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Global Settlement Agreements Finalized
From: "Steven D. Helling" To: "Judy Young" <judy@navnet.net> Date sent: Thu,
9 Dec 2004
Global Settlement Agreements Finalized
On November 17, 2004, Tenants' Association Pelican Resort Club, Pelican
Resort Club, The Owner Company N.V., Pelican Resort Club, The Management Company
N.V. consummated global settlement agreements covering the major legal issues
affecting the Resort.
The other parties to these agreements are the court-appointed Receivers
representing the bankruptcy estate of Dr. Martin Vlietman (a principal and the
former developer of the Resort) as well as Lancaster Investors, Inc.and Leeds
Investors, Inc. (Dr. Vlietman's affiliated companies), Antilles Pelican N.V.,
and the court- appointed Receivers representing the bankruptcy estates of Billy
Folly Development Corporation N.V. (the former development company of the
Resort) as well as Pelican Resort N.V. (Dr. Vlietman's affiliated company).
Since shortly after the acquisition of the Resort in 1997, we have been in
litigation with the companies affiliated with Dr. Vlietman over real estate and
leasing matters affecting the Great House, and over certain payments made by
these companies at the time we acquired the Resort which purportedly benefited
the Resort.
There also have been ongoing unresolved discussions between the Resort and
the Receivers for Billy Folly Development Corporation N.V. regarding mortgages
placed by the Receivers over the Resort and collection and payment matters
concerning promissory notes made by purchasers of timeshare weeks at the Resort
prior to our acquisition of the Resort.
The global settlement resolved all of the foregoing issues by means of an
aggregate payment of $3,185,000 by the Resort in exchange for which the counter
parties agreed to settle all pending disputes, terminate all pending court
proceedings, cancel all outstanding mortgages and exchange mutual releases among
the Resort and all relevant parties.
In the absence of a global settlement, the Board of Directors and Resort
management estimate that the legal issues would take at least 2 more years to
resolve at considerable legal fees, and that there is no guarantee that the
Resort would prevail on any particular issue. Further, it is likely that during
this period, additional related law suits would arise, as is frequently the case
in matters such as those facing the Resort. In the worst case scenario whereby
the other parties were to prevail and collect the amounts they claim plus
interest and the Resort would incur ongoing legal expenses, the aggregate cost
to the Resort would be approximately $6,457,943.
While the actual scenario of continued court battles may have ended up
costing less to resolve, there can be no certainty that this would occur. It is
the business judgment of the Board of Directors, based on advice from Resort
management and legal counsel, that the best course of action was to settle
matters for slightly less than 50% of the worst case scenario amount while at
the same time creating legal and business certainty for the Resort to continue
and plan its operations and strengthen its fiscal position with the least cost
to owners.
It is critical that the settlement removes the mortgages which have been the
main impediments preventing the Resort from being able to finance all of the
capital projects needed to improve and maintain the facilities, and from
undertaking further development at the Resort, such as the Marina Project, which
will allow us to strengthen our finances by taking advantage of available
business opportunities. Notwithstanding the success of the Pelican Capital
Improvement Program (PCIP), necessary projects for the fiscal well- being of the
Resort remain unexecuted.
The settlement also strengthens the financial position of the Resort by
significantly reducing the Resort's projected future legal costs as well as
eliminating the need to incur rental costs in the Great House under the
purported leasing arrangement, offset by a one-time capital cost to move certain
administrative functions out of the Great House but still resulting in a net
cost savings. The Board estimates these savings to be in the neighborhood of
$2,381,386.
The Board of Directors would like to suggest to owners that given the
relative stability of the Resort's Annual Maintenance Fees over the past 8 years
in spite of the continuous rise in the operating costs - such as labor
contracts, minimum wage and utility cost increases - of the Resort, it should
not be surprising that additional financing is necessary to operate the Resort.
This necessity is even more critical in terms of funding the necessary capital
projects for repairing and improving the Resort's facilities which go above and
beyond ordinary operating repairs and maintenance. The settlement paves the way
for the Resort to seek out such financing without needing to raise financing
from owners through the PCIP or special contributions and assessments.
In closing, the Board of Directors views the settlement as a milestone
achievement which opens a new era for the Resort during which owners can expect
to see the Resort return to its highest quality through greater financial
strength and management being able to focus singly on running the Resort to
provide the best services and a great vacation experience year after year.
Len Matsunaga Hughes Hubbard & Reed LLP
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