EXHIBIT 10.8.3
LOAN AND SECURITY AGREEMENT
between
SAN ▇▇▇▇ RESORT PARTNERS, LLC
and
FINOVA CAPITAL CORPORATION
DATED AS OF JUNE 6, 1996
LOAN AND SECURITY AGREEMENT
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BY THIS LOAN AND SECURITY AGREEMENT entered into as of June 6, 1996,
FINOVA CAPITAL CORPORATION, a Delaware corporation ("Lender") and SAN ▇▇▇▇
RESORT PARTNERS, LLC, a Georgia limited liability company ("Borrower"), hereby
confirm and agree as follows:
ARTICLE I
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INTRODUCTION
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1.1 Borrower desires to obtain certain revolving lines of credit
from Lender, the proceeds of which shall be used for working capital purposes
and for purposes of paying and satisfying certain construction indebtedness
owing from Borrower to Lender.
1.2 Lender is willing to extend to Borrower certain revolving lines
of credit for the purposes stated in the preceding paragraph upon the terms and
conditions set forth herein.
ARTICLE II
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DEFINITIONS
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Except where the context clearly requires a different interpretation,
all capitalized terms used in this Agreement shall have the meanings assigned to
them above, immediately below, or elsewhere herein.
"Acquisition Advances" shall have the meaning set forth in the
Construction Loan Agreement.
"Advance" shall mean, collectively and individually, a Receivables
Advance and a Working Capital Advance.
"Advance Date" shall mean each date on which an Advance is made.
"Affiliate" shall mean any person or entity directly or indirectly
Controlling, Controlled by or under common Control with the person or entity 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 shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of another person or entity by any means.
"Affiliate Debt Subordination Agreement" shall mean an agreement, in
such form as Lender shall prescribe, delivered to Lender pursuant to paragraph
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5.2(iii) hereof, as from time to time modified, replaced or restated.
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"Agreement" shall mean this Loan and Security Agreement, as from time
to time modified, extended, renewed, replaced or restated.
"AKGI" shall mean AKGI San ▇▇▇▇, Inc., a Georgia corporation.
"Applicable Environmental Laws" shall have the meaning set forth in
the Environmental Certificate.
"Applicable Usury Law" shall mean the usury law applicable pursuant to
the terms of Article XI, paragraph 11.11 hereof or such other usury law which
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is applicable if the law chosen by the parties is not applicable.
"Acquisition Documents" shall mean that certain Option Agreement dated
as of August 25, 1995, by and between ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chapter 7 Trustee of
▇▇▇▇ ▇▇▇ Resorts, Inc. as Seller ("Seller") and Argosy/KOAR Group, Inc., a
Georgia corporation as Buyer; as amended by that certain Amendment No. 1 to
Option Agreement dated as of February 2, 1996; as further amended by that
Amendment No. 2 to the Option Agreement dated as of April 2, 1996 (Argosy/KOAR
Group, Inc.'s interest in which was assigned to Borrower pursuant to the
foregoing Amendment No. 2 to Option Agreement, which assignment was consented to
by the Seller thereunder); together with that certain Agreement of Purchase and
Sales/Joint Escrow Instructions between the Borrower as buyer and the Seller as
seller, dated June 12, 1996 and all deeds, assignments and other documents
executed in connection therewith.
"Assignments" shall mean written Assignments, in such form as Lender
shall prescribe, of specific Instruments and/or Purchaser Mortgages and the
proceeds thereof delivered to Lender concurrently with each Advance under the
terms of which Borrower transfers and assigns with full recourse all of
Borrower's right, title and interest in and to the Instrument and/or Purchaser
Mortgage, free and clear of all claims, demands, liens and encumbrances of third
parties, as collateral security for the Loan.
"Association" shall mean San ▇▇▇▇ Bay Inn Timeshare Association, Inc.,
a California non-profit corporation, and its successors and assigns, which is
the owner's association formed in connection with Real Property.
"Association Agreement" shall mean a certain Agreement Regarding San
▇▇▇▇ Bay Inn dated as of June 12, 1996 between Borrower and the Association, as
amended, renewed or restated.
"Availability Advance" shall mean an additional Receivables Advance
advanced by Lender to Borrower from time to time with respect to an Eligible
Instrument that then constitutes Receivables Collateral against which a previous
Receivables Advance has been made.
"Biennial Time-Share Interest" shall mean a Time-Share Interest sold
to a Purchaser for the exclusive use of a Unit in the Project and Project common
area for a one (1) week period during each odd numbered calendar year or even
numbered calendar year.
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"Borrower" shall mean San ▇▇▇▇ Resort Partners, LLC, a Georgia limited
liability company.
"Borrowing Base" shall mean either the Borrowing Base (Receivables
Loan) or Borrowing Base (Working Capital Loan).
"Borrowing Base (Receivables Loan)" shall mean an amount equal to the
lesser of (i) 90% of the unpaid principal balance payable under the Eligible
Instruments or (ii) 90% of the then present value assigned to the unmatured
installments of principal and interest payable under the Eligible Instruments
discounted at Lender's Prevailing Discount Rate.
"Borrowing Base (Working Capital Loan)" shall mean an amount equal to
the sum of (A) the lesser of (i) 55% of the unpaid principal balance payable
under the Eligible Instruments against which a Working Capital Advance will be
made or (ii) 55% of the then present value assigned to the unmatured
installments of principal and interest payable under the Eligible Instruments
against which a Working Capital Advance will be made, discounted at Lender's
Prevailing Discount Rate, (B) 55% of any cash down payments and principal and
interest payments then made by the Purchaser under such Eligible Instruments at
the time of such Working Capital Advance; and (C) 55% of any cash sales of Units
then made at the time of such Working Capital Advance, provided that the
proceeds of the cash sales and such cash down payments and principal and
interest payments are held and shall continue to be held in Escrow by Escrow
Agent.
"Borrowing Term (Receivables Loan)" shall mean the period of time
during which Lender is committed to make Receivables Advances under this
Agreement, which commitment shall terminate on June 13, 1998.
"Borrowing Term (Working Capital Loan)" shall mean the period of time
during which Lender is committed to make Working Capital Advances under this
Agreement, which commitment shall terminate on June 13, 1998.
"Business Day" shall mean a calendar day other than a Saturday, Sunday
or legal holiday.
"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 deducted
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from the revenues of Borrower in calculating the net income: (A) depreciation;
(B) amortization; and (C) interest and taxes during such period, and less
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Capital Expenditures to the extent paid in such period.
"Closing Date" shall mean June 13, 1996.
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"Collateral Assignment" shall mean that certain Collateral Assignment
of Material Contracts of even date herewith in a form acceptable to Lender.
Without limitation, the Collateral Assignment shall collaterally assign to
Lender all of Borrower's right, title and interest in the Association Agreement
and the other agreements referenced in such Collateral Assignment.
"Collateral Assignment of Escrow" shall mean that certain Collateral
Assignment, Security Agreement and Account Agreement, in a form acceptable to
Lender, pursuant to which Borrower collaterally assigns to Lender all of the
Borrower's interest in the Escrow and in the agreement pursuant to which the
Escrow is maintained as security for the payment and Performance of the
Obligations, which shall be executed prior to the working of the first Working
Capital Advance.
"Completed" shall have the meaning set forth in the Construction Loan
Agreement.
"Construction Loan" shall mean the loan made pursuant to the
Construction Loan Agreement.
"Construction Loan Agreement" shall mean that certain Construction
Loan Agreement of even date herewith, pursuant to which Lender has agreed,
subject to the terms and provisions thereof, to make a $9,000,000 revolving
construction loan to Borrower, the proceeds of which are to be used to construct
the Project.
"Construction Loan Documents" shall have the meaning set forth in the
Construction Loan Agreement.
"Construction Mortgage" shall mean, collectively, the Mortgage, as
that term is defined in the Construction Loan Agreement.
"Construction Note" shall have the meaning set forth in the
Construction Loan Agreement.
"Deedback Intervals" shall mean no fewer than 145 fee simple Time-
Share Interests, more fully described on the attached Exhibit "A-2", purchased
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by Borrower pursuant to the Acquisition Documents, fee simple title to which was
derived by Borrower's predecessor-in-interest as a result of a foreclosure or
deed in lieu of foreclosure of a deed of trust, mortgage or other security
interest recorded against such Time-Share Interest.
"Delinquencies" shall mean, individually and collectively, an Eligible
Instrument, against which an Advance has been made, under which an installment
payment due becomes more than 59 days past due.
"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. A Distribution shall
not include normal and, customary salary and fringe benefits paid to an employee
of Borrower, on an arm's-length basis, in consideration for services rendered by
such employee directly to and for the benefit of the Borrower, in an amount
commensurate with the value of the services rendered by such employee to
Borrower.
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"Eligible Instruments" shall mean the Instruments, each in
substantially the form of Exhibit "B" hereto, entered into by and between
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Borrower and those Persons who purchase a Time-Share Interest (all of whom shall
be United States or Canadian residents), which Eligible Instruments shall
conform to the criteria and standards set forth on Exhibit "C" hereto; provided,
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however, that an Instrument shall cease to be an Eligible Instrument if (i) any
installment payable thereunder becomes more than (fifty-nine) (59) days past due
and the Instrument under which such installment is payable is not replaced
within ninety (90) days following the due date of such installment or (ii) the
contract fails to continue to conform to the criteria and standards of Exhibit
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"C" .
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"Environmental Certificate" shall mean that certain Environmental
Certificate with Representations, Covenants and Warranties of even date herewith
executed by Borrower and related to the Project.
"Escrow" shall mean that certain account in the name of Escrow Agent
in which the cash payments and principal and interest payments that are used in
calculating the Borrowing Base (Working Capital Loan), together with the
original Instruments and Purchaser Mortgages pertaining thereto are deposited,
pursuant to an agreement acceptable to Lender.
"Escrow Agent" shall mean the person who is not an Affiliate of
Borrower, in whose name the Escrow is maintained, the identify of whom shall be
acceptable to Lender.
"Event of Default" has the meaning set forth in Article IX hereof.
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"Force Majeure" has the meaning set forth in the Construction Loan
Agreement.
"Foreclosed Intervals" shall mean Time-Share Interests owned by
Borrower in fee simple, title to which was derived by Borrower as a result of a
foreclosure or deed in lieu of foreclosure of the Purchased Notes and Mortgages.
"FPSI" shall mean FINOVA Portfolio Services, Inc., an Arizona
corporation, its successors and assigns.
"GAAP" shall mean generally accepted accounting principles as in
effect from time to time, consistently applied, throughout the period involved
and with prior periods, which shall include the official interpretations thereof
by the Financial Accounting Standards Board or any successor thereto.
"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.
"Guarantee(s)" 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.
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"Guarantor(s)" 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.
"Hard Cost Advance" shall have the meaning set forth in the
Construction Loan Agreement.
"Impositions" shall mean any and all taxes (other than any tax
measured by net income payable by Lender to any state or political subdivision
thereof or to the U.S . under Section 11 or 1201 of the Internal Revenue Code,
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as amended), in consequence of the receipt of payments provided for herein,
license fees, assessments, charges, fines, penalties, property, privilege,
excise, real estate or other taxes currently or hereafter levied or imposed by
any state, local or federal authority upon or in connection with or measured by
the Receivables Loan Documents, the Receivables Collateral or the Purchased
Notes and Mortgages Collateral.
"Incipient Default" shall mean any act or event which after the giving
of notice or the lapse of time (or both) would constitute an Event of Default.
"Instrument" shall mean a promissory note which has arisen out of the
sale of a Time-Share Interest in the Project by Borrower to a Purchaser, which
note is secured by a Purchaser Mortgage.
"KGK" shall mean KGK San ▇▇▇▇, Inc., a Georgia corporation.
"Loan" shall mean, collectively and individually, the Receivables Loan
and the Working Capital Loan.
"Loan Balancing Equity" shall have the meaning set forth in
Construction Loan Agreement.
"Loan Fee" shall mean either of the Receivables Loan Fee or the
Working Capital Loan Fee.
"Lockbox Agent" shall mean the entity designated as the Lockbox Agent
in the Lockbox Agreement, or should such entity cease to act as Lockbox Agent
under the Lockbox Agreement, such other entity as Lender may appoint.
"Lockbox Agreement" shall mean the Lockbox Agreement, in such form as
Lender shall prescribe, to be made among Borrower, Lender and the Lockbox Agent,
as from time to time modified, replaced or restated.
"Maturity Date" shall mean that date which shall occur seven (7) years
after the expiration of the Borrowing Term (Receivables Loan).
"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
lead generation, closing costs and sales commissions.
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"Material Agreements" shall mean, individually and collectively, the
Acquisition Documents, the Association Agreement and all amendments,
modifications and replacements thereof.
"Maximum Receivables Loan Amount" shall mean the lesser of (i)
Eighteen Million Dollars ($18,000,000) or (ii) Twenty Million Dollars
($20,000,000) less the principal amount then outstanding under the Working
Capital Loan and the Construction Loan.
"Maximum Working Capital Loan Amount" shall mean the lesser of (i)
Five Hundred Thousand Dollars ($500,000) or (ii) Twenty Million Dollars
($20,000,000) less the principal amount then outstanding under the Receivables
Loan and the Construction Loan.
