EX-10.29
AMENDED AND RESTATED [LOGO OF FINOVA
MASTER LOAN AND FINANCIAL INNOVATORS
SECURITY AGREEMENT APPEARS HERE]
Primary Borrower:
Sunterra Corporation
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Federal Employee Identification No.
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▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
$75,000,000
March __, 2000
RESORT FINANCE
TABLE OF CONTENTS
Page
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1. DEFINITIONS....................................................................... 1
2. LOAN COMMITMENT; USE OF PROCEEDS.................................................. 7
2.1 Inventory Loan Commitment; Determination of Advance Amounts.................. 7
2.2 Inventory Loan Revolver...................................................... 7
2.3 Continuation of Obligations Throughout Term.................................. 7
2.4 Use of Advances.............................................................. 8
2.5 Repayment of Inventory Loan.................................................. 8
2.6 Interest..................................................................... 8
2.7 Inventory Loan Required Payments............................................. 8
2.8 Prepayment................................................................... 9
2.9 Loan Fee; Custodial Fee; Availability Fee.................................... 9
2.10 Application of Proceeds of Collateral and Payments........................... 10
2.11 Borrower's Unconditional Obligation to Make Payments......................... 10
3. SECURITY.......................................................................... 10
3.1 Grant of Security Interest in Collateral..................................... 10
3.2 Ineligible Inventory......................................................... 10
3.3 Borrowing Base Reporting..................................................... 11
3.4 Maintenance of Security...................................................... 11
4. CONDITIONS PRECEDENT TO ADVANCES; MINIMUM AMOUNT AND MAXIMUM
FREQUENCY OF ADVANCES; METHOD OF DISBURSEMENT..................................... 11
4.1 Delivery of Loan Documents and Due Diligence Items Prior to Initial Advance.. 12
4.2 Additional Conditions Precedent for Subsequent Advances...................... 14
4.3 General Conditions Precedent to All Advances................................. 14
4.4 Conditions Satisfied at Borrower's Expense................................... 15
4.5 Minimum Amount and Maximum Frequency of Advances............................. 15
4.6 Disbursement of Advances..................................................... 15
4.7 No Waiver.................................................................... 15
5. BORROWER'S REPRESENTATIONS AND WARRANTIES......................................... 15
5.1 Good Standing................................................................ 15
5.2 Power and Authority; Enforceability.......................................... 15
5.3 Borrower's Principal Place of Business....................................... 15
5.4 No Litigation................................................................ 15
5.5 Compliance with Legal Requirements........................................... 15
5.6 No Misrepresentations........................................................ 16
5.7 No Default for Third Party Obligations....................................... 16
5.8 Payment of Taxes and Other Impositions....................................... 16
5.9 Sales Activities............................................................. 16
5.10 Time-Share Interest Not a Security........................................... 16
5.11 Zoning Compliance............................................................ 16
5.12 Eligible Inventory........................................................... 16
5.13 Association; Assessments and Reserves........................................ 16
5.14 Title to and Maintenance of Common Areas and Amenities....................... 16
5.15 Year 2000.................................................................... 17
5.16 Survival and Additional Representations and Warranties....................... 17
6. BORROWER'S COVENANTS.............................................................. 17
6.1 Borrower's Affirmative Covenants............................................. 17
6.2 Borrower's Negative Covenants................................................ 21
6.3 Survival of Covenants........................................................ 22
7. DEFAULT........................................................................... 22
7.1 Events of Default............................................................ 22
7.2 Remedies..................................................................... 24
7.3 Application of Proceeds During an Event of Default........................... 24
7.4 Uniform Commercial Remedies; Sale; Assembly of Collateral.................... 24
7.5 Application of Proceeds...................................................... 24
7.6 Lender's Right to Perform.................................................... 25
7.7 Non-Exclusive Remedies....................................................... 25
7.8 Waiver of Marshalling........................................................ 25
7.9 Attorney-in-Fact............................................................. 25
8. COSTS AND EXPENSES; INDEMNIFICATION............................................... 25
8.1 Costs and Expenses........................................................... 25
8.2 Indemnification.............................................................. 25
9. CONSTRUCTION AND GENERAL TERMS.................................................... 26
9.1 Payment Location............................................................. 26
9.2 Entire Agreement............................................................. 26
9.3 Powers Coupled with an Interest.............................................. 26
9.4 Counterparts................................................................. 26
9.5 Notices...................................................................... 26
9.6 Successors and Assigns....................................................... 26
9.7 Severability................................................................. 26
9.8 Time of Essence.............................................................. 27
9.9 Miscellaneous................................................................ 27
9.10 CHOICE OF LAW................................................................ 27
9.11 CHOICE OF JURISDICTION; WAIVER OF VENUE...................................... 27
9.12 WAIVER OF JURY TRIAL......................................................... 27
9.13 INDUCEMENT TO LENDER......................................................... 27
9.14 Compliance With Applicable Usury Law......................................... 27
9.15 NO RELATIONSHIP WITH PURCHASERS.............................................. 27
9.16 NO JOINT VENTURE............................................................. 28
9.17 Standards Applied to Lender's Actions........................................ 28
9.18 Meaning of Subordination..................................................... 28
9.19 Scope of Reimbursable Attorney's Fees........................................ 28
9.20 Publicity.................................................................... 28
9.21 Permitted Contests........................................................... 28
9.22 Reliance..................................................................... 28
Schedule of Additional Terms...................................................... 33
Exhibit A - Conditions of Eligible Inventory................................. 35
Exhibit B - Permitted Encumbrances........................................... 37
Exhibit C - Borrower's Certificate........................................... 38
Exhibit D - (NOT USED).......................................................
Exhibit E - Additional Conditions to Inventory Loan Advances................. 39
Exhibit E-1 - Request for Inventory Loan Advance and Certification........... 40
This AMENDED AND RESTATED MASTER LOAN AND SECURITY AGREEMENT is entered
into for good and valuable consideration, by and between FINOVA CAPITAL
CORPORATION, a Delaware corporation, and SUNTERRA CORPORATION, a Maryland
corporation (referred to herein as the "Primary Borrower"), together with those
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business organizations which are affiliated with Primary Borrower and which
either join in the execution of this Agreement below as a "Borrower" or
subsequently join in this Agreement as a "Borrower" hereunder pursuant to an
Assumption Agreement in form and substance satisfactory to Lender (all such
persons being collectively referred to herein as "Borrowers"). This Amended and
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Restated Master Loan and Security Agreement amends and restates that certain
Master Loan and Security Agreement dated September 30, 1999 previously entered
into between Lender, Primary Borrower, and certain Subsidiary Borrowers (herein,
the "Original Loan Agreement"). As of the Effective Date (defined below), this
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Agreement shall supercede and replace the Original Loan Agreement in its
entirety.
1. DEFINITIONS
As used in this Agreement and the other Loan Documents unless otherwise
expressly indicated in this Agreement or the other Loan Documents, the following
terms shall have the following meanings (such meanings to be applicable equally
both to the singular and plural terms defined)
"Access Agreement": that certain Agreement Regarding Access to Club
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Sunterra dated as of September 30, 1999 by and among Primary Borrower, Lender,
and Club Sunterra, Inc., a Florida corporation and wholly owned subsidiary of
Primary Borrower.
"Advance": an advance of the proceeds of the Inventory Loan by Lender to,
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or on behalf of, Borrower in accordance with the terms and conditions of this
Agreement.
"Affiliate": with respect to any individual or entity, any other
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individual or entity that directly or indirectly, through one or more
intermediaries, controls, or is controlled by, or is under common control with,
such individual or entity.
"Agreement": this Amended and Restated Master Loan and Security Agreement,
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as it may be from time to time renewed, amended, restated or replaced.
"Applicable Usury Law": the usury law chosen by the parties pursuant to
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the terms of paragraph 9.10 or such other usury law which is applicable if such
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usury law is not.
"Approved Alternative Interest": any ownership right to a dwelling space
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in a parcel of real property owned by Primary Borrower or any Subsidiary
Borrower which rights have yet to be included within an established Time-Share
Program pursuant to a Time-Share Declaration, but which Lender has approved as
Eligible Completed Project Inventory for inclusion as part of either Borrowing
Base hereunder. As of the Closing Date, Lender agreed that the seventy-five
(75) Units located in the Villas de Santa Fe Time-Share Project, Santa Fe, New
Mexico, which is owned by Primary Borrower, but which Units have not yet been
converted into Time-Share Interests, shall constitute Approved Alternative
Interests, and Primary Borrower contributed such Approved Alternative Interests
to the Primary Borrowing Base.
"Articles of Organization": the charter, articles, operating agreement,
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joint venture agreement, partnership agreement, by-laws and any other written
documents evidencing the formation, organization, governance and continuing
existence of an entity.
"Basic Interest": the meaning given to it in paragraph 2.6.
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"Borrower or Borrowers": means Primary Borrower, together with each
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Subsidiary Borrower, as the same exist from time to time, and subject to the
restrictions on assignment and transfer contained in this Agreement, the
successors and assigns of each such Person.
"Borrowing Base": means, as the context requires, either the Primary
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Borrowing Base or the Supplemental Borrowing Base.
"Borrowing Base Report": the same meaning given to it in paragraph 3.3.
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"Borrowing Base Shortfall": at any time, the amount by which the unpaid
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principal balance of the Inventory Loan exceeds the Primary Borrowing Base.
"Borrowing Term": the period commencing on the date of this Agreement and
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ending on the Maturity Date.
"Business Day": any day other than a Saturday, a Sunday, a national
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holiday or a day on which banks in Phoenix, Arizona are required to be closed.
"CILP Assignment": a written assignment to be executed and delivered to
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Lender by Borrower and creating in favor of Lender a perfected, direct
collateral assignment of the Contracts, Intangibles, Licenses and Permits in
order to facilitate Performance of the Obligations, as it may be from time to
time renewed, amended, restated or replaced.
"Collateral": collectively, (a) the Inventory; (b) the Insurance Policies;
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(c) all Borrower's rights under all escrow agreements and accounts pertaining to
any of the foregoing; (d) the furniture, fixtures and equipment located in the
Units to which the Completed Project Inventory relates, to the extent that any
Borrower has rights in such furniture, fixtures or equipment; and (e) any and
all other property now or hereafter serving as security
for the Performance of the Obligations, and all products and proceeds thereof.
"Completed Project Borrowing Base": an amount equal to twenty-five percent
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(25%) of the Retail Value of the Eligible Completed Project Inventory.
"Completed Project Inventory": collectively, all unsold Time-Share
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Interests, together with any unsold Approved Alternative Interests which may
then exist, but as to either unsold Time-Share Interests or unsold Approved
Alternative Interest, solely to the extent that such interests have been
encumbered by Lender pursuant to a Mortgage.
"Contracts, Intangibles, Licenses, Permits": all contracts, licenses,
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permits, plans and other intangibles in which Borrower now or hereafter has
rights (but only to the extent Borrower has rights in any such items and to the
extent such items primarily pertain to one or more of the Projects) and are now
or hereafter either (i) used in connection with the marketing and sale of
Completed Project Inventory and the management and/or operation of the Time-
Share Projects in which the Completed Project Inventory is situated or (ii)
related to the construction or renovation of any Project Inventory Under
Construction, including without limitation all agreements between the applicable
Borrower and any architect, engineer, or general contractor engaged in the
design or construction of the applicable improvements.
"Construction Reserve": with respect to any Project Inventory Under
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Construction, a reserve against borrowing availability hereunder, in an amount
equal to the amount of any mechanics', materialmen's, or other artisan's liens
which may at any time be outstanding against the applicable Project and as to
which Borrowers have not satisfied the requirements of paragraph 6.1(e) hereof.
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"Default Rate": the per annum rate of interest identified in the Schedule
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as the Default Rate.
"Designated Supplemental Collateral": means those Projects which, at any
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given time, have been designated by the applicable Borrower as intended to
satisfy the Supplemental Borrowing Base requirement of paragraph 2.1(b).
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"Effective Date": means the date upon which this Agreement has been
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executed and delivered by all parties hereto.
"Eligible Completed Project Inventory": all Completed Project Inventory
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which conforms to the standards set forth in Exhibit A. Unsold Completed
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Project Inventory that has qualified as Eligible Completed Project Inventory
shall cease to be Eligible Completed Project Inventory upon the date such
Inventory fails to continue to conform to the standards set forth in Exhibit A.
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"Eligible Inventory": means, collectively, all Eligible Completed Project
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Inventory, all Eligible Project Inventory Under Construction, and all Land
Inventory.
"Eligible Project Inventory Under Construction": all Project Inventory
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Under Construction which conforms to the standards set forth in Exhibit F.
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Project Inventory Under Construction which at any time conforms to the standards
set forth in Exhibit A, and therefore qualifies as Eligible Completed Project
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Inventory, shall cease to be treated as Eligible Project Inventory Under
Construction, and shall thereafter be treated as Eligible Completed Project
Inventory. Any Eligible Project Inventory Under Construction which fails to
conform to the standards set forth in Exhibit F shall, on the date such
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Inventory fails to so conform, cease to qualify as Eligible Project Inventory
Under Construction.
"Environmental Certificate": an environmental certificate executed and
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delivered to Lender by Borrower and such other persons as Lender may require, as
it may be from time to time renewed, amended, restated or replaced.
"Event of Default": the meaning set forth in paragraph 7.1.
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"GAAP": means generally accepted accounting principles in the United
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States of America as in effect from time to time as set forth in the opinions
and pronouncements of the Accounting Principles Board and the American Institute
of Certified Public Accountants and the statements and pronouncements of the
Financial Accounting Standards Boards which are applicable to the circumstances
as of the date of determination consistently applied, except that, for the
financial covenants set forth in this Agreement, GAAP shall be determined on the
basis of such principles in effect on the date hereof and consistent with those
used in the preparation of the audited financial statements delivered to FINOVA
prior to the date hereof. In the event that changes in GAAP shall be mandated
by the Financial Accounting Standards Board and/or the American Institute of
Certified Public Accountants or any similar accounting body of comparable
standing, or shall be recommended by Borrower's certified public accountants, to
the extent that such changes would modify such accounting terms or the
interpretation or computation thereof as contemplated by this Agreement at the
time of execution hereof, then in such event such changes shall be followed in
defining such accounting terms, and Borrower and Lender shall use reasonable
good faith efforts to agree upon an appropriate amendment to this Agreement to
reflect the original intent of such terms in light of such changes, whereupon
such new accounting terms shall apply.
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"Impositions": all real estate, personal property, excise, privilege,
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transaction, documentary stamp and other taxes, charges, assessments and levies
(including non-governmental assessments and levies such as maintenance charges,
association dues and assessments under private covenants, conditions and
restrictions) and any interest, costs, fines or penalties with respect thereto,
general and special, ordinary and extraordinary, foreseen and unforeseen, of any
kind and nature whatsoever which at any time prior to or after the execution
hereof may be assessed, levied or imposed.
"Incipient Default": an event which after notice and/or lapse of time
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would constitute an Event of Default.
"Initial Maximum Inventory Loan Amount": means the Maximum Inventory Loan
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Amount permitted as of the Effective Date.
"Installment Date": the meaning given to it in paragraph 2.7.
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"Insurance Policies": the insurance policies that Borrower is required to
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maintain and deliver pursuant to paragraph 6.1(c).
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"Interest Period": shall mean a thirty (30) day period commencing on each
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Interest Rate Determination Date.
"Interest Rate Determination Date": shall mean the first Business Day of
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each calendar month.
"Inventory": collectively, all Completed Project Inventory, all Project
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Inventory Under Construction and all Land Inventory which may then exist,
including any such Inventory which constitutes Designated Supplemental
Collateral.
"Inventory Loan": the revolving line of credit loan made pursuant to
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Article 2.
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"Land Borrowing Base": an amount equal to twenty-five percent (25%) of the
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applicable Borrower's total funds invested (as determined by Lender in its sole
discretion) with respect to all Land Inventory.
"Land Inventory": all undeveloped real estate owned by any Borrower, to
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the extent such Borrower has encumbered such real estate in favor of Lender
pursuant to a Mortgage.
"Legal Requirements": (a) all present and future judicial decisions,
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statutes, regulations, permits or certificates of any governmental authority in
any way applicable to Borrower or its property; and (b) all material contracts
or agreements (written or oral) by which Borrower or its property is bound or,
if compliance therewith would otherwise be in conflict with any of the Loan
Documents, by which Borrower or its property becomes bound with Lender's prior
written consent.
"Lender": FINOVA Capital Corporation, a Delaware corporation, and its
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successors and assigns.
"LIBO Adjusted Rate": shall mean the rate per annum determined by Lender
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by dividing (the resulting quotient to be rounded upward to the nearest 1/100 of
one percent) (i) the per annum rate of interest at which deposits in U.S.
Dollars in an amount substantially equal to the outstanding balance of the
Inventory Loan and having a maturity comparable to the Interest Period are
offered by Citibank, N.A. or its affiliates in the London interbank market at
approximately 11:00 a.m. (London time) on the applicable Interest Rate
Determination Date, by (ii) a number equal to 1.0 minus the aggregate (but
without duplication) of the rates (expressed as a decimal fraction) of reserve
requirements in effect on the applicable Interest Rate Determination Date
(including, without limitation, basic supplemental, marginal and emergency
reserves under any regulations of the Board of Governors of the Federal reserve
system or other governmental authority having jurisdiction with respect thereto,
as now and from time to time in effect) for eurocurrency funding (currently
referred to as "Eurocurrency liabilities" in Regulation D of such board) which
are required to be maintained by Lender.
"LIBO Rate": shall mean the per annum rate of interest which is ordinarily
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reported on page 3750 of the Telerate Matrix (in U.S. Dollars) that will be paid
for a deposit, in immediately available funds, of a principal amount
substantially equal to the outstanding balance of the Inventory Loan and having
a maturity comparable to the Interest Period; provided, however, if, for
whatever reason, Lender shall be unable to ascertain the LIBO Rate pursuant to
the preceding provisions, the LIBO Rate in such circumstances shall, for the
Interest Period in question, be the LIBO Adjusted Rate.
