EXHIBIT 10.8.8
CONSTRUCTION LOAN AGREEMENT
between
LAKE TAHOE RESORT PARTNERS, LLC
and
FINOVA CAPITAL CORPORATION
DATED AS OF APRIL 29, 1996
CONSTRUCTION LOAN AGREEMENT
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BY THIS AGREEMENT made and entered into as of the 29th day of April,
1996 by LAKE TAHOE RESORT PARTNERS, LLC, whose address is ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (hereinafter called
"Borrower"), and FINOVA CAPITAL CORPORATION, a Delaware corporation, whose
address is ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: Vice President - Resort Finance, with a copy to ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇, Attention: Vice President -
Group Counsel (hereinafter called "Lender"), for and in consideration of the
recitals and mutual promises contained herein, confirm and agree as follows:
W I T N E S S E T H:
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WHEREAS, Borrower has applied to Lender for a revolving construction
loan in the amount of TWENTY EIGHT MILLION DOLLARS ($28,000,000) (the
"Construction Loan") for the purpose of constructing certain improvements (the
"Improvements"), according to final drawings, plans and specifications approved
by Lender (the "Plans and Specifications") on the Real Property (the "Real
Property"). The Improvements are to consist of 146 time-share units and related
amenities, such as, without limitation, beach front, restaurant, indoor/outdoor
swimming pool, spa, sauna, exercise room, convenience store and video arcade;
and.
WHEREAS, concurrently herewith, Borrower has executed and delivered to
Lender a Loan and Security Agreement, of even date herewith ("Receivables Loan
Agreement"), pursuant to which the Borrower has agreed, under the terms and
conditions set forth therein, to pledge to Lender certain receivables and other
collateral arising from the sale of certain ownership interests in the Real
Property and, in exchange therefor, Lender has agreed, under the terms and
conditions set forth therein, to make a revolving line of credit loan to
Borrower in the maximum amount of THIRTY MILLION DOLLARS ($30,000,000) (the
"Receivables Loan"). The proceeds of the Receivables Loan will be used, in part,
to pay and satisfy principal and interest due under the Construction Loan and
the Working Capital Loan.
WHEREAS, further pursuant to the Receivables Loan Agreement, Lender
has agreed, under the terms and conditions set forth therein, to make a
revolving working capital line of credit loan to Borrower in the maximum amount
of FOUR MILLION DOLLARS ($4,000,000) ("Working Capital Loan").
NOW, THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties agree as follows:
1. DEFINITIONS
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Except where the context clearly requires a different interpretation,
all capitalized terms used in this Agreement shall have the following meaning:
"24-Unit Parcel" shall mean that parcel of real property located
on the southwest corner of U.S. ▇▇▇▇▇▇▇ ▇▇. ▇▇ and Ski Run Boulevard, in
South Lake Tahoe, California, more fully described on the attached Exhibit
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"A".
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"186-Unit Parcel" shall mean that parcel of real property located
on the northeast corner of U.S. ▇▇▇▇▇▇▇ ▇▇. ▇▇ and Ski Run Boulevard, in
South Lake Tahoe, California, more fully described on the attached Exhibit
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"B".
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"Advance" or "Advances" shall mean an advance of the Construction
Loan.
"Affiliate" shall mean any Person directly or indirectly
Controlling, Controlled by or under common Control with the Person to whom
the definition is applied, including blood relatives or spouse of the
Person to whom the definition applies, if such Person is a natural person.
Controlled, Control or Controlling, for purposes of the foregoing shall
mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of another Person by any
means.
"Affiliate Debt Subordination Agreement" shall have the meaning
set forth in Paragraph 10.8.1 hereof.
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"Affiliate Indebtedness" shall have the meaning set forth in
Paragraph 6.3(q) hereof.
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"Affiliated Party" shall have the meaning set forth in Paragraph
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10.8.1 hereof.
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"AKGI" shall mean AKGI Lake Tahoe Investments, Inc., a California
corporation.
"Annexable Parcel" shall mean that parcel of real property
located on the southwest corner of U.S. ▇▇▇▇▇▇▇ ▇▇. ▇▇ and Ski Run
Boulevard, in South Lake Tahoe, California, more fully described on the
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attached Exhibit "C".
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"Applicable Environmental Laws" shall have the meaning set forth
in the Environmental Certificate.
"Applicable Usury Law" the usury law applicable pursuant to the
terms of Paragraph 15.8 hereof or such other usury law which is applicable
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if the law chosen by the parties in Paragraph 15.8 hereof is not
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applicable.
"Approvals" shall mean any licenses, permits, consents, approvals
or authorizations.
"Assignments" shall mean, individually and collectively, (i) that
certain Collateral Assignment of Plans and Specifications and Rights under
Architectural Contract of even date herewith, in a form acceptable to
Lender, executed by Borrower in favor of Lender pursuant to which Borrower
collaterally assigns to Lender, as security for the payment and performance
of all of the Obligations, all of the Borrower's rights under the
architectural agreement with respect to the construction of the
Improvements, together with the Plans and Specifications and all
engineering contracts and engineering specifications related thereto; (ii)
that certain Collateral Assignment, Security Agreement and Account
Agreement (re Escrow Account), in a form acceptable to Lender, pursuant to
which Borrower collaterally assigns to Lender, as security for the payment
and performance of the Obligations, all of Borrower's rights in the Escrow
(as defined in the Receivables Loan Agreement) and the agreement under
which the Escrow is maintained, which Assignment shall be executed prior to
the making of the first advance of the Working Capital Loan; (iii) that
certain Collateral Assignment of Rights under Construction Contract and
Guarantee Agreement of even date herewith, in a form acceptable to Lender,
executed by Borrower in favor of Lender pursuant to which Borrower
collaterally assigns to Lender, as security for the payment and performance
of all of the Obligations, all of Borrower's rights under the Construction
Contract with the General Contractor and under the Guarantee Agreement with
the General Contractor's corporate parent; (iv) that certain Collateral
Assignment of Engineering Specifications and Rights under Engineering
Services Contract of even date herewith, in a form acceptable to Lender,
executed by Borrower in favor of Lender pursuant to which Borrower
collaterally assigns to Lender as security for the payment and performance
of all of the Obligations, all of Borrower's rights under the Engineering
Services Contract with respect to the construction of the Improvements
together with the engineering plans and specifications related thereto; (v)
that certain Collateral Assignment of Material Contracts of even date
herewith, in a form acceptable to Lender, executed by Borrower in favor of
Lender, pursuant to which Borrower collaterally assigns
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to Lender, as security for payment and performance of all the Obligations,
all of Borrower's rights under the Material Agreements and the other
agreements referenced therein; (vi) that certain Collateral Assignment of
Project Rights and Documents, of even date herewith, in a form acceptable
to Lender, executed by Borrower in favor of Lender pursuant to which
Borrower collaterally assigns to Lender, as security for the payment and
performance of the Obligations, all of Borrower's rights in certain project
rights and documents more fully described therein; and (viii) that certain
Collateral Assignment of Management Agreement, of even date herewith, in a
form acceptable to Lender, executed by Resort Management International,
Inc. in favor of Lender pursuant to which Resort Management International,
Inc. collaterally assigns to Lender, as security for the payment and
performance of all of the Obligations, all of Resort Management
International, Inc.'s rights under the its management agreement with
Borrower.
"Association" shall mean the owner's association formed in
connection with Real Property.
"Business Day" shall mean a calendar day other than a Saturday,
Sunday or other day on which banks in Phoenix, Arizona or New York, New
York are required to close.
"Capital Expenditure" shall mean payments that are made by the
Borrower for the lease, purchase, improvement, construction or use of any
Property, the value of which under GAAP is required to be capitalized and
shall include, without limitation, payments for the installment purchase of
Property and payments under capitalized leases.
"Cash Flow" shall mean, for any period, the net income or loss of
Borrower, determined in accordance with GAAP (excluding the effect of any
extraordinary gains or losses from the sale of property not in the ordinary
course of business), plus each of the following items to the extent
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deducted from the revenues of Borrower in calculating the net income: (A)
depreciation; (B) amortization; and (C) interest and taxes during such
period, and less Capital Expenditures to the extent paid in such period.
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"Chevron Easement" shall mean an easement executed by STRA in
favor of Borrower granting to Borrower, and its successors and assigns, a
perpetual easement over the parcel of real property located on the
northeast corner of U.S. ▇▇▇▇▇▇▇ ▇▇. ▇▇ and Ski Run Boulevard, in South
Lake Tahoe, California, more fully described in the attached Exhibit "D".
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"Chevron Environmental Indemnity" shall mean certain
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Environmental Agreement (Ski Run Site) dated as of July, 1995, by and among
Chevron U.S.A. Products Company, a division of Chevron U.S.A., Inc.; STRA;
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, as Chapter 11 trustee of E1 Dorado Improvement
Corporation and Argosy/KOAR Group, Inc. a Georgia corporation, Argosy/KOAR
Group, Inc.'s interest in which was assigned to Lake Tahoe Resort Partners,
L.P. on November 14, 1995, pursuant to Assignment and Assumption of
Environmental Agreement (Ski Run Site), and Lake Tahoe Resort Partners
L.P.'s interest in which was assigned to Borrower on March 1, 1996 pursuant
to that certain Assignment and Assumption of Environmental Agreement (Ski
Run Site).
"City" shall mean the City of South Lake Tahoe, California a
California municipal corporation.
"Closing Date" shall mean April 29, 1996.
"Collateral" shall mean the Property upon which Lender is
granted a mortgage, deed of trust, pledge, assignment, lien, charge,
encumbrance or security interest of any kind, pursuant to the Security
Documents.
"Completion" or "Completed" or "Complete" when referring to
the Improvements (or to the Improvements within a particular Phase if the
contexts to requires), shall mean the day each of the following has
occurred: (i) Borrower has received a final and unconditional certificate
of occupancy, as to the structures constituting the Improvements (or the
Improvements within a particular Phase if the context so requires), and an
unconditional acceptance as to the balance of the Improvements (or the
Improvements within a particular Phase if the context so requires), issued
by the political subdivision authorized to issue same; (ii) Borrower has
received all Approvals required in order to permit Borrower to sell Time-
Share Interest and operate the Real Property as a time-share resort
(including, without limitation, a Public Report issued by the California
Department of Real Estate, containing such conditions as are acceptable to
Lender), (iii) Borrower has received complete "as built" plans and
specifications; (iv) Lender has received certificates of substantial
completion from Borrower's architect, with respect to all of the
Improvements (or with respect to the Improvements within a particular Phase
if the context so requires) to be constructed pursuant to the Plans and
Specifications, which certificates of substantial completion have been
approved by Lender's Inspector and indicate that all material "punchlist"
items have been completed; and (v) Borrower supplies Lender, upon request,
with evidence satisfactory to Lender that Borrower has acquired from STRA a
sufficient number of Sewer Units and TAUs as are necessary in order for
Borrower to obtain a certificate of
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occupancy with respect to such Completed Phase.
"Construction Budget" shall mean an AIA form construction
budget and projected monthly funding schedule with respect to the
construction of the Improvements as approved by Lender. A separate
Construction Budget shall be supplied with respect to each Phase. The
Construction Budget shall be supported by firm contracts or purchase
orders, must contain and detail all "soft" costs, and all costs for
furniture, fixtures and equipment. Lender must be satisfied that any
amounts budgeted for "construction overhead," if any, does not represent a
developer fee of any kind, except to the extent clearly disclosed in the
Construction Budget, as approved by Lender. The Construction Budget shall
include an interest reserve (the "Interest Reserve") in the amount of
$1,000,000 with respect to Phase I, in the amount of $500,000, with respect
to Phase II and in the amount of $200,000, with respect to Phase III. The
Construction Budget shall also include a contingency reserve (the
"Contingency Reserve") in the amount of $750,000 with respect to Phase I,
in the amount of $375,000 with respect to Phase II and in the amount of
$245,000 with respect to Phase III. Any Contingency Reserve that is not
used with regard to a particular Phase shall be available for use in
subsequent Phases. The Construction Budget shall not include any fees or
other amount payable to Borrower or its Affiliates, except to the extent
clearly disclosed in the Construction Budget, as approved by Lender. The
Construction Budget shall be accompanied by a final itemized breakdown of
the cost to (i) construct the Improvements, and (ii) acquire the furniture,
fixtures and equipment to be contained within the Improvements indicating
that the Construction Loan will be sufficient to pay for the construction
of the Improvements and acquisition of the furniture, fixtures and
equipment.
"Construction Loan" shall have the meaning set forth in the
Recitals hereof.
"Construction Loan Documents" shall mean this Agreement, the
Construction Note, the Security Documents, the Environmental Certificate,
the Affiliate Debt Subordination Agreement, the Guarantee, and each and
every other document, instrument or writing executed or delivered by
Borrower in connection with the Construction Loan, as the same are
hereafter amended, renewed, replaced or restated.
"Construction Note" shall mean that certain Construction
Promissory Note, of even date herewith, in the amount of $28,000,000, in a
form acceptable to Lender.
"Contingency Reserve" is defined within the definition of
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Construction Budget.
"DDA" shall mean that certain First Amended Ski Run Project
Disposition and Development Agreement by and between STRA and Argosy/KOAR
Group, Inc., a Georgia corporation, dated as of August 4, 1995; as amended
by that certain First Addendum to First Amended Ski Run Project Disposition
and Development Agreement dated as of October, 1995 between STRA and
Argosy/KOAR, Inc., as further amended by the STRA Environmental Indemnity;
as further amended by the First Amended Ski Run Project Disposition and
Development Agreement, Operating Memorandum No. 2 dated as of April 26,
1996; and as further amended by the First Amended Ski Run Project
Disposition and Development Agreement, Operating Memorandum No. 3 dated as
of April 26, 1996, Argosy/KOAR Group, Inc.'s interest in which was assigned
to Lake Tahoe Resort Partners, L.P. on November 14, 1995, pursuant to that
certain Assignment and Assumption of First Amended Ski Run Project
Disposition and Development Agreement, and Lake Tahoe Resort Partners,
L.P.'s interest in which was assigned to Borrower on March 1, 1996
pursuant to that certain Assignment and Assumption of First Amended Ski
Run Project Disposition and Development Agreement.
"Development Agreement" shall mean that certain Ski Run Project
Development Agreement by and between the City and Argosy/KOAR Group, Inc.,
dated as of November 21, 1995, as amended by that certain Ski Run Project
Development Agreement, Operating Memorandum No. A dated as of April 26,
1996, Argosy/KOAR Group, Inc.'s interest in which was assigned to Lake
Tahoe Resort Partners, L.P. on November 14, 1995 pursuant to that certain
Assignment and Assumption of Development Agreement, and Lake Tahoe Resort
Partners, L.P.'s interest in which was assigned to Borrower on March 1,
1996 pursuant to that certain Assignment and Assumption of Development
Agreement.
"Disbursement Request" shall have the meaning set forth in
Paragraph 24(a)(i) hereof.
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"Distribution" shall mean any distribution, advance, payment or
loan to any shareholder, officer, director, member or Affiliate of Borrower
or of any of the foregoing, including, but not limited to, loan repayments,
dividends, bonuses, salary, other compensation and management fees.
"Dynamic Acquisition Documents" shall mean that certain Purchase
and Sale Agreement dated as of August 18, 1994, by and among KOAR Group,
Inc. and Argosy/KOAR Group, Inc. ("KOAR/Argosy"), ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ as
Trustee and Dynamic Finance Corporation, as
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amended by that certain Implementation Agreement relating to Purchase and
Sale Agreement dated as of November 13, 1995, KOAR/Argosy's interests in
which it was assigned to Borrower by mesne conveyances.