"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.
"Nondisturbance Agreement" shall mean an agreement, in form and
substance satisfactory to Lender, pursuant to which the holders of any lien
interest on the streets, amenities, common areas, or other off-site improvements
forming a part of the Project agree that, notwithstanding a foreclosure or other
realization of such encumbrance, (i) the Purchasers shall have uninterrupted use
of such streets, amenities, common areas and other off-site improvements and
uninterrupted use and possession of their respective Time-Share Interests, (ii)
the rights and privileges of such Purchasers shall not be otherwise impaired,
and (iii) the governing documents of the Project, including any declarations of
condominium, shall not be modified.
"Obligations" shall mean each and every obligation, duty, covenant,
undertaking and conditions which Borrower is required or has agreed to perform
under the Receivables Loan Documents and under the Construction Loan Documents,
and each and every other obligation of Borrower now or hereafter owing to
Lender.
"Opening Prepayment Date" shall mean the date which occurs thirty-six
(36) months from the Closing Date.
"Overdue Rate" shall have the same meaning as set forth in the
Receivables Note.
"Perform, Performed or Performance" shall mean the timely, faithful
and complete payment and performance of all Obligations by Borrower.
"Permitted Encumbrances" shall mean those matters set forth on the
attached Exhibit "D".
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"Person" shall mean any adult individual, partnership, corporation or
other form of business entity whatsoever.
"Phase" shall mean either of Phase I or Phase II.
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"Phase I" shall mean the initial 30 Units to be constructed, after the
date hereof, on the Real Property, together with other improvements set forth in
the plans and specifications, approved by Lender, with respect to such Phase.
"Phase II" shall mean the second 32 Units to be constructed, after the
date hereof, on the Real Property together with other improvements set forth in
the plans and specifications, approved by Lender, with respect to such Phase.
"Present Value" shall mean with respect to any Eligible Instrument the
present value of the unmatured and unpaid installments of principal and interest
due thereunder, calculated using a discount rate equal to the Prevailing
Discount Rate applicable to said Eligible Instrument as provided herein.
"Prevailing Discount Rate" shall mean Lender's prevailing discount
rate at the time each Advance is made, which rate shall be Prime Rate plus 2.0%
but in no event less than 12.5%.
"Prime Rate" shall mean the rate of interest publicly announced from
time to time by Citibank, N.A., New York, New York as its corporate base rate of
interest charged to its most creditworthy commercial borrowers notwithstanding
the fact that some such borrowers may borrow at lower rates. The initial Prime
Rate shall be the rate in effect as of the first Business Day of the month of
the initial Advance and, subsequently, the Prime Rate shall be redetermined as
of the first Business Day of each month.
"Project" shall mean the time-share project known as San ▇▇▇▇ Bay Inn
located on the Real Property consisting of 68 existing Units together with 62
Units to be constructed by Borrower.
"Project Documents" shall mean all operating, management, marketing,
supervision, nondisturbance cross-use, parking and other documents relating to
the ownership, development, construction, maintenance repair, leasing,
management, marketing and operation of the Project.
"Purchased Notes and Mortgages" shall mean no fewer than 873
promissory notes, in default, more fully described on the attached Exhibit "A-
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3", purchased by Borrower pursuant to the Acquisition Documents, each of which
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is secured by a first deed of trust on a Time-Share Interest.
"Purchased Notes and Mortgages Collateral" shall mean all right, title
and interest of Borrower now owned or hereafter acquired, all benefits of
Borrower under and all monies due or to be due to Borrower under or in
connection with, the Purchased Notes and Mortgages, together with all cash and
non-cash proceeds from the Purchased Notes and Mortgages, including, without
limitation, all goods, instruments, documents, general intangibles, chattel
paper and accounts wherever located, which have been acquired from the cash
proceeds from any of the foregoing and the proceeds thereof.
"Purchaser" shall mean a Person who purchases a Time-Share Interest in
the Project from Borrower.
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"Purchaser Mortgage" shall mean the purchase money deed of trust given
to secure an Instrument.
"Real Property" shall mean an undivided 3,876/7,344 interest, as
tenants in common, in that certain real property legally described on the
attached Exhibit "A-1", containing approximately 16 acres located on Harford
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Drive in ▇▇▇▇▇ Beach, California and known as the San ▇▇▇▇ Bay Inn.
"Receivables Advance" shall mean an Advance of the Receivables Loan
advanced by Lender to Borrower from time to time in accordance with the terms
and provisions of this Agreement. A Receivables Advance shall include an
Availability Advance.
"Receivables Collateral" shall mean (i) all of the Instruments which
Borrower now or hereafter assigns, transfers, endorses or delivers to Lender in
consideration for an Advance made by Lender pursuant to the terms of this
Agreement and as collateral security for the Obligation; (ii) all Instruments
against which Lender makes an Advance pursuant to the terms of this Agreement,
notwithstanding whether or not such Instrument is assigned, transferred,
endorsed or delivered to Lender; (iii) all Purchaser Mortgages, purchase
contracts, purchase agreements, guarantees and other documents or instruments
evidencing or securing the obligations of the Purchasers and/or any other person
primarily or secondarily liable on the Instruments; (iv) all policies of
insurance related to the Instruments or delivered in connection with the
Instruments (provided that the inclusion of such policies of insurance as part
of the Receivables Collateral shall not be deemed to restrict or limit the
Borrower's ability to encumber such insurance to the extent relating to or
delivered in connection with Instruments pledged to another lender, subject,
however, to the provisions of paragraph 8.28); (v) all rights under escrow
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agreements relating to the Instruments and all impound and/or reserve accounts
related to the Instruments (excluding, however, any escrows set aside for
improvements to the Project); (vi) all licenses, contracts, management contracts
or agreements, franchise agreements, permits, subordination or certificates now
or hereafter required or used in connection with the ownership, operation or
maintenance of the Project (provided that the inclusion of such licenses,
contracts, management contracts and other agreements or permits as part of the
Receivables Collateral shall not be deemed to restrict or limit the Borrower's
ability to encumber such documents and agreements to the extent relating to or
delivered in connection with Instruments pledged to another lender, subject,
however, to the provisions of paragraph 8.28); (vii) all files, books and
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records pertaining to any of the foregoing; and (viii) cash and non-cash
proceeds from all of the foregoing, including, without limitation, all goods,
instruments, documents, general intangibles, chattel paper and accounts wherever
located, which have been acquired with cash proceeds from any of the foregoing
and the proceeds thereof.
"Receivables Loan" shall mean the line of credit loan extended by
Lender to Borrower in accordance with the terms of this Agreement in an
outstanding principal amount not to exceed at any time the Maximum Receivables
Loan Amount.
"Receivables Loan Documents" shall mean this Agreement, the
Receivables Note, the Working Capital Note, the Construction Mortgage, the
Environmental Certificate, the Servicing Agreement, the Lockbox Agreement, the
Services and Fees Agreement, the Guarantee, the Assignments, the Collateral
Assignment of Escrow, the Collateral Assignment, the Affiliate Debt
Subordination Agreement, and each and every other document, instrument or
writing executed or delivered by Borrower to Lender in connection with the Loan.
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"Receivables Loan Fee" shall have the meaning set forth in
paragraph 8.16.
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"Receivables Note" shall mean the Receivables Promissory Note, in the
amount of the Receivables Loan, to be made and delivered by Borrower to Lender
pursuant hereto, in a form acceptable to Lender.
"Security Interest" shall mean a direct and exclusive first security
interest which has been perfected under the Uniform Commercial Code of the
state(s) in which any such security interest must be perfected; provided that
with respect to any portion of the Receivables Collateral or the Purchased Notes
and Mortgages Collateral not covered by the Uniform Commercial Code, it shall
mean a direct and exclusive first lien on such property which has been perfected
in the manner provided by law.
"Servicing Agent" shall mean FPSI or, should such entity cease to act
as Servicing Agent under the Servicing Agreement and Services and Fees
Agreement, such other entity as Lender may appoint.
"Servicing Agreement" shall mean the Servicing Agreement, in such form
as Lender shall prescribe, to be made among Borrower, Lender, and the Servicing
Agent, as from time to time modified, replaced or restated.
"Services and Fees Agreement" shall mean the Services and Fees
Agreement, in such form as Lender shall prescribe, to be made between Borrower
and Servicing Agent and acknowledged by Lender, as from time to time modified,
replaced or restated.
"Term" shall mean the duration of this Agreement commencing as of the
year and day first above written and terminating on the date Borrower has
Performed all of its Obligations under the Receivables Loan Documents.
"Time-Share Interest" shall mean the undivided interest in the Project
sold to a Purchaser which provides the right to reserve the exclusive use of a
Unit in the Project and Project Common Area for one week during each year or
alternate year.
"Unit" shall mean a dwelling unit in the Project.
"Working Capital Advance" shall mean an Advance of the Working Capital
Loan advance by Lender to Borrower from time to time in accordance with the
terms and provisions of this Agreement.
"Working Capital Loan" shall mean a revolving line of credit loan
extended by Lender to Borrower in accordance with the terms of this Agreement in
an outstanding principal amount not to exceed at any time the Maximum Working
Capital Loan Amount.
"Working Capital Loan Fee" shall have the meaning set forth in
paragraph 8.16.
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"Working Capital Note" shall mean the Working Capital Promissory Note,
in the amount of the Working Capital Loan, to be made and delivered by Borrower
to Lender pursuant hereto, in a form acceptable to Lender.
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ARTICLE III
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THE LOAN
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3.1 Lender hereby agrees that the Receivables Loan (including
Availability Advances of the Receivables Loan) will be disbursed to Borrower,
from time to time, in periodic Receivables Advances, but in no event after the
Borrowing Term (Receivables Loan) has expired, in amounts determined by
subtracting from the Borrowing Base (Receivables Loan) the unpaid principal
balance outstanding under the Receivables Loan at the time of each Receivables
Advance; provided that at no time shall the unpaid principal balance of the
Receivables Loan exceed the Maximum Receivables Loan Amount.
(i) Receivables Advances shall not be made more frequently
than twice per month, and each Receivables Advance shall be in an
amount of not less that One Hundred Thousand Dollars ($100,000).
Lender shall charge a fee of Five Hundred Dollars ($500) for the
second Receivables Advance made during any month and shall be
entitled to deduct such fee from the Receivables Advance so made.
The foregoing fee is to be paid to Lender strictly in
consideration for Lender's agreement to make a second Receivables
Advance during any particular calendar month and shall not be
applied or credited against any other Obligations.
(ii) The Receivables Loan is a revolving line of credit
under the terms of which Borrower, during the Borrowing Term
(Receivables Loan), shall have the right to obtain Receivables
Advances, repay Receivables Advances, and obtain additional
Receivables Advances so long as no Event of Default has occurred
and is continuing and so long as all other conditions precedent
to the making of a Receivables Advance have been satisfied.
(iii) No Receivables Advances will be made after the
Borrowing Term (Receivables Loan) has expired unless Lender, in
its sole discretion, shall agree in writing to make such
Receivables Advances.
(iv) Borrower shall use the proceeds of the Receivables
Loan for working capital purposes and to repay the Construction
Loan and the Working Capital Loan, in full. The proceeds of the
Receivables Loan from a particular Phase shall be used to pay and
satisfy the then unpaid principal balance and all accrued
interest under the Working Capital Loan from such Phase before
any portion of the Receivables Loan is paid in satisfaction of
any portion of the Construction Loan with respect to such Phase.
The foregoing notwithstanding, upon the occurrence of any Event
of Default, the proceeds of
the Receivables Loan may be applied by Lender in satisfaction of
the Obligations in such order and manner as Lender shall
determine.
(v) At no time during the term hereof shall the unpaid
principal balance of the Receivables Loan, together with the
unpaid principal balance of the Construction Loan and the Working
Capital Loan, exceed a total amount equal to Twenty Million
Dollars ($20,000,000), and Lender shall have no obligation to
make any Receivables Advance if such Advance would cause the
foregoing limitation to be exceeded.
3.2 Lender agrees that the Working Capital Loan will be disbursed to
Borrower, from time to time, in periodic Working Capital Advances, but in no
event after the Borrowing Term (Working Capital Loan) has expired, in an amount
determined by subtracting from the Borrower Base (Working Capital Loan) the
unpaid principal balance of the Working Capital Loan at the time of each Working
Capital Advance; provided that at no time shall the unpaid principal balance of
the Working Capital Loan exceed the Maximum Working Capital Loan Amount.
(i) Working Capital Advances shall be made no more
frequently than twice per month and each Working Capital Advance
shall be in an amount not less than Seventy Five Thousand Dollars
($75,000). Lender shall charge a fee of Five Hundred Dollars
($500) for the second Working Capital Advance made during any
month and shall be entitled to deduct such fee from the Working
Capital Advance so made. The foregoing fee is to be paid to
Lender strictly in consideration for Lender's agreement to make a
second Working Capital Advance during any particular calendar
month and shall not be applied or credited against any other
Obligations.