"Loan Documents": this Agreement, the Master Note, the Subsidiary Notes,
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the Environmental Certificate, the Access Agreement, the Security Documents, and
all other documents now or hereafter executed in connection with the Inventory
Loan, as they may be from time to time renewed, amended, restated or replaced,
together with such additional documents as Lender may require to amend those
Loan Documents previously executed and delivered in connection with the Original
Loan Agreement or any Project contributed to the Primary Borrowing Base prior to
the Effective Date.
"Loan Fee": the amount identified in the Schedule as the Loan Fee.
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"Master Note": the Amended and Restated Master Promissory Note to be made
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and delivered by Primary Borrower to Lender pursuant to paragraph 4.1, having a
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face amount equal to the Initial Maximum Inventory Loan Amount, dated as of even
date herewith, and made payable to Lender to evidence the Inventory
3
Loan, as it may be from time to time renewed, amended, restated or replaced,
together with any allonges thereto.
"Material Adverse Effect": shall mean a material adverse effect on (a) the
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business, financial condition, or operations of (i) Primary Borrower
individually or (ii) all Subsidiary Borrowers collectively, (b) the ability of
(i) Primary Borrower individually or (ii) all Subsidiary Borrowers collectively,
to Perform their Obligations to Lender, (c) one or more Projects which, in the
aggregate, have contributed at least fifteen percent (15%) of the total Eligible
Inventory constituting the Primary Borrowing Base, (d) one or more Projects
which, in the aggregate, have contributed at least twenty-five percent (25%) of
the total Eligible Inventory constituting the Supplemental Borrowing Base, or
(e) the Collateral. In determining whether any individual event would result in
a Material Adverse Effect, notwithstanding the fact that such event does not of
--
itself have such effect, a Material Adverse Effect shall be deemed to have
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occurred if the cumulative effect of such event and all other then existing
events would result in a Material Adverse Effect. The foregoing
notwithstanding, no Material Adverse Effect shall be deemed to have occurred due
to a reduction of either Borrowing Base resulting from either a revaluation of
any Collateral or from any Eligible Completed Project Inventory or Eligible
Project Inventory Under Construction having become ineligible unless Borrowers
have failed to provide substitute Collateral sufficient to remedy any resulting
Borrowing Base Shortfall or to restore the Supplemental Borrowing Base
Maintenance Requirement on or before the date which is ten (10) Business Days
following the earlier of (x) the date Borrowers submit a Borrowing Base Report
disclosing any Borrowing Base Shortfall or any failure to have maintained the
Supplemental Borrowing Base Maintenance Requirement, or (y) the date upon which
Lender notifies Borrower that such an adverse change has occurred.
"Maturity Date": the date (or if not a Business Day, the first Business
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Day thereafter) which is identified in the Schedule as the Maturity Date.
"Maximum Inventory Loan Amount": the amount identified in the Schedule as
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the Maximum Inventory Loan Amount.
"Measuring Date": means the first Business Day of each calendar month
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during the Term.
"Minimum Opinion Matters": due organization and good standing of Borrower
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and (if any) other sureties for the Performance of the Obligations who are not
natural persons; due authorization, execution and delivery of the Loan
Documents; enforceability of the Loan Documents (including choice of law
provisions); compliance of the Inventory Loan with usury laws; the absence of
conflict between the Loan Documents and its Articles of Organization and Legal
Requirements; compliance by Borrower with applicable laws (other than with
respect to instances of noncompliance which, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect); compliance
of the Time-Share Program Governing Documents and Time-Share Program Consumer
Documents with applicable laws; and proper perfection of the required liens and
security interests.
"Minimum Required Approvals": with respect to the particular Project
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involved, either the Minimum Required Construction Approvals or the Minimum
Required Time-Share Approvals, whichever is applicable.
"Minimum Required Construction Approvals": all regulatory approvals
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required for any Borrower to engage in the creation of improvements upon real
property, whether related to new construction, the addition to or renovation of
existing improvements or otherwise, including without limitation all necessary
zoning approvals, building permits, demolition permits, or any other approval
necessary to be in compliance with applicable law.
"Minimum Required Time-Share Approvals": all registrations/consents to
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sell and all final subdivision public reports/public offering
statements/prospectus, as applicable.
"Mortgage": a mortgage/deed of trust/deed to secure debt recorded against
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the Inventory in a given Project (or other form of development), as it may be
from time to time renewed, amended, restated or replaced.
"Notes": means, collectively, the Master Note and each of the Subsidiary
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Notes.
"Obligations": all obligations, agreements, duties, covenants and
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conditions of Borrower to Lender which Borrower is now or hereafter required to
Perform under the Loan Documents.
"Performance" or "Perform": full, timely and faithful performance.
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"Permitted Debt": the meaning given to it in paragraph 6.2(b).
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"Permitted Encumbrances": the rights, restrictions, reservations,
----------------------
encumbrances, easements and liens of record which Lender has agreed to accept,
as set forth in an exhibit which shall be attached to each Mortgage prior to the
time such Mortgage is recorded.
"Prepayment Premium": has the meaning given to it in paragraph 2.8.
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"Primary Borrower": Sunterra Corporation, a Maryland corporation.
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4
"Primary Borrowing Base": the sum of the Completed Project Borrowing Base,
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the Project Under Construction Borrowing Base and the Land Borrowing Base, as
determined from time to time; provided that no Designated Supplemental
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Collateral shall be included in the calculation of the Primary Borrowing Base;
less, any applicable Construction Reserve.
----
"Principal Reduction Date": means each of December 29, 2000 and June 29,
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2001, at which times the permitted Maximum Inventory Loan Amount is reduced in
accordance with the Schedule attached to this Agreement.
"Project": shall mean, individually and collectively, as the context
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requires, all Time-Share Projects, all Project Inventory Under Construction, and
all Land Inventory, including any Project constituting Designated Supplemental
Collateral.
"Project Inventory Under Construction": all real estate owned by any
------------------------------------
Borrower and with respect to which such Borrower is in the process of
constructing improvements, renovating or adding to existing improvements, or
otherwise building or reconfiguring improvements, together with the improvements
under construction, but solely to the extent that such real estate has been
encumbered by Lender pursuant to a Mortgage.
"Project Under Construction Borrowing Base": an amount, as calculated from
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time to time, equal to fifty percent (50%) of the total development cost
(including, without limitation, the funds invested with respect to the
underlying land), as determined by Lender in its sole discretion, incurred
through the date of any such calculation with respect to all Project Inventory
Under Construction.
"Purchase Contracts": a purchase contract pursuant to which any Borrower
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sold a Time-Share Interest to a Purchaser.
"Purchaser": shall mean each owner of one or more Time-Share Interests in
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those Time-Share Projects with respect to which unsold Time-Share Interests
constitute a portion of the Eligible Completed Project Inventory.
"Purchasers": shall mean all Purchasers with respect to a particular Time-
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Share Project, taken as a whole (with the result that representations,
warranties or covenants with respect to any Borrower's fulfillment of its
obligations to "Purchasers" shall not be breached as a result of the failure of
Borrower to have performed any obligations as to one or more individual
Purchasers unless such failure arises to the level of a material failure as to
all Purchasers considered collectively).
"Quiet Enjoyment Rights": the meaning given to it in paragraph 4.1(b).
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"Release Fee": shall have the meaning set forth in paragraph 3.2.
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"Required Closing Date": the date identified in the Schedule as the
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Required Closing Date.
"Resolution": a resolution of a corporation certified as true and correct
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by an authorized officer of such corporation, a certificate signed by the
manager of a limited liability company and such members whose approval is
required, or a partnership certificate signed by all of the general partners of
such partnership and such other partners whose approval is required.
"Retail Value": shall mean (i) with respect to any Time-Share Project that
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has had a period of at least twelve consecutive months in which Time-Share
Interests have been sold, the actual average sales price of such Time-Share
Interests achieved during the most recent twelve-month period preceding a given
Measuring Date, and (ii) with respect to any Time-Share Project that has not had
a period of at least twelve consecutive months of sales of Time-Share Interests,
the average retail value of all unsold Time-Share Interests as determined by
Lender in its discretion; provided, that at such time as an individual Time-
Share Project has generated sales of Time-Share Interests for a minimum of
twelve consecutive months, Retail Value shall be established pursuant to clause
(i) of this definition. The Retail Value applicable to Eligible Completed
Project Inventory shall be established at the time such Eligible Completed
Project Inventory is contributed to the Primary Borrowing Base or the
Supplemental Borrowing Base (as applicable), and shall thereafter only be
adjusted pursuant to the revaluation process set forth in paragraph 2.7(c).
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"Santa Fe Reserve": shall be a reserve against borrowing availability
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hereunder, in the amount of $750,000, with respect to that part of the Eligible
Completed Project Inventory which consists of Approved Alternative Interests
located in the Villas de Santa Fe Time-Share Project owned by Primary Borrower.
"Schedule": the Schedule of Additional Terms which follows the signature
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pages of the parties.
"Security Documents": the CILP Assignment, the Mortgage, this Agreement
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and all other documents now or hereafter securing the Obligations, as they may
be from time to time renewed, amended, restated or replaced.
"Subsidiary Borrower": means each Affiliate of Primary Borrower which has
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contributed Inventory to either Borrowing Base from time to time throughout the
Term; provided, that references to one or more Subsidiary Borrowers shall only
include entities which own unsold Inventory then constituting a portion of
either or both Borrowing Bases, with the result that any entity which may
previously have contributed Eligible Inventory to the
5
Collateral, but which Eligible Inventory has now all been sold or otherwise
released from both Borrowing Bases, shall no longer be considered a Subsidiary
Borrower hereunder (unless such entity thereafter contributes additional
Inventory to either Borrowing Base).
"Subsidiary Notes": shall mean those promissory notes made and delivered
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by Primary Borrower and individual Subsidiary Borrowers to Lender from time to
time, having a face amount equal to the original Borrowing Base attributable to
the Eligible Inventory contributed by the applicable Subsidiary Borrower,
together with any allonges thereto, as the same may from time to time be
renewed, amended, restated or replaced. Each Subsidiary Note shall indicate
that the indebtedness evidenced thereby constitutes a segregated portion of, and
is not in addition to, the indebtedness evidenced by the Master Note. Each
Subsidiary Borrower shall be liable only to the extent of the Collateral
contributed by such Subsidiary Borrower.
"Supplemental Borrowing Base": the sum of the Completed Project Borrowing
---------------------------
Base, the Project Under Construction Borrowing Base, and the Land Borrowing
Base, as determined from time to time; provided, that only Designated
--------
Supplemental Collateral shall be included in such calculation of the
Supplemental Borrowing Base; plus, at any given time, the amount by which the
----
Primary Borrowing Base exceeds the then outstanding balance of the Inventory
Loan; less, any applicable Construction Reserve.
----
"Supplemental Borrowing Base Maintenance Requirement": shall mean (i) for
---------------------------------------------------
the period from the Effective Date through the earlier to occur of (A) the date
the Supplemental Borrowing Base first equals or exceeds $25,000,000 or (B)
December 31, 2000, an amount equal to the amount by which the outstanding
principal balance of the Inventory Loan exceeds $50,000,000; (ii) for any period
after the date the Supplemental Borrowing Base first equals or exceeds
$25,000,000 until December 31, 2000, the amount of $25,000,000; and (iii) from
and after January 1, 2001, an amount equal to one-third (1/3rd) of the then
outstanding principal balance of the Inventory Loan.
"Supplemental Collateral Advance": means each Advance made on or after the
-------------------------------
Effective Date. Supplemental Collateral Advances are a sub-category of Advances
generally.
"Term": the duration of this Agreement, commencing on the date as of which
----
this Agreement is entered into and ending when all of the Obligations have been
Performed and Lender has no further obligation to extend credit in connection
with the Inventory Loan.
"Third Party Consents": those consents which Lender requires Borrower to
--------------------
obtain, or which Borrower is contractually or legally obligated to obtain, from
others in connection with the transaction contemplated by the Loan Documents.
"Time-Share Association": the association established in accordance with
----------------------
each Time-Share Declaration to manage the applicable Time-Share Program and in
which all owners of Time-Share Interests are or will be members.
"Time-Share Declaration": with respect to each Time-Share Project, that
----------------------
declaration of covenants, conditions and restrictions which has been executed by
Borrower, is recorded in the real estate records of the county where the Time-
Share Project is located, and establishes the Time-Share Program.
"Time-Share Interest": an undivided fractional fee simple interest as
-------------------
tenant-in-common (or an estate for years with a remainder over in fractional fee
simple as tenant-in-common) either (a) in a Unit (coupled with an undivided
fractional fee simple interest as tenant-in-common in the common areas of the
Time-Share Project) or (b) in the entire Time-Share Project, together with the
right to occupy assigned Units for use periods which have been properly reserved
pursuant to the rules and regulations of the Time-Share Program, and the non-
exclusive right to use such common elements during the same occupancy period.
"Time-Share Management Agreement": the management agreement from time to
-------------------------------
time entered into between the Time-Share Association and the Time-Share Manager
for the management of the Time-Share Program.
"Time-Share Manager": the person from time to time employed by the Time-
------------------
Share Association to manage the Time-Share Program.
"Time-Share Program": the program created under each Time-Share
------------------
Declaration by which purchasers may own Time-Share Interests, enjoy their
respective Time-Share Interests on a recurring basis, and share the expenses
associated with the operation and management of such program.
"Time-Share Program Consumer Documents": the Purchase Contract, notes,
-------------------------------------
security documents, deed of conveyance, credit application, credit disclosures,
rescission right notices, final subdivision public reports/prospectuses/public
offering statements, receipt for public report, exchange affiliation agreement
and other documents used or to be used by Borrower in connection with the sale
of Time-Share Interests.
"Time-Share Program Governing Documents": the Time-Share Declaration, the
--------------------------------------
Articles of Organization for the Time-Share Association, any and all rules and
regulations from time to time adopted by the Time-Share Association, the Time-
Share Management Agreement and
6
any subsidy agreement by which Borrower is obligated to subsidize shortfalls in
the budget of the Time-Share Program in lieu of paying assessments.
"Time-Share Project": each Time-Share Project identified in the Schedule
------------------
as a Time-Share Project, together with all Time-Share Projects subsequently
encumbered by a Mortgage in favor of Lender and constituting a portion of either
Borrowing Base. References herein to one or more Time-Share Projects shall only
include such projects in which Completed Project Inventory then constituting a
portion of either or both Borrowing Bases is situated, with the result that any
project which may previously have contributed Inventory to the Collateral, but
as to which all such Inventory has now been sold or otherwise released from both
Borrowing Bases, shall no longer be considered a Time-Share Project hereunder
(unless the owner of such project thereafter contributes additional Completed
Project Inventory situated in such project to either Borrowing Base).
"Title Insurer": a title company which is acceptable to Lender and issues
-------------
a Title Policy.
"Title Policy": in connection with each Mortgage which encumbers a part of
------------
the Collateral, an ALTA lender's policy of title insurance in an amount not less
than the Borrowing Base of the Inventory secured by the Mortgage, insuring
Lender's interest in the Mortgage as a perfected, direct, first and exclusive
lien on the Inventory encumbered thereby, subject only to the Permitted
Encumbrances, issued by Title Insurer and in form and substance acceptable to
Lender.
"Unit": a dwelling unit in the Time-Share Project.
----
"Warehouse Loan": means that certain revolving receivables line of credit,
--------------
in the maximum principal amount of up to $25,000,000.00, which Lender and
Primary Borrower are negotiating, and intend to enter into, on or before May 10,
2000.
"Warrant": has the meaning given to it in paragraph 2.9(c).
------- ----------------
2. LOAN COMMITMENT; USE OF PROCEEDS
2.1 Inventory Loan Commitment; Determination of Advance Amounts. (a)
-----------------------------------------------------------
Lender hereby agrees, if Borrower has Performed all of the Obligations then due,
to make Advances to Borrower in accordance with the terms and conditions of this
Agreement for the purposes specified in paragraph 2.4. The maximum amount of an
-------------
Advance shall be equal to (a) the aggregate Primary Borrowing Base for all
Eligible Inventory less (b) the then unpaid principal balance of the Inventory
Loan; provided, however, at no time shall the unpaid principal balance of the
Inventory Loan exceed the Maximum Inventory Loan Amount; and provided further,
that with respect to the first Advance made on the basis of Inventory which has
not previously constituted a portion of either Borrowing Base, the maximum
amount of such Advance shall not exceed the applicable Borrowing Base amount
directly attributable to such new Inventory.
(b) With respect to each Supplemental Collateral Advance, in addition to
the requirements of paragraph 2.1(a) above, Borrowers shall have encumbered
----------------
Designated Supplemental Collateral which, after giving effect to the amount of
such Supplemental Collateral Advance, is sufficient to cause the Supplemental
Borrowing Base to equal or exceed the Supplemental Borrowing Base Maintenance
Requirement. The foregoing notwithstanding, in no event is the Supplemental
Borrowing Base required to exceed $25,000,000.
(c) The foregoing notwithstanding, Primary Borrower shall not be entitled
to borrow the amount contained in the Santa Fe Reserve until such time as (i)
those improvements which have been disclosed to Lender prior to the Closing Date
with respect to the Units situated in the Villas de Santa Fe project have been
completed for certain of such Units, and (ii) Primary Borrower has provided to
Lender evidence that all amounts required to complete such improvements for such
Units have been expended. Upon completion of the foregoing items, Primary
Borrower shall be permitted to borrow that percentage of the Santa Fe Reserve as
is equal to the percentage of Approved Alternative Interests which remain as
unsold Time-Share Interests following such conversion (with the result that
Primary Borrower shall not be permitted to borrow such portion of the Santa Fe
Reserve as arose with respect to Approved Alternative Interests which were sold
or otherwise disposed of prior to the time such interests were converted into
Time-Share Interests).
