount that would not render its obligations with respect thereto subject to avoidance as a fraudulent transfer or conveyance under Section 548 of Title 11 of the United States Code or any applicable provisions of comparable state, federal, provincial or other applicable law of any jurisdiction (collectively, the "Fraudulent Transfer Laws"), if and to the extent Borrower (or trustee on its behalf) has properly invoked the protections of the Fraudulent Transfer Laws. In making such determination, all rights of subrogation and contribution of Borrower with respect to such obligations shall be deemed to be an asset of Borrower. 23.20. Reimbursement for Taxes. Borrower will promptly, upon written demand of Lender, reimburse Lender for any taxes assessed against Lender by the State of Florida or any subdivision thereof or any other jurisdiction (with the exception of income taxes payable by Lender) which are on account of or measured by the interest income received by Lender under the Project or in any way imposed upon Lender in connection with the transactions contemplated hereunder, including, without limitation, any general intangible tax or documentary tax. 23.21. Headings. Section headings have been inserted in this Agreement as a matter of convenience of reference only; such Section headings are not a part of this Agreement and shall not be used in the interpretation of this Agreement. 23.22. Gender. Words of any gender in this Agreement shall include each other gender where appropriate. 87 23.23. Time of the Essence. Time is of the essence of this Agreement. 23.24. Conflict. The provisions of this Agreement shall control in the event of any conflict among it, the Commitment and any other Loan Document. 23.25. Joinder and Consent. Lender will join in and consent to Declarations, easements and other documents reasonably required in connection with development of the Project provided such documents are reasonably acceptable to Lender. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 88 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above written. LENDER: TEXTRON FINANCIAL CORPORATION, a Delaware corporation By: --------------------------------------- Name: ------------------------------------- Its: -------------------------------------- BORROWER: BLUEGREEN VACATIONS UNLIMITED, INC., a Florida corporation By: --------------------------------------- Name: ------------------------------------- Its: -------------------------------------- GUARANTOR: BLUEGREEN CORPORATION, a Massachusetts corporation By: --------------------------------------- Name: ------------------------------------- Its: -------------------------------------- Schedule 9.8 Taxes The Tennessee Department of Revenue (the "Department") advised Bluegreen that rather than attempting to impose a sales tax on the sale of vacation ownership interests in Tennessee, it intends to try to impose a sales tax on the use of accommodations in Bluegreen's Tennessee properties by Bluegreen owners who became members of Bluegreen Vacation Club through the purchase of non-Tennessee timeshare interests. The Department has audited the period from December 1, 2001 through December 21, 2004 and has given a Notice of Assessment for sales and use taxes for approximately $636,000. Bluegreen intends to vigorously challenge the assessment of sales taxes by the Department; however, there is no assurance that Bluegreen will be successful. The Internal Revenue Service ("IRS") has notified Bluegreen Corporation that the IRS will audit the company's 2004 federal income tax return. Schedule 9.9 Subsidiaries Bluegreen Corporation Bluegreen Interiors, LLC Bluegreen Purchasing and Design, Inc. Bluegreen Resorts Management, Inc. Encore Rewards, Inc. Great Vacation Destinations, Inc. (f/k/a Leisure Plan, Inc.) Leisure Communication Network, Inc. Leisurepath, Inc. New England Advertising Corporation Pinnacle Vacations, Inc. Resort Title Agency, Inc. Schedule 9.10 Litigation Any legal proceedings as disclosed in Guarantor's most recently filed 10K Statement and the following other matters: Bluegreen Southwest One, L.P., ("Southwest"), a subsidiary of Bluegreen Corporation ("Bluegreen"), is the developer of the Mountain Lakes subdivision in Texas. In Lesley, et al v. Bluegreen Southwest One, L.P. acting through its General Partner Bluegreen Southwest Land, Inc., et al, Cause No. 28006 District Court of the 266th Judicial District, Erath County, Texas, plaintiffs filed a declaratory action against Southwest in which they seek to develop mineral interests in the Mountain Lakes subdivision. Plaintiffs' claims are based on property law, contract and tort theories. The property owners association has filed a cross complaint against Bluegreen, Southwest and individual directors of the property owners association related to the mineral rights and related to certain amenities in the subdivision as described in the following paragraph. The court has confirmed the seniority of the mineral interests of the plaintiffs and has held that restrictions against drilling within the subdivision are not enforceable. Bluegreen is evaluating whether to appeal the court's ruling and is unable to predict the ultimate resolution of the litigation. Bluegreen estimates that it is reasonably possible that the company will incur costs of approximately $500,000 in this declaratory action case. One of the lakes that is an amenity in the Mountain Lakes development has not filled to the expected level. Owners of homesites within the subdivision have asserted claims against Bluegreen regarding such failure as part of the litigation referenced above. Southwest has investigated the causes of the failure of the lake to fill and currently estimates that the cost of correcting the condition will be approximately $3,000,000. Bluegreen is involved in litigation relating to the employment of sales associates at its Williamsburg sales and project site, as well as its Shenandoah project, who were allegedly subject to non-compete agreements with a prior employer. Bluegreen cannot predict the outcome of the litigation. Litigation has been initiated against Bluegreen and LeisurePath, Inc. ("LeisurePath"), a subsidiary of Bluegreen whose principal business is a travel club, involving claims asserted by consumers with regard to sales of LeisurePath memberships through Vacation Station, Inc., an independent retail