(ii) The Working Capital Loan is a revolving line of credit
under the terms of which Borrower, during the Borrowing Term
(Working Capital Loan), shall have the right to obtain Working
Capital Advances, repay Working Capital Advances, and obtain
additional Working Capital Advances so long as no Event of
Default has occurred and is continuing and so long as all other
conditions precedent to the making of a Working Capital Advance
have been satisfied. The foregoing notwithstanding, Borrower
shall have no right to obtain a Working Capital Advance against
Eligible Instruments arising from Phase II until all Working
Capital Advances made against Eligible Instruments arising from
Phase I have been paid in full, including all accrued interest
thereon. At such time as Borrower has received a Working Capital
Advance against Eligible Instruments arising from Phase II,
Borrower shall have no further right to obtain any Working
Capital Advances against Eligible Instruments arising from Phase
1.
-12-
(iii) No Working Capital Advances will be made after the
Borrowing Term (Working Capital Loan) has expired unless Lender,
in its sole discretion, shall agree to make such Working Capital
Advances.
(iv) Borrower shall use the proceeds of the Working Capital
Loan for working capital purposes.
(v) Any cash down payments and principal and interest
payments made by Purchasers that are used in calculating the
Borrowing Base (Working Capital Loan) shall be held in Escrow by
the Escrow Agent and shall not be released to Borrower unless a
principal payment under the Working Capital Loan is made in an
amount equal to the amount of the Working Capital Advance
originally made against such cash down payment and principal and
interest payment.
(vi) At no time during the term hereof shall the unpaid
principal balance of the Working Capital Loan, together with the
unpaid principal balance of the Construction Loan and Receivables
Loan, exceed a total amount equal to Twenty Million Dollars
($20,000,000), and Lender shall have no obligation to make any
Working Capital Advance if such Advance would cause the foregoing
limitation to be exceeded.
(vii) Working Capital Advances made against Eligible
Instruments arising from a particular Phase shall be due and
payable in full at such time as such Phase has been Completed and
the Escrow Agent has released from Escrow the cash down payments
and principal and interest payments that were used in calculating
the Borrowing Base (Working Capital Loan) as to such Advances.
The foregoing notwithstanding, all Working Capital Advances shall
be due and payable in full on the maturity date set forth in the
Working Capital Note.
3.3 All Advances made pursuant to this Agreement shall be deemed to
be a single Loan.
ARTICLE IV
----------
SECURITY FOR THE LOAN
---------------------
4.1 As security for Borrower's payment and Performance of all
Obligations owed to Lender, other than those arising out of the Environmental
Certificate, Borrower hereby grants to Lender a first and exclusive Security
Interest in and to (i) the Receivables Collateral assigned, transferred,
endorsed or delivered to Lender under this Agreement or against which an Advance
is made hereunder and (ii)
-13-
the Purchased Notes and Mortgages Collateral. Lender's Security Interest in such
Receivables Collateral and Purchased Notes and Mortgages Collateral shall be
absolute, continuing and applicable to all existing and future Advances and
shall secure the repayment of the Loan and the Construction Loan and the
Performance of all Obligations throughout the Term of the Loan. At the time each
Advance is made hereunder, Borrower shall deliver to Lender (i) an executed
Assignment against which an Advance is requested; (ii) the original of each
Instrument; and (iii) other documents which comprise such Eligible Instruments.
In addition, Borrower's payment and Performance of the Working Capital Loan and
Receivables Loan shall be secured by the Construction Mortgage.
4.2 If an Eligible Instrument which comprises a part of the
Receivables Collateral shall cease to qualify as an Eligible Instrument,
Borrower shall, within 30 days thereafter, pay to Lender an amount equal to that
portion of the Loan, together with interest, costs, and expenses, if any,
attributable to such ineligible Instrument or shall replace such ineligible
Instrument with another Eligible Instrument having a value of not less than that
portion of the Loan together with interest, costs, and expenses, if any,
attributable to the Eligible Instrument being replaced. No prepayment premium
shall be payable with respect to the payment to be made by Borrower pursuant to
the previous sentence as long as Borrower did not cause the Instrument to cease
qualifying as an Eligible Instrument. Concurrently with the delivery of the
replacement Eligible Instrument to Lender, Borrower shall deliver to Lender all
pertinent items (except for a "Request for Advance and Certification") which
Borrower is required to deliver to Lender in connection with an Advance pursuant
to Article V hereof, together with a Borrower's Certificate in form and
---------
substance identical to Exhibit "E" hereto. Upon substitution of the replacement
-----------
Eligible Instrument for the ineligible Instrument, Lender will terminate its
Security Interest in and reassign and endorse to Borrower, without recourse or
warranty of any kind, the replaced ineligible Instrument, together with the
Purchaser Mortgage securing the same, provided that no Event of Default or
Incipient Default has occurred and is continuing.
4.3 RESERVED.
---------
4.4 In connection with a Receivables Advance but not a Working
Capital Advance, Borrower shall, at its expense, deliver to Lender, at the time
of delivery of the Assignment, a policy or policies of title insurance insuring
Lender's interest in the Purchaser Mortgage which is the subject of the
Assignment. Such policy or policies shall be in the amount of the Receivables
Advances made against or, in the case of substitutions, a portion of the
Receivables Loan attributable to the Instruments secured by the insured
Purchaser Mortgages and shall be issued by a title insurer and be in form and
substance satisfactory to Lender in its sole discretion. The title insurance
policies must reflect that the Purchaser Mortgages constitute valid liens
-14-
against the real property to which they pertain subject only to the Permitted
Encumbrances.
4.5 Borrower shall deliver or cause to be delivered to Lender, and
thereafter shall maintain in full force and effect according to the terms
thereof, Guarantees duly executed by the Guarantors.
ARTICLE V
---------
ADVANCES
--------
5.1 Lender shall have no obligation to make any Advance hereunder
until all conditions precedent set forth in the following paragraphs and
elsewhere in this Agreement have been satisfied, at Borrower's sole expense, as
determined by Lender in its reasonable discretion; provided, however to the
-------- -------
extent such condition provides that it pertains only to a Receivables Advance
and not to a Working Capital Advance, such condition need not be satisfied as to
a Working Capital Advance.
5.2 Borrower shall have delivered to Lender the following documents,
duly executed in form and substance satisfactory to Lender (and, when required,
in recordable form):
(i) The Receivables Loan Documents;
(ii) The Construction Loan Documents;
(iii) All documents required to effectuate the purposes of
paragraphs 8.12 and 8.21(ii) hereof;
--------------- -------
(iv) A Nondisturbance Agreement which shall be filed and
recorded in such offices as Lender shall designate;
(v) UCC Financing Statements for filing and recording, if
appropriate, as necessary to perfect Lender's Security Interest
in the Receivables Collateral and the Purchased Notes and
Mortgages Collateral and all other security for the Performance
of Borrower's Obligations which is subject to Article 9 of the
---------
Uniform Commercial Code;
(vi) The title policy referred to in paragraph 4.4 hereof;
-------------
(vii) A favorable opinion from Borrower's independent
counsel as to such matters as Lender may reasonably require; and
-15-
(viii) A favorable opinion from each Guarantor's independent
counsel as to such matters as Lender may reasonably require.
5.3 Not less than ten (10) Business Days before the date on which the
initial Advance is to be made, Borrower shall deliver or cause to be delivered
to Lender the following additional items:
(i) 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 their 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;
(ii) With respect to Borrower and each Guarantor or Person
which is a corporation, a general or limited partnership or
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
Receivables Loan Documents, and evidencing the authority of all
Persons executing the Receivables 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;
(iii) [RESERVED]
(iv) Evidence satisfactory to Lender that the Project
complies with all applicable laws, rules and regulations and
public and private restrictions affecting the use of the Project;
(v) A copy of the Public Report containing such conditions
are acceptable to Lender issued by or used in the State of
Georgia and other jurisdictions where Time-Share Interests are or
have been offered or sold, together with all other approvals from
regulatory agencies having jurisdiction over the Project;
-16-
(vi) If the Project has not been registered under such act,
an opinion from Borrower's counsel that the Project does not fall
within the purview of the Interstate Land Sales Full Disclosure
Act;
(vii) A copy of the purchase contract, deed, note,
mortgage/deed of trust and other documents in existence,
including, without limitation, any covenants running with the
land comprising the Project, as well as any covenants enforceable
as equitable servitudes, the Project management agreement and
advertising materials, which have been or are being used by
Borrower in connection with the Project or the sale of Time-Share
Interests therein;
(viii) Copies of the insurance policies required pursuant to
paragraph 8.9 hereof;
-------------
(ix) Evidence that the Project is not located within a
"special flood hazard" area as such term is used in the National
Flood Insurance Act of 1968, as amended and supplemented by the
Flood Disaster Protection Act of 1973, and in regulations,
interpretations and rulings thereunder;
(x) With respect to a Receivables Advance, the items
described in Exhibit "F" hereto;
-----------
(xi) With respect to a Working Capital Advance, the items
described in the following paragraphs of Exhibit "F" hereto: (a),
-----------
(b) (unrecorded copies only), (e), (f), (g), (h), and (i);
(xii) Such other items as Lender requests which are
reasonably necessary to evaluate whether the request for the
Advance satisfied the requirements set forth herein;
(xiii) UCC, tax lien, litigation and judgment searches for
Borrower and Guarantor;
(xiv) Copies of the forms of Instrument and Purchaser
Mortgage;
(xv) Satisfactory operating budget for the Project owner's
association; and
(xvi) With respect to a Working Capital Advance, the
establishment by Borrower of the Escrow, the approval by Lender
of the
-17-
agreement pursuant to which the Escrow is established and
execution by Borrower and Lender of the Collateral Assignment of
Escrow.
5.4 No material adverse change shall have occurred in the Project or
Borrower's or any Guarantor's business or financial condition since the date of
the latest financial and operating statements given to Lender by or on behalf of
Borrower or any Guarantor.
5.5 Lender shall be satisfied (in Lender's sole and absolute
discretion) with the results of Lender's physical inspection of the Project.
5.6 There shall have been no material adverse change in the
warranties and representations made by Borrower or any Guarantor in the
Receivables Loan Documents.
5.7 Neither an Event of Default nor an Incipient Default shall have
occurred and be continuing.
5.8 The interest rate applicable to the Advance (before giving effect
to any savings clause) will not exceed the maximum contract rate permitted by
the Applicable Usury Law.
5.9 Borrower has paid to Lender the portion of the Loan Fee then due
to Lender.
5.10 The Construction Loan shall have closed and, with respect to the
first Receivables Advance, all conditions precedent to the first Acquisition
Advance shall have been satisfied by Borrower or waived by Lender and, with
respect to the first Working Capital Advance, all conditions precedent to the
first Hard Cost Advance shall have been satisfied by Borrower or waived by
Lender.
5.11 Borrower has received and approved all Project Documents and
has received a collateral assignment of such of the Project Documents as Lender
shall require which collateral assignment shall be accompanied consents of the
other parties thereto, if required by Lender.
5.12 Lender has received and approved all necessary approvals from
all regulatory agencies having jurisdiction over the Projects.
5.13 Lender shall have received evidence satisfactory to it that the
Real Property is environmentally acceptable to Lender.
-18-
5.14 Lender shall have no obligation to make any Advance until the
conditions specified in paragraphs 5.1 through 5.13 (as applicable to the
-------------- ----
particular type of Advance) inclusive herein have been satisfied as determined
by Lender in its reasonable discretion.
5.15 Advances shall be requested in writing on the Request for
Advance and Certification, in the form of the attached Exhibit "F-1," executed
--------------
by Borrower (or, if Borrower is a corporation, partnership or limited liability
company, by those officers, general partners or members, as the case may be, or
agents of Borrower named in authorizing resolutions of Borrower from time to
time delivered to Lender and which are in form and substance satisfactory to
Lender).
5.16 Advances may be disbursed by checks, drafts or wire transfer
payable to Borrower; or, at the option of Lender after Borrower's written
request, to third parties, either severally or jointly with Borrower, for the
credit or benefit of Borrower. If Advances are made by wire transfer, Borrower
shall pay to Lender, Lender's usual and customary fee for wiring such funds.
Lender can withhold such fee from the Advance so made.
5.17 Although Lender shall have no obligation to make an Advance
unless and until all applicable conditions thereto set forth herein have been
satisfied, Lender may, at its sole discretion, make Advances before that time
without waiving or releasing any of the Obligations, but Borrower shall continue
to be required to strictly Perform all such Obligations.
5.18 The proceeds of the Receivables Loan are to be used, in part,
to pay and satisfy in full the Working Capital Loan, the Construction Loan and
all amounts then due and owing to Lender under the Construction Loan Documents.
To the extent that the proceeds of the Receivables Loan arise from a particular
Phase, such proceeds shall be used to pay and satisfy in full the Working
Capital Loan arising from the same Phase, the Construction Loan with respect to
such Phase and all amounts then due and owing to Lender under the Construction
Loan Document with respect to such Phase. Lender shall have the right to
disburse any Receivables Advance directly to Lender in payment or satisfaction
of Working Capital Advances, and interest thereon, and any amounts then due to
Lender under the Construction Loan Documents. The foregoing notwithstanding,
upon and during the continuance of an Event of Default, Lender shall have the
right to disburse Receivables Advances against the Obligations in such order and
manner as Lender deems appropriate.