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"Dynamic Loan Documents" shall mean the documents evidencing and
securing the Dynamic Loan Facility.
"Dynamic Loan Facility" shall mean that certain One Million Eight
Hundred Thousand Dollar ($1,800,000.00) loan made by Dynamic Finance
Corporation to Borrower pursuant to the Dynamic Acquisition Document.
"Environmental Certificate" shall mean that certain Environmental
Certificate with Representations, Covenants and Warranties, of even date
herewith, executed by the Borrower and related to the Real Property.
"Equity" shall mean cash equity contributed or required to be
contributed to Borrower by its members.
"Event of Default" shall have the meaning set forth in Paragraph
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13.1 hereof.
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"First Mortgage" shall mean that certain Deed of Trust,
Assignment of Rents and Proceeds and Security Agreement, of even date
herewith, in a form acceptable to Lender, to be recorded as a first
priority lien against the 186-Unit Parcel, the Garage Parcel and the
Chevron Easement, and the Improvements located and to be located on all of
the foregoing, as security for the payment and performance of all of the
Obligations.
"Force Majeure" shall mean acts of God and other natural
disasters, fires or explosions, transportation difficulties, strike, lock-
outs or other industrial disturbances, war, breakage or accident to
machinery or equipment, shortage of or inability to obtain raw materials,
any law, rule or action of any court or of any other instrumentality of the
Federal or any State or local government or any other cause or causes
beyond Borrower's reasonable control, whether similar or dissimilar to
those above; provided that the same does not arise as a result of
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Borrower's failure to pay money, the same is not willfully done or brought
about by Borrower or any Affiliate and Borrower gives Lender written notice
of the occurrence of such event within ten (10) days following its
occurrence.
"GAAP" shall mean generally accepted accounting principles in
effect from time to time, consistently applied, throughout the period
involved
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and with prior periods, which shall include the official interpretations
thereof by the Financial Accounting Standards Board or any successors
thereto.
"Garage Parcel" shall mean that parcel of real property located
on the southwest ▇▇▇▇▇ of U.S. ▇▇▇▇▇▇▇ ▇▇. ▇▇ and Ski Run Boulevard, in
South Lake Tahoe, California, more fully described in the attached Exhibit
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"E".
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"General and Administrative Expenses" shall mean all expenses of
Borrower less (i) Marketing Expenses, (ii) interest on the Construction
Loan, the Working Capital Loan and the Receivables Loan and (iii)
Borrower's cost of Time-Share Interest sold.
"General Contractor" shall mean, individually and collectively,
the General Contractor or General Contractors responsible for constructing
the Improvements.
"Guarantee" shall mean, individually and collectively, a written
Guarantee Agreement, in such form as Lender shall prescribe, executed and
delivered by a Person (or Persons) to Lender, under the terms and
conditions of which such Person (or Persons), as Guarantor(s), shall
individually and/or jointly and severally guarantee Borrower's Performance
of all of its Obligations under the Receivables Loan Documents.
"Guarantor" shall mean individually, a Person, and collectively
each and every Person, who executes and delivers to Lender a Guarantee
pursuant to the terms and conditions of this Agreement. The Guarantors of
this Loan are KGK and AKGI.
"Improvements" shall have the meaning set forth in the
Recitals hereto.
"Incentive Fee" shall have the meaning set forth in the
Receivables Loan Agreement.
"Incipient Default" shall mean any act or event which with
notice, passage of time or both would constitute an Event of Default.
"Interest Rate" shall mean an annual rate equal to the Prime Rate
plus 2%, to be adjusted on the first Business Day of each month.
"Interest Reserve" is defined within the definition of
Construction Budget.
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"Job Progress Schedule" shall mean a schedule showing the planned
timing, progress of construction and completion date for the Improvements.
A separate Job Progress Schedule shall be prepared with respect to each
Phase.
"KGK" shall mean KGK Lake Tahoe Development, Inc., a California
corporation.
"Lender's Inspector" shall mean an independent inspector,
architect or engineer, of Lender's choosing, but retained at the cost of
Borrower, to assist Lender with all aspects of construction of the
Improvements, such as, without limitation, approving Plans and
Specifications, Job Progress Schedule, Construction Budget, draw requests,
construction contracts, and architectural contracts and making monthly
inspections as the construction of the Improvements progresses.
"Loan Balancing Equity" shall have the meaning set forth in
Paragraph 7.3 hereof.
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"Loan Fee" shall have the meaning set forth in Paragraph
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3.1 hereof.
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"Major Elements of Construction" an element of construction of
the Improvements the cost of which, as reflected in the Construction
Budget, exceeds $25,000.
"Major Subcontractor" shall mean a Subcontractor who is
reasonably expected to receive $100,000 or more in compensation in
connection with the construction of the Improvements.
"Marketing Expenses" shall mean the aggregate of all expenses
incurred in the sale and marketing of Time-Share Interests, including
without limitation, all costs and expenses for advertising, mailing,
consumer premiums, referral and lead generation, closing costs and sales
commissions.
"Material Agreements" shall mean, individually and collectively,
the DDA (including, without limitation, the STRA Environmental Indemnity),
the Development Agreement and the Chevron Environmental Indemnity, and all
amendments, modifications and replacements thereof.
"Maturity Date" shall have the meaning set forth in Paragraph 2.2
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hereof.
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"Net Income" shall mean the net income or loss of Borrower,
determined in accordance with GAAP (excluding the effect of any
extraordinary gains or losses from the sale of property not in the ordinary
course of business).
"Net Sale" shall mean gross sales of Time-Share Interests during
such quarterly period reduced only by cancellations thereof.
"Obligations" shall mean each and every obligation, duty,
covenant, undertaking and condition which Borrower is required or has
agreed to perform under the Receivables Loan Documents and the Construction
Loan Documents, and each and every obligation of Borrower now or hereafter
owing to Lender.
"Overdue Rate" a rate of interest per annum equal to four percent
(4%) above the then Interest Rate, computed on the basis of the actual
number of days elapsed using a 360 day year, provided, however, that, in no
event shall such interest rate be greater than the maximum rate permitted
under the Applicable Usury Law.
"Permitted Exceptions" shall mean those matters set forth on the
attached Exhibit "F". Permitted Exceptions shall include, as to the 24-Unit
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Parcel and Annexable Parcel only, the lien in favor of Dynamic Finance
Corporation to secure the Dynamic Loan Facility.
"Person" shall mean any individual, firm, corporation, business
enterprise, trust, association, joint venture, governmental body, or other
entity, whether acting in an individual, fiduciary or other capacity.
"Phase" shall mean any of Phase I, Phase II or Phase III.
"Phase I" shall mean that portion of the Improvements consisting
of the initial 66 time-share units to be constructed on the 186-Unit Parcel
together with other Improvements set forth in the Plans and Specifications,
approved by Lender, with respect to such Phase.
"Phase II" shall mean that portion of the Improvements consisting
of the second 40 time-share units to be constructed on the 186-Unit Parcel
together with other Improvements set forth in the Plans and Specifications,
approved by Lender, with respect to such Phase.
"Phase III" shall mean that portion of the Improvements
consisting of the third 40 time-share units to be constructed on the
▇▇▇-▇▇▇▇
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▇▇▇▇▇▇ together with other Improvements set forth in the Plans and
Specifications, approved by Lender, with respect to such Phase.
"Phase I Advances" shall mean an Advance for the
construction of Phase I.
"Phase II Advances" shall mean an Advance for the construction of
Phase II.
"Phase III Advances" shall mean an Advance for the construction
of Phase III.
"Plans and Specifications" shall have the meaning set forth in
the Recitals hereto.
"Prime Rate" shall mean the rate of interest publicly announced
from time to time by Citibank, N.A. as its fluctuating "corporate base
rate" or equivalent rate of interest charged to its most creditworthy
commercial borrowers notwithstanding the fact that some borrowers of
Citibank, N.A. may borrower at rates less than such announced Prime Rate.
"Project" shall mean, collectively, the Real Property and the
Improvements.
"Project Documents" shall mean all operating, management,
marketing, supervision, nondisturbance, cross-use, parking agreements and
all other documents, instruments or agreements relating to the ownership,
development, construction, maintenance, repair, leasing, management,
marketing and operation of the Project.
"Property" shall mean all types of real, personal or mixed
property and all types of tangible or intangible property.
"Real Property" shall mean, collectively, the 186-Unit Parcel,
the Chevron Easement, the Garage Parcel, the Annexable Parcel and the ▇▇-
▇▇▇▇ ▇▇▇▇▇▇.
"Receivables Collateral" shall have the meaning set forth in the
Receivables Loan Agreement.
"Receivables Loan" shall have the meaning set forth in the
Recitals hereto.
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"Receivables Loan Agreement" shall have the meaning set forth in
the Recitals hereto.
"Receivables Loan Documents" shall have the meaning set forth in
the Receivables Loan Agreement.
"Retention Funds" shall have the meaning set forth in Paragraph
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2.3(a) hereof.
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"Second Mortgage" shall mean that certain Deed of Trust,
Assignment of Rents and Proceeds and Security Agreement, of even date
herewith, in form acceptable to Lender, to be recorded as a second priority
lien (subject to the lien securing the Dynamic Loan Facility) against the
24-Unit Parcel and the Annexable Parcel and the improvements located and to
be located on all of the foregoing.
"Security Documents" shall mean, individually and collectively,
the Assignments, the First Mortgage, the Second Mortgage and the Uniform
Commercial Code Financing Statements.
"Sewer Units" shall mean sewage treatment capacity which must be
acquired by STRA and transferred to Borrower in accordance with the terms
of the DDA.
"STRA" shall mean the South Lake Tahoe Redevelopment Agency, a
California municipal corporation.
"STRA Environmental Indemnity" shall mean that certain First
Amended Ski Run Project Disposition and Development Agreement, Operating
Memorandum No. 1 dated as of March, 1996 between STRA and Borrower. The
STRA Environmental Indemnity is included within the DDA, as that term is
defined in this Agreement.
"Subcontractor" shall mean any subcontractor, materialman or
supplier (other than the General Contractor) who is supplying labor or
materials in connection with the construction of the Improvements.
"TAUs" shall mean tourist accommodation units which must be
retired by STRA in accordance with the terms and conditions of the DDA.
"Time-Share Interests" shall have the meaning set forth in the
Receivables Loan Agreement.
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"Title Policy" shall have the meaning set forth in Paragraph
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6.3(i)(c) hereof.
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"Working Capital Loan" shall have the meaning set forth in the
Recitals hereto.
2. LOAN COMMITMENT: ADVANCES
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2.1 THE CONSTRUCTION LOAN. Subject to the conditions herein set
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forth, Lender agrees to loan to or for the benefit of Borrower, and Borrower
agrees to draw upon and borrow, in the manner and upon the terms and conditions
herein expressed, amounts that shall not exceed (i) at any one time, the sum of
$28,000,000 and, (i) in the aggregate, the sum of $39,000,000 (the "Construction
Loan"). The foregoing notwithstanding, under no circumstances shall the unpaid
principal balance of the Construction Loan, together with the unpaid principal
balance of the Receivables Loan and the Working Capital Loan exceed a total
amount equal to $45,000,000, and Lender shall have no obligation to make any
Advance hereunder if such Advance would cause the foregoing limitation to be
exceeded. The proceeds of the Construction Loan, together with Loan Balancing
Equity, shall be (i) used to construct the Improvements and pay other costs and
expenses in the amounts and to the extent set forth in the Construction Budget
and (ii) disbursed only in accordance with the Job Progress Schedule and
Construction Budget approved by Lender. Equity in the amount of $10,000,000
shall be used by Borrower to acquire the Real Property and fund operating
expenses of the Borrower incurred during the pre-development and construction
stages of Project. Anything to the contrary notwithstanding, in the event
Borrower does not satisfy all of the conditions precedent to making the first
Advance on or before the Closing Date, (i) the entire Loan Fee shall
nevertheless be deemed earned by Lender in consideration for Lender's holding
itself ready and willing to make the Construction Loan upon the terms and
conditions set forth herein and (ii) Lender shall have no further obligation to
make the Receivables Loan, the Construction Loan or the Working Capital Loan.
The retention of the Loan Fee is in addition to Borrower's obligations under
Paragraph 15.7 hereof.
--------------
2.2 THE NOTE. The Construction Loan shall be a revolving loan and
--------
shall be evidenced by the Construction Note of Borrower, executed and delivered
simultaneously with the execution of this Agreement, in the amount of
$28,000,000, payable to Lender upon the terms and conditions contained therein.
Interest on Phase I Advances shall be paid from the interest reserve established
in connection with Phase I until such time as such interest reserve is
exhausted, whereupon, any further interest due and owing on Phase I Advances
shall be paid from Borrower's own funds. Interest on Phase II Advances shall be
paid from the interest reserve established in connection with Phase II until
such time as such interest reserve is exhausted, whereupon, any further interest
due and owing on Phase II Advances shall be paid
-14-
from Borrower's own funds. Interest on Phase III Advances shall be paid from the
interest reserve established in connection with Phase III until such time as
such interest reserve is exhausted, whereupon, any further interest due and
owing on Phase III Advances shall be paid from Borrower's own funds. The
principal balance of the Construction Loan, all accrued interest and any other
sums due and owing pursuant to the Construction Loan Documents shall be due and
payable in full on (the "Maturity Date") the first day of the forty-eighth month
--------------
following the making of the first Advance (but in no event later than April 30,
2000); provided, however, that Borrower shall make principal payments through
interval release fees or otherwise as may be necessary from time to time so that
the outstanding principal balance of the Phase I Advances does not exceed Three
Million Eight Hundred Thousand Dollars ($3,800,000) on the earlier to occur of
December 31, 1998 or the sale of 3,162 Time-Share Interests in Phase I and
further provided that Borrower shall make a principal payment through interval
release fees or otherwise as may be necessary from time to time so that the
outstanding principal balance of the Phase II Advances does not exceed Five
Hundred Thousand Dollars ($500,000) on the earlier to occur of December 31, 1999
or the sale by Borrower of 2,040 Time-Share Interests in Phase II. The sale of a
Time-Share Interests is deemed to occur at such time as Borrower's deed to a
purchaser is placed of public record.
2.3 ADVANCES. Lender shall make Advances in accordance with one or
--------
more of the options described below; upon the occurrence of any event described
in this Paragraph 2.3, Lender may cease Advances under one option and thereafter
-------------
make Advances under the other option:
(a) Upon receipt by Lender of a Disbursement Request
described below, together with all of the items described in Paragraph
---------
2.4 hereof that are required by Lender in connection with that
---
Advance, Lender shall make Advances no more frequently than once per
month as construction progresses, in amounts equal to ninety percent
(90%) of expenditures for labor performed and material supplied under
the construction contract for construction of the Improvements in
accordance with the Plans and Specifications during the period
immediately preceding that Advance, together with one hundred percent
(100%) of expenditures for (i) indirect construction costs related to
the construction of the Improvements other than labor and materials,
such as permit fees, architect and engineering fees, interest and
taxes, but not including any profit to Borrower or any Affiliate of
Borrower, (ii) general conditions with respect to the General
Contractor and (iii) specific expenditures for labor performed and
material supplied under the construction contract for construction of
the Improvements in accordance with the Plans and Specifications
during the period immediately preceding that Advance, approved by
Lender on
-15-
a case-by-case basis. In no event shall any portion of the
Construction Loan or Equity be advanced to pay fees or other amounts
to Borrower or any of its partners, members or Affiliates, except to
the extent provided in Paragraph 10.8.l(xi) hereof. The amount equal
--------------------
to ten percent (10%) of the expenditures for labor performed and
material supplied under the construction contract for construction of
the Improvements in accordance with the Plans and Specifications not
disbursed pursuant to the foregoing (hereinafter called the "Retention
---------
Funds") shall be disbursed upon a date to be determined at Lender's
-----
discretion but not later than fifteen (15) days after receipt by
Lender of the items specified above that are conditional to the making
of an Advance and (as to the General Contractor) receipt and approval
by Lender of the items described in Paragraph 25(a) hereof and (as to
---------------
each Subcontractor) receipt and approval by Lender of the items
described in Paragraph 2.5(b).