outlet. Claims asserted against Bluegreen and its affiliates relate to transactions that allegedly occurred in May, 2005. LeisurePath had terminated its relationship with Vacation Station, Inc. prior to that time. Bluegreen believes that the likelihood of an unfavorable outcome resulting in a material loss to be remote; however Bluegreen cannot predict the outcome of the litigation. Schedule 9.23 Names and Addresses Bluegreen Vacations Unlimited, Inc. 4960 Conference Way North Suite 100 Boca Raton, Florida 33431 Schedule 10.18 Project Contracts AIA A101 & A201 Standard Form of Agreement between Owner and Contractor and General Conditions by and between Bluegreen Vacations Unlimited, Inc. and WPC I, Inc. dba Winter Park Construction, dated August 17, 2005 AIA B151 Abbreviated Standard Form of Agreement between Owner and Architect by and between Bluegreen Corporation and Forum Architecture & Interior Design, Inc., dated September 7, 2004 (Building 5) AIA B151 Abbreviated Standard Form of Agreement between Owner and Architect by and between Bluegreen Corporation and Forum Architecture & Interior Design, Inc., dated September 7, 2004 (Building 6) Landscape Agreement by and between Tidewater Landscape Management and Grande Villas at World Golf Village Condominium Association, Inc. dated January 1, 2005 Lease Agreement by and between InnRcom Communications, LLC and Grande Villas at World Golf Village Condominium Association, Inc. dated February 1, 2005. Use Agreement by and between Serenata Beach Club and Grande Villas at World Golf Village Condominium Association, Inc. dated January 1, 2005 Schedule 14.7 Permitted Liens Schedule 21 Form of Partial Release EXHIBIT A-1 Legal Description of Phase 2 EXHIBIT A-2 Legal Description of Existing Units EXHIBIT B Intentionally Omitted EXHIBIT C Form of Request for Construction Advance See Attached EXHIBIT D Approved Site Plan EXHIBIT E Phase 2 Cost Certificate See Attached EXHIBIT F Form of Officer's Certificate Date:_________________ In accordance with Section 13.4 of the Construction Loan and Security Agreement dated as of March __, 2007, by and between Bluegreen Vacations Unlimited, Inc. ("Borrower") and Textron Financial Corporation ("Lender") (as it may be amended, modified, supplemented or restated, the "Loan Agreement"), the undersigned hereby certifies to Lender that as of the date described above: 1. The undersigned is the chief financial officer of Bluegreen Corporation ("Guarantor"). 2. Borrower has observed, performed and complied with each and every undertaking contained in the Loan Agreement and the Loan Documents. 3. Guarantor's Form 10-Q or Form 10-K Financial Statements have been delivered to Lender, as required under the Loan Agreement. 4. There does not exist any Incipient Default or Event of Default under the Loan Agreement or Loan Documents. Capitalized terms shall have the meanings set forth therefor in the Loan Agreement. The certifications in this Officer's Certificate are made by the undersigned, in his capacity as the chief financial officer of Guarantor, from the undersigned's own personal knowledge, after due inquiry and with full knowledge that Lender will rely upon this Officer's Certificate. The undersigned has executed and delivered this Officer's Certificate as an inducement for Lender to continue to extend advances to the Borrower pursuant to the Loan Agreement. BLUEGREEN CORPORATION, a Massachusetts corporation By: ---------------------------- Name/Title: ---------------------- Dated: ______________, 200___ EX-31.1 6 d71810_ex31-1.txt CERTIFICATIONS EXHIBIT 31.1 Rule 13a-14(a)/15d-14(a) Certification I, John M. Maloney, Jr., certify that: 1. I have reviewed this quarterly report on Form 10-Q of Bluegreen 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: May 9, 2007 /S/ JOHN M. MALONEY, JR. - ------------------------ John M. Maloney, Jr. Chief Executive Officer 43 EX-31.2 7 d71810_ex31-2.txt CERTIFICATIONS EXHIBIT 31.2 Rule 13a-14(a)/15d-14(a) Certification I, Anthony M. Puleo, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Bluegreen 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: May 9, 2007 /S/ ANTHONY M. PULEO - -------------------- Anthony M. Puleo Chief Financial Officer 44 EX-32.1 8 d71810_ex32-1.txt CERTIFICATIONS EXHIBIT 32.1 Certification Required by 18 U.S.C. Section 1350 (as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002) I, John M. Maloney, Jr., as Chief Executive Officer of Bluegreen Corporation (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 accompanying Quarterly Report on Form 10-Q of the Company for the period ended March 31, 2007 (the "Report"), filed with the U.S. Securities and Exchange Commission, 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. By: /S/ JOHN M. MALONEY, JR. ------------------------ John M. Maloney, Jr. Chief Executive Officer Date: May 9, 2007 The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and is not being filed as part of the Form 10-Q or as a separate disclosure document. A signed original of this written statement required by Section 906 has been provided to Bluegreen Corporation and will be retained by Bluegreen Corporation and furnished to the Securities and Exchange Commission or its staff upon request. 45 EX-32.2 9 d71810_ex32-2.txt CERTIFICATIONS EXHIBIT 32.2 Certification Required by 18 U.S.C. Section 1350 (as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002) I, Anthony M. Puleo, as Chief Financial Officer of Bluegreen Corporation (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: (3) the accompanying Quarterly Report on Form 10-Q of the Company for the period ended March 31, 2007 (the "Report"), filed with the U.S. Securities and Exchange Commission, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and (4) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. By: /S/ ANTHONY M. PULEO -------------------- Anthony M. Puleo Senior Vice President, Chief Financial Officer and Treasurer Date: May 9, 2007 The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and is not being filed as part of the Form 10-Q or as a separate disclosure document. A signed original of this written statement required by Section 906 has been provided to Bluegreen Corporation and will be retained by Bluegreen Corporation and furnished to the Securities and Exchange Commission or its staff upon request. 46 -----END PRIVACY-ENHANCED MESSAGE-----