5.19 Working Capital Advances shall be made only against the
Borrowing Base (Working Capital Loan); provided that with respect to Working
Capital Advances only, the eligibility criteria set forth in the following
subparagraphs of Exhibit "C" need not be satisfied as a condition to the making
-----------
of such Advance: (j),
-19-
only as to the requirement that the Purchaser Mortgage be recorded, (k), (m) and
(n) to the extent that such rescission rights pertain only to Borrower's
obligations under subparagraph (k) thereof
----------------
5.20 Lender acknowledges that Borrower obtained a conditional Public
Report from the California Department of Real Estate which contains, in
substance, the following conditions:
(i) Recordation of a third amendment to the Declaration of
Covenants, Conditions and Restrictions with regard to the
Project;
(ii) The delivery to the California Department of Real
Estate of a title insurance policy covering the Deedback
Intervals;
(iii) The execution by the Borrower and the Association of
an Agreement terminating an existing trust arrangement with
respect to the Project; and
(vi) The delivery to the California Department of Real
Estate of a title policy with respect to the Real Property.
Borrower warrants and represents and, with respect to clauses (ii) and
(iv) above, covenants; that the conditions described in clauses (i) and (iii)
will be satisfied concurrently with the Borrower's acquisition of the Real
Property and the conditions described in clauses (ii) and (iv) will be satisfied
within thirty (30) days following Borrower's acquisition of the Real Property.
Borrower agrees to obtain a final Public Report from the California Department
of Real Estate, containing no conditions, no later than November 27, 1996, which
is the expiration date of Borrower's existing conditional Public Report.
ARTICLE VI
----------
RESERVED
--------
ARTICLE VII
-----------
NOTE; MAINTENANCE OF BORROWING BASE;
------------------------------------
PAYMENTS; SERVICING AND COLLECTION
----------------------------------
7.1 In connection with the Receivables Loan:
-20-
(i) In no event shall the aggregate principal amount of
the Receivables Loan outstanding at any time exceed the Maximum
Receivables Loan Amount and in the event for any reason the
aggregate principal amount of the Receivables Loan does exceed
the Maximum Receivables Loan Amount, then Borrower upon demand,
shall immediately make a principal payment to Lender in an amount
equal to such excess plus accrued and unpaid interest thereon.
(ii) If for any reason the aggregate principal amount of
the Receivables Loan outstanding as of the last Business Day of
any month shall exceed the then Borrowing Base (Receivables
Loan), Borrower, upon demand, shall immediately make to Lender a
principal payment in an amount equal to such excess plus accrued
and unpaid interest thereon.
(iii) The Receivables Loan shall be evidenced by the
Receivables Note and shall be repaid in immediately available
funds according to the terms thereof and such provisions of this
Agreement as are applicable.
7.2 In connection with the Working Capital Loan:
(i) In no event shall the aggregate principal amount of
the Working Capital Loan outstanding at any time exceed the
Maximum Working Capital Loan Amount and in the event for any
reason the aggregate principal amount of the Working Capital Loan
does exceed the Maximum Working Capital Loan Amount, then
Borrower upon demand, shall immediately make a principal payment
to Lender in an amount equal to such excess plus accrued and
unpaid interest thereon.
(ii) If for any reason the aggregate principal amount of
the Working Capital Loan outstanding as of the last Business Day
of any month shall exceed the then Borrowing Base (Working
Capital Loan), Borrower, upon demand, shall immediately make to
Lender a principal payment in an amount equal to such excess plus
accrued and unpaid interest thereon.
(iii) The Working Capital Loan shall be evidenced by the
Working Capital Note and shall be repaid in immediately available
funds according to the terms thereof and such provisions of this
Agreement as are applicable.
7.3 Borrower is not entitled to prepay, in whole or in part, the
Receivables Loan until the Opening Prepayment Date. Thereafter, if (i) Borrower
has paid all sums due and payable to Lender in connection with the Receivables
Loan,
-21-
Working Capital Loan and the Construction Loan, and (ii) Borrower has given
Lender at least 30 days prior written notice of the prepayment and has paid to
Lender at the time of prepayment a prepayment premium equal to a percentage, as
set forth below, of the then principal balance of the Receivables Loan, then
Borrower shall have the option to prepay the Receivables Loan in full, but not
in part, on any date an installment is due on the Receivables Note:
Period Premium
------ -------
Through the third Anniversary Date of the Closing Date Closed to Prepayment
After the third Anniversary Date and through the fourth Anniversary 3%
Date of the Closing Date
After the fourth Anniversary Date and through the fifth Anniversary 2%
Date of the Closing Date
After the fifth Anniversary Date and through the sixth Anniversary 1%
Date of the Closing Date
Thereafter 0%
If there should occur an acceleration of maturity following an Event
of Default and such occurrence results in prepayment of the Receivables Loan, a
prepayment premium will be required in the amount specified above; or if
occurring prior to the Opening Prepayment Date, Borrower shall pay to Lender
with the prepayment a prepayment premium equal to 5% the then principal balance
of the Receivables Loan being prepaid. A Purchaser shall be permitted to prepay
the amount owed on its Instrument without penalty. There shall be no prepayment
premium payable in connection with the prepayment, in whole or in part, of the
Working Capital Loan. If there should occur a casualty to or condemnation of the
Project and such occurrence results in a prepayment of the Receivables Loan, no
prepayment premium shall be payable in connection with such prepayment.
7.4 (a) Lockbox Agent, as agent for Lender, shall collect payments
on the Eligible Instruments used in making Borrowing Base computations or
otherwise constituting part of the Receivables Collateral and shall remit
them to Lender on the last Business Day of each and every week according to
the terms of the Lockbox Agreement; and Borrower shall
-22-
immediately forward all such payments received by it to Lockbox Agent for
Lender. However, the Obligation to make, or any requirement that Lender
receives, payments called for in the Receivables Loan Documents shall not
be deemed satisfied until Lender actually receives such payments from
Lockbox Agent. For the purpose of determining the adequacy of such
payments, Borrower will cause Servicing Agent to furnish to Lender at
Borrower's sole cost and expense, no later than the tenth day of each month
commencing with the first full calendar month following the first Advance,
a report meeting the following requirements: (i) shows as of the end of the
prior month with respect to each Eligible Instrument which is used in
making Borrowing Base computations or otherwise constitutes part of the
Receivables Collateral (A) all payments received during the prior month on
the Eligible Instrument, allocated as between principal, interest, late
charges, taxes, and the like, (B) the opening and closing balances during
the prior month on each such Eligible Instrument, (C) present value of the
cash flow (if required by Lender) and (D) extensions, refinances,
prepayments, and other similar adjustments; and (ii) itemizes the Eligible
Instrument which are used in making Borrowing Base computations or
otherwise constitute part of the Receivables Collateral to show
delinquencies of 30, 60, 9O and in excess of 9O days. On the basis of such
reports, Lender will compute the amount, if any, which was due and payable
by Borrower on the last day of the preceding month and will notify Borrower
as soon as possible of any amount due. If such reports are not timely
received, Lender may reasonably estimate the amount which was due and
payable; and, in such event, Borrower shall pay upon demand the amount
estimated by Lender to be due and payable. If payment is made on the basis
of Lender's estimate, and reports required by this paragraph are thereafter
received by Lender, the estimated payment amount shall be adjusted by an
additional payment or a refund to the correct amount, as the reports may
indicate; such additional amount to be paid by Borrower upon demand and
such refund to be made by Lender within five Business Days after receipt by
Lender of a written request therefor by Borrower. In addition, at each
calendar quarter, upon request, Borrower shall deliver to Lender a current
list of the names addresses and phone numbers of the Purchasers related to
Eligible Instruments.
(b) Subject to the following sentence, FPSI shall act as the
Servicing Agent during the Term. Lender, subject to any restriction
contained in the Services and Fees Agreement, the Servicing Agreement or
the Lockbox Agreement, may at any time and from time to time in its
discretion substitute a successor or successors to any Servicing Agent or
Lockbox Agent acting in such capacity under the Services and Fees
Agreement, the Servicing Agreement and Lockbox Agreement, if the Servicing
Agent or Lockbox Agent is not satisfactorily performing its respective
obligations thereunder. In the event Lender substitutes a successor
Servicing Agent or Lockbox Agent pursuant to
-23-
the provisions of this paragraph, Borrower shall have the right to approve
the identity of such successor Servicing Agent or Lockbox Agent; provided
--------
that there does not then exist an Event of Default or an Incipient Default
----
and further provided that Borrower shall not unreasonably withhold or
------- -------- ----
unduly delay its consent.
7.5 Subject to Lender's rights upon the occurrence of an Event of
Default, all proceeds from the Receivables Collateral (except payments which are
identified by Purchasers as tax or maintenance and other assessment payments and
are required to be so treated by Borrower) during the Term hereof shall be
applied first to the payment of all costs, fees and expenses required by the
Receivables Loan Documents to be paid by Borrower, second to accrued and unpaid
interest due on the Receivables Note, third to the unpaid principal balance of
the Receivables Note, and then to the other Obligations arising out of the
Receivables Loan Documents in such order and manner as Lender may determine.
Unless and until all such Obligations have been Performed, Borrower shall have
no right to any portion of the proceeds of the Receivables Collateral.
7.6 Whether or not the proceeds from the Receivables Collateral shall
be sufficient for that purpose, Borrower shall pay when due all payments
required to be made pursuant to the Receivables Note, Working Capital Note and
other Receivables Loan Documents; and any and all amounts payable by Borrower
under the Receivables Note, Working Capital Note and other Receivables Loan
Documents shall be paid without notice (except as otherwise expressly provided
therein), demand, counterclaim, set-off, deduction, recoupment or defense, and
without abatement, suspension, deferment, diminution or proration by reason of
any circumstance or occurrence whatsoever, Borrower's Obligation to make such
payments being absolute and unconditional.
7.7 All payments to be made by Borrower under the Receivables Loan
Documents shall be free of expense to Lender with respect to the amount of any
Impositions, all of which Impositions Borrower assumes and shall pay on demand
in addition to the other payments provided for in the Receivables Loan Documents
to be made by it. Borrower's Obligation to pay Impositions shall likewise
include the Obligation to pay any increase to Lender in federal, state, or local
income tax as a result of inclusion in income of Lender of any amount required
by this paragraph to be paid to or for Lender.
-24-
ARTICLE VIII
------------
BORROWER'S ADDITIONAL REPRESENTATIONS,
--------------------------------------
WARRANTIES AND COVENANTS
------------------------
8. 1 (a) Borrower is, and will continue to be during the Term hereof,
a limited liability company duly organized, validly existing and in good
standing under the laws of the State of Georgia and is, and will continue
to be during the Term hereof, qualified to do business and in good standing
in California and in each jurisdiction in which it is selling Time-Share
Interests or where the location or nature of its properties or business
makes such qualification necessary (except where failure to do so would not
adversely affect Lender's ability to realize upon the Receivables
Collateral, the Purchased Notes and Mortgages Collateral or any other
security for the Performance of the Obligations or materially adversely
affect the business or financial condition of Borrower or the ability of
Borrower to complete Performance of the Obligations). Borrower has, and
will continue to have, powers adequate for making and Performing under the
Receivables Loan Documents, for undertaking and Performing the Obligations,
and for carrying on its business and owning its property. AKGI is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Georgia and is, and will continue during the Term
hereof, qualified to do business and in good standing in each jurisdiction
where the location or nature of the properties or business of AKGI make
such qualification necessary, to the extent such qualification is required
by such foreign jurisdiction (except where failure to do so would not
adversely affect Lender's ability to realize upon the Receivables
Collateral, the Purchased Notes and Mortgages Collateral or any other
security for the Performance of the Obligations or materially adversely
affect the business or financial condition of Borrower or the ability of
Borrower to complete Performance of the Obligations). AKGI is a member of
Borrower. KGK is a corporation duly organized, validly existing and in good
standing under the laws of the State of Georgia and is, and will continue
during the Term hereof, qualified to do business and in good standing in
each jurisdiction or where the location or nature of the properties or
business of KGK make such qualification necessary, to the extent such
qualification is required by such foreign jurisdiction (except where
failure to do so would not adversely affect Lender's ability to realize
upon the Receivables Collateral, the Purchased Notes and Mortgages
Collateral or any other security for the Performance of the Obligations or
materially adversely affect the business or financial condition of Borrower
or the ability of Borrower to complete Performance of the Obligations). KGK
is a member of Borrower.
-25-
(b) Borrower has good right and power to grant the Security
Interest in the Receivables Collateral and the Purchased Notes and
Mortgages Collateral and to execute and deliver this Agreement and the
other Receivables Loan Documents and to Perform the Obligations. All
action necessary and required by Borrower's organization documents and
all applicable laws for the obtaining of the Loan and for the
execution and delivery of this Agreement and all other Receivables
Loan Documents executed and delivered in connection with the Loan has
been duly and effectively taken; and, to the best of Borrower's
knowledge, this Agreement is and shall be, and all other Receivables
Loan Documents are and shall be, legal, valid, binding and enforceable
against Borrower in accordance with their respective terms, other than
as such enforceability may be limited by bankruptcy, insolvency,
reorganization, arrangement, moratorium, or similar laws relating to
or affecting the rights of creditors generally or general principles
of equity (except to the extent that such laws, rights, remedies or
principles are waivable by Borrower and have been waived in the
Receivables Loan Documents). To the best of Borrower's knowledge, the
Receivables Loan Documents do not violate the Applicable Usury Law or
any other usury law known to Borrower. The execution, delivery and
Performance of the provisions of this Agreement and all the other
Receivables Loan Documents will not violate, constitute a default
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any of the properties or assets of Borrower pursuant
to any provision of: any law, regulation, judgment, decree, order,
franchise or permit applicable to Borrower; Borrower's charter
documents; or any contract or other agreement or instrument to which
Borrower is a party or by which Borrower or Borrower's properties or
assets are bound. No consent of any government or agency thereof, or
any other person, firm or entity not a party hereto, is or will be
required as a condition to the execution, delivery, Performance or
enforceability of the Receivables Loan Documents.