----------------
(b) (i) Upon the occurrence of any Event of Default, (ii) at
any time that Lender determines from its own inspection that the
Improvements are not being constructed (A) in material accordance with
the Plans and Specifications, (B) in material accordance with the Job
Progress Schedule or (C) in material conformity with cost estimates
approved by Lender or (iii) at any time Lender determines from its own
inspection that requisite and reasonably acceptable standards of
workmanship are not being met, then Lender shall have the right (which
right, in connection with the occurrence of the events set forth in
clauses (ii) and (iii) above shall be exercised only upon the giving
by Lender to Borrower of 30 days prior written notice and the failure
of Borrower within such 30-day period to remedy the cause for Lender's
actions) to take over and complete construction of the Improvements by
or through any agent, contractor or subcontractor of its selection and
may make Advances and disburse any funds deposited with Lender by
Borrower in payment of the costs, expenses, fees, attorneys' fees and
other charges, together with reasonable allowances for supervision,
incurred in connection with such taking over and completion. In the
event proceeds of the Construction Loan and amounts deposited by
Borrower are insufficient to pay all of the same, the unpaid amount
thereof shall be an indebtedness of Borrower to Lender, payable
immediately without demand or notice, shall bear interest at the
highest rate payable under the Note, and shall be secured by all of
the Security Documents.
2.4 (a) CONDITIONS TO EACH ADVANCE. When Borrower believes it is
--------------------------
entitled to an Advance, Borrower shall furnish Lender with the following
all in form satisfactory to Lender, at least ten (10) Business Days prior
to the
-16-
date that the Advance is to be made:
(i) Disbursement Request (the "Disbursement Request") in the
--------------------
form of (i) AIA Form G702, (ii) AIA Form G702A and (iii) the
Borrower's Affidavit attached hereto as Exhibit 24(a)(i) hereof, fully
----------------
completed and executed. Any materials covered by a Disbursement
Request must be suitably stored at the construction site or, if
required by Lender, actually incorporated into the Improvements.
(ii) The certification by Borrower, the Borrower's supervising
architect, the General Contractor, and Lender's Inspector, that: (A)
all work (including work, the cost of which was paid from sources
other than the Construction Loan) performed is in substantial
accordance with the Plans and Specifications; (B) all governmental
licenses and permits required for the Improvements as then completed
have been obtained and will be exhibited to the Lender upon request;
(C) the Improvements (including Improvements, the cost of which was
paid from sources other than the Construction Loan) as then completed
do not violate, and, if further completed in accordance with the Plans
and Specifications, will not violate any law, ordinance, rule or
regulation or covenant, condition or restriction affecting the Real
Property; (D) the remaining undisbursed proceeds of the Construction
Loan are sufficient to pay for the completion of the Improvements; (E)
the information set forth in the Disbursement Request is true and
accurate in all material respects; (F) the Advance is in an amount not
in excess of the value of the work and materials for which such
Advance is requested.
(iii) Paid invoices and lien waivers relating to the
construction of the Improvements for all work through the date of the
previous Disbursement Request.
(iv) Evidence that any inspection required by any state, city or
other governmental authority has been completed with results
satisfactory to that authority.
(v) Certification by Borrower, the Borrower's supervisory
architect and Lender's Inspector of the percentage to which the
Improvements have been completed.
(vi) The certification by Borrower and the determination by
Lender that no Event of Default exists and no event or condition
exists that with notice or lapse of time, or both, would
-17-
constitute an Event of Default.
(vii) An irrevocable commitment from Lender's title insurer to
issue an endorsement to Lender's title insurance policy, increasing
the policy amount by the amount of the contemplated Advance and
insuring that no intervening matters have affected the priority of the
First Mortgage or the Second Mortgage (which commitment shall be
supplied to Lender immediately prior to the contemplated Advance, the
provisions of the introductory portion of this Paragraph 2.4(a) to the
----------------
contrary notwithstanding).
(viii) Such other information and documents as Lender may
reasonably require.
(b) CONDITIONS TO DISBURSEMENT OF EQUITY. Loan Balancing
------------------------------------
Equity or other monies paid by Borrower in payment of the construction
costs for the Improvements shall be disbursed by Borrower, in the payment
of such construction costs, only upon satisfaction of same terms and
conditions that would be applicable if the Equity and other monies were
proceeds from the Loan and were being disbursed by Lender. Without limiting
the generality of the foregoing, such Equity and other monies shall not be
disbursed without the satisfaction of the conditions set forth in Paragraph
---------
2.4(a) hereof.
------
(c) PHASING OF ADVANCES. Lender shall have no obligation to
-------------------
make Phase I Advances unless and until each of the conditions precedent set
forth in Paragraphs 2.4 and 2.5 and in Sections 6 and 7 have been
-------------- --- ---------- -
satisfied. In no event shall the Phase I Advances exceed, in the aggregate,
the sum of $22,000,000 and Lender shall have no obligation to make any
Phase I Advances if the making of such Advances would cause the foregoing
limitation to be exceeded. In the event for any reason a Phase I Advance
exceeds the foregoing limit, then Borrower shall, upon demand, immediately
make a principal payment to Lender in an amount equal to such excess plus
accrued and unpaid interest thereon. Lender shall have no obligation to
make any Phase II Advances unless and until (i) each of the conditions
precedent set forth in Paragraphs 2.4 and 2.5 and in Sections 6 and 7 have
-------------- --- ---------- -
been satisfied; (ii) Phase I has been Completed; (iii) Lender is satisfied,
in its sole discretion, with the financial condition of Borrower and with
the pace at which sales of Time-Share Interests from Phase I are being
sold; (iv) the total cost, determined in Lender's discretion, to Complete
Phase II, together with the then unpaid principal balance of the
Construction Loan, does not exceed $28,000,000; (v) the total cost,
determined in Lender's discretion, to Complete Phase II, together with the
then unpaid principal balance of each of the Construction Loan, Receivables
-18-
Loan and the Working Capital Loan does not exceed $45,000,000; (vi) there
does not then exist an Event of Default or an Incipient Default; and (vii)
Lender has received and approved the Construction Budget and Job Progress
Schedule for Phase II and the Construction Budget reflects a total cost to
construct and Complete Phase II of no more than $10,300,000. In no event
shall the Phase II Advances exceed, in the aggregate, the sum of
$10,300,000 and Lender shall have no obligation to make any Phase II
Advances if the making of such Advance would cause the foregoing limitation
to be exceeded. In the event for any reason a Phase II Advance exceeds the
foregoing limit, then Borrower shall, upon demand, immediately make a
principal payment to Lender in an amount equal to such excess plus accrued
and unpaid interest thereon. Lender shall have no obligation to make any
Phase III Advances unless and until (i) each of the conditions precedent
set forth in Paragraphs 2.4 and 2.5 and in Sections 6 and 7 hereof have
-------------- --- ---------- -
been satisfied; (ii) Phase II has been Completed; (iii) Lender is
satisfied, in its sole discretion, with the financial condition of Borrower
and with the pace at which sales of Time-Share Interest from Phases I and
II are being sold; (iv) the total cost, determined in Lender's discretion,
to Complete Phase III, together with the then unpaid principal balance of
the Construction Loan does not exceed $28,000,000; (v) the total cost,
determined in Lender's discretion, to Complete Phase III together with the
then unpaid principal balance of each of the Construction Loan, Receivables
Loan and the Working Capital Loan does not exceed $45,000,000; (vi) there
does not then exist an Event of Default or an Incipient Default; and (vii)
Lender has received and approved the Construction Budget and Job Progress
Schedule for Phase III and the Construction Budget reflects a total cost to
construct and Complete Phase III of no more than $6,700,000. In no event
shall the Phase III Advances exceed $6,700,000 and Lender shall have no
obligation to make Phase III Advances if the making of such Advance would
cause the foregoing limitation to be exceeded. In the event, for any
reason, Phase III Advance exceeds the foregoing limit, then Borrower shall,
upon demand, immediately make a principal payment to Lender in an amount
equal to such excess plus accrued and unpaid interest thereon.
2.5 (a) CONDITIONS TO DISBURSEMENT OF RETENTION FUNDS. Except as
---------------------------------------------
otherwise provided with respect to the early release of retention funds as
provided in subparagraph (b) below, upon Completion of the Improvements,
----------------
Borrower shall furnish Lender with the following, all in form and content
satisfactory to Lender, as a condition precedent to disbursement of the
remaining balance of the Retention Funds; provided, however, that to the
-------- -------
extent a particular condition pertains solely only to a particular Phase,
such condition need not be satisfied, as to such Phase, until such time as
Borrower requests the disbursement of the remaining balance of the
Retention Funds with respect to such Phase:
-19-
(i) The certification by the Borrower's supervising
architect, the General Contractor, Borrower and Lender's Inspector
that the Improvements have been Completed substantially in accordance
with the Plans and Specifications;
(ii) A final and unconditional certificate of occupancy (or
its equivalent as relating to the Improvements) issued by the
political subdivision authorized to issue such certificate together
with all other necessary governmental permits and approval from the
political subdivision authorized to issue such permits and approvals
as required by such political subdivision; provided, however, that
Borrower may, in lieu of providing a final and unconditional
certificate of occupancy, provide to Lender a temporary certificate of
occupancy which provides for the issuance by the applicable governing
entity of a final and unconditional certificate of occupancy upon the
satisfaction of conditions which are deemed to be nonmaterial by
Lender, are otherwise acceptable to Lender and with respect to which
Borrower provides assurances satisfactory to Lender that such
conditions are or will be promptly satisfied;
(iii) The certification by Lender's Inspector that the
Improvements have been fully Completed substantially in accordance
with the Plans and Specifications and within the boundary lines of the
Real Property;
(iv) Full, unconditional lien waivers from all persons or
entities (including, without limitation, the General Contractor and
all Subcontractors) for all labor performed and/or materials supplied
in connection with the construction of the Improvements, subject to
the receipt of the final payment due and owing to such person;
(v) An affidavit of full payment of debts and claims executed
by the General Contractor and all Subcontractors, subject to the
receipt of the final payment due and owing to such person;
(vi) Written certification from Borrower's supervising
architect that each final punch list item for the Improvements has
been completed;
(vii) Copies of all special inspection reports, certificates or
any similar items as required by any political subdivision relating to
the Improvements;
-20-
(viii) Copies of all guaranties for workmanship, and all
warranties and maintenance agreements, relating to the completed
Improvements; and
(ix) Such other information and documents as Lender may
reasonably require.
In the event all of the conditions precedent to the disbursement of
Retention Funds pursuant to this subparagraph 2.5(a) are satisfied with the
-------------------
exception of the condition set forth in clause (vi) above, Retention Funds
(other than as set forth in this sentence) will be disbursed on the condition
that an amount equal to two times the amount necessary to complete the punchlist
items (established by evidence satisfactory to Lender) shall not be disbursed
until each punchlist item for the Improvements has been completed.
(b) CONDITIONS TO DISBURSEMENT OF RETENTION FUNDS OWED TO
-----------------------------------------------------
SUBCONTRACTORS. Borrower shall furnish Lender with the following, all in a
--------------
form and content satisfactory to Lender, as a condition precedent to the
disbursement of the Retention Funds owed to a Subcontractor; provided,
--------
however, that to the extent a particular condition pertains only to a
-------
particular Phase, such condition need not be satisfied, as to such Phase,
until such time as Borrower requests the disbursement of the remaining
balance of the Retention Funds with respect to such Phase:
(i) The certification by Borrower's supervising architect,
the General Contractor, Borrower and Lender's Inspector that the
Improvements to be constructed by such Subcontractor have been
completed or the materials or work to be supplied or performed by such
Subcontractor have been fully performed and supplied, substantially in
accordance with the Plans and Specifications;
(ii) Full, unconditional lien waivers from such Subcontractor
for all labor performed or materials supplied in connection with the
construction of the Improvements, subject to the receipt of the final
payment due and owing to such Subcontractor;
(iii) An affidavit of full payment of debts and claims executed
by the Subcontractor, subject to the receipt of the final payment due
and owing to such Subcontractor;
(iv) Written certification from Borrower's supervising architect
that each final punchlist item for the Improvements to be
-21-
constructed by such Subcontractor has been completed;
(v) Copies of all guaranties for workmanship and all warranties
and maintenance agreements, relating to the Improvements completed by
such Subcontractor; and
(vi) Such other information and documents as Lender may
reasonably require.
In the event all of the conditions precedent to the disbursement of Retention
Funds pursuant to this subparagraph 2.5(b) are satisfied with the exception of
-------------------
the conditions set forth in clause (iv) above, Retention Funds (other than as
set forth in this sentence) will be disbursed on the condition that an amount
equal to two times the amount necessary to complete the punchlist items
established by evidence satisfactory to Lender) shall not be disbursed until
each punchlist item for the Improvements has been completed.
2.6 INSPECTIONS ARE EXPENSE OF BORROWER. Borrower shall pay for all
-----------------------------------
inspections, whether made by Lender's Inspector or by Lender.
2.7 DISBURSEMENT OF ADVANCES. Any Advance made by Lender under any
------------------------
application for disbursement, or so much thereof as Lender may consider proper,
may be disbursed, at Lender's election, to Borrower or its order or to both
Borrower and the persons furnishing labor and/or materials, or, after the
occurrence of an Event of Default and at all times thereafter whether or not
such default is cured, directly to the persons furnishing labor and/or
materials. Lender shall have no obligation to see that the disbursements made by
it to Borrower or any designee of Borrower are actually used by that party to
pay for labor and materials furnished for construction of the Improvements.
Borrower acknowledges that Borrower assumes all risks in connection with any
disbursement to any such designee. Lender shall have the right to make any
Advance through Lender's title insurer.
2.8 RIGHT TO WITHHOLD ADVANCES. Lender may withhold from any Advance
--------------------------
or, on account of subsequently discovered evidence, withhold from a later
Advance, or require the Borrower to repay to Lender any earlier Advance, as
Lender in its discretion considers necessary to protect Lender from loss on
account of (i) materially defective work on the Improvements that has not been
remedied, (ii) any obligation required by this Agreement to have been performed
that has not been performed, (iii) liens filed against the Real Property and
Improvements or reasonable evidence that such liens will be filed, (iv) failure
of Borrower to make properly due payments to contractors or subcontractors for
material or labor, or (v) a reasonable doubt by Lender that construction of the
Improvements can be completed with the undisbursed proceeds of the Construction
Loan. Subject to the other provisions of this
-22-
Agreement, any amount so withheld shall be disbursed after the basis for such
withholding has been cured or removed.
2.9 RIGHT TO WITHHOLD FROM AMOUNTS ADVANCED. Under any option for
---------------------------------------
Advances, Lender, in its discretion, may withhold any payment or portion thereof
until Lender has received releases of lien, waivers of lien or paid bills in
form satisfactory to it for the period of time through the prior Advance. Lender
shall have no obligation to require and/or obtain lien waivers or receipts, and,
although Lender requires presentation to it of lien waivers and/or receipts,
Lender shall have no responsibility for the validity thereof nor for the
correctness of the amounts indicated thereon. No Advance by Lender shall
constitute approval of any certification or relieve any person making such
certification of responsibility therefor.