(d) In addition, Borrowers shall not be entitled to borrow any amount at
any time subject to the Construction Reserve until the requirements of paragraph
---------
6.2(e) have been satisfied.
------
2.2 Inventory Loan Revolver. The Inventory Loan is a revolving line of
-----------------------
credit; however, all Advances shall be viewed as a single loan. Borrower shall
not be entitled to obtain Advances after the expiration of the Borrowing Term
unless Lender, in its discretion, agrees in writing with Borrower to make
Advances thereafter on terms and conditions satisfactory to Lender.
2.3 Continuation of Obligations Throughout Term. Whether or not
-------------------------------------------
Borrower's right to obtain Advances has terminated, this Agreement and
Borrower's liability for Performance of the Obligations
7
shall continue until the end of the Term and the repayment in full of the
Obligations.
2.4 Use of Advances. Borrower will use the proceeds of the Inventory Loan
---------------
only for working capital and other business purposes.
2.5 Repayment of Inventory Loan. The Inventory Loan shall be evidenced by
---------------------------
the Notes and shall be repaid in immediately available funds according to the
terms of the Notes and this Agreement.
2.6 Interest. Except as otherwise provided in the Notes or this
--------
Agreement, interest ("Basic Interest") shall accrue on the unpaid principal
--------------
balance of the Inventory Loan from time to time outstanding at the Basic
Interest Rate. Basic Interest shall be calculated on the basis of the actual
number of days elapsed during the period for which interest is being charged
predicated on a year consisting of three hundred sixty (360) days. Installments
of principal, Basic Interest and any other amounts due and payable under the
Loan Documents shall earn interest after they are due at the Default Rate. At
the option of Lender, while an Event of Default exists, interest shall accrue at
the Default Rate.
2.7 Inventory Loan Required Payments.
--------------------------------
(a) Monthly Payments; Maturity. Commencing on the last Business Day
--------------------------
of the calendar month in which the initial Advance is made and on the last
Business Day of each succeeding month thereafter during the Borrowing Term
(each, an "Installment Date"), Borrower will pay to Lender an installment
----------------
payment equal to accrued interest on the then outstanding balance of the
Inventory Loan. Following expiration of the Borrowing Term, accrued
interest on the outstanding principal balance of the Inventory Loan shall
be payable monthly, on the last Business Day of each month, and the
outstanding principal balance of the Inventory Loan shall be payable
through the payment of Release Fees concurrently with the sale or other
disposition of individual items of Inventory until the Maturity Date, at
which time all outstanding amounts shall be due and payable. Lender shall
provide to Primary Borrower, on or before the seventh day prior to the end
of each calendar month, a statement of accrued interest for such month
(which statement shall assume that the unpaid principal balance of the
Inventory Loan remains the same from the date of such statement through the
end of the applicable month). Lender shall deliver such statement of
accrued interest either via facsimile or e-mail, whichever method of
delivery is selected by Primary Borrower. In the event actual accrued
interest for a calendar month is different from the accrued interest set
forth on any monthly statement as a result of a change in the outstanding
principal balance of the Inventory Loan, an appropriate adjustment shall be
calculated by Lender and reflected in the next monthly accrued interest
statement.
(b) Borrowing Base Maintenance. If there exists a Borrowing Base
--------------------------
Shortfall and Borrower knows of the occurrence of such condition or should
have known of its occurrence by virtue of reports required to be delivered
to Lender, Borrower, without notice or demand, will immediately (a) make to
Lender a principal payment in an amount equal to the Borrowing Base
Shortfall plus accrued and unpaid interest on such principal payment or (b)
deliver to Lender additional Eligible Inventory having an aggregate Primary
Borrowing Base not less than the Borrowing Base Shortfall. Simultaneously
with the delivery of additional Eligible Inventory to correct a Borrowing
Base Shortfall, Borrower will deliver to Lender all of the items (except
for a "Request for Advance and Certification") required to be delivered by
-------------------------------------
Borrower to Lender pursuant to paragraph 4.2, together with a "Borrower's
------------- ----------
Certificate" in form and substance identical to Exhibit C.
----------- ---------
(c) Revaluation of Retail Value. Each party shall have the right to
---------------------------
request a revaluation of the Retail Value applicable to all then existing
Eligible Completed Project Inventory semi-annually, each such revaluation
to occur on a mid-year or annual anniversary of the Closing Date. In the
event either Lender or Borrower requests a revaluation of Retail Value,
each Borrower owning Eligible Completed Project Inventory as to which a
revaluation has been requested shall provide to Lender a summary of the
actual sales prices attained during the preceding twelve (12) months with
respect to the particular Eligible Completed Project Inventory involved,
and the average actual sales price realized upon sales of Eligible
Completed Project Inventory shall become the new Retail Value with respect
to the particular Time-Share Project in which such Eligible Completed
Project Inventory was sold. The foregoing notwithstanding, no revaluation
shall take place with respect to any Eligible Completed Project Inventory
which has constituted a part of the Collateral for less than six (6)
months. In the event that such recalculated Retail Value is less than the
Retail Value originally established when Eligible Completed Project
Inventory from such Time-
8
Share Project was contributed to the applicable Borrowing Base, and as a
result thereof either a Borrowing Base Shortfall is created or the
Supplemental Borrowing Base falls below the Supplemental Borrowing Base
Maintenance Requirement, then Borrower shall either comply with the Primary
Borrowing Base maintenance requirements of paragraph 2.7(b) above or shall
----------------
contribute additional Designated Supplemental Collateral in an amount
sufficient to maintain the Supplemental Borrowing Base at a level greater
than or equal to the Supplemental Borrowing Base Maintenance Requirement,
whichever is applicable.
(d) Changes in Inventory Classification. At such time as any Project
-----------------------------------
Inventory Under Construction has been completed and has received the
Minimum Required Time-Share Approvals, such Inventory shall be reclassified
as Completed Project Inventory for purposes of computing the Primary
Borrowing Base hereunder, in which case a Retail Value for such Completed
Project Inventory shall be established in accordance with this Agreement.
In like manner, at such time as any Borrower has obtained the Minimum
Required Construction Approvals and commenced project development upon any
property constituting Land Inventory, such Inventory shall be reclassified
as Project Inventory Under Construction. Upon any reclassification of
Inventory, the applicable Borrowing Base and its component parts (i.e., the
Completed Project Borrowing Base, Project Under Construction Borrowing
Base, and Land Borrowing Base) shall be recalculated, for purposes of
determining whether any Borrowing Base Shortfall then exists, or whether
the Supplemental Borrowing Base Maintenance Requirement exceeds the
Supplemental Borrowing Base. In order to provide Borrowers the benefit, in
the calculation of the Project Under Construction Borrowing Base, of
additional investment made by Borrowers in Project Inventory Under
Construction, Borrowers shall be entitled to revalue the Project Under
Construction Borrowing Base from time to time, provided that such
revaluations shall occur not more often than once per month, and shall
result in a minimum increase in the Project Under Construction Borrowing
Base of at least $1,000,000. In addition to the foregoing, Borrowers can
reclassify Designated Supplemental Collateral as Primary Borrowing Base
Collateral subject to the contribution of new Designated Supplemental
Collateral in an amount sufficient to maintain the Supplemental Borrowing
Base at a level greater than or equal to the Supplemental Borrowing Base
Maintenance Requirement.
2.8 Prepayment. Without the prior written consent of Lender, Borrower
----------
shall not be entitled to prepay the Inventory Loan except in accordance with the
terms of this Agreement. Borrower shall have the option to prepay the Inventory
Loan in full, but not in part, upon thirty (30) days prior written notice and
conditioned on the payment of a prepayment premium equal to five percent (5%)
(the "Prepayment Premium") of the outstanding principal balance of the Inventory
------------------
Loan as of the date notice of prepayment is given to Lender. The foregoing to
the contrary notwithstanding, neither any principal payments required pursuant
to paragraphs 2.7 or 3.2 hereof, nor the payments required to have taken place
---------------------
on or before the Principal Reduction Dates in order to cause the outstanding
principal balance of the Inventory Loan to be reduced below the applicable
Maximum Inventory Loan Amount, shall be considered prepayments which are
prohibited hereby, and no Prepayment Premium shall be required in connection
with any such payments, nor shall any prepayment resulting from the application
of (i) insurance proceeds following an insured casualty, or (ii) condemnation
proceeds in the event any portion of the Inventory is condemned, or (iii) the
payment of the applicable Release Fee upon the sale or other disposition of any
Project as a whole, be considered prepayments which are prohibited hereby or as
to which any Prepayment Premium is required.
2.9 Loan Fee; Administrative Fee; Warrants.
--------------------------------------
(a) Loan Fee. Borrower will pay to Lender the Loan Fee in accordance
--------
with the requirements set forth in the Schedule. The Loan Fee was earned
by Lender upon distribution of the first draft of this Agreement, and is
non-refundable.
(b) Administrative Fee. In the event Borrower requests more than one
------------------
Advance in any given calendar month, Borrower shall pay to Lender a fee
("Administrative Fee"), equal to $500 for each such additional Advance.
--------------------
(c) Warrant. Simultaneously with the execution and delivery of this
-------
Agreement, Primary Borrower shall deliver to Lender a warrant agreement
(the "Warrant"), in form and substance satisfactory to Lender, entitling
-------
Lender to purchase 500,000 shares of Primary Borrower's common stock, at
any time for a period commencing with the Effective Date and expiring on
the tenth anniversary of the Effective Date, at a purchase price of $3.00
per share. The
9
Warrant shall include, without limitation, demand registration rights,
piggy-back registration rights, and anti-dilution provisions, and shall
otherwise be in form and substance satisfactory to Lender.
2.10 Application of Proceeds of Collateral and Payments. Notwithstanding
--------------------------------------------------
anything in the Loan Documents to the contrary, the amount of all payments or
amounts received by Lender with respect to the Inventory Loan shall be applied
to the extent applicable under the Loan Documents: (a) first, to any past due
payments of interest on the Inventory Loan and to accrued interest on the
Inventory Loan through the date of such payment, including any default interest;
(b) then, to any late fees, overdue risk assessments, collection fees and
expenses and any other fees and expenses due to Lender under the Loan Documents
in connection with the Inventory Loan; and (c) last, the remaining balance, if
any, to the unpaid principal balance of the Inventory Loan; provided, however,
while an Event of Default or Incipient Default exists, each payment received
with respect to the Inventory Loan shall be applied to such amounts owed to
Lender by Borrower as Lender in its discretion may determine. In calculating
interest and applying payments as set forth above: (i) interest on the
Inventory Loan shall be calculated and collected through the date payment is
actually received by Lender; (ii) interest on the outstanding balance of the
Inventory Loan shall be charged during any grace period permitted under the Loan
Documents; (iii) at the end of each month, all past due interest and other past
due charges provided for under the Loan Documents with respect to the Inventory
Loan shall be added to the principal balance of the Inventory Loan; and (iv) to
the extent that Borrower makes a payment or Lender receives any payment or
proceeds of the Collateral for Borrower's benefit that is subsequently
invalidated, set aside or required to be repaid to any other person or entity,
then, to such extent, the Obligations in connection with the Inventory Loan
intended to be satisfied shall be revived and continue as if such payment or
proceeds had not been received by Lender, and Lender may adjust the Inventory
Loan balance in order to take into account such repayment, by restoring the
amount of the repayment to the outstanding balance of the Obligations (with the
particular Obligations deemed to have been revived to be such Obligations as
Lender, in its discretion, deems appropriate under the circumstances), giving
retroactive effect to the restoration of such particular Obligations as if the
payment required to be repaid had never been received by Lender. The provisions
of this paragraph 2.10 are also subject to the parties rights and obligations
--------------
under the Loan Documents as to the application of proceeds of the Collateral
following an Event of Default.
2.11 Borrower's Unconditional Obligation to Make Payments. Whether or not
----------------------------------------------------
the proceeds from the Collateral shall be sufficient for that purpose, Borrower
will pay when due all payments required to be made pursuant to any of the Loan
Documents, Borrower's obligation to make such payments being absolute and
unconditional.
3. SECURITY
3.1 Grant of Security Interest in Collateral. To secure the Performance
----------------------------------------
of all of the Obligations, together with the Performance of all obligations of
any Borrower to Lender arising in connection with the Warehouse Loan, Borrower
hereby grants to Lender a security interest in and collaterally assigns to
Lender the Collateral. Such security interest shall be absolute, continuing,
perfected, direct, first, exclusive and applicable to all existing and future
Advances and to all of the Obligations. In addition, each Borrower acknowledges
and agrees that, for purposes of administrative convenience to Borrowers
collectively, Borrowers have requested, and Lender has agreed, to permit the
Primary Borrowing Base to be calculated on a consolidated basis, with the
further result that the determination of any Borrowing Base Shortfall which
would obligate Borrower to make the payments required by paragraph 2.7(b) herein
----------------
shall only occur if a Borrowing Base Shortfall exists on a consolidated basis.
The foregoing approach results in significant administrative conveniences to
each Borrower, in that each Borrower may benefit from over-collateralization
existing on a consolidated basis by virtue of the fact that such an approach
permits the streamlined release procedure described in first sentence of
paragraph 3.2 hereof. Accordingly, each Borrower hereby acknowledges that it
-------------
has received benefit from the consolidated Borrowing Base Reporting procedure
implemented by this Agreement, and each Borrower acknowledges that the security
interest granted in favor of Lender pursuant to this Agreement, and pursuant to
each of the Mortgages, shall secure, up to the full amount of the applicable
Borrowing Base contributed by each such Borrower, the payment and performance of
all Obligations of each Borrower to Lender. Borrower further warrants and
guarantees the enforceability of Lender's security interest in the Collateral.
Lender is hereby appointed Borrower's attorney-in-fact to take any and all
actions in Borrower's name and/or on Borrower's behalf deemed necessary or
appropriate by Lender with respect to the collection and remittance of payments
(including the endorsement of payment items) received on account of the
Collateral; provided, however, that Lender shall not take any action which is
described in paragraph 7.2(c) unless an Event of Default exists.
----------------
3.2 Release of Collateral. (a) Primary Borrowing Base. Borrower shall
--------------------- ----------------------
be entitled to sell or
10
otherwise dispose of those unsold Time-Share Interests constituting a portion of
the Collateral, and to obtain a partial release of such Time-Share Interests
from the applicable Mortgage in favor of Lender without payment of a release
fee, or to sell or otherwise dispose of any Collateral through the sale of a
Project as a whole without payment of a release fee, if at the time such release
--
is requested: (i) no Event of Default or Incipient Default exists; (ii) after
giving effect to the proposed release of such Inventory, no Borrowing Base
Shortfall will exist or be created; and (iii) Borrower has requested Lender in
writing to release such items of Inventory. In the event that a proposed sale or
other disposition of Inventory will result in a Borrowing Base Shortfall, then
Lender shall only be obligated to release the Inventory being sold upon
satisfaction of the following conditions: (a) no Event of Default or Incipient
Default exists; (b) Borrower has paid a fee (the "Release Fee") (all Release
-----------
Fees paid under this Agreement shall apply against the outstanding principal
balance of the Inventory Loan), in an amount, (I) with respect to all Completed
Project Inventory, equal to twenty-five percent (25%) of the Retail Value which
was allocated to such item of Inventory at the time such item of Completed
Project Inventory was designated as Eligible Completed Project Inventory
hereunder and contributed to the Primary Borrowing Base, and (II) with respect
to either Land Inventory or Project Inventory Under Construction, which is
sufficient, after giving effect to the release of such Inventory, to avoid the
creation of a Borrowing Base Shortfall; and (c) Borrower has requested Lender in
writing to release such Inventory. Borrower will prepare all release documents
which shall be in form and substance satisfactory to Lender, and will deliver
them to Lender for execution. Lender will send Borrower the release documents
within a reasonable time after satisfaction of the conditions precedent
specified in the foregoing sentence.
(b) Supplemental Borrowing Base. Borrowers shall not be entitled to the
---------------------------
release of any Designated Supplemental Collateral except in accordance with the
provisions of this paragraph 3.2(b). Provided that no Event of Default or
----------------
Incipient Default exists, Borrowers (i) may replace Designated Supplemental
Collateral by contributing new Designated Supplemental Collateral, and may
obtain the release of a Project previously constituting Designated Supplemental
Collateral, provided that after giving effect to such substitution, the
Supplemental Borrowing Base remains equal to or greater than the Supplemental
Borrowing Base Maintenance Requirement; and (ii) may obtain the release of
certain Designated Supplemental Collateral in the context of a sale or other
disposition of any Project as a whole, or in the context of the sale or other
disposition of individual Time-Share Interests, provided that (A) Borrowers pay
a Release Fee in an amount equal to the difference between (I) the amount which
such Designated Supplemental Collateral originally added to the Supplemental
Borrowing Base less (II) the amount, if any, by which the Supplemental Borrowing
Base exceeds the Supplemental Borrowing Base Maintenance Requirement; and (B)
after giving effect to the release of such Designated Supplemental Collateral
and payment of such Release Fee, the Supplemental Borrowing Base equals or
exceeds the Supplemental Borrowing Base Maintenance Requirement.
3.3 Borrowing Base Reporting. At least two (2) Business Days prior to the
------------------------
date any Advance is requested hereunder, or prior to the date upon which
Borrower is requesting a partial release of Time-Share Interests pursuant to
paragraph 3.2 hereof, Borrower shall provide to Lender a report (herein, the
-------------
"Borrowing Base Report") with respect to each Project which makes up a part of
----------------------
the Eligible Inventory upon which such request for an Advance is based, or in
which any Time-Share Interests or other Collateral proposed to be released is
situated. A form of the Borrowing Base Report is attached hereto as Exhibit B.