8.2 (a) There is no action, litigation or other proceeding
pending (or, to Borrower's knowledge, threatened) before any
arbitration tribunal, court, governmental agency or administrative
body against Borrower which, if adversely determined, might adversely
affect Lender's ability to realize upon the Receivables Collateral or
the Purchased Notes and Mortgages Collateral or any other security for
the Performance of the Obligations, or materially adversely affect the
Project, the business or financial condition of Borrower, or the
ability of Borrower to complete Performance of the Obligations; or
which questions the validity of the Receivables Loan Documents.
(b) If Borrower or a Guarantor becomes a party to any
action, litigation or other proceeding which asserts a material claim
against Borrower or a Guarantor, or Borrower becomes the subject of an
investigation by a
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governmental agency or administrative body with respect to the
Project, then Borrower shall within 10 days after it obtains knowledge
thereof notify Lender of such action, litigation, proceeding or
investigation and the particulars thereof. Thereafter, if requested by
Lender, Borrower shall report to Lender with respect to the status of
such matter and the particulars thereof.
8.3 (a) Borrower has sold or has offered for sale Time-Share
Interests which generate Eligible Instruments only in the State of
Georgia and all sales have been made at the Project or in the private
residences of potential Purchasers. Before it sells or offers for sale
Time-Share Interests outside the State of Georgia, Borrower shall
promptly notify Lender and provide Lender with evidence that Borrower
has complied with all laws of such jurisdiction governing the proposed
conduct of Borrower.
(b) Except for violations which do not individually or in
the aggregate affect Lender's ability to realize upon the Receivables
Collateral or the Purchased Notes and Mortgages Collateral or any
other security for the Performance of the Obligations or do not
materially adversely affect the business or financial condition of
Borrower or the ability of Borrower to complete Performance of the
Obligations, Borrower has complied, and will comply, with all laws and
regulations of the United States and every state, county and municipal
jurisdiction in which Time-Share Interests have been sold or offered
for sale.
(c) Without limiting the generality of any other
representation or warranty contained herein, Borrower will not violate
any private covenant or restriction or any zoning, use or similar law,
ordinance or regulation affecting the use or occupancy of the Project,
the violation of which could have a material adverse effect on
Lender's ability to realize upon the Receivables Collateral or the
Purchased Notes and Mortgages Collateral or any other security for the
Performance of the Obligations or materially adversely affect the
business or financial condition of the Borrower or the ability of
Borrower to complete Performance of the Obligations.
8.4 (a) Each Instrument at the time it is assigned to Lender in
connection with the Loan and this Agreement shall be an Eligible
Instrument. At the time such Instrument is assigned to Lender,
Borrower shall have performed all of its obligations to Purchasers,
and there shall be no executory obligations to Purchasers to be
Performed by Borrower. Borrower further warrants and guarantees the
value and enforceability of the Receivables Collateral. The foregoing
notwithstanding, Lender acknowledges that with respect to Instruments
against which a Working Capital Advance has been made, Borrower shall
not, at the time of such Advance, have completed the
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improvements that the Borrower has represented will be available to
Purchasers.
(b) Borrower shall not, without the prior written consent
of Lender, cancel or materially modify, or consent to or acquiesce in
any material modification to, or solicit the prepayment of, any
Eligible Instrument used in making Borrowing Base computations or
which otherwise constitutes part of the Receivables Collateral; or
waive the timely performance of the obligations of the Purchaser
thereunder. Borrower shall not pay or advance directly or indirectly
for the account of any Purchaser any sum owing by the Purchaser under
any of the Eligible Instruments used in making Borrowing Base
computations or which otherwise constitute part of the Receivables
Collateral.
(c) Borrower at all times shall fulfill, and cause its
Affiliates, agents and independent contractors at all times to
fulfill, all obligations to Purchasers under all Eligible Instruments
which are used in making Borrowing Base computations or otherwise
constitute part of the Receivables Collateral or the Purchased Notes
and Mortgages Collateral.
(d) True and complete copies of the Project governing
documents, the purchase contract, deed, note, mortgage/deed of trust,
the Instruments, advertising materials and other documents and
exhibits thereto which have been and are being used by Borrower in
connection with the Project and the sale or offering for sale of Time-
Share Interests therein have been delivered to Lender. Such documents
are the only ones which have been used in connection with the Project
and the sale of Time-Share Interests therein. Borrower shall not,
without the prior written consent of Lender, cancel or materially
modify any such documents, which consent will not be unreasonably
withheld. Borrower shall Perform all of its obligations under the
Project governing documents.
(e) All off-site roads and other off-site improvements
contained within the Project (other than private easements) will have
been dedicated to and accepted by the responsible governmental
authority or utility prior to the initial Receivables Advance.
Borrower shall maintain or cause to be maintained in good condition
and repair all amenities, common areas and private easements which
have been promised or represented as being available to Purchasers and
all off-site roads and off-site improvements which have not been
dedicated to or accepted by the responsible governmental authority or
utility.
(f) Each Purchaser shall automatically be a member of the
Project's owners association or associations, if any, and shall be
entitled to vote
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on the affairs thereof (subject, however, to any preferential voting
rights in favor of Borrower as permitted under California time-share
laws). Each such owners association shall be governed by a Board of
Directors, which have the authority to fix and levy pro rata upon each
Purchaser annual assessments to cover the costs of maintaining and
operating the Project (including, without limitation, taxes and
assessments not levied by the appropriate taxing authority directly
against owners of Time-Share Interests) and to establish a reasonable
reserve for improvements, the replacement of items and furnishings,
and contingencies. If Borrower controls an owners association,
Borrower will while it controls such association: (i) cause such
owners association to (A) discharge timely and completely its
obligations under the Project governing documents and maintain the
reserve described above; and (ii) pay to such owners association not
less often than every twelve months hereafter the difference between
(A) the cumulative total amount of the maintenance and operating
expenses incurred by such association, together with the amount of any
installment of real property taxes currently due and payable with
respect to the Project not directly levied against owners of Time-
Share Interests, through the end of the calendar month preceding the
month in which such payment is made and (B) the cumulative total
amount of assessments (less amounts thereof allocated to reserve
expenses) payable to association by Time-Share Interest owners other
than Borrower through the end of the calendar month preceding the
month in which such payment is made.
(g) Except as otherwise permitted by the Project governing
documents, the Project owners association or the owners of Time-Share
Interests in common shall own the furnishings in the Project Units and
all the common areas in the Project and other amenities which have
been promised or represented as being available to Purchasers, free
and clear of liens and security interests, except for the Permitted
Encumbrances and the Construction Mortgage; and no part of the Project
is subject to partition by owners of Time-Share Interests. Borrower
will maintain or cause to be maintained in good condition and repair
all common areas in the Project and other amenities which have been
promised or represented as being available to Purchasers and which are
not the responsibility of the Project owners association to maintain
and repair. Borrower will maintain or cause the owner's association
for the Project to maintain a reasonable reserve to assure compliance
of the terms of the foregoing sentence.
(h) The common areas and amenities and the streets and
other off-site improvements contained within the Project are free and
clear of all liens or other encumbrances of third parties, subject to
the Permitted Encumbrances. Borrower agrees that such common areas,
amenities, streets
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and other off-site improvements will not, during the Term hereof, be
encumbered.
8.5 LENDER DOES NOT ASSUME AND SHALL HAVE NO RESPONSIBILITY,
OBLIGATION OR LIABILITY TO PURCHASERS, LENDER'S RELATIONSHIP BEING SOLELY THAT
OF A CREDITOR WHO HAS TAKEN, AS SECURITY FOR INDEBTEDNESS OWED TO IT, A
COLLATERAL ASSIGNMENT FROM BORROWER OF INSTRUMENTS. EXCEPT AS REQUIRED BY LAW,
OR TO THE EXTENT NECESSARY IN ORDER FOR BORROWER TO OBTAIN A PERMIT TO SELL
TIME-SHARE INTERESTS IN A PARTICULAR STATE, BORROWER SHALL NOT, AT ANY TIME, USE
THE NAME OF OR MAKE REFERENCE TO LENDER WITH RESPECT TO THE PROJECT, THE SALE OF
TIME-SHARE INTERESTS OR OTHERWISE, WITHOUT THE EXPRESS WRITTEN CONSENT OF
LENDER.
8.6 Borrower shall undertake the collection of amounts delinquent
under each Eligible Instrument which is used in making Borrowing Base
computations or otherwise constitutes part of the Receivables Collateral, shall
bear the entire expense of such collection work, and shall diligently and timely
do such work respecting collection, including forfeiture or foreclosure
proceedings. Lender shall have no obligation to undertake any collection,
eviction or foreclosure action against the obligor under any Eligible Instrument
or to otherwise realize upon any Eligible Instrument.
8.7 Borrower shall maintain in a secure place in its offices at
the address specified below proper and accurate books, records, ledgers,
correspondence and other papers relating to the Receivables Collateral and the
Purchased Notes and Mortgages Collateral. Lender may notify the appropriate
Purchasers of the existence of Lender's interest as assignee in the Receivables
Collateral and the Purchased Notes and Mortgages Collateral and request from
such Purchasers any information relating to the Receivables Collateral and the
Purchased Notes and Mortgages Collateral. Borrower shall cooperate with Lender
in giving such notice and will do so under its letterhead if requested.
Borrower's chief executive office is as set forth on the signature page of this
Agreement. Borrower will not change its chief executive office without giving
Lender thirty (30) days prior written notice of such contemplated change.
Borrower has not operated under any names or fictitious names during the
previous six (6) years. Borrower will not change its name or operate under any
fictitious names without first giving Lender thirty (30) days prior written
notice.
8.8 Borrower shall not, without the prior written consent of
Lender; (i) sell, convey, pledge, hypothecate, encumber or otherwise transfer
any security for the Performance of the Obligations; or (ii) permit or suffer to
exist any liens, security interests or other encumbrances on any security for
the Performance of the
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Obligations, except with respect to either (i) or (ii) for the Permitted
Encumbrances and liens and security interests expressly granted to Lender.
8.9 Borrower shall obtain before funding, shall maintain during
the Term of the Loan, and shall deliver to Lender evidence of such insurance,
written by such insurers, and in such forms and such amounts, as Lender may
require.
8.10 (a) This Agreement and the other Receivables Loan
Documents, certificates, financial statements and written materials
furnished to Lender by or on behalf of Borrower in connection with the
transactions contemplated herein do not contain any untrue statement
of a material fact or omit to state a material fact necessary in order
to make the statements contained herein and therein not misleading.
There is no fact known to Borrower which materially adversely affects
or in the future may (so far as Borrower can now foresee) materially
adversely affect the Receivables Collateral or the Purchased Notes and
Mortgages Collateral or any other security for the Performance of the
Obligations or the business or financial condition of Borrower or the
Project which has not been set forth in this Agreement or the other
Receivables Loan Documents, certificates, financial statements or
written materials furnished to Lender in connection with the
transactions contemplated herein.
(b) The fact that Lender's representatives may have made
certain examinations and inspections or received certain information
pertaining to the Receivables Collateral or the Purchased Notes and
Mortgages Collateral or the Project and the proposed operation thereof
does not in any way affect or reduce the full scope and protection of
the warranties, representations and Obligations contained herein,
which have induced Lender to enter into this Agreement.
8.11 (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) On or before the tenth day of each month, Borrower shall
furnish or cause to be furnished to Lender (i) the reports of the
Servicing Agent and Borrower required pursuant to paragraph 7.4 hereof
-------------
and (ii) a sales report for the prior month showing the number of
sales of Time-Share Interests and the aggregate dollar amount thereof,
including down payments.
(c) 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
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of each of Borrower, Guarantor and the Project's owners association (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 generally
accepted accounting principles consistently applied throughout the period
involved and with prior periods. 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 30 days beyond the giving of such notice) shall
be audited by a certified public accountant and shall be certified to by
said certified 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 Project. 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
and no condition, event or act which, with notice or lapse of time or both,
would become an Event of Default or, if any such Event of Default or any
such condition, event or act 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 Borrower is in compliance with all Applicable Environmental Laws or in
the event of noncompliance, specifying the nature and period of the
existence of such noncompliance.
(d) Upon request of Lender, Borrower shall deliver to
Lender from time to time, as available, and promptly upon amendment or
effective date, current price lists, sales literature,
registrations/consents to sell, final public reports/public offering
statements/prospectuses, and other items requested by Lender which relate
to the Project.