2.10 ADVANCES TO PRESERVE COLLATERAL. Lender, from time to time, may
-------------------------------
make Advances in payment of insurance premiums, taxes, assessments, liens or
encumbrances existing against the Real Property and Improvements, interest
accrued and payable upon the Construction Loan, and any charges and expenses
that are the obligation of Borrower under this Agreement or any Security
Document and any charges or matters necessary to preserve the Real Property and
the Improvements or to cure any Event of Default.
2.11 ADVANCES PRIOR TO SATISFACTION OF CONDITIONS. Although Lender
--------------------------------------------
shall have no obligation to make any Advance unless and until all of the
conditions and prior performances set forth herein have been kept, fulfilled or
performed, and until all inspections, certifications, releases, waivers, or paid
bills (for the period of time through the prior Advance) or other requirements
set forth in this Section 2 have been made, delivered and complied with, Lender,
---------
at its sole discretion, may make Advances prior to that time without waiving or
releasing any of the requirements or conditions of this Agreement; but Borrower
shall continue to be strictly obligated and subject thereto, and all such
conditions, prior performances and other requirements shall nevertheless be
strictly and punctually complied with, fulfilled and performed; and,
notwithstanding any such disbursement, Lender, at its discretion, may
discontinue any further Advances at any time until all of the conditions, prior
performances and other requirements of this Agreement have been strictly
fulfilled, performed and complied with.
2.12 ADVANCES WITHOUT PREJUDICE. In the event of any dispute that, in
--------------------------
the good faith opinion of Lender, may endanger the timely completion of the
Improvements or the fulfillment of any condition precedent or covenant herein,
Lender may agree to make Advances for the account of Borrower without prejudice
to Borrower's rights, if any, to recover such funds from the party to whom paid.
Such agreement or agreements may take any form that Lender in its reasonable
discretion deems proper, including, without limitation, agreements to indemnify
a title insurer
-23-
against possible assertion of lien claims and agreements to pay disputed amounts
to contractors in the event Borrower is unable or unwilling to pay the same. All
sums paid or agreed to be paid pursuant to such agreement shall be for the
account of Borrower and shall be charged as an Advance. Lender will not make an
Advance as to a disputed claim in the event Borrower posts a bond as to such
claim, within ten (10) days after Borrower's receipt of actual knowledge of the
claim, in a form and substance and from a surety acceptable to Lender.
2.13 NO OTHER RIGHT TO ADVANCES. Borrower shall have no right to any
--------------------------
Advance other than to have the same disbursed by Lender in accordance with one
or more of the disbursement provisions contained in this Agreement. Any
assignment or transfer, voluntary or involuntary, of this Agreement or any right
hereunder shall not be binding upon or in any way affect Lender without its
written consent; Lender may make Advances under one or more of the disbursement
provisions herein, notwithstanding any such assignment or transfer.
2.14 COMMITMENT TO MAKE ADVANCES. In no event shall Lender have the
---------------------------
obligation to make or Borrower have the right to demand an Advance after the
earlier of (i) the first day of the thirty-sixth (36th) month following of the
making of the first Advance or (ii) April 30, 1999.
3. LOAN FEE
--------
3.1 LOAN FEE; DEPOSIT. Borrower shall pay the Lender a loan fee
-----------------
in connection with the Construction Loan of one percent (1%) of each Advance
(the "Loan Fee") which shall be deemed fully earned by Lender on the Closing
--------
Date. The Loan Fee in the amount of one percent (1%) of each Advance shall be
payable on the earlier of forty five (45) days following the making of such
Advance or concurrently with the making of the next succeeding advance of the
Receivables Loan or Working Capital Loan and such Loan Fee may be withheld from
the advance of the Receivables Loan or Working Capital Loan so made. The payment
of the Loan Fee is in addition to Borrower's obligation under Paragraph 15.7
--------------
hereof and is an addition to Borrower's obligation to pay a loan fee under the
Receivables Loan Agreement.
4. SECURITY
--------
4.1 SECURITY FOR LOAN. Borrower shall cause the Obligation to
-----------------
be secured by the Security Documents and guaranteed by the Guarantor pursuant to
the Guarantee.
5. RESERVED
--------
6. CONDITIONS PRECEDENT FOR CLOSING
--------------------------------
-24-
The obligation of Lender to make the Construction Loan, and each and
every Advance, is subject to the following express conditions precedent, all of
which shall have been satisfied prior to the recording of the First Mortgage and
Second Mortgage:
6.1 CONSTRUCTION LOAN DOCUMENTS. Borrower shall have executed (or
---------------------------
obtained the execution or issuance of) and delivered to Lender the following
documents, all in form and substance satisfactory to Lender:
(a) The Construction Loan Documents;
(b) The Receivables Loan Documents; and
(c) Such other documents, instruments and assurances as
Lender shall reasonably require to carry out and effect the intents and
purposes of this Agreement.
6.2 LOAN FEE. Lender shall have received that portion of the
--------
Loan Fee then due and payable.
6.3 DELIVERY OF OTHER ITEMS.
------------------------
(i) Borrower, at its expense, shall have obtained and
delivered to Lender the following items, all of which shall be in form and
content satisfactory to Lender in Lender's sole discretion and shall be
subject to approval in writing by Lender; provided, however, that as to
the item described in subparagraph (s), (t), (u), (y), (z), and (bb) that
pertain only to a particular Phase, such condition need not be satisfied,
as to such Phase, until such time as Borrower requests an Advance with
respect to such Phase.
(a) Evidence satisfactory to Lender that upon the Closing
Date, Borrower shall have good and marketable title to the Collateral.
(b) A current survey of the Real Property by a licensed
surveyor acceptable to Lender describing the boundaries of the Real
Property and showing all means of ingress and egress to a public
right-of-way, the location of all buildings and other improvements
(including parking areas), rights-of-way, easements and other common
facilities, and title exceptions able to be located thereon (each of
which shall be identified by docket and page or recording number where
recorded) and all other customary and relevant information pursuant to
-25-
ALTA and ASCM standards and any title company requirements. Following
completion of the foundations and footings and prior to any Advance
for footings and foundations, Borrower shall furnish to Lender an
update of this survey showing the location of the footings and
foundations and the proposed Improvements which shall be within the
boundaries of the Real Property and shall not encroach on any easement
area or any building setback requirement, and Lender shall review and
approve or disapprove such updated survey within five (5) Business
Days after its receipt thereof. Following completion of the
Improvements, Borrower shall furnish to Lender an ALTA "as built"
survey showing the location of the improvements upon the Real Property
and showing all easements and other matters affecting the site. All
surveys shall be certified to Lender and the title company issuing the
Title Policy.
(c) An ALTA extended coverage mortgagee's title insurance
policy (the "Title Policy"), with such endorsements as Lender may
require, issued by a title insurance company satisfactory to Lender in
the amount of $34,500,000 insuring the lien of the First Mortgage and
the Second Mortgage to be a first and prior lien upon the Real
Property and Improvements as security for the payment and performance
of all of the Obligations, subject only to the Permitted Exceptions,
and insuring against any lien claims that could arise out of the
construction of the Improvements on the Real Property. During the
course of construction of the Improvements, Borrower shall provide
Lender with such title insurance endorsements as Lender may reasonably
require, including any endorsements Lender may reasonably require to
insure that the Improvements shall have been constructed within the
boundaries of the Real Property and in accordance with all applicable
laws, covenants and restrictions. Upon Completion of the Improvements,
Borrower shall deliver to Lender such further endorsements to the
title insurance policy as Lender may reasonably require.
(d) Evidence that the Real Property has ingress and egress to a
dedicated street or highway.
(e) Evidence of the degree to which the Real Property, or any
part thereof, lies within a "special flood hazard area" as designated
on maps prepared by the Department of Housing and Urban Development.
(f) Evidence that all utilities and services to the Real
-26-
Property and Improvements, including without limitation water, sewer,
electric and telephone, are available or will be available as
required, and will be provided in amounts that are sufficient to
service the Improvements for their intended use.
(g) Evidence that each type of off-site improvement for the Real
Property has been completed and has been certified and/or accepted by
any municipality, utility, county or other governmental entity whose
certification or acceptance thereof is required.
(h) Reserved.
(i) Copies of any Declaration of Covenants, Conditions and
Restrictions and related documents pertaining to the Real Property and
the Improvements.
(j) Evidence that all taxes and assessments levied against
or affecting the Real Property have been paid current.
(k) With respect to Borrower and each Guarantor or Person which
is a corporation, general or limited partnership or limited liability
company, certified copies of their articles, certificates and
agreements of general or limited partnership, their articles of
incorporation and by-laws or other articles of organization and
operating agreement (and all amendments thereto), together with
evidence that Borrower and each such Guarantor or Person is duly
organized, validly existing, and in good standing under the laws of
the jurisdiction in which they are organized, and in each and every
other jurisdiction where the nature of their respective businesses
require them to be so qualified. With respect to Borrower and each
Guarantor or Person which is a corporation, a general or limited
partnership or a limited liability company, a copy of the resolutions
certified to be true and complete by the corporate secretary, all of
the general partners or all of the members (as the case may be),
authorizing the execution, delivery and performance of the
Construction Loan Documents, and evidencing the authority of all
Persons executing the Construction Loan Documents on behalf of
Borrower, the Guarantor, and such other Persons, and if Borrower,
Guarantor or such Persons are operating under a fictitious name, a
copy of the recorded certificate of fictitious name. No material
change shall be made to any organizational documents previously
submitted to Lender without Lender's written approval.
(l) Evidence that any fees due to any broker utilized
-27-
by Borrower in connection with the Construction Loan, the Receivables
Loan or the Working Capital Loan have been paid, together with
evidence of the payment by Borrower of any expenses payable in
connection with the Construction Loan, the Receivables Loan and the
Working Capital Loan, including, without limitation, those set forth
in Paragraph 15.7. In any event, all broker's fees (other than fees
--------------
owed to a broker with whom Lender has a specific agreement) shall be
borne by Borrower, and Borrower and such brokers shall indemnify and
hold Lender harmless from any liability for the payment of any and all
such brokerage fees.
(m) RESERVED.
(n) A fully executed and recorded copy of the plat for the Real
Property.
(o) Evidence that the liens and security interests in the
Collateral have been duly perfected as first and prior liens and
security interests, and that there are no other financing statements
or liens filed against Borrower or on the property of Borrower, except
the Permitted Exceptions.
(p) The License Agreement between Borrower and Embassy
Vacation Resorts, Inc. with respect to the Project; a comfort letter,
in form and substance satisfactory to Lender, from Embassy Vacation
Resorts, Inc. with respect to Lender's rights under the foregoing
License Agreement; the Management Agreement between Borrower and
Resort Management International, Inc.; and the Management Agreement
between Resort Management International, Inc. and Embassy Vacation
Resorts Suites, Inc.
(q) Such documents, instruments and agreements as Lender may
require establishing that any and all indebtedness owed by Borrower to
its officers, members or partners, to Guarantor, or to any relatives,
shareholders, partners, members or Affiliates of Borrower or of
Guarantor or any of the foregoing ("Affiliate Indebtedness"), is fully
subordinated as to right and time of payment to the indebtedness to
Lender contemplated herein and in the Receivables Loan Agreement, all
as more fully provided in Paragraph 10.8 hereof.
--------------
(r) Credit references and Dun & Bradstreet reports for
Borrower and Guarantor; and UCC, tax lien, litigation and judgment
searches for Borrower and Guarantor.
-28-
(s) Two copies of the Plans and Specifications together with
evidence that the same have been approved by all applicable federal,
state and local authority.
(t) Copies of firm and binding fixed price contracts,
approved by Lender, for the General Contractor approved in writing by
Lender and no later than two weeks prior to the making of an Advance
against elements of the construction of the Improvements supplied by a
Major Subcontractor, copies of firm and binding fixed contracts
approved by Lender with respect to such elements, as set forth in the
Construction Budget, with Major Subcontractors that have been approved
in writing by Lender.
(u) Financial statements for the General Contractor covering the
year immediately preceding the date of this Agreement; evidence that
the General Contractor is licensed by and authorized to do business in
the State of California as a general contractor; and client and
project lists, customer references, and resumes for the General
Contractor.
(v) A soil report, including drainage, boring and compacting
data, bearing a date acceptable to Lender, by engineers acceptable to
Lender, indicating that the soil conditions of the Real Property are
suitable for construction of the Improvements without extraordinary
land preparation and indicating approval of the proposed foundation
design. Any recommendations in the approved soil report must be
complied with and incorporated into the Plans and Specifications.
(w) Evidence that the Real Property is properly zoned for the
Improvements and their intended use as a time-share resort and that
such zoning is final and not subject to challenge.
(x) Such insurance as required by Lender, written by insurers
and in amounts and forms satisfactory to Lender, which insurance shall
be obtained at the sole cost of Borrower.
(y) Copies of all building and other necessary or appropriate
permits issued by each federal, state and local authority having
jurisdiction over the Real Property and Improvements and its intended
uses and permitting construction of the Improvements in accordance
with the Plans and Specifications, together with evidence
-29-
reasonably satisfactory to Lender that the Real Property has available
to it all necessary permits for the use of the Real Property as a
time-share resort.
(z) Copies of all agreements between Borrower and architects,
engineers, managers or supervisors related to the construction,
maintenance, repair, leasing, management and operation of the Real
Property and Improvements, together with all other Project Documents,
together with written agreements by the persons or entities that are
parties to all of the foregoing that they will perform for Lender the
services contracted to Borrower, notwithstanding the occurrence of any
Event of Default and any foreclosure of the First Mortgage or Second
Mortgage (provided that all prior defaults under their respective
contracts are cured, and further provided that such persons or
entities continue to receive payments under their respective
contracts), and the consent of such persons or entities to the
collateral assignment by Borrower to Lender of their respective
contracts;
(aa) The Job Progress Schedule for Phase I together with the
Construction Budget for Phase I. The Construction Budget shall reflect
a total cost to construct and Complete Phase I of not more than
$22,000,000.
(bb) Evidence that all permits and licenses required to
construct and operate the Property as of the date hereof as a time-
share resort are in place and have been approved by, and issued by,
the appropriate federal, state or local agency for use by the
Borrower, all of which shall be reasonably satisfactory to Lender.
(cc) Evidence that the Improvements as completed and the
contemplated uses thereof as a time-share resort, will not violate any
applicable ordinances or statutes, (including the zoning laws), any
covenants, conditions or restrictions running with the Real Property
or any regulations or building codes of any governmental or municipal
agency having jurisdiction over the Improvements.
(dd) Evidence that the Real Property is environmentally
acceptable to Lender.
(ee) If requested in writing by Lender with respect to a
particular General Contractor (other than to the extent waived, as
provided below) or Subcontractor, a dual obligee payment and
performance bond, with respect to the General Contractor or
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Subcontractor, naming Lender and Borrower as co-obligees for an amount
not less than the total price of the construction contract(s) for the
Improvements, containing a waiver of all rights under applicable state
law, if any, which requires a creditor or obligee to bring an action
against a surety under a contract within a specific number of days of
notice by the surety, written by a bonding company or companies
acceptable to Lender and dated prior to or of even date with the
construction contract to which it relates. As of the date hereof
Lender waives the requirement that a payment and performance bond be
obtained with regard to Pirini Building Company. Notwithstanding the
fact that Lender may have waived the requirement for a bond as to a
particular General Contractor or Subcontractor, Lender reserves the
right to require a bond with respect to such General Contractor or
Subcontractor in the event of the occurrence of a material adverse
change in the business or financial condition of such General
Contractor or Subcontractor. Furthermore, Lender shall be named as a
co-obligee on any payment and performance bonds that the General
Contractor requires be obtained with regard to any Subcontractor.