Each Borrowing Base Report shall be prepared and presented on both a
consolidated and consolidating basis (i.e., each Borrowing Base Report shall
have a section describing, for all Borrowers, the aggregate of the Eligible
Completed Project Inventory, Eligible Project Inventory Under Construction, and
Land Inventory contributed by such Persons, with separate sections identifying
Eligible Completed Project Inventory, Eligible Project Inventory Under
Construction, and Land Inventory contributed by each individual Project).
Borrower will also deliver to Lender, promptly after receipt of a written
request for them, such other reports with respect to Inventory constituting part
of the Collateral as Lender may from time to time reasonably require, provided
that the information requested by Lender is readily available on Borrower's
record keeping systems, or can be developed from information which is readily
available. In the event that the information requested by Lender is neither
readily available on Borrower's record keeping systems nor can it be developed
from such readily available information, then Borrower and Lender shall confer
and attempt to identify alternate information which is readily available to
Borrower to be substituted for the information requested.
3.4 Maintenance of Security. Borrower will deliver or cause to be
-----------------------
delivered to Lender and will maintain or cause to be maintained in full force
and effect throughout the Term (except as otherwise expressly provided in such
Loan Document), as security for the Performance of the Obligations, the Security
Documents and all other security required to be given to Lender pursuant to the
terms of this Agreement.
4. CONDITIONS PRECEDENT TO ADVANCES; MINIMUM AMOUNT AND
11
MAXIMUM FREQUENCY OF ADVANCES; METHOD OF DISBURSEMENT
4.1 Delivery of Loan Documents and Due Diligence Items Prior to Initial
-------------------------------------------------------------------
Advance. Lender's obligation to make the initial Advance shall be subject to
-------
and conditioned upon the terms and conditions set forth in the following
subparagraphs and elsewhere in this Agreement, and Lender's obligation to make
each subsequent Advance hereunder shall be subject to satisfaction of the
following terms and conditions, to the extent applicable to any Subsidiary
Borrower not previously a party to this Agreement, or any Project and Eligible
Inventory not previously contributed to either Borrowing Base:
(a) Loan Documents. Borrower shall have delivered to Lender or caused
--------------
to be delivered to Lender the following duly executed, delivered (where
appropriate) and in form and substance satisfactory to Lender, not later
than the Required Closing Date:
(i) the Loan Documents;
(ii) UCC financing statements for filing and/or recording, as
appropriate, where necessary to perfect the security interests in the
Collateral;
(iii) the Mortgage applicable to each Time-Share Project in
which unsold Time-Share Interests have been contributed as Collateral
hereunder, or applicable to each other Project which has been contributed
as Collateral hereunder;
(iv) the Title Policy applicable to each Mortgage (subject to the
provisions of paragraph 4.1(e) hereof);
(v) a favorable opinion or opinions from independent counsel for
Borrower, which counsel shall be satisfactory to Lender and which opinion
shall cover such matters as Lender may require, including, without
limitation, the Minimum Opinion Matters pertaining to Borrower and each
Project (the foregoing notwithstanding, in the event Lender funds an
Advance under the Inventory Loan upon the basis of an opinion delivered to
Lender as to which Lender has not specifically reserved the right to
require additional opinions or to have such opinion otherwise be
supplemented, then such opinion shall be deemed acceptable regardless of
whether each item included within the description of Minimum Opinion
Matters has been addressed therein);
(vi) the Third Party Consents, if any;
(vii) a request for the first Inventory Loan Advance in form
and substance identical to Exhibit E-1; and
-----------
(viii) such other documents as Lender may reasonably require
to effect the intent and purposes of this Agreement.
(b) Organizational, Project and Other Due Diligence Documents.
---------------------------------------------------------
Borrower shall have delivered to Lender (I) with respect to the initial
Advance hereunder, prior to the earlier of (a) the date of the initial
Advance or (b) the Required Closing Date; or (II) with respect to each
subsequent Advance hereunder, at least ten (10) Business Days (unless a
longer period is expressly specified) prior to the date such Advance is
requested to be funded, the following items (in applying the following
provisions, references to Borrower, a Project, Title Policies, etc., shall
be deemed to apply only to those Borrowers which have contributed a portion
of the Collateral supporting the requested Advance and only to the Projects
from which such contributed Collateral is derived, and the items requested
by clauses (viii) - (xi) and (xiv) - (xvii) shall only be applicable to
Completed Project Inventory):
(i) the Articles of Organization of Borrower and (if any) other
sureties for the Obligations and, if applicable, their respective managers,
members and partners, to the extent any such entity is not a natural
person;
(ii) the Resolutions of Borrower and (if any) other sureties for
the Obligations and, if applicable, their respective managers, members and
partners, to the extent any such entity is not a natural person,
authorizing the execution and delivery of the Loan Documents, the
transactions contemplated thereby and such other matters as Lender may
reasonably require;
(iii) a certificate of good standing for Borrower and (if any)
other sureties for the Performance of the Obligations and, if applicable,
their respective managers, members and partners, to the extent any such
entity is not a natural person, from the state of its organization;
(iv) at least fifteen (15) Business Days prior to the date of the
Advance,
12
a Phase I environmental assessment of the Project;
(v) evidence that all taxes and assessments on the Project have
been paid;
(vi) a title commitment or preliminary title report for the
issuance of the Title Policy insuring the Mortgage together with copies of
all documents referred to therein and, in the event responsibility for
recordation of the Mortgage and such other matters as are involved in the
escrow with respect thereto are to be handled by a title agent rather than
by the Title Insurer through a direct operation, a closing protection
letter issued to Lender with respect to the issuing title agent by the
Title Insurer;
(vii) unless waived in writing by Lender, a 1997 ALTA/ACSM
survey map of the Project prepared by a licensed land surveyor acceptable
to Lender, certified to Lender in writing and showing the Project, evidence
of access to the Project, all easements necessary for the operation and use
of the Project, and such other details as Lender may reasonably require;
and/or at Lender's option, a condominium map if any part of any Project has
been dedicated to a condominium regime;
(viii) all permits, licenses, approvals and certificates for
the occupancy, use and operation of the Time-Share Project for time-share
and other intended uses, including any necessary architectural committee
approvals (and, with respect to any newly-completed construction, including
specifically the certificate of occupancy or other applicable form of final
governmental approval evidencing that such construction has been
satisfactorily completed), but excluding the Minimum Required Time-Share
Approvals;
(ix) evidence that the Project is zoned for time-share and other
intended uses and that all approvals required for such uses under any
covenants, conditions and restrictions have been obtained, which evidence
shall be deemed satisfied by Borrower providing to Lender a copy of the
certificate of occupancy (or other applicable form of final governmental
approval) for any individual Time-Share Project, in the absence of any
direct evidence indicating non-compliance with applicable zoning, the
absence of any necessary approval, or a violation of any existing covenant,
condition or restriction;
(x) at least fifteen (15) Business Days prior to such Advance,
the Minimum Required Time-Share Approvals;
(xi) at least fifteen (15) Business Days prior to such Advance, a
copy of the Time-Share Program Governing Documents;
(xii) the Insurance Policies;
(xiii) at least fifteen (15) Business Days prior to such
Advance, evidence that the Project is not located within a flood prone area
or, if within a flood zone, evidence that flood insurance has been
obtained;
(xiv) if requested by Lender, at least fifteen (15) Business
Days prior to such Advance, evidence of the current and continued
availability of utilities necessary to serve any Time-Share Project or
Project Inventory Under Construction for time-share and other intended
uses;
(xv) if requested by Lender, at least fifteen (15) Business Days
prior to such Advance, evidence of access to and parking for the Time-Share
Project adequate for time-share and hotel uses;
(xvi) if requested by Lender, a copy of all marketing
contracts, management contracts, service contracts, operating agreements,
equipment leases, space leases and other agreements pertaining primarily to
the Time-Share Project and which are necessary for the sale, operation and
intended time-share use of the Time-Share Project and are not otherwise
required pursuant to another item in this paragraph;
(xvii) evidence that each owner of a Time-Share Interest will
have available to it the quiet and peaceful enjoyment of the Time-Share
Interest (including promised amenities and necessary easements) owned by it
which cannot be disturbed so long as such owner is not in default of its
obligations to pay the purchase price of its Time-Share Interest, to pay
assessments to the Time-Share Association, and to comply with reasonable
rules and regulations pertaining to the use of the Time-Share Interest
("Quiet Enjoyment Rights");
------------------------
(xviii) the items required pursuant to Exhibit E; and
---------
(xix) such other items as Lender requests which are reasonably
necessary to evaluate the request for the Advance and the
13
satisfaction of the conditions precedent to the Advance.
(c) Credit Reports; Search Reports; Site Inspections. Lender shall
------------------------------------------------
have received, in form and substance satisfactory to Lender, the results of
UCC searches with respect to Borrower and the Time-Share Association, if
any, and lien, litigation, judgment and bankruptcy searches for Borrower
and (if existing) the Time-Share Association conducted in such
jurisdictions as Lender deems appropriate and having a currency meeting
Lender's requirements. In addition, if requested by Lender, a member of
Lender's credit department shall have visited each Project and shall be
satisfied with the results of such inspection.
(d) Structural and Mechanical. With respect to any Completed Project
-------------------------
Inventory, if requested in writing by Lender, Borrower shall provide to
Lender, at Borrower's sole cost and expense, a structural inspection report
and mechanical inspection report covering the Time-Share Project prepared
by a construction consultant or engineer acceptable to Lender. The results
of such structural and mechanical inspection must be satisfactory to
Lender. In the event the structural and mechanical inspection report
reveals that repairs must be made to the Time-Share Project, Borrower's
budget shall include the cost of such repairs.
(e) Certain Matters Affecting Project Inventory Under Construction.
--------------------------------------------------------------
With respect to any Project Inventory Under Construction to be contributed
to the Primary Borrowing Base, the Title Policy shall be in form and
substance satisfactory to Lender and, without limiting the generality of
the foregoing, shall not contain any exceptions for mechanics',
materialmen's or other artisan's liens. With respect to Project Inventory
Under Construction which has been designated as Designated Supplemental
Collateral, Lender shall accept a Title Policy including an exception for
mechanics' or materialmens' liens, provided that Borrower has reaffirmed
the representations and warranties set forth in paragraph 5.16 as to the
--------------
applicable Project, and in reliance upon Borrowers' affirmative covenant as
set forth in paragraph 6.1(e) hereof.
----------------
4.2 Additional Conditions Precedent for Subsequent Advances. For each
-------------------------------------------------------
Advance, Lender's obligation to make such Advance shall be subject to the terms
and conditions set forth in Exhibit E, including delivery of the items called
---------
for therein at least five (5) Business Days prior to the date of such Advance.
4.3 General Conditions Precedent to All Advances. Lender's obligation to
--------------------------------------------
fund any Advance is subject to and conditioned upon the additional terms and
conditions set forth in the following subparagraphs being satisfied at the time
of such Advance:
(a) No material adverse change shall have occurred in the Projects,
the Collateral, the business or financial condition of Borrower (since the
date of the latest financial and operating statements given to Lender by or
on behalf of Borrower and after giving effect to those items disclosed on
Schedule 5.1 attached hereto which, for purposes of applying this provision
------------
following the Effective Date, shall not consider any change or circumstance
which took place or existed prior to the Effective Date and had been
---
disclosed to Lender in writing on or before the Effective Date), or the
ability of Borrower to Perform the Obligations.
(b) There shall have been no material, adverse change in the
warranties and representations made in the Loan Documents by Borrower
and/or any surety for the Performance of the Obligations.
(c) Neither an Event of Default nor Incipient Default shall have
occurred and be continuing.
(d) The interest rate applicable to the Advance (before giving effect
to any savings clause) will not exceed the maximum rate permitted by the
Applicable Usury Law.
(e) Borrower shall have paid to Lender the Loan Fee and any other
applicable fees which are required to be paid at the time of the Advance.
(f) To the extent that one or more of the Borrowers have requested
that they be permitted to make payments directly to the applicable Title
Insurers amounts which include, but are not necessarily limited to the
premium payable with respect to the issuance of the Title Policies in
connection with any prior disbursement of an Advance, Lender shall not be
obligated to fund a subsequent Advance until Borrower has made such payment
and Lender has received all Title Policies required hereunder. In the
event that Borrower for any reason fails to make such payment to the Title
Insurer, Lender shall be entitled to make such payment directly in order to
cause the Title
14
Policy to be issued, and the amount of any such payment shall constitute an
Obligation hereunder.
4.4 Conditions Satisfied at Borrower's Expense. The conditions to
------------------------------------------
Advances shall be satisfied by Borrower at its expense.
4.5 Minimum Amount and Maximum Frequency of Advances. Advances shall be
------------------------------------------------
made in amounts not less than the amounts identified in the Schedule as the
Minimum Advance Amount. Advances shall be made no more frequently in any
calendar month than the frequency identified in the Schedule as the Maximum
Advance Frequency.
4.6 Disbursement of Advances. Advances may be payable to Borrower; or if
------------------------
requested by Borrower and approved in writing by Lender, to others, either
severally or jointly with Borrower, for the credit or benefit of Borrower.
Advances shall be disbursed by wire transfer or, at Borrower's option exercised
by written request to Lender, by check or drafts. Borrower will pay Lender's
reasonable charge in connection with any wire transfer, and Lender's current
charge is identified in the Schedule as the Wire Transfer Fee. Lender may, at
its option, withhold from any Advance any sum (including costs and expenses)
then due to it under the terms of the Loan Documents or which Borrower would be
obligated to reimburse Lender pursuant to the Loan Documents if first paid
directly by Lender.
4.7 No Waiver. Although Lender shall have no obligation to make an
---------
Advance unless and until all of the conditions precedent to the Advance have
been satisfied, Lender may, at its discretion, make Advances prior to that time
without waiving or releasing any of the Obligations.
5. BORROWER'S REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender that, other than with
respect to those matters which have been disclosed in writing to Lender as of
the Effective Date, a listing of which is set forth on Schedule 5.1 attached
------------
hereto:
5.1 Good Standing. Borrower is and duly organized, validly existing and
-------------
in good standing as a business organization of the type identified in the
Schedule as Borrower's Type of Business Organization under the laws of the state
identified in the Schedule as Borrower's State of Organization and is in good
standing and authorized to do business in the jurisdiction where each Project is
located and in each jurisdiction where Borrower is at any time selling Time-
Share Interests or where at any time the location or nature of its properties or
its business makes such good standing and qualification necessary. Borrower has
full power and authority to carry on its business and own its property.
5.2 Power and Authority; Enforceability. Borrower has full power and
-----------------------------------
authority to execute and deliver the Loan Documents and to Perform the
Obligations. All action necessary and required by Borrower's Articles of
Organization and all other Legal Requirements for Borrower to obtain the
Inventory Loan, to execute and deliver the Loan Documents which have been or
will be executed and delivered in connection with the Loan Documents and to
Perform the Obligations has been duly and effectively taken. The Loan Documents
are, and to Borrower's knowledge shall be, legal, valid, binding and enforceable
against Borrower; and do not violate the Applicable Usury Law or constitute a
default or result in the imposition of a lien under the terms or provisions of
any agreement to which Borrower is a party. Except for the Third Party Consents
delivered pursuant to paragraph 4.1(a) and the consents evidenced by the
----------------
Resolutions delivered pursuant to paragraph 4.1(b), no consent of any
----------------
governmental agency or any other person not a party to this Agreement is or will
be required as a condition to the execution, delivery or enforceability of the
Loan Documents .
5.3 Borrower's Principal Place of Business. Borrower's principal place of
--------------------------------------
business and chief executive office are located at the addresses identified in
the Schedule as Borrower's Principal Place of Business and Borrower's Chief
Executive Office.
5.4 No Litigation. 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 could
reasonably be expected to result in a Material Adverse Effect, other than with
respect to actions or proceedings involving or relating to the operation of an
individual Project only (e.g., personal injury lawsuits) which are adequately
covered by insurance with respect to which the applicable insurance carrier has
neither denied coverage nor delivered to the applicable Borrower a letter
reserving its rights with respect to the claims asserted. Borrower will
promptly notify Lender if any such action, litigation or proceeding is commenced
or threatened, and the foregoing representation and warranty shall be deemed to
be true and accurate at any given time after giving effect to all disclosures of
any hereafter-arising matters of which Borrower has provided notice to Lender
after the date of this Agreement.
5.5 Compliance with Legal Requirements. Borrower has complied with all
----------------------------------
Legal Requirements, including, without limitation all Legal Requirements of (a)
the state in which the Project is located and (b) all other governmental
jurisdictions in which either (i) the
15
Project is located or (ii) Time-Share Interests will be sold or offered for
sale, except to the extent that the failure of Borrower to have complied with
any such Legal Requirements would not reasonably be expected to have a Material
Adverse Effect.
5.6 No Misrepresentations. The Loan Documents and all certificates,
---------------------
financial statements and written materials furnished to Lender by or on behalf
of Borrower in connection with the Inventory Loan do not contain as of the date
furnished to Lender any untrue statement of a material fact or omit to state a
fact which materially adversely affects or in the future may materially
adversely affect any Project, the Collateral, the business or financial
condition of Borrower, or the ability of Borrower to Perform the Obligations.
5.7 No Default for Third Party Obligations. Borrower is not in default
--------------------------------------
under any other agreement evidencing, guaranteeing or securing borrowed money or
a receivables purchase financing or in violation of or in default under any
material term in any other material agreement, instrument, order, decree or
judgment of any court, arbitration or governmental authority to which it is a
party or by which it is bound.
5.8 Payment of Taxes and Other Impositions. Borrower has filed all tax
--------------------------------------
returns and, subject to the provisions of paragraph 9.21, has paid all
--------------
Impositions, if any, required to be filed by it or paid by it, including real
estate taxes and assessments relating to the Project or the Collateral.