-32-
(e) So long as the same shall be pertinent to the Loan, the
Project, the documents or any transactions contemplated therein, Borrower
shall at its expense (i) permit Lender and its representatives at all
reasonable times to inspect, audit and copy, as appropriate, the Project,
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.
(f) Borrower shall annually submit to Lender within 45 days
after each is available proposed annual maintenance and operating budgets
for the Project, certified to be adequate by Borrower and a statement of
the annual assessment to be levied upon the Purchasers.
8.12 Borrower shall cause any and all indebtedness owed by Borrower
or secured by the Project (other than the Permitted Encumbrances and other than
the lien of another construction lender who is financing the construction of
improvements on the Real Property, as contemplated by Paragraph 12.3 of the
--------------
Construction Loan Agreement), to be subordinated to the Obligations pursuant to
subordination agreements satisfactory to Lender in form and substance.
8.13 Borrower shall not, without Lender's prior written consent; (i)
(other than the sale of Time-Share Interests in the ordinary course of
Borrower's business or the rental of units in the Project in the ordinary course
of Borrower's business) sell, lease, transfer or dispose of its all or
substantially all of its assets to another entity; or (ii) 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 Borrower or Guarantor to any other person or entity,
or permit any of the foregoing to occur with respect to Borrower or Guarantor.
Borrower shall have the right to retain a third-party management company to
manage the operation of the Project, provided that Lender has first approved the
identity of such management company. Lender approves RCI Management, Inc. as the
present manager of the Project.
8.14 Borrower is not in default of any payment on account of
indebtedness for borrowed money or of any repurchase obligations in connection
with a receivables purchase financing, or in violation of or in default under
any material term in any agreement, instrument, order, decree or judgment of any
court, arbitration or governmental authority to which it is a part or by which
it is bound.
8.15 Borrower has filed all tax returns and paid all taxes,
assessments, levies and penalties, if any, in respect thereof required to be
filed by it or paid by it to
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any governmental or quasi-governmental authority. All real estate taxes and
assessments have been paid which are due and owing in connection with the common
areas and the Project and other amenities which have been promised or
represented as being available to Purchasers for use by them. Borrower shall,
upon request of Lender, provide to Lender not more than 30 days after such taxes
and assessments would become delinquent if not paid evidence that all taxes and
assessments on the Project and common areas have been paid in full.
8.16 Borrower shall pay to Lender on demand all out-of-pocket costs
and expenses incurred or to be incurred by Lender or its counsel in connection
with the initiation, documentation and closing of the Loan, the making of
Advances hereunder , the administration of the Loan, the protection of the
security for the Performance of the Obligations, or the enforcement of the
Obligations against Borrower or any Guarantor (including, without limitation,
travel costs, all attorneys' fees, any brokerage or similar fees, all filing
and recording fees, all charges for consumer credit reports and UCC, tax lien,
judgment and litigation searches, all revenue and documentary stamp and
intangible taxes, and all fees and expenses of the Servicing Agent and Lockbox
Agent to perform the services contemplated hereunder and under the terms of the
Services and Fees Agreement, the Servicing Agreement and Lockbox Agreement,
respectively). Borrower shall pay to Lender a non-refundable loan fee (the
"Working Capital Loan Fee") in the amount of Five Thousand Dollars ($5,000)
which fee was earned by Lender in consideration of Lender holding itself ready,
willing and able to make the Working Capital Loan upon the terms and conditions
set forth herein. The Working Capital Loan Fee shall be paid in full
concurrently with the making of the first Working Capital Advance and may be
withheld from the Advance so made. Borrower shall also pay to Lender a
nonrefundable loan fee (the "Receivables Loan Fee") in the amount of One
Hundred Eighty Thousand Dollars ($180,000) which fee was earned by Lender in
consideration of Lender holding itself ready, willing and able to make the
Receivables Loan upon the terms and conditions set forth herein. The Ten
Thousand Dollar ($10,000) deposit received by Lender shall be applied against
the Receivables Loan Fee. An additional Forty Thousand Dollars ($40,000) of the
Receivables Loan Fee shall be due concurrently with the making of the first
Receivables Advance and may be withheld from the Advance so made. An additional
Twenty-Five Thousand Dollars ($25,000) of the Receivables Loan Fee shall be due
and payable concurrently with the making of second Receivables Advance and may
be withheld from the Advance so made. An additional Twenty-Five Thousand Dollars
($25,000) of the Receivables Loan Fee shall be due and payable concurrently with
the making of the third Receivables Advance and may be withheld from the Advance
so made. The foregoing notwithstanding, unless sooner paid, the entire
Receivables Loan Fee shall be due and payable in full on the earlier of (i) the
making of the Receivables Advance which causes the unpaid principal balance of
the Receivables Loan to exceed Ten Million Dollars ($10,000,000) and may be
withheld from the Advance so made or (ii) July 1, 1997. In the event the Loan
does not close on or before the Closing Date,
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as such date may be extended by Lender, other than due solely to the default of
Lender; (i) the entire Loan Fee shall nevertheless be deemed fully earned by
Lender in consideration for Lender's holding itself ready and willing to make
the Loan upon the terms and conditions set forth herein and shall be due and
payable upon demand and (ii) Lender shall have no further obligation to make the
Loan or the Construction Loan. The payment of the Loan Fee is in addition to
Borrower's obligation to pay a loan fee under the Construction Loan Agreement.
Lender shall act as custodian for purposes of holding Eligible Instruments and
Borrower shall pay to Lender on demand, a custodial fee of Ten Dollars ($10.00)
for each Eligible Instrument so held by Lender, exclusive of Eligible
Instruments that are substituted for ineligible Instruments (provided that such
custodial fee was paid in connection with such ineligible Instrument) and
exclusive of Instruments that have been canceled by the Purchaser or the
Borrower. Notwithstanding the foregoing, Borrower shall have the right to select
an independent custodian to hold Eligible Instruments on Lender's behalf and as
Lender's agent, so long as (i) Borrower pays all costs charged by such
independent custodian, and (ii) such independent custodian is approved in
advance, in writing by Lender.
8.17 Borrower shall INDEMNIFY, DEFEND AND HOLD HARMLESS, Lender, its
successors, assigns and shareholders (including corporate shareholders), and the
directors, officers, employees, agents and servants of the foregoing, from any
and all losses, costs, expenses (including, without limitation, court costs and
attorney's fees), demands, claims, suits, proceedings (whether civil or
criminal), orders, judgments, penalties, fines and other sanctions arising from
or brought in connection with (i) the Project, the security for the Performance
of the Obligations, Lender's status by virtue of the Assignments, creation of
Security Interests, the terms of the Receivables Loan Documents or the
transactions related hereto, or any act or omission of Borrower, the Servicing
Agent or the Lockbox Agent, or the employees or agents of any of them, whether
actual or alleged, and (ii) any and all brokers' commissions or finders' fees or
other costs of similar type, or claims by any broker, agent or other party in
connection with this transaction (other than fees claimed owed by a broker,
finder, or other party with whom Lender has a specific agreement). On written
request by anyone covered by the above agreement of indemnity, Borrower shall
undertake, at its own cost and expense, on behalf of such indemnitee, using
counsel satisfactory to the indemnitee, the defense of any legal action or
proceeding to which the indemnitee shall be a party, provided that such action
or proceeding shall result from, or grow or arise out of any of the events set
forth in this paragraph.
8.18 Borrower shall not directly or indirectly invest all or any part
of the proceeds of the Loan in any investment security subject to the margin
requirements of Regulation G of the Board of Governors of the Federal Reserve
System.
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8.19 Borrower shall execute or cause to be executed all Receivables
Loan Documents and do or cause to be done all acts necessary for Lender to
perfect and to continue the perfection of the Security Interest of Lender in the
Receivables Collateral, the Purchased Notes and Mortgages Collateral and the
other security for the Performance of the Obligations or otherwise to effect the
intent and purposes of the Receivables Loan Documents. Borrower shall prosecute
or defend any action involving the priority, validity or enforceability of the
Security Interest granted to lender; provided that, at Lender's option, Lender
may do so at Borrower's expense.
8.20 Borrower is fully familiar with all of the terms and conditions
of the Receivables Loan Documents and is not in default thereunder. No act or
event has occurred which after notice and/or lapse of time would constitute such
a default or an Event of Default.
8.21 During the Term, Borrower shall not pay or make any
Distributions to its officers, partners, 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 an 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 Working Capital Loan
or the Receivables Loan unless and until the date that all of the
obligations of Borrower under and with respect to the Construction Loan,
Working Capital Loan and Receivables 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 Working Capital Loan and the Receivables 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
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respect to a tax year of Borrower (a "Tax Year") resulting from the
inclusion in such member's 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 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. As a
condition to Borrower's right to make such Distribution, Borrower shall
supply to Lender such information Lender shall request to determine and
substantiate Borrower's tax liability;
(xi) Such Distribution is made in an amount equal to or less
than 100% of the lesser of Borrower's Net Income or Cash Flow, 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 Working Capital Loan, 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 obligations to make any
advances of the Working Capital Loan; and
(xii) Such Distribution is made in an amount necessary to
reimburse a member or Affiliate of Borrower who has made an advance 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 to
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
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the Construction Loan, plus the then existing and undisbursed balance of
the Loan Balancing Equity will be sufficient to pay the total cost for
completion of the Improvements (as defined in the Construction Loan
Agreement), (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 Borrowers failure to comply with the net worth
covenant in Paragraph 8.22(a) hereof;
-----------------
(xiii) A Distribution made pursuant to Paragraph 10. 8(xiii)
---------------------
of the Construction Loan Agreement.
8.22 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
$1,000,000. The foregoing covenant shall be tested quarterly beginning with
the quarter year ending September 30, 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
September 30, 1996. Each of the tests conducted as of the end of September
30, 1996, 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 September 30, 1996. Each of the tests conducted as of the end of
September 30, 1996, 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.
(d) Borrower shall not permit Delinquencies as of the end of any
three (3) consecutive calendar months during the Term to exceed three
-38-
percent (3%) of the aggregate then unpaid principal balance of all Eligible
Instruments against which a Receivables Advance has been made.
(e) Upon request by Lender, Borrower shall provide from time to
time such information as Lender may reasonably require to determining
compliance with the foregoing requirements.
8.23 Until such time as all of the Obligations under and arising out
of the Construction Loan Documents, together with the Working Capital Loan,
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 written consent of
Lender, develop or permit any of its Affiliates to develop a time-share resort
in San ▇▇▇▇ Obispo County, California.
8.24 If there occurs a material adverse change in the Project or in
the financial condition of Borrower or any Guarantor or in the Receivables
Collateral or any other security for the Performance of the Obligations, which
change is not enumerated in paragraph 8.22 or 9.1 Borrower will promptly provide
-------------- ---
Lender with assurance that neither the prospect of Performance of the
Obligations nor Lender's security therefore is imperiled. If Borrower fails to
provide Lender with assurance satisfactory to Lender in its reasonable
discretion, such failure will be considered an Event of Default.
8.25 [Reserved]
8.26 Lender hereby agrees that it will promptly release from the lien
of the Construction Mortgage, an individual Time-Share Interest which is sold by
Borrower in the ordinary course of business in bona-fide, arm's-length
---------
transactions upon the satisfaction of the following terms and conditions;
(a) With respect to Time-Share Interests constituting Deedback
Intervals or Foreclosed Intervals, the payment to Lender of an interval
release payment equal to (i) $3,117 per Time-Share Interest (or $1,559
per Time-Share Interest if such Time-Share Interest is a Biennial Time-
Share Interest), with respect to a studio Unit, or (ii) $3,553 per Time-
Share Interest (or $1,777 per Time-Share Interest if such Time-Share
Interest is a Biennial Time-Share Interest), with respect to a one-bedroom
Unit; provided, however, that under no circumstances shall a particular
-------- -------
interval release payment payable with respect to Time-Share Interests
constituting a Deedback Interval or a Foreclosed Interval be less than
thirty-three percent (33%) of the gross sales price of such Time-Share
Interest;
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(b) With respect to Time-Share Interests located in Phase I, the
payment to Lender of an interval release payment equal to (i) $3,247 per
Time-Share Interest (or $1,624 per Time-Share Interest if such Time-Share
Interest is a Biennial Time-Share Interest), with respect to a one-bedroom
Unit, (ii) $4,349 per Time-Share Interest (or $2,175 per Time-Share
Interest if such Time-Share Interest is a Biennial Time-Share Interest),
with respect to a two-bedroom Unit or (iii) $4,639 per Time-Share Interest
(or $2,320 per Time-Share Interest if such Time-Share Interest is a
Biennial Time-Share Interest), with respect to a two-bedroom lockout Unit;
provided, however, that under no circumstances shall a particular interval
release payment payable with respect to Time-Share Interests located in
Phase I be less than twenty-eight percent (28%) of the gross sales price of
such Time-Share Interest;
(c) With respect to Time-Share Interests located in Phase II,
the payment to Lender of an interval release payment equal to (i) $3,247
per Time-Share Interest (or $1,624 per Time-Share Interest if such Time-
Share Interest is a Biennial Time-Share Interest), with respect to a one-
bedroom Unit or (ii) $4,639 per Time-Share Interest (or $2,320 per Time-
Share Interest if such Time-Share Interest is a Biennial Time-Share
Interest), with respect to a two-bedroom lockout Unit; provided, however,
that under no circumstances shall a particular interval release payment
payable with respect to Time-Share Interest located in Phase II be less
than twenty-four percent (24%) of the gross sales price of such Time-Share
Interest;
(d) No Event of Default or Incipient Default shall have occurred
or be continuing;
(e) The purchaser of the Time-Share Interest shall not be an
Affiliate of Borrower;
(f) Lender shall have received a written request for such
release in which Borrower certifies compliance with the items set forth
above and with all other requirements for such release; and
(g) Borrower has paid all of Lender's reasonable out-of-pocket
expenses incurred in connection with such release.