(ii) Lender shall have reviewed and approved (A) the results
of a physical inspection of the Real Property and (B) all governmental
licenses and permits necessary in connection with the construction and
operation of the Improvements.
(iii) Lender shall have reviewed and approved the General
Contractor and any Major Subcontractors who will participate in the
construction of the Improvements and receive a payment from such Advance,
which review shall include, without limitation, review by Lender of the
materials referred to in Paragraph 6.3(i)(u) with respect to such General
-------------------
Contractor and Major Subcontractors.
(iv) The following conditions precedent to the making of an
advance under the Receivables Loan Agreement shall have been satisfied:
52(v).
(v) Lender has received no evidence that the current zoning of
the Real Property is being challenged or is other than final.
(vi) Lender has received and approved the Material Agreements
and has received evidence satisfactory to it that the rights of Argosy/KOAR
Group, Inc. in and to each of the foregoing have been assigned to Borrower
with the consent of the other parties thereto.
-31-
(vii) Lender and STRA have reached such agreements concerning
the DDA as are acceptable to Lender. Such agreements shall include a
consent by STRA as to the collateral assignment of the DDA to Lender.
(viii) Lender has received the consent from the City with regard
to the collateral assignment to Lender of the Borrower's rights under the
Development Agreement and an acknowledgment from the City that its taxing
and bonding capacity will support the obligations of STRA under the STRA
Environment Indemnity.
(ix) Borrower has acquired, or concurrently with the Closing
will acquire, the Real Property and the prior lien of Dynamic Finance
Corporation pursuant to the Dynamic Acquisition Documents and the DDA.
(x) Lender shall receive evidence satisfactory to it that STRA
and the South Tahoe Joint Powers Financing Authority have sold and closed
the sale of the Bond Anticipation Notes described in the DDA and the
Financial Plan attached thereto and the proceeds from such sale, in an
amount no less than $8,295,000, has been deposited with ▇▇▇▇▇ Fargo Bank,
as escrow agent.
(xi) Lender has received evidence from STRA that it has
approved Pirini Building Company as the General Contractor.
(xii) Lender has received and approved a letter from the
appropriate governmental authority indicating that Borrower is entitled to
obtain a "foundation only" building permit for the construction of the
Improvements, subject solely to the payment of a fee in an amount no
greater than $60,000 (and no other conditions).
(xiii) All conditions precedent to the obligations of STRA under
the DDA, which are required to be satisfied by the Closing Date, have been
satisfied or waived.
(xiv) Lender has received and approved an order from the United
States Bankruptcy Court for the Central District of California authorizing
and approving the sale of the Real Property to Borrower subject only to the
lien in favor of Dynamic Finance Corporation as to the 24-Unit parcel and
the Annexable Parcel.
(xv) Borrower has received and approved all other operating,
management, marketing, supervision, nondisturbance cross-use, parking and
-32-
other documents relating to the ownership, development, construction,
maintenance repair, leasing, management, marketing and operation of the Project
and has received a collateral assignment of such of the foregoing as Lender
shall require which collateral assignment shall be accompanied consents of the
other parties thereto if required by Lender.
(xvi) Lender has received and approved all necessary approvals
from all regulatory, agencies having jurisdiction over the Project.
6.4 OPINION OF COUNSEL. Borrower and Guarantor, at their expense,
------------------
shall have provided Lender with a written opinion by counsel acceptable to
Lender regarding such matters as Lender shall require.
6.5 REPRESENTATIONS TRUE. All representations and warranties by
--------------------
Borrower shall remain true and correct, in all material respects, and all
agreements that Borrower is to have performed or complied with by the date
hereof shall have been performed or complied with.
6.6 NO EVENT OF DEFAULT. No Event of Default exists or Incipient
-------------------
Default exists.
6.7 NO MATERIAL CHANGE. There shall have occurred no material adverse
------------------
change in Real Property or in the business or financial condition of Borrower
and Guarantor since the date of the last financial statements submitted to
Lender for its consideration in making the Construction Loan.
6.8 NO FAILURE TO DISCLOSE. Neither Borrower nor Guarantor shall have
----------------------
failed to disclose to Lender any material information and no material
information supplied by Borrower or Guarantor shall be found to be misleading,
misrepresented or materially incorrect.
7. ADDITIONAL CONDITIONS PRECEDENT
-------------------------------
The obligation of Lender to make the Construction Loan, and each and
every Advance, is subject to the following additional conditions precedent, all
of which shall have been satisfied prior to the first Advance:
7.1 OTHER CONDITIONS PRECEDENT. All of the conditions precedent
--------------------------
provided in Section 6 hereof shall have been satisfied.
---------
7.2 EQUITY. Lender shall have received evidence satisfactory to Lender
------
that no less than $10,000,000 in Equity has been contributed in cash to
Borrower. Lender has approved the identity of the parties who contributed such
-33-
Equity. As of the date hereof, Borrower has not supplied to Lender sufficient
back up documentation concerning the following expenditures which the Borrower
intends to constitute part of the Equity: $550,000 for land acquisition;
$570,000 for land acquisition; $12,000 to Argosy/KOAR; and $3,549.78 to KOAR
Group, Inc. Within thirty (30) days from the Closing Date, Borrower shall supply
to Lender evidence satisfactory to Lender as to the expenditure of the foregoing
monies and the purpose for which such monies were expended. In the event, within
the foregoing thirty (30) day period, satisfactory evidence has not been
supplied to Lender to indicate that such monies are Equity, Borrower, upon
written demand of Lender, agrees to cause its members to make an additional
Equity contribution to Borrower, within ten (10) days following such written
demand, in an amount equal to the amounts attributable to a particular item for
which satisfactory evidence has not been supplied.
7.3 DEPOSIT OF FUNDS WITH LENDER. If at any time or from time to
----------------------------
time Lender, in its sole discretion, determines that the remaining undisbursed
proceeds of the Construction Loan, plus the then existing and undisbursed
balance of the Equity are insufficient to pay the total cost for the completion
of the Improvements, Lender may demand that an amount equal to such deficiency
(the amount of such deficiency, as deposited with Lender, hereinafter "Loan
Balancing Equity") be deposited with Lender to insure such completion and
payment. Within ten (10) days after such demand, Borrower shall deposit with
Lender the amount of such deficiency as determined by Lender. All or part of the
initial or any additional deposit may be in the form of (a) cash, (b) an
irrevocable, nondocumentary stand-by letter of credit in form and substance and
from an issuer satisfactory to Lender providing that Lender shall have the
unconditional right to draw against such letter of credit at any time or (c)
other security reasonably satisfactory to Lender, in the amount of such
deficiency. All funds obtained by Lender by drawing upon any letter of credit
provided pursuant to this Paragraph 7.3 and all funds deposited by Borrower
-------------
pursuant to this Paragraph 7.3 shall accrue interest in favor of Borrower at a
-------------
passbook rate until disbursed by Lender and shall be disbursed by Lender in the
manner provided herein for Advances prior to, in conjunction with or after any
or all Advances. Borrower hereby grants to Lender a security interest in all of
Borrower's funds at any time held by Lender as additional security for the (i)
timely repayment and performance of the Construction Loan and all other
indebtedness and obligations of Borrower arising under the Construction Loan
Documents and (ii) timely repayment and performance of the Receivables Loan and
the Working Capital Loan and all other indebtedness and obligations of Borrower
arising under the Receivables Loan Documents.
7.4 REPRESENTATIONS AND WARRANTIES TRUE. All representations and
-----------------------------------
warranties by Borrower shall remain true and correct, in all material respects
and all agreements that Borrower is to have performed or complied with by the
date of the first Advance shall have been substantially performed or complied
with.
-34-
8. REPRESENTATIONS AND WARRANTIES
------------------------------
Borrower represents and warrants to Lender as follows:
8.1 RECITALS CORRECT. The recitals and statements of intent
----------------
appearing in this Agreement are true and correct.
8.2 VALID EXISTENCE. Borrower is a limited liability company, duly
---------------
organized, validly existing and in good standing under the laws of the State of
California. AKGI is a corporation, duly organized, validly existing and in good
standing under the laws of the State of California and is a member of Borrower.
KGK is a corporation duly organized, validly existing and in good standing under
the laws of the State of California and is a member of Borrower.
8.3 OWNER AND AUTHORITY. Borrower has full power and authority to own
-------------------
its properties and assets and to carry on its business as now being conducted.
8.4 AUTHORIZATION. Borrower is fully authorized and permitted to enter
-------------
into this Agreement, to execute any and all documentation required herein, to
borrow the amounts contemplated herein upon the terms set forth herein and to
perform the terms of this Agreement, none of which conflicts with any provision
of law or regulation applicable to Borrower. The Construction Loan Documents
are, to the best of Borrower's knowledge, valid and binding legal obligations of
Borrower and each is enforceable in accordance with its terms, other than as
such enforceability may be subject to or limited by bankruptcy, insolvency,
reorganization, arrangement, moratorium, similar laws relating or affecting
rights of creditors generally or general principles of equity (except to the
extent such laws, rights, remedies or principles are waivable by Borrower and
have been waived in the Construction Loan Documents). The Perfection
Certificate, delivered to Lender prior to the date hereof, was, on the date of
delivery, true and correct in all respects and no events have occurred since the
time of delivery which would make the Perfection Certificate inaccurate in any
respect.
8.5 LIENS EFFECTIVE. To the best of Borrower's knowledge, the liens,
---------------
security interests and assignments created by the Security Documents will, when
granted, be valid, effective, properly perfected and enforceable liens, security
interests and assignments.
8.6 NO BREACH. The execution, delivery and performance by Borrower of
---------
the Construction Loan Documents and all other documents and instruments relating
to the Construction Loan will not, immediately, or with notice, passage of time
or both, result in any breach of the terms or conditions of, or constitute a
default under, any agreement or instrument under which Borrower is a party or is
obligated. Borrower is not in default in the performance or observance of any
obli-
-35-
gations, covenants or conditions of any such agreement or instrument and there
exists no events which, with notice, passage of time or both, would constitute
such default.
8.7 ALL LICENSES. Borrower has obtained and there remain in full force
------------
and effect all licenses, permits, consents, approvals and authorizations
necessary or appropriate for the construction of the Improvements and all
licenses, permits, consents, approvals and authorizations necessary or
appropriate for the management and operation of the Improvements for their
intended purpose, to the fullest extent required as of the date hereof.
8.8 NO LITIGATION. No litigation, proceeding or investigation is
-------------
pending or, to the best of Borrower's knowledge, threatened which might result
in any material adverse change in the business, property or financial condition
of Borrower or Guarantor, or in any liability on the part of Borrower or
Guarantor, or which would question the validity of the Construction Loan or of
the documentation described herein, or of any action taken or to be taken
pursuant to or in connection herewith, or that might materially and adversely
affect the performance by Guarantor of the Guarantee or the performance by
Borrower of this Agreement, or of the other Construction Loan Documents.
8.9 ALL STATEMENTS CORRECT. All financial statements, profit and loss
----------------------
statements, statements as to ownership and other statements or reports
previously or hereafter given to Lender by or on behalf of Guarantor and
Borrower are and shall be true, complete and correct, in all material respects,
as of the date thereof. There has been no material adverse change in the
financial condition or the results of the operation of Borrower or Guarantor
since the latest financial statements of Borrower or Guarantor given to Lender.
8.10 TAX RETURNS FILED. Borrower and Guarantor have filed all federal,
-----------------
state and local tax returns and have paid all of their respective current
obligations before delinquent, including all federal, state and local taxes and
all other payments required under federal, state or local law.
8.11 NO ASSUMED NAMES. Borrower is not operating its business
----------------
under any assumed or fictitious name.
8.12 EQUIPMENT; MOTOR VEHICLE TITLE. As of the date of this Agreement,
------------------------------
none of the equipment comprising the Collateral is a "motor vehicle" under
applicable law with respect to which a certificate of title or similar document
or instrument has been or must be issued, or will be used or operated in a
manner which would require issuance of a certificate of title or similar
document or instrument.
8.13 GUARANTEE. To the best of Borrower's knowledge, the
---------
-36-
Guarantee constitutes a legal, and valid and binding obligation of Guarantor,
enforceable in accordance with its terms, other than as such enforceability may
be subject to or limited by bankruptcy, insolvency, reorganization, arrangement,
moratorium, similar laws relating or affecting rights of creditors generally or
general principles of equity (except to the extent such rights, laws, remedies
or principles are waivable by Guarantor and have been waived by Guarantor).
8.14 NO LABOR OR MATERIAL. Borrower warrants that no labor or material
--------------------
was furnished for construction of the Improvements which would give rise to a
lien that would be superior to the First Mortgage or Second Mortgage.
8.15 ZONING. The Real Property is properly zoned for the Improvements
------
and their intended use as a time-share resort and such zoning is final and not
subject to challenge.
8.16 BROKER. Borrower has not utilized any broker, finder or like
------
person in connection with the Construction Loan, Receivables Loan or Working
Capital Loan to whom there may be owed any commission, finder's fee or other
compensation as a result of the Closing of the Construction Loan, Receivables
Loan or Working Capital Loan.
8.17 VALIDITY OF AGREEMENTS. Each of the Material Agreements are (i)
----------------------
in full force and effect; and (ii) have not been modified, amended, altered
or changed in any manner except to the extent that such modifications,
amendments, alterations or changes have been delivered to Lender prior to
the date hereof. Any conditions precedent to STRA's obligation under the
DDA, which are required to be satisfied on or prior to the Closing Date,
have been satisfied or waived. Any conditions precedent to Chevron U.S.A.
Inc.'s and Chevron U.S.A. Products Company's obligation under the Chevron
Environmental Indemnity, which are required to be satisfied on or prior to
the Closing Date, have been satisfied or waived. Any conditions precedent
to STRA's obligation under the STRA Environmental Indemnity, which are
required to be satisfied on or prior to the Closing Date, have been
satisfied or waived. Any conditions precedent to City's obligation under
the Development Agreement, which are required to be satisfied on or prior
to the Closing Date, have been satisfied or waived. The Borrower is not in
default under any of the Material Agreements and, to the best of Borrower's
knowledge, none of the other parties to the Material Agreements will be in
default of any of their respective obligations thereunder upon Borrower's
acquisition of the Real Property. To the best of Borrower's knowledge, STRA
will not be in default in the performance of any its obligations under the
Project Documents (as defined in the DDA) upon Borrower's acquisition of
the Real Property.
-37-
8.18 REAFFIRMATION. Each request by Borrower for an Advance shall
-------------
constitute an affirmation on the part of Borrower that the representations and
warranties contained herein are true and correct as of the time of such request
and that the conditions precedent set forth in Sections 6 and 7 hereof have
----------- -
been fully satisfied. All representations and warranties made herein shall
survive the execution of this Agreement, all Advances and the execution and
delivery of all other documents and instruments in connection with the
Construction Loan, so long as Lender has any commitment to lend to Borrower
hereunder and until the Construction Loan and all indebtedness hereunder have
been paid in full and all of Borrower's obligations hereunder have been fully
discharged.
9. AFFIRMATIVE COVENANTS
---------------------
So long as Lender has any commitment to lend to Borrower hereunder and
until the Construction Loan and all other indebtedness hereunder have been paid
in full and all of Borrower's obligations hereunder have been fully discharged:
9.1 PAYMENT BY BORROWER. Borrower shall promptly pay for all labor,
-------------------
materials, equipment and fixtures used in connection with the construction of
the Improvements and all other costs relating to the Improvements.