5.9 Sales Activities. Prior to the date of this Agreement, Borrower has
----------------
sold Time-Share Interests and offered Time-Share Interests for sale only in the
jurisdictions identified in the Schedule as the Jurisdictions Where Sales And/or
Offers to Sell Have Occurred.
5.10 Time-Share Interest Not a Security. Borrower has not sold or offered
----------------------------------
for sale any Time-Share Interest as an investment. Neither the sale nor the
offering for sale of any Time-Share Interest will constitute the sale or the
offering for sale of a security under any applicable law.
5.11 Zoning Compliance. Neither time-share use nor other transient use and
-----------------
occupancy of any Time-Share Project violates or constitutes or will violate or
constitute a non-conforming use or require a variance under any private covenant
or restriction or any zoning, use or similar law, ordinance or regulation
affecting the use or occupancy of any Time-Share Project or Project Inventory
Under Construction.
5.12 Eligible Inventory. Each unsold Time-Share Interest which is
------------------
encumbered in favor of Lender pursuant to this Agreement and against which an
Advance is requested, or which is encumbered in favor of Lender pursuant to
Borrowers' obligations under paragraph 2.7 shall constitute Eligible Inventory
-------------
at the time such Advance is made. Borrower has Performed in all material
respects all of its obligations to Purchasers, to the extent that Borrower was
obligated to have performed such obligations as of the date hereof, and with
respect to any obligations to Purchasers as to which performance by Borrower is
to occur in the future, Borrower is not aware of any fact or circumstance which
causes it to believe that it will be unable to timely perform those obligations.
5.13 Association; Assessments and Reserves. Each Purchaser, upon the
-------------------------------------
closing of the purchase by such Person of a Time-Share Interest, automatically
became a member of the applicable Time-Share Association, and is thereafter
entitled to remain a member of the Time-Share Association and be entitled to
vote on the affairs thereof, subject only to retaining ownership of a Time-Share
Interest. At all times throughout the Term: (a) the Time-Share Association will
have authority to levy annual assessments to cover the costs of maintaining and
operating the Time-Share Project; (b) to Borrower's knowledge, the Time-Share
Association will be solvent; (c) to Borrower's knowledge, levied assessments
will be adequate to cover the current costs of maintaining and operating the
Time-Share Project and to establish and maintain a reasonable reserve for
capital improvements; and (d) to Borrower's knowledge, there will be no events
which could give rise to a material increase in such costs, except for additions
of subsequent phases of the Time-Share Project that will not materially increase
assessments.
5.14 Title to and Maintenance of Common Areas and Amenities. Except as
------------------------------------------------------
otherwise permitted and disclosed by the Time-Share Program Governing Documents:
(a) the Time-Share Association or the owners of Time-Share Interests in common
will at all times own the furnishings in the Units and all the common areas in
the Time-Share Project and other amenities which have been promised or
represented as being available to Purchasers (except to the extent of those
amenities which are available to the Purchasers pursuant to a lease or form of
access other than ownership, which alternate form of access was disclosed to the
Purchasers in the Time-Share Program governing documents), free and clear of
liens and security interests except for the Permitted Encumbrances; (b) no part
of the Time-Share Project is or will be subject to partition by the owners of
Time-Share Interests (provided, however, that individual owners of Time-Share
Interests have the right to partition those Time-Share Interests, which
partition does not affect the Time-Share Project taken as a whole); and (c) all
access roads and utilities and off-site improvements necessary to the use of the
Time-Share Project will have been dedicated to and/or accepted by the
responsible governmental authority or utility company or are owned by an
association of owners of property in a
16
larger planned development or developments of which the Time-Share Project is a
part.
5.15 Year 2000. Borrower has taken all action reasonably believed to be
---------
sufficient to assure that there will be no material adverse change to Borrower's
business by reason of the advent of the year 2000, including without limitation
that all computer-based systems, embedded microchips and other processing
capabilities effectively recognize and process dates after April 1, 1999.
5.16 Certain Matters Affecting Project Inventory Under Construction. With
--------------------------------------------------------------
respect to all Project Inventory Under Construction which has been contributed
either to the Primary Borrowing Base or the Supplemental Borrowing Base,
Borrowers hereby represent and warrant that as of the time any such Project is
contributed, there are no outstanding mechanics', materialmen's or other
artisan's liens, and that there is no Person who would be entitled to file any
such lien claim except for those Persons who have performed services and whose
invoices are not past their due date.
5.17 Survival and Additional Representations and Warranties. The
------------------------------------------------------
representations and warranties and contained in this Article 5 are in addition
---------
to, and not in derogation of, the representations and warranties contained
elsewhere in the Loan Documents and shall be deemed to be made and reaffirmed
prior to the making of each Advance.
6. BORROWER'S COVENANTS
6.1 Borrower's Affirmative Covenants.
--------------------------------
(a) Good Standing. Borrower will maintain its existence as a business
-------------
organization of the type described below when it has signed this Agreement,
duly organized, validly existing and in good standing as the type of
organization identified in the Schedule as Borrower's Type of Business
Organization under the laws of the state identified in the Schedule as
State of Organization and remain in good standing and authorized to do
business in the jurisdiction where the Project is located and in each
jurisdiction where Borrower is then selling Time-Share Interests or where
at any time the location or nature of its properties or its business then
makes such good standing and qualification necessary. Borrower will
maintain full authority to Perform the Obligations and to carry on its
business and own its property.
(b) Compliance with Legal Requirements. Borrower will comply with all
----------------------------------
Legal Requirements in all material respects, including, without limitation,
all Legal Requirements of the state in which the Project is located and all
other governmental jurisdictions in which the Project is located or in
which Time-Share Interests will be sold or offered for sale.
(c) Insurance. Borrower will pay the cost of and will maintain and
---------
deliver to Lender evidence of insurance policies required by Lender which
cover such risks, are written by insurers and are in amounts and on forms
satisfactory to Lender. The foregoing notwithstanding, to the extent that
it is the responsibility of any Time-Share Association to maintain
insurance which is required by Lender, Borrower shall be permitted to
perform its obligations pursuant to this paragraph 6.1(c) by delivering
----------------
evidence to Lender confirming that the necessary insurance is being
maintained by such Time-Share Association; provided, however, that with
respect to any Time-Share Association as to which one or more Borrower has
the power to direct and control its activities, such Borrower shall be
responsible for providing satisfactory insurance in the event such Time-
Share Association has failed to do so.
(d) Reports.
-------
(i) Financial Information. Commencing with the period ending
---------------------
December 31, 1999, Borrower will furnish or cause to be furnished to Lender
within one hundred twenty (120) days after each fiscal year of the subject,
a copy of the current annual financial statements of Borrower and of each
Time-Share Association; and will furnish or cause to be furnished to Lender
within forty-five (45) days after each interim quarterly fiscal period of
the subject, a copy of the current financial statements of Borrower for the
period commencing with the first day of the fiscal year and concluding with
such quarter end. Such financial statements shall contain a balance sheet
as of the end of the relevant fiscal period and statements of income and of
cash flow for such fiscal period (together, in each case, with the
comparable figures for the corresponding period of the previous fiscal
year), all in reasonable detail. All financial statements shall be
prepared in accordance with generally accepted accounting principles,
consistently applied. All financial statements of Borrower and of each
Time-Share Association shall be certified by the chief financial officer of
such entity. Annual statements of Borrower and of each Time-Share
Association shall be audited, certified by a recognized firm of certified
public accountants reasonably satisfactory to Lender. Anything in
17
this paragraph 6.1(d)(i) to the contrary notwithstanding, the following two
-------------------
conventions shall be applied to Borrower's reporting obligations hereunder.
With respect to Borrower's required financial information hereunder,
Borrower shall be permitted to satisfy its reporting obligations by
providing a copy of Primary Borrower's consolidated financial statements as
filed with the U.S. Securities and Exchange Commission (the "SEC"), as long
---
as those reports are in compliance with then existing SEC reporting
requirements for publicly traded companies. With respect to the financial
information required to be provided for the various Time-Share
Associations, in the event that no Borrower is in control of a given Time-
Share Association, then Borrower's obligation to provide the foregoing
financial information shall only require Borrower to use its reasonable
good faith efforts to obtain and deliver to Lender the information
requested. In the event that Primary Borrower shall ever cease to be a
reporting company with the SEC, with the result that the financial
statements provided by Primary Borrower hereunder shall no longer be
Primary Borrower's consolidated financial statements as filed with the SEC,
then upon such occurrence Primary Borrower shall be obligated to deliver to
Lender, together with such financial statements as Primary Borrower does
deliver to Lender, a certificate signed by Borrower's chief executive
officer and chief financial officer stating that, to the best of such
person's knowledge, there exists no Event of Default or Incipient Default
or, if any such Event of Default or Incipient Default exists, specifying
the nature and period of its existence and what action Borrower proposes to
take with respect to it. Such certificate shall state specifically that
Borrower is in compliance with paragraphs 6.1(c), 6.2(b) and 6.2(c), along
------------------------- ------
with any required financial covenants. For purposes of this paragraph, in
the case of a partnership or limited liability company, "chief executive
---------------
officer" of an entity shall mean the general partner, member or manager
-------
having primary responsibility for the operations of such entity; and "chief
-----
financial officer" of such an entity shall mean the general partner, member
-----------------
or manager having primary responsibility for the finances of such entity.
(ii) Litigation. Borrower will promptly notify Lender if any
----------
action, litigation or other proceeding becomes pending or, to Borrower's
knowledge, threatened before any arbitration tribunal, court, governmental
agency or administrative body against Borrower, which could reasonably be
expected to result in a Material Adverse Effect (exclusive of those items
which are related to an individual Project and with respect to which
adequate insurance coverage [which has not been denied or reserved against]
exist, in the manner described in paragraph 5.4 hereof). The foregoing
-------------
notwithstanding, with respect to any lawsuit involving a shareholder class
action against Primary Borrower, or seeking to establish or confirm a class
of shareholders for purposes of pursuing a shareholder class action against
Primary Borrower, Primary Borrower shall only be required to notify Lender
as of the fifteenth (15th) and last day of each month with respect to any
such lawsuits filed subsequent to the last such report provided by Primary
Borrower.
(iii) Sales Reports. On or before the fifteenth (15th) day
-------------
after the end of each month, Borrower will cause to be furnished to Lender,
if requested by Lender in writing, a sales report showing the number of
sales and closings of Time-Share Interests and the aggregate dollar amount
thereof, including down payments, during such month.
(iv) Time-Share Project and Sales Information. Borrower will
----------------------------------------
deliver current price lists for Time-Share Interests to Lender from to time
to time within ten (10) Business Days after receipt of a written request
from Lender to do so. Borrower will deliver to Lender from time to time,
as available and promptly upon amendment or effective date, upon written
request from Lender for such information, sales literature, registrations/
consents to sell, and final public reports/public offering statements/
prospectuses. Borrower will deliver to Lender, upon written request from
Lender for such information, any changes which Borrower proposes or any
other person having the power to do so proposes be made to the Time-Share
Program Governing Documents last delivered to Lender, together with a
description and explanation of the changes; and other items requested by
Lender which relate to the Time-Share Interests.
(v) Right to Inspect. Borrower will at its expense permit
----------------
Lender and its representatives at all reasonable times to inspect each
Project and to inspect, audit and copy Borrower's books and records.
(vi) Time-Share Association Budgets. Borrower will submit to
------------------------------
Lender (if the same had been requested by
18
Lender in writing) within ten (10) days after each is available, proposed
annual maintenance and operating budgets of the Time-Share Association,
certified to be adequate by the Time-Share Manager (or if there is not a
Time-Share Manager, by an authorized officer of the Time-Share Association)
and a statement of the annual assessment to be levied upon the owners of
Time-Share Interests; and will use reasonable good faith efforts to cause
to be made available to Lender for inspection, auditing and copying, upon
Lender's request, the books and records of the Time-Share Association.
(vii) Material Increases to Assessments. If Borrower has
---------------------------------
knowledge or has reason to believe that an event (other than general
changes in the economy) has occurred or could occur which could give rise
to a material increase in assessments to cover the then current costs of
operating the Time-Share Project and to establish and maintain a reasonable
reserve for capital improvements to the Time-Share Project, it will notify
Lender of the occurrence of such event.
(viii) Additional Information. Borrower will deliver to
----------------------
Lender the reports and other information required pursuant to paragraph
---------
3.3, and Borrower will make available such further information as Lender
may from time to time reasonably request.
(e) Correction of Construction Liens. In the event that any
--------------------------------
mechanics', materialmen's or other artisan's liens (herein, the
"Construction Liens") are at any time filed or recorded against any Project
Inventory Under Construction, Borrowers shall promptly either (i) cause all
such liens to be paid in full and released; (ii) provide Lender with a
Title Policy or an endorsement to an existing Title Policy confirming the
priority of the lien of Lender's Mortgage over the priority of any such
Construction Liens; (iii) provide to Lender a bond or other form of
assurance, in form and substance satisfactory to Lender, assuring against
the foreclosure of any such Construction Liens; or (iv) deliver substitute
Collateral in favor of Lender in replacement of any Collateral subject to
such Construction Liens and in an amount sufficient to preserve the Primary
Borrowing Base or the Supplemental Borrowing Base Maintenance Requirement,
as applicable. In the event that any such Construction Liens at any time
are recorded, unless Borrower has effected one of the above remedies within
ten (10) days following the date such liens are recorded, Lender shall
create a Construction Reserve in an amount equal to the amount of the lien
claims.
(f) Payment of Taxes and Other Impositions. Subject to the provisions
--------------------------------------
of paragraph 9.21, Borrower will file all tax returns and will pay all
--------------
Impositions, if any, required to be filed by it or paid by it, including
real estate taxes and assessments relating to the Project or the
Collateral. Borrower will provide to Lender (if Lender has requested in
writing that Borrower provide such information) not more than thirty (30)
days after such Impositions required to be paid pursuant to the preceding
sentence become delinquent evidence that all Impositions required to be
paid pursuant to the preceding sentence on the Units and Time-Share Project
common areas and related amenities have been paid in full.
(g) Payment of Impositions. Borrower will promptly pay upon demand
----------------------
all Impositions imposed upon Lender by any state of the United States or
political subdivision thereof or the United States by reason of the Loan
Documents, the Collateral and/or any sale, rental, use, delivery or
transfer of title to the Collateral, other than any tax measured by net
income payable by Lender to any State of the United States or political
subdivision thereof or to the United States of America under Section 11 or
-------------
1201 of the Internal Revenue Code, as amended, in consequence of the
----
receipt of payments provided for in the Loan Documents. If it is unlawful
for Borrower to pay such Impositions, Borrower shall not be required to pay
such Impositions; but Lender may demand payment of such additional amount
as is necessary to maintain Lender's yields on the Inventory Loan in either
a single payment or at Lender's option, in installment payments, and
Borrower will pay such amount upon demand. If it is unlawful to pay such
additional amount, Borrower shall not be required to pay it; but Lender may
demand immediate payment of the Obligations in full, and Borrower will pay
the Obligations in full within sixty (60) days after such demand. If
Lender has not received evidence satisfactory to it from Borrower that such
Impositions have been paid by Borrower within five (5) Business Days after
demand was made upon Borrower to make such payment, Lender may, at its
option, pay the same, and Borrower shall immediately reimburse Lender for
such sums so expended, together with interest at the Default Rate.
19
(h) Further Assurance. Borrower will execute or cause to be executed
-----------------
all documents and do or cause to be done all acts reasonably necessary for
Lender to perfect or evidence and to continue the perfection of the liens
and security interest of Lender in the Collateral or otherwise to
reasonably effectuate the intent and purposes of the Loan Documents.
(i) Fulfillment of Obligations to Purchasers. Borrower will fulfill,
----------------------------------------
and will cause its Affiliates, agents and independent contractors at all
times to fulfill, all their respective material obligations to Purchasers.
Borrower will Perform all of its material obligations under the Time-Share
Program Consumer Documents and the Time-Share Program Governing Documents.
(j) Material Increases to Assessments. Borrower (i) will use
---------------------------------
reasonable good faith efforts to cause the Time-Share Association to (A)
discharge its obligations under the Time-Share Program Governing Documents
and (B) maintain a reasonable reserve for capital improvements to the Time-
Share Project; and (ii) so long as Borrower controls the Time-Share
Association, will cause each such Time-Share Association to maintain a
budget requiring the payment of dues and assessments which are designed, on
an annual basis, to make available sufficient funds to adequately provide
for the maintenance and operating expenses incurred by the Time-Share
Association, together with a reasonable reserve for capital improvements
and the amount of any installment of real property taxes currently due and
payable with respect to the Time-Share Project and related amenities, and
in the event that, as a result of unexpected contingencies, the amount
budgeted in any given year fails to adequately provide for the foregoing,
Borrower shall cause such Time-Share Association to take reasonable steps,
either in the form of a special assessment or through an increase in the
annual assessment for upcoming years, in order to make-up for any budgetary
shortfalls.
(k) Maintenance of Time-Share Project and Other Property. Borrower
----------------------------------------------------
will maintain or cause to be maintained in good condition and repair all
common areas in the Time-Share Project and other on-site amenities which
have been promised or represented as being available to Purchasers and
which are not the responsibility of the Time-Share Association to maintain
and repair and, to the extent owned by Borrower or an Affiliate of
Borrower, all portions of improvements in which Units are located and are
not part of the Time-Share Project. Borrower will maintain or cause the
Time-Share Association to maintain a reasonable reserve to assure
compliance with the terms of the foregoing sentence, to the extent that
Borrower is in control of the applicable Time-Share Association. In
applying the foregoing provision, Borrower shall be permitted to implement
the funding of necessary reserves on a staged basis, through increases in
applicable Time-Share Association dues over a period of one or more years,
as deemed appropriate by Borrower in its reasonable and prudent business
judgment, to the extent that such increases would reasonably be expected to
cause sufficient reserve amounts to be available on or before the date the
expenditure of funds from such reserves was anticipated to occur. In the
event Borrower is no longer in control of such Time-Share Association,
Borrower shall use reasonable good faith efforts to cause such Time-Share
Association to include within its budget a reasonable reserve to assure
compliance with the terms of this paragraph 6.1(k).