All interval release payments shall be applied as an ordinary principal payment
under the Construction Loan. No release of a Time-Share Interest pursuant hereto
shall impair or affect Lender's remaining lien on the balance of the property
subject to the Construction Mortgage or any term or provision of the Receivables
Loan Documents as they pertain to those portions of the property remaining
subject to the Construction Mortgage. Principal payments otherwise made under
the Construction Loan, the
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Working Capital Loan or the Receivables Loan and interest payable under any of
the foregoing shall not be credited against the interval release fee.
8.27 Except to the extent set forth in the Disclosure Schedule,
attached to the Environmental Certificate, the Borrower is in compliance in all
material respects with all applicable federal, state or local environmental,
health and safety statutes and regulations. The Borrower has not filed any
notice under any federal or state law indicating past or present treatment,
storage or disposal of a hazardous waste or reporting a spill or release of a
hazardous or toxic waste, substance or constituent, or other substances into the
environment. None of the operations of Borrower are the subject of federal or
state litigation or proceedings involving, or any investigation evaluating
whether any remedial action involving a material expenditure is needed to
respond to, any improper treatment, storage, recycling, disposal or release into
the environment of any hazardous or toxic substance, waste or constituent, or
other substance. The Borrower does not have any material contingent liability in
connection with any improper treatment, storage, recycling, disposal or release
into the environment of any hazardous or toxic substance, waste or constituent.
None of the operations of Borrower are subject to any judicial or administrative
proceeding alleging the violation of any federal, state or local environmental,
health or safety statute or regulation. The Borrower does not transport any
hazardous wastes, substances or constituents.
8.28 Provided that Borrower has not then borrowed the Maximum
Receivables Loan Amount, Borrower shall not, during the Borrowing Term
(Receivables Loan), pledge, assign, or hypothecate any Eligible Instruments
arising from Units other than to Lender; provided that that terms and conditions
of the financing of such Eligible Instruments is reasonably consistent with the
terms and conditions set forth in this Agreement. After the expiration of the
Borrowing Term (Receivables Loan), Lender shall have the right of first
negotiation with Borrower in the event Borrower wishes to accept or seek an
offer from a third party to loan moneys to Borrower in exchange for a pledge,
assignment or hypothecation of any Eligible Instruments arising from Units. 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, any and all
such lenders providing financing secured by Instruments shall have entered into
an intercreditor agreement with Lender in form and substance reasonably
satisfactory to Lender.
8.29 [Reserved]
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8.30 [Reserved]
8.31 Each of the Material Agreements is (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 the Seller's obligation under the Acquisition Documents or to the
Association's obligation under the Association 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.
8.32 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.
8.33 All representations and warranties contained in this Agreement
are continuing and shall be deemed to be made and reaffirmed prior to the making
of each Advance under this Agreement.
8.34 The representations, warranties and covenants contained in this
Agreement shall be applicable to and binding upon Borrower during the Term
hereof, notwithstanding the fact that no Advances have yet been made hereunder.
ARTICLE IX
----------
DEFAULT
-------
9.1 The occurrence of any of the following events or conditions
shall constitute an Event of Default by Borrower under the Receivables Loan
Documents:
(a) Lender fails to receive from Borrower when due and payable
any amount which Borrower is obligated to pay on the Note or any other
payment due under the Receivables Loan Documents; and such failure
-42-
shall continue for seven (7) days, except for the payment of the final
installment due at the Maturity Date, for which no grace period is allowed;
(b) any material representation or warranty of Borrower
contained in the Receivables Loan Documents or in any certificate furnished
under the Receivables Loan Documents proves to be, in any material respect,
false or misleading as of the date deemed made or restated;
(c) there is a default in the Performance of the Obligations set
forth in paragraphs 8.8, 8.9 or 8.13 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 8.9;
-------------
(d) there is a default in the Performance of the Obligations or
a violation of any term, covenant or provision of the Receivables Loan
Documents (other than a default or violation referred to elsewhere in this
paragraph 9.1) and such default or violation continues unremedied (i) for a
-------------
period of five days after the giving of notice thereof to Borrower in the
case of a 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 notice 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 Defaults," as defined elsewhere herein or in
any of the other Receivables Loan Documents, 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 accelerate any of the
Obligations or exercise its other remedies upon the occurrence of an Event
of Default hereunder;
(f) any material default by Borrower under any other agreement
evidencing, guaranteeing, or securing borrowed money or a receivables
purchase financing has occurred and there has been an acceleration of such
indebtedness or repurchase obligations, which accelerated repayment or
repurchase obligations are in excess of $100,000 in the aggregate;
(g) any final, non-appealable judgment or decree for money
damages or for a fine or penalty against Borrower which is not paid and
discharged or stayed within 30 days thereafter and, when aggregated with
all other judgment(s) or decree(s) that have remained unpaid and
undischarged or
-43-
not stayed for such period, the sum of such judgment and decrees is in
excess of $100,000;
(h) any party holding a lien or security interest in the
Receivables Collateral or the Purchased Notes and Mortgages Collateral, or
any other security for the Performance of the Obligations or a lien on any
common areas or other amenities in the Project commences foreclosure or
similar sale thereof;
(i) (i) Borrower or any Guarantor becomes insolvent or unable
to pay its debts when due; generally fails to pay its debts when due; files
a petition in any bankruptcy, reorganization, winding-up or liquidation
proceeding or other proceeding analogous in purpose or effect relating to
such entity; applies for or consents to the appointment of a receiver,
trustee or other custodian for the bankruptcy, reorganization, winding-up
or liquidation of such entity; 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 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 Receivables Collateral, the Purchased Notes and
Mortgages Collateral or the Project or for the assets of Borrower or any
Guarantor;
(j) Performance by Borrower or any Guarantor of any material
obligation under any Receivables Loan Document or Guarantee, as the case
may be, is rendered unenforceable in any material respect, or any Guarantor
repudiates, rescinds, limits or annuls its Guarantee;
(k) An Event of Default, as defined in the Construction Loan
Agreement, occurs, or an act or event occurs under any of the Construction
Loan Documents, whether or not denominated as an Event of Default, which
expressly entitles the Lender to exercise its remedies; or
(1) Notwithstanding the limitations in Paragraph 9.1(f),
----------------
above, the declaration of default with regard to the obligations of the
Borrower under any of the Material Agreements, beyond any applicable cure
or grace periods contained therein.
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9.2 At any time after an Event of Default has occurred and while it
is continuing, Lender shall have the right to do any one or more of the
following:
(a) cease to make further Advances;
(b) declare each of the Receivables Note and Working Capital
Note, together with prepayment premiums and all other sums owing by
Borrower to Lender in connection with the Receivables Loan Documents,
immediately due and payable without notice, presentment, demand or protest,
which are hereby waived by Borrower;
(c) with respect to the Receivables Collateral and the Purchased
Notes and Mortgages Collateral, (i) institute collection actions against
all Persons obligated thereon and in default thereunder; (ii) enter into
modification agreements and make extension agreements with respect to
payments and other performances; (iii) release Persons liable for the
payment and performance thereof or the securities for such payment and
performance; and (iv) settle and compromise disputes with respect to
payments and performances claimed due thereon, all without notice to
Borrower, without being called to account therefor by Borrower and without
relieving Borrower from Performance of the Obligations;
(d) in the event Lender has previously agreed that Borrower may
act as Servicing Agent, remove Borrower as Servicing Agent and substitute
as Servicing Agent such other Person as Lender shall designate; and
(e) proceed to protect and enforce its rights and remedies under
this Agreement, the Construction Loan Documents or any other documents and
to foreclose or otherwise realize upon its security for the Performance of
the Obligations, or to exercise any other rights and remedies available to
it at law, in equity or by statute.
The rights and powers granted pursuant to this paragraph are not
intended to limit the rights and powers granted elsewhere herein.
9.3 Notwithstanding anything in the Receivables Loan Documents to the
contrary, while an Event of Default exists, any cash received and retained by
Lender in connection with the Receivables Collateral or the Purchased Notes and
Mortgages Collateral may be applied to payment of the Obligations in the manner
provided in paragraph 9.5 hereof.
-------------
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9.4 (a) Pursuant to its rights under paragraph 9.2 hereof, following
-------------
an Event of Default, and subject to the terms and conditions hereof, Lender
may sell, assign and deliver the Receivables Collateral or the Purchased
Notes and Mortgages Collateral or any part thereof, at public or private
sale, conducted in a commercially reasonable manner by an officer, or agent
of, or auctioneer or attorney for, Lender at Lender's place of business or
elsewhere, for cash, upon credit or future delivery, and at such price or
prices as Lender shall reasonably determine, and Lender may be the
purchaser of any or all of the Receivables Collateral or the Purchased
Notes and Mortgages Collateral so sold. Lender may, in its reasonable
discretion, at any such sale, restrict the prospective bidders or
purchasers as to number, nature of business and investment intention, and,
without limitation, may require that the persons making such purchases
represent and agree to the satisfaction of Lender that they are purchasing
the Receivables Collateral or the Purchased Notes and Mortgages Collateral
for their account, for investment, and not with a view to the distribution
or resale of any thereof Lender shall have no obligation to delay sale of
any Receivables Collateral or the Purchased Notes and Mortgages Collateral
for the period of time necessary to permit such Receivables Collateral or
the Purchased Notes and Mortgages Collateral to be registered for public
sale under the Securities Act of 1933, as amended, and any applicable state
securities laws. Private sales made without registration shall not be
deemed to have been made in a commercially unreasonable manner by virtue of
any terms less favorable to the seller resulting from the private nature of
such sales.
(b) Without prejudice to the right of Lender to make such sale
within such shorter period as may be reasonable under the circumstances,
foreclosure sale of all or any part of the Receivables Collateral or the
Purchased Notes and Mortgages Collateral shall be deemed held pursuant to
reasonable notice if held:
(i) 45 days after notice is given, based upon default
consisting of insolvency, bankruptcy or other default of a nature
which cannot be corrected by Borrower, or default for which no grace
period is specified herein; or
(ii) 60 days after notice of any other act, circumstance or
event which, if uncorrected, after expiration of any applicable grace
period, shall constitute a default hereunder.
-46-
Where any notice to Borrower and grace period thereafter is required under
this Agreement, such grace period shall be deducted from the 60 day notice
of foreclosure sale specified in item (ii) above, so that the maximum
period between notice to Borrower of any act, circumstance or event which,
if uncorrected after elapse of any applicable grace period, would
constitute an Event of Default and the foreclosure sale of the Receivables
Collateral or the Purchased Notes and Mortgages Collateral based upon such
Event of Default shall in no event be required to exceed 60 days.
(c) At any sale following an Event of Default, the Receivables
Collateral and the Purchased Notes and Mortgages Collateral may be sold as
an entirety or in partial interests. Lender shall not be obligated to make
any sale pursuant to any notice previously given. In case of any sale of
all or any part of the Receivables Collateral or the Purchased Notes and
Mortgages Collateral on credit or for future delivery, the Receivables
Collateral and the Purchased Notes and Mortgages Collateral so sold may be
retained by Lender until the selling price is paid by the purchaser
thereof, but Lender shall not incur any liability in case of the failure of
such purchaser to take up and pay for the collateral so sold; and in case
of any such failure, such Receivables Collateral and the Purchased Notes
and Mortgages Collateral may again be sold under and pursuant to and in
compliance with the provisions hereof
(d) In connection with sales made following an Event of Default,
Lender may, in the name and stead of Borrower or in its own name, make and
execute all conveyances, assignments and transfers of the Receivables
Collateral and the Purchased Notes and Mortgages Collateral sold pursuant
to this Agreement; and Lender is hereby appointed Borrower's attorney-in-
fact for this purpose. Nevertheless, Borrower will, if so requested by
Lender, ratify and confirm any sale or sales by executing and delivering to
Lender, or to such purchaser or purchasers, all such instruments as may, in
the judgment of Lender, be advisable for that purpose.
(e) The receipt by Lender of the purchase money paid at any sale
made following an Event of Default shall be a sufficient discharge therefor
to any purchaser of the Receivables Collateral or the Purchased Notes and
Mortgages Collateral or any portion thereof, and no such purchaser, after
paying
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such purchase money and receiving such receipt, shall be bound to see to
the application of such purchase money or any part thereof or in any manner
whatsoever be answerable for any loss, misapplication or nonapplication of
any such purchase money, or any part thereof, or be bound to inquire as to
the authorization, necessity, expediency or regularity of any such sale.