9.2 COMMENCEMENT AND COMPLETION. Borrower shall (a) commence
---------------------------
construction of Phase I no later than 30 days following the Closing Date, and
cause Completion of Phase I to occur on or before June 30, 1997, subject however
to delays resulting from acts of Force Majeure; (b) commence construction of
Phase II no later than July I, 1997 and cause completion of Phase II to occur on
or before April 30, 1998, subject however to delays resulting from acts of Force
Majeure; (c) commence construction of Phase III no later than July 1, 1998 and
cause Completion of Phase III to occur on or before April 30, 1999, subject to
delays resulting from acts of Force Majeure; (d) permit no material deviations
to occur in the progress, timing or completion of construction of the
Improvements; (e) otherwise abide by the Job Progress Schedule in all respects;
and (f) complete the construction of the Improvements in a good and workmanlike
manner substantially according to the Plans and Specifications, free from all
liens and encumbrances (other than the Permitted Exceptions), and in accordance
with the DDA and the Development Agreement, all applicable ordinances and
statutes, including zoning laws, all covenants, conditions and restrictions
running with the land, all regulations and building codes of any governmental or
municipal agency having jurisdiction over the Improvements. A material deviation
in the progress, timing or completion of construction of the Improvements shall
be deemed to occur if there occurs a delay, at any point, of more than 30 days
in the progress, timing or completion as set forth in the Job Progress Schedule
(exclusive of delays resulting from acts of Force Majeure). Construction of a
particular Phase shall be deemed commenced upon the digging of the footings for
-38-
the foundation.
9.3 MATERIAL AGREEMENTS. Borrower will keep and perform all of its
-------------------
material obligations to be kept and performed by it under each of the Material
Agreements and will diligently enforce all material obligations to be kept and
performed by each other party under the Material Agreements. Without the prior
written consent of Lender, Borrower will not modify, amend, alter or change, in
any material respect, any of the Material Agreements or cancel or terminate the
Material Agreements. Borrower will do all things necessary and proper to keep
each of the Material Agreements in effect. Borrower will furnish Lender with
copies of all notices of default given or received by Borrower concurrently with
the giving of the same by Borrower or as soon as reasonably possible following
the Borrower's receipt thereof.
9.4 ENFORCEMENT OF CONSTRUCTION CONTRACT. Borrower shall strictly
------------------------------------
enforce all material provisions of the contract(s) for the construction of the
Improvements to ensure that the contractor is required to promptly and
diligently perform all of its obligations thereunder and in such a manner as to
preserve Lender's security in the Real Property and Improvements. No material
change, amendment or modification shall be made to such contract(s) without the
prior written consent of Lender.
9.5 LISTS OF CONTRACTORS. Borrower, promptly upon request of Lender
--------------------
from time to time, shall furnish to Lender correct lists of the General
Contractor and all Subcontractors. Each such list shall show the name, address
and telephone number of each such person, a general statement of the nature of
the work to be done, the labor and materials to be supplied, and the approximate
dollar value of such labor or work with respect to each. Lender shall have the
right to telephone or otherwise communicate with the General Contractor and each
Subcontractor to verify the facts disclosed by said list or by any Disbursement
Request, or for any other purpose.
9.6 NO SECURITY INTERESTS. No materials, equipment, fixtures or any
---------------------
other part of the Improvements, or articles of personal property placed in the
Improvements, shall be purchased or installed under any security agreement or
other arrangements wherein the seller reserves or purports to reserve the right
to remove or to repossess any such items or to consider them personal property
after their incorporation into the Improvements.
9.7 MAINTENANCE OF LICENSES AND ZONING. Borrower shall timely obtain
----------------------------------
and maintain in full force and effect all rights, permits, governmental
authorizations and licenses necessary to carry on its business, and all permits,
licenses, consents and approvals necessary for the construction, maintenance and
operation of the Improvements. Borrower shall maintain its present existence and
shall maintain
-39-
executive personnel and management at a level of experience and ability
equivalent to present personnel and management. Borrower shall not change the
present zoning of the Real Property and shall give Lender written notice in the
event such zoning is being challenged.
9.8 MAINTENANCE OF INSURANCE. Borrower will maintain and deliver
------------------------
evidence to Lender of such insurance required by Lender, written by insurers,
and in amounts and forms satisfactory to Lender. Borrower shall maintain in full
force and effect at all times all insurance coverages required to be provided
hereunder.
9.9 PAYMENT OF BILLS; MAINTENANCE OF RECORDS. Borrower shall pay
----------------------------------------
all bills when due, keep books and records in accordance with generally accepted
accounting principles, consistently applied, and will permit a representative on
behalf of Lender to examine and audit the books of its business. Borrower shall
immediately inform Lender of any litigation involving Borrower, the adverse
determination of which might prejudice repayment of the Construction Loan.
9.10 COMPLIANCE WITH CONSTRUCTION LOAN DOCUMENTS. Borrower shall make
-------------------------------------------
all payments of interest and principal due under the Construction Loan and shall
keep and comply with all covenants, terms and provisions of the Construction
Loan Documents.
9.11 PUBLICITY. After the execution of this Agreement, any and all
---------
publicity releases to newspapers of general or limited circulation or trade
publications announcing any of the financing by Lender provided for herein shall
be issued by or subject to prior written approval by Lender. Lender, at its
option and at Borrower's expense, may erect a sign upon the Real Property
indicating that Lender is the source of the financing of the construction of the
Improvements. The foregoing notwithstanding, Lender shall not erect its own sign
upon the Real Property in the event Borrower erects a sign indicating that
Lender is the source of the financing for construction of the Improvements and
Lender has given its prior written approval as to contents of such sign. In
addition, Lender is authorized to issue appropriate press releases and cause a
tombstone to be published announcing the consummation of the Construction Loan
and the aggregate amount thereof.
9.12 MECHANIC'S LIEN FILING PERIOD. To the extent there is a procedure
-----------------------------
available under the laws of the State of California which operates to shorten
the period within which a mechanic or materialman may perfect a mechanics' or
materialman's lien against the Real Property, Borrower will comply with such
procedure.
9.13 FURTHER ASSURANCES. Borrower shall execute and deliver to Lender
------------------
such other instruments and documents and do such other acts as Lender may
-40-
reasonably require in connection with this Loan.
9.14 INDEBTEDNESS OWED TO AFFILIATED PARTIES. Borrower shall cause any
---------------------------------------
and all Affiliate Indebtedness to be subordinated in all aspects to Borrower's
indebtedness to Lender in the manner and to the extent set forth in Paragraph
---------
10.8.
----
9.15 ENVIRONMENTAL MATTERS. Borrower shall furnish to Lender, promptly
---------------------
upon receipt thereof, a copy of (i) any notice of any violation or
administrative or judicial complaint or order having been filed or about to be
filed against Borrower, the Real Property or any other real property used by
Borrower alleging violations of any law, ordinance and/or regulation requiring
Borrower to take any action in connection with the release, transportation
and/or clean-up of any hazardous, toxic or dangerous waste, substance or
material ("Hazardous Materials"), or (ii) any notice from any governmental body
or any other person or entity alleging that Borrower is or may be liable for
costs associated with a response or clean-up of any Hazardous Materials or any
damages resulting from such release or transportation. Borrower, at its sole
cost and expense, shall comply in all material respects with the foregoing
notices or diligently contest in good faith by appropriate proceedings any
demands set forth in such notices and, in all events, shall at all times comply
in all material respects with, and be responsible for, all environmental laws
applicable to the Real Property and any other real property used or leased by
Borrower.
9.16 COMPLIANCE WITH LAW. Until all of Borrower's obligations under
-------------------
the Construction Loan Documents have been fully paid and discharged, Borrower
shall comply with (i) all laws, ordinances, regulations, rules, covenants,
conditions and restrictions affecting Borrower, the Real Property, the
Improvements or any other Collateral (other than where a failure to so comply
will not adversely affect Lender's ability to realize upon the Collateral,
materially adversely affect the construction of the Improvements or the
financial or business condition of the Borrower or the ability of Borrower to
complete performance of all obligations of Borrower to Lender) and (ii) all
laws, rules and regulations relating to environmental matters.
9.17 ENVIRONMENTAL PROVISIONS. Within forty-five (45) days following
------------------------
the end of each quarterly fiscal period of Borrower, Borrower shall deliver to
Lender a report, certified correct to the best of Borrower's knowledge, setting
forth the remediation progress being made under the Chevron Environmental
Indemnity and, if applicable, the STRA Environmental Indemnity and the expected
delivery date of a "No Further Action" letter from the applicable regulatory
authorities (if any such letter is expected or anticipated) with regard to the
environmental contamination on the Real Property, together with copies of
reports, laboratory results and communications with the applicable regulatory,
authorities concerning such contamination, to the extent within the possession
or control of Borrower.
-41-
9.18 REPORTS.
--------
(a) Borrower shall maintain a standard, modern system of
accounting and shall keep and maintain all books and records in accordance
with generally accepted accounting principles on a consistent basis.
(b) Borrower shall furnish or cause to be furnished to Lender,
as soon as the same are available, and in any event within 110 days after
the end of each fiscal year and within 45 days after the end of each
interim quarterly fiscal period of the subject, a copy of the current
financial statements of each of Borrower, Guarantor and the Association.
Such financial statements shall contain a balance sheet as of the end of
the relevant fiscal period and statements of income and cash flows for such
fiscal period (together, in each case, with the comparable figures for the
corresponding period of the previous fiscal year, if available), all in
reasonable detail, prepared in accordance with GAAP. All annual financial
statements of Borrower and the Association required pursuant hereto shall
be audited by a certified public accountant, shall be certified to by said
certified public accountant and shall be accompanied by the accountant's
work papers. All annual financial statements of Guarantor shall be reviewed
by a certified public accountant; provided, however, that upon the giving
--------- -------
of written notice by Lender to each of Borrower and Guarantor, the annual
financial statements of Guarantor thereafter supplied to Lender (commencing
with the fiscal year ending at least thirty (30) days beyond the giving of
such notice) shall be audited by a certified public accountant, shall be
certified to by such public accountant and shall be accompanied by the
accountant's work papers). In addition to the foregoing, all financial
statements required pursuant hereto shall be certified correct by the
individual who is the subject of such statements, or the chief financial
officer or general partner, as the case may be, of the subject of such
statements. The financial statements of Borrower shall also contain in
reasonable detail a statement of income and expenses covering the operation
of the Real Property. Together with such financial statements, Borrower
shall deliver to Lender a certificate signed by the chief financial officer
or managing general partner, as the case may be, of Borrower stating that
to the best of his knowledge, after inquiry, there exists no Event of
Default or Incipient Default or, if any such Event of Default or Incipient
Default exists, specifying the nature and period of existence thereof and
what action Borrower proposes to take with respect thereto. Together with
such financial statements, Borrower shall also deliver to Lender a
certificate of its chief executive officer certifying that (other than with
respect to matters that are within the scope of the Chevron Environmental
Indemnity or the STRA Environmental Indemnity) Borrower is in compliance
with all Applicable Environmental Laws or in the event of noncompliance,
specifying the nature
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and period of the existence of such noncompliance.
(c) Borrower shall, at its expense, (i) permit Lender and its
representatives at all reasonable times to inspect, audit an copy, as
appropriate, the Real Estate, Borrower's facilities, activities, books of
account, logs and records; (ii) cause its employees, agents and accountants
to give their full cooperation and assistance in connection with any such
visits of inspection or financial conferences; and (iii) make available
such further information concerning its business and affairs as Lender may
from time to time reasonably request.
(d) Upon request, Borrower shall furnish to Lender reports
that Borrower has received from STRA under the DDA advising Borrower with
respect to the retirement, acquisition and transfer of TAU's and Sewer
Units under the DDA.
9.19 COVENANTS. Borrower hereby covenants and agrees as follows
---------
during the Term hereof:
(a) As of the end of each fiscal quarter of Borrower, Borrower
shall maintain a net worth, calculated in accordance with GAAP, of at least
$7,500,000. The foregoing covenant shall be tested quarterly beginning with
the quarter year ending December 31, 1996.
(b) Marketing Expenses associated with the marketing and sale
of Time-Share Interests shall not exceed 50% of Net Sales, determined
quarterly. The foregoing covenant shall be tested quarterly, commencing
December 31, 1996. Each of the tests conducted as of the end of December
31, 1996 and March 31, 1997 shall cover the period from the Closing Date
through the end of the relevant quarter. Commencing with the test for June
30, 1997, and thereafter throughout the term hereof, the foregoing covenant
shall be tested quarterly, on a rolling twelve (12) month basis.
(c) Borrower's General and Administrative Expenses shall not
exceed 10% of Net Sales. The foregoing covenant shall be tested quarterly,
commencing December 31, 1996. Each of the tests conducted as of the end of
December 31, 1996 and March 31, 1997 shall cover the period from the
Closing Date through the end of the relevant quarter. Commencing with the
test for June 30, 1997, and thereafter throughout the term hereof, the
foregoing covenant shall be tested quarterly, on a rolling twelve (12)
month basis.
9.20 NOTICES FROM GOVERNMENTAL BODIES. Borrower will
--------------------------------
immediately upon receipt thereof, give to Lender copies of any notices received
by
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Borrower from any governmental or regulatory body or entity regarding or
affecting any license, permit, consent or approval described in Paragraph
---------
6.3(xii).
--------
9.21 DYNAMIC LOAN. Borrower shall (i) keep and perform all obligations
------------
to be kept and performed by it under the Dynamic Loan Documents; (ii) not
modify, amend, alter or change the Dynamic Loan Documents in any material
respect; (iii) not incur any additional indebtedness, which if incurred, would
be secured by the Dynamic Loan Document; and (iv) furnish Lender with copies of
all notices given or received by Borrower under the Dynamic Loan Documents
concurrently with the giving of the same or as soon as is reasonably following
Borrower's receipt thereof.
9.22 TITLE ENDORSEMENT. At such time as each Phase has been Completed,
-----------------
Borrower shall obtain, at its sole cost and expense, a lenders comprehensive
endorsement (CLTA Form 100) to Lender's title insurance policy with respect to
such Phase.
9.23 BUILDING PERMITS. On or before May 10, 1996, Borrower agrees to
----------------
obtain and deliver to Lender a copy of the "foundation only" building permit
with respect to the construction of Phase I and on or before May 15, 1996 obtain
and deliver to Lender a "full building" permit with respect to the construction
of Phase I. Other than the initial Advance made on April 30, 1996, no further
Advances shall be made until the conditions in this paragraph have been
satisfied.
10. NEGATIVE COVENANTS
------------------
Borrower covenants and agrees that so long as Lender has any
commitment to make advances of the Construction Loan and until such time as the
Construction Loan has been paid in full and all of Borrower's obligations
hereunder have been fully discharged, Borrower shall not, without receiving the
prior written consent of Lender, which consent as to Paragraphs 10.1, 10.2 and
---------------------
10.8 hereof, may be withheld is Lender's sole discretion:
----
10.1 DISSOLUTION, MERGER OR THE LIKE. Dissolve or liquidate, or merge
-------------------------------
or consolidate with or into any other entity, transfer to any person or entity,
the right to control Borrower or Guarantor, turn over the management or
operation of the property, assets or business of Borrower or Guarantor to any
other person or entity, or permit any of the foregoing events to occur. The
foregoing notwithstanding, Borrower may engage an independent third-party
management company to manage the Improvements, provided Lender has approved such
manager.
10.2 TRANSFER OR CONVEYANCE. Other than as permitted or
----------------------
-44-
contemplated in the First Mortgage or Second Mortgage and other than the rental,
in the ordinary course of business, of units in the Improvements, assign, sell,
transfer or otherwise convey any of its right, title and interest in any
property whether real or personal (including, without limitation, the
Collateral); guarantee or become otherwise primarily, secondarily or
contingently liable for the payment of any obligation of a third party; incur
any debt except for liabilities incurred in the ordinary course of business; or
create or suffer to be created any mortgage, pledge, security interest,
encumbrance or other lien on any property encumbered by the Security Documents.