----------------
(l) Maintenance of Larger Tract. To the extent either the Time-Share
---------------------------
Project is part of a larger common ownership regime or planned development
or parts of buildings in which Units are located are not part of the Time-
Share Project, Borrower will pay its share of such common expenses as has
been allocated to the Inventory. Borrower will use commercially reasonable
efforts to cause all such property which is not part of the Time-Share
Project to be professionally managed in a first class manner.
(m) Year 2000. Borrower shall take all action reasonably believed to
---------
be sufficient to assure that there will be no material adverse change to
Borrower's business by reason of the advent of the year 2000, including
without limitation that all computer-based systems, embedded microchips and
other processing capabilities effectively recognize and process dates after
April 1, 1999. At Lender's request, Borrower shall provide to Lender
assurance reasonably acceptable to Lender that Borrower's computer-based
systems, embedded microchips and other processing capabilities are year
2000 compatible.
(n) Tangible Net Worth. Primary Borrower shall maintain, on a
------------------
consolidated basis, Tangible Net Worth (as hereafter defined) in an amount
of not less than $120,000,000 for each test conducted through and including
the test as of September 30, 2000, and thereafter shall
20
maintain, on a consolidated basis, Tangible Net Worth in an amount of not
less than $150,000,000. "Tangible Net Worth" shall be defined as Primary
------------------
Borrower's stockholders' equity, on a consolidated basis, less the amount
of any intangible assets shown on Primary Borrower's consolidated balance
sheet. The foregoing covenant shall be tested quarterly, commencing
December 31, 1999, concurrently with the delivery of Primary Borrower's
quarterly and annual financial information to the SEC, and on the basis of
the financial information reported to the SEC.
(o) Leverage Ratio. Primary Borrower shall maintain, on a
--------------
consolidated basis, a ratio of total liabilities to Tangible Net Worth of
not greater than 7.0:1.0 for each test conducted through and including the
test as of September 30, 2000, and thereafter shall maintain, on a
consolidated basis, a ratio of total liabilities to Tangible Net Worth of
not greater than 6.0:1.0. The foregoing covenant shall be tested
quarterly, commencing December 31, 1999, simultaneously with, and on the
basis of, Primary Borrower's financial information as reported to the SEC.
(p) Net Profit Margin. Primary Borrower shall maintain, on a
-----------------
consolidated basis, a "Net Profit Margin" (as hereafter defined) of at
least five percent (5%). "Net Profit Margin" shall be defined, for any
-----------------
period of measurement, as Primary Borrower's consolidated net income during
such period divided by Primary Borrower's consolidated gross revenue during
the same period (with respect to the determination of both net income and
gross revenues, excluding the effect of any extraordinary gains or losses
and any other non-recurring items not in the ordinary course of business,
as determined in accordance with GAAP). The foregoing covenant shall be
tested quarterly, commencing June 30, 2000, on the basis of the trailing
two fiscal quarters most recently completed as of each test date, on the
basis of Primary Borrower's financial information as reported to the SEC.
6.2 Borrower's Negative Covenants.
-----------------------------
(a) Change in Borrower's Name or Principal Place of Business.
--------------------------------------------------------
Borrower will not change its name or move its principal place of business
or chief executive office except upon not less than sixty (60) days prior
written notice to Lender.
(b) Restrictions on Additional Indebtedness. Borrower will not incur
---------------------------------------
any additional indebtedness which indebtedness is in any manner secured by
a lien on all or any part of the Inventory.
(c) Restrictions on Liens or Transfers. Borrower, without the prior
----------------------------------
written consent of Lender, will not: (i) sell, convey, lease, pledge,
hypothecate, encumber or otherwise transfer any security for the
Performance of the Obligations, except to the extent Borrower is permitted
to sell unsold Completed Project Inventory constituting a portion of the
Collateral and to obtain releases from Lender with respect to such sales,
in accordance with paragraph 3.2 hereof; (ii) permit or suffer to exist any
-------------
liens, security interests or other encumbrances on the Inventory, except
for the Permitted Encumbrances and liens and security interests expressly
granted to Lender; (iii) sell, convey, lease, transfer or dispose of all or
substantially all of its assets to another entity; or (iv) enter into any
merger, consolidation, or other form of corporate reorganization, unless
Borrower is the surviving corporation of such merger, consolidation or
reorganization. The foregoing notwithstanding, nothing in this paragraph
---------
6.2(c) is intended to restrict or otherwise prohibit the ability of Primary
------
Borrower to cause any Affiliate to be merged with or into Primary Borrower,
as long as Primary Borrower is the surviving entity of such merger.
(d) No Sales Activities Prior to Approval. Borrower will not sell any
-------------------------------------
Time-Share Interest or offer any Time-Share Interest for sale in any
jurisdiction, unless: (i) Borrower has delivered to Lender true and
complete copies of the Minimum Required Time-Share Approvals required in
such jurisdiction for its proposed conduct and all other evidence required
by Lender that Borrower has complied in all material respects with the
Legal Requirements of such jurisdiction governing its proposed conduct; and
(ii) Borrower has delivered to Lender the Time-Share Program Consumer
Documents and the Time-Share Program Governing Documents which Borrower is
using in connection with the Time-Share Project and the sale or offering
for sale of Time-Share Interests in such jurisdiction and such documents
have been approved by Lender, which approval shall not be unreasonably
withheld.
(e) No Modification of Time-Share Documents. Borrower will not cancel
---------------------------------------
or
21
materially modify, or consent to or suffer to exist any cancellation or
material modification of any Time-Share Program Governing Document. The
foregoing notwithstanding, the following events shall not be deemed a
material modification to any Time-Share Program Governing Document
requiring the consent of Lender hereunder: (1) the addition of Units to any
Time-Share Program, to the extent such Units were contemplated to be added
in stages as an individual Time-Share Project was developed, or (2) a
conversion of all or a portion of the rights in a given Time-Share Project
from a structure in which such ownership rights are characterized as Time-
Share Interests which are identifiable to a specific Unit and/or period of
time to a structure in which such ownership rights are characterized as
"points" or other comparable form which may or may not be identifiable to a
specific Unit and/or period of time, in the manner from time to time
implemented by Borrower with respect to the program that Primary Borrower
refers to as "Club Sunterra," provided that the resulting interests in each
Time-Share Project constitute separately identifiable and legally described
direct ownership interests in real property.
(f) Maintenance of Larger Tract. To the extent either the Time-Share
---------------------------
Project is part of a larger common ownership regime or planned development
or parts of buildings in which Units are located are not part of the Time-
Share Project, for the period during which Borrower is in control of the
larger common ownership regime or planned development, Borrower will not
permit common expenses to be allocated to the Time-Share Project in an
unreasonably disproportionate manner.
6.3 Survival of Covenants. The covenants contained in this Article 6 are
--------------------- ---------
in addition to, and not in derogation of, the covenants contained elsewhere in
the Loan Documents and shall be deemed to be made and reaffirmed prior to the
making of each Advance.
7. DEFAULT
7.1 Events of Default. The occurrence of any of the following events or
-----------------
conditions shall constitute an Event of Default by Borrower under the Loan
Documents:
(a) failure of Lender to receive from Borrower within five (5)
Business Days of the date when due and payable (i) any amount payable under
the Notes or (ii) any other payment due under the Loan Documents, except
for the payments required as of each Principal Reduction Date (in order to
cause the then outstanding balance of the Inventory Loan to be less than or
equal to the then permitted Maximum Inventory Loan Amount) and the payment
due on the Maturity Date, for none of which any grace period shall be
allowed;
(b) any representation or warranty which is made by a person other
than Lender and is contained in the Loan Documents or in any certificate
furnished to Lender under the Loan Documents by or on behalf of Borrower
proves to be, in any material respect, false or misleading as of the date
deemed made, and Borrower has failed to cause such representation or
warranty to become true and correct, in all material respects, within
thirty (30) days following notice from Lender;
(c) a default in the Performance of the Obligations set forth in
paragraph 6.1(n), 6.1(o), 6.1(p), 6.2(b), 6.2(c)(i), 6.2(c)(iii), or
--------------------------------------------------------------------
6.2(c)(iv);
----------
(d) a default in the Performance of the Obligations or a violation of
any term, covenant or provision of the Loan Documents (other than a default
or violation referred to elsewhere in this paragraph 7.1) which continues
-------------
unremedied (i) for a period of thirty (30) days after notice of such
default or violation to Borrower in the case of a default under or
violation of paragraph 6.2(c)(ii) or any default or violation which can be
--------------------
cured by the payment of money alone or (ii) for a period of thirty (30)
days after notice to Borrower in the case of any other default or
violation;
(e) an "Event of Default," as defined in any of the other Loan
----------------
Documents;
(f) any default by Borrower under any other agreement evidencing,
guaranteeing or securing borrowed money or a receivables purchase financing
involving an obligation in excess of One Million Dollars ($1,000,000) to
make a payment of principal or interest or to repurchase receivables;
(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 thirty (30) days thereafter and which, when aggregated with
all other judgment(s) or decree(s) that have remained unpaid and
undischarged or are not stayed for such period, are in excess of One
Million Dollars ($1,000,000);
(h) any party holding a lien on or security interest in any Collateral
commences
22
foreclosure or similar sale thereof, unless Borrower causes such proceeding
to be stayed pending determination of the rights of the respective parties
with respect to such Collateral, which stay continually prevents the party
holding the lien or security interest from proceeding against the
Collateral at issue;
(i) a material adverse change in any Project, the Collateral or the
business or financial condition of Borrower, which change is not enumerated
in this paragraph 7.1, as the result of which Lender in good ▇▇▇▇▇ ▇▇▇▇▇
-------------
the prospect of Performance of the Obligations materially impaired or the
Collateral materially imperiled; provided, however, that no Event of
-------- -------
Default shall be deemed to occur as a result of this paragraph 7.1(i)
----------------
arising due to any reduction in either the Primary Borrowing Base or the
Supplemental Borrowing Base caused by any Eligible Completed Project
Inventory or any Eligible Project Inventory Under Construction having
become ineligible unless Borrowers have failed to provide substitute
Collateral sufficient to cure any Borrowing Base Shortfall, or to cause the
Supplemental Borrowing Base to equal or exceed the Supplemental Borrowing
Base Maintenance Requirement, by the date which is ten (10) Business Days
following the earlier of (x) the date Borrower submits a Borrowing Base
Report disclosing either any Borrowing Base Shortfall or any failure of the
Supplemental Borrowing Base to equal or exceed the Supplemental Borrowing
Base Maintenance Requirement, or (y) the date on which Lender notifies
Borrowers that an adverse change of this nature has occurred;
(j) Borrower shall (i) generally not be paying its debts as they
become due, (ii) file, or consent by answer or otherwise to the filing
against it of, a petition for relief or reorganization, arrangement or
liquidation or any other petition in bankruptcy or insolvency under the
laws of any jurisdiction, (iii) make an assignment for the benefit of its
creditors, (iv) consent to the appointment of a custodian, receiver,
trustee or other officer with similar powers for itself or any substantial
part of its property, (v) be adjudicated insolvent, (vi) dissolve or
commence to wind-up its affairs or (vii) take any action for purposes of
the foregoing; or a petition for relief or reorganization, arrangement or
liquidation or any other petition in bankruptcy or insolvency or the
appointment of a custodian under the laws of any jurisdiction is filed
against Borrower or a custodian is appointed for Borrower, the Collateral
or any material part of Borrower's property and such proceeding is not
dismissed and appointment vacated within ninety (90) days thereafter;
(k) any of the events enumerated in paragraphs 7.1(f), (g), (i) or (j)
--------------------------- ---
occurs with respect to any general partner or manager of Borrower, if
Borrower is a partnership or limited liability company, or any surety for
the Performance of the Obligations;
(l) failure of Lender to receive from Borrower, within thirty (30)
days of the date Borrower knows of such event, notice of any event which
renders any representation or warranty in any Loan Documents false in any
material, adverse respect were it made after the occurrence of such
condition;
(m) any "Event of Default" under the Warehouse Loan shall occur, as
defined in that certain Loan and Security Agreement to be entered into
between Primary Borrower and Lender which evidences the Warehouse Loan;
(n) if Primary Borrower shall have failed, on or before the date sixty
(60) days following the Effective Date, to have successfully closed, on
terms and conditions acceptable to Lender (and on economic terms
substantially in accordance with the terms set forth in those certain
proposal letters from Lender to Primary Borrower with respect to each of
the following), each of the following facilities: (i) the Warehouse Loan;
(ii) a facility pursuant to which Lender shall purchase up to $20,000,000
of receivables owned by Primary Borrower or one of its Affiliates; and
(iii) a facility pursuant to which Lender and/or its Affiliates shall make
available a $100,000,000 receivables conduit facility to Primary Borrower;
provided, however, that the failure of Primary Borrower to have closed all
---
of the foregoing facilities by the date specified shall not constitute an
Event of Default hereunder if the foregoing facilities fail to close by the
date specified either (x) as the result of reasons within Lender's control
but not under the control of Primary Borrower or (y) because Lender
declines to approve funding of any of the foregoing facilities (or, with
respect to the conduit facility described in clause (iii) above, as to
those terms for the conduit facility that are not yet specified in Lender's
proposal letter to Primary Borrower, Lender approves such facility on
economic terms materially less favorable to Primary Borrower
23
than are otherwise available to Primary Borrower from other sources), in
which event Primary Borrower shall have a period of one hundred twenty
(120) days from the date Lender indicates its unwillingness to approve any
such facility (or, with respect to the conduit facility described above,
approves such facility on economic terms, as to presently unspecified
items, that Primary Borrower notifies Lender Primary Borrower believes are
materially less favorable to it than are otherwise available) to close the
relevant facility with another lender on terms and conditions which are
satisfactory to Lender; or
(o) with respect to the facilities described in clauses (ii) or (iii)
of paragraph 7.1(n) above, if either facility is funded by Lender, if
----------------
Primary Borrower fails to perform on any repurchase obligation in favor of
Lender set forth in the documentation for such facilities, after giving
effect to any applicable grace periods set forth in such documentation.
7.2 Remedies. At any time after an Event of Default has occurred and
--------
while it is continuing, Lender may but without obligation, in addition to the
rights and powers granted elsewhere in the Loan Documents and not in limitation
thereof, do any one or more of the following:
(a) cease to make further Advances;
(b) declare the Notes, together with all other sums owing by Borrower
to Lender in connection with the Inventory Loan, immediately due and
payable without notice, presentment, demand or protest, which are hereby
waived by Borrower;
(c) proceed to protect and enforce its rights and remedies under the
Loan 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; and
(d) without notice to Borrower, have a receiver appointed for Borrower
and/or its property.
7.3 Application of Proceeds During an Event of Default. Notwithstanding
--------------------------------------------------
anything in the Loan Documents to the contrary, while an Event of Default
exists, any cash received and retained by Lender in connection with the
Collateral may be applied to payment of the Obligations in the manner provided
in paragraph 7.5.
-------------
7.4 Uniform Commercial Remedies; Sale.
---------------------------------
(a) UCC Remedies; Sale of Collateral. Lender shall have all of the
--------------------------------
rights and remedies of a secured party under the Uniform Commercial Code of
the State of Arizona and of the state in which the applicable Collateral is
situated, and all other rights and remedies accorded to a Secured Party at
equity or law with respect to that portion of the Collateral not consisting
of an interest in real property. Any notice of sale or other disposition
of such non-real property Collateral given not less than ten (10) days
prior to such proposed action in connection with the exercise of Lender's
rights and remedies shall constitute reasonable and fair notice of such
action. Lender may postpone or adjourn any such sale from time to time by
announcement at the time and place of sale stated on the notice of sale or
by announcement of any adjourned sale, without being required to give a
further notice of sale. Any such sale may be for cash or, unless
prohibited by applicable law, upon such credit or installment as Lender may
determine. Borrower shall be credited with the net proceeds of such sale
only when such proceeds are actually received by Lender in good current
funds. Despite the consummation of any such sale, Borrower shall remain
liable for any deficiency on the Obligations which remains outstanding
following such sale. All net proceeds recovered pursuant to a sale shall
be applied in accordance with the provisions of paragraph 7.5.
-------------
(b) Lender's Right to Execute Conveyances. Lender may, in the name of
-------------------------------------
Borrower or in its own name, make and execute all conveyances, assignments
and transfers of the Collateral sold in connection with the exercise of
Lender's rights and remedies, and Lender is hereby appointed Borrower's
attorney-in-fact for this purpose.
7.5 Application of Proceeds. The proceeds of any sale of all or any part
-----------------------
of the Collateral made in connection with the exercise of Lender's rights and
remedies shall be applied in the following order of priorities; first, to the
payment of all costs and expenses of such sale, including without limitation,
reasonable compensation to Lender and its agents, attorneys' fees, and all other
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 Loan Documents; second, to the
payment of all late charges required by the Loan Documents to be paid by
Borrower, in such order and manner as Lender shall in its
24
discretion determine; third, 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; fourth, to the other
Obligations in such order and manner as Lender may determine; and last, to the
payment to Borrower, its successors or assigns, or to whosoever 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.