(f) Each purchaser at any sale following an Event of Default
shall hold the Receivables Collateral or the Purchased Notes and Mortgages
Collateral so sold absolutely free from every claim or right of Borrower,
including, without limitation, any equity or right of redemption of
Borrower, which Borrower hereby specifically waives to the extent Borrower
may lawfully do so. Lender, its employees and agents shall after such sale
be fully discharged from any liability or responsibility in any matter
relating to the Receivables Collateral or the Purchased Notes and Mortgages
Collateral and such other security that is sold and resulting from any
action or inaction on the part of such purchaser or any successor-in-
interest of such purchaser.
9.5 The proceeds of any sale of all or any part of the Receivables
Collateral and the Purchased Notes and Mortgages Collateral shall be applied in
the following order or priorities; first, to the payment of all reasonable costs
and expenses of such sale, including, without limitation, reasonable
compensation to Lender and its agents, attorney's fees, and all other reasonable
expenses, liabilities and advances incurred or made by Lender, its agents and
attorneys, in connection with such sale, and any other unreimbursed expenses for
which Lender may be reimbursed pursuant to the Receivables Loan Documents;
second, to the payment of the Obligations, in such order and manner as Lender
shall in its discretion determine, with no amounts applied to payment of
principal until all interest has been paid; and third, to the payment to
Borrower, its successors or assigns, or to whomsoever may be lawfully entitled
to receive the same, or as a court of competent jurisdiction may direct, of any
surplus then remaining from such proceeds.
9.6 Lender may, at its option, and without any obligation to do so,
pay, perform and discharge any and all amounts, costs, expenses and liabilities
herein agreed to be paid or performed by Borrower if Borrower fails to do so
within 7 days following the giving of written notice of such failure; and for
such purposes Lender may use the proceeds of the Receivables Collateral or the
Purchased Notes and Mortgages Collateral and is hereby appointed Borrower's
attorney-in-fact. All amounts
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expended by Lender in so doing or in exercising its remedies hereunder following
an Event of Default shall become part of the Obligations secured hereby, shall
be immediately due and payable by Borrower to Lender upon demand therefor, and
shall bear interest at the Overdue Rate from the dates of such expenditures
until paid. Exercise by Lender of its option under this paragraph will not cure
any default of Borrower.
9.7 No remedy herein or in any other Receivables Loan Document
conferred on or reserved to Lender is intended to be exclusive of any other
remedy or remedies, but each and every such remedy shall be cumulative and shall
be in addition to every other remedy given hereunder, under any other
Receivables Loan Document or now or hereafter existing at law or in equity.
Notwithstanding anything herein to the contrary, in any non-judicial, public or
private sale or sales under the Uniform Commercial Code or in any judicial
foreclosure and sale of the Receivables Collateral or the Purchased Notes and
Mortgages Collateral, the Receivables Collateral and the Purchased Notes and
Mortgages Collateral may be sold in any manner whatsoever not prohibited by law.
No delay or omission to exercise any right or power shall be construed to be a
waiver of any default or acquiescence therein or a waiver of any right or power;
and every such right and power may be exercised from time to time and as often
as may be deemed expedient. Lender's acceptance of any performance due hereunder
which does not comply strictly with the terms hereof shall not be deemed to be a
waiver of any right of Lender to strict Performance by Borrower. Acceptance of
past due amounts or partial payments shall not constitute a waiver of full and
timely payment of the Obligations. No Event of Default, declaration of the
unpaid principal of the Loan to be immediately due and payable or exercise of
any other right to remedy upon default' shall stay, waive, or otherwise affect
Lender's right to receive payments on and other proceeds of the Receivables
Collateral or the Purchased Notes and Mortgages Collateral.
9.8 Borrower, for itself and for all who may claim through or under
it, hereby expressly waives and releases all right to have the Receivables
Collateral or the Purchased Notes and Mortgages Collateral or any other security
for the Performance of the Obligations, or any part thereof, marshalled on any
foreclosure, sale or other enforcement hereof.
9.9 While an Event of Default exists, Borrower shall, on the request
of Lender, assemble the Receivables Collateral and the Purchased Notes and
Mortgages Collateral not already in Lender's possession and make it available to
Lender at a time and place reasonably convenient to Lender.
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9.10 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 performance of which shall be an
Obligation hereunder, and shall be secured by the Receivables Collateral and the
Purchased Notes and Mortgages 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.
ARTICLE X
---------
POWER OF ATTORNEY
-----------------
For the purpose of enabling Lender to protect and preserve its
Security Interest in the Receivables Collateral and the Purchased Notes and
Mortgages Collateral and its rights and remedies under this Agreement and the
Receivables Loan Documents, Borrower does hereby constitute and appoint Lender,
and its successors and assigns, to be Borrower's true and lawful attorney-in-
fact upon the occurrence of an Event of Default, and during the continuance
thereof, to perform any act, take any action, execute and sign any document,
statement, instrument or other writing, and to do and perform any and all deeds
and things in the name, place, and stead of Borrower, which Lender in its
discretion shall determine necessary or required to protect and preserve its
Security Interest in the Receivables Collateral and the Purchased Notes and
Mortgages Collateral and its rights and remedies under this Agreement and the
Receivables Loan Documents, or which Borrower is required or obligated to
perform under the terms of this Agreement or the Receivables Loan Documents.
ARTICLE XI
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CONSTRUCTION AND GENERAL RULES
------------------------------
11.1 All moneys payable hereunder or under the Receivables Loan
Documents shall be paid to Lender at its address set forth below.
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11.2 This Agreement and the other Receivables Loan Documents
exclusively and completely state the rights and obligations of Lender and
Borrower with respect to the Loan. No modification, termination, variation,
discharge or abandonment hereof and no waiver of any of the provisions or
conditions shall be valid unless in writing and signed by duly authorized
representatives of Lender and Borrower or the successor, transfers or assigns of
either, subject, however, to the limitations on assignment herein by Borrower.
This Agreement supersedes any and all prior agreements or understandings,
written or oral, between Borrower and Lender (other than in the other
Receivables Loan Documents) concerning this transaction.
11.3 The powers and agency hereby granted by Borrower are coupled
with an interest and are irrevocable and are granted as cumulative to the
remedies for collection of the indebtedness secured hereby provided by law.
11.4 This Agreement may be executed simultaneously in any number of
identical copies each of which shall constitute an original for all purposes.
11.5 Any notice required or permitted to be given hereunder shall
be in writing and shall be (i) personally delivered to the party being notified
if an individual or to an officer, general partner or member if a corporation,
partnership or limited liability company, or (ii) transmitted by postage
prepaid, certified or registered mail (return receipt requested) to such party
at its address after its signature on the signature page hereof or such other
address as the party being notified may have otherwise designated in a notice
given as provided in this paragraph. Such notice shall be deemed to be given and
effective, unless actual receipt is expressly elsewhere specified herein, upon
the date of receipt or the date delivery is first attempted and refused if
transmitted by registered or certified mail, whichever shall first occur. A copy
of any notices given to Borrower shall also be given to:
▇▇▇ ▇▇▇▇ III, Esq.
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇
The ▇▇▇▇▇▇▇ Building, 16th Floor
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
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11.6 All the covenants, promises, stipulations and agreements of
Borrower and all the rights and remedies of the Lender in this Agreement
contained shall bind Borrower, and, subject to the restrictions on merger,
consolidation and assignment herein contained, its successors and assigns, and
shall inure to the benefit of Lender, its successors and assigns, whether so
expressed or not. Borrower may not assign its rights herein in whole or in part.
Except as may be expressly provided herein, no person or other entity shall be
deemed a third party beneficiary of this Agreement.
11.7 Subject to the provisions of Article IX hereof, if any one or
----------
more of the provisions contained in this Agreement shall be held invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.
11.8 Time is of the essence in the Performance of the Obligations.
11.9 All headings are inserted for convenience only and shall not
affect any construction or interpretation of this Agreement. The provisions of
this Agreement shall apply to the parties according to the context hereof and
without regard to the number or gender of words and expressions used herein.
Unless otherwise indicated, all references herein to clauses and other
subdivisions refer to the corresponding paragraphs, clauses and other
subdivisions of this Agreement; the words "herein", "hereof", "hereto",
"hereunder" and words of similar import, refer to this Agreement as a whole and
not to any particular paragraph, clause or other subdivision hereof; and
reference to a numbered or lettered subdivision of an Article, or paragraph
shall include relevant matter within the Article or paragraph which is
applicable to but not within such numbered or lettered subdivision.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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11.10 THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO
THE LAWS OF THE STATE OF ARIZONA. BORROWER HEREBY AGREES THAT ALL ACTIONS OR
PROCEEDINGS INITIATED BY BORROWER AND ARISING DIRECTLY OR INDIRECTLY OUT OF THE
RECEIVABLES 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 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 RECEIVABLES 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
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IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
Initial /s/ illegible
---------------
Initial /s/ illegible
---------------
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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11.11 It is the intent of the parties hereto to comply with the
Applicable Usury Law. Accordingly, notwithstanding any provisions to the
contrary in this Agreement or in any of the other Receivables Loan Documents in
no event shall this Agreement or the Receivables Loan Documents require the
payment or permit the collection of interest in excess of the maximum contract
rate permitted by the Applicable Usury Law. If (i) any such excess of interest
otherwise would be contracted for, charged or received from Borrower or
otherwise in connection with the Obligations or (ii) the maturity of the
Obligations is accelerated in whole or in part, or (iii) all or part of the
principal or interest of the Obligations shall be prepaid, so that under any of
such circumstances the amount of interest contracted for, charged or received in
connection with the Obligations would exceed the maximum contract rate permitted
by the Applicable Usury Law, then in any such event (A) the provisions of this
paragraph shall govern and control, (B) neither Borrower nor any other person or
entity now or hereafter liable for the payment hereof will be obligated to pay
the amount of such interest to the extent that it is in excess of the maximum
contract rate permitted by the Applicable Usury Law, (C) any such excess which
may have been collected shall be either applied as a credit against the then
unpaid principal amount of the Obligations of Borrower or refunded to Borrower,
at Lender's option, and (D) the effective rate of interest will be automatically
reduced to the maximum contract rate permitted by the Applicable Usury Law.
Without limiting the generality of the foregoing, to the extent permitted by the
Applicable Usury Law; (x) all calculations of the rate of interest which are
made for the purpose of determining whether such rate would exceed the maximum
contract rate permitted by the Applicable Usury Law shall be made by amortizing,
prorating, allocating and spreading during the period of the full stated term of
the Obligations, all interest at any time contracted for, charged or received
from Borrower or otherwise in connection with the Obligations; and (y) in the
event that the effective rate of interest on the Obligations should at any time
exceed the maximum contract rate permitted by the Applicable Usury Law, such
excess interest that would otherwise have been collected had there been no
ceiling imposed by the Applicable Usury Law shall be paid to Lender from time to
time, if and when the effective interest rate on the Obligations otherwise falls
below the maximum contract rate permitted by the Applicable Usury Law, to the
extent that interest paid to the date of calculation does not exceed the maximum
contract rate permitted by the Applicable Usury Law, until the entire amount of
interest which would have otherwise been collected had there been no ceiling
imposed by the Applicable Usury Law has been paid in full. Should the maximum
contract rate permitted by the Applicable Usury Law be increased at any time
hereafter because of a change in the law, then to the extent not prohibited by
the Applicable Usury Law, such increases shall apply to all the Obligations
regardless of when incurred; but, again to the extent not prohibited by the
Applicable Usury Law, should the maximum contract rate permitted by the
Applicable Usury Law be decreased because of a change in the law, such decreases
shall not apply to the Obligations regardless if resulting from an advance of
the Loan made after the effective date of such decrease.
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ARTICLE XII
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SPECIAL PROVISIONS
------------------
12.1 Lender covenants and agrees that, notwithstanding anything to
the contrary herein or in any other Receivables Loan Document, during the Term
hereof it shall take no action to disturb Purchasers in their use and possession
of their Time-Share Interests or otherwise to impair the rights and privileges
of such Purchasers under their Time-Share Interests or the governing documents
of the Project so long as such Purchasers are fulfilling their obligations under
their respective Instruments.
[THE SIGNATURES OF FINOVA CAPITAL CORPORATION AND
SAN ▇▇▇▇ RESORT PARTNERS, LLC APPEAR ON THE FOLLOWING PAGE.]
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Signature page for Loan and Security Agreement dated as of June 6,
1996 between FINOVA Capital Corporation and San ▇▇▇▇ Resort Partners, LLC.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by Persons duly authorized on the day and year first above written.
"Lender"
FINOVA CAPITAL CORPORATION, a
Delaware corporation
By /s/ ??^^
----------------------------
Vice President
Address:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Vice-President-Resort Finance
With a copy to:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Vice-President-Group Counsel
____ Check here to confirm that Paragraph 11.10
has been initialed.
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"Borrower"
SAN ▇▇▇▇ RESORT PARTNERS, LLC
a Georgia limited liability company
By: AKGI San ▇▇▇▇, Inc., a Georgia corporation
Title: Managing Member
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------
Title: Vice President
Address:
▇/▇ ▇▇▇▇▇▇/▇▇▇▇ Group, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Check here to confirm that Paragraph
----
11.10 has been initialed.
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