10.3 PLANS AND SPECIFICATIONS. Make or permit any change in the Plans
------------------------
and Specifications except changes that: (i) in the case of any building or
structure, are for non-structural changes and are otherwise not of a material
nature, (ii) do not change the nature of the Improvements or reduce or adversely
affect the quality of the Improvements, (iii) do not increase the costs of the
Improvements by more than $25,000 or together with all other changes do not
increase the costs of the Improvements by more than $150,000. Proposed changes
shall be submitted on AIA Construction Change Authorization Form G713 and
accompanied by a copy of the portion of the Plans and Specifications applicable
to the changes. Prior to implementing any change order, Borrower shall deposit
with Lender sufficient cash to cover the cost of all change orders to the extent
that the costs of the Improvements, after taking into account such change order,
then to be completed is more than the remaining undisbursed proceeds of the
Construction Loan, plus the then existing and undisbursed balance of the Equity.
All such funds deposited with Lender shall be held and disbursed in the manner
provided in Paragraph 7.3 hereof and are hereby assigned to Lender as additional
-------------
security for the Construction Loan and all other indebtedness of Borrower
arising hereunder.
10.4 FISCAL YEAR. Change the times of commencement or termination of
-----------
its fiscal year or other accounting periods; or change its methods of accounting
other than to conform to generally accepted accounting principles applied on a
consistent basis.
10.5 FICTITIOUS NAMES. Conduct its business under any names (other
----------------
than Lake Tahoe Resort Partners) or use any trade names or fictitious names,
without in each case giving Lender thirty (30) days prior written notice of any
such change.
10.6 COMPETITIVE PROJECTS. Until such time as all of the Obligations
--------------------
under and arising out of the Construction Loan Documents, together with the
Working Capital Loan and the Incentive Fee, excluding the Receivables Loan, have
been paid and satisfied in full, and Lender has no further obligation to make
any advances of the Construction Loan or Working Capital Loan, Borrower shall
not, without the prior
-45-
written consent of Lender, develop or permit any of its Affiliates to develop a
time-share resort in or around the Lake Tahoe resort area.
10.7 OTHER ACTIVITIES. Engage in any business activities or acquire
----------------
any assets, other than those activities and assets that are directly related to
the development, ownership and operation of the Real Property and the sales and
marketing of Time-Share Interests therein.
10.8 DISTRIBUTIONS. Pay or make any Distributions to its officers,
-------------
partners, members or any Guarantor or to any relatives or Affiliates of
Borrower, of any Guarantor or of any other of the foregoing. The foregoing
notwithstanding, on the condition that:
(i) There does not then exist an Event of Default or an
Incipient Default; and
(ii) Prior to the incurring of any obligation to make a
Distribution, Borrower has caused the proposed recipient of such
Distribution (the "Affiliated Party") to have entered into a
----------
Subordination Agreement in form and substance satisfactory to Lender
(the "Affiliate Debt Subordination Agreement") pursuant to which the
--------------------------------------
Affiliated Party agrees (A) that it shall not exercise any rights
against Borrower or against any of the collateral securing the
Construction Loan, the Receivables Loan or the Working Capital Loan
unless and until the date that all of the obligations of Borrower.
under and with respect to the Construction Loan, Receivables Loan and
Working Capital Loan have been fully paid, performed and discharged;
(B) that any entitlement to a Distribution is and shall be fully
subordinated as to right and time of payment to the payment in full of
the Construction Loan, the Receivables Loan and the Working Capital
Loan and (C) that upon and during the continuance of an Event of
Default or an Incipient Default, no Distributions shall be permitted,
made, demanded or accepted;
the following Distributions shall be permitted:
(x) Such Distribution is made to each of KGK and AKGI in
their capacity as members of the Borrower, but not to any other
members of Borrower, no more frequently than quarterly in an amount
sufficient for the payment of federal and state income taxes payable
by such member with respect to a tax year of Borrower (a "Tax Year")
resulting from the inclusion in such members' taxable income of the
member's share of taxable income of Borrower for that Tax Year,
subject to reasonable assumptions as to the marginal tax bracket to
-46-
which the members of Borrower generally are subject (the "Tax
Amount"). Notwithstanding the foregoing, if for any prior Tax Year of
the Borrower, the Borrower had a loss for tax purposes which, under
tax laws then in effect, would offset taxable income (which loss has
not been previously used to offset taxable income in accordance with
this sentence), then for purposes of determining the Tax Amount for
the current Tax Year, the taxable income of the Borrower for the
current Tax Year shall be reduced by the amount of such loss. On or
about the fifth (5th) day prior to each date on which estimated
federal income tax payments are required to be paid by the members of
Borrower, Borrower may make a distribution to the members which,
together with prior distributions for the Tax Year on account of the
Tax Amount, shall not exceed the applicable percentage (which shall be
25%, 50%, 75%, and 100% for the first, second, third and fourth
calendar quarters, respectively) of a reasonable estimate of the Tax
Amount. If, at the end of the Tax Year, the aggregate estimated
quarterly distributions exceed the actual Tax Amount for such Tax
Year, future quarterly tax distributions shall cease with respect to
the affected members until such excess amount has been fully
recaptured or until the excess amount has been repaid by the affected
members to the Borrower;
(xi) Such Distribution is made in an amount equal to or less
than 100% of the lesser of Borrower's Cash Flow or Net Income, with
respect to the period in which such Distribution is to be made;
provided however, that no Distribution shall be permitted under this
-------- -------
clause (xi) until such time as the Incentive Fee, the Working Capital
Loan, the Construction Loan and all other obligations under the
Construction Loan Documents have been paid in full and until such time
as Lender has no further obligation to make any advances of the
Working Capital Loan and Construction Loan; and
(xii) Such Distribution is made in an amount necessary to
reimburse or repay a member or Affiliate of Borrower who has made an
advance or loan for the benefit of Borrower to pay Project costs for
items and in amounts consistent with the Construction Budget as
approved by Lender. The provisions of this subparagraph shall not,
however, be used as a basis to return to any member or Affiliate any
Loan Balancing Equity contributed by such member or Affiliate to
Borrower unless and until each of the following conditions have been
satisfied: (i) after taking into account the making of such
Distribution, Lender determines, in its sole discretion, that the
remaining undisbursed proceeds of the Construction Loan, plus the then
existing and undisbursed balance of the Loan Balancing Equity will be
sufficient to
-47-
pay the total cost for completion of the Improvements, (ii) the
Distribution is in the amount no greater than the then undisbursed
amount of Loan Balancing Equity and (iii) both before and after taking
into account the making of such Distribution there does not exist an
Event of Default or Incipient Default, including, without limitation,
a default by virtue of Borrower's failure to comply with the net worth
covenant in Paragraph 9.19(a) hereof.
-----------------
11. INSPECTION BY LENDER: STOPPAGE OF CONSTRUCTION
----------------------------------------------
11.1 INSPECTION. Lender, either through its employees or its
----------
independent representatives, shall have the right, but not the obligation, to
enter at any reasonable times upon the Real Property and Improvements to
determine if the construction of the Improvements is in conformity with the
Plans and Specifications and all other requirements hereof and to examine and
make copies and extracts of any books, records, accounting data and other
documents, including without limitation all permits, licenses, consents and
approvals of governmental authorities having jurisdiction over Borrower, the
Improvements and the contractor and all subcontractors supplying labor and/or
materials in connection with the Improvements.
11.2 INDEPENDENT INSPECTOR. Borrower acknowledges that Lender will be
---------------------
hiring Lender's Inspector for the purpose of assisting Lender in approving the
Plans and Specifications, budgets, draw requests, construction contracts,
architectural contracts and for purposes of making monthly inspections as the
construction of the Improvements progresses. Borrower and Lender agree that the
fees and expenses of Lender's Inspector, and of any other independent inspector,
architect or engineer of Lender's choosing providing any service on behalf of
Lender in connection herewith shall be borne by Borrower, shall be payable on
demand, may be withheld by Lender from the proceeds of the Construction Loan,
and shall be included as a line item on Borrower's budget. Notwithstanding the
foregoing, Lender shall have no duty to supervise or inspect any of the
foregoing; any inspection by Lender shall be for the sole purpose of protecting
Lender's security and preserving Lender's rights hereunder. Failure by Lender to
inspect any work shall not constitute a waiver of any of Lender's rights
hereunder. Inspection not followed by notice of an Event of Default shall not
constitute a waiver of any Event of Default then existing. Any inspection by
Lender shall not be a representation by Lender that there has been or will be
compliance with the Plans and Specifications or that the construction is free
from defective materials or workmanship, nor shall any inspection by Lender
constitute approval of any certification given to Lender or relieve any person
making such certification of responsibility therefor.
11.3 STOPPAGE OF CONSTRUCTION. Upon discovery by Lender of any
------------------------
-48-
material deviation from the Plans and Specifications or of defective or
unworkmanlike labor or materials being used in the construction of the
Improvements, Lender may immediately order stoppage of construction and demand
that any unsatisfactory work be replaced and that the condition be corrected,
whether or not any unsatisfactory work has already been incorporated into the
Improvements. After issuance of such an order in writing, the condition shall be
corrected within fifteen (15) days from the date of stoppage by Lender. Lender
shall have the right to withhold all further Advances until the condition is
corrected and no other work shall be done on the Improvements without the prior
written consent of Lender unless, and until, such condition has been fully
corrected.
11.4 APPOINTMENT OF LENDER. Borrower irrevocably appoints, designates,
---------------------
and authorizes Lender as its agent (said agency being coupled with an interest)
to file for record any notices of completion or any other notice that Lender
deems necessary or desirable to protect its interest hereunder or under the
Security Documents. This power of attorney is solely for the benefit and
protection of Lender, its successors and assigns and Lender shall have no
obligation to exercise this power in any event. This power of attorney is a
power coupled with an interest and shall be irrevocable so long as any part of
the Construction Loan or any indebtedness or obligations of Borrower to Lender
arising in connection with the Construction Loan remain unpaid or unperformed.
12. WAIVER; ISSUES REGARDING MORTGAGES
----------------------------------
12.1 WAIVER BY BORROWER. Borrower waives presentment, demand, protest
------------------
and notices of protest, nonpayment, partial payment and all other notices and
formalities except as expressly called for in this Agreement. Borrower consents
to and waives notice of: (i) the granting of indulgences or extensions of time
of payment, (ii) the taking or releasing of security, and (iii) the addition or
release of persons who may be or become primarily or secondarily liable for the
Construction Loan or any other indebtedness arising in connection with the
Construction Loan, or any part thereof, and all in such manner and at such time
as Lender may deem advisable.
12.2 DELAYS OR OMISSIONS BY LENDER. No delay or omission by Lender in
-----------------------------
exercising any right, power or remedy hereunder, and no indulgence given to
Borrower, with respect to any condition set forth herein, shall impair any
right, power or remedy of Lender under this Agreement, or be construed as a
waiver by Lender of, or acquiescence in, any Event of Default. Likewise, no such
delay, omission or indulgence by Lender shall be construed as a variation or
waiver of any of the terms or provisions of this Agreement. Any actual waiver by
Lender of any Event of Default shall not be a waiver of any other prior or
subsequent Event of Default or of the same Event of Default after notice to
Borrower demanding strict performance.
-49-
12.3 RELEASE OF MORTGAGES. At such time as:
--------------------
(i) the Working Capital Loan, Construction Loan, Incentive Fee and
all other obligations due and owing to Lender under the Construction Loan
Documents (other than the Receivables Loan) have been paid and satisfied in full
and Lender has no further obligation to make any further advances of the
Construction Loan or the Working Capital Loan,
(ii) there does not then exist an Event of Default or Incipient
Default,
(iii) Borrower is desirous of developing additional portions of the
Real Property and Lender did not issue a financing proposal to Borrower, as
contemplated in Paragraph 12.5 hereof to provide such construction financing, or
--------------
if such financing proposal was issued, Borrower or Lender are unable or
unwilling to close such financing; and
(iv) Borrower is in a position to close a construction loan with
another construction lender who has agreed to finance such development,
Lender will release the Real Property and the Improvements from the lien of the
First Mortgage and the Second Mortgage concurrently with the closing by Borrower
of such construction loan (but not before). In the event Lender is obligated to
release the lien of the First Mortgage and Second Mortgage as provided in this
paragraph, Lender will, upon the request of Borrower, assign the First Mortgage
and the Second Mortgage to Borrower's construction lender provided that Lender's
representations and warranties with regard to such assignment shall be limited
to (i) the valid organization of Lender, the authority of Lender to make such
assignment and (ii) the status of Lender's title to the First Mortgage and the
Second Mortgage. In conjunction with the release by Lender of the First Mortgage
and Second Mortgage, Lender will partially terminate its financing statement
with regard to the collateral that is within the scope of the First Mortgage and
Second Mortgage together with the collateral within the scope of the Collateral
Assignment of Project Rights and Documents.
12.4 MODIFICATIONS TO SECOND MORTGAGE. At such time as Borrower has
--------------------------------
satisfied in full the indebtedness secured by the Dynamic Loan Documents,
Borrower shall, upon the request of Lender, amend the Second Mortgage so that it
secures all of the Obligations, and not simply those that arise out of the
Construction Loan Documents. In connection with such amendment, Borrower shall
supply to Lender such title endorsements to Lender's title insurance policy as
Lender shall reasonably request, at Borrower's sole cost and expense.
12.5 OTHER CONSTRUCTION FINANCING. Lender shall have the right of
----------------------------
-50-
first negotiation with Borrower in the event Borrower wishes to accept or seek
an offer from a third party to loan moneys to Borrower for the construction of
improvements on the Real Property. In the event Borrower desires to seek or
obtain such an offer, Borrower shall first give Lender written notice to that
effect and give Lender the opportunity, within 10 Business Days thereafter, to
issue a financing proposal to Borrower, before Borrower enters into a binding
agreement with such third party with respect to such financing. Borrower shall
have no obligation to accept any proposal made by Lender with respect to such
financing; provided that if Borrower obtains any such financing from a lender
other than Lender, such lender providing financing shall have entered into a
reasonable intercreditor agreement with Lender in form and substance reasonably
satisfactory to Lender.