7.6 Lender's Right to Perform. Lender may, at its option, and without any
-------------------------
obligation to do so, pay, perform and discharge any and all obligations agreed
to be paid or Performed in the Loan Documents by Borrower or any surety for the
Performance of the Obligations if (a) such person fails to do so and (b) (i) an
Event of Default exists and at least five (5) Business Day's notice has been
given to such person of Lender's intention to take such action, (ii) the action
taken by Lender involves obtaining insurance which such person has failed to
maintain in accordance with the Loan Documents or to deliver evidence thereof,
or (iii) in the opinion of Lender, such action must be taken because an
emergency exists or to preserve any of the Collateral or its value. For such
purposes Lender may use the proceeds of the Collateral. All amounts expended by
Lender in so doing or in exercising its remedies under the Loan Documents
following an Event of Default shall become part of the Obligations, shall be
immediately due and payable by Borrower to Lender upon demand, and shall bear
interest at the Default Rate from the dates of such expenditures until paid.
7.7 Non-Exclusive Remedies. No remedy in any 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 under any Loan Document or now or hereafter
existing at law or in equity. No delay or omission to exercise any right or
power shall be construed to be a waiver of or acquiescence to any default 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.
7.8 Waiver of Marshalling. Borrower, for itself and for all who may claim
---------------------
through or under it, hereby expressly waives and releases all right to have the
Collateral, or any part of the Collateral, marshalled on any foreclosure, sale
or other enforcement of Lender's rights and remedies.
7.9 Attorney-in-Fact. For the purpose of exercising its rights and
----------------
remedies under paragraphs 7.2(c) and 7.6, Lender may do so in Borrower's name or
----------------- ---
its name and is hereby appointed as Borrower's attorney-in-fact to take any and
all actions in Borrower's name and/or on Borrower's behalf as Lender may deem
necessary or appropriate in its discretion in the accomplishment of such
purposes.
8. COSTS AND EXPENSES; INDEMNIFICATION
8.1 Costs and Expenses. Borrower will pay on demand any and all costs and
------------------
expenses incurred by Lender (exclusive of Lender's employees' expenses other
than travel expenses) in connection with the initiation, documentation and
closing of the Inventory Loan, the making of Advances, the protection of the
Collateral, or the enforcement of the Obligations against Borrower, including,
without limitation, all attorneys', inspecting architect's/engineer's and other
professionals' fees (including, without limitation, reasonable out-of-pocket
expenses and reasonable and normal charges of such attorneys' and other
professionals for photocopy, telecopy and computer services, and clerical
overtime), consumer credit reports, and revenue, documentary stamp, transaction
and intangible taxes. Without limiting the generality of the foregoing, if a
bankruptcy proceeding is commenced by or against Borrower or otherwise involving
the Collateral, Lender shall, to the extent not already provided for herein, be
entitled to recover, and Borrower shall be obligated to pay, Lender's attorneys'
fees and costs incurred in connection with: any determination of the
applicability of the bankruptcy laws to the terms of the Loan Documents or
Lender's rights thereunder; any attempt by Lender to enforce or preserve its
rights under the bankruptcy laws or to prevent Borrower or any other person from
seeking to deny Lender its rights thereunder; any effort by Lender to protect,
preserve or enforce its rights against the Collateral, or seeking authority to
modify the automatic stay of 11 U.S.C. Section 362 or otherwise seeking to
---------------------
engage in such protection, preservation or enforcement; or any proceeding(s)
arising under the bankruptcy laws, or arising in or related to a case under the
bankruptcy laws.
8.2 Indemnification. Borrower will INDEMNIFY, PROTECT, HOLD HARMLESS, and
---------------
defend Lender, its successors, assigns and shareholders (including corporate
shareholders), and the directors, officers, employees, servants and agents of
the foregoing, for, from and against: (a) any and all liability, damage,
penalties, or fines, loss, costs or expenses (including, without limitation,
court costs and attorneys' fees), claims, demands, suits, proceedings (whether
civil or criminal), orders, judgments, penalties, fines and other sanctions
whatsoever asserted against it and arising from or brought in connection with
any Project, the Collateral, Lender's status by virtue of the Loan Documents,
creation of liens and security interests, the terms of the Loan Documents or the
transactions related thereto, or any act or omission
25
of Borrower or an Agent, or their respective employees or agents, whether actual
or alleged unless such act or omission is caused by Lender's gross negligence or
willful misconduct; and (b) any and all brokers' commissions or finders' fees or
other costs of similar type by any party in connection with the Inventory Loan.
Each Borrower and Lender hereby represents and warrants to the other that
neither such Person has engaged the services of a broker of any other Person to
act as an intermediary in connection with the Inventory Loan. On written request
by a person or other entity covered by the above agreement of indemnity,
Borrower will 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 such person or entity shall be a party. At
Lender's option, Lender may at Borrower's expense prosecute or defend any action
involving the priority, validity or enforceability of any of the Loan Documents
or Lender's lien on or security interest in any of the Collateral.
9. CONSTRUCTION AND GENERAL TERMS
9.1 Payment Location. All monies payable under the Loan Documents shall
----------------
be paid to Lender at its address set forth following its signature in lawful
monies of the United States of America, unless otherwise designated in the Loan
Documents or by Lender by notice.
9.2 Entire Agreement. The Loan Documents exclusively and completely state
----------------
the rights and obligations of Lender and Borrower with respect to the Inventory
Loan. No modification, variation, termination, discharge, abandonment or waiver
of any of the provisions or conditions of the Loan Documents shall be valid
unless in writing and signed by a duly authorized representative of the party
sought to be bound by such action. The Loan Documents supersede any and all
prior representations, warranties and/or inducements, written or oral,
heretofore made by Lender and Borrower concerning this transaction, including
any commitment for financing.
9.3 Powers Coupled with an Interest. The powers and agency hereby granted
-------------------------------
by Borrower are coupled with an interest and are irrevocable until the
Obligations have been paid in full and are granted as cumulative to Lender's
other remedies for collection and enforcement of the Obligations.
9.4 Counterparts; Facsimile Signatures. Any Loan Document may be executed
----------------------------------
in counterpart, and any number of copies of such Loan Document which have been
executed by all parties shall constitute one (1) original. Delivery of an
executed counterpart of any Loan Document by telefacsimile shall be equally as
effective as delivery of a manually executed counterpart of such Loan Document.
Any party delivering an executed counterpart of any Loan Document by
telefacsimile shall also deliver a manually executed counterpart of such Loan
Document, but the failure to deliver a manually executed counterpart shall not
affect the validity, enforceability, and binding effect of such Loan Document.
9.5 Notices. All notices, requests or demands required or permitted to be
-------
given under the Loan Documents shall be in writing, and shall be deemed
effective (a) upon hand delivery, if hand delivered; (b) one (1) Business Day
after such are deposited for delivery via Federal Express or other nationally
recognized overnight courier service; or (c) three (3) Business Days after such
are deposited in the United States mails, certified or registered mail, all with
delivery charges and/or postage prepaid, addressed as shown below, or to such
other address as the party being notified may have designated in a notice given
to the other party. Written notice may be given by telecopy to the telecopier
number shown below or to such other telecopier number as the party being
notified may have designated in a notice given to the other party, which notice
shall be effective on the day of receipt if received during the recipient's
normal business hours on the day of receipt or otherwise on the next Business
Day; provided that such notice shall not be deemed effective unless not later
than the next Business Day, a copy of such notice is hand delivered or deposited
for delivery via courier or in the United States mails in accordance with the
requirements set forth above. The notice addresses and telecopy numbers for
Primary Borrower and Lender are set forth at the end of this Agreement following
their respective signatures. All notices required to be given to any Borrower
may be given to such Borrower at the notice address for Primary Borrower set
forth herein, each Subsidiary Borrower at any time a party to this Agreement
acknowledging that such Subsidiary Borrower maintains executive offices and
functions sufficient for the receipt of notice at the offices of Primary
Borrower.
9.6 Successors and Assigns. All the covenants of Borrower and all the
----------------------
rights and remedies of the Lender contained in the Loan Documents shall bind
Borrower, and, subject to the restrictions on merger, consolidation and
assignment contained in the Loan Documents, 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 in the Loan Documents in
whole or in part. Except as may be expressly provided in a Loan Document, no
person or other entity shall be deemed a third party beneficiary of any
provision of the Loan Documents.
9.7 Severability. If any provision of any Loan Document is held to be
------------
invalid, illegal or unenforceable under present or future laws, the legality,
validity and enforceability of the remaining provisions of
26
the Loan Documents shall not in any way be affected or impaired thereby. In lieu
of each such illegal, invalid or unenforceable provision, there shall be added
to the Loan Document affected, a provision that is legal, valid and enforceable
and as similar in terms to such illegal, invalid and unenforceable provision as
may be possible.
9.8 Time of Essence. Time is of the essence in the Performance of the
---------------
Obligations.
9.9 Miscellaneous. All headings are inserted for convenience only and
-------------
shall not affect any construction or interpretation of the Loan Documents.
Unless otherwise indicated, all references in a Loan Document to clauses and
other subdivisions refer to the corresponding paragraphs, clauses and other
subdivisions of the Loan Document; the words "herein," "hereof," "hereto,"
------ ------ ------
"hereunder" and words of similar import refer to the Loan Document as a whole
----------
and not to any particular paragraph, clause or other subdivision; 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. All Schedules and Exhibits
referred to in this Agreement are incorporated in this Agreement by reference.
Whenever the words "including", "include", or "includes" are used in the Loan
Documents, they shall be interpreted in a non-exclusive manner as though the
words, "without limitation," immediately followed the same.
9.10 CHOICE OF LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED THEREIN, THE
-------------
LOAN DOCUMENTS AND THE RIGHTS, DUTIES AND OBLIGATIONS OF THE PARTIES THERETO
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
STATE OF ARIZONA (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS) AND TO THE
EXTENT THEY PREEMPT THE LAWS OF SUCH STATE, THE LAWS OF THE UNITED STATES.
9.11 CHOICE OF JURISDICTION; WAIVER OF VENUE. EACH OF BORROWER AND LENDER:
---------------------------------------
(A) HEREBY IRREVOCABLY SUBMITS ITSELF TO THE PROCESS, JURISDICTION AND VENUE OF
THE COURTS OF THE STATE OF ARIZONA, MARICOPA COUNTY, AND TO THE PROCESS,
JURISDICTION, AND VENUE OF THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF
ARIZONA, FOR THE PURPOSES OF SUIT, ACTION OR OTHER PROCEEDINGS ARISING OUT OF OR
RELATING TO ANY LOAN DOCUMENT OR THE SUBJECT MATTER THEREOF, OR, IF LENDER
INITIATES SUCH ACTION, ANY COURT IN WHICH LENDER SHALL INITIATE SUCH ACTION, AND
THE CHOICE OF SUCH VENUE SHALL IN ALL INSTANCES BE AT LENDER'S ELECTION; AND (B)
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, HEREBY WAIVES AND AGREES NOT
TO ASSERT BY WAY OF MOTION, DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION OR
PROCEEDING ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF
THE ABOVE-NAMED COURTS, THAT SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN
INCONVENIENT FORUM OR THAT THE VENUE OF SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER. EACH OF BORROWER AND LENDER HEREBY WAIVES THE RIGHT TO COLLATERALLY
ATTACK ANY JUDGMENT OR ACTION IN ANY OTHER FORUM.
9.12 WAIVER OF JURY TRIAL. LENDER AND BORROWER ACKNOWLEDGE AND AGREE THAT
--------------------
ANY CONTROVERSY WHICH MAY ARISE UNDER ANY LOAN DOCUMENT WOULD BE BASED UPON
DIFFICULT AND COMPLEX ISSUES; AND THEREFORE, THEY AGREE THAT ANY LAWSUIT ARISING
OUT OF ANY SUCH CONTROVERSY SHALL BE TRIED BY A JUDGE SITTING WITHOUT A JURY,
AND KNOWINGLY AND VOLUNTARILY WAIVE TRIAL BY JURY IN ANY SUCH PROCEEDING.
9.13 INDUCEMENT TO LENDER. ALL OF THE PROVISIONS SET FORTH IN THIS
--------------------
PARAGRAPH ARE A MATERIAL INDUCEMENT FOR LENDER'S MAKING ADVANCES TO BORROWER.
(BORROWER'S INITIALS
RE: 9.10 - 9.13 _____)
9.14 Compliance With Applicable Usury Law. It is the intent of the
------------------------------------
parties hereto to comply with the Applicable Usury Law. Accordingly,
notwithstanding any provisions to the contrary in the Loan Documents, in no
event shall the Loan Documents require the payment or permit the collection of
interest in excess of the maximum contract rate permitted by the Applicable
Usury Law.
9.15 USE OF LENDER'S NAME. EXCEPT AS REQUIRED BY LAW AND FOR FILINGS
--------------------
MADE WITH THE SECURITIES AND EXCHANGE COMMISSION, ANY STOCK EXCHANGE ON WHICH
BORROWER'S STOCK IS TRADED, ANY REGULATORY AGENCY HAVING JURISDICTION OVER
BORROWER OR ANY OF THE TIME-SHARE PROJECTS, OR WITH RESPECT TO FILINGS REQUIRED
TO BE MADE IN THE LAND RECORDS APPLICABLE TO ANY OF THE TIME-SHARE PROJECTS,
BORROWER WILL NOT, AT ANY TIME, USE THE NAME OF OR MAKE REFERENCE TO LENDER WITH
RESPECT TO THE TIME-SHARE
27
PROJECT, THE SALE OF TIME-SHARE INTERESTS OR OTHERWISE, WITHOUT THE EXPRESS
WRITTEN CONSENT OF LENDER.
9.16 NO JOINT VENTURE. THE RELATIONSHIP OF BORROWER AND LENDER IS
----------------
THAT OF DEBTOR AND CREDITOR, AND IT IS NOT THE INTENTION OF EITHER OF SUCH
PARTIES BY THIS OR ANY OTHER INVENTORY BEING EXECUTED IN CONNECTION WITH THE
INVENTORY LOAN TO ESTABLISH A PARTNERSHIP, AND THE PARTIES HERETO SHALL NOT
UNDER ANY CIRCUMSTANCES BE CONSTRUED TO BE PARTNERS OR JOINT VENTURERS.
9.17 Standards Applied to Lender's Actions. Unless otherwise
-------------------------------------
specifically stipulated elsewhere in the Loan Documents, if a matter is left in
the Loan Documents to the decision, requirement, request, determination,
judgment, opinion, approval, consent, satisfaction, acceptance, agreement,
option or discretion of Lender, its employees, Lender's counsel or any agent for
or contractor of Lender, such action shall be deemed to be exercisable by Lender
or such other person in its sole and absolute discretion and according to
standards established in its sole and absolute discretion. Without limiting the
generality of the foregoing, "option" and "discretion" shall be implied by use
------ ----------
of the words "if" or "may."
-- ---
9.18 Participations. Lender shall have the right without the consent
--------------
of or notice to the Borrower to grant participating interests in the Inventory
Loan, or to assign all or any portion of Lender's interest in and to the
Inventory Loan to any other Person acceptable to Lender, and may disclose to
such other Person all information relating to Borrower as Lender may deem
appropriate in connection with such sales or assignments, provided that Lender
shall obtain from the Person receiving any such information an agreement to be
bound by and abide with such confidentiality provisions as are then binding upon
Lender. The foregoing notwithstanding, in the event Lender sells participating
interests in the Inventory Loan to any other Persons, Lender shall continue to
serve as the lender with responsibility for administration of the Inventory
Loan, shall continue to be the notice party for purposes of the giving of
notices by Borrower, and shall be responsible for disseminating financial and
other information received from Borrower to each participating lender.
9.19 Scope of Reimbursable Attorney's Fees. As used in the Loan
-------------------------------------
Documents, the term "attorneys' fees" includes the reasonable fees of attorneys
---------------
licensed to practice law in any jurisdiction, law clerks, paralegals,
investigators and others not admitted to the bar but performing services under
the supervision of a licensed attorney, and the expenses (including, without
limitation, normal and customary charges for telecopy and photocopy services and
clerical overtime) incurred by them in the performance of their services. As
used in the Loan Documents, attorneys' fees incurred by Lender in the
enforcement of any remedy or covenant include, without limitation, attorneys'
fees incurred in any foreclosure of the Security Documents, in protecting or
sustaining the lien or priority of the Collateral, or in any proceeding arising
from or connected with any such matter, including any bankruptcy, receivership,
injunction or other similar proceeding, or any appeal from or petition for
review of any such matter, and with or without litigation.
9.20 Publicity. Lender is hereby authorized to cause a tombstone to
---------
be published announcing the consummation of this transaction and the aggregate
amount thereof. Borrower consents to such advertising and authorizes Lender to
use Borrower's name, logo, insignia, descriptive art work, trade name,
trademark, or other similar material, whether or not protected by copyright (or
otherwise), in any such advertisement. The foregoing notwithstanding, Lender
shall not issue any press releases concerning this transaction without Primary
Borrower's prior written approval as to the content of such releases, which
approval shall not be unreasonably withheld or conditioned, or unduly delayed.
9.21 Permitted Contests. Notwithstanding anything in the Loan
------------------
Documents to the contrary, after prior written notice to Lender, Borrower at its
expense may contest, by appropriate legal or other proceedings conducted in good
faith and with due diligence, the amount or validity of any tax, Imposition,
Legal Requirement or any monetary lien on the Collateral, so long as: (a) in
the case of an unpaid Imposition or lien, such proceedings suspend the
collection thereof from Borrower and the Collateral, and shall not interfere
with the payment of any monies due under the Collateral in accordance with the
terms of the Security Documents; (b) none of the Collateral is, in the judgment
of Lender, in any imminent danger of being sold, forfeited or lost; (c) in the
case of a Legal Requirement, neither Borrower nor Lender is in any danger of any
civil or criminal liability for failure to comply therewith; and (d) Borrower
has furnished such security, if any, as may be required in the proceedings or as
Lender reasonably requests up to one hundred twenty-five percent (125%) of the
amount in controversy.
9.22 Reliance. Lender's examination, inspection, or receipt of
--------
information pertaining to Borrower, the Collateral or any Project shall not in
any way be deemed to reduce the full scope and protection of the warranties,
representations and Obligations contained in the Loan Documents.
28
[SIGNATURE PAGE FOLLOWS]
29
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in their respective name, personally or by their duly authorized
representatives as of March ___, 2000.
PRIMARY BORROWER SUNTERRA CORPORATION, a Maryland corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------
Title: Senior Vice President
-------------------------------------
Primary Borrower's Notice Address
and Telecopy Number:
---------------------------------------------
---------------------------------------------
Attention: General Counsel
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
SUNTERRA CORPORATION
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
with a further copy to:
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇, LLP
▇▇▇▇▇▇▇ Building, 16th Floor
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇ III, Esq.
SUBSIDIARY BORROWERS ALL SEASONS RESORTS, INC., an Arizona corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------
Title: Assistant Treasurer
-------------------------------------
POWHATAN ASSOCIATES, a Virginia joint venture
By: PLANTATION RESORT GROUP, INC., a Virginia
corporation, Its Joint Venturer
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------
Title: Assistant Treasurer
-------------------------------------
30
By: WILLIAMSBURG VACATIONS, INC., a Virginia
corporation, its Joint Venturer
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------
Title: Assistant Treasurer
-------------------------------------
GREENSPRINGS ASSOCIATES, a Virginia joint venture
By: PLANTATION RESORT GROUP, INC., a Virginia
corporation, Its Joint Venturer
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------
Title: Assistant Treasurer
-------------------------------------
By: GREENSPRINGS PLANTATION RESORTS, INC., a
Virginia Corporation, its Joint Venturer
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------
Title: Assistant Treasurer
-------------------------------------
MMG DEVELOPMENT CORP., a Florida corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------
Title: Assistant Treasurer
-------------------------------------
Subsidiary Borrowers' Notice Address and
Telecopy Number:
c/o Sunterra Corporation
---------------------------------------------
---------------------------------------------
Attn.:
---------------------------------------
Telecopy:
------------------------------------
LENDER FINOVA CAPITAL CORPORATION, a Delaware corporation
By:
------------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
31
Lender's Notice Address and Telecopy Number:
FINOVA Capital Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn.: Vice President-Resort Finance
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
FINOVA Capital Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn.: Vice President-Group Counsel
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
32
SCHEDULE OF ADDITIONAL TERMS
S.1 This Schedule has been incorporated by reference into and form a
part of that Amended and Restated Master Loan and Security Agreement dated as of
March __, 2000, between FINOVA Capital Corporation as "Lender" and Sunterra
Corporation as the "Primary Borrower," and the Subsidiary Borrowers party
thereto.
S.2 To the extent of any inconsistency between this Schedule and the
other provisions of the provisions of the Loan and Security Agreement, the
provisions of this Schedule shall prevail.
S.3 The provisions of the Loan and Security Agreement are
supplemented as follows (paragraph references are references to paragraphs of
the Loan and Security Agreement) which are intended to be supplemented by the
following provisions:
(a) (P)1. Basic Interest Rate: four and one-half percent
(4.50%) per annum in excess of the LIBO Rate or the LIBO
Adjusted Rate, as applicable, fluctuating monthly on the
first Business Day of each calendar month based upon the
LIBO Rate or the LIBO Adjusted Rate, as applicable, in
effect on such date, provided, however, that in no event
shall the Basic Interest Rate exceed the maximum contract
rate of interest permitted by the Applicable Usury Law.
(b) (P)1. Default Rate: two percent (2%) above the Basic
Interest Rate or the maximum contract rate permitted under
the applicable usury law, whichever is less.
(c) (P)1. [Intentionally not used.]
(d) (P)1. Maximum Inventory Loan Amount: (I) from the Effective
Date through and including December 28, 2000 - Seventy Five
Million Dollars ($75,000,000); (II) from December 29, 2000,
through and including June 28, 2001 - Sixty Million Dollars
($60,000,000); (III) from June 29, 2001 through and
including September 30, 2001 - Thirty Million Dollars
($30,000,000); and (IV) on October 1, 2001 $- 0.
(e) (P)1. [Intentionally not used.]
(f) (P)1. Original Borrowing Term Expiration Date:
September 30, 2001.
(g) (P)1. Loan Fee: Two Hundred Fifty Thousand Dollars
($250,000).
(h) (P)1. Maturity Date: October 1, 2001.
(i) (P)1. [Intentionally not used.]
(j) (P)1. Required Closing Date. March 15, 2000.
(k) (P)1. Initial Time-Share Projects: Powhatan Plantation,
Williamsburg, Virginia; Greensprings Plantation,
Williamsburg, Virginia; Scottsdale Villa Mirage, Scottsdale,
Arizona; Villas at Santa Fe, Santa Fe, New Mexico; ▇▇▇▇▇
▇▇▇▇▇, Miami Beach; The Savoy, Miami Beach; San ▇▇▇▇ Bay,
▇▇▇▇▇ Beach, California; The Village at Steamboat, Steamboat
Springs, Colorado; Gatlinburg Town Square, Gatlinburg,
Tennessee; Sedona Summit, Sedona, Arizona; and The
Breckenridge, Breckenridge, Colorado.
(l) (P)2.9(a). Payment of Loan Fee: The Loan Fee shall be
payable in full on the Closing Date. Any remaining portion
of Borrower's $250,000 good faith deposit that was delivered
to Lender in connection with Primary Borrower's acceptance
of Lender's Proposal Letter dated March 3, 2000, after the
payment of Lender's costs and expenses, shall be applied
toward the Loan Fee.
(m) (P)4.5. Minimum Advance Amount: Five Hundred Thousand
Dollars ($500,000).
(n) (P)4.5. Maximum Advance Frequency: twice per calendar month
with a Five Hundred Dollar ($500) charge being imposed in
connection with the second Advance in any one (1) calendar
month. Lender shall have the right to withhold the amount of
such charge from such Advance.
(o) (P)4.6. Wire Transfer Fee: Twenty-Five Dollars ($25.00).
(p) (P)5.1, 6.1. Borrower's Type of Business Organization:
Primary Borrower - corporation
All Seasons Resorts, Inc. - corporation
Powhatan Associates - a joint venture
Greensprings Associates - a joint venture
MMG Development - corporation.
(q) (P)5.1, 6.1. Borrower's State of Organization:
Primary Borrower - Maryland
All Seasons Resorts, Inc.- Arizona
Powhatan Associates - Virginia
Greensprings Associates - Virginia
MMG Development - Florida
(r) (P)5.3. Borrower's Principal Place of Business: ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇.
(s) (P)5.3. Borrower's Chief Executive Office: ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
(t) (P)5.9 Jurisdiction Where Sales and/or Offers to Sell Have
Occurred: See Exhibit 5.9 attached hereto.
S.4 In addition to the other representations, warranties and
covenants of Borrower set forth in the Loan and Security Agreement, Borrower
represents, warrants and covenants that each Borrowing Base Report shall be
signed by Primary Borrower and the applicable Subsidiary Borrower (if any) and
shall contain a representation and warranty of each such Person that all of the
information contained therein (including, but not limited to, the sales of Time-
Share Interests reported therein, and the Retail Value with respect to the
Eligible Completed Project Inventory located at the applicable Time-Share
Project) are true, complete and accurate in all material respects. Lender shall
be entitled to request copies of sales contracts to provide substantiation as to
the actual sales prices of those items of Completed Project Inventory sold by
Borrower and requested to be released from the lien of Lender's Mortgage.
EXHIBIT A
CONDITIONS OF ELIGIBLE COMPLETED PROJECT INVENTORY
(a) The applicable Time-Share Project in which such Inventory exists is
located in the United States.
(b) The applicable Time-Share Project is owned one hundred percent (100%)
either by Primary Borrower or by an Affiliate of Primary Borrower which joins in
the Loan and Security Agreement as a Subsidiary Borrower thereunder.
(c) The Time-Share Association established in connection with the
applicable Time-Share Project must be in stable financial condition, as
demonstrated to Lender's satisfaction. Prior to a given Time-Share Project
being approved for the contribution of Eligible Completed Project Inventory to
the applicable Borrowing Base, Borrower shall have provided to Lender, and
Lender shall have reviewed and found satisfactory, the following information
relative to the applicable Time-Share Association:
(1) Most recent audited financial statement;
(2) A current statement of the replacement fund balance maintained by
such Time-Share Association;
(3) A current statement of the operating fund balance maintained by
such Time-Share Association;
(4) A description of the extent to which such Time-Share Association
is entitled to any continuing subsidy from the developer of the
applicable Time-Share Project, together with a statement of the
extent to which such Time-Share Association has utilized such
subsidy during the past three (3) fiscal years;
(5) A description of the annual dues paid by owners of Time-Share
Interests in such Time-Share Project, broken down to the type of
Unit involved; and
(6) An identification of the Time-Share Manager applicable to such
Time-Share Project, together with such additional information
concerning the Time-Share Manager as Lender may request
(including without limitation, if such Time-Share Manager is not
an Affiliate of Primary Borrower, financial statements for such
Time-Share Manager and a description of such Person's experience
and qualifications for management of the Time-Share Association).
(d) With respect to each Time-Share Project, evidence that the Unit(s) in
which the Time-Share Interest(s) are owned and the amenities that have been
promised to the Purchasers (and to prospective purchasers) have been completed
(taking into account the dates upon which any such amenities have been promised
to Purchasers, such that a Time-Share Project shall not be deemed ineligible
hereunder due to the fact that certain amenities have not yet been completed
unless the time by which those amenities were to have been completed, as
represented to the Purchasers, has passed), fully furnished and approved and
ready for occupancy and the furnishings in those Units are free of any lien
except for the Permitted Encumbrances; no Unit or other part of the common areas
of the Time-Share Project is subject to partition; and the time-share use of the
Units and amenities conform to all applicable restrictions and laws, necessary
approvals having been obtained.
(e) With respect to each Time-Share Project, Borrower shall have provided
to Lender, and Lender shall have reviewed and found satisfactory, the following
information concerning such project and the unsold Time-Share Interests which
are proposed to become Eligible Completed Project Inventory:
(1) Location of the project;
(2) Site plan for the project;
(3) Total number of Units planned for the project;
(4) Number of Units then completed;
(5) Number of Units presently under construction;
(6) A description of the total amenities which are planned to be
included in such project, together with a description of whether
such amenities have been constructed and, if such amenities have
not yet been constructed, a time-line describing the periods
remaining to completion; and
(7) A description of the complete amenity package which is to be
presented to prospective purchasers of the Time-Share Interests.
(f) With respect to each Time-Share Project, a description of the following
matters relative to such project's marketing and sales history:
(1) The month and year in which sales of Time-Share Interests
commenced;
(2) Location of the sales and marketing center for such Time-Share
Project;
(3) A table depicting, for each Time-Share Project, the various
sources of tours generated during the prior twelve months as a
percentage of total tours generated; and
(4) A table describing the annual sales since the sale of Time-Share
Interests commenced, broken down by the number of Time-Share
Interests sold per year and the average sales price per year for
such Time-Share Interests.
(g) With respect to those specific unsold Time-Share Interests which are to
become Eligible Completed Project Inventory, Borrower shall have provided to
Lender, and Lender shall have reviewed and found satisfactory, the following
information:
(1) Total number of Units in the applicable Time-Share Project; and
(2) A report detailing the unsold number of Time-Share Interests,
categorized by type of Unit involved, price for each Time-Share
Interest, the total Retail Value of all such unsold Time-Share
Interests, and the average price at which all unsold Time-Share
Interests are offered for sale.
(h) Lender shall have a valid, direct and perfected first lien/security
interest in the Completed Project Inventory and the proceeds thereof.
(i) In the event that any Time-Share Project which Borrowers propose to
qualify for the contribution of Eligible Completed Project Inventory hereunder
includes unsold Time-Share Units which are valued and sold on a points basis
(which program Primary Borrower currently refers to as "Club Sunterra"), such
points must continue to qualify as "Time-Share Interests" as defined herein, and
Lender must be satisfied with the systems and procedures by which Borrowers (1)
assure that points sold are adequately supported by available and completed
Units and unsold Time-Share Interest and (2) calculate the number of points to
be assigned to each unsold Time-Share Interest contributed as Eligible Completed
Project Inventory hereunder. In the event Borrowers' systems and procedures are
not satisfactory to Lender, Lender reserves the right, in its discretion, to
require a quarterly third party audit, to be conducted at Borrowers' expense, to
assure that all points sold and credited to purchasers are adequately supported
by completed Units and unsold Time-Share Interests therein; provided, however,
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that for so long as no Event of Default exists and is continuing, in no event
shall the total expense of such quarterly audits which Borrower is required to
bear exceed $7,500 during any calendar quarter.
EXHIBIT B
FORM OF BORROWING BASE REPORT
EXHIBIT C
BORROWER'S CERTIFICATE
[Borrower Name], [Type of Borrower Entity] ("Borrower") hereby certifies to
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FINOVA CAPITAL CORPORATION ("Lender") that the Inventory described in Schedule A
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attached hereto and by this reference incorporated herein qualifies as Eligible
Inventory.
Except as otherwise defined herein or the context otherwise requires, all
capitalized terms used herein have the meaning given to them in the Loan and
Security Agreement between Borrower and Lender dated as of [Month Day,][Year],
as it may be from time to time renewed, amended, replaced or restated.
DATED: ____________, ______.
BORROWER: [Borrower Name], [Type of Borrower Entity]
By:
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Type/Print Name:
-----------------------
Title:
---------------------------------
EXHIBIT E
ADDITIONAL CONDITIONS
TO INVENTORY LOAN ADVANCES
(a) a completed and executed "Request for Inventory Loan Advance and
Certification," in form and substance identical to Exhibit E-1.
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(b) a Mortgage in recordable form and otherwise in form and substance
satisfactory to Lender, properly completed, executed and acknowledged (with
respect to any Inventory not previously encumbered).
(c) with respect to any Completed Project Inventory, if not previously
furnished, evidence satisfactory to Lender that: (i) all Time-Share Interests
which are the subject of the Completed Project Inventory covered by item (b)
above have all necessary and promised on-site and off-site improvements thereto
(taking into account the dates upon which any such improvements have been
promised to Purchasers, such that this condition shall be deemed satisfied
unless the time by which those improvements were to have been completed, as
represented to the Purchasers, has passed) and necessary and promised utilities
are available; (ii) all Units and amenities which are to be available to
Purchasers obligated on the Completed Project Inventory covered by item (b)
above have been completed in accordance with all applicable building codes and
are fully furnished, necessarily equipped and will be available for use by
Purchasers without disturbance or termination of their use rights so long as
they are not in default of their obligations owed to the applicable Time-Share
Association, or to any Borrower with respect to financing owed by such Purchaser
to Borrower incurred in connection with the purchase of such Purchaser's Time-
Share Interest; and (iii) all furnishings in the Units and amenities are owned
either by the Purchasers directly or by an owners' association or associations
in which the Purchasers are members, free of charges, liens and security
interests other than the Permitted Encumbrances.
(d) a Title Policy with respect to each Mortgage covered by item (b) above.
(e) with respect to any Completed Project Inventory, if requested by Lender
following a material change of circumstances or not more often than annually at
Lender's discretion, an opinion from independent counsel to Borrower
satisfactory to Lender with respect to the continued compliance of any Time-
Share Project and such other matters as Lender shall reasonably require.
(f) if requested by Lender, such other items which are reasonably necessary
to evaluate the request for the Inventory Loan Advance and the satisfaction of
the conditions precedent thereto.
EXHIBIT E-1
REQUEST FOR INVENTORY LOAN ADVANCE
AND CERTIFICATION
The undersigned ("Borrower") requests FINOVA CAPITAL CORPORATION
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("Lender") to make a Inventory Loan Advance in the sum of
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_____________________________ ______________ UNITED STATES DOLLARS (U.S.
$_____________) upon receipt hereof, pursuant to the Amended and Restated Master
Loan and Security Agreement between such parties dated as of [Month Day,][Year]
(with any amendments, "Agreement").
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Borrower hereby certifies to Lender that (i) the Retail Value of all
Eligible Completed Project Inventory pledged to Lender is not less than
$_______________; (ii) Borrower's acquisition costs incurred to date with
respect to all Land Inventory which has been encumbered in favor of Lender is
not less than $_________________; (iii) Borrower's development costs incurred to
date with respect to all Project Inventory Under Construction which has been
encumbered in favor of Lender to date is not less than $_________________; (iv)
the Inventory against which the requested disbursement of the Inventory Loan is
sought constitutes Eligible Inventory; (v) no material adverse change has
occurred in the financial condition or in the business and operations of
Borrower since _______________, _____, the date of the last financial statements
delivered to Lender; (vi) all representations and warranties contained in the
Agreement are true and correct as of the date hereof in all material respects;
(vii) neither an Event of Default nor an Incipient Default exists; and (viii)
Borrower has Performed and complied with all agreements, covenants and
conditions required by the Agreement to be Performed and complied with prior to
or at the date of the requested disbursement of the Inventory Loan.
Except as otherwise defined herein or the context otherwise requires, all
capitalized terms used herein have the meaning given to them in the Agreement.
DATED: ________________, ______.
"BORROWER" [Borrower Name],
[Type of Borrower Entity]
By:
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Type/Print Name:
----------------
Title:
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EXHIBIT F
CONDITIONS OF ELIGIBLE PROJECT
INVENTORY UNDER CONSTRUCTION
(a) The applicable Project shall have obtained all Minimum Required
Construction Approvals.
(b) Borrower shall have provided Lender with a copy of the
construction budget and the plans for the Project.
(c) Borrower shall have provided to Lender copies of the construction
contract with the general contractor, the architect, and any engineer.