13. DEFAULT
-------
13.1 EVENTS OF DEFAULT. The occurrence of any of the following events
------------------
or conditions shall constitute an "Event of Default" under this Agreement:
(a) Lender fails to receive from Borrower when due and payable
(i) any amount that Borrower is obliged to pay on the Construction Note or
(ii) any other payment due under the Construction Loan Documents; and such
failure shall continue for seven (7) days (with such seven (7) day period
running, as to the Construction Note, from the later of (i) the due date of
such installment or (ii) the date of mailing of Lender's invoice with
respect to such installment), except for the final installment due under
the Construction Note for which no grace period is allowed;
(b) any material representation or warranty contained in the
Construction Loan Documents or in any certificate furnished under the
Construction Loan Documents proves to be, in any material respect, untrue,
incorrect or misleading as of the date made or restated;
(c) there is a default in the performance of any of the terms
of Paragraphs 7.2, 9.8, 9.23 or 10.2 hereof or Borrower knowingly violates
------------------------- ----
or suffers or permits the violation of any of the warranties or conditions
of the policies of insurance required under Paragraph 9.8;
-------------
(d) there is a default in the performance of any term,
covenant or provision of the Construction Loan Documents (other than a
default or violation referred to elsewhere in this Paragraph 13.1) and such
--------------
default or violation continues unremedied (i) for a period of five (5) days
after the giving of notice thereof to Borrower in the case of any default
or violation which can be cured by the payment of money alone or (ii) in
the case of any other default or violation for a period of (A) thirty (30)
days after the giving of
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notice thereof to Borrower or (B) (in the event such default is not capable
of being cured within such thirty (30) day period) for a period not
exceeding sixty (60) days after the giving of such notice; provided
Borrower is diligently and in good faith pursuing such cure;
(e) an "Event of Default" as defined in any of the
Construction Loan Documents occurs, or an act or event occurs under any of
the Construction Loan Documents which is not cured within applicable notice
or grace periods, whether or not denominated as an "Event of Default,"
which expressly entitles Lender to exercise its remedies;
(f) any final, non-appealable judgment or decree for money
damages or for a fine or penalty is entered against Borrower, which is not
paid and discharged or stayed within thirty (30) days thereafter and, when
aggregated with other judgments or decrees that have remained unpaid and
undischarged or unstayed for such period, the sum of such judgments and
decrees is in excess of One Hundred Thousand Dollars ($100,000);
(g) any party holding a mortgagee's or beneficiary's interest
under a mortgage or deed of trust or any other lien or security interest on
any part of the Real Property commences foreclosure or sale thereof;
(h) (i) Borrower or any Guarantor becomes insolvent or
unable to pay its debts when due; generally fails to pay its debt when due;
files a petition in any bankruptcy, reorganization, winding-up or
liquidation proceeding or other proceeding analogous in purpose or effect;
applies for or consents to the appointment of a receiver, trustee or other
custodian for the bankruptcy, reorganization, winding-up or liquidation;
makes an assignment for the benefit of creditors; or admits in writing that
it is unable to pay its debts; (ii) any court order or judgment is entered
confirming the bankruptcy or insolvency of Borrower or any Guarantor or
approving any reorganization, winding-up or liquidation of such entity or
individual or a substantial portion of its assets; (iii) there is
instituted against Borrower or any Guarantor any bankruptcy,
reorganization, winding-up or liquidation proceeding or other proceeding
analogous in purpose or effect and the same is not dismissed within 60 days
after the institution thereof; or (iv) a receiver, trustee or other
custodian is appointed with regard to Borrower or any Guarantor, for any
part of the Real Property or for the assets of Borrower or any Guarantor;
(i) Borrower vacates or abandons the Real Property;
(j) performance by Borrower or any Guarantor of any material
obligation under this Agreement or under any Loan Document is
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rendered unenforceable in any material respect or any Guarantor repudiates,
rescinds, limits or annuls its guarantee;
(k) any material default by Borrower under any other agreement
evidencing, guaranteeing, or securing borrowed money or a receivables
purchase financing resulting in an acceleration of such indebtedness or
repurchase obligations, which accelerated repayment or repurchase
obligations are in excess of One Hundred Thousand Dollars ($100,000) in the
aggregate;
(1) an "Event of Default" as defined in the Receivables Loan
Agreement occurs, or an act or event occurs under any of the Receivables
Loan Documents, which is not cured within applicable notice or grace
periods, whether or not denominated as an "Event of Default," which
expressly entitles Lender to exercise its remedies; or
(m) notwithstanding the limitations in Paragraph 13.1(k)
-----------------
above, the declaration of default with regard to the obligations of the
Borrower under any of the Material Agreements or under the Dynamic Loan
Documents, beyond any applicable cure or grace periods contained therein.
13.2 REMEDIES. Upon the occurrence of any Event of Default and at any
--------
time thereafter while such Event of Default is continuing, Lender may do one or
more of the following:
(a) Cease making Advances and declare the entire Construction
Loan and all other indebtedness of Borrower hereunder immediately due and
payable, without notice or demand;
(b) Proceed to protect and enforce its rights and remedies
under this Agreement, the Construction Note, and all Security Documents;
(c) Take over and complete construction of the Improvements by
or through any agent, contractor or subcontractor of its selection, and
make Advances in payment of the costs, expenses, fees, attorneys' fees and
other charges incurred in connection with such taking over and completion,
together with reasonable allowances for supervision;
(d) Avail itself of any remedies available to Lender under the
Receivables Loan Documents; and
(e) Avail itself of any other relief to which Lender may be
legally or equitably entitled.
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13.3 COSTS OF ENFORCEMENT. Borrower shall pay all costs and expenses,
--------------------
including without limitation costs of title searches and title policy
commitments, court costs and attorneys' fees, incurred in enforcing payment and
performance of the Construction Loan and the other indebtedness and obligation
of Borrower hereunder or in exercising the rights and remedies of Lender
hereunder. Such court costs and attorneys' fees shall be set by the court and
not by jury, shall be included in any judgment obtained by Lender and shall be
secured by the Security Documents.
14. ACTION UPON AGREEMENT
---------------------
14.1 NO THIRD PARTY BENEFICIARY. This Agreement is made for the sole
--------------------------
protection and benefit of the parties hereto and no other person or organization
shall have any right of action hereon.
14.2 ENTIRE AGREEMENT. This Agreement embodies the entire Agreement of
----------------
the parties with regard to the subject matter hereof. There are no
representations, promises, warranties, understandings or agreements expressed or
implied, oral or otherwise, in relation thereto, except those expressly referred
to or set forth herein. Borrower acknowledges that the execution and delivery of
this Agreement is its free and voluntary act and deed, and that said execution
and delivery have not been induced by, nor done in reliance upon, any
representations, promises, warranties, understandings or agreements made by
Lender, its agents, officers, employees or representatives (other than as set
forth in the Construction Loan Documents).
14.3 MODIFICATION IN WRITING. No promise, representation, warranty or
-----------------------
agreement made subsequent to the execution and delivery of this Agreement by
either party and no revocation, partial or otherwise, or change, amendment or
addition to, or alteration or modification of, this Agreement shall be valid
unless the same shall be in writing signed by all parties hereto.
14.4 NO JOINT VENTURE. Lender and Borrower each have separate and
----------------
independent rights and obligations under this Agreement. Nothing contained
herein shall be construed as creating, forming or constituting any partnership,
joint venture, merger or consolidation of Borrower and Lender for any purpose or
in any respect.
15. GENERAL
-------
15.1 SURVIVAL OF AGREEMENT. This Agreement shall survive the making of
---------------------
the Construction Loan and shall continue so long as any part of the
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Construction Loan, or any extension or renewal thereof, remains outstanding.
15.2 RIGHTS OF LENDER. All rights, powers and remedies granted Lender
----------------
herein, or otherwise available to Lender, are for the sole benefit and
protection of Lender, and Lender may exercise any such right, power or remedy at
its option and in its sole and absolute discretion without any obligation to do
so. In addition, if, under the terms hereof, Lender is given two or more
alternative courses of action, Lender may elect any alternative or combination
of alternatives, at its option and in its sole and absolute discretion. All
monies advanced by Lender under the terms hereof and all amounts paid, suffered
or incurred by Lender in exercising any authority granted herein, including
attorneys' fees, shall be secured by the Security Documents, shall bear interest
at the Overdue Rate until paid, and shall be due and payable by Borrower to
Lender immediately without demand.
15.3 INDEMNIFICATION OF LENDER. Borrower shall indemnify and hold
-------------------------
Lender harmless from and against all claims, costs, expenses, actions, suits,
proceedings, losses, damages and liabilities of any kind whatsoever, including
but not limited to attorneys' fees and expenses, arising out of any matter
relating, directly or indirectly, to the Construction Loan, to the ownership,
development, construction, or sale of the Improvements, whether resulting from
internal disputes of the Borrower, disputes between the Borrower and any
guarantor, or whether involving other third persons or entities, or out of any
other matter whatsoever related to this Agreement, the Security Documents, or
any property encumbered thereby, but excluding any claim or liability which
arises as the direct result of the gross negligence or willful misconduct of
Lender. This indemnity provision shall continue in full force and effect and
shall survive not only the making of the Construction Loan and all Advances but
shall also survive the repayment of the Construction Loan and the performance of
all the Borrower's other obligations hereunder.
15.4 JOINT AND SEVERAL LIABILITY. If Borrower consists of more than
---------------------------
one person or entity their liability shall be joint and several. This Agreement
shall apply to the parties hereto according to the context hereof and without
regard to the number or gender of words or expressions used herein.
15.5 TIME OF ESSENCE. Time is expressly made of the essence of
---------------
all of Borrower's obligations under this Agreement.
15.6 NOTICE. Any notice, demand or any other instruments authorized by
------
this Agreement to be served on or given shall be sufficiently served or given
for all purposes (a) when personally delivered to any officer of the party to
whom it is addressed or (b) the earlier of actual receipt or the date delivery
is first attempted and refused if sent by certified or registered mail, postage
prepaid, addressed to each party at its address set forth above, or at such
other address as has been furnished in writing
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by a party to the other in the manner provided in this Paragraph 15.6. A copy of
--------------
any notices given to Borrower shall also be given to:
▇▇▇ ▇▇▇▇ III, Esq.
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇
The ▇▇▇▇▇▇▇ Building, 16th Floor
127 Peachtree Street, N.E.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇ 845
15.7 COSTS AND EXPENSES OF LENDER. Borrower shall pay, upon demand,
----------------------------
all costs and expenses arising from the preparation of this Agreement, the
closing of the Construction Loan, the issuing of Lender's commitment to make the
Construction Loan, the making of Advances, or otherwise incurred by Lender in
connection with the Construction Loan, including but not limited to title
insurance premiums, other title company charges, recording fees, Lender's
attorneys' fees and costs, appraisal fees, survey costs, inspection costs and
fees both during construction or otherwise, escrow disbursement expenses, any
intangible or recording taxes, out-of-pocket travel expenses incurred by
Lender's agents and employees, environmental assessment fees, brokerage
commissions, and any other costs, expenses or charges that may be imposed on or
incurred by Lender as a result of this transaction.
15.8 GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL. THIS AGREEMENT SHALL
------------------------------------------
BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAWS OF THE STATE OR ARIZONA.
BORROWER HEREBY AGREES THAT ALL ACTIONS OR PROCEEDINGS INITIATED BY BORROWER AND
ARISING DIRECTLY OR INDIRECTLY OUT OF THE LOAN DOCUMENTS SHALL BE LITIGATED IN
THE SUPERIOR COURT OF ARIZONA, MARICOPA COUNTY DIVISION, OR THE UNITED STATES
DISTRICT COURT OF ARIZONA OR, IF LENDER INITIATES SUCH ACTION, IN ADDITION TO
THE FOREGOING COURTS, ANY COURT IN WHICH LENDER SHALL INITIATE SUCH ACTION, TO
THE EXTENT SUCH COURT HAS JURISDICTION. BORROWER HEREBY EXPRESSLY SUBMITS AND
CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED
BY LENDER IN ANY OF SUCH COURTS, AND HEREBY WAIVES PERSONAL SERVICE OF THE
SUMMONS AND COMPLAINT, OR OTHER PROCESS OR PAPERS ISSUED THEREIN, AND AGREES
THAT SERVICE OF SUCH SUMMONS AND COMPLAINT OR OTHER PROCESS OR PAPERS MAY BE
MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO BORROWER AT THE ADDRESS TO
WHICH NOTICES ARE TO BE SENT PURSUANT TO THIS AGREEMENT. BORROWER WAIVES ANY
CLAIM THAT PHOENIX, ARIZONA OR THE DISTRICT OF ARIZONA IS AN INCONVENIENT FORUM
OR AN IMPROPER FORUM BASED ON LACK OF VENUE. SHOULD BORROWER, AFTER
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BEING SO SERVED, FAIL TO APPEAR OR ANSWER TO ANY SUMMONS, COMPLAINT, PROCESS OR
PAPERS SO SERVED WITHIN THE NUMBER OF DAYS PRESCRIBED BY LAW AFTER THE MAILING
THEREOF, BORROWER SHALL BE DEEMED IN DEFAULT AND AN ORDER AND/OR JUDGMENT MAY BE
ENTERED BY LENDER AGAINST BORROWER AS DEMANDED OR PRAYED FOR IN SUCH SUMMONS,
COMPLAINT, PROCESS OR PAPERS. THE EXCLUSIVE CHOICE OF FORUM FOR BORROWER SET
FORTH IN THIS PARAGRAPH SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT, BY
LENDER OF ANY JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE TAKING BY LENDER OF
ANY ACTION TO ENFORCE THE SAME IN ANY OTHER APPROPRIATE JURISDICTION, AND
BORROWER HEREBY WAIVES THE RIGHT TO COLLATERALLY ATTACK ANY SUCH JUDGMENT OR
ACTION. LENDER AND BORROWER ACKNOWLEDGE AND AGREE THAT ANY CONTROVERSY WHICH
MAY ARISE UNDER ANY OF THE LOAN DOCUMENTS OR WITH RESPECT TO THE TRANSACTIONS
CONTEMPLATED THEREBY WOULD BE BASED UPON DIFFICULT. AND COMPLEX ISSUES AND,
THEREFORE, THE PARTIES AGREE THAT ANY LAWSUIT ARISING OUT OF ANY SUCH
CONTROVERSY SHALL BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE
SITTING WITHOUT A JURY.
15.9 SUBSTITUTE PERFORMANCE. In the event that Borrower at any time
----------------------
fails to do or perform any act, or pay any amount, or take any action, when such
performance, payment or action is required hereunder (and, if applicable,
following the lapse of any grace or compliance period in which such payment,
performance or action may be taken by Borrower hereunder), then Lender may make
such payment or cause such performance or action to be taken, and all amounts
expended by Lender in making such payment or causing such performance or action
to be taken, together with all expenses incurred by Lender in connection
therewith shall be immediately due and payable by Borrower to Lender, the
payment and performance of which shall be an Obligation hereunder, and shall be
secured by the Collateral. All such amounts expended by Lender in making such
payment or causing such performance or action to be taken, together with all
expenses incurred by Lender in connection therewith, shall bear interest at the
Overdue Rate from the date incurred by Lender until paid.
15.10 SUCCESSORS AND ASSIGNS. This Agreement shall, except as herein
----------------------
otherwise provided, be binding upon and inure to the benefit of the successors
and assigns of the parties hereto.
15.11 HEADINGS. The headings or captions of sections in this Agreement
--------
are for convenience and reference only and in no way define, limit or describe
the scope or intent of this Agreement or the provisions of such sections.
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15.12 SALES OF INTERESTS IN LOANS. Lender, at any time, shall have the
---------------------------
right to sell participation interests in the Construction Loan and in any
documents and instruments executed in connection herewith. Lender is authorized
to furnish to any participant or prospective participant any information or
document that Lender may have or obtain regarding the Construction Loan,
Borrower or any guarantor of the Construction Loan.
15.13 MARGIN REQUIREMENTS. Borrower understands that the margin
-------------------
requirements of Federal Reserve Board Regulation "G" govern Lender's lending
activities and Borrower hereby warrants and represents that Borrower will not
directly or indirectly invest all or any part of the proceeds of the
Construction Loan in any security subject to the margin requirements of
Regulation "G." The warranty and representation contained in this Paragraph
shall survive the Closing Date.
IN WITNESS WHEREOF, these presents have been executed as of the
day and year set forth above.
"Borrower"
LAKE TAHOE RESORTS PARTNERS, LLC, a California
limited liability company
By: AKGI Lake Tahoe Investments, Inc.
a California corporation
Its Members
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Its: Vice President
"Lender"
FINOVA CAPITAL CORPORATION, a
Delaware corporation
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇, III
--------------------------
Its: ▇▇▇▇ ▇▇▇▇▇▇, III
----------------------
Group Vice President
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